IRS trudges on with aging computers

More than 20 years after its first attempt at a massive upgrade of 1960s-era mainframes, the IRS still isn't sure when the project will be finished.

By Anne Broache
Staff Writer, CNET News.com

Published: April 12, 2007, 12:56 PM PDT

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The Internal Revenue Service has been trying for years to upgrade its antiquated mainframe computers, which process Americans' tax returns by churning through millions of lines of assembly code written by hand in the early 1960s.

But after more than 20 years and over $5 billion, there's still no end in sight. Not all computer systems can talk to each other, information isn't available in real time, and tax returns filed on paper are often manually entered by typists.

An internal strategy document written seven years ago likened the upgrade task to redesigning and rebuilding a densely populated city like New York, without evacuating it first or disrupting the "daily pattern" of the residents' lives.

The IRS' long-term goal is to run its operations with the efficiency Americans expect of banks and credit card companies, but it has consistently fallen short. Right now, for instance, a taxpayer who submits a tax return on a Monday will likely find that it will not be processed until at least the following weekend, thanks to limitations in the antiquated core of the agency's tax-processing apparatus. Over $3 billion was wasted in an earlier upgrade attempt in the 1990s. Last year, computer problems caused the IRS to erroneously hand out an estimated $318 million in fraudulent refunds.

IRS' ailing computers

To run the numbers on tax returns, the IRS relies on computer systems from the Kennedy administration.

1960s
IRS designs and launches Master File system, still its primary repository of taxpayer information today.

1970s
The Integrated Data Retrieval System comes into existence.

1986
IRS receives 25,000 tax returns filed by modem in the first year it offers its e-File setup, begins its Tax Systems Modernization effort.

1997
After spending more than $3 billion, agency scraps TSM project and issues "blueprint" for renamed Business Systems Modernization project.

1998
Congress passes the Restructuring and Reform Act of 1998, setting goal for IRS to ave at least 80 percent of tax returns filed electronically by 2007.

2000
Then-IRS Commissioner Charles Rossotti releases his modernization vision, compares task ahead to rebuilding a large city.

2004
IRS launches Modernized e-File system, which allows businesses to file tax returns online. Releases first version of Customer Account Data Engine, the intended successor to Master File.

2006
IRS releases updated Modernization and Vision Strategy that prioritizes systems to replace Master File and IDRS.

2007
IRS rapped again for losing track of computer equipment and falling down on security.

Government audits show that the many years of planned upgrades have been dogged by the same missteps that plague so many massive government computer upgrades: inadequate management, ill-defined goals, repeated cost overruns, and failure to meet deadlines and expectations. (Earlier articles in this occasional CNET News.com series have explored computer systems at Homeland Security and the FBI.)

"They have made advances, and there has been incremental progress and success, but they still struggle," said Margaret Begg, an assistant inspector general for audit, told CNET News.com in an interview. Begg specializes in evaluating the U.S. Department of Treasury's tax-related computer systems.

The U.S. Government Accountability Office, which has long warned of the risks associated with this complex project, reached a similar conclusion in a February report to Congress. The auditors said the IRS had made improvements, but its future strategy remains worrisome because it lacks clear deadlines for "consolidating and retiring legacy systems."

Losing at least $318 million
IRS Chief Information Officer Richard Spires says there's reason to believe things are looking up. In the three years since he joined the agency, Spires said in an interview this week, the IRS has refined its management processes, hired more talented people, and wised up to the perils of taking on more than it can handle.

"There are no guarantees in this world in the sense of what could happen in the future, but I think the confidence level in us and the confidence level in our team has grown," he said. Spires, a former executive at software developer Mantas who has degrees in electrical engineering, became the IRS' assistant chief information officer in 2004 and was promoted to the CIO post in September.

One potentially major change is that, up until about two years ago, officials had been thinking the IRS needed to replace all the legacy systems--meaning about $8 billion over 15 years. The agency backed away from that idea in its latest modernization plan (PDF), released in October, saying it intended to include at least some components of the older systems in the transformation.

"I think it's the prudent thing to do given our management bandwidth and the dollars we're going to get," Spires said, adding that many of the older COBOL-based systems are still "very maintainable." Created in 1959, COBOL (Common Business-Oriented Language) is a mainstay of mainframe programming but has been criticized for its verbosity and for, in older versions, not supporting local variables. Local variables are fundamental to modern programming techniques.