The new Tax Cuts and Jobs Act (the “Act”) brought significant tax code changes to both individuals and businesses and to tax-exempt organizations. In an effort to evaluate how the IRS’ information technology organization has been dealing with the various changes, an audit was initiated by the Treasury Inspector General for Tax Administration (TIGTA). The findings? There is increased risk of a delayed start to the 2019 tax-filing season. Reasons point to the obvious: significant changes in the tax code, shortened delivery cycles and many missed deadlines.
In implementing the new Act, President Trump signed the Consolidated Appropriations Act, granting the IRS $320 million, $291 million of which was earmarked for information technology and ancillary operations support work. The TIGTA audit also estimated that it would take more than 1.1 million labor hours (or 542 full-time equivalents) to implement the new tax provisions, but as of June 2018, the IRS had only 117 current and new employees on hand to meet the changes. The IRS IT organization had planned to identify any potential negative impact on existing programs and projects brought about by the implementation of the Act, but as of July 16, no documentation had been provided.
The standard deadline for IT products and services for the next filing season is January 31. With implementation of the Act, several short-term deadlines were effected to simplify execution of the Act’s tax provisions. Unfortunately, those deadlines were missed, necessitating a new deadline of June 1 for submitting final work request notifications, set by the IT organization. This deadline change effectively shortened the timeframe for making system changes for the 2019 filing season by four months, but as the TIGTA audit notes, that deadline was also missed.
In response to the TIGTA report, IRS CIO S. Gina Garza had the following response:
“The IRS has created new forms and governance structures to increase communication, collaboration and alignment across critical IT stakeholders and implement tax reform changes, including an Executive Oversight Team comprised of IT leaders. The IRS has also secured adequate funding and hiring flexibility for tax reform implementation, and proactively addresses outstanding resource gaps.”
It’s been more than 30 years since the last major tax reform act and it’s estimated that implementation of the new Act will require creating or revising more than 450 forms, publications and instructions, and modifying over 140 IT systems. With all the tax law changes and the missed guidance deadlines, a delayed start to the 2019 filing season is all but guaranteed. Strap on your helmet; this filing season is going to be a bumpy ride.