integrated modernization business plan

A better way to drive your business

Managing the availability of supply to meet volatile demand has never been easy. Even before the unprecedented challenges created by the COVID-19 pandemic and the war in Ukraine, synchronizing supply and demand was a perennial struggle for most businesses. In a survey of 54 senior executives, only about one in four believed that the processes of their companies balanced cross-functional trade-offs effectively or facilitated decision making to help the P&L of the full business.

That’s not because of a lack of effort. Most companies have made strides to strengthen their planning capabilities in recent years. Many have replaced their processes for sales and operations planning (S&OP) with the more sophisticated approach of integrated business planning (IBP), which shows great promise, a conclusion based on an in-depth view of the processes used by many leading companies around the world (see sidebar “Understanding IBP”). Assessments of more than 170 companies, collected over five years, provide insights into the value created by IBP implementations that work well—and the reasons many IBP implementations don’t.

Understanding IBP

Integrated business planning is a powerful process that could become central to how a company runs its business. It is one generation beyond sales and operations planning. Three essential differentiators add up to a unique business-steering capability:

• Full business scope. Beyond balancing sales and operations planning, integrated business planning (IBP) synchronizes all of a company’s mid- and long-term plans, including the management of revenues, product pipelines and portfolios, strategic projects and capital investments, inventory policies and deployment, procurement strategies, and joint capacity plans with external partners. It does this in all relevant parts of the organization, from the site level through regions and business units and often up to a corporate-level plan for the full business.
• Risk management, alongside strategy and performance reviews. Best-practice IBP uses scenario planning to drive decisions. In every stage of the process, there are varying degrees of confidence about how the future will play out—how much revenue is reasonably certain as a result of consistent consumption patterns, how much additional demand might emerge if certain events happen, and how much unusual or extreme occurrences might affect that additional demand. These layers are assessed against business targets, and options for mitigating actions and potential gap closures are evaluated and chosen.
• Real-time financials. To ensure consistency between volume-based planning and financial projections (that is, value-based planning), IBP promotes strong links between operational and financial planning. This helps to eliminate surprises that may otherwise become apparent only in quarterly or year-end reviews.

An effective IBP process consists of five essential building blocks: a business-backed design; high-quality process management, including inputs and outputs; accountability and performance management; the effective use of data, analytics, and technology; and specialized organizational roles and capabilities (Exhibit 1). Our research finds that mature IBP processes can significantly improve coordination and reduce the number of surprises. Compared with companies that lack a well-functioning IBP process, the average mature IBP practitioner realizes one or two additional percentage points in EBIT. Service levels are five to 20 percentage points higher. Freight costs and capital intensity are 10 to 15 percent lower—and customer delivery penalties and missed sales are 40 to 50 percent lower. IBP technology and process discipline can also make planners 10 to 20 percent more productive.

When IBP processes are set up correctly, they help companies to make and execute plans and to monitor, simulate, and adapt their strategic assumptions and choices to succeed in their markets. However, leaders must treat IBP not just as a planning-process upgrade but also as a company-wide business initiative (see sidebar “IBP in action” for a best-in-class example).

IBP in action

One global manufacturer set up its integrated business planning (IBP) system as the sole way it ran its entire business, creating a standardized, integrated process for strategic, tactical, and operational planning. Although the company had previously had a sales and operations planning (S&OP) process, it had been owned and led solely by the supply chain function. Beyond S&OP, the sales function forecast demand in aggregate dollar value at the category level and over short time horizons. Finance did its own projections of the quarterly P&L, and data from day-by-day execution fed back into S&OP only at the start of a new monthly cycle.

The CEO endorsed a new way of running regional P&Ls and rolling up plans to the global level. The company designed its IBP process so that all regional general managers owned the regional IBP by sponsoring the integrated decision cycles (following a global design) and by ensuring functional ownership of the decision meetings. At the global level, the COO served as tiebreaker whenever decisions—such as procurement strategies for global commodities, investments in new facilities for global product launches, or the reconfiguration of a product’s supply chain—cut across regional interests.

To enable IBP to deliver its impact, the company conducted a structured process assessment to evaluate the maturity of all inputs into IBP. It then set out to redesign, in detail, its processes for planning demand and supply, inventory strategies, parametrization, and target setting, so that IBP would work with best-practice inputs. To encourage collaboration, leaders also started to redefine the performance management system so that it included clear accountability for not only the metrics that each function controlled but also shared metrics. Finally, digital dashboards were developed to track and monitor the realization of benefits for individual functions, regional leaders, and the global IBP team.

A critical component of the IBP rollout was creating a company-wide awareness of its benefits and the leaders’ expectations for the quality of managers’ contributions and decision-making discipline. To educate and show commitment from the CEO down, this information was rolled out in a campaign of town halls and media communications to all employees. The company also set up a formal capability-building program for the leaders and participants in the IBP decision cycle.

Rolled out in every region, the new training helps people learn how to run an effective IBP cycle, to recognize the signs of good process management, and to internalize decision authority, thresholds, and escalation paths. Within a few months, the new process, led by a confident and motivated leadership team, enabled closer company-wide collaboration during tumultuous market conditions. That offset price inflation for materials (which adversely affected peers) and maintained the company’s EBITDA performance.

Our research shows that these high-maturity IBP examples are in the minority. In practice, few companies use the IBP process to support effective decision making (Exhibit 2). For two-thirds of the organizations in our data set, IBP meetings are periodic business reviews rather than an integral part of the continuous cycle of decisions and adjustments needed to keep organizations aligned with their strategic and tactical goals. Some companies delegate IBP to junior staff. The frequency of meetings averages one a month. That can make these processes especially ineffective—lacking either the senior-level participation for making consequential strategic decisions or the frequency for timely operational reactions.

Finally, most companies struggle to turn their plans into effective actions: critical metrics and responsibilities are not aligned across functions, so it’s hard to steer the business in a collaborative way. Who is responsible for the accuracy of forecasts? What steps will be taken to improve it? How about adherence to the plan? Are functions incentivized to hold excess inventory? Less than 10 percent of all companies have a performance management system that encourages the right behavior across the organization.

By contrast, at the most effective organizations, IBP meetings are all about decisions and their impact on the P&L—an impact enabled by focused metrics and incentives for collaboration. Relevant inputs (data, insights, and decision scenarios) are diligently prepared and syndicated before meetings to help decision makers make the right choices quickly and effectively. These companies support IBP by managing their short-term planning decisions prescriptively, specifying thresholds to distinguish changes immediately integrated into existing plans from day-to-day noise. Within such boundaries, real-time daily decisions are made in accordance with the objectives of the entire business, not siloed frontline functions. This responsive execution is tightly linked with the IBP process, so that the fact base is always up-to-date for the next planning iteration.

A better plan for IBP

In our experience, integrated business planning can help a business succeed in a sustainable way if three conditions are met. First, the process must be designed for the P&L owner, not individual functions in the business. Second, processes are built for purpose, not from generic best-practice templates. Finally, the people involved in the process have the authority, skills, and confidence to make relevant, consequential decisions.

