IRS' Progress in Implementing Its Electronic Filing and Communications Replacement Systems

GAO discussed the Internal Revenue Service's (IRS): (1) development of an electronic filing system for individual tax returns; and (2) progress in installing new communications processors. GAO noted that IRS: (1) believed that an electronic filing system would reduce tax return processing and storage costs; (2) abandoned its original plans, citing system and acquisition strategy problems, and implemented an interim system in limited regions for the 1988 tax filing season; (3) spent about $13 million through 1988 and planned to spend another $163 million on system development and operations through 1999; (4) anticipated that 2.2 million of the estimated 110 1989 million tax returns would be filed electronically; and (5) proposed to expand and modify the interim system for nationwide implementation, although it had not demonstrated the system's ability to meet its long-range needs. GAO also noted that IRS: (1) awarded a contract to replace its existing data communication processing system and obsolete computer terminals; (2) experienced several project delays due to contract award protests and redirection of contract efforts; (3) has installed its new Communications Replacement System, which is now operational at all 10 service centers and is working reasonably well; and (4) is withholding contractor payments until the contractor provides acceptable systems documentation and corrects some software problems that do not affect return processing.