The IRS Is Trying to Become an Innovative, Tech-Forward Agency

The much-publicized flap over the IRS’s now-scuttled plans to use facial recognition software to improve its identity verification process was unsurprising, given the political panic attacks that ensue at the mere mention of a federal agency controlling citizens’ data. And as ITIF has noted, the panic was both overblown and counterproductive. But there’s another point that also bears mentioning: the fact that the episode appears to show the IRS is willing, in fact eager, to innovate.

The IRS hasn’t had the best reputation since…forever. More than any other agency, Americans find it represents that particular brand of unwieldy federal bureaucracy that is irritating on a good day and downright scary on a bad one. (Cue “Jaws” music for an impending audit.) But if the old Ben Franklin adage that “in this world, nothing is certain except death and taxes” continues to ring true, then citizens will be dealing with the IRS for the foreseeable future. And while other countries have successfully employed digital technology over the past 15-20 years to ease how citizens interact with their respective federal collection agencies, the IRS itself has languished in comparison.

But maybe that’s changing. The IRS has been making serious investments in IT, and not just in the obvious ways you’d expect like modernizing aging legacy systems (though it has a lot of those it’s looking to replace). In 2020, the IRS established the Enterprise Digitalization and Case Management Office (EDCM) with the goal to digitize its essential business processes and move away from paper. As you can imagine, the IRS traditionally deals with a lot of documents, so this is no small feat. The EDCM also looks to “apply agile, customer-centered thinking and draw on leading industry test-and-learn practices to rapidly identify what combination of business process and technology works best for the IRS's customers and employees.” Indeed, the IRS has been proactive in seeking industry expertise and tools, exploring cloud solutions and shared services, and investing in proven project management principles like Scaled Agile Framework (SAFe). And don’t forget the IRS pilot program designed to “let the agency test new technologies on faster timelines,” including automation. As part of this program, the IRS is utilizing optical character recognition (OCR) that can extract data from even “low resolution, poor quality digital images” to make them readable to IRS systems.

All that said, it’s certainly true that the IRS is far from where it needs to be regarding IT modernization and general improvements to its business processes. It’s struggled with the growing pains of digital transformation and delays due to the pandemic response. The agency continues to handle too much paper, with filing backlogs in the millions. Its customer service leaves a lot to be desired when only about 11 percent of citizen calls are answered. Returning to the IRS’s use of facial recognition software, the agency could have been more open around why these technologies are secure, how they directly help citizens, and how Americans without immediate access to digital technology could participate.

And yet despite these valid criticisms, the IRS appears to be moving in the right direction by making concerted, innovative efforts to modernize how it does business. Innovation is never painless and the long transition to digital government certainly won’t be for any agency. This current lambasting of the IRS feels like a step backward, particularly when directed at a proven biometric technology (that many federal agencies already use) that could improve what is commonly considered an annual bummer of an activity and result in a positive impact for most Americans. For a large agency that interacts with millions of citizens, and which has a reputation for being sluggish and slow-to-move in adapting new methods, we should be encouraging this forward-thinking, innovative behavior from the IRS.