IRS asking for $2.7B to modernize IT

The IRS commissioner told a Senate panel April 10 that it needs $290 million this year and between $2.3 billion and $2.7 billion in additional funding over the next six years to implement an IT modernization plan that would tackle longstanding complaints about the agency's outdated legacy systems.

According to the agency's fiscal year 2020 budget request, funding would go toward simplifying taxpayer interactions across the board, stabilizing operations and maintenance costs for legacy systems, enabling real-time processing and transparency of tax returns, standing up new identity and access management technologies and boosting the use of data analytics to yield operational efficiencies and proactively mitigate emerging IT security threats.

Commissioner Charles Rettig told the Senate Finance Committee that the certainty and stability of having multiple years of funding mapped out will help improve the agency's execution of modernization initiatives over the next six years. He said it would also help the agency better absorb and adapt to laws passed by Congress, like the Affordable Care Act and the 2017 tax reform bill, that require significant tax and IT changes.

"It's difficult to continually patch," Rettig said. "At some point you need to replace, and we're definitely at that point."

On the cybersecurity front, the agency is planning to use a chunk of that proposed modernization funding to implement its Data Encryption at Rest initiative, provide the Departments of Treasury and Homeland Security with the ability to monitor IRS networks and fund insider threat programs. Rettig said IRS systems face approximately 1.2 billion attacks every year, many from nation-state hacking groups.

While senators on the panel generally lauded the overarching goals behind the plan, Chairman Chuck Grassley (R-Iowa) expressed concern that Congress might be simply throwing good money after bad at the problem.

"I could not agree more the importance of [modernization], Grassley said. "However, in recent years, Congress has appropriated billions of dollars to update and modernize IRS computer systems and [the Government Accountability Office] and the [Treasury Inspector General] have raised significant concerns that those funds were not spent efficiently and effectively."

Rettig said the plan had a series of metrics and goals attached that will be reviewed by "independent third parties" to ensure the money is well spent.

Workforce issues were also front and center for an agency that has seen its staffing numbers reduced by nearly 20 percent since 2010.

Several lawmakers complained that IRS taxpayer assistance centers in their state had seen significantly reduced staff. Rettig acknowledged the shortages, attributing them to strains caused by an aging workforce and noting that 45% to 55% of IRS employees are eligible for retirement in the next two years. Meanwhile, federal hiring freezes since 2010 have deprived the agency of "an entire generation" of new blood needed to replace those impending departures.

The result: Instead of spending years training newer staff on how to read and sift through the ancient code that still powers tax processing systems, those older employees will most likely take a significant chunk of the agency's institutional IT knowledge with them when they do leave.

In written testimony to the House and Senate, Tony Reardon, president of The National Treasury Employees Union, said both the proposed cuts for 2020 and chronic underfunding over the past decade have hollowed out the IRS' enforcement activities, a charge that has been largely backed up by the GAO and media reports.

He decried a number of proposed cuts to IRS workforce priorities, including an 8% cut to taxpayer support service staff, a $90 million dollar cut to taxpayer and call center services and a $154 million reduction for enforcement activities.

Rettig said the agency was in the midst of hiring more than 4,300 new employees for compliance and enforcement, but it's not clear how many of those hires would augment the agency's human capital as opposed to simply replacing outgoing and retiring feds.