Outdated computer system taxing IRS resources

Tax modernization plan deemed a failure

NEW YORK (AP) -- The Internal Revenue Service may take a $4 billion loss to its own books because of failed modernization attempts.

The IRS has found that its customer service representatives must use as many as nine different computer terminals, each of which connects to several different data bases, to resolve problems, according to a report published Friday in the New York Times.

"Dysfunctional as some of these systems may be today," the agency "is wholly dependent on them" to bring in $1.4 trillion in taxes a year, Arthur Gross, the IRS's assistant commissioner told the Times.

Gross said he doubted the IRS has the "intellectual capital" to develop modern computer systems.

Gross said the agency's Tax Systems Modernization effort is failing, and that it already has killed a project to turn paper tax returns into electronic images after paying $284 million to develop it. The Times said 12 other projects are under review.

The systems, which cost the agency $4 billion, just "do not work in the real world," Gross said.

Agency reportedly seeking outside help

Meanwhile, The Washington Post has reported that because of problems the IRS is planning to survey private companies about building and operating a system to process about 200 million tax returns each year.

In a 43-page report sent last week to the House and Senate appropriations subcommittees that oversee the Treasury Department, the IRS said contracts could begin about four years after the agency evaluates the companies' replies.

But any move to hire companies to process taxpayers' returns will probably draw complaints from people concerned about privacy. The Post reported that agency lawyers were reviewing laws regarding which government functions cannot legally be entrusted to the private sector.

The Post reported some of the agency's problems are related to its aging computer systems, noting the system used to enter data for processing and posting to a taxpayer's file is 12 years old and a system that routes payments for deposit is 19 years old.

Gross told the Times that the IRS must rely on the antiquated systems at least for the foreseeable future, and that modernization would probably come piecemeal instead of all at once.

Copyright 1997   The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

Related CNN transcript:

• Experts feel that the IRS needs to be reformed

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• Internal Revenue Service

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