WASHINGTON - The Internal Revenue Service's (IRS) Modernized e-file (MeF) system needs

improvement so that more taxpayers will be able to electronically file their tax returns, according

to two new reports released publicly today.

The MeF system is designed to replace the IRS's current tax return filing technology with a

single, Internet-based electronic filing platform by the 2013 Filing Season. The Treasury

Inspector General for Tax Administration (TIGTA) reviewed whether the IRS corrected

performance problems identified by TIGTA during the 2010 Filing Season and whether the

system will timely and accurately process individual tax returns during the 2011 Filing Season.

Overall, TIGTA found that the processes the IRS used to validate and monitor MeF system

processing did not ensure the accurate processing of individual tax returns, and that TIGTA

could not validate that previously identified performance issues were resolved.

"Since a growing number of Americans are filing their returns electronically, there is no room

for error in IRS computer systems," said J. Russell George, Treasury Inspector General for Tax

Administration. "The IRS must be relentless in its pursuit of excellence with regard to all

aspects of the Modernized e-file system. Attention to system security, capacity, and performance

accuracy are paramount."

In its first report, "The Modernized e-File Release 6.2 Included Enhancements, but

Improvements Are Needed for Tracking Performance Issues and Security Weaknesses," TIGTA

found that the IRS successfully planned for key performance enhancements and tested the

system's requirements prior to implementation during the 2011 Filing Season, but needed to

improve its methods for tracking performance problems and security weaknesses. Specifically,

the IRS could not provide documentation to show TIGTA that performance enhancements were

implemented to address performance-related issues identified during the 2010 Filing Season.

The IRS agreed with three of TIGTA's four recommendations for improvement but disagreed

with TIGTA's assertion that security weaknesses were not immediately mitigated. Although the

IRS stated it currently accounted for all security controls, TIGTA maintains that documentation

for tracking security issues should be continuously monitored and updated as weaknesses are

identified or as changes occur.

In its second report, "Low Participation and Tax Return Volumes Continue to Hinder the

Transition of Individual Income Tax Returns to the Modernized e-File System," TIGTA found

that IRS processes were not effective in ensuring the accuracy of the returns processed by MeF

during the 2011 Filing Season. TIGTA also found that reluctance by tax return transmitters and

State tax agencies to e-file using MeF raises significant concerns regarding the IRS's ability to

replace fully the Legacy e-file system for the 2013 Filing Season. According to the report, some

return transmitters lacked confidence in the performance of the MeF system.

Further, the IRS is not encouraging taxpayers to take advantage of the ability to use the MeF

system to scan and upload supplemental documentation to their e-filed tax returns.

TIGTA recommended in its second report that the IRS:

• Develop a comprehensive testing plan to ensure the accuracy of MeF system processing

  and correct the programming errors identified during our review of the MeF system

  processing during the 2010 Filing Season;

• Continue to work with tax return transmitters and States to identify and address concerns

  with MeF system performance;

• Test system performance, stability of web services, and processing capacity; and
• Adequately test the MeF system's ability to receive, process, store, and retrieve tax

  return attachments and promote the use of such attachments.

IRS management agreed with most of TIGTA's recommendations. It disagreed with TIGTA's

recommendation to develop a comprehensive testing plan.