February 28, 1994
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
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
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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