IRS tests database, sets free-filing deal

The IRS has begun testing the Customer Account Data Engine, the database management system that will replace the nearly 40-year-old Master File and Integrated Data Retrieval System.

“We launched a pilot three weeks ago,” said David A. Mader, assistant deputy commissioner of the IRS. Mader spoke at the second annual Treasury Information Processing Support Services Symposium at Washington.

The CADE pilot kickoff is one of two IT breakthroughs for the agency in the last month. The IRS also for the first time next year will let taxpayers file returns online free of charge.

The IRS and private-sector tax services reached an agreement last month to provide free online tax preparation. Companies will form a consortium to offer free services. The Treasury Department has yet to determine the number of companies that will participate.

For the CADE test, the service is using 2001 data from 7 million to 8 million taxpayers who filed 1040EZ forms this year.

“It’s a baby step,” Mader said.

The test will run through December, and the IRS plans to use CADE to handle live tax data from 1040EZ forms for 2002 returns filed next year.

Computer Sciences Corp. is leading the modernization effort with a group that includes IBM Corp., KPMG LLC of New York, Northrop Grumman Corp. and Science Applications International Corp.

Once the IRS converts from its old flat-file system to CADE, the service plans to update its data daily.

Faster file updates

Now, the agency takes up to eight working days to update the Master File using batch processing from tapes mailed from facility to facility.

The 1.5T Master File consists of three flat files. The Individual Master File, or IMF, holds data about individual taxpayers; the Business Master File, or BMF, contains business returns; and the Nonmaster File holds cases that don’t fit into either of the other two categories.

With CADE, IRS workers will access a central repository of taxpayer information from PCs, and taxpayers will be able to get information on refunds within three days instead of six weeks.

As to online filing, taxpayers will find the links to services provided by the vendor consortium through the IRS Web site, and through the federal FirstGov portal.

In previous years, online filers on average paid about $12.50 in filing fees and also had to buy tax preparation software. Under the new system, tax preparers will not charge filing fees and will provide software for free.

“This new e-filing partnership is one positive step forward,” Treasury secretary Paul O’Neill said. “We’re taking advantage of technology to reduce the cost and the hassle of filing for millions of taxpayers.”

The agreement has a base term of three years, with two two-year options. The IRS will not compete with the consortium to provide free, online tax preparation and filing services.

A-76 concerns

Earlier this year, Congress voiced concerns that IRS e-filing efforts might violate OMB Circular A-76, which prohibits the government from competing with industry to provide commercial services or products.

The IRS will maintain and host a Web page for the consortium that will go online by Dec 31. Companies will submit content to the IRS, which will determine what appears on the Web.

To lure more online filers, the agency wants to extend the deadline for returns filed electronically from April 15 to April 30. The move was called for in the Tax Relief Guarantee Act of 2002. The House passed HR 586 earlier this year; it is awaiting action by the Senate.

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