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Information Technology: IRS Needs to Complete Planning and Improve Reporting for Its Modernization Programs

GAO-24-106566 Published: Mar 19, 2024. Publicly Released: Mar 19, 2024.
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Fast Facts

The Internal Revenue Service relies extensively on IT systems to collect taxes and distribute refunds. In August 2022, Congress appropriated tens of billions of dollars to the IRS, partly to help the agency modernize its IT systems.

The IRS intends to use some of these funds to replace legacy IT systems, give taxpayers more online tools and services, and protect taxpayer privacy and security. However, the agency hasn't fully updated its plans to incorporate these additional funds. For example, the IRS needs to make changes to the scope and milestones of its IT modernization programs.

We recommended, among other things, that it do so.

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Highlights

What GAO Found

In April 2023, the Internal Revenue Service (IRS) issued its agency-wide strategic operating plan outlining its vision to use billions of dollars contained in the Inflation Reduction Act of 2022 appropriation to transform the administration of the tax system and services provided to taxpayers. The plan identified five objectives, including a technology objective underpinning the other four.

Figure: Inflation Reduction Act Strategic Operating Plan Transformation Objectives

Figure: Inflation Reduction Act Strategic Operating Plan Transformation Objectives

The IRS plan, among other things, states that it will use the technology objective to retire and replace legacy systems and update programming languages, give taxpayers tools to access their data and use online services, and ensure continued security and privacy of taxpayer data. IRS identified eight initiatives and 38 key projects for the technology objective but noted the list of projects was not comprehensive. This is consistent with the Treasury Inspector General for Tax Administration 2023 report stating that the technology objective had a total of 142 projects. These 142 represent about 30 percent of the 475 projects for all five objectives.

Projects under the technology objective include ongoing modernization programs that have been modified to account for the new appropriations. However, plans showing changes to the scope of future work, milestones, and efforts to retire legacy systems have not yet been updated. IRS officials stated that updating these plans is contingent on completing a roadmap to implement the strategic plan. These officials added that the first version of the roadmap was completed in December 2023. However, this roadmap did not include the technology objective. They said that this objective would be included in version two of the roadmap which they expected would be completed very soon. Completing the roadmap and then updating ongoing IT modernization plans to reflect revisions driven by the strategic plan are essential to the transformation's success.

Regarding cost and schedule performance of IT modernization programs, IRS reported meeting most of its quarterly targets for fiscal years 2022 and 2023. These reports, however, could be improved by including programs' historical cost and schedule goals and how quarterly performance compares to overall program goals. For example, GAO previously reported that a key IT investment was within schedule estimates for 2019 and 2020 but that IRS had changed its overall program plans several times. These changes led to a 9-year milestone delay--from 2014 to 2023. However, the quarterly reports did not show this lengthy delay because they do not include programs' historical cost and schedule goals.

Why GAO Did This Study

IRS relies extensively on IT to annually collect trillions of dollars in taxes, distribute hundreds of billions of dollars in refunds, and carry out its mission of providing service to America's taxpayers in meeting their tax obligations. In August 2022, Congress appropriated tens of billions to IRS through fiscal year 2031 to bolster taxpayer services and enforcement of the tax code, and modernize IT, among other things.

The Joint Explanatory Statements accompanying the Financial Services and General Government Appropriations Bills for 2022 and 2023 include provisions for GAO to review the status of IRS's IT investments. This report, among other things, summarizes the technology objective of IRS's strategic plan, determines the extent to which the agency has updated plans for its IT modernization programs, and assesses IRS progress made on its modernization programs in fiscal years 2022 and 2023.

GAO reviewed IRS's strategic operating plan and associated program documentation. In addition, GAO assessed IRS's progress on its reported modernization program cost and schedule performance for fiscal years 2022 and 2023. GAO also interviewed cognizant IRS officials.

Recommendations

GAO is making three recommendations to IRS to complete a technology roadmap, update individual modernization plans, and improve its reporting on modernization progress. IRS agreed with all three recommendations.

Recommendations for Executive Action

Agency Affected Recommendation Status
Internal Revenue Service The Commissioner of the IRS should complete the enterprise roadmap and ensure it addresses the strategic operating plan's technology objective. (Recommendation 1)
Open
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Internal Revenue Service The Commissioner of the IRS should complete plans for its modernization programs that include (1) milestones to complete the modernization, (2) a description of the work necessary to complete the modernization, and (3) details regarding the disposition of the legacy system, if applicable. (Recommendation 2)
Open
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Internal Revenue Service The Commissioner of the IRS should include information including a history of programs' cost and schedule goals and showing how the quarterly cost and schedule performance aligns with fiscal year and overall goals for the programs in its quarterly reports to Congress. (Recommendation 3)
Open
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

Full Report

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Topics

Business systems modernizationIndividual retirement accountsInformation technologyIRS modernizationIT infrastructureIT investmentsLegacy systemsPerformance measurementTaxpayersCost and schedule