Progress in Meeting the Challenge of Modernizing IRS Tax Processing System

GAO discussed the Internal Revenue Service's (IRS) progress in modernizing its tax processing computer systems. GAO noted that: (1) the unmodernized tax processing system heavily relied on paper-driven, labor-intensive processes; (2) IRS has spent about $120 million on its Tax Modernization System program since 1986, and estimated that it will cost several billion dollars to complete the modernization; (3) IRS has not clearly or comprehensively articulated a modernization program, its benefits, or plans and schedules; (4) IRS lacked a master modernization program plan, and the number and scope of projects it identified in its budget continually changed; (5) the lack of stated goals and purposes for the IRS Electronic Filing System made it difficult to assess the system's effectiveness; (6) the IRS On-Line Entity System, intended to help IRS to validate taxpayer identities before sending tax return information to master files, was in the early stages of a pilot test; and (7) the IRS automatic data processing budget for 1990 sustained cuts of nearly $100 million due to sequestration and increased salary costs, with the cuts most frequently affecting projects aimed at increasing the number of computers and terminals for responding to taxpayer inquiries and researching problem tax returns.