IRS’ 60-Year-Old IT System Failed on Tax Day Due to New Hardware

J. David Ake/AP File Photo

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Congress and watchdogs have been warning the IRS to upgrade its systems for years.

The Internal Revenue Service attributed the agency’s Tax Day crash to a piece of hardware supporting an IT system that is almost 60 years old.

Called the Individual Master File, components of the system—including 20 million lines of computer code—date back to 1960, when John F. Kennedy was president.

IRS told Nextgov 18-month-old hardware supporting the Individual Master File experienced a caching issue causing the system to fail. The failure disrupted almost all other services and systems IRS provides because those systems ingest data from the Individual Master File. When those systems—such as Direct Pay and the structured payments portal—called to the Individual Master File mainframe and got no response, they too failed.

Despite repeated warnings from the Government Accountability Office and Congress, IRS’ plans to modernize the system are at least six years behind schedule and several hundred million dollars over budget.

“This was our biggest fear about one of these mission-critical systems crashing,” Dave Powner, GAO’s director of IT management issues, told Nextgov Thursday. “Fortunately, it wasn’t down for a long period of time, so in that way, we dodged a bullet.”

Still, the crash forced the IRS to extend the tax filing deadline one day, delaying some 14 million submissions. It could be several years before the Individual Master File is fully modernized and rid of 1960s-era technology.

“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 told Nextgov in March, before the crash occurred. That timeline could slip because the IRS says it needs to hire at least 50 additional employees—while backfilling any attrition—plus an additional $85 million per year in annual non-labor funding over the next five years. The president’s fiscal 2018 budget request called for a $239 million reduction in funding for the IRS, which has faced numerous cuts in recent years.

“Since Republicans gained control of the House of Representatives in 2010, their partisan attacks have left the IRS with nearly 10,000 fewer customer service representatives to assist taxpayers and a patchwork of IT systems, some dating back to the Kennedy Administration, which is ultimately harming all taxpayers,” Rep. Gerry Connolly, D-Va., told Nextgov.

However, the Republican-led House ratified a package of nine IRS reform bills following the Tax Day crash that could amp up IRS’ modernization efforts. The bills, including the 21st-Century IRS Act and the Taxpayer First Act, will stress improving the customer experience for taxpayers as well as modernizing technology across the agency. The reform package was ushered in by the House Ways and Means committee, chaired by Rep. Kevin Brady, R-Texas.

“A new tax code calls for a new tax administrator, and we have worked together so that the IRS can be transformed into an agency with a singular mission: taxpayer first,” Brady said in a statement.

One of the bills will require IRS to compile a plan to enhance agency technology and customer service. That plan is due to Congress by September.

The Individual Master File contains data from 1 billion taxpayer accounts dating back several decades and is the chief IRS application responsible for receiving 100 million Americans’ individual taxpayer data and dispensing refunds. IRS first attempted to replace the system with a modernized Customer Account Data Engine, but that effort was canceled in 2009. A delivery date for CADE 2, the IRS’ subsequent modernization effort, has slipped several years even as contractors working on the project have earned as much as $290 million.

“We still have not seen a solid plan in place,” Powner told Nextgov. GAO identified the Individual Master File as the oldest technology system still operational in government in 2016.