Remembering the Technology Glitches and Failures of Tax Years Past

A look back at some of the notable failures that have occurred when mixing taxes and IT

2 min read
Remembering the Technology Glitches and Failures of Tax Years Past
Photo-Illustration: iStockphoto

We're pleased to note that on 1 April, IEEE Spectrum won the Jesse H. Neal Best Infographics Award for our series "Lessons from a Decade of Failures." To celebrate, it seemed like a good time to once again take a dive into the Risk Factor archives and search for additional historical lessons. Because we're nearing the end of tax season here in the United States, I decided to examine the often volatile combination of tax policy and IT systems. Tax-related problems are some of the most painful IT failures, because they tend to hit citizens right where it hurts most: their bank accounts.

Below you'll find some of the most noteworthy operational glitches of the past decade, but as with previous timelines, the incidents listed here are merely the tip of the iceberg, and should be veiwed as being representative of tax-related IT problems rather than comprehensive. It doesn't even include incidents of tech-assited fraud, data breaches, or failed modernization projects (like the cancellation of the My IRS Account Project). It's not always easy to identify the exact impact of tax related glitches: in some cases it's easier to measure the number of people affected, while in others, the monetary cost is more straightforward. Use the dropdown menus to navigate to other incidents that might be hidden in the default view.

In reviewing this list of failures, a few of lessons jumped out at me:

  • For ongoing, excruciating, cringe-worthy tax-tech pain, no one beats Her Majesty's Revenue and CustomsAs my colleague Bob Charette has chronicled, the multiyear rollout of the Pay-As-You-Earn computerized tax system is a textbook case of technological and bureaucratic hubris in the face of a challenging IT problem. You can see from the timeline the magnitude of people affected by calculation errors, which grew over time.
  • Data validation, verification, and sanity checks remain poor. Increasing computerization has meant an increase in mistakes that should have been caught by common sense. Tax systems need better safety checks and governments need to be more skeptical of sudden, unexpected windfalls.
  • Don't automatically trust automatically generated notices. It seems like the software in tax systems that generates letters and notices is subject to even less scrutiny and oversight than the rest of the systems' components.
  • There's danger in waiting to file your taxes at the last minute, but doing them early can also cause problemsThere are many examples of tax services simply being unprepared to process early returns, whether because of last-minute changes to the tax code, or from data that has not yet been updated.

Clearly there are lots of advantages to digitizing tax calculation and collection, including efficiency and accuracy. But it's worth keeping in mind that in all likelihood, our IT systems are bound to fail occasionally, so we need to make sure our laws and systems are better prepared for those contingencies. In the past decade, our ability to cause harm with tax systems has often outpaced our ability to make things right.

If there's a notable tax-related glitch you'd like to see represented on the timeline, let me know in the comments, and I'll try to add it.

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