Page 1 GAO-14-534R Internal Revenue Service

441 G St. N.W.

Washington, DC 20548

April 21, 2014 

The Honorable Ron Wyden 

Chairman

The Honorable Orrin Hatch 

Ranking Member

Committee on Finance 

United States Senate 

The Honorable Tom Udall

Chairman

The Honorable Mike Johanns

Ranking Member

Subcommittee on Financial Services and General Government

Committee on Appropriations

United States Senate 

The Honorable Charles W. Boustany, Jr.

Chairman

The Honorable John Lewis

Ranking Member

Subcommittee on Oversight

Committee on Ways and Means

House of Representatives 

Internal Revenue Service: Absorbing Budget Cuts Has Resulted in Significant Staffing 

Declines and Uneven Performance 

This letter transmits briefing slides based on our work to date in response to your requests for 

information on our ongoing reviews of the 2014 tax filing season and fiscal year 2015 budget 

request for the Internal Revenue Service (IRS). See the enclosed briefing slides that include the 

information used to brief your staff on April 10, 2014. We subsequently updated the briefing 

slides to reflect more current information.

Our briefing objectives were to (1) analyze IRS funding, staffing, and performance trends for 

fiscal years 2009 through 2014, including an assessment of IRS’s 2014 filing season to date; (2) 

describe IRS’s fiscal year 2015 budget request and workload; and (3) describe IRS’s actions to 

absorb budget cuts and cite opportunities that could help IRS more strategically manage 

operations.

To conduct this work, we analyzed funding, staffing, and performance trends, including the 2014 

filing season to date, and summarized the President’s budget requests for IRS from fiscal years 

2009 through 2014. We analyzed the fiscal year 2015 justification and other IRS data, including 

performance data for key IRS operations and full-time equivalents (FTE) for priority programs. 

We reviewed our prior work and interviewed IRS officials in the Office of the Chief Financial 
Page 2 GAO-14-534R Internal Revenue Service

Officer and the Information Technology organization, the National Taxpayer Advocate, and 

representatives from tax preparation firms.

We conducted this performance audit from January to April 2014 in accordance with generally 

accepted government auditing standards. Those standards require that we plan and perform the 

audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings 

and conclusions based on our audit objectives. We believe that the evidence obtained provides 

a reasonable basis for our findings and conclusions based on our audit objectives. We 

interviewed IRS officials and determined that the data presented in this report were sufficiently 

reliable for our purposes.

In summary, we found: 

• IRS’s appropriations have declined to below fiscal year 2009 levels and FTEs have been 

reduced by about 8,000 since fiscal year 2009. Planned performance in enforcement and 

taxpayer service has decreased or fluctuated; for example, in the fiscal year 2014 

congressional justification the audit coverage target for individual examinations was 1.0 

percent for fiscal year 2014, however, the target was lowered to 0.8 percent in the fiscal 

year 2015 congressional justification. Amidst lower demand, IRS’s telephone level of service 

performance (the percentage of callers seeking live assistance and receiving it) was 73 

percent from January 1 through March 15, 2014 compared to 69 percent during the same 

period last year. However, between fiscal years 2009 and 2013, IRS’s telephone level of 

service fluctuated between 61 percent and 74 percent. Average wait times have almost 

doubled since fiscal year 2009—from 8.8 minutes to 16.8 minutes as of mid-March 2014.

• Not including other budgetary resources such as user fees, the fiscal year 2015 budget 

request for IRS is $12.5 billion, which is an increase of 10.5 percent ($1.2 billion) in funding 

and 8.3 percent in staffing (6,998 FTEs) over fiscal year 2014. According to the President’s 

budget, of the requested $1.2 billion, $480 million is predicated on a cap adjustment—

funding above the discretionary spending limit—and largely covers enforcement and 

infrastructure initiatives. IRS’s workload has increased as a result of legislative mandates 

and priority programs, such as work related to the Patient Protection and Affordable Care 

Act and identity theft.

• IRS has absorbed approximately $900 million in budget cuts since fiscal year 2010 through 

savings and efficiencies and by reducing, delaying, or eliminating services. For example, 

IRS delayed two information technology projects (Information Reporting and Document 

Matching and Return Review Program) and substantially reduced employee training. To 

help improve operations, the President requested a large budget increase for IRS in fiscal 

year 2015. However, additional funding is not the only solution. We have open 

recommendations on IRS’s operations that may help it achieve efficiencies over time, such 

as developing a long-term plan to improve web services. 

Agency Comments 

On April 16, 2014, IRS provided technical comments on our findings, which we have 

incorporated where appropriate.
Page 3 GAO-14-534R Internal Revenue Service

- - - - - 

We plan to send copies of this report to the Chairman and Ranking Members of other Senate 

and House committees and subcommittees that have appropriation, authorization, and oversight 

responsibilities for IRS. We are also sending copies to the Commissioner of Internal Revenue, 

the Secretary of the Treasury, and the Chairman of the IRS Oversight Board. The report is 

available at no charge on the GAO website at http://www.gao.gov.

If you or your staffs have any questions about this report, please contact us at (202) 512-9110 

or mctiguej@gao.gov or whitej@gao.gov. Contact points for our offices of Congressional 

Relations and Public Affairs are on the last page of this report. GAO staff members who made 

major contributions to this report were Libby Mixon, Assistant Director, and Joanna 

Stamatiades, Assistant Director, and Jehan Chase, Pawnee A. Davis, Mary Evans, Charles 

Fox, Suzanne Heimbach, LaKeshia Allen Horner, Natalie Maddox, Paul Middleton, Ed 

Nannenhorn, Sabine Paul, Amy Radovich, Mark Ryan, Erinn L. Sauer, Cynthia Saunders, and 

Tamara Stenzel.

