Since 1986, the IRS has invested $2.5 billion in Tax System Modernization. Through 2001, it expects to spend over $8 billion on TSM. This report critiques the effectiveness of IRS efforts to modernize tax processing. Discusses IRS's progress in implementing modernization and describes serious remaining mgmt. and technical weaknesses that must be corrected if tax systems modernization is to succeed. Includes over a dozen specific recommendations for improving IRS's business mgmt. and info. systems mgmt. and development capabilities. Charts and tables.