IRS information systems get 2007 tax season report card

The tax deadline is April 15, but the General Accountability Office has already given the Internal Revenue Service a preliminary report card.

And the results aren't half bad considering the IRS implemented a bevy of information systems changes. In a report released April 4, the GAO said "early data show that tax systems changes have not had a significant effect on filing season operations or performance."

Specifically, the IRS changed its information systems to account for a telephone excise tax refund and an option where a taxpayer can route refunds to three separate accounts. Meanwhile, the IRS is updating the bulk of its information systems.

Simply put, how the IRS manages its IT will determine whether it stays on the good side of the GAO, which has dinged the tax agency before. Among the risks facing the IRS, project management is one of the biggest.

"Another high-risk challenge is IRS’s ongoing Business Systems Modernization (BSM) program, a multibillion-dollar, highly complex effort that involves the development and delivery of a number of modernized information systems that are intended to replace the agency’s aging business and tax processing systems."

Among the key points in the GAO report:

The IRS delayed a tax return processing system. The GAO said:

"In early March, the latest release of the Customer Account Data Engine (CADE), one of IRS’s key tax return processing systems, became operational—2 months behind schedule. As a result of the delay, IRS has had slower processing times and delayed refunds for up to several days for millions of taxpayers. This delay may have a more serious impact on IRS’s ability to deliver future releases of CADE, because it caused contention for key resources, but it is too early to know. Taxpayers’ use of the Free File program (an alliance of companies that offer free return preparation and electronic filing on their Web sites to eligible taxpayers) is 5.5 percent below last year at this time."

CADE is critical to the IRS since the system "is being introduced through a series of releases and is intended to fully replace IRS’s antiquated Individual Master File system of taxpayer accounts by 2012."

Faced higher than expected costs. The CADE system as well as a new electronic system "experienced significant cost overruns during 2006."

Strained resources because of the CADE delay. "Delays in deploying the latest release of CADE have resulted in contention for key resources and will likely impact the design and development of the next two important releases, which are scheduled to be deployed later this year."

Despite those worries, the IRS operations are on par with where they were the same time a year ago. As of March 16, the IRS:

• Processed 63.5 million returns compared to 62.7 million returns;
• Issued 55.2 million refunds for $139.3 billion compared to 56.3 million refunds for $134 billion;
• Saw 77 percent of individual tax returns filed electronically, up 5.3 percent from a year ago;
• Deposited 76.2 percent of refunds directly;
• Used 1,700 fewer staff years for processing tax returns than in 1999 to save $78 million;
• Delivered more service through the IRS Web site. Visits to IRS.gov were up 10 percent in 2007 compared to the prior year, downloads increased 13 percent and searches increased more than 15 percent;
• Handled 19,406,273 telephone calls below projections. Of those calls more than 40 percent were answered by IRS customer service reps. The remainder went to an automated menu;
• Took 4.4 minutes to answer questions, up from 3.1 minutes in 2006. In addition, taxpayer disconnects were up to 12.7 percent from 9 percent in 2006;

Since incoming calls came in lower than projected the GAO noted that the IRS has excess capacity in its call centers. The GAO recommended that the IRS consolidate its call centers.