The IRS System Processing Your Taxes is Almost 60 Years Old

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The IRS’ Individual Master File may be the oldest IT system in government and its failure could disrupt tax processing nationwide.

One of the IRS’ most important tax-processing applications is old enough to be a grandparent, and officials warn a failure during tax season could have dire economic ramifications or delay tax refunds for 100 million Americans.

The Individual Master File, a massive application written in the antiquated and low-level Assembly programming language, is comprised of data from 1 billion taxpayer accounts going back decades, and chiefly responsible for receiving individual taxpayer data and dispensing refunds.

Despite hundreds of millions in spending, plans to fully modernize the application are more than six years behind schedule, and in a statement to Nextgov, IRS revised its new timeline for a modernized IMF to 2022.

“To address the risk of a system failure, the IRS has a plan to modernize two core components of the IMF by 2021, followed by a year of parallel validation before retiring those components in 2022,” the IRS said.

The timeline could slip further, however, because IRS will need the authority to hire at least 50 additional employees—and backfill any losses—and receive an additional $85 million in annual non-labor funding for the next five years. The president’s fiscal 2018 budget request would cut IRS funding by $239 million.

In the statement, IRS said IMF “is antiquated, with an architecture and design that dates back to the 1960s,” and admitted fewer programmers understand the old Assembly code. Auditors at the Government Accountability Office have said IRS has more than 20 million lines of Assembly code.

“The antiquated code is limiting and inflexible in today’s world of databases. Also, the population of developers that understand the IMF code is diminishing as they retire. This means fewer individuals we can hire and train to make necessary filing season changes and address IMF operational and maintenance issues thus creating a higher risk of failure with each passing year,” IRS said. “In spite of this, the code is still robust. With investments in recent years to modernize the IMF infrastructure platform, it continues to run reliably.”

The IRS’ main efforts to replace the IMF is the Customer Account Data Engine, which was canceled in 2009, and the subsequent modernization effort CADE 2. Plans to fully implement CADE 2 and replace IMF have slipped, even as individual companies working on the project have earned as much as $290 million in revenue from IRS.

Contracting data obtained by Nextgov through Virginia-based analytics firm Govini indicates contractors Deloitte, CSRA, Northrop Grumman and MITRE Corporation all earned more than $60 million through fiscal 2017 through CADE or CADE 2 task orders.

In the meantime, IRS runs its legacy systems like IMF on newer hardware, though GAO’s latest audit stated 64 percent of the agency’s hardware is aged.

“To IRS’ credit, it keeps these old systems running during the file season,” Dave Powner, GAO’s director of IT management issues, said before the House Committee on Ways and Means in October. “But relying on these antiquated systems for our nation’s primary source of revenue is highly risky, meaning the chance of having a failure during the filing season is continually increasing.”

Such a failure would be “catastrophic,” according to former IRS Commissioner John Koskinen.

“I’m concerned that the potential for a catastrophic system failure is increasing as our infrastructure continues to age. If this failure were to occur during the filing season, we could be looking at a lengthy interruption in processing returns and issuing refunds,” Koskinen said in November in his final press conference before stepping down. “This could have a devastating effect on more than 100 million taxpayers waiting on their refunds as well as the nation's economy, which sees some 275 billion dollars of refunds each winter and spring.”

After resigning, Koskinen told Nextgov in late November that work on CADE 2 stalled “because of the budget crunch of the past year or two, along with the critical need to protect taxpayers against identity theft.” IRS diverted resources toward partnerships with private companies and state and local tax agencies to battle identity theft. The agency spends $2.7 billion annually on IT.

“Victims of identity theft dropped by two-thirds, after years of barely being able to hold our own,” he said. “It was the appropriate decision to protect accounts against identity theft, but it has meant that other critical information technology programs have gone more slowly.”

Koskinen added that he doesn’t blame IT contractors “who have done good work” but maligned the recurring cuts in resources Congress dealt the IRS in the past decade.

“We’ve been trying to keep a core team together who understands the system and where it is going, but there are not enough resources,” Koskinen said.

Powner told lawmakers in October that oversight from both Congress and the administration would be crucial toward ensuring IRS delivers a modernized tax-processing system. The American Technology Council or White House Office of American Innovation, he said, could add necessary administrative oversight to IRS’ tech system.

Powner echoed the need for administrative oversight on critical IT projects in a House Oversight and Government Reform subcommittee hearing last week.

The Oldest IT System in Government?

Based on research from GAO, the IMF and its sister system, the Business Master File—both operated by IRS—are the two oldest tech systems in all the federal government at approximately 58 years old. The next oldest tech system identified is the Defense Department’s Strategic Automated Command and Control System, which helps coordinate U.S. nuclear forces, which was developed 55 years ago.

At IRS, the beginning of the IMF and BMF harkens back to the early days of computing itself. In 1960, an IRS report announced plans to install computers to automate tax processing at a facility in Martinsburg, West Virginia.  

Today, almost six full decades later, the IRS is still using the same systems to process the nation’s tax returns.

Editor's note: This article was updated to correct the name of the Business Master File.