IRS pilot program looks to jump-start IT innovation

The IRS is laying the groundwork for a series of pilot projects over the next year to further flesh out its IT modernization priorities.

On Nov. 29, the tax agency released a request for information for "Pilot IRS," a program under which the tax agency looks to provide a more streamlined procurement process that allows a company to propose an innovative solution to an IRS problem and receive technical and actionable feedback in weeks instead of months.

Each project will consist of four phases: engaging with industry to scope out project details and potential solutions, putting out calls for select solutions and testing, developing prototypes and testing interoperability with the IRS network and implementing limited deployment.

The RFI doesn't offer details on what technological solutions IRS is seeking, but each project will be funded at a maximum of $7 million over five years, with the potential for additional funding and scoping as individual projects mature. It also gives the agency an opportunity to cut bait, with four built-in phases that allow officials to revisit a project and determine whether to continue funding or terminate at the end of each phase.

The document indicates a willingness on the part of the normally risk-averse organization to take more chances as it builds on the modernization roadmap developed in its most recent strategic plan. For decades, the legacy environment at IRS has presented with a raft of technical complications that have hampered the modernization agenda of IT policymakers, with decades-old systems like the Individual Master File CADE-2 so deeply embedded within the agency's year-round tax filing operations that it cannot simply be ripped out or turned off for long periods of time without causing major problems.

The agency alludes to recognition this problem in the RFI, saying the "process will represent some risk to the IRS, as the technologies may not currently be fully aligned to its mission; however … risk is inherent to the operations of any organization and acknowledges that it must sometimes accept risk to further its mission."

The IRS spent $500 million of its $2.9 billion technology budget last year on business systems modernization, according to congressional testimony provided by the Treasury inspector general for tax administration. However, those topline figures belie an often contentious debate on whether the agency can -- and should – dedicate more resources and develop a comprehensive modernization roadmap.

While the Republican-controlled Congress has trimmed the agency's budget over the past decade, it has also been quick to criticize when things go wrong, as it did in April, when a hardware glitch caused a temporary outage of the agency's tax processing systems on tax deadline day.

Still, there are indications that poor planning and resource management may also be at play. In July a Treasury Inspector General for Tax Administration audit found that IRS spent $85 million for an enterprise case management system that it later opted not to use due to integration and scalability issues. Danny Verneuille, Assistant Inspector General for Audit at TIGTA, told lawmakers last year that "IRS needs to improve its project planning prior to starting development activities," including "more clearly defined requirements and scope and a well-designed architecture in comprehensive assessments of commercial, off the shelf products to be used."