Title: IRS's Reliance on Aging Technology Impacts Taxpayers, and
Modernization Plans are Incomplete and Delayed

Description: The IRS relies heavily on outdated computer software and
hardware to perform its day-to-day operations. This includes things that
would impact taxpayers, such as processing tax returns and refunds, and
collecting taxes. We find out about IRS's efforts to modernize its IT
from GAO's Dave Hinchman.

Related GAO Work: GAO-23-104719, Information Technology: IRS Needs to
Complete Modernization Plans and Fully Address Cloud Computing
Requirements

Released: February 2023

[Music]

[Dave Hinchman:] IRS relies on information technology to perform mission
critical functions. However, this vital technology relies on outdated
and expensive legacy systems.

[Holly Hobbs:] Hi and welcome to GAO's Watchdog Report, your source for
news and information from the U.S. Government Accountability Office. I'm
your host, Holly Hobbs. The IRS is responsible for processing more than
150 million tax returns each year, as well as helping taxpayers
understand their taxes and answering questions, among other things. But
to complete this work, the IRS relies heavily on outdated legacy
computer and data systems. Our new report looks at the challenges that
IRS's use of older systems has caused, as well as the agency's plans to
modernize this technology. We'll find out more from GAO's Dave Hinchman,
an expert on IT systems. Thanks for joining us, Dave.

[Dave Hinchman:] Thanks, Holly. Great to be here.

[Holly Hobbs:] So, Dave, for taxpayers, what does it mean that IRS uses
these legacy systems?

[Dave Hinchman:] IRS relies extensively on IT systems to collect
trillions of dollars in taxes every year, distribute hundreds of
billions of dollars in refunds every year, and otherwise carry out its
mission of providing service to the American taxpayers in meeting our
tax obligations. And IRS's use of legacy IT systems may be older,
possibly outdated, impacts taxpayers in different ways. IRS has itself
acknowledged that these older legacy systems we're talking about totally
limit IRS ability to provide the kind of service taxpayers have grown
accustomed to receiving in today's world. If you think about, we're very
used to using our phone to log on to our bank's mobile app and getting
incredibly detailed information about our accounts and financial
transactions. But GAO recently reported that IRS's Where's My Refund
application, which is one of IRS's most popular and in demand services,
isn't capable of accessing detailed information on an individual's tax
return status. And this was in turn leading taxpayers to then call IRS's
toll free numbers to get this information they're looking for. And these
are calls which due to IRS staffing shortages-- might, at best, have
insanely long waits to talk to someone, at worst might actually go
unanswered.

[Holly Hobbs:] When we say IRS uses outdated or legacy systems, what do
we mean?

[Dave Hinchman:] That's a great question. The definition can vary from
federal agency-to-federal agency. In the case of IRS, they define legacy
as a system that's outdated but still critical to day-to-day operations.
And under this definition, this includes IRS custom built applications
that are over 25 years or older, or which are written in outdated
programing language. But also includes off the shelf software that's
more than two versions behind the current version, and hardware that
industry standards consider to be aged. When we did our analysis of
IRS's IT enterprise, we found that this definition applied to about a
third of IRS's custom applications, a quarter of their off the shelf
software, and about 10% of their hardware assets.

[Holly Hobbs:] Can you give us some examples?

[Dave Hinchman:] I think the most notable example of all of this is one
of IRS's custom applications, and it's one that directly impacts the
taxpayer experience. And it's known as IRS's individual master file.
This is the primary system that IRS uses to process individual taxpayer
account data, including assessing taxes, generating refunds, and
updating the accounts. And Holly, the individual master file is now over
50 years old--meaning that it was built in the late-1960s, at the same
time that we were sending crews to the moon on the Apollo missions. And
although the individual master file system has been updated over the
years, it still relies on COBOL, which is a programing language that
fewer and fewer people are familiar with. From what we can tell, COBOL
isn't even really taught anymore and is considered by some in the field
to be an obsolete computer language. IRS has been trying to modernize
the individual master file for several decades, has spent hundreds of
millions of dollars, and is now targeting not until 2030 at the earliest
for the completion of this vital work. At which point the system will be
over 60 years old.

[Holly Hobbs:] So the IRS knows it has problems, and it has plans to
modernize its technology. What are these plans and when might we see
changes?

[Dave Hinchman:] So the most current modernization plans are covered by
a high-level, 5-year plan for modernizing IRS's IT that the agency
issued in April 2019. And so in 5 years, that goes through 2024. This
plan identifies a series of initiatives supporting four broad categories
of work, such as taxpayer experience and cybersecurity. And as of August
2022, IRS was pursuing 21 different initiatives, each with detail
supporting plans to implement this high-level plan. This includes
initiatives like replacing the individual master file that we've talked
about and also expanding web services that are available to taxpayers.
And so we looked at these plans and unfortunately, we realized that all
of these 21 initiatives have completion date beyond the current high
level plans and date of 2024. And there's a further complication,
earlier this year, IRS suspended six of the 21 initiatives because their
resources were reassigned to address higher organizational priorities.
We still haven't seen what impact this will have on that targeted
completion date of 2030 for replacing the individual master file.

[Holly Hobbs:] Dave, beyond delays, what else were we looking for in
IRS's plans?

[Dave Hinchman:] Specifically, the three things that we looked for were--
one, a description of the work to be completed; two, milestones for
completing the work; and three, how IRS plans to dispose of any legacy
systems that are part of that modernization effort. All of the plans
included both descriptions of the work and project milestones, which is
great. This is exactly what we wanted to see. And 12 of these plans were
geared towards new capabilities that IRS wants to build out. But the
remaining nine plans were very much geared towards replacing legacy
systems. And of those nine plans, only three included the details we
expected to see about disposing of legacy systems. This raises questions
for us about whether IRS has really thought through what they plan to do
with these legacy systems that they want to replace.

{Music}

[Holly Hobbs:] So Dave just told us that the IRS's use of legacy IT
systems have had an impact on taxpayers as well as the IRS itself. And
that while IRS has plans to modernize these systems, its efforts have
been delayed and are missing some key components that could further
delay updates. So, Dave, what can the IRS do to improve its efforts?

[Dave Hinchman:] We recommended that IRS establish timeframes for
addressing the disposition of legacy systems for the six modernization
initiatives that didn't include this element in their plans. In
addition, IRS needs to follow through on documenting complete
modernization plans for these six initiatives. And in the agency's
formal response to our report, IRS agreed with all of our
recommendations and outlined plans to address a number of the concerns
we raised. I think the planned actions that IRS shared in their letter
are a substantial public commitment to addressing the findings in our
report. And these actions, if taken, could have a positive difference in
addressing the gaps that we identified in our work.

[Holly Hobbs:] And last question, what's the bottom line of this report?

[Dave Hinchman:] At the end of the day, IRS relies extensively on
information technology to perform mission critical functions. IT is
literally the vehicle on which our taxes are processed. However, this
vital technology relies on the heavy use of outdated and expensive
legacy systems. And these legacy systems are the same things that
contribute to security risks, unmet mission needs, and shortage of
skilled staff. IRS needs to identify timeframes for completing those
plans, and then follow through on those timeframes to help ensure the
success of their modernization efforts.

[Holly Hobbs:] That was Dave Hinchman talking about GAO's recent review
of IRS's plans to modernize its legacy systems. Thanks for your time,
Dave.

[Dave Hinchman:] Thanks, Holly. It was great to be here.

[Holly Hobbs:]: And thank you for listening to the Watchdog Report. To
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