IRS presses its paperless project

The Internal Revenue Service, flush with money and new ideas for digitizing

customer service, is turning up the heat on its huge modernization project

called IRS Prime — a program to turn a paper-driven department into a seamless

electronic one over the next decade.

By the end of the year, the IRS will unveil a new blueprint for modernizing

its information systems and providing a complete suite of services online.

The program, an update of a 1997 plan, will provide a road map for the next

two or three years as well as a model for an "ideal IRS."

The IRS launched the Prime program in December 1998 with the award of

a 15-year contract to Computer Sciences Corp. Initially, the program was

focused on improving the systems used to process tax documents and handle

customer queries. The updated strategies, however, will reflect the agency's

interest in taking advantage of internal systems modernization to move services

online, according to Bert Concklin, IRS business systems executive. Still,

the agency is proceeding carefully.

"Society is getting much more accustomed to transactions across the

Internet, but nobody really knows at what rate the majority of our population

conducts personal and professional business online," Concklin said.

Concklin, hired earlier this year to help move the IRS toward providing

more electronic services, said the blueprint is not the only project on

the drawing board. The agency is developing a long-term strategy, to be

unveiled in March, spelling out the IRS vision for the Digital Age over

the next decade. It will include details for several new projects and a

plan for the IRS architecture.

In addition, taxpayers will see the first sign of modernization in February

when the IRS launches a $38 million automated telephone system to give customers

quicker service.

Two of the most important Prime contracts will be awarded next spring,

Concklin said, when the IRS moves more quickly toward a digital system.

One of the contracts — a $50 million to $100 million project — will

focus on replacing the IRS' tape-based master file system, which stores

taxpayer records, with a digital system that will allow faster access to

information and be easier to manage.

Another contract, worth $15 million to $30 million, will create more

electronic services, using the Internet to replace existing manual and mail-based

systems for taxpayers and tax preparers.

Overall, the IRS is expected to receive $72 million for modernization

next year, less than the $119 million requested.

"While it is not all the funding requested, it is a big push forward

for IRS modernization," said Olga Grkavac, executive vice president of the

Enterprise Solutions Division at the Information Technology Association

of America.

But more money is available if needed. Congress set up a complex funding

mechanism to make sure the money for modernization is properly spent and

established an Information Technology Investment Account that the IRS can

draw from with congressional approval. Fiscal 2001 funds will bring the

account to $330 million, and the IRS expects to draw out $200 million for

proj-ects in 2001.

Nearly everyone agrees that IRS modernization is long overdue. IRS Commissioner

Charles Rossotti said in a September report on the progress of the program

that the tax system is still "critically dependent on a collection of obsolete

computer systems...[that] are fundamentally deficient."

Pete Sepp, vice president of communications at the National Taxpayers

Union, which is usually critical of anything the IRS does, agreed that changes

are needed, but he questioned whether pouring more money into the project

is the answer.

Taxpayers are already seeing signs of change. More than 34 million taxpayers

filed their returns online for the 1999 filing season, and the number of

e-filers is expected to grow dramatically for 2000.

"We started seeing things happen this year, and for the next filing

season, we'll see even more," said Paul Cosgrave, chief information officer

at the IRS. "But we believe the program will take the entire decade. But

this year is the first year we'll be getting into some heavy spending."