IRS Tech Issues

I have a memory from my first job as a lawyer that reminds me how slow the legal profession can be embracing new technology. Or maybe it just reminds me of how old I am.

It was 2003 and we were using these lined, carbon copy half-sheets we called “quick notes” to send informal hand-written messages to opposing attorneys, doctors, etc. I don’t remember sending them to clients because they didn’t really make the best impression, so we would dictate actual printed letters on official letterhead when writing to clients. We mailed the top white sheet to the recipient and saved the yellow carbon copy for the file. This form of communication seemed a little dated to me, even then, but it worked, and it was efficient. Even though it had been in the mainstream for about 10 years, I do not remember using email at that job.

Some people, or groups of people, just don’t latch onto technology very quickly. Because the taxpaying public includes every category of person imaginable, it is easy to see how a large percentage of taxpayers would have a hard time with the IRS’ suite of web-based services. The National Taxpayer Advocate, Nina Olson, is concerned about those who may get left behind as the IRS moves more and more of its services online. These are some of the concerns outlined in her annual report to Congress that was published a few days ago.

Somewhat of a contradiction has been developing over the years as the IRS formulates its “future plan” that heavily emphasizes technology and, specifically, online taxpayer accounts. Online tools are supposed to make things easier and more accessible for taxpayers (in fact, that is always their stated purpose), but it is obvious that the main purpose is to save the IRS money. Can you have both? Sure you can, but the key is that you don’t completely phase out the low-tech alternatives so that there are still options for the “quick note” users. For example, the IRS plans to phase out face-to-face taxpayer assistance. First they changed the name of walk-in sites to “Taxpayer Assistance Centers.” Then they plan to eliminate walk-ins and require appointments. Is it only a matter of time before these assistance centers are completely off limits to the public? It’s true, the IRS has a tricky balancing act when it comes to implementing new technology, and frugal administration of the tax system is certainly a worthy goal. But forcing everyone to embrace online accounts and tools will only cause more frustration, distrust, and inefficiency — things the IRS has been trying to avoid for decades.

IRS Uses 40-Year-Old Data Processing System

The Commish recently addressed the National Press Club to discuss some of the IRS’ major deficiencies and how the agency is overcoming them by never being satisfied with the status quo:

[T]he germination of any idea…the cultivation of a concept…is only the beginning. Then, begins the real work of teasing it into life, and growing it. And that process never ends. It’s one of continuous improvement.

~IRS Commissioner, Douglas H. Shulman

The speech is long, and my attention span is not.  If you want to read the whole thing, here is the link.  But there was at least one interesting point that I want to share having to do with technology.  In my experience, small tax problems can become bigger when IRS technology is not up to par.  I have always said that the IRS has been behind the curve when it comes to technology.  Even the strides that have been made recently to appear tech savvy seem to have been more for show than anything.  I’m referring to changes that have been made to the IRS website and their entry into YouTube and social media.

Well, it turns out I’m even more correct than I thought.  Shulman says that the IRS uses the same basic data processing system that was used in the 1960s.  Here’s why (according to the Commish) the IRS has not made a comprehensive technology upgrade:

  • The IRS believes in the philosophy “if it ain’t broke, don’t fix it.”
  • The IRS relies on a complicated hodgepodge of new and old computer systems (so it’s not ALL old)
  • The IRS hasn’t been able to get the funding they need to make a comprehensive upgrade

So, which is it?  Is it because they don’t get enough funding, or is it because they are satisfied with the way the 40-year-old technology works?  I suppose it’s both.  The amount of funding is never quite enough to do any kind of comprehensive technological overhaul, and when they do get some money, they (quite correctly) spend it on whatever is broken regardless of how old or new it is.