Design for the P&L owner

IBP gives leaders a systematic opportunity to unlock P&L performance by coordinating strategies and tactics across traditional business functions. This doesn’t mean that IBP won’t function as a business review process, but it is more effective when focused on decisions in the interest of the whole business. An IBP process designed to help P&L owners make effective decisions as they run the company creates requirements different from those of a process owned by individual functions, such as supply chain or manufacturing.

One fundamental requirement is senior-level participation from all stakeholder functions and business areas, so that decisions can be made in every meeting. The design of the IBP cycle, including preparatory work preceding decision-making meetings, should help leaders make general decisions or resolve minor issues outside of formal milestone meetings. It should also focus the attention of P&L leaders on the most important and pressing issues. These goals can be achieved with disciplined approaches to evaluating the impact of decisions and with financial thresholds that determine what is brought to the attention of the P&L leader.

The aggregated output of the IBP process would be a full, risk-evaluated business plan covering a midterm planning horizon. This plan then becomes the only accepted and executed plan across the organization. The objective isn’t a single hard number. It is an accepted, unified view of which new products will come online and when, and how they will affect the performance of the overall portfolio. The plan will also take into account the variabilities and uncertainties of the business: demand expectations, how the company will respond to supply constraints, and so on. Layered risks and opportunities and aligned actions across stakeholders indicate how to execute the plan.

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Trade-offs arising from risks and opportunities in realizing revenues, margins, or cost objectives are determined by the P&L owner at the level where those trade-offs arise—local for local, global for global. To make this possible, data visible in real time and support for decision making in meetings are essential. This approach works best in companies with strong data governance processes and tools, which increase confidence in the objectivity of the IBP process and support for implementing the resulting decisions. In addition, senior leaders can demonstrate their commitment to the value and the standards of IBP by participating in the process, sponsoring capability-building efforts for the teams that contribute inputs to the IBP, and owning decisions and outcomes.

Fit-for-purpose process design and frequency

To make IBP a value-adding capability, the business will probably need to redesign its planning processes from a clean sheet.

First, clean sheeting IBP means that it should be considered and designed from the decision maker’s perspective. What information does a P&L owner need to make a decision on a given topic? What possible scenarios should that leader consider, and what would be their monetary and nonmonetary impact? The IBP process can standardize this information—for example, by summarizing it in templates so that the responsible parties know, up front, which data, analytics, and impact information to provide.

Second, essential inputs into IBP determine its quality. These inputs include consistency in the way planners use data, methods, and systems to make accurate forecasts, manage constraints, simulate scenarios, and close the loop from planning to the production shopfloor by optimizing schedules, monitoring adherence, and using incentives to manufacture according to plan.

Determining the frequency of the IBP cycle, and its timely integration with tactical execution processes, would also be part of this redesign. Big items—such as capacity investments and divestments, new-product introductions, and line extensions—should be reviewed regularly. Monthly reviews are typical, but a quarterly cadence may also be appropriate in situations with less frequent changes. Weekly iterations then optimize the plan in response to confirmed orders, short-term capacity constraints, or other unpredictable events. The bidirectional link between planning and execution must be strong, and investments in technology may be required to better connect them, so that they use the same data repository and have continuous-feedback loops.

Authorize consequential decision making

Finally, every IBP process step needs autonomous decision making for the problems in its scope, as well as a clear path to escalate, if necessary. The design of the process must therefore include decision-type authority, decision thresholds, and escalation paths. Capability-building interventions should support teams to ensure disciplined and effective decision making—and that means enforcing participation discipline, as well. The failure of a few key stakeholders to prioritize participation can undermine the whole process.

Decision-making autonomy is also relevant for short-term planning and execution. Success in tactical execution depends on how early a problem is identified and how quickly and effectively it is resolved. A good execution framework includes, for example, a classification of possible events, along with resolution guidelines based on root cause methodology. It should also specify the thresholds, in scope and scale of impact, for operational decision making and the escalation path if those thresholds are met.

Transforming supply chains: Do you have the skills to accelerate your capabilities?

In addition to guidelines for decision making, the cross-functional team in charge of executing the plan needs autonomy to decide on a course of action for events outside the original plan, as well as the authority to see those actions implemented. Clear integration points between tactical execution and the IBP process protect the latter’s focus on midterm decision making and help tactical teams execute in response to immediate market needs.

An opportunity, but no ‘silver bullet’

With all the elements described above, IBP has a solid foundation to create value for a business. But IBP is no silver bullet. To achieve a top-performing supply chain combining timely and complete customer service with optimal cost and capital expenditures, companies also need mature planning and fulfillment processes using advanced systems and tools. That would include robust planning discipline and a collaboration culture covering all time horizons with appropriate processes while integrating commercial, planning, manufacturing, logistics, and sourcing organizations at all relevant levels.

As more companies implement advanced planning systems and nerve centers , the typical monthly IBP frequency might no longer be appropriate. Some companies may need to spend more time on short-term execution by increasing the frequency of planning and replanning. Others may be able to retain a quarterly IBP process, along with a robust autonomous-planning or exception engine. Already, advanced planning systems not only direct the valuable time of experts to the most critical demand and supply imbalances but also aggregate and disaggregate large volumes of data on the back end. These targeted reactions are part of a critical learning mechanism for the supply chain.

Over time, with root cause analyses and cross-functional collaboration on systemic fixes, the supply chain’s nerve center can get smarter at executing plans, separating noise from real issues, and proactively managing deviations. All this can eventually shorten IBP cycles, without the risk of overreacting to noise, and give P&L owners real-time transparency into how their decisions might affect performance.

P&L owners thinking about upgrading their S&OP or IBP processes can’t rely on textbook checklists. Instead, they can assume leadership of IBP and help their organizations turn strategies and plans into effective actions. To do so, they must sponsor IBP as a cross-functional driver of business decisions, fed by thoughtfully designed processes and aligned decision rights, as well as a performance management and capability-building system that encourages the right behavior and learning mechanisms across the organization. As integrated planning matures, supported by appropriate technology and maturing supply chain–management practices, it could shorten decision times and accelerate its impact on the business.

Elena Dumitrescu is a senior knowledge expert in McKinsey’s Toronto office, Matt Jochim is a partner in the London office, and Ali Sankur is a senior expert and associate partner in the Chicago office, where Ketan Shah is a partner.

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Will the IRS Integrated Modernization Business Plan Work?

On April 18, 2019, IRS released the IRS Integrated Modernization Business Plan April 2019 (Plan) - a six year Plan designed to modernize the IRS’ technology systems, improve Taxpayer services and protect Taxpayer data. According to IRS, the Plan will cost between $2.3 billion and $2.7 billion through Fiscal Year 2024 and will help IRS achieve modernization required to deliver efficient Taxpayer services and enforcement with enhanced user experiences and curtail the rising operational costs.

According to IRS, the Plan will allow IRS to provide superior service to Taxpayers while delivering long-term budget efficiencies as the IRS decommissions legacy applications, automates manual processes, and expands advanced analytics programs.

