The Treasury Inspector General for Tax Administration today released Modernized e-File Will Enhance Processing of Electronically Filed Individual Tax Returns, but System Development and Security Need Improvement (2010-20-041):

The IRS's Modernized E-file (MeF) system did not process electronically filed individual tax returns as effectively as it should have during the 2010 filing season. …  The estimated $574 million MeF system is replacing the IRS's current tax-return filing technology with a modernized, Internet-based electronic filing platform. … The MeF project development team did not adequately manage the MeF Release 6.1 testing prior to deployment, TIGTA found. IRS's test report showed all requirements were tested and passed; however, TIGTA auditors found supporting test documents showed that many of the requirements were not tested, many more failed the tests, and no indication was provided to show the defects were corrected. Subsequently, the MeF system rejected 23% of the 127,105 individual tax returns that were e-filed during the system's initial three weeks of operation. TIGTA also found that the IRS has not addressed many of the security vulnerabilities with the MeF system identified in a December 2009 TIGTA report.

TIGTA recommended that the IRS: ensure that project releases are deployed only after verifying that all system requirements have been tested, consider lessons learned from prior deployment experiences in planning future releases, and ensure that the MeF team enter and track all MeF system security weaknesses in IRS control systems.