James R. McTigue, Jr.

Director, Tax Issues

Strategic Issues 

James R. White

Director, Tax Issues

Strategic Issues 

Enclosure – 1 
Page 4 GAO-14-534R Internal Revenue Service

Enclosure: Briefing Slides

INTERNAL REVENUE SERVICE: Absorbing Budget 

Cuts Has Resulted in Significant Staffing Declines 

and Uneven Performance

Prepared for Congressional Committees

April 10, 2014

(Updated April 18, 2014)

Page 1
Page 5 GAO-14-534R Internal Revenue Service

Objectives

Our objectives are to provide interim information on the Internal Review Service’s (IRS) 

fiscal year 2015 budget request and its 2014 filing season performance. This briefing:

• analyzes IRS funding, staffing, and performance trends for fiscal years 2009 

through 2014, including an assessment of IRS’s 2014 filing season to date; 

• describes IRS’s fiscal year 2015 budget request and workload; and

• describes IRS’s actions to absorb budget cuts and cites opportunities that could 

help IRS more strategically manage operations. 

Page 2

.
Page 6 GAO-14-534R Internal Revenue Service

Scope and Methodology

• To analyze funding, staffing, and performance trends, including the 2014 filing season, we 

summarized the President’s budgets and IRS’s congressional justifications (CJ) from fiscal years 

2009 through 2014, and interviewed IRS officials in the Office of the Chief Financial Officer (CFO); 

analyzed IRS data including full-time equivalents (FTE) and performance data for key IRS 

operations; and interviewed IRS officials and other stakeholders such as representatives from tax 

preparation firms on filing season performance and challenges.

• To describe IRS’s fiscal year 2015 budget request and workloads, we reviewed the fiscal year 

2015 CJ and other budget documents; analyzed FTE data on IRS identified priority programs; and 

interviewed officials from IRS’s Offices of Corporate Budget and the National Taxpayer Advocate.

• To describe IRS’s actions to absorb budget cuts and cite opportunities for IRS to more strategically 

manage operations, we reviewed Office of Management and Budget (OMB) and Department of 

Treasury guidance on sequestration; interviewed officials from IRS’s Office of the CFO and 

Information Technology organization; and reviewed our prior work.

We conducted this performance audit from January to April 2014 in accordance with generally 

accepted government auditing standards. Those standards require that we plan and perform the 

audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and 

conclusions based on our audit objectives. We interviewed IRS officials and determined that the 

data presented in this briefing were sufficiently reliable for our purposes.

Page 3
Page 7 GAO-14-534R Internal Revenue Service

Results in Brief

• IRS’s appropriations have declined to below fiscal year 2009 levels. IRS FTEs have 

been reduced by about 8,000 FTEs since fiscal year 2009. Performance in 

enforcement and taxpayer service has decreased or fluctuated. IRS is providing a 

better level of telephone service in 2014 amidst lower demand.

• Not including other budgetary resources such as user fees, the fiscal year 2015 

budget request for IRS is $12.5 billion, which is an increase of 10.5 percent ($1.2 

billion) in funding and 8.3 percent in staffing (6,998 FTEs) over fiscal year 2014. IRS’s 

workload is dedicated to legislative mandates and priority programs. 

• IRS has absorbed budget cuts through savings and efficiencies and by reducing, 

delaying, and eliminating some services. To improve operations, IRS has requested a 

large budget increase for 2015. However, additional funding is not the only solution 

for IRS. We have open recommendations that may help IRS to more effectively 

manage its operations and achieve some savings over time.

Page 4
Page 8 GAO-14-534R Internal Revenue Service

Page 5

Funding Trends: IRS’s Appropriations Have Declined to 

Below Fiscal Year 2009 Levels

$11,523 $12,146 $12,122 $11,817 $11,199 $11,291

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014

Enforcement 

Operations Support and 

Business Systems 

Modernization (combined)

Taxpayer Services

IRS Appropriations

Figure 1: IRS’s Appropriations, Fiscal Years 2009 through 2014 (Dollars in Millions)

Legend: FY = fiscal year.

Source: Fiscal years 2009 through 2014 congressional justifications for IRS.

Notes: The fiscal year 2013 levels represent an across the board rescission and reductions required by sequestration. In fiscal year 2014, IRS received 

$92 million for the improvement of services to taxpayers, refund fraud and identity theft, and international and offshore compliance issues. The operating 

plan, which has not been approved as of April 11, 2014, proposes allocating $34 million to Taxpayer Services and $58 million to Operations Support. In 

addition, IRS has proposed to transfer $69.2 million from Enforcement to Operations Support for information technology infrastructure ($40 

million) and a program reclassification ($29.2 million). Amounts shown do not include other budgetary resources, such as user fees. 

.

IRS presents its budget 

request through four 

appropriation accounts: 

Enforcement, Operations 

Support, Business Systems 

Modernization (BSM), and 

Taxpayer Services. 

See appendix I for more information on IRS budget trends, including other budgetary resources.
Page 9 GAO-14-534R Internal Revenue Service

Page 6

Staffing Trends: IRS Has Reduced FTEs by about 8,000 (9 

percent) since Fiscal Year 2009

Figure 2: IRS Full-Time Equivalents (FTE) Funded through Appropriations, Fiscal Years 2009 through 2013 Actual 

and Fiscal Year 2014 Enacted

Legend: FY = fiscal year.

Source: Fiscal years 2009 through 2014 congressional justifications for IRS.

