How Does Something Like This Even Happen?

Government agencies spend billions every year on technology, cybersecurity, digital modernization, and cloud software. But sometimes, those investments go wrong — and taxpayers end up paying the price.

Recently, the IRS made headlines after spending $12 million on Microsoft software it ultimately couldn’t deploy or use effectively, raising questions about federal IT management, procurement oversight, and waste.

Let’s break down what happened, why it matters, and what this says about IRS modernization.

What Exactly Happened?

According to federal audits and internal reporting, the IRS purchased Microsoft cloud and enterprise software — including licensing and infrastructure tools — intended to support their modernization upgrades.

But here’s the problem:

The IRS:

• didn’t have the infrastructure ready,
• wasn’t prepared to migrate systems,
• lacked implementation planning,
• and couldn’t deploy the technology timeline required.

So the software sat unused.

$12 million.
Zero benefit.

Why Would the IRS Buy Software It Can’t Use?

Government purchasing doesn’t always work like private business. In many cases:

• funds must be spent by deadline,
• agencies forecast future usage,
• contracts are awarded years before systems are ready,
• procurement rules push agencies to “use it or lose it” before fiscal year end.

In other words — sometimes the government buys technology before they’re actually ready to implement it.

Why IRS Tech Modernization Is So Complicated

The IRS runs on decades-old legacy systems — some dating back to the 1960s and 1970s. Many core IRS functions still run on COBOL, a programming language older than personal computers.

So upgrading the IRS isn’t as simple as downloading Windows and plugging in new software.

Major obstacles include:

• outdated mainframes
• systems written before modern computing
• cybersecurity challenges
• legacy tax processing code
• massive national data volumes
• strict regulatory compliance
• extremely slow modernization cycles

Think of it like trying to install modern software… on a computer built 40 years ago.

So Who Pays for the Mistake?

We do.

This isn’t just an IT issue — it’s taxpayer money.
That $12 million didn’t go to:

• faster refunds,
• better security,
• more IRS staff,
• better call support,
• or improved online tools.

It went to software licenses that ended up sitting unused because implementation was impossible at the time.

Will It Affect Refund Processing or Security?

In most cases, no — but there are real concerns.

When modernization stalls:

• security risks stay higher
• identity theft filters lag behind
• system outages increase
• refund delays become more likely
• taxpayer tools improve more slowly

The IRS needs modernization to:

• secure taxpayer data
• upgrade refund processing systems
• build stronger identity protection
• prevent refund fraud
• reduce filing backlogs

When upgrades stumble, everyone feels it eventually.

This Wasn’t Just a “Mistake” — It’s a Modernization Warning

The IRS is moving toward:

• cloud-based processing
• AI-based identity protection
• secure digital systems
• modernization of filing platforms
• online account expansion

But modernization without planning means wasted funding and delays.

Imagine if that $12 million had gone toward:

• hiring more IRS phone support
• reducing backlog
• faster WMR updates
• better ID verification tools
• improved taxpayer services

Instead, it went nowhere.

What Happens Next?

Federal investigators and oversight agencies have already cited the issue, and IRS leadership has promised stronger technology planning going forward.

But modernization at the IRS is a long-term problem, and there will be more tech failures, delayed projects, and budget waste if systems are not upgraded strategically.

Until then, taxpayers are stuck waiting for:

• faster refunds
• improved security
• modern identity protection
• and better digital IRS tools

Every failed project pushes that future back.

The IRS Needs Better Tech — But It Has to Be Done Right

Modernizing the IRS is absolutely necessary.
But modernization without infrastructure planning wastes money and slows progress.

Taxpayers should expect government agencies, especially those holding America’s most sensitive financial data, to use funds responsibly and strategically.

Because every dollar wasted is a dollar not used to:

• fight identity theft,
• process returns faster,
• and secure your personal information.