At last: IRS starts using modern database for returns

Internal Revenue Service officials have begun processing a number of taxpayer returns on a new central database system, marking the first time in 40 years that individual tax returns have been processed using modern computer technology.

The achievement put IRS officials in a celebratory mood this week, prompting IRS Commissioner Mark Everson to declare, "We've waited a long time for this moment."

Several years of frustrating and costly delays preceded the successful processing run that began last week. IRS officials said they began the much-awaited transition to the new computer system by processing a set of 1040EZ returns. Interest in the success of the processing run and anxiety about a potential failure ran so high that IRS officials installed a 24-hour hotline that employees involved in the program could call for a status check, said Paul Cofoni, president of the federal sector group at Computer Sciences Corp., which leads the alliance of contractors working on the project.

The conversion to the new database system, known as the Customer Account Data Engine, will happen in phases as IRS officials move the processing of more and more complex taxpayer returns onto the system. Officials said they expect to use one version of the database, CADE Release 1.2, to process more than 2 million 1040EZ returns during the 2005 filing season.

The 1040EZ is the simplest taxpayer return. But a successful 1040EZ processing run demonstrates that the new database system and its supporting infrastructure are fundamentally sound, Cofoni said.

"About 90 percent of the first release was putting in place the infrastructure and all the connections back to the legacy systems that will be needed for all future releases," Cofoni said.

A more advanced version, known as CADE Release 1.3, will include a business rules engine that is expected to pose a difficult set of new technical and operational challenges for the IRS and CSC, its lead prime contractor.

Many large financial institutions are moving to a technology that permits them to build software engines to maintain and update all of the rules that are important to their business, Cofoni said. "It's a relatively new idea and the technology that exists for it is still evolving," he said.

CADE will gradually replace the IRS' 40-year-old Master File, a system that technical experts say has grown alarmingly fragile. The old Master File uses magnetic tapes to store tax information on more than 200 million individual and corporate taxpayers.