IRS PICalcFor1040_PWS _RFI_DRAFT_v1.pdf

Draft Performance Work Statement Commercial Off the Shelf (COTS) Penalty and Interest Calculator for 1040 Exam (“PICalcFor1040”)

1. BACKGROUND

The Internal Revenue Service’s (IRS) Enterprise Case Management (ECM) Initiative is a multi-year, IRS-wide, forward-looking effort which will substantially enhance the taxpayer experience by implementing a modern technology solution for IRS account and case management. ECM addresses the long-standing need to modernize and unite the 100-plus legacy case management systems, tools, spreadsheets, and other manual workarounds that arose during periods of budget austerity through a shared, Commercial-off-the-Shelf (COTS)-based solution that serves the needs of the IRS workforce, taxpayers, and tax professionals.

The IRS has a deadline of December 31, 2024, for the implementation and release of the modernized 1040 Exam workflow to IRS examiners on ECM. As part of this effort, the IRS requires a Penalty and Interest Calculator which will be integrated into the IRS’ ECM 1040 Exam Workflow.

1.1 PURPOSE

The IRS is seeking to acquire and integrate a proven, commercial-off-the-shelf (COTS) Penalty and Interest Calculation software (“PICalc”) which can be installed and operate in the IRS Net Hub Cloud environment. The IRS NetHub, deployed in AWS GovCloud (US-West), is a Federal Risk and Authorization Management Program (FedRAMP) “High” authorized cloud platform and classified as a Federal Information Security Management Act (FISMA) “Moderate” security categorization. It includes the full scope of the Enterprise-level core services to support IRS Cloud workloads. The IRS NetHub requires Red Hat Enterprise Linux (RHEL) as the operating system for all workloads. The IRS seeks a vendor that can provide this COTS software and develop the required application programming interfaces (API) for the IRS to integrate the PICalc solution software with the IRS’ ECM 1040 Exam Workflow. The resulting solution will allow the determination of penalty and interest calculations to support the ECM 1040 Exam Workflow.

1.2 AGENCY MISSION

The IRS Mission is to provide America's taxpayers top-quality service by helping them understand and meet their tax responsibilities and enforce the law with integrity and fairness to all.

2. SCOPE

The scope of this contract is for the vendor to provide and support the installation of a COTS PICalc software which can be installed and operate in the IRS Net Hub Cloud environment. The vendor will also support the IRS to integrate this software to deliver the 1040 Exam workflow in

ECM.

Key requirements under this scope include:

• Deliver a PICalc solution that:

o Performs the calculations and produces output as detailed in sections 5.2.3, 5.2.4, 5.2.5, and 5.2.6.

o Is Linux-based and can be installed in the IRS Net Hub environment, currently running on AWS GovCloud.

o Has a set of APIs to enable penalty and interest calculations to be seamlessly integrated with the ECM 1040 Exam workflow.

• Support the installation of the PICalc solution in the IRS NetHub environment.

• Support the successful integration of the PICalc solution with the 1040 Exam Workflow in ECM.

• Provide relevant information and complete necessary documentation for the IRS Net Hub environment to maintaining the IRS Authority to Operate (ATO), FedRAMP certification, and for the PICalc solution software to adhere to all relevant IRS security protocols.

• Ensure the PICalc solution’s calculations are in strict accordance with current tax laws, regulations, and IRS procedural updates.

• Provide full support for addressing operational issues, monitoring performance, and assisting with system upgrades. The vendor will work collaboratively with IRS stakeholders to plan and implement updates and enhancements effectively.

3. CURRENT INFORMATION TECHNOLOGY (IT)/NETWORK ENVIRONMENT

The IRS seeks to acquire a PICalc solution to deliver its 1040 Exam workflow in ECM. ECM is a Pega-based environment hosted in the IRS FedRAMP Moderate-accredited Net Hub environment running on AWS GovCloud. It is anticipated that the acquired PICalc solution will be Linux-based, API-enabled software which will be installed within the IRS Net Hub environment and added to NetHub’s security boundary. This solution, intended for seamless integration with the ECM system and eventual broader IRS IT ecosystem, must meet comprehensive business, technical, operational, and security objectives.

4. OBJECTIVE

Provide a PICalc solution that can be integrated with ECM to support the delivery of its 1040 Exam workflow by December 31, 2024.

5. TASKS

For this procurement, the work required is structured into the following tasks:

5.1 Project Management: The contractor shall provide project management support. This includes the management and oversight of all activities performed by contractor personnel, including subcontractors, to satisfy the requirements identified in this Performance Work Statement (PWS).

5.1.1 Kick-off Meeting: The contractor shall schedule, coordinate, and host a Project Kick-Off Meeting either virtually or at the location approved by the IRS (Section 6, Deliverable 1).

5.1.2 Monthly Status Report (MSR): The contractor shall develop and provide a MSR (Section 6, Deliverable 2) to include, at minimum, accomplishments, upcoming deliverables, issues with proposed mitigations, and any required Government actions.

