The Internal Revenue Service (IRS) is one of the most important federal government agencies, responsible for collecting taxes to fund nearly everything the government does. However, according to a report by the Government Accountability Office (GAO), the IRS is facing a major challenge because of its outdated IT systems. The report states that some of the computer systems used by the agency are so old that it is difficult to find people who know how to work them.
One of the major problems is the IRS’s use of an “obsolete programming language” called COBOL. The report warns that this could lead to a “shortage of expert personnel available to maintain a critical system” and create significant risk to the agency’s mission. Furthermore, the report claims that 33 percent of IRS applications, 23 percent of software, and 8 percent of hardware are outdated but still critical to day-to-day operations. Some of these legacy assets are 25 to 64 years old and software up to 15 versions behind.
The use of obsolete systems not only creates staffing issues but also discourages people trained in cutting-edge computer technology from pursuing a career at the IRS. It also makes trouble for taxpayers, who are required to pay taxes and often need to access IRS services. For example, the report notes that the IRS’s “Where’s My Refund” application is in high demand, but the program “isn’t capable of accessing detailed information on an individual’s tax return status,” leaving many disappointed.
Aggravating the situation is the IRS’s recent suspension of six modernization projects, which the GAO said includes operations “essential to replacing the 60-year-old Individual Master File (IMF),” described as “the authoritative data source” for individual tax accounts. The IRS had been trying to replace the master file for more than a decade but then decided to reassign employees to other work. This will lead to mounting challenges in continuing to rely on a critical system with software written in an archaic language requiring specialized skills.
Money for modernization is not the problem, as the IRS reported spending almost $7 billion on IT in fiscal 2021 and 2022 combined. Additionally, nearly $80 billion for the IRS in the Inflation Reduction Act, approved in August, included almost $4.8 billion for business systems modernization and more than $25.3 billion for operations support, which includes operating and maintaining its IT systems. However, despite this investment, the IRS’s legacy IT systems continue to create problems.
The IRS has long been a target of criticism from Republicans, and last month, in one of the first actions after the party won control of the House, it voted to rescind the $80 billion boost, on a straight party-line vote. A House Ways and Means Committee statement claimed Democrats had “supercharged” the IRS and “have long used the IRS and the tax code as a political weapon.” However, the House bill has little chance of passing the Senate.
The report recommends setting time frames to complete modernization plans, and the IRS has agreed with the watchdog’s nine recommendations. The agency has 21 IT modernization initiatives in progress, but more than a quarter of them do not have time frames for addressing outdated systems.
“At the end of the day, IRS relies extensively on information technology to perform mission-critical functions,” says David B. Hinchman, the GAO’s director of IT & cybersecurity. “IT is literally the vehicle on which our taxes are processed. However, this vital technology relies on the heavy use of outdated and expensive legacy systems.” The IRS must take urgent steps to modernize its systems to ensure the efficient and secure functioning of its operations.