The government’s free tax preparation software is almost guaranteed to fail

As the former chief information officer of the Obama administration, and former CIO of Microsoft, The Walt Disney Co. and VMware, I’ve learned a thing or two over the past forty years about early indicators of a technology project’s chances of success or failure.

Based on what I’ve seen so far, it’s clear to me that the “free” tax preparation software project (the so-called “IRS Direct File”) being implemented by the Treasury Department and the Internal Revenue Service is all but guaranteed to be a success. . failure.

While the reasons why a technology project succeeds or fails may vary, I have found that a basic set of questions should be answered at the beginning of any project:

Is there a compelling necessity?

In the case of IRS Direct File—where the government would compete with private sector tax software companies in preparing and filing U.S. taxpayers’ individual federal tax returns—the government has conducted a number of surveys over the years, and more recently was urged by a small group of members of Congress.

But such studies do not translate into a reliable demand signal. Actual experience is a much more reliable indicator of whether a real and compelling need exists. And there is an excellent recent independent analysis from the MITER Corporation that comes to the opposite conclusion of these government studies, is based on actual experience, and identifies the many flaws in these research methodologies.

So there appears to be a clear, demonstrable need for IRS Direct File to be missing.

Even if there is a need for the technology project, is the proposed approach adequate and appropriate to meet that need?

In this case, the proposed solution – tax preparation software developed by the IRS for what appears to be merely federal tax returns – will fall short because it does not address some of the most basic needs of the target taxpayers.

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Those needs include:

  • The ability to file state income taxes along with the customer’s federal return, which is required by taxpayers in all but a few states
  • Ability to provide expert support, both online and in person, during critical tax filing periods (IRS call centers and online resources routinely receive failing grades)
  • The ability to easily transition a taxpayer from the simple service the IRS would try to provide to more sophisticated software as taxpayer needs change over time
  • The ability to make relatively complex individualized claims for tax credits and deductions (e.g., the Earned Income Tax Credit, Form 1099, itemized deductions) that are important benefits to the target group

These are important things that commercial tax preparation companies learned long ago and are missing from the proposed IRS approach to Direct File.

Are the estimated total lifecycle costs – for example, initial rollout, operational support costs, ongoing functionality upgrades and updates, and additional cybersecurity costs – commensurate with the benefits?

Neither the IRS nor members of Congress who favor this IRS-sponsored approach have been able to characterize the benefits of their strategy in terms of time saved, costs avoided, increased customer satisfaction, or any other commonly used measure of success/benefit. They also failed to determine the expected cost per return (derived by adding up all the costs associated with the project and dividing that figure by the number of users).

The estimated costs of this project are most likely grossly underestimated, based on a sample of other government software development projects. This is a pattern I’ve seen time and time again and it’s unlikely to change.

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As a former federal CIO, I have great respect for the men and women tasked with implementing such technology projects. But asking a very precious resource (the IRS technical staff) to take on a project that gives every indication of being unnecessary, ill-conceived, and doomed to failure is a waste of their time—and money. of the taxpayer.

There are many other high-priority technology issues that the IRS can and should focus on – not the least of which is upgrading core infrastructure, which is underfunded and behind schedule. Here, with IRS Direct File, they are asked to implement a project that, even if completed, will be extremely expensive to operate and maintain, and would likely serve as a half-baked and little-used skeleton of already available and fully functional , on market tested commercial software.

Tony Scott was the Federal Chief Information Officer in the Obama administration.

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