Could Big Data and Analytics Provide the Answer to the IRS’ Woes?

On Tax Day, 2018, the unthinkable (but not unexpected) happened. The IRS’ IT system crashed after a hardware issue took down a number of apps including those that interface with third-party tax preparation software as well as the IRS Direct Pay application.

IRS IT Systems are Decades Old

IRS IT systems are some of the oldest in government. The Individual Master File (IMF) – the authoritative hardware-based data source for individual taxpayer accounts that crashed on April 17th – contains code that dates to the Kennedy administration. NextGov reports that the hardware experienced caching issues causing the system to fail: “The failure disrupted almost all other services and systems IRS provides because those systems ingest data from the Individual Master File.” The glitch meant that other applications couldn’t access the IMF data.

Modernization Need and Trend

The IRS’ IT modernization plans are currently six years behind schedule and millions of dollars over budget. Furthermore, last year a report from the Treasury Inspector General for Tax Administration found that 64% of the agency’s hardware is beyond its useful lifespan.

Similar to other government agencies, the IRS modernization imperative and struggles are a challenge. IT modernization is a center point of the 2018 omnibus spending bill that passed in March 2018. The Technology Modernization Fund includes $100 million for the first six months, while the wider budget includes $2.26 billion for IT modernization projects. NextGov breaks down highlights of how this impacts each agency and department.

IRS Leads the Charge

Despite budget cuts and staff losses, the IRS is leading the charge with several innovative IT modernization efforts. For example, the agency is well ahead of other agencies in its move to data analytics. For example, the IRS engaged DLT partner, Hortonworks, to compensate for a shortfall in auditor headcount.

Hortonworks Data Platform (HDP®), built on Hadoop, offers the ability to capture all structured and emerging types of data, keep it longer, and apply traditional and new analytic engines to drive value, all in an economically feasible fashion.

Hadoop-driven analysis and “robo-auditors” can trace the digital footprint of tax evaders across internet and social media sites and then provide that information to revenue investigators. Because HDP enables efficient categorization and real-time analysis across large, previously disparate data sets, agency personnel are able to quickly uncover and apply actionable intelligence, freeing up resources for higher-value activities.

Learn more about how Big Data, Analytics, and Data Science can help your tax and revenue agency do more with less.