Dive Brief:

• The Internal Revenue Service relies on technology six decades old for critical, day-to-day tasks, putting the security of its operations at risk, the Government Accountability Office said in a report.
• One out of three software applications used by the IRS range from 25 to 64 years in age, with software as many as 15 versions behind the newest version, the GAO said. The “IRS has acknowledged these legacy assets will continue to contribute to security risks, unmet mission needs, staffing issues and increased costs.”
• The IRS recently suspended efforts to upgrade the Individual Master File that includes data on tax accounts using technology dating to 1970, the GAO said. Without an updated IMF, the agency is unable to quickly respond to tax code changes, improve analytics and yield data essential for more effectively fighting fraud and identity theft.

Dive Insight:

Under a Biden administration plan approved by Congress last year, the IRS is set to receive $80 billion during the next 10 years for several improvements, including upgrading technology and bolstering taxpayer services.

The funding includes $45 billion for strengthening corporate and individual tax enforcement. Every additional dollar spent on enforcement would yield an average return on investment of $2.50, according to the Committee for a Responsible Federal Budget.

In its first vote this year under Republican control, the House on Jan. 9 voted to claw back $71 billion of the new funding earmarked for tougher enforcement.

“This common sense bill would simply prevent the IRS from using its massive infusion of taxpayer dollars to harass and squeeze more revenue out of American families,” according to Rep. Adrian Smith, R-Neb., a sponsor of the bill and member of the Ways and Means Committee.

“The last thing the American people need right now are more audits from an out-of-control, bloated IRS,” Smith said in a statement.

The legislation will likely die in the Democratic-controlled Senate.

In his State of the Union address on Tuesday, President Joe Biden called on lawmakers to “close the loopholes that allow the very wealthy to avoid paying their taxes.”

“Instead of cutting the number of audits of wealthy taxpayers, I signed a law that will reduce the deficit by $114 billion by cracking down on wealthy tax cheats,” he said.

“Our present tax system is simply unfair,” Biden said. “The idea that in 2020, 55 of the biggest companies in America made $40 billion in profits and paid zero in federal income taxes — that’s simply not fair.”

The IRS should set a timetable for updating its technology and meeting federal cloud computing requirements, the GAO said.

IRS “legacy systems may operate with known security vulnerabilities that are either technically difficult or prohibitively expensive to address,” the GAO said. “In some cases, vendors no longer provide support for hardware or software, creating security vulnerabilities and additional costs.”

The IRS has in some cases bypassed its aging technology by relying on cloud computing, the GAO said. Yet “it has no plans to standardize cloud contract service level agreements or conduct evaluations of customer experience and user needs, which would help ensure that their solutions successfully foster efficiency, accessibility and privacy,” according to GAO.