The IRS and IT: Sorting fact from fiction

Shutterstock image: 1040 IRS form.

The failures are high profile, easy to spot and they just keep coming: billions in bogus tax credits paid out, an "abysmal" customer service rate around 40 percent and the awarding of millions in employee bonuses amid budget cuts, to name a few.

But when it comes to IT, is the IRS' story really all bad? Is a lack of funding to blame for the shortcomings? Is a mismanaged approach to technology to blame for the agency's failings?

The answers, respectively: not entirely, not really and kind of.

Some of the agency's toughest critics admit the IRS is no badly managed anomaly in government, tech-wise.

"They're better than more than half of the agencies we look at," said David Powner, the lead on the Government Accountability Office's February report on IRS technology. "The bottom line is, the IRS really used to be the poster child for IT."

For years, congressional oversight of the agency was tight, forcing the IRS to make do with relatively limited funds -- and it did so rather effectively, Powner said.

Still, in the past decade especially, the agency has stumbled technologically.

Web initiatives have been subsumed under a broad "Service on Demand" strategy instead of a unique online services strategy, against repeated GAO advice, and major projects -- including the fraud-detecting Return Review Program, originally due to be completed this year -- have been put on indefinite hold.

Of the IRS's major IT projects, GAO reported as of September 2014 that most were within 10 percent of cost estimates (11 out of 17) and/or within 10 percent of schedule estimates (13 out of 17) — but often meeting those targets was achieved by gutting the projects' scope.

"Sometimes they stay within cost and schedule by cutting deliverables," noted Jay McTigue, GAO's director of tax issues.

"We've been recommending for years that the IRS needs a measure of scope," said Powner, noting that the agency, the GAO and the American people are being denied "an accurate picture on delivery" when it comes to IRS tech investments.

And while the IRS might point to mandates from the outside as a reason for its struggles — the agency had to dedicate nearly a billion dollars last year to accommodating Affordable Care Act requirements -- the GAO disagreed.

"I don't think you can blame everything on mandates and the like," Powner said.

McTigue concurred, pointing to the agency's continued resistance to formulating dedicated digital strategies.

"They have a high-level idea of where they want to go, but what we haven't seen is discrete building blocks towards that 24/7, one-stop shop [tax service] that they've talked about," McTigue said. "They're not going to get there overnight, and they're not going to get there with [just] a high-level strategy."

McTigue and Powner both noted that when it came to the IT implementation of the health care law requirements, the IRS excelled, demonstrating that the agency has talented tech people — just not necessarily enough to handle all of its projects at once.

"They had the A-team on [health care work]," Powner said. "I have to give them kudos for that."

Powner suggested a central issue may simply be that the IRS's IT portfolio is too broad. "Is it too much?" he asked. "That's a good question."

But does the IRS need more funding?

As always with that question, the answer depends on whom you ask.

The IRS's fiscal 2015 appropriation was $10.9 billion, down $1.2 billion since fiscal 2010. The agency is requesting $12.9 billion for 2016, $3.2 billion of which would be dedicated to IT ($2.3 billion to major projects).

FCW made multiple requests for interviews with IRS officials on this topic, to no avail. But in public remarks, agency leaders have put the blame for shoddy service squarely on the shoulders of the Republican-led Congress that has trimmed their funding over the past half-decade.

IRS Commissioner John Koskinen said as much before the House Ways and Means Committee last month. "[W]hile I am pleased with the performance of IRS staff in very difficult circumstances, I am disappointed that because of budget cuts, taxpayers did not get the customer service experience they deserve," he testified.

The Ways and Means Commission fired back by pointing to the millions in bonus money the IRS has paid out -- contrary to Office of Management and Budget guidance -- and the many hours IRS employees spent on union activities instead of customer service work.

Besides, Congress does not control all of the IRS's purse strings.

The agency has control over how its user fee revenue is distributed. And the fact that IRS executives decided to slash the amount of user-fee dollars dedicated to taxpayer services in fiscal 2015, at the same time that budget allocations were cut, has struck some as the tax agency's version of shutting down the Washington Monument or national parks during sequestration -- hit the customers where they'll notice it, so they'll support you when you ask for more money.

GAO's Powner and McTigue, for their part, noted that the IRS has plenty of options besides budget increases to address its problems, IT and otherwise.

"We would never say that they need more resources," McTigue said. "We've been pushing them to stop some of what they're doing and set aside money [for technology investments]."

While the IRS's IT budget had been "flatlined" around $2.4 billion for the last few years, that's "a lot of money," Powner noted, and the problems may stem from a lack of competent program managers rather than a lack of overall funding.

And even on failures, Powner found a silver lining.

"In some ways it's encouraging," he said of the Return Review Program's halting, noting that far too often agencies continue to stagger forward with an IT project everybody knows is doomed. "There are so many examples in government of throwing good money at a bad approach," he said.

The fact that the IRS was willing to cut its losses and stop the project is a good thing, and as the project lingers in a reconsideration-and-planning phase, Powner said it's a perfect example of a time when money isn't the issue -- leadership is.

About the Author

Zach Noble is a former FCW staff writer.


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