October 24, 2017

The Honorable Steve Mnuchin
Secretary, Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, D.C. 20220

Dear Secretary Mnuchin,

On behalf of the more than one million members and supporters of the Council for Citizens Against Government Waste (CCAGW), I urge you to identify, plan and modernize outdated legacy information technology (IT) systems at the Internal Revenue Service (IRS) in order to address issues of identity theft, fraud, and mismanagement.

IRS Commissioner John Koskinen is set to depart the IRS on November 13, 2017.  During his term, Commissioner Koskinen was unable to improve upon these technological and fraudulent abuse issues.  His departure serves as a natural inflection point, whereby the Department of Treasury and the new IRS commissioner can resolve longstanding problems related to outdated IT systems.

In 1994, the IRS created the Electronic Fraud Detection System (EFDS), which was intended to identify fraudulent tax returns and maximize revenue protection.  In 2009, the IRS began developing the Return Review Program (RRP) to replace EFDS.  In 2010, the IRS declared EFDS “too risky to maintain, upgrade, or operate beyond 2015.”  Despite the recognized need to unplug the EFDS and get the RRP in place in a timely manner, the program is still in development, and is now estimated to be completed in 2022. 

Anyone familiar with the long history of failed federal IT investments will not be surprised to learn that the RRP has had substantial cost overruns and produced inadequate results.  A February 2015 Government Accountability Office report noted that the RRP had exceeded its initial budget by $86.5 million.  According to a December 11, 2015 Treasury Inspector General for Tax Administration (TIGTA) report, during a two-year pilot program, the RRP missed 54,175 fraudulent returns totaling $313 million.

Federal Acquisition Regulation 12.101 requires agencies to “conduct market research to determine whether commercial items or non-developmental items are available that could meet the agency’s requirements,” and use them when available.  In other words, if it is available in the private sector, also known as “commercial off-the-shelf,” or COTS, it should be used.  A July 26, 2013 TIGTA report found that commercial software products were not fully considered before beginning development of the RRP system.  A September 29, 2015 TIGTA report estimated that the operation and maintenance of running EFDS while RRP is being developed will cost taxpayers $18.2 million annually.  Furthermore, while the IRS civil division continues to invest in the underperforming RRP, the IRS criminal division is already utilizing a private sector platform for its anti-fraud efforts.  The civil division should drop its government-created software and join the criminal division in using proven private sector solutions.

The chances of falling victim to fraud seem to increase each year.  The hack of the credit reporting agency Equifax, revealed on September 7, 2017, exposed the personal information – including Social Security numbers – of 143 million U.S. customers.  During the 2017 tax season, these individuals will be at an increased risk of having their tax returns stolen and the IRS’s outdated legacy IT systems will only heighten the threat.

There is significant room for technological improvements at the IRS.  CCAGW thanks you for your efforts to address these concerns.  If you have any questions regarding these comments, please feel free to contact me at (202) 467-5300.

Sincerely,

Tom Schatz
President, CCAGW

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