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DOGE Halts $1.5 Billion in IRS Contracts as Modernization Effort Lags Decades Behind

The Department of Government Efficiency has paused IRS modernization investments, citing outdated infrastructure, contractor dependency, and a $15 billion budget overrun.

People walk by the U.S. Internal Revenue Service (IRS) building in Washington, D.C., February 20, 2025. REUTERS/Kent Nishimura/File Photo
Image
In this Jan. 11, 2013 file photo, employees of Infosys Technologies, the Indian technology outsourcing giant, move inside the company headquarters during a break after their quarterly financial results were announced in Bangalore, India. Speculation about tougher rules on so-called H-1B visas, used heavily by India’s massive technology and outsourcing industries to send programmers and other computer specialists to the United States, sent tech stocks tumbling in India early February, 2017, and compounded concerns about the protectionist direction of U.S. policy after President Donald Trump temporarily suspended immigration from seven Muslim-majority countries. (AP Photo/Aijaz Rahi, File)

Overview

  • The IRS modernization program, initiated in 1990, is 35 years behind schedule and $15 billion over budget, with no clear completion timeline.
  • DOGE has canceled $1.5 billion in contracts deemed wasteful and paused further modernization spending to reassess strategies.
  • Outdated IRS systems rely on decades-old COBOL and Assembly mainframes, creating challenges for modernization compared to private-sector banks.
  • Approximately 80% of the IRS’s $3.5 billion annual operations budget is spent on contractors, raising concerns about inefficiency and accountability.
  • Treasury Secretary Scott Bessent and DOGE representatives have criticized entrenched interests and systemic inertia for perpetuating inefficiencies within the IRS.