GAO report: IRS to fall short of e-filing goal

The Internal Revenue Service's modernization program continues to make major inroads in delivering better service to taxpayers, but the IRS will not meet its 2007 deadline to have 80 percent of all taxpayers filing online, according to a General Accounting Office report released May 20.

Instead, the tax agency can anticipate having 61 percent of all taxpayers filing online by the deadline if the current rate of e-filers continues, the report said. "Slower growth in electronic filing will reduce IRS' ability to shift resources out of paper return processing," GAO officials reported.

John Reece, until last month chief information officer at the IRS, said 80 percent "is probably a very ambitious target." He said the IRS was right on target for this year's e-filing expansion and that "anything up into the high 60s [percent] is an extraordinary level of achievement."

"The higher you go up the percentage of accomplishment ladder, the incremental growth gets harder," Reece said.

Nevertheless, IRS officials are making strides in their efforts to provide better service to customers, according to the GAO report. Taxpayers are having an easier time reaching the IRS by phone and increasingly are using the agency's Web site to download tax forms and check the status of their refunds.

Computer systems security remains a problem, the report noted: "Long- standing computer security weaknesses continue to threaten the confidentiality, integrity and availability of sensitive systems and taxpayer data."

In the past five years, Congress has appropriated $1.35 billion for business systems modernization. It has also fully funded IRS' annual budget requests each year during that period.

In written testimony delivered May 20 to lawmakers, IRS commissioner Mark Everson said he will "continue to drive the information technology modernization program."

Progress has been made, Everson said. For instance, almost 52 million people filed their taxes online this year, up from 29 million in 1999. And in the next few weeks, taxpayers and others will be able to apply online for an Employer Identification Number.

However, the centerpiece of the agency's modernization effort — replacing decades-old master files — won't begin until this summer. Everson has asked an outside group to look at the Customer Account Data Engine (CADE), a taxpayer database for filers of form 1040EZ that will deliver faster refunds and daily posts of transactions and account updates.

GAO criticized CADE in 2001 for being behind schedule and over budget. Everson said the outside group, which has not been named, will report back to him at the end of the summer.

No work will stop while the review is under way, he said, "but this is a good time to assess progress, project risk and [determine] whether any midcourse corrections are needed."