Notes: The fiscal year 2013 level represents an across-the-board rescission and reductions required by sequestration. In fiscal year 2014, IRS received $92 million 

for the improvement of services to taxpayers, refund fraud and identity theft, and international and offshore compliance issues. The operating plan, which has not 

been approved as of April 11, 2014, proposes allocating $34 million to Taxpayer Services and $58 million to Operations Support. In addition, IRS has proposed to 

transfer $69.2 million from Enforcement to Operations Support for information technology infrastructure ($40 million) and a program reclassification ($29.2 million). 

Amounts shown do not include FTEs funded with other budgetary resources, such as user fees. 

See appendix II for more information on IRS budget trends, including other budgetary resources.

92,216 94,618 93,906

89,486

85,881 84,189

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014

Enforcement

Operations Support and Business 

Systems Modernization (combined)

Taxpayer Services

Total actual FTEs

Total enacted FTEs
Page 10 GAO-14-534R Internal Revenue Service

Page 7

Performance Trends: Return Examination and Collection 

Coverage Measures Show Decline 

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

Other coverage measures

Collection coverage

Collection Coverage (units)

Examination Coverage -

Business (Assets > $10 

million)

Automated Underreporter 

Coverage

Examination Coverage -

Individual

FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2014 FY 2015

Actual Actual Actual Actual Actual Target Target Target

(Original) (Updated 

March 2014)

Figure 3: IRS Return Examination and Collection Coverage Measures, Fiscal Years 2009 through 2013 Actual and Fiscal Year 2014

and 2015 Targets

Source: GAO analysis of fiscal years 2009 through 2014 congressional justifications for IRS.

For more information on coverage measures, see appendix III.
Page 11 GAO-14-534R Internal Revenue Service

Page 8

Performance Trends: Electronic Filing Continues to 

Increase in 2014

2009 2010 2011 2012 2013 2014

Percentage 

change from 

2013 to 2014

Number of individual tax returns processed 89,215 85,210 87,595 96,556 93,103 98,170 5.4

Electronic 70,705 71,153 76,664 85,904 84,443 90,333 7

Paper 18,510 14,057 10,932 10,653 8,660 7,837 -9.5

Percentage electronically fileda 79.3 83.5 87.5 89.0 90.7 92.0 n/a

Free Fileb

2,416 2,498 2,344 2,431 2,337 2,573 10.1

Number of refunds issued (millions) 77.7 74.1 75.2 80.4 77.8 78.8 1.2

Amount of refunds (billions) $210.2 $219.4 $219.8 $224.7 $214.5 $219.9 2.5

Table 1: Tax Returns Processed, 2009 through 2014 Filing Seasons (in Thousands)

Legend: n/a = not applicable.

Source: GAO analysis of IRS data. 

Notes: Unless otherwise noted, data are from January 1 of each year through April 3, 2009; April 2, 2010; April 1, 2011; April 6, 2012; April 5, 2013; and April 4, 2014. 

Numbers may not add due to rounding. 

aThe percentage of returns filed electronically early in the filing season is likely to decline before the filing season is over. Taxpayers filed about 84 percent of all 

individual returns electronically in 2013. The numbers for electronic filing that we are reporting are for returns processed versus returns received. bIRS offers Free File software for eligible taxpayers to prepare and e-file their federal tax returns online for free at IRS.gov. Free File 2013 and 2014 data are from 

January 1 through April 8, 2013 and April 7, 2014. 
Page 12 GAO-14-534R Internal Revenue Service

Page 9

Performance Trends: IRS Is Providing Better Telephone 

Service in 2014 Amidst Lower Demand Which IRS Attributes 

in Part to Fewer Tax Law Changes

Interim Filing Seasona Truncated Interim Filing Season

2009 2010 2011 2012 2013

2013

(March 16)

2014 

(March 15)

Percent 

change 

from March 

2013 to 

March 

2014b

Call volume (in millions)

Total calls to IRSc

52.4 48.7 53.3 65.1 59.0 51.1 39.6 -23

Automated calls answered

19.6 23.1 26.8 36.4 32.4 28.7 21.5 -25

Assistor answered calls

14.9 12.6 12.8 10.6 11.2 9.3 6.7 -28

Abandoned, busies, and disconnects 17.9 13.0 13.7 18.1 15.4 13.1 11.5 -13

Access measures

Level of Service (LOS) – Percentage of callers seeking live assistance 

who receive it 64 75 75 68 69 69 73 7

Average wait time (in minutes) 8.8 9.9 9.7 15.9 13.8 13.7 12.4 -9

Table 2: Interim IRS Call Volume, Level of Service, and Average Wait Times, 2009 through 2014 Filing Seasons

Source: GAO analysis of IRS data.

a Unless otherwise noted, data for filing season to date are cumulative for IRS from January 1 of each year to April 4, 2009; April 3, 2010; April 2, 2011; March 31, 2012; and March 30, 2013. Because of 

time lags in data reporting, to compare this year to last, we used data from January 1 of each year to March 16, 2013, and March 15, 2014, for the truncated interim filing season column. b The numbers in the table are rounded, but the percent change was calculated using exact values.

c The numbers in the table include the total automated, assistor answered, abandoned, busy and disconnected account calls, taxpayer account-related and tax law calls, but do not reflect the total number 

of attempted calls to IRS, nor do they represent total call volume to all IRS functions such as enforcement. 
Page 13 GAO-14-534R Internal Revenue Service

Page 10

Performance Trends: IRS Is Providing Better Telephone 

Service in 2014 Amidst Lower Demand Which IRS Attributes 

in Part to Fewer Tax Law Changes (Continued)

Fiscal Year (October 1 through September 30)a

2009 2010 2011 2012 2013 2014

Level of Service (LOS) – Percentage of callers seeking live 

assistance who receive it Goal 77b 71 71 61 70 61

Actual 70 74 70 68 61 67c

Average wait time (in minutes)

