IRS Awards $1.3 Billion Technology Contract to IBM

WASHINGTON - The Internal Revenue Service today awarded a $1.3 billion contract to IBM Federal Systems for document processing technology that will electronically image paper tax forms filed by millions of taxpayers starting in 1996.

Using imaging technology to improve the accuracy and speed of tax data processing is a major part of IRS' modernization program. This equipment will scan paper tax forms to create an electronic image of the paper from which data will be extracted for all subsequent processing activity.

The DPS system will be located in five submission processing centers, replacing the manual data entry operations currently used by IRS in its ten service centers.

The system will be installed in the IRS processing center in Austin, Tx., starting in August, 1995, in preparation for the 1996 tax filing season. By 1998 the system will be in place in the four other processing centers, in Ogden, Utah; Cincinnati, Ohio; Memphis, Tenn.; and Kansas City, Mo. IRS plans to gradually add various types of tax and related forms to DPS processing so that all forms are processed by DPS by the year 2001.

When fully implemented in the year 2001, an estimated 312 million tax and informational returns will be processed through the DPS system. As many as 60 million of the tax forms will be those electronically filed, which require no imaging but will require DPS based data perfection. The system will also be used to image an estimated 35 million pieces of correspondence sent by taxpayers each year.

The DPS system is critical to IRS' tax system modernization program because it will put tax data that IRS does not receive electronically into electronic format. Data from imaged paper will be transmitted to IRS computing centers for further action, such as generating tax refunds, updating tax accounts and identifying tax cases that require followup contact with taxpayers. The IRS will also place tax data on-line so that IRS personnel across the country have ready access to information needed to assist taxpayers and work tax cases.

Processing paper tax returns with the DPS imaging system will provide many benefits. The system will result in more accurate data input and tax return processing time will be reduced by about a week. When fully operational, DPS will save several thousand positions in manual paper processing work each year. IRS wants to reinvest these saving in direct revenue production activities.

The DPS contract with IBM is for 15 years and covers hardware, software, testing, training, implementation and maintenance.

About $300 million of the contract will be for subcontractors that are small businesses, small disadvantaged business and women owned business. In all, IBM has over 60 subcontractors that will work on DPS.

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