Report: IRS Spending Millions on Redundant Tech Systems

Published January 10, 2016

A recent report from the U.S. Department of the Treasury says the Internal Revenue Service (IRS) is spending millions of taxpayer dollars on needlessly redundant information technology systems used to verify tax data.

The Treasury Inspector General for Tax Administration report says the IRS’ inability to decide between two report verification systems, the obsolete Electronic Fraud Detection System and the newer Return Review System, costs taxpayers about $1.5 million every month.

Strung Up in Red Tape

Veronique de Rugy, a senior research fellow at the Mercatus Center at George Mason University, says IRS’ bureaucratic paralysis is common in the public sector and unique to that realm.

“In the private sector, you would actually have a plan to retire the other [system] once you knew that the first one worked well,” de Rugy said. “The second one has been in place for quite a while now, long enough that they should know. If you say that they are running both of them together, it also tells you that the second one is probably not as good as it should be.”

‘Terrible Stewards’

De Rugy says government agencies have little reason to spend taxpayer money wisely or efficiently.

“Bureaucrats are terrible stewards of government money, period.” de Rugy said. “The incentives are in the wrong place to spend on the right thing. [They] are in the wrong place to actually save money. The incentives are really in the wrong place to ensure you don’t duplicate spending.”

Mismanaged Money

Michi Iljazi, the communications and policy manager for the Taxpayers Protection Alliance, says IRS’ problems aren’t caused by a lack of money. In fiscal year 2014, IRS spent $10.9 billion in taxpayer funds. For fiscal year 2016, IRS requested $12.9 billion in taxpayer funds.

“IRS has a real problem when it comes to how they manage their money,” Iljazi said. “This report about the overlapping systems is just another example. Over the last couple of years, the IRS has been complaining about budget cuts they’re having and [saying] they’re not going to be able to fulfill the duties and needs that they need to service.”

IRS has a budget priority problem, not a revenue shortage, Iljazi says.

“[IRS] spent money on studies that had to do with spouse satisfaction, a study for taxpayer use on paper products, and they also did several studies on ‘tipping income behavior,'” Iljazi said.

Andrea Dillon ([email protected]) writes from Holly Springs, North Carolina.

Internet Info:

Treasury Inspector General for Tax Administration, “Review of the Electronic Fraud Detection System,” U.S. Department of the Treasury:

The photo “Burning Money” is copyright © 2008 Purple Slog, and was made available under a Creative Commons Attribution-Share Alike 2.0 Generic license.