First, let’s understand how IRS works:

• IRS has Four major Business Units:
• Large Business and International (LB&I)
• Tax-Exempt and Government Entities (TE/GE)
• Small Business/Self-Employed (SB/SE)
• Wage & Investment (W&I)
• IRS offers Six business processes:
• CUSTOMER SERVICE: • Online Payment • Online Account • Third Party • Customer Management • Education & Outreach
• INTERNAL OPERATIONS: • Financial Management • Human Capital Management • Asset Management • IT Management • Administrative Management
• ACCOUNT MANAGEMENT: • Record Business Events • Settle Account • Settlement Actions • Post Transaction • Analyze Account
• INTAKE: • Ingestion Service • Perfection Service • Calculator Services • Anomaly Detection • Verification • Issue Resolution
• CASE MANAGEMENT: • Case Inventory • Case Treatment • Workflow Management • Correspondence Management
• COMPLIANCE: • Issue Detection • Issue Identification • Issue Selection • Correlation • Inventory Prioritization

How will IRS improve Taxpayer services and protect Taxpayer data and deliver on its Business Plan?

The IRS plans to deliver improved Taxpayer services and protect Taxpayer data via Four Modernization Pillars:

• Taxpayer Experience : Help taxpayers resolve issues quickly and efficiently, empower taxpayers with information about their account, obligations and payment options, make services available to customers when they need them and Protect taxpayer information and data.
• Core Taxpayer Services & Enforcement : Integrate tax processing systems to increase the cost effectiveness of operations, enable real time processing and increase transparency of return status, increase data usability and the use of data analytics to combat fraud.
• Modernized IRS Operations : Reduce complexity of the technical environment, leverage data to deliver secure, agile and efficient applications and services, strengthen organizational agility through automation and streamlining processes.
• Cybersecurity & Data Protection : Establish trusted and streamlined access to information through identity and access management technologies, proactively identify emerging threats and vulnerabilities through the use of real time intelligence information and analytics, protect taxpayer data and systems via end to end visibility and common platforms.

Will the Business Plan work?

The Business Plan Report states that it is burdensome and expensive to keep the existing IRS IT infrastructure up and running: “The cost to operate the IRS technology infrastructure annually now exceeds $2.2 billion and is expected to exceed $3 billion by FY2026 if current trends continue”.

IRS receives and warehouses amounts of data that are difficult to visualize. Yet, the Plan makes no mention of Big Data analytics and Artificial Intelligence (AI) support. It could be an enhancement to the Plan that could more quickly and efficiently reduce the annual Tax Gap. This would require enough flexibility in the software to permit the quality of possible increasing enhancements to the Plan that advances in AI could bring to the Plan.

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IRS Lays Out Its Technology Modernization Vision

Phil Goldstein is a former web editor of the CDW family of tech magazines and a veteran technology journalist. He lives in Washington, D.C., with his wife and their animals: a dog named Brenna, and two cats, Grady and Princess.

As the Government Accountability Office detailed in 2016 , the Treasury Department’s taxpayer data program uses assembly language code — a low-level computer code that is difficult to write and maintain — and operates on an IBM mainframe. At this point, it is about 60 years old. 

That is why the IRS and Treasury have devised a comprehensive modernization plan to propel the revenue service into the 21st century. The plan, formally known as the IRS Integrated Modernization Business Plan , was released in April and details how the IRS plans to modernize its processes for the digital age and improve services for citizens . 

During a congressional hearing in April, IRS Commissioner Charles Rettig cited IT modernization as one of the agency’s most important priorities over the next few years. The replacement and modernization of the IRS’ aging IT systems is expected to cost between $2.3 billion and $2.7 billion over the next six years, beginning with $290 million requested in the president’s fiscal 2020 budget proposal, as FedScoop reports . 

While that is a substantial sum of money, the IRS plan makes clear that it will cost the agency more in the long run to maintain legacy systems than it will to modernize. “The cost to operate the IRS technology infrastructure annually now exceeds $2.2 billion and is expected to exceed $3 billion by FY2026 if current trends continue,” the plan states. “Modernization is necessary to deliver efficient taxpayer services and enforcement with enhanced user experiences and to curtail the rising operational costs.”

A key element of the modernization plan is to streamline IRS operations through the elimination of millions of lines of legacy code.

Through modernization, the IRS wants to be able to, among other things, reduce call wait times and case resolution times with customer callback technology, online notices, and live online customer support; speed up tax return and refund processing with real-time return processing and taxpayer error correction; simplify identity verification to expand access to online services while protecting data ; and increase systems availability for taxpayers and tax professionals. 

IRS Focuses Modernization on the User Experience

Speaking last month to Congress, and in asking for funding for modernization, Rettig described how the IRS’ legacy IT systems are insecure and unsustainable in their current form.

“They have been patched through the years and IRS systems have been asked to take on more and more tasks,” he said, according to FedScoop. “We have about 60 different applications . We have 12,000 or 13,000 servers on 12 mainframes . It’s difficult to continually patch. At some point, we need to replace. And we’re definitely at that point.”

The modernization plan is based on four pillars: the taxpayer experience, core taxpayer services and enforcement, modernizing IRS operations, and cybersecurity and data protection .

“Rapid advancements in the digital customer service experience offered by private industry increase customer expectations of superior service from government agencies, including the IRS,” the plan notes. 

In an introductory section of the plan signed by Rettig, Deputy Commissioner for Operations Support Jeffrey Tribiano and Deputy Commissioner for Services and Enforcement Kirsten Wielobob, the IRS leaders say that they ultimately aim to enhance the citizen experience and make the IRS’ IT systems more resilient. 

“We all know that advances in technology will require adjustments over time and that challenges lie ahead,” they say. “If and when disaster strikes, the story shouldn’t be that a system went offline but rather how quickly we recovered and resumed normal operations.”

To that end, the plan calls for the IRS to use more web applications for self-service options, establish secure information exchange options and build internal capabilities. “By enabling authorized third parties and taxpayers to interact digitally with the IRS, the investment will provide a better user experience, achieve significant savings by moving some service interactions to lower cost channels, and deliver consistent data and services through reusable Application Programming Interfaces (APIs),” the plan states.

The IRS also plans to target younger citizens and develop “ digital notices through the secure messaging platform that provides communications to taxpayers who prefer that channel over mailed correspondence, including digital chat.”

Another project involves converting more than 200,000 lines of legacy assembly-language code to modern software language . Similarly, the plan says, “efforts are underway to migrate from text-based legacy programming languages (e.g., Common Business-Oriented Language (COBOL)) to modern, common languages (e.g., .NET, JAVA), which will promote programming language standardization and reduce workforce sustainment risks.”

MORE FROM FEDTECH: Find out how your agency can successfully migrate data to modern architectures. 

Cloud and Cybersecurity Are Key Elements of IRS Modernization

To maintain the efficiency of its apps and underlying tax data, the IRS needs to have end-to-end visibility and be more agile. As a result, the plan says, the IRS will transition its “data, applications, and services from onsite to the cloud, where applicable.”  

Moving to the cloud “will reduce fixed investment, minimize the risks of aging hardware, and improve scalability and elasticity.” 

