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1998-02-20 08:47:04


IRS Must Get Everything Fixed by 1999



BUSINESS WEEK is as mainstream as they get. "Hear no crisis, see no crisis, say no crisis: it's bad for advertising revenue." But they now admit that the IRS may not make the deadline. Because of tax filing deadlines, the IRS faces a 1999 Problem. (Y2K - 1).

I don't know how long this link will be good. But I assure you, this article was published in BUSINESS WEEK (Feb. 23).

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It's hard to imagine how things could get much worse for the IRS. It is taking a beating on Capitol Hill, it's struggling to keep up with an ever more complicated tax code, its aging computers are falling apart, and it will soon launch a top-to-bottom management overhaul. Now, the Internal Revenue Service faces a potential calamity: a meltdown triggered by the Year 2000 computer glitch --and the guy in charge of keeping the data systems running just quit.

The prospect that IRS computers will read ''00'' as 1900 instead of 2000 induces nightmares at an agency where nearly every document has a date on it. Returns would go unprocessed. Refunds would lie unsent. Taxpayers would be told they owed 99 years' interest on a disputed deduction. Says one former top agency official: ''It would shut down the entire system--everything from collections to compliance would just stop.''

CONTINGENCY PLAN. To avoid such a catastrophe, IRS techies are poring through 88,000 programs containing 60 million lines of computer code--some of it three decades old. They must patch up 80 mainframes, 1,000 midsize computers, and 130,000 PCs. The cost: $1 billion.

Will the fix be ready in time? ''That's our goal,'' says John Yost, director of the Year 2000 project. ''[But] I'm not making any promises just yet.'' In fact, BUSINESS WEEK has learned that the General Accounting Office is urging the IRS to set up a contingency plan to prevent a ''systemwide failure'' in 2000. In the worst case, that could mean shifting some processing to computers outside the agency. And IRS officials concede that at least some of its computers won't be updated on time.

The best-case scenario: Most taxpayers will still be able to file their returns, especially if they do so electronically. The latest tax software has addressed the problem and may be able to bypass the worst of the IRS troublespots. But there could be hitches, depending on the complexity of the return. The rule of thumb for 2000 is that the more paper you file, the more trouble you may run into. Small businesses--which generate huge amounts of paperwork for their size--could face the worst woes. . . .

But the effort is likely to be slowed by the unexpected departure of Arthur A. Gross, the agency's chief information officer and the architect of its Year 2000 strategy. Gross announced his resignation in early February, following a dispute with Rossotti over computer modernization plans. Insiders say that if Gross isn't replaced soon, the Year 2000 project could suffer badly.

In practical terms, Jan. 1, 2000, will arrive sooner than the calendar date. Computer specialists say the IRS really has less than a year to get its fixes in place. That's because it will take at least one full filing season to test the repairs and work out the inevitable bugs. ''It's a Year 1999 problem for them,'' says Jeffrey S. Trinca, former chief of staff at the Commission to Restructure the IRS, a bipartisan congressional panel whose 1997 recommendations led to an IRS reform bill about to pass Congress.

But it may be too late for the IRS to make the 1999 deadline. Like many businesses and government agencies, it got a late start. As of mid-November, just 10% of the needed repairs had been done. Yost says serious work began only 14 months ago. ''We would have been better off if we had started two years before that and had everything in place by January, 1998,'' he concedes. . . .

Despite all these headaches, the IRS gamely predicts that, while there will surely be glitches come 2000, there won't be chaos. But outside experts are hedging their bets.


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