Goal 10.4 11.6 11.6 19 14.6 22.0

Actual 8.8 10.8 13.0 16.7 17.6 16.8c

Table 3: IRS Key Telephone Actual Performance Compared to its Goals, Fiscal Years 2009 through 2014

Source: GAO analysis of IRS data. 

a Unless otherwise noted, the goals listed are for the entire fiscal year.

b IRS revised its original fiscal year goal of 77 percent down to 70 percent because of high call volume from taxpayers requesting electronic filing authentication information and 

asking stimulus-related questions. c Unlike the level of service and wait time information reported in Table 2 for 2014, which is from January 1 through March 15, 2014, the corresponding data shown for 2014 in this 

table are fiscal year to date—October 1, 2013, through March 15, 2014. 
Page 14 GAO-14-534R Internal Revenue Service

Page 11

Performance Trends: IRS Continues to Answer More 

Automated than Assistor Answered Calls in 2014

Source: GAO analysis of IRS data. 

Notes: Unless otherwise noted, data are cumulative for IRS from January 1 of each year to April 4, 2009; April 3, 2010; April 2, 2011; March 31, 2012; and March 30, 

2013. For 2014, data are from January 1 through March 15, 2014. The numbers in the graphic include the total automated, assistor answered, abandoned, busy and 

disconnected taxpayer account-related and tax law calls, but do not reflect the total number of attempted calls to IRS, nor do they represent total call volume to all IRS 

functions such as enforcement. 

52.4

48.7

53.3

65.1

59.0

39.6

19.6

23.1

26.8

36.4

32.4

21.5

14.9 12.6 12.8 10.6 11.2

6.7

17.9

13 13.7

18.1

15.4

11.5

0

10

20

30

40

50

60

70

2009 2010 2011 2012 2013 2014 (Mar 15)

Call volume (in millions)

Year

Figure 4: IRS Call Volume, 2009 through 2014 Filing Seasons

Total calls to IRS 

Automated calls answered

Assistor answered calls

Abandoned, busies, and disconnects

IRS has reported that answering 

calls using automation is 

substantially less expensive than 

using live assistors, which IRS 

estimated costs $33 per call in 

2013. 
Page 15 GAO-14-534R Internal Revenue Service

Page 12

Performance Trends: Average Wait Times Have Generally 

Increased since 2009

Legend: FY = fiscal year.

Source: GAO analysis of IRS data. 

Notes: Unless otherwise noted, data are cumulative for IRS from January 1 of each year to April 4, 2009; April 3, 2010; April 2, 2011; March 31, 2012; and March 30, 2013. 

For 2014, data are from January 1 through March 15, 2014. 

10.4

11.6 11.6

19

14.6

22

8.8

10.8

13.0

16.7 17.6 16.8

8.8

9.9 9.7

15.9

13.8

12.4

0

5

10

15

20

25

2009 2010 2011 2012 2013 2014 (Mar 15)

Average wait time (in minutes)

Fiscal Year

Figure 5: Average Wait Time (in minutes), Fiscal Years 2009 through 2014

FY goal

FY actual

Filing season actual
Page 16 GAO-14-534R Internal Revenue Service

Page 13

Performance Trends: Overage Correspondence Has 

Increased Significantly since 2009

Source: GAO analysis of IRS data.

Notes: Aggregate data are from two IRS units that jointly handle taxpayer correspondence. The same employees that provide telephone service are also responsible for 

responding to correspondence from taxpayers. Data cover equivalent periods for each fiscal year with slight variation in the exact dates depending on the year and data source.

19 20 20 21 21 25%

27%

35%

40%

47%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

0

5

10

15

20

25

30

35

40

45

50

2009 2010 2011 2012 2013

Percentage of taxpayer correspondence overage

Correspondence received (in millions)

Fiscal Year

Figure 6: IRS Taxpayer Correspondence Performance, Fiscal Years 2009 through 2013

Correspondence received during the fiscal year (in 

millions)

Percentage of taxpayer correspondence overage at 

the end of the fiscal year

Overage correspondence is paper 

correspondence that IRS has not 

responded to within 45 days of 

receipt. This figure shows data for 

two IRS units that handle 

correspondence.
Page 17 GAO-14-534R Internal Revenue Service

Page 14

Fiscal Year 2015 Request: IRS Is Requesting $12.5 Billion 

in Appropriations, an Increase of 10.5 percent ($1.2 

Billion) over Fiscal Year 2014 

Figure 7: IRS Enacted Appropriations, Fiscal Year 2009 through 2014, and Fiscal Year 2015 Request 

Legend: FY = fiscal year.

Source: Fiscal years 2009 through 2015 congressional justifications for IRS.

Notes: Fiscal year 2013 levels represent an across-the-board rescission and reductions required by sequestration. In fiscal year 2014, 

IRS received $92 million for the improvement of services to taxpayers, refund fraud and identity theft, and international and offshore 

compliance issues. The operating plan, which has not been approved as of April 11, 2014, proposes allocating $34 million to Taxpayer 

Services and $58 million to Operations Support. In addition, IRS has proposed to transfer $69.2 million from Enforcement to Operations 

Support for information technology infrastructure ($40 million) and a program reclassification ($29.2 million). Amounts shown do not 

include other budgetary resources, such as user fees.

See appendix I for more information on the fiscal year 2015 budget request for IRS, including other 

budgetary resources.

