July 19, 2018

The IRS Has the Mother of All Nightmare Legacy Systems

Legacy systems are awful — so awful it’s the first thing I wrote about on Going Concern. To refresh your memory, legacy systems are obsolete software/hardware with so much technological baggage that they make you want to run away screaming, but you can’t for one reason or another. The most significant reason, unfortunately, is that it would take a lot of planning, money, and a small miracle to transition from the old clunker to a new, fancy tech platform with all the bells and whistles.

So instead of embracing a change, we trudge forward with the crappy one, putting a Band-Aid on the problems that crop up. Over time, these short-term Band-Aids — which never end up being short-term — cause even more of a headache. The code gets very unruly and buggy, and when something breaks, you are stuck relying on a couple of people who helped code the darn thing in the first place.

This can go on for eternity, because, well, people are lazy.

Let’s look at the best example of this I’ve read in a long time (shout out to Blake Oliver for sharing this one):

The IRS computer system.

In the 1960s, the IRS embarked on creating a file on each taxpayer according to Social Security number. This file is referred to as the Individual Master File (IMF). The concept was discussed in a Washington Post article from 1959 as quoted in Bloomberg:

[…] the Washington Post, capturing the mood of the moment, warned of “brain machines” that would soon audit taxpayer returns; the Wall Street Journal called them “robot revenuers.”

Nearly sixty, yes, SIXTY, years later, we’re still dependent on the same computer code. From a recent Accounting Today article:

Most of it is in the Assembly programming language, which the IRS itself has described as “antiquated” and “inflexible.” Worse, the number of programmers who can understand and maintain the code behind the Individual Master File (IMF) dwindles with every passing year. According to the Government Accountability Office, the IMF and its business counterpart (the BMF) are the oldest computing systems used by the federal government.

As you probably heard, the computer woes and processing system failures gave procrastinators an extra day to file their taxes. At least the IT team worked through the night to get it fixed, because, you know, it’s the most important day of the tax year.

I’m going out on a limb here, but in addition to laziness and the fact that the IRS can just keep kicking the can down the road (read: federal bureaucracy at its finest), I’m going to blame Intuit and H&R Block for this quagmire.

Sure, TurboTax is lovely. It’s actually a pretty piece of software and makes the chore of taxes for millions (over 31 million, per Intuit) easier. But here’s the problem and why some have argued we should boycott Intuit and others in the same industry:

Years ago, the Obama administration proposed a system of automatic tax filing, in which the IRS uses income information it already has to fill out your tax return for you. That would save millions of Americans considerable time and energy every year, but the idea has gone nowhere. The main reason? Lobbying from Intuit and H&R Block.

Return-free, auto-filing could be the kick in the pants the IRS needs to ditch the old legacy system and clean house. But until taxpayers start feeling feisty and demand an easier option, it’s never going to happen. And because it will likely have some growing pains, maybe it’s best to try to keep the IRS out of the spotlight for a few more years after the IRS scandal surfaced speculating that former President Obama was responsible for “ordering his minions in the IRS to harass conservatives

While it may not be in a CPA’s best interest to decrease the amount of work, most tax professionals who are recovering from busy season can attest to the fact that there’s plenty of work to go around. And, most of the returns in question don’t require a CPA anyway, leaving the repercussions to be primarily felt by the large-scale software options. Hence, Intuit and H&R Block have their panties in a twist about it and will put money toward keeping the sloppy, outdated legacy system in place for many years to come.

I don’t envy the schmuck that has to update this mess of code for the new tax laws.

Image: iStock/baranozdemir

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The U.S. and Swiss governments have agreed to share more tax information in order to crack down on all the tax dodgers out there that send their money offshore. The timing of this agreement is is especially diabolical because the IRS is currently trying to get Swiss bank behemoth UBS to name names of over 50,000 American clients.
Hearings in Miami are scheduled for next month to see if the names can be released, however, the Swiss have stated that this may violate Swiss law of double-secret-no-tattling-on-clients.
Ultimately, the Swiss Federal Council and Parliament will decide if the new agreement is kosh but judging by the Obama Administration’s hard-on for closing tax loopholes, they’ll probably play ball.

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No Comments

  1. It’s easy to blame the IRS itself for problems like this, and most people do, but its a fact that one of the two major political parties in this country has painted the IRS as a bogeyman and actively seeks to undermine and destroy the agency every single day. They’ve been doing this for decades, and we are seeing the result of their efforts.

    It’s really easy to be a Republican. Do everything you can to undermine and defund the government, and then win campaigns by saying that the government is incompetent and broken. In this case, the IRS doesn’t have the tools and resources to adequately pursue bad corporate citizens and wealthy tax dodgers (side benefit for the Republicans).