5.1.3 Provide Quality Management: The contractor shall identify and implement its approach for providing and ensuring quality throughout its solution to meet the requirements of the PWS. The contractor shall provide a quality control plan (QCP) and maintain and update it as changes in the program processes are identified (Section 6, Deliverable 3). The contractor’s QCP shall describe the application of the appropriate methodology (i.e., quality control and/or quality assurance) for accomplishing PWS performance expectations and objectives. The QCP shall describe how the appropriate methodology integrates with the Government’s requirements.

Each work product delivered by the Contractor under this contract will be evaluated against the following quality measures:

• Accuracy: Each work product must present accurate information, including technical content, in alignment with recognized style guidelines. Accuracy is key to the usability and reliability of the delivered content.

• Clarity: The information within work products should be expressed clearly and concisely. Technical terminology is to be used appropriately to ensure understanding, with diagrams that are straightforward and directly support the text.

• Format: Submission of work products is required in both hard copy (as applicable) and the digital formats specified in the contract PWS. Hard copies must adhere to the Department of the Treasury and IRS directives, ensuring consistency with similar documents. All files, including texts and diagrams, should be provided in formats that allow for Government editing.

• Specifications Validity: Work products must fully meet the Government's specified requirements as outlined in the Performance Work Statement (PWS) and adhere to any set technical specifications, ensuring they are fit for the intended purpose.

• Timeliness: Timely delivery is crucial. Work products must be submitted by the due date listed in the task order or by an alternative date that has been agreed upon with the Contracting Officer (CO).

5.1.4 Transition-Out: The contractor shall provide transition-out support when required by the Government. The Transition-Out Plan shall facilitate the accomplishment of a seamless transition from the incumbent to incoming contractor/Government personnel at the expiration of the contract (Section 6, Deliverable 4).

5.2 Penalty and Interest Calculation Software (PICalc):

5.2.1 Linux-based: The vendor shall deliver a Linux-based solution that can be installed in an IRS environment (Section 6, Deliverable 5).

5.2.2 API-enabled: The vendor shall provide a set of APIs and documentation for the PICalc solution to ingest data, calculate the penalty and interest amounts, and return calculation results and supporting schedules to the calling program. Ensure that all calculations needed to complete the ECM 1040 Exam workflow are API-enabled (Section 6, Deliverable 6).

5.2.3 Interest Calculations: The PICalc solution shall perform interest calculations in accordance with the Internal Revenue Code (IRC) as described in the requirements listed below and (Section 6, Deliverable 7):

• Compute Interest in accordance with IRC 6601.

• Analyze IRS transaction codes related to a taxpayers account and determine the impact to any interest computation.

• Determine the impact when an election is made under IRC 6402 (commonly referred to as a credit elect transfer) to the interest computation.

5.2.4 Penalty Calculations: The PICalc solution shall perform penalty calculations in accordance with the Internal Revenue Code (IRC) as described in the requirements listed below (Section 6, Deliverable 8):

• Accuracy Related Penalties:

• Negligence – IRC Section 6662(c)

• Substantial understatement of income tax – IRC Section 6662(d)

• Substantial valuation misstatement – IRC Section 6662(e)

• Transactions lacking economic substance – IRC Section 6662(b)(6)

• Gross valuation misstatement – IRC Section 6662(h)

• Nondisclosed transaction lacking economic substance – IRC 6662(i)

• Unclosed foreign financial assets – IRC Section 6662(j)

• Reportable Transactions – IRC 6662A(a)

• Nondisclosed Listed Transactions – IRC 6662A(c)

• Civil Fraud – IRC Section 6663

• Delinquency Penalties:

• Failure to File a Tax Return – IRC 6651(a)(1)

• Failure to Pay Tax Shown on the Return – IRC 6651(a)(2)

• Failure to Pay Tax Upon Notice and Demand – IRC 6651(a)(3)

• Fraudulent Failure to File – IRC 6651(f)

• Estimated Tax Penalties:

• Estimated Tax – IRC 6654

5.2.5 Penalty and Interest Ordering: The PICalc solution shall maintain an ordering array that specifies the order for penalties and interest to be executed and applied (Section 6, Deliverable 9):

• If applicable, penalties shall be calculated prior to calculating Interest since penalties can be subject to Interest.

• As applicable, penalties calculations results shall be used as input to the Interest calculations.

5.2.6 Response File: The PICalc solution shall provide output in both JSON and PDF formats that contains (Section 6, Deliverable 10):

• The calculated values for applicable penalties and interest.

• Supporting schedules for penalties and interest that shows the detailed computation.

5.2.6.1 Interest Supporting Schedule: Will show the amount subject to interest, broken down by Tax Deficiency or each applicable

Penalty. A breakdown of interest values per quarter, with start and end dates, numbers of days, the interest rate and the interest value. In instances in which the interest rate is unchanged, the option to consolidate the quarters. Output should be in PDF and all the data points used should be included in a JSON response file.

5.2.6.2 Penalty Supporting Schedule: Will show the underpayment that is subject to penalty, the code section under which the penalty is imposed and the computation of the penalty. Output should be in PDF and all the data points used should be included in a JSON response file.

