INTU Intuit Inc

By Richard Rubin 

(More to come)

WASHINGTON -- Some IRS computer systems are "experiencing technical difficulties" on the deadline to pay individual income taxes for 2017, the U.S. tax agency said Tuesday.

The problem, which didn't affect all Internal Revenue Service systems, is believed to have been caused by a hardware failure, not a cyberattack, according to the IRS.

The agency said taxpayers should continue filing returns as usual. The agency is having difficulty receiving returns from tax preparers, including large companies such as TurboTax maker Intuit Inc. and H&R Block Inc., acting IRS commissioner David Kautter told House subcommittees on Tuesday.

Rep. Richard Neal (D., Mass.) said the problem was related, in part, to the transmission of direct payments to the agency.

"Tax Day is already a stressful time for millions of Americans, even when everything goes right," said Mr. Neal, the top Democrat on the House Ways and Means Committee. "Given this news, I hope that the IRS will make accommodations so that every taxpayer attempting to file today has a fair shot to do so without penalty."

TurboTax is still receiving returns and will hold them until the IRS is ready to accept them again, said Ashley McMahon, a company spokeswoman. H&R Block issued a similar statement.

Most Americans have already filed their 2017 income taxes, but millions do so as the deadline nears for filing or seeking an extension. Last year, the IRS received about 5 million returns on the final day of the filing season.

The deadline this year is April 17, not April 15, because of the weekend and the Emancipation Day holiday in the District of Columbia.

The IRS is rebooting its systems, a congressional aide said.

The agency sent an email at 8:46 a.m. ET Tuesday notifying accountants and other tax professionals that parts of the Modernized eFile system, which receives tax returns electronically, were "unavailable."

The IRS has long operated aging computer systems. Agency leaders for years have warned about potential malfunctions and said they are guarding closely against external threats.

Former IRS Commissioner John Koskinen said the agency's hardware is two or three generations out of date, stressed by budget cuts and especially vulnerable in the final week of the filing season as millions of returns come in.

"The question was becoming not whether the system would just shut down one day, but when," he said in an interview on Tuesday. "Each year, there have been more glitches that get handled so nobody sees them, but the system gets more rickety every year."

The main systems are in Martinsburg, W.Va., Mr. Koskinen said. The first goal would be to get those computers working again, but there are also backup systems that are tested annually, he said.

"In the case of significant failure, you can move the system from a major site to the backup site," said Mr. Koskinen, who left the IRS in 2017 after his term expired. "But that doesn't necessarily work quickly."

In a report last year, the Treasury Inspector General for Tax Administration identified areas for improvement in the agency's information-technology systems.

"The IRS could better protect IRS systems and data by improving disaster recovery planning and testing, general support system security controls, transfers of data to external partners, email records management, and external network perimeter security," the report said.

Congress has been steadily cutting the IRS budget or holding it flat for the past few years, partly in a broader austerity effort and partly in response to the agency's treatment of conservative groups seeking tax-exempt status.

Those cuts have reduced the frequency of audits and at times lowered the IRS's ability to respond to taxpayers' queries. Congress just approved $320 million for the IRS to implement the tax law that passed last year.

Write to Richard Rubin at richard.rubin@wsj.com

(END) Dow Jones Newswires

April 17, 2018 19:08 ET (23:08 GMT)

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