IRS modernization program moves forward

The Internal Revenue Service will move forward with information technology modernization efforts this fiscal year, but budget constraints pose a challenge, two agency officials said Thursday.

The IRS launched its Business Systems Modernization program in 1999, with the goal of replacing the existing IT environment in 10 to 15 years. Delays and cost overruns plagued the program, leading the agency to make significant adjustments in 2005. The resulting Modernization Vision and Strategy seeks to leverage legacy systems and deploy modernized systems on an incremental basis. The IRS started the second phase of the new strategy in October.

"It doesn't do any good to have plans [without] buy in, [or plans] that we can't execute," said Richard Spires, deputy commissioner for operations support at the IRS, during a panel discussion at the research firm INPUT's FedFocus conference. Spires was named to the position in September, after serving as agency chief information officer for a year. "[The IRS has] 400 key legacy systems; there's no way the vast majority of those are going away any time soon. Build when you have to build new, but also enhance where it makes sense," he said.

From fiscal 2005 to fiscal 2007, the IRS identified business domains based on function, such as customer service, filing and payment compliance, and submission processing. Supporting those business domains are cross-cutting areas, such as common business services, data, infrastructure and security. Technical domains were introduced more recently, focusing on the delivery of products and services, including application development, end-user equipment and services and enterprise networks.

But finding funds for the IT modernization effort has been an ongoing battle for the agency. The IRS requested an $11.6 billion operating budget for fiscal 2008, with 63 percent of the budget for enforcement activities and 31 percent for taxpayer services. The remainder -- about $696 million - is funding for the IT modernization program.

"We've been fighting for years to keep up," said Andy Buckler, senior adviser to the deputy commissioner for operations support at the IRS. "The budget is tight, and the infrastructure has suffered."

Budget delays on the Hill further complicate issues, requiring the IRS to juggle funds between existing projects.

"Based on the rules of the continuing resolution, we need to be careful," Spires said. He expects appropriations for fiscal year 2008 to face more delays. "We can't start new projects."

According to a May report from the Government Accountability Office, the modernization project has helped drive an increase in electronic filing and IRS Web site use, and an improvement in telephone access in the 2007 tax season, though fewer than 4 percent of eligible taxpayers used the Free File program for federal tax preparation and electronic filing.

The latest release of Customer Account Data Engine, the new tax processing system, also was delayed, according to the report, but a Treasury Department inspector general report issued last month concluded the latest software release performed as planned. Eventually, CADE will replace a 40-year-old Master File tax administration system for faster processing of tax returns.

Now in year three of the Modernization Vision and Strategy, IRS officials plan to speed up progress and increase taxpayer services by developing new business domains that support tax administration and roadmaps that link business strategies with data, applications and technology.

"We'll do a comprehensive review of the domain systems to figure out where we want to be," Buckler said. "And we're keeping them real. All domains will have a future."