IRS Says It Depends on Kennedy-Era Computing

irs kennedy era computing for tax returns
If dealing with federal income taxes have seemed a byzantine and painful process, there may be a reason. IRS Commissioner John Koskinen told the Senate on Tuesday the agency is woefully behind the times when it comes to computers and automation, according to a CNN Money report.

%VIRTUAL-pullquote-We're running applications we were running when John F. Kennedy was president.%"We're running applications we were running when John F. Kennedy was president," Koskinen said.

His statement was in response to questions from anything-but-friendly Senators who wanted to know why it took so long for victims of identity theft to get new tax identification numbers.

According to Koskinen, the IRS has computer systems that were customized in the 1950s and 1960s. More recently, the agency has been spending significant money trying to upgrade the Camelot-era systems.

The IRS budget request for fiscal year 2014, which ended last September, shows that the upgrade spending is hefty. In fiscal 2012, the IRS spent $1.8 billion on information systems. The number rose slightly for 2013 and the agency wanted $2.2 billion in 2014.

It's like driving a Model T that now has a great GPS system and wonderful sound system, [and] has a rebuilt engine," Koskinen said.

Senate Republicans weren't terribly understanding in a letter they sent Koskinen at the end of January.

Your agency spends billions of dollars every year on information technology systems -- roughly twenty percent of its entire budget. Given this extraordinary amount, we question the efficiency in which IRS IT systems are procured, and we look forward to working with you in the coming months to find ways to spend this money in a manner that provides better value to taxpayers.

Some significant part of the cost is due to new tax laws and programs that Congress has told the IRS it must administer, Koskinen testified. For example, under the Foreign Account Tax Compliance Act, the IRS must collect data from foreign-based financial institutions that have accounts held by U.S. citizens.

"We have 145,000 foreign financial institutions about to provide us data under [that act]," Koskinen said. "All of those systems had to be built and rebuilt to absorb that data."

According to National Taxpayer Advocate Nina Olson, budget constraints on the IRS have, in general, created a "devastating erosion of taxpayer service."

"Taxpayer service has reached unacceptably low levels and is getting worse, creating compliance barriers and significant inconvenience for millions of taxpayers," a report from Olson's office stated. Only half of the projected 100 million taxpayer telephone calls it receives will actually be answered.

The irony is that in 1953, when it first was using computers, the IRS had to convince the public that it was a good idea. Here's a 10-minute video the agency created to calm taxpayer distrust.
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