In particular, migrating to private and hybrid cloud architectures “will support long-term and emergent business requirements for enterprise IT orchestration and service management,” the plan says. “IRS systems must accommodate heavy demand during peak times, resulting in the critical need for both infrastructure scalability and flexibility.”

The plan also emphasizes the importance of cybersecurity. “To protect IRS systems and retain public trust, we must maintain a strong security posture with a focus on Identity & Access Management (IAM), vulnerability and threat management, and enterprise-wide security operations and management ,” it says. 

The IRS aims to implement existing IAM capabilities as a set of common services to standardize authentication and authorization across its platforms. The revenue service also wants to be able to “proactively identify emerging threats and vulnerabilities through the use of real-time intelligence information and analytics.”

Additionally, the IRS says it will “establish security standards and reusable security services and tools appropriate to the evolving technology ecosystem. We will integrate security processes into the service design/operations lifecycle to deliver systems and processes with security built in at the outset.”

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US Government Accountability Office tells IRS to bring cloud migration deadline forward

GOA cites cyber security risks caused by outdated IT including applications up to 64 years old

The US Government’s Internal Revenue Service (IRS) has been told to speed up its move to the cloud.

A report from the Government Accountability Office (GAO) found that the IRS’s reliance on outdated IT infrastructure was increasing the risk of cybersecurity breaches and staffing issues, as well as costs.

The report found that around 33 percent of applications, 23 percent of software instances in use, and eight percent of hardware assets were considered ‘legacy’. For context, the applications were between 25 and 64 years old, and the software was up to 15 versions outdated.

The issue of legacy IT is not new for the IRS. In 2019 the organization released its Integrated Modernization Business Plan . This initially laid the pathway for modernization incentives including moving to the cloud through the fiscal year 2024. This has since been updated and a plan should be finalized sometime early this year.

The GOA found that of 21 modernization initiatives that the IRS had underway, nine involved legacy systems. Of those nine, six failed to address the key problem of the disposition of legacy systems. Officials had instead vaguely stated that the issue would be addressed at an ‘appropriate’ time.

Last year the IRS announced that it would be updating the Individual Master File (IMF), which houses the data for individual tax accounts, by 2030. However, the organization recently paused six of its initiatives including two which were necessary for the scheduled update. As a result, the new deadline is unknown. The IMF has been used since 1970, making it around 53 years old.

According to the IRS, this suspension was due to a need to prioritize and staff were thus moved to other projects. The IRS has since agreed to restart work on the IMF and will do so with the remainder of funding provided by the Inflation Reduction Act which saw ~$4.8bn go to the IRS for Business Systems Modernization and $25.3 billion for Operations Support which includes the funding of operations and maintenance of the IT systems.

The GAO’s report also notes that IRS’s cloud computing efforts fully addressed 11, partially addressed one, and did not address two requirements identified in the Office of Management and Budget’s June 2019 cloud computing strategy . The main element of this was the IRS's failure to conduct regular evaluations of customer experiences and needs.

In total, the GAO has made nine recommendations to the IRS, including that the IRS should: establish time frames for addressing the disposition of legacy systems and document this (Enterprise Case Management, Enterprise Data Platform, Information Returns Modernization, Information Technology Service, Enterprise Anomaly Detection, and Workforce Infrastructure); ensure that cloud computing efforts fully address the key Office of Management and Budget’s requirements as related to standardizing cloud contract agreements, those associated with the developing and implementing of policy for high-value assets in the cloud, and finally to conduct regular evaluations of customer experience.

The IRS has agreed to all recommendations.

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• By Mark Castro, CPA
• Taxpayer First Act — Key provisions
• IRS Modernization Plan — Summary of the four pillars of the plan

Taxpayer First Act

This legislation was signed into law on July 1, 2019. Its main focus is on administrative and structural changes which will affect how the IRS operates in the future. It also includes a few items that will directly affect taxpayers as well. The overall administrative changes are designed to help modernize the IRS and help it operate more efficiently to meet taxpayer’s needs.

Below are some of the key provisions in the legislation:

Filing and Penalty Provisions

• Identity Protection PIN The IRS is required to phase in over the next five years the ability for any taxpayer residing in the United States to request an IP PIN.
• Tax exempt organizations  – All tax exemption organization federal returns must be filed electronically.
• 100 returns for 2021
• 10 returns for 2022 and beyond
• Calendar year 2018 – 200
• Calendar year 2019 – 150
• Calendar year 2020 – 100
• Calendar year 2021 – 50
• After 2021 – 10
• Minimum penalty for failure to file a return on time  will be $330 beginning with calendar year 2020.
• Penalty per return will be $1,000
• Maximum penalty for any one year is $50,000
• Filing 1099s  – By January 1, 2023 the IRS must create and make available on their website the ability for taxpayers to prepare and file Form 1099 electronically.

IRS Administrative Provisions

• Reorganization of IRS IRS must submit a reorganization plan to Congress by September 30, 2020. This plan must consider how IRS will prioritize taxpayer services, streamline and simplify its structure, better position itself to combat ongoing cybersecurity and other threats, address whether the IRS Criminal Division should report directly to the IRS Commissioner and implement other provisions of the Taxpayer First Act.
• Plan to Improve Service The legislation requires the IRS to submit to Congress a written comprehensive customer service strategy. This plan must provide assistance to taxpayers that is secure, designed to meet reasonable taxpayer expectations and adopt appropriate best practices of customer service provided in the private sector, including online services, telephone call back services, and training of employees providing customer services.
• Limits IRS seizure authority to property derived from an illegal source.
• Revises requirements related to equitable relief from joint liability for unpaid taxes.
• Restricts referrals of tax debts to private debt collection agencies, excluding taxpayers whose income consists of disability insurance benefits or other low income taxpayers.
• IRS may no longer immediately sell seized property merely if is liable to become greatly reduced in price or value or cannot be kept without great expense.
• Establishes Independent Office of Appeals  and makes access to appeals generally available to all taxpayers

See the text of the  Taxpayer First Act (HR 3151)  for more details on the above provisions and other provisions included in this legislation.

IRS Modernization Plan The IRS published their new  Integrated Modernization Business Plan  in April 2019. This plan describes a six-year strategy to modernizing IRS systems and taxpayer services. It will consist of two 3-year phases beginning this year (2019).

Completion of this plan will enable the IRS to:

• Significantly improve the taxpayer experience by standardizing customer workflows and expanding access to information.
• Reduce call wait and case resolution times with customer callback technology, online notices and live online customer support.
• Expedite return and refund processing with real-time return processing and taxpayer error correction.
• Simplify identity verification to expand access to online services while protecting data.
• Increase systems availability for taxpayers and practitioners.
• Facilitate implementation of new tax provisions including common extenders enacted by Congress by eliminating millions of lines of legacy code.

This modernization plan is organized around the following four pillars:

Taxpayer Experience Expand digital options, improve traditional channels and provide simplified and proactive services for taxpayers and their representatives.

The plan has the following objectives for the taxpayer experience:

• Help taxpayers resolve issues quickly and efficiently.
• Empower taxpayers with information about their account, obligations and payment options.
• Make services available to customers when they need them.
• Protect taxpayer information and data.

