Boost IRS funding to avoid system collapse, Oversight Board says

Funding for business systems modernization at the Internal Revenue Service should be significantly higher to cut costs and delivery time and to avoid a catastrophic collapse of archaic legacy systems, the IRS Oversight Board said in a report released today.

Later in the day, IRS Commissioner Mark Everson disagreed with the board’s view of the modernization budget, calling it a balanced request. “My belief is that it is an appropriately focused program that will allow us to devote the right management attention and resources and knock off the important things,” Everson said after a speech at the National Press Club in Washington.

The board urged a 6 percent increase over what President Bush requested in IRS funding for fiscal 2006, from $10.7 billion to $11.6 billion. This includes $140 million more for business systems modernization and $78 million for other initiatives to strengthen the modernization program.

The president’s request seeks an increase in tax enforcement, but at the expense of customer service and modernization, the report said.

“The IRS is now solidly on the right track and is making progress, but [it] must be given the resources to achieve its strategic objectives,” said IRS Board Chairman Raymond Wagner Jr. Among its gains, IRS’ computer modernization program met its cost and schedule milestones in 2004, and the first taxpayers have been moved off the old tape-based Master File system to the Customer Account Data Engine.

Congress has reduced modernization funding by almost half in recent years, from $388 million in 2004 to the $199 million request for 2006. The cuts will make the program take longer and cost more than necessary.

“Of greatest concern is the age of IRS’ existing computer systems, which will eventually become impossible to maintain. As time passes, a catastrophic disruption in our nation’s tax system becomes more likely,” the report said.

IRS should instead accelerate systems modernization, which will strengthen the agency’s efforts to enforce the tax law and improve customer service, according to the report.

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