"We realized that this would be a huge and complex undertaking, and we've decided to pull back," says the spokesman, adding that the IRS had been in preliminary talks with technology vendors about the plan but that no deals had been signed.
The halting of the plan is unrelated to the fact that the IRS has a poor track record when it comes to managing large outsourcing projects, the spokesman insists. In the most recent foul up, the agency issued more than $318 million in refunds on phony returns last year because of a botched software project, a government report released earlier this year concluded. The project had been outsourced to Computer Sciences Corp.
The IRS is also delaying the implementation of a separate plan to outsource the handling of paper tax returns to a contractor. Under a revised plan, the tax agency will reduce from seven to two the number of processing centers that will be handed off to IAP Worldwide Services by December. IAP is now scheduled to take control of the remaining centers in June.
The calendar played a big part in the IRS's decision to slow the implementation. "The January to April tax season is prime time for us, and we didn't want any interruptions," the spokesman says. The IRS's deal with IAP is worth $103 million over five years. The agency expects the plan to result in total savings of $25 million to $30 million, the spokesman says.