The Key Programs that will be utilized to meet the objectives are:

• Taxpayer Digital Communications Outbound Notifications (TDC-ON) Provide a web-based platform for taxpayers to receive online notifications (such as tax credit qualifications and balance due). Would allow delivery of digital notices using the secure messaging platform to the taxpayer’s secure online account (to preparer’s online account as well). Also, include digital chat option.
• Web Applications Improve interactions and communications with taxpayers, employers, IRS and third parties (tax preparers and tax software programs) by providing broad range of self-service options and establishing secure information exchange options. Would enable authorized third parties and taxpayers to interact digitally with IRS.
• Live Assistance (Callback & Omnichannel) IRS will provide call-back option to taxpayer, will redesign the customer voice portal and improve identity verification. Provide live text chat, virtual assistance capabilities and video chat assistance.

Core Taxpayer Services and Enforcement Streamline and integrate IT programs that enable top quality service.

The plan has the following objectives for core taxpayer services and enforcement:

• Integrate tax processing systems to increase cost effectiveness of operations.
• Enable real-time processing and increase transparency of return status.
• Increase data usability and the use of data analytics to combat fraud.

IRS will accomplish these objectives with the following programs:

• CADE 2 Transition State 2  — This program will help modernize the taxpayer account processing environment and develop an integrated real-time processing environment to support tax returns, information returns, payments and other transactions. A key project supporting CADE 2 TS is the Individual Tax Processing Engine (ITPE) project which will convert approximately 200,000 lines of legacy assembly language code to modern software language. This code conversion is a major milestone towards retiring the Individual Master File (IMF).
• CADE 2 Target State  — This will provide capabilities that will allow direct visibility and access to taxpayer account detail on a near real time basis and furthers the effort to retire the IMF.
• Enterprise Case Management (ECM)  — This solution will digitize case information, automate work selection and will improve resource alignment.
• Return Review Program (RRP)  — The program that runs returns through fraud detection and other detection processes during the processing of the returns.
• Real-Time Tax Processing (RTTP) —  This program will deliver independent and near real-time data processing, allowing the IRS to move away from batch processing, view returns dynamically and understand the status of a return as it is processed. Within certain parameters, RTTP will allow amendments to be processed directly.

Modernized IRS Operations IRS will use innovative technologies and processes, such as Cloud, Agile, DevOps, Application Programming Interfaces, robotic process automation and next generation infrastructure to reduce costs and manual effort. The plan has the following objectives for modernizing IRS operations:

• Reduce complexity of technical environment.
• Leverage data to deliver secure, agile, and efficient applications and services.
• Strengthen organizational agility through automation and streamlining processes.

Cybersecurity & Data Protection IRS will protect taxpayer data using advanced analytics and tools and align to government wide cybersecurity standards and priorities by doing the following:

• Establish trusted and streamlined access to information through identity and access management technologies
• Proactively identify emerging threats and vulnerabilities through real-time intelligence information analytics
• Protect taxpayer data and systems via end-to-end visibility and common platforms

See the following for more information on the IRS Modernization Plan:

• IRS Fact Sheet 2019-9  (IRS Modernization Plan provides plan to improve services for taxpayers, tax community) of April 2019
• IRS Integrated Modernization Business Plan
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IT Modernization – The IRS’s Reliance on Antiquated Technology Poses a Continuing Risk to Tax Administration

Subscribe to the NTA’s Blog and receive updates on the latest blog posts from National Taxpayer Advocate Erin M. Collins.

I discussed the expansion of digital service options to improve taxpayers’ experiences interacting with the IRS. Here, I will discuss the desperate need for multi-year funding to modernize IRS computer systems and infrastructure. Tax administration is at risk, and the country and the IRS need a solution now more than ever.

A Supreme Court justice famously opined that “taxes are the life-blood of government.” In that vein, the IRS is responsible for collecting approximately $3.5 trillion in taxes each year – roughly 95 percent of federal revenue. In addition, the agency is tasked with administering recurring social benefits programs like the Earned Income Tax Credit, and one-time financial relief programs like Economic Stimulus Payments in 2008 and Economic Impact Payments in 2020. Despite these enormous and critical responsibilities, the IRS is overwhelmingly reliant on “legacy” information technology (IT) systems – which the IRS’s IT function has defined as systems that are at least 25 years old, use obsolete programming languages ( e.g. , COBOL), or lack vendor support, training, or resources to maintain. A recent report published by the Treasury Inspector General for Tax Administration found that 231 IT systems used by the IRS are legacy systems.

In order to provide first-rate taxpayer service, the IRS will require a substantial overhaul of its IT systems. Over the past 50 years or so, the IRS has developed hundreds of software programs to meet the needs of its business units. But these programs generally lack the ability to interface with each other to provide a seamless taxpayer experience, nor are they nimble enough to integrate new technologies, with the consequence that data from one system must be re-entered into another ( e.g., when a taxpayer’s case moves from Exam to Appeals).

Example: When a custodial parent wishes to amend her 2019 tax return to allow the non-custodial parent to claim a child as a dependent and to claim various credits, she can file an amended return electronically , but must mail the Form 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent, along with Form 1040-X, Amended U.S. Individual Income Tax Return. The return-processing arm of the IRS does not have the capability to accept the Form 8332 electronically, so it must scan and upload the data from a paper form received. The delay resulting from mailing and processing of a paper Form 8332 could cause complications for the taxpayer or the non-custodial parent if the audit arm of the IRS acts on the amended return based on outdated return information of either parent.

Regardless of how the IRS organizes its business units and its behind-the-scenes processes, taxpayers will benefit if IRS systems can communicate with each other, in real time, to better serve both individual and business taxpayers.

In Section 2101 of the Taxpayer First Act (TFA), Congress directed the IRS Chief Information Officer to develop and implement a multi-year strategic plan for IT. Prior to the passage of the TFA, the IRS had embarked on a mission to modernize its IT systems. In April 2019, it released an Integrated Modernization Business Plan that outlines the IRS leadership’s vision to improve the taxpayer experience by modernizing core tax administration systems, IRS operations, and cybersecurity over a six-year period, but does not fully address all of its IT needs.

The IRS has also established a new Enterprise Digitalization and Case Management office to oversee its efforts to develop a more taxpayer-centric approach to management. The Enterprise Case Management initiative has the dauting task of overcoming the challenges the IRS currently faces from having casework taking place on more than 60 aging systems, most of which are incapable of communicating with each another, onto a cloud-based case management system.

We can all envision the benefits of IT modernization, but core IT upgrades are more than just about improving taxpayer service – they are also required to reduce the chances of a catastrophic breakdown. Modernizing technology is no longer a luxury; it is a necessity, and it is needed now. Imagine the panic and pandemonium that would ensue if the IRS’s IT systems crashed and could not be recovered quickly. In 2018, some systems crashed for just a few hours; although the IRS was able to recover quickly this time, it happened on the filing deadline, prompting the agency to give panicked taxpayers and practitioners an extra day to file their returns. With a more significant crash, the IRS might be unable to collect tax payments or issue tax refunds. Just this year, we have seen a further glimpse of the IRS’s IT systems limitations, as IRS operations have been impacted by COVID-19 (see my earlier blog post ).

