Treasury Secretary Janet Yellen sent an August 17 memorandum to Internal Revenue Service (IRS) Commissioner Charles Rettig setting a six-month deadline to produce a plan for the tax agency to overhaul its technology and staffing capabilities.

That directive from Yellen to IRS – a component agency of the Treasury Department – follows congressional approval last week of the Inflation Reduction Act which provides $80 billion of new funding over ten years for IRS.

On the technology front, the new funding includes nearly $5 billion for “business systems modernization,” aimed at boosting the agency’s three-year-old IT modernization plan, which had already received $275 million from the fiscal year 2022 budget and a one-time shot of $1 billion under the American Rescue Plan Act in 2021.

The IRS’s systems date to as far back as the 1960s, which has drawn criticism from lawmakers concerned about the use of obsolete programming languages, along with the Government Accountability Office (GAO), which says taxpayers could be vulnerable to data breaches because of lax cybersecurity practices.

Secretary Yellen’s memo emphasizes that the IRS needs to streamline services for taxpayers as part of the technology revamp.

“This operational plan should include details on how resources will be spent over the ten-year horizon on technology, service improvement, and personnel,” she said. “This operational plan is key to ensuring the public and Congress are able to hold the agency accountable as it pursues needed improvements.”

“To that end, as you develop an operational plan, it must include metrics for areas of focus and targets over the course of the coming years that the agency will strive to achieve,” said Yellen.

“Ahead of us is a monumental opportunity to transform tax administration in this country,” the secretary said. “It is also a significant operational challenge. The work will require an all-hands-on-deck approach from the dedicated employees of the IRS.”

“And it will require the agency to modernize: first, to fully resolve the inventory backlog and make significant improvements in taxpayer services; second, to overhaul an information technology system that is decades out of date and invest in training employees so they can identify the most complex evasion schemes by those at the top; and third, to replace the attrition that is on the horizon from the expected retirement of at least 50,000 IRS employees over the next five years,” she said.

“We finally have the tools that we need to improve the service that is provided to American taxpayers and address noncompliance by the wealthy and those who aid and abet them,” Yellen said. “I know this is work you are committed to, and I look forward to working closely with the IRS on the effort ahead.”

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Jose Rascon
Jose Rascon
Jose Rascon is a MeriTalk Staff Reporter covering the intersection of government and technology.