Glitches and Crashes at the IRS

By Jamie Murphy

April 15 was the deadline for Americans to file their 1984 tax returns, but for the Internal Revenue Service that date marked only the halfway point in the gargantuan task of sorting and examining 100 million tax reports. Ordinarily the agency, long hailed by intimidated taxpayers as a model of efficiency, is unfazed by the awesome bureaucratic burden. This year, however, an astonishing array of glitches in the IRS's new $131 million Sperry-Univac computers has created an unprecedented backlog of unprocessed tax forms.

By April 12 clerks had gone over only 64% of the 67.6 million returns received, compared with 73% in 1984. Last week the IRS gained some ground but was still behind schedule. As a result, refund checks are being sent out as much as a month later than normal. The Commerce Department reported last week that consumer spending in March tumbled .5%, compared with the same period last year. Reason: the computer troubles delayed payment on $6.7 billion in tax refunds that people would have otherwise received and probably spent. At fault is the most expensive and sophisticated computer system ever used to sift through America's tax returns: eleven Sperry 1100/84 machines. Each computer has 8 million characters of memory and can perform up to 8 million operations a second.

The IRS long had one of the Government's most sophisticated computer systems; its first machine was installed in 1961. But like companies that buy their first computers and then decide they can forget about data-processing problems forever, the IRS before long found itself with old and outdated equipment. A plan to upgrade its machines was defeated in Congress during the 1970s, when the agency fell prey to suspicions generated by Watergate. Legislators feared that some day an Administration might use a centralized computer tax system to harass citizens. In January 1980 the IRS at last issued a call for bids on a new computer to replace its old Honeywell and Control Data machines. The contract was awarded to Sperry 18 months later, but the agency did not complete its order for the new computers until December 1984. Later it twice changed the specifications on the original order, each time requiring more sophisticated equipment. After all the modifications, the computers arrived at IRS regional centers last November, four months late and only weeks before the start of this year's filing season.

Problems with the hastily installed machines began to crop up immediately. Two of the computers had to be sent back to Sperry when technicians at the IRS offices in Memphis and Atlanta could not get them started. At other centers tape drives storing tax-return information persistently malfunctioned. In addition, a program developed to allow computers that suddenly crashed to resume processing where they left off mysteriously failed as well. Each time the system went down, operators had to start the work from scratch. Says Thomas Laycock, the IRS assistant commissioner of computers: "There were things that we had to do over and over and over and over again."

The agency also encountered difficulties tailoring software for the machines. IRS officials decided to rewrite 1,500 programs containing 3.5 million lines of code into COBOL, a more sophisticated computer language than the old system's assembly code. A team of 300 programmers was assigned to the monumental task. The new software was first tested at IRS headquarters in Martinsburg, W. Va., where a computer dedicated to experimenting with the programs had been assembled. After that testing, it was run on the new 1100/84s at an IRS regional office in Memphis. Finally, the software was installed at the agency's nine remaining processing sites. In April 1984, when programmers put all the pieces of the tax-return processing program together, IRS officials discovered that it would run only half as fast as needed. The agency then desperately threw all of its available programmers into a crash effort to improve the system's performance. It took the special team nine months to finish the task, and by then 1984 returns were already flooding in.

Amid all this turmoil, the IRS committed a basic mistake of the computer age: it did not have a sufficient backup. Because of tight budgets, the service did not have the money or the programmers to process tax returns on its old Honeywell and Control Data machines in case of emergency. Data processing experts outside the agency also feel that the IRS took an unreasonable risk by attempting to convert both its hardware and software in the same year. IRS officials now agree. Given the chance to do it over, Assistant Commissioner Laycock admits, he would postpone conversion to the new system for another year. Said he: "When we realized the equipment was not going to be delivered on time, we might have said, 'Let's do it next year,'"

Laycock says that all ten IRS processing centers are now back up to speed and that all refunds will be in the mail by May 30, after which time the Government is required to pay 13% interest on amounts due. That prediction may be a little too optimistic. A phone call to Tele-Tax, a Government service that allows taxpayers to query IRS computers for tax information, revealed last week that forms mailed to the IRS as early as Feb. 2 still have not been processed. --By Jamie Murphy. Reported by Gregory H. Wierzynski/Washington

With reporting by Reported by Gregory H. Wierzynski/Washington