The Internal Revenue Service announced last week that a major milestone in the agency's massive modernization project will not be met.

The first phase of the Customer Account Data Engine (CADE), a database that will eventually hold tax records of all of the nation's taxpayers, was scheduled to go online in August, 2003, after an earlier postponement from December, 2001. Delays in programming will postpone the launch for at least another year.

The programming team, headed up by Computer Systems Corp., includes contractors from BearingPoint, IBM, Northrop Grumman Information Technology, SAIC, and Unisys. Although programmers indicated they could have the first phase of the database ready for launch later this year, that launch could interfere with computer work being put in place for the 2004 tax filing season. IRS Commissioner Mark Everson chose to delay the initial launch of CADE until after next spring's filing season.

In the interim, Mr. Everson has asked the federally funded Software Engineering Institute at Carnegie Mellon University to review the system and determine if any changes are required in the current plan. The results of that review are due in October, 2003. Mr. Everson has also asked the IRS Oversight Board to assess CADE and comment on the future of the project.

The CADE project began four years ago with a plan to replace the IRS's antiquated computer database that stores tax information on magnetic tape. The system has been in use for 40 years. Programmers for CADE indicated in a report last year that they had "underestimated the complexity" of developing the technology to hold the tax records of over 200 million taxpayers.