IRS Expands Program to Speed Refunds

In 2004, the IRS began phasing in the CADE system to replace their antiquated magnetic tape-based system, called the “Master File.” The master file system has been in place over four decades and takes a week to update taxpayer records, creating delays in providing accurate account information and
issuing refunds.
Through April 3, 2007, the IRS had used the CADE system to post over 5.3 million tax returns and issue almost $5.9 billion in refunds. It appears returns processed through CADE usually received the direct deposit of refunds within 48 hours regardless of which day of the week they were filed. Returns processed under the master file system are dependent on the normal weekly processing, taking the IRS from two to 10 days to process the direct deposit.
Some tax preparers have expressed concern over the impact that faster refund processing might have on the accuracy of refunds and on the bank product market. To date, it does not appear that either of these concerns have come to fruition.
When fully operational, CADE will be a modern database that will house tax information for more than 200 million individual and business taxpayers. IRS Commissioner Mark Everson expressed frustration last year during the IRS forums that it can take up to three years to accumulate adequate statistics on returns during the selection of returns for audit.
He expects the modernized database to cut this selection time to less than one year and to assist auditors in identifying problem areas more efficiently.
CADE should also benefit practitionersby notifying them within a year if a return they prepared will be selected for audit. For both the preparer and his client, documents and memories will still be relatively fresh and easier to access. The next phase of the CADE system will be to post eligible taxpayers filing Schedules C, F and SE.

From October 2007

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