IRS modernization, e-filing pushed

Fiscal 2002 budget

The Bush administration wants $450 million for the Internal Revenue Service's modernization program in fiscal 2003 — a 15 percent increase to keep the project on time and on target.

As expected, the administration's budget supported continued funding for the 15-year multibillion-dollar program that would eliminate the IRS' outdated computer system and turn the tax agency into a paperless one. The budget also calls for finding ways to let taxpayers file their returns for free to spur more e-filing, an idea that has drawn protests from the tax software industry.

The $450 million request is an increase over the $391 million earmarked in fiscal 2002 appropriations for modernization. But most experts say the modernization program is urgently needed and can't come soon enough.

"The long-range solution to many of the IRS' problems is to modernize its business processes and information technology," said the independent IRS Oversight Board. "The Oversight Board recommends that [business systems modernization] be accomplished as quickly as possible, consistent with the IRS' ability to manage the program and absorb change."

Larry Levitan, chairman of the IRS Oversight Board, said funding modernization is critical to homeland security because the IRS "pumps the fuel that keeps the system running."

"If the IRS does not operate effectively, it impacts the taxes that are collected for every single program," Levitan said.

Modernization is expected to make the IRS more efficient and responsive to taxpayers as well as making sure taxes are collected fairly. Modernization also is expected to enable the agency to give taxpayers answers they seek more quickly.

Some opponents still say the IRS is wasting money. "In the course of three years, we've put down nearly $1 billion for modernization and the results are a lot more elusive than the dollars that have been spent," said Pete Sepp of the National Taxpayers Union. "At some point in time, the agency won't be able to make excuses that they have been chronically underfunded."

The budget proposal also said the IRS has serious problems answering the millions of phone calls it gets every year. This year's budget calls for $102 million for new customer service and compliance staffing. And it urged the IRS to come up with a better telephone answering system.

"What business would survive for long if it failed to pick up the phone one time in four?" the budget asked.

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