IRS will stick with legacy processing system for the upcoming tax season
Treasury Secretary Janet Yellen and IRS Commissioner Danny Werfel take questions from reporters on a tour of a tax processing facility in Austin, Texas. Brandon Bell/Getty Images
By
Natalie Alms
The IRS is waiting to switch away from the old Individual Master File “out of an abundance of caution,” despite hopes to potentially convert to the new one this year, IRS Commissioner Danny Werfel told Nextgov/FCW.
AUSTIN, Texas — The IRS won’t switch away from its legacy, 1960s-era system for individual tax account administration — called the Individual Master File — until after the coming tax season, IRS Commissioner Danny Werfel told Nextgov/FCW last week during an interview at an IRS facility.
The IRS has been testing a new processing engine this year as a possible replacement for the 2025 tax filing season.
“But out of an abundance of caution, we’ve decided to do the cutover after this filing season, rather than before,” said Werfel.
The IMF is used for individual tax administration — essentially taking in information, processing it and generating details for refunds. It serves as the transaction records for all individual filers.
A former IRS commissioner has previously described the IMF to Nextgov/FCW as “the heart of the tax season.” The system is the agency’s authoritative data source for individual tax data, and most IRS systems depend on it.
The tax agency has been trying to update it for over a decade.
Testing has so far involved running the same tax return information on both the legacy and new systems to see if they spit out the same outputs. That effort followed progress in translating IMF from legacy languages like COBOL into Java, a multiyear endeavor. The IMF also got new hardware last year.
While that testing is going well, said Werfel, the plan is to continue that parallel production for another tax season before cutting to the new processing engine next summer as the system of record.
The goal is to hit as many potential edge cases as possible by running through another filing season, according to an IRS official, who said that there is a 99% match rate between the two systems. The agency also hasn’t tested at the peak of a tax season yet, since it only started running the two systems in tandem in April.
The fact that the IRS has multiple modernization projects going at once also informed the decision, said Werfel.
“What I didn't want to have happen is if we have some kind of launch failure with IMF — what would happen is you surge all the resources there and then you lose momentum,” he said. “Because we have multiple modernizations going all at once, we have to make some of these trade-offs.”
“After weighing all of the risks, we decided ‘Let’s do one more year, one more filing season on the old, and have even more further robust testing,” said Werfel. “So this will be the last filing season on the legacy IMF solution.”
Still, he emphasized that the tax agency is able to use the more timely, standardized data generated by the newer system for business intelligence and analysis — even without switching over to the new processing engine, called the Individual Tax Processing Engine, as the system of record.
The agency is also tapping into simplified access to IMF information via a data access layer framework, which lets employees read and write legacy IMF files without needing specialized training, according to an IRS official. This byproduct of the modernization efforts lets the IRS move more quickly to build features, such as creating the back-end transactions needed to implement its clean energy responsibilities.
Werfel called the work done so far on the IMF a “milestone in modernizing a core technology component of the Individual Master File” in remarks before Austin employees and press on Friday, saying that the IRS is “now taking the final steps towards a modern system.”
A new IMF will make better data available both for IRS employees and citizens alike, said Werfel.
“For example, when a taxpayer calls with a question about their account, our phone assisters will be able to access real time account information, just like any bank or financial institution does,” said Werfel.
While the agency is still on the legacy system, there are risks.
“Modernizing isn't just about efficiency,” said Werfel. “It's about preventing a potential collapse of the technology that underpins the tax system and ensures consistent revenue for government operations.”