Modernization means faster tax refunds

"Individual Income Tax Return Information Was Accurately and Timely Posted"

The tax return processing system at the heart of the Internal Revenue Service’s ongoing modernization effort is speeding the time it takes for the tax agency to issue refunds, auditors find.

Treasury Tax Inspector General for Tax Administration (TIGTA) auditors reviewed a sample of individual returns being processed by the Customer Account Data Engine (CADE) in February. CADE is the digital replacement for the 40-year old magnetic-tape Master File system that still processes the majority of tax returns filed in the United States. Since the IRS first activated CADE last summer, the replacement system has processed about 2 million individual returns.

On average, refunds sent via direct deposit to bank accounts reached taxpayers four days faster than the 11 days the Master File needed to complete that task. CADE also issued paper refunds on average eight days faster, requiring only 10 days rather than the 18 days the Master File required.

Taxpayer accounts stored on Master File are updated only on weekends through batch processing, while CADE is slated to update those accounts daily. IRS officials say CADE should completely replace the Master File for individual tax returns by 2012.

Tax auditors also say that CADE could have processed more tax returns during the time they examined it. Some taxpayer accounts deemed too complicated for the new system to handle when in fact, IRS workers had just attached temporary comments to them or had used them to send a computer-generated letter to the taxpayer.

“This occurred even though these actions made no actual changes to the taxpayers’ account and were on the account only temporarily,” auditors said. The IRS will make programming changes to eliminate this problem, they added.

Successful implementation of the first releases of CADE “is a noteworthy achievement, providing a good foundation for future releases,” auditors add.

However, they also note that the system is processing only 1 percent of taxpayer returns and that future releases “will become even more challenging as the IRS adds capabilities to handle more complicated tax returns.”