11,523

12,146

12,122

11,817

11,199

11,291

12,477

11,997

$11,000

$11,200

$11,400

$11,600

$11,800

$12,000

$12,200

$12,400

$12,600

$12,800

FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015

(Dollars in millions)

IRS Appropriations

IRS Requested Appropriation

IRS Requested Appropriation Before Cap 

Adjustment
Page 18 GAO-14-534R Internal Revenue Service

Page 15

Fiscal Year 2015 Request: IRS’s Largest Requested 

Increase Is $658 Million for Operations Support1

Figure 8: Fiscal Year 2015 Budget Request by Appropriation Compared to Fiscal Year 2014 Enacted Appropriation for IRS 

Legend: FY = fiscal year.

Source: Fiscal years 2014 through 2015 congressional justifications for IRS. 

Notes: Request includes 22 program initiatives totaling more than $1.1 billion (see appendixes IV through VIII). Amounts shown do not 

include other budgetary resources, such as user fees.

1Operations Support includes IRS’s information systems and overall planning, direction, and support for the IRS.

$2,157

$2,318

$5,022

$5,372

$3,799

$4,457

$313

$330

$0 $5,000 $10,000 $15,000

FY 2014 enacted

FY 2015 requested

(Dollars in millions)

Taxpayer Services

Enforcement 

Operations Support

Business Systems 

Modernization

See appendix I for more information on IRS budget trends, including other budgetary resources.
Page 19 GAO-14-534R Internal Revenue Service

Page 16

Fiscal Year 2015 Request: IRS Proposed Increasing 

Staffing to about Fiscal Year 2012 Levels

Figure 9: IRS Full-Time Equivalents Funded through Appropriations, Fiscal Years 2009 through 2013 Actual, 2014 Enacted, 

and 2015 Request

Legend: FY = fiscal year. FTE = full-time equivalent.

Source: Fiscal years 2009 through 2015 congressional justification for IRS.

Notes: Fiscal year 2013 levels represent the across-the-board rescission and reductions required by sequestration. In fiscal year 2014, IRS received $92 million for the 

improvement of services to taxpayers, refund fraud and identity theft, and international and offshore compliance issues. The operating plan, which has not been 

approved as of April 11, 2014, proposes allocating $34 million to Taxpayer Services and $58 million to Operations Support. In addition, IRS has proposed to transfer 

$69.2 million from Enforcement to Operations Support for information technology infrastructure ($40 million) and a program reclassification ($29.2 million). Amounts 

shown do not include FTEs funded with other budgetary resources, such as user fees. The FY 2015 initiatives were developed with most FTE costed assuming a 

January 1 hire date.

See appendix II for more information on FTEs in the Fiscal Year 2015 budget request for IRS, including other budgetary 

resources.

92,216

94,618

93,906

89,486

85,881

84,189

91,187

88,798

80,000

85,000

90,000

95,000

100,000

FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015

Actual FTEs

Enacted FTEs

Requested FTEs

IRS Requested FTEs 

Before Cap 

Adjustment
Page 20 GAO-14-534R Internal Revenue Service

Page 17

Fiscal Year 2015 Request: The Largest Staffing Increase Is 

about 3,000 FTEs for Enforcement

Figure 10: Fiscal Year 2015 Full-Time Equivalents, Budget Request by Appropriation Compared to Fiscal Year 2014 Enacted 

Appropriation for IRS

Legend: FY = fiscal year.

Source: Fiscal year 2015 congressional justification for IRS.

Note: The FY 2015 initiatives were developed with most FTE costed assuming a January 1 hire date.

See appendix II for more information on FTEs in the fiscal year 2015 budget request for IRS, including other budgetary 

resources.

28,996

31,481

42,805

45,757

11,860

13,380

528

569

0 25,000 50,000 75,000 100,000

FY 2014 enacted

FY 2015 requested Taxpayer Services

Enforcement

Operations Support

Business Systems 

Modernization
Page 21 GAO-14-534R Internal Revenue Service

Page 18

Workload: Staff Dedicated to Legislative Mandates and 

Priority Programs

Table 4: Full-Time Equivalents to Implement New Laws and Priority Programs, Fiscal Years 2013 Actual, 2014 Planned, and 

2015 Requested

Legend: FY = fiscal year. FTE = full-time equivalent.

Source: IRS Office of Corporate Budget. 

Notes: a The FY 2015 initiatives were developed with most FTE costed assuming a January 1 hire date . bPPACA, Pub. L. No. 111-148, 124 Stat. 119 (Mar. 23, 2010), as amended by the Health 

Care and Education Reconciliation Act (HCERA), Pub. L. No. 111-152, 124 Stat. 1029 (Mar. 30, 2010). All references to PPACA include amendments by HCERA. c According to IRS officials, this reflects the number of FTEs requested in the Fiscal Year 2014 President’s Budget.

dHousing Assistance Tax Act of 2008, Pub. L. No. 110-289, div. C, §3091, 122 Stat. 2654, 2908-2911 (July 30, 2008). e Energy Improvement and Extension Act of 2008, Pub. L. No. 110-343, div. B, §403, 122 Stat. 3765, 3854-3860 (Oct. 3, 2008). f

Hiring Incentives to Restore Employment Act, Pub. L. No. 111-147, Title V, 124 Stat. 71, 97-117 (Mar. 18, 2010).

