‘The IRS Says There’s Always Next Year’

The tax agency again delays a vital software upgrade, at the cost of billions. WSJ’s Editorial Board: Taxpayers endure drudgery to file on time each year, but the tax collectors seem less concerned with deadlines. A new Internal Revenue Service database, more than a decade in the making, will be delayed another year. And its cost is billions of dollars and climbing. The IRS told the press this week that it won’t replace its Individual Master File until the 2026 tax year, at the earliest. That falls short of Commissioner Danny Werfel’s goal of launching a new system in time for 2025 taxes, and the delay could mean another year of grief for countless taxpayers. The file is the digital silo in which more than 154 million tax files are held, and keeping it up-to-date helps to enable speedy, accurate refunds.

The code that powers the database was written in the 1960s by IBM engineers at the same time their colleagues worked on the Apollo program. The system runs on a nearly extinct computer language known as Cobol, and though it retains its basic functionality, maintaining it requires bespoke service. By 2018 the IRS had only 17 remaining developers considered to be experts on the system. The agency has sought and failed to overhaul or replace the database since the 1980s. It spent $4 billion over 14 years to devise upgrades, but it canceled that effort in 2000 “without receiving expected benefits,” according to the Government Accountability Office.

The costs continue to mount. IRS spending on operating and maintaining its IT systems has risen 35% in the past four years, to $2.7 billion last year from $2 billion in 2019. These costs will “likely continue to increase until a majority of legacy systems are decommissioned,” according to a report last month by the agency’s inspector general. Each year major upgrades are pushed back adds a larger sum to the final tab. The IRS usually pleads poverty as an excuse for failing to stay up-to-date. Yet Congress gave the agency billions of extra dollars through the Inflation Reduction Act to fund a speedy database overhaul. Since 2022 it has spent $1.3 billion beyond its ordinary budget to modernize its business systems. Taxpayers will have to wait at least another year to see if that investment has paid off.