Magazine | June 22, 2015, Issue

Tax Tech

You’ve heard the promise of nanotechnology: Soon tiny machines will repair organs, fight disease, swarm into enemy facilities to disable electronic devices, or even build self-replicating machines on Mars to prepare the way for colonists. Why, it’ll be possible to build a violin two molecules long, which can be used to play a sad song for stories like one recently posted on about how the IRS is too broke to do its job.

We’re not talking about the job of sitting back with fingers laced over the stomach, snoring gently, while automatic deposits flow into the accounts. No, it’s the job of keeping hackers out of their systems. Interlopers got over 100,000 Americans’ tax files last month, and IRS defenders say it’s because they’re too broke to afford a front-door lock.

The IRS says it’s underfunded. Republicans in Congress have slashed the IRS budget for five years straight — the same politicians who now criticize the IRS for not having better security. The agency has 10% less money and 13,300 fewer employees than it did in 2010 — but it handles a bigger workload than ever.

Everyone in favor of the IRS’s handling a smaller workload, raise your hand. Use the one you use to write checks to the IRS. As for those 13,000 fewer employees — the IRS still has 92,000 people on the payroll, which would seem to be enough when your primary enterprise consists of depositing money people send to you.

Last year, the IRS spent $252 million on just the tech and computer side of Obamacare — but got no additional funding to pull off the task.

Last year a lot of people’s premiums went up, and they got no additional funding, either.

The IRS still uses Windows XP, which is dangerously outdated, exposed to hackers and no longer supported by Microsoft. IRS Commissioner John Koskinen has said it still uses some tech from the days of the Kennedy administration. Its 19-year-old fraud-catching software is antiquated and ineffective. A project to replace it is severely delayed.

The Kennedy administration? Is that why they got hacked? Someone mailed in a punch card with Frank Sinatra’s Social Security number? As for the fraud-catching software, something from 1996 might be calibrated to scan floppies for Y2K exploits, but things have gotten a bit more sophisticated lately. Some Bulgarian miscreants could set up a honey-pot porn site whose name might appeal to naughty IRS Web-surfers — say, an S&M site called “Interest and Penalties” — and while someone streams the video, caught up in the heady moment when the domineering lady really depreciates that asset, a file gets uploaded that spreads through the network and resets everyone’s password to “password” between 2 and 3 a.m. Provided it isn’t already “password,” of course.

Maybe the worker can’t stream it, because his computer is running XP, an operating system so old its “calculator” app is an abacus. Don’t worry, they’ll run something less porous than a colander, but the project to replace the old computers is “severely delayed.” This means the Exploratory Committee to Explore Tasking the Committee That Will Be Tasked with Exploring Options hasn’t finished putting together the Powerpoint on Key Objectives. More excuses:

Some at the IRS tell CNNMoney it’s not just a matter of budget versus priorities. It’s insanely difficult to create programs to stop fraudsters. Consider the current IRS pilot program to give Americans special PINs. This six-digit passcode makes it harder for a fraudster to file in your name. . . . But many people lose their PINs. If the program went nationwide, the IRS would be inundated with millions of phone calls it can’t answer.

Well, since people cannot be trusted to write down the number and put it in a safe place, we need a nationwide call center (with unionized federal employees, naturally) that will give you the PIN if you can rattle off your Social Security number and a special question about your first pet’s name. What? No, it wasn’t “Fido.” I’m sorry, you can’t pay taxes this year. Try again in 2016.

This story is an instructive lesson on the nature and efficiencies of the modern state: The one thing it requires is the constant nourishment of its citizens’ property, extracted through intervention in nearly every human and commercial interaction — and the bureaucrats still can’t get it right. No one wants a ruthlessly efficient IRS, with armies of grim men in black suits and dark glasses who dispatch Taser drones when someone rounds up a charity contribution too generously. No one, however, wants what we have: an arthritic, gouty colossus incapable of responding to alarms and attacks, pleading poverty and overwork but finding the employees and money to investigate people for the crime of funding the Wrong Side in an election.

Be assured they’ll replace today’s miserable old system with an ugly, confusing program called irsnet or govprog or sourceworks, and it will require a week’s worth of training in a dark room where everyone stares at the instructor with the blank expression of dead souls ferried across the Styx while he drones on about the Multi-Input Task-Selector Option. It will have a thuddingly dull and incomprehensible 57-page manual that goes straight into the drawer, unread. Gradually, workers will adapt to the deficiencies of the new system as they would to a shortened femur. When it’s finally rolled out to every office, it will be the result of a purchase decision made ten years ago, obsolete at its birth, destined to rule for a decade.

And hacked on Day One. There’s only one place to store the information where it will never be seen by outsiders, but Hillary’s not renting out space on her server.

– Mr. Lileks blogs at

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