Legislative Mandate/Priority Program FY 2013 actual FY 2014 

enacted

FY 2015 

requesteda

Refund fraud including identity theft 4,146 4,146 4,603

International and offshore tax administration 2,135 1,819 2,151

Patient Protection and Affordable Care Actb 701 1,954c 2,046 

Merchant card/cost basis reportingd,e 90 128 450 

Foreign Account Tax Compliance Actf 40 50 394 

Return Review Program/Electronic Fraud Detection System 104 137 137

Return preparer oversight 167 80 186 

Total FTEs 7,383 8,314 9,967

See appendices IX and X for more information on PPACA spending.
Page 22 GAO-14-534R Internal Revenue Service

Page 19

Absorbing Cuts: Reductions to IRS’s Budget Greater than 

Projected Savings 

$94,249

$118,125

$190,638

$189,957

$70,850

$254,864

$95,200

$176,425

$277,178

$426,013

$586,382

$0 $100,000 $200,000 $300,000 $400,000 $500,000 $600,000 $700,000

FY 2009

FY 2010

FY 2011

FY 2012

FY 2013

FY 2014

FY 2015

Actual Budget Reductions, Savings 

and Efficiencies

Projected Savings and Efficiencies

Dollars in thousands

Legend: FY = fiscal year.

Source: GAO analysis of fiscal year 2009 through fiscal year 2015 IRS congressional justifications for the IRS.

Note: aIRS began calculating actual savings and efficiencies in fiscal year 2012, based on our recommendation.

Figure 11: IRS Projected and Actual Savings and Efficiencies, Fiscal Year 2009 through 2015a

• IRS has absorbed approximately $900 million in budget cuts since fiscal year 2010.
Page 23 GAO-14-534R Internal Revenue Service

•In 2014, IRS reduced or eliminated services, consistent with our finding in December 2012 that IRS 

needed to dramatically revise its strategy for providing telephone and correspondence services, and 

that incremental efficiency gains would not be enough to reverse service declines. IRS:

• limited inquiries to answer only basic tax law questions during the filing season and reassigned assistors to 

work account-related inquires;

• launched the “Get Transcript” tool, which allows taxpayers to obtain a viewable and printable transcript on 

www.irs.gov, and redirected taxpayers to automated tools for additional guidance;

• redirected refund-related inquiries to automated services and did not answer refund inquires until 21 days after the tax return was filed electronically or 6 weeks after the return was filed by paper (unless the automated 

service directed the taxpayer to contact IRS);

• limited access to the Practitioner Priority Services line to only those practitioners working tax account issues; 

• limited live assistance and redirected requests for domestic employer identification numbers to IRS’s online tool; and

• eliminated free return preparation and reduced other services at IRS’s walk-in sites. 

Page 20

Absorbing Cuts: IRS Reduced or Eliminated Some 

Services in 2014 
Page 24 GAO-14-534R Internal Revenue Service

Absorbing Cuts: IRS Has Delayed Two IT Projects In Part 

Due to Budget Reductions

IRS put two major IT projects, Information Reporting and Document Matching (IRDM) and the Return 

Review Program (RRP), on hold due to a lack of funding and technical issues (See appendix XI).1

• During the hold, IRS will determine the best case management tool to use to meet IRDM’s 

program requirements. It plans to leverage an off-the-shelf solution because IRS believes it 

will be more cost effective than building one. 

• IRS initially planned to release all of RRP by March 2015. The first phase, Transition State 

1.0 (TS1), was split into two releases: R1.0 and R1.1. Testing of TS1 R1.0 has been 

ongoing, and will continue for the remainder of the calendar year. IRS put the next two 

phases, TS1.5 and TS2.0 on hold until it has analyzed and resolved how to design RRP’s 

architecture more efficiently.

• IRS is working to develop a plan to move beyond the hold on RRP, and expects to 

complete the plan in the summer of 2014, and will initiate the plan after that time. 

Moving forward, this plan will help inform IRS’s funding needs for RRP. 

Page 21

1Information Reporting and Document Matching (IRDM): IRDM is intended to be used to improve business taxpayer compliance by matching 

business information (e.g., 1099-K) tax returns with individual tax returns to identify potential income under reporting. Return Review Program 

(RRP): When RRP is fully deployed it is expected to make use of leading-edge technology to detect, resolve, and prevent fraud. 

2
Page 25 GAO-14-534R Internal Revenue Service

Absorbing Cuts: IRS Substantially Reduced Employee 

Training

• According to IRS Commissioner Koskinen, since 2010 IRS has reduced training costs by 83 percent and 

training-related travel costs by 87 percent by limiting employee travel and training to mission-critical projects.

• For fiscal year 2013, IRS reported a savings of $56.2 million by reducing agency-wide, non-technical training 

and non-case related travel. 

• In its fiscal year 2013 Report to Congress, the National Taxpayer Advocate lists training cuts as one of IRS’s 

most serious problems. From fiscal years 2009 through 2013, per-employee spending dropped from $1,450 per 

full-time equivalent to less than $250.

Page 22

Division Percent reduction

Appeals 96

Tax Exempt and Government Entities 96

Small Business/Self-Employed 93

Large Business and International 92

Taxpayer Advocate Service 78

Wage and Investment 74

Table 5: Percentage of Training Reduction for Selected IRS Divisions, Fiscal Years 2009 through 2013

Source: National Taxpayer Advocate: 2013 Annual Report to Congress, Volume I, (Dec. 31, 2013).
Page 26 GAO-14-534R Internal Revenue Service

Opportunities Exist to More Strategically Manage 

Operations

Funding is one component of improving operations. Legislative proposals and our prior work provide options to 

improve IRS operations (see appendixes XII and XIII). For example, the administration proposes legislative 

changes such as providing IRS with greater flexibility to address correctable errors (broaden math error authority). 

In addition, we recommended that IRS: 

• outline a strategy that defines appropriate levels of telephone and correspondence service and wait times and lists specific steps 

to manage service based on an assessment of time frames, demand, capabilities, and resources (GAO-13-156).1 IRS did not 

agree or disagree with this recommendation, stating that it already had an objective of providing taxpayers with access to accurate 

services while managing demand by improving efficiency. However, in recent years, because IRS has not kept up with the demand 

for its services we maintain our recommendation is valid; a strategy to reverse the trends may require difficult tradeoffs. 

