We regularly remind policymakers about the urgent need for IRS modernization: ancient legacy systems, misguided priorities, improper payments, data security, and customer service tools.
Wired magazine reports that the Department of Government Efficiency (DOGE, formerly known as the U.S. Digital Service) is hosting a “hackathon” at the IRS to streamline its technology. While some have greeted the news with skepticism, here are a few reasons not to panic.
Hackathons have nothing to do with hacking.
The term “hack” may seem concerning, especially in terms of the IRS and government data systems. Hacks typically mean that a computer system has been breached by someone external to the organization without authorized access, usually resulting in private information being exposed or stolen.
After all, hackers targeted the IRS in 2015 and gained access to the tax return information of over 100,000 taxpayers. That same year, the Office of Personnel Management (OPM) suffered two cyber attacks exposing the data of more than 20 million federal employees. Hacking is just one way that sensitive taxpayer information can be disclosed, along with leaks from those with authorized access to IRS systems, as in the case of contractor Charles Littlejohn in 2021.
But a “hackathon” refers to a group of individuals coming together to use technology to solve unique problems in a short time. These tech brainstorming sessions are typically focused on a few specific goals with the end result being a workable product that can be implemented at scale.
Hackathons are not new in government.
This will not be the first time a government agency has hosted a hackathon—and not even for the IRS. The IRS hosted its first hackathon in 2021, and over 150 information technology specialists attempted to bring innovative ideas to action. Judges evaluated the solutions based on criteria including impact and path to production.
Another bureau under the Department of the Treasury, the Financial Crimes Enforcement Network (FinCEN), hosts hackathons that it calls “tech sprints.” These tech sprints aim to foster collaboration between government, stakeholders, and technology experts to combat money laundering.
Other federal hackathons include an artificial intelligence themed hackathon hosted by the General Services Administration in 2024, a health themed hackathon hosted by the Department of Veterans Affairs in 2024, and an annual congressional hackathon. Even secretive and low-tech government agencies have hosted hackathons, such as the Department of Defense and Department of Agriculture.
A hackathon can address the most serious challenges faced by the IRS.
Career IRS employees rather than DOGE employees are leading the IRS hackathon, officially called the IRS Technical Roadmap Kickoff. The theme of the hackathon is streamlining communication between various IRS technology systems. This is an area that needs dramatic improvement at the IRS, and additional attention from technology experts is certainly welcome.
Currently, the IRS operates on legacy technology for some of its most important systems. The Individual Master File (IMF) stores all individual income tax data, including taxpayers’ most sensitive information, yet it has been in use for more than 60 years and is widely recognized as one of the most archaic systems still in use by the federal government. Efforts to replace the IMF with a more modern system began as early as 2009, with milestones continuously being pushed back while expected costs increase. The expected completion date for one major milestone in IMF replacement, Transition State 2, has been delayed since 2014. As of December 2024, the IRS noted that it “currently does not have the necessary resources in-house with the specific skillsets to successfully accomplish” tasks to complete Transition State 2.
Outdated IRS systems are more vulnerable to failure caused by firmware bugs, security failures, and delays in critical taxpayer services. Despite these challenges, the IRS has failed to make meaningful progress in modernizing its information technology, even after receiving billions in supplemental funding for modernization projects. Instead of focusing on backend processes such as replacing the IMF, the IRS has used its Inflation Reduction Act (IRA) funds to replace old hardware, increase paper scanning, and develop Direct File—a program not authorized by Congress. Furthermore, one year after releasing its Strategic Operating Plan for using IRA funding, the IRS had not completed any of the modernization goals it had anticipated completing by then.
Reports indicate that the IRS hackathon is focusing on developing an application program interface (API) to improve communication and data sharing across IRS systems. This could have benefits beyond addressing challenges posed by the IMF. The IRS uses about 60 different case management systems to store taxpayer data, and these systems generally do not communicate with each other. The IRS reportedly plans to partner with outside parties to develop these new systems, which has raised concerns. However, it is important to note that the IRS was seeking outside assistance in modernizing its systems prior to the advent of DOGE, and the results it has had modernizing on its own in the past several decades have been subpar at best.
There is an incredible amount of work to be done to modernize the IRS.
Modernizing technology systems could dramatically improve nearly every aspect of IRS operations, resulting in an immeasurable benefit for taxpayers. Some areas of tax administration that would benefit from better technology include:
Taxpayer rights can be safeguarded and strengthened through basic adjustments such as making the Taxpayer Bill of Rights more prominent on the IRS website, similarly to how DOGE has moved the Login page to a more recognizable part of the website.
The tax gap can be calculated much more precisely with better data collection and standardization of processes, as well as more basic changes like eliminating duplicate tax gap pages on the website.
Taxpayer service can be improved through improving the search functionality of the IRS website, giving taxpayers access to more forms digitally, and increasing the usability of online accounts.
Data collection and publishing can be made more transparent with improved technology to ensure that the public and policymakers have a better understanding of what challenges need to be addressed.
The government’s new Direct File program can benefit from better tracking and oversight of costs through technological means. This is critical as miscalculated costs, identity verification concerns, and the duplicative nature of the program should be taken seriously when considering the program’s future.
Many of these are particularly longstanding and challenging problems. However, moving the login link to the top-right corner of the navigation bar is a great example of where DOGE and other outside experts can make immediate changes. IRS staff initially estimated that it would take over three months to move the login link to another part of the website due to red tape, yet DOGE got it done in just over an hour. Outside pressure and fresh thinking can break through bureaucratic delays—and it’s exactly the kind of push the IRS needs. We look forward to seeing the result of the hackathon.