It is incumbent upon Congress to fund the technological upgrades the IRS requires to provide an enhanced level of service and improve its overall operations. The IRS estimates it requires approximately $2.5 billion over six years to implement its modernization plan. Yet Congress appropriated only $150 million in fiscal year (FY) 2019 and $180 million in FY 2020 for business modernization efforts. In order for the IRS to properly implement its modernization plan, as a whole and not in pieces, it is imperative to provide multi-year funding, along with sufficient flexibility to use IT funds sensibly. The IRS cannot implement its modernization plan unless Congress gives it the multi-year support it needs for necessary long-term contracts. Absent adequate funding, IRS infrastructure will face increasingly greater risks, and the IRS will have to unnecessarily extend its IT modernization efforts, while continually expending resources to support its current systems. Money that would be better spent on its modernization efforts.

In this year’s Annual Report to Congress, I plan to offer legislative and administrative recommendations to improve IT systems and infrastructure, which are essential to taxpayer rights and taxpayer service. But the time to act is now.

Correction (9/3): Blog has been updated to reflect the correct year of 2019 in the “Example”. Initial version incorrectly stated 2018.

The views expressed in this blog are solely those of the National Taxpayer Advocate. The National Taxpayer Advocate presents an independent taxpayer perspective that does not necessarily reflect the position of the IRS, the Treasury Department, or the Office of Management and Budget.

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The IRS Technology Modernization Program: An Overview

November 2, 2023 – May 20, 2024 IF12525

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The New Rules of Marketing Across Channels

• Joshua Bowers,
• Denise Linda Parris,
• Qiong Wang,
• Danny McRae,
• Francisco Guzmán,
• Mark Bolino

Strategies for navigating a new kind of communication landscape: the “echoverse.”

The Internet and AI tools are transforming marketing communications within a complex, interactive landscape called the echoverse. While marketing has evolved since the proliferation of the Internet, in the echoverse, a diverse network of human and nonhuman actors — consumers, brands, AI agents, and more — continuously interact, influence, and reshape messages across digital platforms. Traditional one-way and two-way communication models give way to omnidirectional communication. The authors integrated communication theory and theories of marketing communications to create a typology of marketing communication strategies consisting of three established strategies — 1) promotion marketing, 2) relationship marketing, and 3) customer engagement marketing — and their proposed strategy, 4) echoverse marketing. The authors also recommend three strategies for marketers to make the shift from leading messaging to guiding messaging: 1) Enable co-creation and co-ownership, 2) Create directed learning opportunities, and 3) Develop a mindset of continuous learning.

Today, companies must navigate a new kind of communication landscape: the “ echoverse .” This new terrain is defined by a complex web of feedback loops and reverberations that are created by consumers, brands, news media, investors, communities, society, and artificial intelligence (AI) agents. This assemblage of actors continuously interact, influence, and respond to each other across a myriad of digital channels, platforms, and devices, creating a dynamic where messages circulate and echo, being amplified, modified, or dampened by ongoing interactions.

• JB Joshua Bowers is Co-CEO of Pavilion Intelligence, a marketing science consultancy and upcycled timber operation. He has a Ph.D. in Marketing from the University of Oklahoma and is a leader in new product development for enterprise and marketing technology.
• DP Denise Linda Parris is Co-CEO Pavilion Intelligence, a marketing science consultancy and upcycled timber operation. She has been a professional athlete, entrepreneur, and academic with research focused on servant leadership, societal impact, and marketing technology.
• QW Qiong Wang is the Ruby K. Powell Professor of Marketing and Associate Professor of Marketing and Supply Chain at the University of Oklahoma’s Price College of Business. Her research focuses on the processes and boundaries of inter-organizational issues, including the development and management of strategic partnerships, marketing strategies, and supply chain management.
• DM Danny McRae is a technology professional with over 20 years of experience in information architecture.
• FG Francisco Guzmán is Professor of Marketing at the University of North Texas’ G. Brint Ryan College of Business. His research focuses on how brands can drive social transformation.
• MB Mark Bolino is the David L. Boren Professor and the Michael F. Price Chair in International Business at the University of Oklahoma’s Price College of Business. His research focuses on understanding how an organization can inspire its employees to go the extra mile without compromising their personal well-being.

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Backgrounder: Minister Vandal announces federal investments to support clean technology advancements across Alberta

From: Prairies Economic Development Canada

Backgrounder

PrairiesCan is investing over $21 million for 13 projects in Alberta through several federal programs, including the Alberta Indigenous Clean Energy Initiative; the Business Scale-up and Productivity program; and the Regional Innovation Ecosystems program. These investments are expected to support over 415 jobs and help Alberta organizations seize opportunities resulting from the integration and development of clean technologies. Adopting and commercializing new technologies offers the potential of environmental and economic benefits across a wide range of industries.

PrairiesCan is investing over $21 million for 13 projects in Alberta through several federal programs, including the Alberta Indigenous Clean Energy Initiative (AICEI); the Business Scale-up and Productivity program (BSP); and the Regional Innovation Ecosystems program (RIE). These investments are expected to support over 415 jobs and help Alberta organizations seize opportunities resulting from the integration and development of clean technologies. Adopting and commercializing new technologies offers the potential of environmental and economic benefits across a wide range of industries.

Alberta Indigenous Clean Energy Initiative (AICEI) - $926,450

The AICEI supports renewable energy generation or energy efficiency projects that are led by, or for the benefit of, First Nation and Métis communities in Alberta. AICEI is funded through the Strategic Partnerships Initiative which is led by Indigenous Services Canada to provide a way for federal partners to coordinate their efforts, reduce administrative burden and pool resources in support of Indigenous communities. Today, PrairiesCan announced AICEI support for four projects:

• Cold Lake First Nations ($124,000) Complete a feasibility study to determine the suitability of a geothermal system to heat and cool a new pre-construction events centre as well as the existing Casino Dene and Hotel Dene.
• Métis Nation of Alberta ($174,000) As part of the Métis Nation of Alberta (MNA) Climate Change Action Plan, conduct a comprehensive review of the MNA housing portfolio and develop a report which gives prioritized recommendations to increase the energy efficiency of homes.
• Neyaskweyak Group of Companies Inc. (Ermineskin Cree Nation) ($373,450) Complete a feasibility study to support the approval and construction of a new solar farm in Ermineskin Cree Nation.
• Southern Alberta Institute of Technology (SAIT) ($255,000) As part of a partnership between SAIT 's Green Building Technologies research division and the Alberta Native Friendship Centre Association (ANFCA), upgrade ANFCA Friendship Centres in Fort McMurray, Medicine Hat, and St. Paul with energy efficient building systems to reduce emissions and operating costs.

Business Scale-up and Productivity (BSP) Program - $5,986,395

The BSP program supports high-growth businesses that are seeking to improve productivity, scale-up and commercialize technology. It offers interest-free, repayable funding to incorporated businesses that have been in operation for a minimum of two years. Today, PrairiesCan announced BSP support for two projects:

• Kuva Canada ($4,079,895) Expand marketing, operations, and product development initiatives to grow market share of its automated methane monitoring products and software which safely detect methane leaks more accurately, faster and at a lower cost than traditional methane inspection technologies.
• RJ Maclean Tank Services ($1,906,500) Incorporate product improvements and launch marketing initiatives to increase international sales of its robotic tank cleaning system which uses less water and produces less waste than traditional industrial storage tank cleaning processes.

