No Indication of Hacking Seen as IRS Restores E-Filing

  • Electronic filings still on hold as officials work on repairs
  • Taxpayers urged to send returns to e-file providers as normal

The Internal Revenue Service still hasn’t said what caused some of its systems to shut down Wednesday, but the agency’s processing functions -- including e-filing -- were restored by Thursday evening.

The cause of the system failure didn’t appear to involve hackers, said a person familiar with the matter, who asked not to be identified because the matter remains under investigation.

“Taxpayers should see little, if any, impact on their tax returns or refunds,” IRS Commissioner John Koskinen said in a statement. Teams worked through the night Wednesday and well into Thursday to restore functions, Koskinen said.

The agency is still studying what happened, but the statement Thursday said, “It’s important to note that at this time this situation appears to be a hardware failure.” There’s no indication that any external factors such as hackers had any role in the incident, said the person familiar with the matter.

On Wednesday, Matt Leas, an IRS spokesman, said a “power or electrical issue” caused the failures. He provided no additional details. Officials said they didn’t anticipate major disruptions to the payment of income-tax refunds and expect that 90 percent of taxpayers will get refunds within 21 days.

IRS officials forecast that more than 80 percent of income tax returns will be filed electronically this year. The deadline for most individuals to file their federal income taxes for the 2015 tax year is April 18.

Several tools and applications were back online Thursday morning, including the “Where’s My Refund” feature on the IRS website. And even while the agency was unable to accept electronically filed returns, taxpayers could still send them to their e-file providers, the IRS said.

The service providers were simply holding returns until the IRS began accepting them again. By Thursday evening, the returns had begun flowing in again, according to the IRS’s statement.

Those who have already filed returns don’t need to take any additional steps, the agency said.

Ashley McMahon, a spokeswoman for Intuit Inc., which markets TurboTax, the most widely used e-file software, said the IRS had been in communication with industry representatives about the system failure. She declined to discuss details.

That wasn’t true for the National Association of Tax Professionals, said Cindy Hockberry, the trade group’s spokeswoman. By Thursday afternoon, she hadn’t heard from the agency since it announced the e-file failure Wednesday. “I’m kind of wanting to know what’s going on,”’ she said.

The system failure occurred at a center in West Virginia, according to the person with knowledge off the matter. Agency officials were trying to determine if any other facilities were affected.

The IRS website lists several facilities in West Virginia; it wasn’t clear which might have been affected. IRS sites there include at least two “enterprise computing centers” in Martinsburg and Kearneysville and the Beckley Finance Center in Beckley. The finance center, part of the IRS’s chief financial office, processes payments for manual transactions and electronic payment files and helps handle the agency’s general ledger, according to the website.

The IRS says congressional funding cuts over the last five years have eroded its ability to maintain and upgrade technology, to conduct audits and enforcement and to assist taxpayers over the phone. The agency’s $11.9 billion budget decreased about 17 percent in inflation-adjusted figures from 2010 to 2015.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE