Known as the Customer Account Data Engine, or CADE, the system has successfully processed 15.1 million individual tax returns through March 7, more than 25 percent of all those processed so far this year by the IRS. The number of tax returns processed this year by CADE has already topped the 11.2 million returns the system handled for all of last year.

Richard Spires, IRS Deputy Commissioner for Operations Support, said the long-term investment is paying off for the American taxpayer.

"This system is the centerpiece of our modernization efforts at the IRS," said Spires.

CADE, which is at the core of the effort to replace many of the agency's aging systems, speeds up internal IRS processing, permitting taxpayer accounts to update on a daily basis. The older system updates only on a weekly basis.

"This supports better customer service for the taxpayers, processes refunds quicker and helps the IRS better administer the nation's tax system," Spires said.

The IRS is rolling out CADE in a series of "releases," each improving on and adding to the system capabilities. The current release, launched in January, permits CADE to process certain 1040, 1040A and 1040EZ forms, as well as schedules C, E and F for Form 1040 and a number of other IRS schedules, such as the Earned Income Tax Credit (EITC).

CADE was envisioned to replace the legacy Master File system, parts of which date back to the Kennedy Administration. CADE will eventually house the account information of more than 200 million individual and business taxpayers.

The IRS will process nearly 140 million individual tax returns in 2008 and collect approximately $2 trillion in federal government revenue.