April 12, 2007 12:56 PM PDT

IRS trudges on with aging computers

Tech follies

The Internal Revenue Service has been trying for years to upgrade its antiquated mainframe computers, which process Americans' tax returns by churning through millions of lines of assembly code written by hand in the early 1960s.

But after more than 20 years and over $5 billion, there's still no end in sight. Not all computer systems can talk to each other, information isn't available in real time, and tax returns filed on paper are often manually entered by typists.

An internal strategy document written seven years ago likened the upgrade task to redesigning and rebuilding a densely populated city like New York, without evacuating it first or disrupting the "daily pattern" of the residents' lives.

IRS' ailing computers

To run the numbers on tax returns, the IRS relies on computer systems from the Kennedy administration.

1960s
IRS designs and launches Master File system, still its primary repository of taxpayer information today.

1970s
The Integrated Data Retrieval System comes into existence.

1986
IRS receives 25,000 tax returns filed by modem in the first year it offers its e-File setup, begins its Tax Systems Modernization effort.

1997
After spending more than $3 billion, agency scraps TSM project and issues "blueprint" for renamed Business Systems Modernization project.

1998
Congress passes the Restructuring and Reform Act of 1998, setting goal for IRS to ave at least 80 percent of tax returns filed electronically by 2007.

2000
Then-IRS Commissioner Charles Rossotti releases his modernization vision, compares task ahead to rebuilding a large city.

2004
IRS launches Modernized e-File system, which allows businesses to file tax returns online. Releases first version of Customer Account Data Engine, the intended successor to Master File.

2006
IRS releases updated Modernization and Vision Strategy that prioritizes systems to replace Master File and IDRS.

2007
IRS rapped again for losing track of computer equipment and falling down on security.

The IRS' long-term goal is to run its operations with the efficiency Americans expect of banks and credit card companies, but it has consistently fallen short. Right now, for instance, a taxpayer who submits a tax return on a Monday will likely find that it will not be processed until at least the following weekend, thanks to limitations in the antiquated core of the agency's tax-processing apparatus. Over $3 billion was wasted in an earlier upgrade attempt in the 1990s. Last year, computer problems caused the IRS to erroneously hand out an estimated $318 million in fraudulent refunds.

Government audits show that the many years of planned upgrades have been dogged by the same missteps that plague so many massive government computer upgrades: inadequate management, ill-defined goals, repeated cost overruns, and failure to meet deadlines and expectations. (Earlier articles in this occasional CNET News.com series have explored computer systems at Homeland Security and the FBI.)

"They have made advances, and there has been incremental progress and success, but they still struggle," said Margaret Begg, an assistant inspector general for audit, told CNET News.com in an interview. Begg specializes in evaluating the U.S. Department of Treasury's tax-related computer systems.

The U.S. Government Accountability Office, which has long warned of the risks associated with this complex project, reached a similar conclusion in a February report to Congress. The auditors said the IRS had made improvements, but its future strategy remains worrisome because it lacks clear deadlines for "consolidating and retiring legacy systems."

Losing at least $318 million
IRS Chief Information Officer Richard Spires says there's reason to believe things are looking up. In the three years since he joined the agency, Spires said in an interview this week, the IRS has refined its management processes, hired more talented people, and wised up to the perils of taking on more than it can handle.

"There are no guarantees in this world in the sense of what could happen in the future, but I think the confidence level in us and the confidence level in our team has grown," he said. Spires, a former executive at software developer Mantas who has degrees in electrical engineering, became the IRS' assistant chief information officer in 2004 and was promoted to the CIO post in September.

One potentially major change is that, up until about two years ago, officials had been thinking the IRS needed to replace all the legacy systems--meaning about $8 billion over 15 years. The agency backed away from that idea in its latest modernization plan (PDF), released in October, saying it intended to include at least some components of the older systems in the transformation.

"I think it's the prudent thing to do given our management bandwidth and the dollars we're going to get," Spires said, adding that many of the older COBOL-based systems are still "very maintainable." Created in 1959, COBOL (Common Business-Oriented Language) is a mainstay of mainframe programming but has been criticized for its verbosity and for, in older versions, not supporting local variables. Local variables are fundamental to modern programming techniques.

CONTINUED: Progress on some fronts…
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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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