• review disparities in the ratios of direct revenue yield to costs across different enforcement programs and across different groups 

of cases within programs and determine whether this evidence provides a basis for adjusting IRS’s allocation of enforcement 

resources each year. We noted that the better empirical basis IRS planners have for making such judgments, the more confident 

they can be that they are allocating their limited resources to the best effect (GAO-13-151).2 IRS agreed with our recommendation. 

Given the time to develop additional key data, IRS is considering how to apply interim methods, findings, or approximations. They 

are unsure when this work will be completed; we believe our recommendation remains valid. 

• develop a long-term strategic plan for its web services. We noted that a long-term strategy could help managers have a common 

understanding of IRS's plans, and better assist Congress in understanding what it is being asked to fund and holding IRS 

accountable for progress (GAO-13-435).3 In April 2014, IRS reported that a long-term online strategy for improving web services 

will be completed in February 2015. 

Page 23

1GAO, 2012 Tax Filing: IRS Faces Challenges Providing Service to Taxpayers and Could Collect Balances Due More Effectively, GAO-13-156 (Washington, 

D.C.: Dec. 18, 2012). 

2GAO, Tax Gap: IRS Could Significantly Increase Revenues by Better Targeting Enforcement Resources, GAO-13-151 (Washington, D.C.: Dec. 5, 2012). 3GAO, IRS Website: Long-Term Strategy Needed to Improve Interactive Services, GAO-13-435 (Washington, D.C.: Apr. 16, 2013). 
Page 27 GAO-14-534R Internal Revenue Service

Concluding Observations

IRS has absorbed budget cuts since fiscal year 2010, and the resulting imbalance 

between service and demand has adversely affected operations. To address this 

imbalance, IRS has requested a large budget increase for 2015. However, additional 

funding is not the only solution for IRS. We have open recommendations that may help 

IRS to more effectively manage its operations and achieve some savings over time.

Page 24
Page 28 GAO-14-534R Internal Revenue Service

Page 25

Appendix I: Dollars by Appropriation Account, Fiscal 

Years 2009 through 2015

Appropriation account

FY 2009 

enacted

FY 2010 

enacted

FY 2011 

enacted

FY 2012 

enacted

FY 2013 

enacteda

FY 2014 

enactedb

FY 2015 

requested

Dollar change FY 

2014 enacted 

compared to FY 

2015 requested

Percent change FY 

2014 enacted 

compared to FY 2015 

requested

Enforcement $5,117 $5,504 $5,493 $5,299 $4,949 $5,022 $5,372 $350 7.0

Operations support 3,867 4,084 4,057 3,947 3,801 3,799 4,457 658 17.3

Taxpayer services 2,293 2,279 2,293 2,240 2,136 2,157 2,318 161 7.5

Business Systems Modernization 230 264 263 330 313 313 330 17 5.5

Health Insurance Tax Credit 

Administration (HITCA)c 15 16 15 0 0 0 0 0 0

Subtotal 11,523 12,146 12,122 11,817 11,199 11,291 12,477 1,186 10.5

Other resources, such as user fees 390 539 655 695 855 815 785 -30 -3.7

Total funding available for 

obligations $11,913 $12,686 $12,777 $12,512 $12,053 $12,106 $13,261 $1,156 9.6

Table 6: Fiscal Years 2009 through 2014 Enacted and Fiscal Year 2015 Budget Request for IRS by Appropriation Account (Dollars in Millions)

Legend: FY = fiscal year.

Source: Fiscal years 2011through 2015 congressional justifications for IRS. 

Notes: Dollars are nominal and not adjusted for inflation, and numbers may not add due to rounding.

aFY 2013 enacted represents the operating level after applying across-the-board rescission and reductions required by sequestration and an interappropriation transfer of $73 million transferred 

from the Enforcement appropriation to the Taxpayer Services ($13 million) and Operations Support ($60 million) appropriations. bIn fiscal year 2014, IRS received $92 million for the improvement of services to taxpayers, refund fraud and identity theft, and international and offshore compliance issues. The operating plan, 

which has not been approved as of April 11, 2014, proposes allocating $34 million to Taxpayer Services and $58 million to Operations Support. In addition, IRS has proposed to transfer $69.2 

million from Enforcement to Operations Support for information technology infrastructure ($40 million) and a program reclassification ($29.2 million). cIn FY 2012, administrative resources for HITCA were moved to the Taxpayer Services appropriation under the Consolidated Appropriations Act, 2012, Pub. L. No. 112-74, 125 Stat. 786 (Dec. 23, 

2011). 
Page 29 GAO-14-534R Internal Revenue Service

Page 26

Appendix II: Staffing by Appropriation Account, Fiscal 

Years 2009 through 2015

Appropriation

account

FY 2009 

actual

FY 2010 

actual

FY 2011 

actual

FY 2012 

actual

FY 2013 

actuala

FY 2014 

enactedb

FY 2015 

requestedc

FTE change FY 

2014 enacted 

compared to FY 

2015 requested

Percent change 

FY 2014 enacted 

compared to FY 

2015 requested

Enforcement 47,361 50,400 49,920 47,189 44,174 42,805 45,757 2,952 6.9

Operations support 12,101 12,262 12,103 11,499 11,610 11,860 13,380 1,520 12.8

Taxpayer services 32,422 31,607 31,574 30,236 29,646 28,996 31,481 2,485 8.6

Business Systems Modernization 322 337 309 562 451 528 569 41 7.8

Health Insurance Tax Credit 

Administration (HITCA)d 10 12 0 0 0 0 0 0 0

Subtotal 92,216 94,618 93,906 89,486 85,881 84,189 91,187 6,998 8.3

Other resources, such as user fees 1,153 752 1,003 2,185 1,884 1,503 1,503 0 0

Total 93,369 95,370 94,909 91,671 87,765 85,692 92,690 6,998 8.2

Table 7: Fiscal Years 2009 through 2013 Actual, 2014 Enacted, and 2015 Requested Full-time Equivalents by Appropriation Account 

Legend: FY = fiscal year.

