IG gives IRS some credit for progress on modernization

The Internal Revenue Service achieved successes in its Business Systems Modernization Program when it has followed its system development and management guidance, the Treasury Inspector General for Tax Administration (TIGTA) said. The modernization program seeks to transform the IRS’ tax administration systems and processes and provide more services to taxpayers electronically. The IRS' modernization also has progressed with the implementation of management components of its Enterprise Services organization and development of the Information Technology Modernization Vision and Strategy as a map for future development, TIGTA said in a report published June 26. Since May 2007, the IRS has completed 19 of the 20 program milestones within 10 percent of cost estimates and 18 of them within 10 percent of schedule estimates, said Michael Phillips, deputy inspector general for audit.. However, the IRS and its contractors must overcome significant barriers to the goals of the modernization program, which has not progressed enough to eliminate its material weakness designation, TIGTA said in its annual assessment of the program. The service has adhered inconsistently to established project development guidelines, which has limited the effectiveness and growth of the modernization program, the report said.“Over the past year, the IRS also made advances in incorporating the Information Technology Modernization Vision and Strategy into the framework of how it does business,” Phillips said. The strategy is five-year plan that drives IT investment decisions based on priorities centered on modernizing frontline tax administration and its supporting technical infrastructure. Among its management improvements, IRS now identifies program weaknesses and determines how best to resolve them through its Highest Priority Initiatives process, which senior managers and executives oversee and receive monthly progress reports on. They identify new initiatives to focus on every six months, the report said. Since the assessment, the IRS has taken other steps to improve its performance, said Arthur Gonzalez, the service's chief information officer. For exmple, the IRS is developing strategies to reduce the potential risks associated with future releases of its modernized systems, he said. The modernization effort involves integrating thousands of hardware and software components and must be done while replacing outdated technology and maintaining the current tax system, the report said. The program is in its tenth year and has received approximately $2.5 billion for contractor services plus an additional $310 million for internal costs. The service said it plans to spend $267 million on the program in fiscal year 2008. In August 2009, the IRS plans to start using the Modernized e-File (MeF) system, an Internet-based electronic filing program, for individual tax returns. The IRS had limited the use of the MeF to returns for corporations, large partnerships and tax-exempt organizations. The IRS plans to complete the transfer of individual tax returns from the 1040 family of forms to MeF in January 2011, according to another report by TIGTA published June 25. The service needs to develop a formal process for identifying, reporting and resolving issues related to tax returns that MeF processes, Phillips said. The agency also should refine the validation controls in MeF to verify that taxpayers file the correct form. In another report, the Electronic Tax Administration Advisory Committee, a group of various industry and public representatives, praised the IRS for its efforts to convince tax payers to e-file their returns. But despite their best efforts, some professional tax preparers still prepared returns on a computer and had the taxpayer file them even though the preparers could easily have e-filed them, ETAAC said in its report released June 27. That accounted for 23 million returns. “Without manda es, the IRS will fall short of the 80 percent goal for e-filing Form 1040s whether or not that goal is extended to 2012,” ETAAC said. The organization recommended that Congress empower the IRS to require paid preparers who prepare more than 50 returns annually to file all returns electronically.