A closed IRS tax office focused on decommissioning and replacing outdated technology is set to reopen so the tax agency can get a handle on replacing its aging technology stack, according to an audit.

The Treasury Inspector General for Tax Administration (TIGTA) report credits the IRS with fully implementing two of four previous technology modernization recommendations, but argues that the other two recommendations were implemented ineffectively.

Among these failures is the agency’s decision in 2023 to disband its own Technology Retirement Office, which was created in 2021 “to strategically reduce the IRS’s (IT) footprint.”

Without this office, the IRS would have “no enterprise-wide program to identify, prioritize and implement the updating, replacement or retirement of legacy systems,” the inspector general said, adding that the unit would have to be re-established or reinstated in a similar form.

There is no enterprise-wide program to identify, prioritize and execute the upgrade, replacement or decommissioning of legacy systems.

From TIGTA’s perspective, the closure of the pension office is part of the IRS’s failure to properly identify legacy systems and plan for their shutdown and possible replacement with modern systems.

According to the audit report, the IRS has designated 107 of its 334 legacy systems as decommissioned, but only two of those 107 systems have concrete plans for decommissioning. TIGTA would like to have clear plans for all of these systems and had hoped that the Decommissioning Office (or similar agency) would provide them.

Then there is the second incomplete recommendation, which the IG says is due to the IRS’s failure to properly apply its own definition of a legacy system to all of its technology.

According to the report, which gets to the heart of the matter with its title “IRS has no concrete plans to replace and retire legacy systems,” the IRS defines legacy systems as systems that use outdated technology that is still critical to day-to-day operations.

This definition can include hardware, software or programming languages ​​and further states that systems with “an application age of 25 years or more” and those that use outdated languages ​​​​apply.

According to TIGTA, this definition was misapplied, causing the IRS to incorrectly identify five systems as legacy when they were not. The tax authorities attributed this error to “a query programming error that has since been corrected.” How apt.

In addition, the IG’s own analysis using the IRS definition of legacy systems uncovered 344 of them – ten more than the IRS was aware of.

“A subsequent review found two additional systems that had not been identified as legacy systems when they should have been, bringing the total number of legacy systems to 346,” the IG report added.

Due to poor management of outdated technologies, IRS spending on IT infrastructure has increased 35 percent, from $2 billion in 2019 to $2.7 billion in 2023. The IG report expects this increase to continue until more legacy systems are retired.

To its credit, the IRS has properly implemented previous recommendations to establish an as-built architecture (ABA) system to track existing IT resources and to ensure that the specific system data in the ABA is complete.

Progress in the right direction

In its response to the IG report, the IRS said it had largely addressed the two incomplete recommendations, although not quite as the Inspector General would have liked.

On the first request that the IRS re-establish the Technology Retirement Office, the tax agency said it does not intend to do so. It does plan to transfer those responsibilities to its Transformation and Strategy Office – but it does not intend to implement those changes before September 2025, when it releases its next Inflation Reduction Act Transformation Roadmap.

“The roadmap will reflect a change in strategy to modernize legacy systems,” the IRS stated in its response letter (which is included in the report). “The IRS no longer intends to rewrite and decommission all systems identified as legacy in the ABA.”

Instead, the IRS said, legacy systems would be replaced once transformation steering committees identified appropriate “common enterprise platforms” that could be implemented in their place.

So there is a general will within the IRS to replace outdated stacks with modern offerings, and there is a basic plan to move that forward. It’s just not particularly concrete at this point because those details need to be developed as teams figure out a path forward, as evidenced by the audit reports and responses.

You could say the IRS is looking at this on a case-by-case basis because there are concerns that what is replacing the old IT is really up to the job, which is reasonable.

We believe that management’s response is consistent with the intent of our recommendation

“Although the IRS only partially agreed with our recommendation, we believe management’s response is consistent with the intent of our recommendation,” the IG said in his response.

Regarding the issue of identifying legacy systems, the IRS agreed with the recommendation and promised improvements.

The IRS’s Office of the Taxpayer Advocate told Congress in its fiscal year 2025 report released in June that while the IRS is still struggling to modernize its technology, it is making progress.

“Has the IRS done a perfect job? No,” wrote national taxpayer advocate Erin Collins in the report’s foreword. “But I believe the IRS has turned things around… particularly in taxpayer services and information technology (IT) modernization.”

We have reached out to the IRS and TIGTA for further comment. ®