FROM THE OFFICE OF PUBLIC AFFAIRS

Summary

The new IRS "Blueprint for Modernization" outlines a plan to update the technologicalsystems in order to provide superior service to the taxpayer, tomove toward paperless operations, and to increase compliance withthe law. The Blueprint represents a new way of doing business atthe IRS. It is the first comprehensive attempt to form astrategic partnership with the private sector in order to addressthe problems of the past and ensure that the IRS is flexible forthe future. The Blueprint uses a centralized, main-frame computersystem that will ensure taxpayer privacy and minimize cost, whileenabling IRS customer service and compliance personnel to easilyaccess accurate and timely information.

History

In 1988, the Internal Revenue Service put intoeffect a plan to upgrade and modernize the agency’stechnological system. The plan, known as the Tax SystemModernization (TSM), was implemented over the course of the nextseven years. In 1995, the General Accounting Office released areport that uncovered failures in the program and large financiallosses. It called for massive changes in program planning,management and implementation of TSM. Congress, in turn, calledon the IRS by May 15, 1997 to produce a plan for correcting andupdating its technological capabilities.

The primary failure of TSM was the result ofinadequate design and planning. The system’s multiplecomputers and databases installed could not be integrated withexisting computers. TSM also failed to move the IRS toward apaperless system and made current inefficiencies worse. IRSemployees were unable to access current and correct informationto effectively serve American taxpayers.

A Sharp Turn

In early 1996 the Treasury Department - takinginto account the serious problems with the IRS computer system -called for a sharp turn in technology modernization. Treasury:

Hired a new IRS Chief Information Officer with extensive private sector experience and launched a nationwide search for new technical managers;

Created the Modernization Management Board (MMB) to oversee the creation and implementation of new IRS technological systems.

Put a stop to existing TSM contracts in order to review and evaluate the system;

Eliminated 26 wasteful TSM contracts and collapsed the remaining contracts into 9;

Began to draft a Modernization Blueprint to guide the overhaul of IRS technology.

Principles of the Blueprint

The new IRS "Blueprint forModernization" outlines a plan to update the technologicalsystems in order to provide superior service to the taxpayer, tomove toward paperless operations, and to increase compliance withthe law. The Blueprint represents a new way of doing business atthe IRS. It is the first comprehensive attempt to form astrategic partnership with the private sector in order to solvethe problems of the past and ensure that the IRS is flexible forthe future. In preparing the Blueprint, the MMB used a number ofstrategic principles which were developed in accord with the 1995GAO report. These principles are designed to:

Ensure that the modernized computer system maximizes IRS employees’ ability to serve taxpayers;

Develop a centralized, main-frame computer system that guarantees taxpayer privacy and minimizes cost.

Fully integrate the central computer with the existing computers and enable all systems to communicate.

Require that technological improvements be implemented incrementally; that new stages be installed only when previous stages have been proven successful.

Provide credible estimates of potential cost and deliverables before implementation.

The Plan

The Modernization Blueprint addresses theproblems of the past, eliminates wasteful and ineffectiveprojects, and develops a plan that is flexible for the future.The Blueprint uses a centralized, main-frame computer system thatwill ensure taxpayer privacy and minimize cost, while enablingcustomer service and compliance personnel to easily accessaccurate and timely information. The Modernization Blueprintcalls for:

A centralized and flexible system that is capable of adapting to constant changes in tax law.

A computer system that is easy to use and enables IRS employees -- customer service representatives and compliance personnel -- to access accurate and timely information from one terminal in order to be more productive and offer better service.

[IRS employees must currently use between 5-9terminals.]

A centralized database that better analyzes taxpayer records to improve compliance.

An interactive computer system that will move the IRS to a paperless system, decrease operating costs, and expedite processing of taxpayer returns and refunds.

Future Steps

Along with the release of the Blueprint, the IRSplans to issue what is known as a Request for Comments(RFC), seeking input and guidance from the private sector. Afterreceiving and reviewing comments and revising the Blueprint, theIRS, working with the MMB, will competitively bid a contract toassume overall responsibility. The selected contractor will workin collaboration with the IRS and the Treasury Department as theBlueprint is put into effect.