Why does the IRS constantly have technology failures? Ask Jeeves

Why does the IRS constantly have technology failures? Ask Jeeves
© Greg Nash

The year 1994 witnessed the introduction of many innovative technologies. The first commercially available browser, Netscape Navigator, was launched. Search engines like Lycos were amongst the most popular with consumers. America Online first placed advertisements, as the public was still growing accustomed to the newfangled notions of “email,” and “surfing the net.” The Internal Revenue Service created the electronic fraud detection system. Two years later, Ask Jeeves was launched.

Many of these technologies are now defunct or fundamentally altered, save the electronic fraud detection system, which is still deployed by the IRS. Intended to identify fraudulent tax returns, the electronic fraud detection system has defied many attempts to modernize the program. In 2009, the IRS began developing the return review program to replace electronic fraud detection system, declaring the following year that the latter program was “too risky to maintain, upgrade, or operate beyond 2015.” Seven years later, the return review program is still under development and now estimated to be completed in 2022.

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Anyone familiar with the long history of failed federal information technology investments will be unsurprised to learn that the return review program has encountered substantial cost overruns and poor performance. In February 2015, a Government Accountability Office report showed that the program had exceeded its initial budget by $86.5 million. In December 2015, a Treasury Inspector General report showed that during a pilot program, the return review program missed more than 54,100 fraudulent returns totaling $313 million.

The quality of information on the return review program released by the IRS for review by the public is also substandard. In June 2016, a GAO report on the return review program stated that the “IRS used a method inconsistent with best practices for determining the amount of work completed by its own staff.” In the meantime, the electronic fraud detection system continues to burn money. In September 2015, a Treasury Inspector General report stated, “If the IRS does not efficiently transition to the return review program so that it can retire the electronic fraud detection system, the estimated additional operation and maintenance costs of running the system could cost taxpayers approximately $18.2 million per year.” Two years later, a Treasury Inspector General report found that the IRS would not be able to meet the planned electronic fraud detection system retirement date of December 2018.

The problems facing the IRS are similar to those of other agencies across the federal government. On far too many occasions, the government has attempted to build information technology systems, including software, instead of acquiring commercially available items, often available at a lower price. This trend exist despite the fact that federal acquisition regulations require agencies to “conduct market research to determine whether commercial items or nondevelopmental items are available that could meet the agency’s requirements,” and to select them if available.

In other words, if an alternative is available in the private sector, it should be used. In the case of the return review program, a July 2013 Treasury Inspector General report found that “alternative commercial software products were not fully considered prior to selecting technology solutions for the return review program system.” While the IRS civil division continues to invest in the underperforming return review program, the IRS criminal division is already utilizing a private sector platform for its anti-fraud efforts.

The chances of falling victim to fraud perpetrators seems to increase each year. The hack of the credit reporting agency Equifax, revealed in September, exposed the personal information, including Social Security numbers, of 143 million U.S. customers. During the next tax season, these individuals will be at an increased risk of having their tax returns stolen. The primary tool the IRS has to combat this threat will turn 24.

Netscape and the electronic fraud detection system may have gone online in 1994, yet only one remains widely used today. Even Ask Jeeves, which became the now little used and ineffective Ask.com in 2005, would be able to tell the IRS that the answer to its anti-fraud problems is to immediately pull the plug on the electronic fraud detection system the return review program and implement a private sector solution.

Thomas A. Schatz is president of Citizens Against Government Waste.