Modernizing Tax Processing Systems

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Modernizing Tax Processing Systems

Get a closer look at how the IRS Information Technology team is working to maintain, secure and modernize the systems and applications that make it possible for taxpayers and working families to get the services they need.

CADE web

By Nancy Sieger, Chief Information Officer
CL-22-11, July 28, 2022

Ten years ago, the IRS began the highly complex effort of modernizing the engine of the nation’s core tax processing system with current technology. Known as the Customer Account Data Engine 2 (CADE 2) program, we are finally on the home stretch. Let’s take a closer look at the program and why it’s key to unlocking better taxpayer service and reducing risk to the nation’s tax system.

The long journey to modernize data processing

The IRS pioneered the use of automated data processing in the early 1960s to keep track of taxpayer account information more efficiently and harness the power of technology. The agency’s first computer, an IBM 7074, enabled the IRS to centralize incoming data. Data on every taxpayer in the country fit into a living-room-size storage rack containing an estimated 500 miles of tape. Once a week, tapes were flown from service centers around the country to the Enterprise Computing Center in Martinsburg, West Virginia where 600 clerical workers punched out 50 million cards a year. The IRS had officially entered the computing age and begun our technology modernization journey.

We’ve come a long way since then. The massive machines and keypunch operations you see in old films like Right on the Button no longer exist in our operating environment. We process tax data on the current technology mainframes. We have a state-of-the-art infrastructure operating two world-class data centers and one of the largest call center operations in the world.

What is the CADE 2 program?

One of the fundamental functions in tax administration is to interact with taxpayers to collect the right amount of tax owed. This depends not only on processing massive amounts of data but also on continuously adapting to frequently changing tax laws. For the IRS, much of this success depends on CADE 2.

CADE 2 is a database and multi-faceted processing engine that enables faster refund processing, improved fraud detection and faster case resolution. Think of it as the heart of a complex tax processing environment consisting of hundreds of interrelated systems and impacting nearly every IRS function. Today we’re focused on the most critical part of this modernization effort: reengineering the core components of the legacy tax processing system (the Individual Master File). Even though the IRS uses state-of-the-art hardware for tax processing, many of our systems run on very old programming languages such as Assembly Language Code (ALC). Ensuring the IRS can continue to adjust our systems to account for the many tax law changes throughout the year makes this effort enormously complicated, particularly when the computer programs are in a complex language fewer and fewer people know and use. It’s like trying to fix a plane while you’re flying it. Here are some basic facts about the CADE 2 program and why it’s important:

  • We have only a small cadre of experts who have specialized knowledge and experience with ALC. They have the tall task of updating the current system while concurrently delivering on modernization and other mission-critical work. It’s only through their dogged determination and dedicated funding from Congress that we’ve been able to make continued progress. We have converted over 90% of the core legacy code for processing individual income tax returns to Java, with the goal of finishing this portion of the work in FY 2023.
  • While it is difficult to truly appreciate the magnitude and complexity of the CADE 2 program, one can certainly recognize the value when you understand the complexity of the IRS environment, the billions of rows of data that must balance down to the penny, and the over 6,000 logical paths that must be accounted for, with some paths only used once every ten years!
  • When the conversion is complete and tested, the IRS will no longer be reliant on legacy code for core individual tax processing. This means that for future system changes, the updates will be done in Java programming language, which any trained developer can use. This achievement will also help us recruit, hire and train the people we need to run our modernized tax systems more readily.

Our people are problem-solvers and public servants whose work affects millions of Americans.

How we’ve evolved into a world-class technology shop

For people looking to further their technology careers, now is a great time to join the IRS. When our teams are at recruiting events looking to hire the next generation of technologists, one of the first questions we get is “why work for the IRS?” Aside from a host of benefits, we talk about the many opportunities to serve and grow in a career. Our people are problem-solvers and public servants whose work affects millions of Americans.

At the IRS, we have experienced teams of programmers, IT specialists and cybersecurity experts. We work on delivering technological improvements comparable to leading financial institutions while meeting new legislative priorities with unprecedented speed and accuracy. We use the leading practices of America’s top technology firms in the areas of software development, DevSecOps, strategic acquisitions, cybersecurity and cloud technology. The results have been significant. Technology deployments such as virtual server builds that historically took days to complete are now achieved in minutes. We are increasing our cloud computing environment. And we are working to automate processes that don’t require human intervention so the IRS can be more responsive and more efficient.

New changes improve service to customers in 2022

We have completed important work over the last year to help our customers get the assistance they need, in addition to improving the agency’s underlying technology infrastructure. Here’s a quick overview of what’s new:

Go paperless. We continue making the IRS Online Account more useful and more effective in helping people get their tax information, make payments and resolve other tax issues electronically. Since we launched Online Account in 2016, we have surpassed over 100 million sessions. We’ve had record high traffic this year; and now, you have the option to “go paperless” by choosing to receive more and more IRS notices digitally rather than by paper mail.

Customer callback. In three years, almost 12 million callbacks have been offered to people who don’t wish to remain on hold, with just over 7 million callers opting to use the service.  The IRS estimates callers have saved almost 3.9 million hours in hold time since we initiated the callback service in 2019.

Automated Voicebots. For those calling the IRS for information about the Child Tax Credit, we now offer automated voicebots on this and other issues to help them get the information they need without waiting to speak with an IRS customer service representative. The service has been used over 9 million times so far and helps reduce the historically high demand to speak with our limited number of IRS customer service representatives.

Automated Chatbots on To help site visitors navigate to find information on how to make a payment, we now offer automated chatbots. The service has been used over 100,000 times already, helping free up IRS representatives to focus on people with more complex inquiries.

Modernized e-File System. For the first time this tax filing season, the MeF system was available to accept returns from transmitters 24/7, eliminating downtime previously required for planned maintenance.

A more seamless customer experience

In the coming months, we will update the multi-year IRS Integrated Modernization Business Plan with a view of existing modernization programs and future plans that can be scaled up or down based on available resources. Our vision includes personalized online accounts for individuals, businesses and tax professionals that are simple to use and navigate and seamless updates to IRS systems when tax laws change.

Our continued progress depends on Congressional appropriations that fund IRS operations and our continuing modernization and cybersecurity activities.  With consistent investments, we will continue building the IRS of the future and providing America’s taxpayers the information, security and service they deserve.

Visit to view our most recent IT Annual Key Insights Report PDF on what we achieved in FY 2021 and what’s ahead in the coming years.  All of us in IRS Information Technology are working hard to maintain, secure and modernize the systems and applications that make it possible for taxpayers and working families to get the services they need.

Nancy A. Sieger
Chief Information Officer

Image of Nancy Sieger, Chief Information Officer

About the Author

Nancy Sieger is the IRS Chief Information Officer responsible for operating and modernizing one of the most complex technology environments in government. Nancy leads the IRS in delivering the Integrated Modernization Business Plan, which includes dozens of initiatives to enhance taxpayer service and enforcement activities. Nancy helped rapidly transform IRS operations during the 2020 pandemic by accelerating the availability of new technology options for employees and taxpayers. She also led the agency’s technology work to implement the Tax Cuts and Jobs Act of 2017, one of the most significant tax reform laws in over 30 years.


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