The Internal Revenue Service (IRS) spent nearly two years and $19.5 million to develop its new Web portal, but cancelled the project six months before its scheduled completion date, according to a new report publicly released last week by the Treasury Inspector General for Tax Administration (TIGTA).

Despite increasing demand for increased services from both taxpayers and IRS employees, the IRS cancelled the project because of concerns about the portal's business strategy and hardware costs, the report found. The IRS subsequently spent $9.7 million for new equipment and upgrades to the existing portal capacity in order to operate projects dependent on the portals, including the "My IRS Account" and the Modernized E-File projects.

A portal is a point of entry to a network system that includes a search engine or collection of links to other sites arranged by topic. The IRS's Internet portal provides the infrastructure that allows users (IRS employees and taxpayers) to have Web-based access to IRS information and file tax returns electronically.

"The portal environment is a critical interface between the public and the IRS," commented J. Russell George, the Treasury Inspector General for Tax Administration. "While we appreciate that the IRS wants to ensure that its portal plan reflects industry best practices and advancements in technology, purchasing new equipment for short-term upgrades increases the risk that the new equipment may not integrate with a new portal environment once it is developed."

TIGTA recommended that the IRS develop a process to ensure that new information technology projects seeking approval and funding includes an analysis of its web portal needs. The IRS agreed with the recommendation.

You can read the full report, including the scope, methodology and full IRS response.