• Applicable penalty reports that are compliant with IRC 6751 requirements

5.3 Installation, Integration and Compliance support: The vendor shall:

5.3.1 Support the installation of the PICalc solution in the IRS NetHub environment (Section 6, Deliverable 11).

5.3.2 Support the integration of the PICalc solution with the 1040 Exam workflow in ECM (Section 6, Deliverable 12).

5.3.3 Provide relevant information and complete necessary documentation for the IRS Net Hub environment to maintain the IRS ATO and certification (Section 6, Deliverable 13).

5.3.4 Ensure that the installation and testing of the provided PICalc solution adheres to all relevant IRS security protocols (Section 6, Deliverable 14).

5.4 Support and Maintenance: The vendor shall:

5.4.1 Provide full support for addressing operational issues, monitoring performance, and assisting with system upgrades. This includes providing help-desk support, triaging, and resolving issues, identifying metrics for monitoring performance, and providing fixes for software defects.

5.4.2 Work collaboratively with IRS stakeholders to plan and implement software updates and enhancements effectively.

5.4.3 Ensure the solution’s calculations are in strict accordance with current tax laws, regulations, and IRS procedural updates. The solution shall be updated, as required, to account for any changes in tax laws, regulations, and IRS procedural updates.

6 DELIVERABLES TABLE:

7 PLACE OF PERFORMANCE

The Contractor will work at Contractor facilities, remote, and onsite at various IRS locations as mutually agreed with the Government.

The Contractor must coordinate site visits to IRS facilities with the Government Task Manager (GTM) and COR and must abide by Department of the Treasury Directive (TD) 71-10 regarding provisions for authorized entrance and exit at these facilities. When working at a government facility, Contractor employees are required to wear identification badges. The Contractor must

DEL.

MILESTONE/

DELIVERABLE

PWS

REFERENCE

DATE OF COMPLETION/

DELIVERY

Project Kick-Off Meeting

5.1.1 Within ten (10) workdays of award

Monthly Status Report (MSR

5.1.2 Monthly (NLT the 10th calendar day of the next month)

Quality Management Plan (QCP)

5.1.3 Due at Project Kick-Off Meeting; updated as changes in program processes are identified

4 Transition-Out Plan 5.1.4 When requested by Government

5 Linux-based Software 5.2.1 As mutually agree to with Government and NLT October 31, 2024

6 API-enabled 5.2.2 As mutually agree to with Government and NLT October 31, 2024

7 Interest Calculations 5.2.3 As mutually agree to with Government and NLT October 31, 2024

8 Penalty Calculations 5.2.4 As mutually agree to with Government and NLT October 31, 2024

9 Penalty Ordering 5.2.5 As mutually agree to with Government and NLT October 31, 2024

10 Response File 5.2.6 As mutually agree to with Government and NLT October 31, 2024

11 Install software 5.3.1 As mutually agree to with Government and NLT December 31, 2024

12 Integrate with ECM 5.3.2 As mutually agree to with Government and NLT December 31, 2024

13 ATO Documentation 5.3.3 As mutually agree to with Government and NLT December 31, 2024

14 Security Protocol Adherence 5.3.4 As mutually agree to with Government and NLT December 31, 2024 provide the COR, GTM, and other IRS staff as appropriate with advanced notice to make necessary arrangements to be on-site at IRS locations. There is no reimbursable travel required.

8 PERIOD OF PERFORMANCE

The period of performance for any resultant award will include a 5-month base period plus one 12-month option period. The agency will evaluate the option to execute FAR 52.217-8, Option to Extend Services.

9 GOVERNMENT FURNISHED PROPERTY (GFP)

The below Government Furnished Property (GFP) will be provided to the Contractor. Additional materials, to include equipment and/or information, may be provided should it become necessary for the execution of the contract.

ITEMS QUANTITY

Contractor Identification Badge/Smart ID Card TBD Laptops with Local Area Network Access TBD Microsoft: Word, Excel, PowerPoint, Project Access TBD

Upon completion of any resultant contract/order, disposition of GFP shall be in accordance with

FAR 52.245-1.

All Contractor employees who are provided an IRS laptop or similar equipment are required to fully utilize the government furnished equipment (GFE) and conduct all official IRS business on the IRS issued laptop. Government furnished information (GFI) can only be maintained on GFE.

Contractors shall not conduct any IRS business and related tasks on their corporate or personal computers. IRS information will not be sent to a Contractor’s corporate or personal email. This includes removable media, such as thumb drives.

At the written request of the Government, the Contractor will immediately return any property provided by the Government for Contractor’s use and completion of assigned tasks. If not requested, Contractor will continue to abide by FAR Part 45 until completion of the contract

10 GOVERNMENT-FURNISHED INFORMATION (GFI)

GFI (to include manuals, notes, memos, instruction materials and other information) may be provided in the performance of this award. The following GFI will be provided to the Contractor upon order award.

INFORMATION ITEMS

TBD

Upon completion of any resultant GSA order, disposition of GFI shall be in accordance with

FAR 52.245-5.