The Government Accountability Office (GAO) is taking the Internal Revenue Service to task on a range of IT improvement fronts, including planning for how to get rid of legacy systems, and how to make sure the agency’s uptake of cloud-based systems meets Office of Management and Budget (OMB) policy objectives.

GAO’s new report on the state of IRS tech modernization also offers up some sobering findings on the share of IT systems that are considered to be “legacy,” and a decision by the IRS to suspend work on initiatives that would help the agency update technology for its Individual Master File (IMF) – a 60-year old system that is the authoritative data source for individual tax account data.

Legacy Moves

On the IT modernization planning front, GAO reported that as of August 2022, IRS had 21 modernization initiatives ongoing across the agency, and that nine of those relate to replacing outdated IT systems.

For six of those nine IT-related plans, however, IRS had not yet specified how it planned to “dispose of outdated IT systems,” GAO said. IRS officials told GAO that they would address “this element at the appropriate time,” but did not provide a timeline.

IMF Work

According to GAO, IRS “recently suspended” six modernization initiatives, including two that are key to replacing the IMF infrastructure.

That larger replacement effort has been underway for more than ten years, GAO said. Because of the recent suspensions, “the schedule for these initiatives is now undetermined,” the watchdog agency said.

“Accordingly, the 2030 target completion date for replacing the IMF that IRS announced last year is now unknown,” GAO said. “This will lead to mounting challenges in continuing to rely on a critical system with software written in an archaic language requiring specialized skills,” it said.

IRS told GAO that the suspensions were due to “IRS’s determination to shift resources to higher priorities,” and that “staff members working on these suspended initiatives were reassigned to other projects.”

IT Inventory Aging

According to GAO, IRS continues to operate substantial legacy IT that “includes applications, software, and hardware, which are outdated but still critical to day-to-day operations.” Here are some numbers on what GAO considers to be in the legacy category:

  • 33 percent of IRS applications;
  • 23 percent of its software instances in use; and
  • Eight percent of its hardware assets.

“This includes applications ranging from 25 to 64 years in age, as well as software up to 15 versions behind the current version,” GAO said.

“As GAO has previously noted, and IRS has acknowledged, these legacy assets will continue to contribute to security risks, unmet mission needs, staffing issues, and increased costs,” GAO wrote.

Cloud Objectives

Finally, GAO reviewed IRS cloud computing efforts and found the agency coming up short in a few instances.

“IRS’s cloud computing efforts fully addressed 11, partially addressed one, and did not address two requirements identified in the Office of Management and Budget’s June 2019 cloud computing strategy,” GAO said.

“Key shortfalls include IRS not conducting regular evaluations of customer experiences and user needs,” GAO said. “Until IRS fully addresses all cloud computing requirements, it will have less assurance that it is adopting cloud solutions that efficiently and effectively help it meet its mission needs and protect sensitive taxpayer information.”


GAO listed out nine recommendations for IRS action, including steps to establish time frames to address how it disposes of legacy systems with its:

  • Enterprise Case Management modernization plan;
  • Returns Modernization initiative;
  • Information Technology Service Management modernization initiative,
  • Enterprise Anomaly Detection/Enterprise Case Selection modernization initiative; and
  • Workforce Infrastructure modernization initiative.

GAO also issued several recommendations for IRS to ensure that its cloud computing efforts fully address OMB requirements dealing with:

  • Standardizing cloud contract service level agreements that will provide more effective, efficient, and secure cloud procurement outcomes for agencies;
  • Developing and implementing policy to contracts impacting high value assets that are managed and operated in the cloud, including requirements that provide continuous visibility of the asset; and
  • Conducting regular evaluations of customer experiences and user needs to ensure that cloud solutions foster efficiency, accessibility, and privacy. (Recommendation 9)

Congressional Reaction

Rep. Gerry Connolly, D-Va., who is ranking member of the House Oversight and Accountability Committee’s Subcommittee on Cybersecurity, Information Technology, and Government Innovation, blasted prior congressional efforts to “starve” the IRS of funding.

“As Chairman of the Subcommittee on Government Operations, I made the funding and reform of IRS operations one of my top priorities,” he said, adding, “Years of Republican Congresses starving the agency have left it understaffed and under-resourced.”

“The subcommittee held hearings to identify areas of oversight focus that would best serve taxpayers and successfully advocated for several rounds of additional funding for the IRS,” he continued. “The American Rescue Plan and Inflation Reduction Act, which both passed the House and Senate without a single Republican vote, will provide the IRS with more than $30 billion in funding for operations support and business and IT systems modernization.”

Rep. Connolly said today’s GAO report “reaffirms that the IT challenges at the IRS are substantial and it provides further detail on where we can focus our oversight.”

“First, the IRS does not even have its arms around its legacy IT problem,” he said. “Legacy IT costs are still unknown, modernization plans lack timelines for the disposition of legacy systems, nearly a quarter of the agency’s software inventory is legacy software, and the effort to replace the 60-year-old Individual Master File is on hold with no definitive end in sight.”

“While IRS cloud computing efforts are a somewhat brighter spot for the agency, it is beyond frustrating that customer experience is not being adequately assessed for new cloud solutions,” he said. “We all know that customer experience should be a top priority for an agency with a nearly ubiquitous public footprint. Our tax system is complicated enough. IRS IT should be solving, not contributing to, the problem.”

Rep. Connolly said the work of his current subcommittee “will include demanding the IRS produce a plan to implement each of the recommendations in the report as well as getting major modernization projects back on track using new funding provided by Congress and flexible funding opportunities, such as the Technology Modernization Fund.”

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John Curran
John Curran
John Curran is MeriTalk's Managing Editor covering the intersection of government and technology.