IRS needs improved planning for modernization funding.

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The IRS received additional funding from the Inflation Reduction Act to modernize its systems, enhance customer service, and improve enforcement efforts. However, the agency has not fully updated its plans to incorporate these funds due to ongoing threats of rescission by Congress. The IRS has been making progress in technology improvements according to its strategic operating plan, but plans to retire legacy systems and update programming languages have not been updated. Completion of a road map is essential for the transformation’s success. The IRS stressed the need for continued funding from congressional appropriators to maintain staffing levels and deliver the promised modernization.

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The Internal Revenue Service (IRS) is facing challenges in fully utilizing the tens of billions of dollars in additional funds provided by the Inflation Reduction Act for modernization efforts. The Government Accountability Office (GAO) released a report highlighting that while the IRS intends to use the funds to replace legacy IT systems, improve online tools and services for taxpayers, and enhance security and privacy, it has not fully updated its plans to incorporate these additional funds. This is partly due to the constant threat of funds being rescinded by Congress.

The Inflation Reduction Act of 2022 allocated $80 billion over 10 years for the IRS to upgrade its technology, enhance customer service, and increase enforcement efforts. However, over $21 billion in funding for tax enforcement was clawed back last year as part of a bipartisan deal, leading to cuts in IRS funding. Despite these challenges, the IRS has been implementing technology improvements in line with its strategic plan released the previous year.

The IRS’s plan includes retiring legacy systems, updating programming languages, and providing taxpayers with tools for online services. However, the GAO report points out that plans showing changes to future work, milestones, and efforts to retire legacy systems have not been updated. IRS officials mentioned that updating these plans is dependent on completing a road map to implement the strategic plan, with the first version of the road map completed in December but without the technology objective.

In response to the report, the IRS emphasized the need for continued funding from Congress to maintain staffing levels, systems, and services, and to avoid cannibalizing Inflation Reduction Act funds. The IRS stressed the importance of restoring Business Systems Modernization appropriation to deliver the promised modernization that taxpayers deserve.

IRS Commissioner Danny Werfel highlighted the progress in technology improvements, including upgrades to online tools like “Where’s My Refund?” and the launch of Direct File for free online tax filing in certain states. The IRS is also working on adding security features to online accounts to protect taxpayers from scams and identity theft. Leveraging artificial intelligence, the IRS aims to detect tax evasion by large partnerships and focus enforcement efforts on high-risk groups.

Overall, updating plans, completing the road map, and securing continued funding are crucial for the IRS’s modernization success and ensuring fair enforcement of tax laws.

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