InformationWeek

April 12, 1999

IRS Uses IT To Improve Services

Errors caught, money saved for tax agency

By Rick Whiting

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s you make out your income-tax return for Thursday's filing deadline, are you thinking that you just might get away with that questionable deduction?

Don't. The Internal Revenue Service has implemented a data warehouse system and information portal software that catches tax-return errors--unintentional or otherwise. In its efforts to become a kinder, gentler IRS, the agency is also using information technology to improve taxpayer services.

The IRS Office of Research in Washington has assembled a "compliance data warehouse" with a terabyte of tax-return, accounts-receivable, and audit data. IRS employees tap into the information to detect fraud, flag recurring tax-return errors that could indicate poorly written instructions, and determine how to best allocate IRS resources.

The data warehouse was built in 1996 on Sybase's Adaptive Server IQ system. In late 1997, the agency began using Space SQL information portal software from Viador Inc. to access and query the data and generate reports on their findings. (This year, Viador added online analytical processing capabilities to the product and renamed it the Viador E-Portal Suite.)

"One of the biggest problems we've had is getting access to our data," says Jeffrey Kmonk, IT manager within the Office of Research. "We've put in technology which, for the first time, gives analysts and decision makers access to large data sets."

Worth The Effort
The effort is paying off. Using the portal to review problems with duplicate Social Security numbers appearing on tax returns in 1998, the IRS discovered errors or deliberate falsifications that will generate $250 million in additional tax revenue. For instance, a whopping $70 million came from tax returns of divorced parents who had both claimed their children as dependents.

But while the system is used for taxpayer-compliance applications, the ultimate goal is analyzing IRS operations to make them more efficient, improve voluntary compliance with tax laws, and offer better service to taxpayers. "This gives us the ability to be proactive, rather than reacting through enforcement," Kmonk says.

For example, although the system is used to measure the effectiveness of letters sent to taxpayers who made mistakes on their returns, in the future the technology will be used to measure the efficiency of IRS programs that assist taxpayers and enforce tax laws. The system will also help determine the best way to allocate IRS resources, including employees who man taxpayer hot lines at tax time. "By analyzing all the information around customer contacts, we can see if we have enough resources in some areas of the country to handle the workload," Kmonk says.

Within the IRS customer-service organization, about 100 employees in 10 service centers are using the data warehouse and portal system. Before the Viador software was installed, "there was a lot of time wasted on data extraction, with not enough time to do analysis," says IRS programmer analyst Ester G. Brock-Jones. Spreadsheets with data that needed to be shared among managers had to be faxed by hand, a time-consuming process.

The IRS chose the Viador system because it lets employees generate and transmit reports via an intranet, and because it provides a way to ensure that all IRS employees use consistent data for decision-making. What's more, employees can generate their own reports in as little as 20 to 30 minutes, instead of waiting months for IS to create them, Kmonk says. By cutting down on the number of printed and faxed reports, the Viador system is also helping the IRS comply with paper-reduction goals set by the Office of Management and Budget.

And Viador's built-in security technology ensures that IRS employees at each service center are restricted to viewing only the tax-return data for which they have clearance, according to Brock-Jones.

Pricing for the Viador E-Portal Suite begins at $20,000. The suite includes a Java server that provides data access, content delivery, session management, and user security, while other components provide a portal interface, report-generation capabilities, and gateways to a range of data sources.