After admitting earlier this month that it had squandered US$400 million in a hapless attempt to update its computer systems, the Internal Revenue Service announced Monday a plan to provide more oversight and to contract out upcoming modernization attempts.
"Only if we confront problems directly - from protecting taxpayers' privacy, to using technology, to making sure the phones are answered - will we build an IRS for the 21st century," said Deputy Treasury Secretary Lawrence Summers, speaking to the Tax Executives Institute.
Summers outlined a general five-point plan to streamline the agency. Key to the proposal is making the Modernization Management Board - a group of senior government officials overseeing the technological upgrade - a permanent entity. The Treasury Department will also establish an advisory committee of tax, technology, and business industry leaders to report directly on IRS issues to Treasury Secretary Robert Rubin.
Summers said the Treasury Department will ask Congress for more funds to hire more experts and to "pursue outsourcing strategies" for developing the IRS' new systems. Over the past two years, he said, the percentage of contractors working on modernization increased from 40 percent to 64 percent.
With the 15 April tax deadline fast approaching, the IRS estimates that it will receive some 200 million tax returns this year - including 19.2 million from taxpayers who will file by telephone or computer. In 1995, 11.8 million taxpayers filed electronically.
The agency is also considering ways to simplify the tax code, Summers said.
But critics say the Treasury Department's plan for improving the tax code, while well-intentioned, remains vague, and that modernizing IRS computers and updating the tax code simultaneously will take resources the agency simply does not have.
"The agency has to issue tax returns on a timely basis, figure out new tax laws, and update the current computer system," said David Keating, executive vice president of the American Taxpayers Union, and member of Congress' National Commission on Restructuring the IRS. "I wouldn't expect any massive leaps forward in computer technology unless Congress doesn't change any tax laws, which is unlikely."
At a hearing last week of the National Commission on Restructuring the IRS - an 18-member panel headed by Senator Bob Kerrey (D-Nebraska) and Representative Rob Portman (R-Ohio) - computer security experts said that the IRS has one of the worst computer-security systems in government.
This June, the restructuring panel will release its own guidelines on how to update the IRS for the millennium.
