IRS updates modernization strategy

Tax agency will emphasize more frequent, incremental releases of products.

An Internal Revenue Service long-term strategy for modernizing information technology unveiled Tuesday largely codifies an approach that the agency's top technology executives introduced several years ago.

The tax agency intends to undertake more frequent, smaller, incremental releases of products, reuse systems when possible and involve business units with management of application development, according to an executive summary of the new five-year IT Modernization Vision and Strategy.

The IRS relies heavily on an early-1960s magnetic tape system encoded with an obsolete computer language to process tax returns. The agency began an ambitious effort in 1999 to replace that system with a digital one and to upgrade other internal systems. The project was nearly canceled in 2003, early during IRS Commissioner Mark Everson's tenure.

But new IT leadership managed to rescue the effort. A doctrine of smaller phases completed using better internal collaboration surfaced under former Chief Information Officer W. Todd Grams, who recently left the agency for another government position.

Since electronic tax processing was introduced during the Kennedy era, the IRS has progressively added layers of technology, creating a very complex environment. Its authoritative source of taxpayer data, the Master File, is updated through batch processing once a week. As a result, updated data from secondary systems may not find its way into the Master File for days.

"You don't have one source of the truth for taxpayer information," said Tom Lucas, IRS senior adviser for enterprise architecture, on Tuesday at an industry event sponsored by INPUT, a Reston, Va., market analysis firm.

The new strategy acknowledges that the modernization project will not strip out current systems as quickly as anticipated, Lucas said. "We've got to live with our existing systems, we've got to coexist during this transition period," he said.

New systems gradually are coming online. The Master File replacement -- called the Customer Account Data Engine -- processed about 7 million tax returns during the 2006 tax season and should handle more than 30 million in 2007, said Richard Spires, who recently took over as agency CIO.

Having both CADE and the Master File store taxpayer data will add complexity in the short term, Spires acknowledged: "But keep in mind, you're either on the Master File or on CADE, you're not on both. The idea is because of this transitional period, we're going to have both operational for a while."

The release of the modernization strategy comes after some oversight organizations pressured the IRS to update its plan. The tax agency plans to revamp the strategy annually, "so that hopefully it becomes a living document that is always current," Spires said.