Four years ago, the IRS suffered a technology failure at the worst time: the last day of tax filing season.
For about 11 hours, dozens of critical IRS processing systems went down, including the agency’s ability to accept electronically filed returns.
It wasn’t hackers who brought down the IRS on Tax Day 2018. Instead, a firmware bug caused a storage device that supports the IRS’s computing infrastructure to fail. agency, almost 60 years old.
Relying on old systems increases the risk of future IT failures. But it also hampers the IRS on a day-to-day basis, contributing to two of the agency’s biggest customer service problems today: a backlog of millions of unprocessed tax returns and the agency’s inability to deal with a flood of phone calls from the public and their frustrations. tax professionals.
“In our business, time is money: we have to account for every minute of our day,” said Evan Morgan, director of tax advisory services at Miami-based Kaufman Rossin. “If I agree to file a tax return and something the IRS does takes me longer than necessary, then either I have to come back to you and ask you for more money, which you’re not going to. not be happy doing it – or I have to eat it and have less profit.
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And yet, the IRS is still in trouble. The Covid-19 pandemic has amplified longstanding structural shortcomings that hamper the IRS’ ability to fulfill its primary mission of collecting revenue and enforcing tax laws — problems that money alone cannot solve. More resources would help, but with or without a financial boost, the agency must address the technology, workforce, and public perception issues that are causing its customer service struggles.
The IRS already spends billions of dollars a year on IT, but agency officials say they need more to execute a long-term strategic plan, including an ambitious project to modernize the system that stores data. taxpayer information. In this case, long-term stable funding seems like a silver bullet to address the agency’s technology issues, but it will be years before the agency can abandon legacy systems that contribute to its customer service challenges.
Read more: Kelly Phillips Erb (@Taxgirl) highlights the impact of IRS processing delays, student loan refunds.
“Archaic” space-age technology
Employees who process paper tax returns must manually enter data into a system built in the 1960s, known as the Individual Master File, which holds taxpayer data. A government watchdog said last fall that the IRS system, one of the oldest still in use by the federal government, relies on “archaic” assembly language code that is difficult to write and maintain.
Relying on legacy systems makes the process longer and requires hours of training for new employees, compounding the agency’s recruiting challenges.
“I watch the IRS try to recruit people who can program their existing technology, because you have to make fixes, you have to make changes at the start of every filing season,” said Natasha Sarin, Deputy Assistant Secretary of the Treasury for economic policy. “It’s just incredibly expensive to find these people.”
Technological limitations also hamper IRS phone service, with operators unable to answer many more calls than they can possibly handle. The IRS has repeatedly asked the public to check its website before picking up the phone, but the most frequently used app on the IRS website isn’t very helpful.
The nearly 20-year-old “Where’s my refund?” The tool is popular — taxpayers accessed it about 629 million times last year, according to an April report by National Taxpayer Advocate Erin Collins. The tool will verify that a return has been received, approved, or is in progress, but IRS officials told Collins he was unable to access data sources with more detailed information. , as if a return had been reported for an error.
“The lack of detailed information in the application has led taxpayers to call the IRS for live assistance, or in some cases to file a second return, which creates additional work for IRS staff,” Collins said.
Collins said the IRS isn’t planning to significantly upgrade the ‘Where’s My Refund’ tool — blaming a lack of resources, funding and technical limitations — even though the Treasury Department has. identified as a high priority for modernization.
Major IT upgrade in progress
The IRS is banking on a long-running IT project called Customer Account Data Engine (CADE) 2 to help solve some of its customer service issues. It is one of the cornerstones of the agency’s long-term IT strategy.
Much depends on the project, which is supposed to provide state-of-the-art processing of individual taxpayer accounts for faster refunds, notices and payment postings. It will also allow IRS employees faster access to data, speeding up interactions with taxpayers, according to Nancy Sieger, IRS Chief Information Officer.
Sieger said in an interview that the project has had major wins so far. Early work on the project has sped up taxpayers’ refund time to 7-10 days from 4-6 weeks, she said.
The IRS already spends a considerable amount to maintain and upgrade its IT systems, with nearly $25 billion allocated between fiscal year 2011 and fiscal year 2020. But resources remain an issue, even for such a large project. than CADE 2.
An effort to convert major legacy system components to the more modern Java programming language in CADE 2 is 80% complete and expected to be complete by 2023, according to Sieger. The next phase will take place next year, where the old and the new system will operate in parallel.
After that, the project’s position is on hold as the agency’s technology modernization effort is 57% funded, she said. A larger budget will be required to completely remove the individual master file from the 60s.
“We have a very detailed, very robust and very current individual master file modernization plan,” Sieger said. “And we hope that additional modernization funds will be provided so that we can launch this plan and really roll up our sleeves to modernize the entire individual main file. Today, we are not fully funded for this work.
CR “madness” makes planning difficult
Like any business, the IRS cannot enforce a set-it-and-forget-it policy when it comes to technology. Stable funding is needed to retain employees, hire new ones, and ensure that software and systems are regularly updated to keep critical agency information secure.
And since IRS funding is tightly controlled by Congress, it’s up to lawmakers to make sure it has the money it needs to keep all of its functions running smoothly.
“The tax authorities are limited. You can’t move money from bucket A to bucket B,” former IRS chief information officer Terence Milholland said. “You have to get money that’s sustainable and doesn’t get cut.”
Stability is not one of the hallmarks of Congress’s annual appropriations process, where lawmakers routinely rely on short-term funding extensions called continuing resolutions to keep government open while negotiations unfold. For fiscal year 2022, Congress passed four different continuing resolutions before the President
“If they finally get a budget, then they have to spend everything they have by the end of September and pray for the thing to be renewed,” Milholland said. “This is madness.”
Long way to go
The Biden administration wants to supercharge the IRS budget, proposing to allocate $80 billion over a decade to the agency to more than double its staff, strengthen enforcement of corporate and wealthy laws, and modernize its business systems.
That proposal is stalled in the Senate along with the rest of the administration’s broad tax, climate and social spending plans. But even if the agency gets the funding it seeks, tech upgrades won’t deliver results in time to address short-term issues like the backlog, says the former IRS commissioner Mark Everson.
“What has to happen is the technology has to improve, but that’s not going to happen in the next 60 or 90 days, or by the end of the calendar year,” Everson said today. vice-president of alliantgroup. a meeting. “It just won’t happen.”
Everson said the agency was “suffering” because it failed to resolve its short-term issues. The most immediate solution to things like the backlog, he said, is to provide IRS employees with the low-tech resources they need to navigate their way.
The administration recognizes that fixing IRS technology will take time and money.
“It’s not something that, even when the resources come in, is going to happen overnight because you bring the whole legacy system – the oldest legacy system in the US government – into the 21st century,” said said Sarin.