April 12, 2007 12:56 PM PDT

IRS trudges on with aging computers

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Congress has written checks for significantly less money each year for the upgrades than some at the agency had originally expected, but the IRS has nonetheless spent $2.1 billion on its overall modernization efforts since the most recent phase began in 1999, according to Spires. (An earlier effort, which began in 1986 and was ultimately scrapped in 1997, cost more than $3 billion.)

Richard Spires
Richard Spires

And that's not counting the costly losses tied directly to botched upgrades. Last year, for example, Treasury Department auditors estimated that the IRS handed out at least $318.3 million in fraudulent refunds because a new Web-based fraud detection database, originally slated for use in 2005, was still not ready in time for last year's tax-filing season.

The gaffe occurred because the old system had already been dismantled months earlier amid assurances from the contractors involved--overseen by Computer Sciences Corporation--that the new system would arrive on schedule. The old version has now been restored for this year's tax season, Deputy Inspector General Michael Phillips told the U.S. Senate Finance Committee at a hearing this week.

Beyond sky-high costs, building such a massive system from scratch today is simply "too complicated," said Peter Neumann, a computer scientist with SRI International who served on an IRS advisory panel during the Clinton administration. "The fact that any high-school kid in the world can break into a system that's on the Internet right now and that the serious aggressors have relative ease in getting into systems that they shouldn't be getting into, means the problem is much more difficult now than it was then."

To be sure, the IRS has made progress on some technological fronts. The mere act of keeping an elderly system--written in assembly language--able to process tax returns when federal law changes every year is a significant ongoing task.

Electronic tax return filing has been another area that is enjoying relative success. The number of returns e-filed by individual taxpayers has been steadily climbing, and since 2004, corporations have had the option of filing their returns via the Internet. This year, about 21 million taxpayers have already logged onto a new "Where's my refund" Internet application this year to keep tabs on their expected checks.

Origins in the early days of computing
The year 1962 didn't just bring the first industrial robots to General Motors' vehicle assembly lines and the inaugural Earth-orbiting voyage by an American astronaut. It also marked the debut of Master File, an IRS mainframe system that even now remains its most important repository of taxpayer records.

The system, written in low-level assembly language, involves a series of very large magnetic tape files--one set dedicated to individual taxpayers, one for businesses, and others for holding data that doesn't fit into either category. (Assembly language relies on nearly inscrutable commands such as "A R5,0(R0,R8)," meaning add the word in memory pointed to by the value in location R8 to R5.)

"We don't really control our own fate here around budgets and the like. I think we've delivered an awful lot for what we've expended."
--Richard Spires, chief information officer, IRS

Those sequential files, stored primarily at a facility in Martinsburg, W.Va., are only capable of receiving batch updates on a weekly basis. Those delays mean that taxpayers might receive repeat notices for problems that have already been resolved, and IRS representatives don't always have the most up-to-date account information at their disposal.

It's also growing trickier to find programmers skilled in a language that has long dropped out of favor in computer science curriculums. The IRS has occasionally been forced to bring in outside trainers to ensure its employees can make even basic system updates arising from annual tax law changes.

Each week, certain records are extracted and placed on a separate system called the Integrated Data Retrieval System (IDRS), which allows IRS employees at a handful of service centers to query and to send updates to the files. The IRS has acknowledged that the system, which was designed in the 1970s and was last overhauled in 1985, takes excessive time to master in part because it requires entering hard-to-remember codes, rather than standard business English, to get anything done.

The IRS has since deployed more than 500 separate computer systems to handle facets of the process by which some 200 million tax returns are vetted every year. Many of them were designed throughout the years simply to provide workarounds or extract particular data from Master File and IDRS, which it considers the heart and soul of its operations.

Its highest priority project is a new system called the Customer Account Data Engine, or CADE, which is supposed to serve as the successor to Master File. CADE's data stores will be updated daily, thus allowing readier access to up-to-date account data and quicker processing of tax refunds.

