Part of the IRS building (Photo: Allison Bell/ALM)

The Internal Revenue Service has developed a six-year roadmap for modernizing its systems and taxpayer services, including revamping an outdated information technology infrastructure, IRS Commissioner Charles Rettig told senators in recent testimony.

The IRS’ Integrated Modernization Business Plan is expected to cost $2.3 billion to $2.7 billion over six years — including $290 million requested in President Donald Trump’s fiscal 2020 budget — to implement, Rettig told the Senate Finance Committee on Wednesday.

The investment, Rettig said, “will position the IRS to greatly improve and expand the services we provide to taxpayers — with new technologies such as customer callback and online notifications — while strengthening our enforcement capabilities.”

Other benefits include helping the IRS “operate more efficiently and effectively, by stabilizing the cost of operating and maintaining our systems,” he continued, adding that the “integrity of the nation’s voluntary tax compliance system depends on modernizing IRS service and compliance systems, and we look forward to working with Congress to implement this plan.”

One of Rettig’s highest priorities, he said, is updating the IRS’ IT. “Modernization is vital to all of our core functions: successfully delivering the annual tax filing season, ensuring the health of the nation’s tax system and supporting the federal government’s financial strength,” he told lawmakers.

The Modernization Plan will also help the IRS in its ongoing efforts “to secure our systems and protect taxpayer data,” Rettig testified.

IRS systems withstand approximately 1.4 billion cyberattacks annually (including denial-of-service attacks, unsuccessful intrusion attempts, probes or scans, and other unauthorized connectivity attempts), he reported. “Many of these attempts are sophisticated in nature or represent advanced, persistent threats. To combat tomorrow’s threats, the IRS will need to continue investing in cyber defenses as proposed in the plan.”

Protecting taxpayers and their information against tax-related identity theft is also an ongoing challenge, but the IRS continues “to see significant progress on this front.”

Rettig reported that between 2015 and 2018:

  • The number of taxpayers who reported they were victims of identity theft fell 71%. In 2018, the IRS received 199,000 identity theft affidavits from taxpayers compared with 677,000 in 2015. This was the third consecutive year this number declined.
  • The number of confirmed identity theft returns stopped by the IRS declined by 54%, falling from 1.4 million in 2015 to 649,000 in 2018.
  • The number of suspicious refunds recovered has declined by 66%. The financial industry is a key partner in fighting identity theft, helping the IRS and states recover suspicious refunds. But as fewer false tax returns enter the system, fewer fraudulent refunds are being issued. In 2018, financial institutions recovered 84,000 federal refunds totaling $112 million for the IRS. By comparison, institutions recovered 249,000 refunds totaling $852 million in 2015.

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