Regional Innovation Ecosystems (RIE) Program - $15,070,112

The  RIE  program helps create, grow, and nurture inclusive regional ecosystems that support business needs to facilitate innovation. Through the RIE program, targeted investments in not-for-profit organizations support businesses in priority sectors to innovate, grow and compete globally. The  RIE program also promotes inclusive growth by helping underrepresented groups more fully participate in the innovation economy. Today, PrairiesCan announced RIE support for seven projects:

• Alberta Energy Efficiency Alliance ($500,000) Lead stakeholder engagement sessions and technology demonstrations to increase the adoption of energy reducing technologies and support collaboration in Alberta’s energy industry. 
• Alberta Innovates ($10,000,000) Establish a specialized production and testing facility to commercialize technologies that convert bitumen into carbon fibre at a significantly lower cost than traditional carbon fibre manufacturing processes.
• Alberta Motor Transport Association and the University of Alberta ($1,400,000) Expand hydrogen heavy vehicle trials and demonstrations across Alberta, including in rural areas and Indigenous communities. This latest funding builds on PrairiesCan’s previously announced funding of $3 million, bringing total PrairiesCan funding to $4.4M.
• Battery Metals Association of Canada ($850,000) Support growth of the battery metals sector in Western Canada by enhancing collaboration and educating stakeholders.
• Carbon Management Canada ($1,168,000) Purchase and install new equipment to enhance its emission management technology validation facility where small- and medium-sized businesses can test, refine, and commercialize carbon capture products and technologies. This latest funding builds on PrairiesCan’s previously announced funding of $1,573,500, bringing total PrairiesCan funding to $2,741,500.
• Pembina Institute ($752,112) Establish a new Centre for Carbon Dioxide Removal based in Calgary which will provide resources and workshops to advance a market for innovative technologies that remove carbon dioxide directly from the atmosphere.
• Petroleum Technology Alliance Canada ($400,000) Provide technical, business and marketing support to help businesses in Alberta export their clean technology innovations to international markets.

Related products

• News Release: Minister Vandal announces federal investments to support clean technology advancements across Alberta

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• Prairies Economic Development Canada (PrairiesCan)
• Green Prairie Economy
• Alberta Indigenous Clean Energy Initiative (AICEI)
• Business Scale-up and Productivity (BSP) program
• Regional Innovation Ecosystems (RIE) program

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The Enterprise Digitalization & Case Management Office teams have quickly risen to the challenge of implementing digitalization and case management initiatives to improve the experience of IRS employees and taxpayers.

Get to know the IRS, its people and the issues that affect taxpayers

By Harrison Smith and Justin Abold-LaBreche CL-21-23, July 22, 2021

A challenge across the federal government is bringing what everyone expects in terms of easy access to services outside of the government into the way those services are provided through technology happen inside the government. We’re Harrison Smith and Justin Abold-LaBreche, the Co-Directors of the IRS Enterprise Digitalization & Case Management Office, and we’re going to give you a closer look into how we’re trying make the easy things easy, as we like to say, here at the IRS.

Our office’s unique leadership construct works well for us and our diverse employees. We both feel strongly that when IRS employees can rapidly resolve taxpayer issues in a simplified digital environment, we can dramatically improve the taxpayer experience.  We each bring unique skills to the office, and we support one another and model that to our employees to create a positive working environment. We’re serious about using a team approach, being inclusive, and employing speedy innovation techniques, but we both use our sense of humor to keep the office atmosphere light when we’re working hard on projects.

The Enterprise Digitalization & Case Management Office was created in July 2020 to address the long-standing need for the IRS to modernize and consolidate many aged case management systems business processes and policies to improve the taxpayer experience. While “vintage” and “antique” are great adjectives for cars, furniture and clothing, they aren’t good descriptions for vital business systems.

To be sure, this is no small task. The technology infrastructure includes 60 legacy case management systems – yes, 60! Each system provides our employees with various pieces of information about a taxpayer’s history with the IRS, but none of them can provide the whole picture or work together to combine information. This isn’t good for our workforce and it’s not good for taxpayers and IRS partners.

Our success depends on collaboration with offices across the IRS. Working closely with our amazing partners in the Information Technology (IT) organization and Business Units, we have begun implementing digitalization and case management initiatives to improve the experience of our employees and taxpayers. We’ll take turns telling you about our recent successes and future plans.

It’s important to note that we’re fortunate that Congress is helping us in this regard by providing a budget for FY 2021 that represents a 3.6 percent increase over FY 2020. This increase will help us make progress on our modernization initiatives as we support the implementation of the IRS multi-year Integrated Modernization Business Plan. Some of the Digitalization and Case Management improvements in the works include:

• Improved ease of IRS interactions for taxpayers.
• Simplified and improved digital communications with the taxpayer.
• Ability for taxpayers to engage the IRS about their cases through a single point of contact.
• Improved taxpayer knowledge and compliance on applicable tax rules.
• Improved IRS customer service.

Enterprise Case Management

Justin here to talk about Enterprise Case Management, or ECM. I’m excited to share that we’ve started moving business processes from legacy systems onto a cloud-based ECM platform to provide IRS employees with a 360-degree view of a taxpayer’s account by enabling appropriate levels of access. This may not sound like a big deal, but it is. Just this one feature will lead to faster and better service for taxpayers and cost savings for us.

Working with our IT partners, we use agile best practices to modernize, configure and migrate business processes and features and deploy them to the end user as they become ready. This was important to us because we didn’t want to wait until we had everything modernized and migrated into ECM to push them live. With over 300 legacy case management processes residing on those 60+ systems, an all-or-nothing approach would take way too long to start delivering value to taxpayers and employees. Instead we started small testing our approach to see what works each step of the way – this will get us better results in the long run as well as let us routinely release modernized functionality to users. Another thing (the most important thing? Only those who have sampled my baking can be the judge…) that got us better results was my baking delicious treats for the ECM staff and steering committees, but that was curtailed by COVID, unfortunately. All kidding aside, we know that everyone in ED&CMO is a person who is more than just the professional side that shows up in the office, and we try to find ways to draw on this rich diversity of talent and experience as well as support everyone inside and outside the office.

One of the ways ECM helped improve operations this year was in the Tax Exempt/Government Entities (TE/GE) Exempt Organization’s Correspondence Unit. Each year, about 30,000 pieces of mail make their way to the TE/GE Correspondence Unit, typically asking for copies of applications or determination letters.  

Previously, the mail traveled through a paper-heavy, manual process . Employees had to use multiple IRS systems to find the information needed to respond, printing required documents along the way. Stacks of paper accumulated and then grew taller as the Unit employees printed a copy of each response letter packet.

Creating even more paper, the Unit converted electronic emails or e-faxes to paper to get them through this same process. Yes, you read that right: converting digital to paper! It’s easy to see why the Correspondence Unit was eager for a more efficient process.