But numerous delays and glitches have peppered CADE's development. Conceived in 1999, its first release, which can deal with only one kind of tax return, was slated for rollout in early 2002. It wasn't deployed until July 2004, however, in part because of "significant breakdowns" on the IRS' part in laying out what sort of requirements the system was expected to meet and testing to make sure it didn't fall short, the GAO said in a report last year. CADE is expected to process 17 million to 19 million returns this year--up from about 7.4 million last year--but delays in the latest software release mean the IRS will fall short of the 33 million returns it hoped the system would process by now.

Another planned system called Account Management Services, which will work with CADE, is supposed to tackle another obstacle: getting the disparate IRS systems to talk to each other. Right now, IRS telephone representatives often have to make callers wait as they manually toggle among different information stores, and employees in the agency's enforcement wing aren't able to run as sophisticated algorithms to determine who should and shouldn't receive an audit.

What's still unclear is when the IRS will be able to shelve its aging systems for good. Spires, the IRS' IT chief, maintains his department is being "aggressive," but he said it would be "inappropriate" to commit to hard deadlines for even the most critical projects without a better idea of how much funding lies ahead.

"We don't really control our own fate here around budgets and the like," he said. "I think we've delivered an awful lot for what we've expended."

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10 comments

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That explains it!
They're using computers dating from the JFK era? No wonder my
tax forms still state "Ask what you can do for your country".
Posted by GGGlen (491 comments )
Reply Link Flag
Old and working computer
Well, The computer is mainframe computer. even the oldest mainframe is very much up and running now. The cost of conversion from mainframe to new technology is too high. Problems is the communication between various points where data is entered. Not to forget Mainframes are unhackable. Till now no big new in last 40 years. By an IDC study cost of conversion from mainframe to new technology would be some hundres trillions and not to forget the time.
Posted by KeWLDa3mon (1 comment )
Link Flag
Idea!
Why don't they rebuild the IRS elsewhere, building it while still
using the old one. then they could be transferring data to the new
one so just when the old one shuts down, the new one starts (the
IRS is one building, right?).
Posted by FuturDreamz (28 comments )
Reply Link Flag
too easy
my guess is your solution is way to easy and obvious to implement.

Start state by state.. age group by age group... there seems an limitless way of dividing up returns and starting small then moving more and more processing to the new system once it's glitch free.

Anybody want to be all the wasted money so far was based on solutions from Redmond?
Posted by jltnol (85 comments )
Link Flag
Elsewhere...
I suggest building it in the Fiery Pits of Hell, though nobody would
likely know the difference.
Posted by GGGlen (491 comments )
Link Flag
Ahhh
the lack of fraudulent return software is the reason they accepted my hand written $500,000 deduction for not wanting to do a tax return.
Posted by ajbright (447 comments )
Reply Link Flag
Why don't they just use TurboTax? :-)
I'm half serious...
Posted by fafafooey (171 comments )
Reply Link Flag
assembly language?
Since when is COBOL assembly language?

The IRS would be insane to be running all that tax processing in assembly language because it really would be impossible to change the hardware. I shudder if they would switch to something like SAP too.

Why does having local variables matter? This article doesn't read technically competent nor detailed.

If it ain't broke ...
Posted by NuShrike (13 comments )
Reply Link Flag
Equal File ID in VTOC!!!
BALR ya'll...

Thank goodness that the 3 billion spent so far kept all those consultant's mortgage payments current. Cause you KNOW a large majority of that spending was for "outside intervention".

Just consider the year that the conversion to the new systems actually happens.

FAIRTAX - FLATTAX - ANYTHING ELSE!!!
Posted by Kings X Rocks! (89 comments )
Link Flag
What a Pity!!
Considering that the IRS doesn't even follow its own manuals and federal regulations, I doubt we should feel as sorry for it as the media wants us to with their stories. IRS officials are supposed to use badge numbers, sign and reply to inquiries from the public according to federal law and their own regulations. Furthermore, they are supposed to send out proper forms and documents to the public instead of manually altering people's status and then sending them out the wrong ones. What a pity they use old computers. What a pity.....I just can't sleep at night.....
Posted by Doovi (2 comments )
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