Rebates pose challenge for IRS systems

Treasury Department Secretary Paul O'Neill said last week he intends to launch a Herculean effort to get tax-rebate checks into the hands of taxpayers even faster than the September deadline. Whether Internal Revenue Service computers are up to the job, however, remains an open question.

Even as O'Neill pledged to fast- forward rebates once President Bush signs the $1.35 trillion tax-cut package into law, IRS experts were scrambling to redesign software and make good on the promise to send out rebate checks to 95 million taxpayers.

The IRS is promising only one thing — taxpayers won't have to do anything to get their money. Nevertheless, the tax agency faces massive obstacles in getting the job done.

The IRS was confronting "all the complex issues of how one sends money back to a population that is constantly moving and relocating," O'Neill said.

Treasury spokesman Rob Nichols downplayed how difficult it would be to cut the checks by September.

"Every year, the IRS is accustomed to sending out tens of millions of checks. We are making preparations to get these rebate checks to the American public as soon as possible," Nichols said.

Because of the difficulty in reprogramming its computers, the tax agency will not be depositing checks electronically — a disappointment to the millions of taxpayers who usually get their annual refunds deposited in their bank accounts.

It remains unclear whether IRS' extra work will delay the planned phase-in of the IRS modernization program to replace 1960s technology with a new system. "It's still very early in the process," said Karla Pierce, director of organizational transformation at Computer Sciences Corp., the prime contractor for the modernization effort. "We're prepared to work with the IRS and ensure that any impacts there are will be addressed accordingly and do our best to keep this on schedule."