We’re fortunate that Congress is helping us by providing a budget for FY 2021 that represents a 3.6 percent increase over FY 2020. This increase will help us make progress on our modernization initiatives as we support the implementation of the IRS multi-year Integrated Modernization Business Plan.

After migrating to a new case management platform in December 2020, the correspondence process was modernized. Taxpayer requests and letters are now scanned into the EMC platform, and the TE/GE case workers can conduct almost all their research right from the same platform instead of using multiple systems, speeding up our response time to taxpayers.

Another project we’re working on is migrating our Grants Management program onto the ECM platform this grant season. The SPEC Grants Program Office administers two programs: Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE). These grants are awarded annually to eligible organizations that provide free tax return preparation services for low- to moderate-income individuals and families, persons with disabilities, limited English-speaking individuals, the elderly, Native Americans, and rural communities.

Transitioning to the ECM platform will give employees consolidated and streamlined access to handle the grant management process with one tool, enabling them to respond to applicants and recipients more efficiently. We launched initial functionality in late April in time for the launch of the FY21 grant season. IRS employees are now able to import data from the grant application directly into ECM, which makes the process more efficient. Throughout the summer and fall, we hope to build and release new features with the goal of expanding the functionality to additional grant programs including Taxpayer Advocate Service grants.

We’re very proud of the success so far and look forward to more in the years to come. We are adding more business processes to the ECM platform this year, and by 2022 most operating divisions will have at least one business process in ECM. We plan to modernize and migrate several important taxpayer facing journeys into ECM over the next 12 – 18 months including Information Referrals (Form 3949-A), Circular 230 oversight, Offer in Compromise, and Correspondence Exam, with more in the early planning stages including Criminal Investigation, Determinations, and Appeals.

As a result, here are some of the enhancements our employees and taxpayers will see in specific areas, as we migrate legacy systems into ECM:

• Individual taxpayers will receive updates in their online account about the status of their audit, beginning with correspondence exams.
• Application materials, document requests, etc. will be able to be submitted online and taxpayers will receive updates about their receipt electronically.
• Letters will be simplified with plain language and streamlined text so taxpayers can understand their case and what they need to do.
• Employees will have user friendly account and return displays available within ECM to make it more efficient to process cases and resolve issues for taxpayers.

For example, starting this summer, taxpayers who want to submit an Information Referral (Form 3949-A) alerting the IRS to potential tax wrong-doing by others will be able to do so entirely online using the IRS’s new Document Upload Tool, an innovation conceived and already deployed by our Information Technology organization. The referral will then be automatically uploaded into ECM, where a case will be systemically created for further review and assignment to our compliance organizations. Today, all the Forms 3949-A come into the IRS Submission Processing organization in paper, where they are opened and reviewed and then packaged back up for transshipment by mail to the compliance organizations. Can you imagine what a difference in efficiency it will be when all of this is electronic and there is no transshipment because the 3949-A will simply be assigned electronically? This means the IRS can spend more time investigating potential tax wrong-doing and less time receiving, opening and sending mail.

We will continue modernizing and migrating business processes into ECM for the next few years – as well as retiring the legacy case management systems along the way.

Our Digitalization Strategy

Harrison here – now it’s my turn to talk about digitalization. First, I want to note the difference between “digitize” and “digitalize” in what we’re doing at the IRS. My mother is a great – and funny – example of the difference between the two. My mother will take a picture of an e-mail and then text it to me. Seriously. This is digitization - it’s harder to use the information and isn’t searchable or really useful from an information standpoint. But it is faster than printing out the e-mail and sending it to me – which she has done before.  Digitalization is sending the e-mail in a way that I can add to it, make edits, search the text, etc.  If you’re reading this, Mom, I love you and all the letters I get from you – keep them coming! 

I share this anecdote because it shows two things – one, just because something comes across in an electronic format, it doesn’t mean it’s super useful, and two, there are tools that aren’t always available or well known that we should be exploring for taxpayers.

Aside from modernizing our processes, we’re also committed to creating an environment where IRS data is available, accessible and usable in a format that enables our employees to make data-driven decisions. We’re currently working on a project that has the potential to provide access to data contained within more than 10 years of digital images of forms – a wealth of information that we can use to focus our efforts within the Service.

One way we have improved service is by engaging users throughout the process. The users are the experts. Getting input from users and having them define what needs to be done is critical to our digitalization strategy, and it also reinforces the need to have an early conversation with offices about “what are you trying to do” as opposed to “what do you think you want.” When the conversation is focused on what a customer wants, it hampers our ability to figure out what they might really need. And then we risk purchasing and launching new tools/approaches that may not work in the long run.

We’ve also focused on projects where we can move quickly to improve the taxpayer experience in small pieces, testing an approach that, if successful, can be used elsewhere.  Last year, we shifted a process that was completely paper-driven to digital – providing an option for a form to be submitted via e-fax. From the taxpayer’s perspective, this accelerated the processing time from 3 weeks or more to almost instantaneous, reducing the time needed to fulfill their request.  We are now looking at ways to further reduce the time needed to fulfill a taxpayer’s request by utilizing technology that will help us extract machine-readable data from those forms, automating a process that is primarily manual today.  If we’re successful, we will look at using this approach for other forms used by taxpayers and IRS partners.

As Justin mentioned earlier, we generate a tremendous volume of paper in all our lines of business. It could fill rooms, and sometimes it does. Our Digitalization Strategy was designed to address this issue and aligns with legislative mandates for records storage. The three goals of the strategy are:

• Reducing paper volume.
• Increasing access to digital data.
• Preparing the IRS to manage digital data and drive efficiencies.

Employing our inclusive approach, we will continue to hire a diverse workforce and engage subject matter experts throughout the IRS to evaluate and identify the best combination of policy, business process and technology solutions to reach our digitalization goals. In these efforts, the agency will also engage employees and their representation to fulfill any bargaining obligations. Earlier this year, we launched an internal Digitalization Request Form and collected over 200 ideas from employees throughout the agency that helped to kickstart our digitalization pilots and efforts!  I’m also excited about our partnering with other agencies to use new technology to electronically file documents that currently take a lot of time and manual processes. Not only will this improve our customer service for taxpayers, it has the potential to save millions of dollars in labor costs each year!

When we look at the work ahead for us in modernizing our business processes, Justin and I often joke that our organization is “Team Plinko.” Just like the popular game show involving disks bouncing their way down a peg-lined board, there are challenges which we view as opportunities to learn and improve. We’re excited to see what the future holds as we continue to innovate the taxpayer experience.

Harrison Smith and Justin Abold-LaBreche Co-Directors of the IRS Enterprise Digitalization & Case Management Office

About the Authors

Harrison Smith and Justin Abold-LaBreche are Co-Directors of the Internal Revenue Service Enterprise Digitalization and Case Management Office. As senior leaders with leadership experience across multiple IRS offices, they are tasked with spearheading IRS’s efforts to modernize systems, simplify business processes, and empower taxpayers and IRS employees to rapidly resolve issues in simplified digital environments.

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