IRS' taxpayer database processes first live returns

The IRS has used its new taxpayer database to process its first live returns, the tax agency said today.

The Customer Account Data Engine started processing an initial set of 1040EZ tax returns in the past week. The returns being processed are the most basic of 1040EZ forms and have a narrow range of taxpayer information.

"For the first time in 40 years, the IRS is processing returns and issuing refunds on a new computer system," said IRS Commissioner Mark Everson, adding, "While long overdue, this is an important first step in modernizing our return processing technologies."

CADE, which lead contractor Computer Sciences Corp. is developing, will process more than 2 million 1040 EZ tax returns during the 2005 tax filing season.

The IRS expects to phase in the CADE system over several years, processing increasingly more complex tax returns in stages.

When fully operational, CADE will house tax information for more than 200 million individual and business taxpayers. It replaces Master File, a magnetic tape-based system in use for four decades and which takes a week to update records and creates delays in providing accurate account information for taxpayers.

When completed, CADE will provide faster refunds and daily postings of transactions and updating of accounts.

IRS and lead Prime contractor Computer Sciences Corp. in the fall will apply tax law changes to CADE for next year's filing season. That version of CADE, Release 1.2, will be used in 2005. IRS will then replace that CADE version with the 1.3 release, which layers in the business rules engine, software that will encode tens of thousands of business rules.

The business rules engine will tell CADE how to process the tax returns. IRS and CSC will build 1.3 during 2005 for use in 2006, IRS has said.