Source: Fiscal years 2011 through 2014 congressional justifications for IRS. 

Notes: aFY 2013 actual represents the operating level after applying across-the-board rescission and reductions required by sequestration and an interappropriation transfer of $73 million transferred 

from the Enforcement appropriation to the Taxpayer Services ($13 million) and Operations Support ($60 million) appropriations. bIn fiscal year 2014, IRS received $92 million for the improvement of services to taxpayers, refund fraud and identity theft, and international and offshore compliance issues. The operating plan, which 

has not been approved as of April 11, 2014, proposes allocating $34 million to Taxpayer Services and $58 million to Operations Support. In addition, IRS has proposed to transfer $69.2 million from 

Enforcement to Operations Support for information technology infrastructure ($40 million) and a program reclassification ($29.2 million). 

CThe FY 2015 initiatives were developed with most FTE costed assuming a January 1 hire date.

dThe administrative resources for HITCA were moved to the Taxpayer Services appropriation under the Consolidated Appropriations Act, 2012, Pub. L. No. 112-74, 125 Stat. 786 (Dec. 23, 2011).
Page 30 GAO-14-534R Internal Revenue Service

Page 27

Appendix III: IRS Adjusted Enforcement Coverage and 

Efficiency Targets Downward

FY 2009 

Actual

FY 2010 

Actual

FY 2011 

Actual

FY 2012 

Actual

FY 2013 

Actual

FY 2014 

Targeta

(Original)

FY 2014 

Target 

(March 2014)

FY 2015 

Targetb

Selected Examination Measures

Examination Coverage - Individual 1.0% 1.1% 1.1% 1.0% 1.0% 1.0% 0.8% 0.8%

Examination Efficiency - Individual 138 140 139 142 142 145 133 124

Examination Coverage Business 

(Assets >10mil)

5.6% 5.7% 6.2% 6.2% 5.6% 4.9% 4.2% 4.1%

Automated Underreporter Coverage 2.6% 3.0% 3.3% 3.2% 2.8% 3.1% 2.5% 2.7%

Automated Underreporter Efficiency 1,905 1,924 2,007 2,041 2,025 2,001 1,931 1,950

Selected Collections Measures

Collection Coverage 54.2% 50.1% 50.0% 48.1% 47.0% 47.1% 42.7% 45.0%

Collection Efficiency 1,845 1,822 1,952 1,997 2,057 2,039 2,007 1,900

Automated Collection System 

Accuracy 94.3% 95.9% 94.9% 94.7% 94.4% 94.5% 94.0% 94.0%

Source: GAO analysis of fiscal years 2014 and 2015 congressional justifications for IRS.

Notes: Coverage measures generally are the number of closed examinations by the number of filings for the prior year. Efficiency measures are generally the total number of cases closed divided by 

total full time equivalents used. Automated Collection System Accuracy refers to the percent of taxpayers who received the correct answer to their question. aThe FY 2014 target was based on the FY2014 budget request. bThe FY 2015 target was based on the FY2015 budget request.

Table 8: IRS Enforcement Coverage Measures Fiscal Years 2009 through 2013 Actual and 2014 and 2015 Targets
Page 31 GAO-14-534R Internal Revenue Service

Page 28

Appendix IV: Of Requested $1.2 Billion for Fiscal Year 

2015, $480 Million Predicated on a Cap Adjustment1

The fiscal year 2015 request includes 22 new program initiatives—17 of which are predicated on a 

cap adjustment—with total requested funding of more than $1.1 billion.2 This includes: 

• 13 for enforcement ($535 million), 

• 6 for Infrastructure ($376 million), 

• 1 for taxpayer service ($221 million), and 

• 1 for BSM ($17 million). 

$0 $100,000 $200,000 $300,000 $400,000 $500,000 $600,000 $700,000

Predicated on Cap 

Adjustment

Program Increases

Taxpayer Services Enforcement Operations Support BSM

Figure 12: Funding Requested for New Initiatives Predicated on a Cap Adjustment (Dollars in Thousands) 

Source: GAO analysis of fiscal year 2015 congressional justification for IRS. 

1Congress passes cap adjustments to allow for additional funding above discretionary spending lists for certain activities. 

2One of the new program initiatives predicated on a cap adjustment is a funding transfer to the Alcohol Tobacco Trade Bureau. 
Page 32 GAO-14-534R Internal Revenue Service

Page 29

Appendix V: IRS Proposed 17 Initiatives Predicated on a 

Cap Adjustment Totaling $480 Million

Description of budget adjustments

Fiscal year 2015 funding requested, by appropriation 

account

Total

Projected

Enforcement

ROI for fiscal 

year 2017

Projected 

Protected 

Revenue

ROI for 

fiscal year 

2017

Taxpayer 

services 

account

Enforcement 

account

Operations 

support 

account

Business 

Systems 

Modernization

Enforcement Initiatives

Address International and Offshore Compliance Issues - 49,037 7,773 - 56,810 4.8 -

Expand Coverage of High Wealth Individuals and Enterprises - 17,684 3,273 - 20,957 11.3 -

Expand Audit Coverage - 53,581 44,198 - 97,779 7.1 20.5

Enhance Collection Coverage - 41,692 25,070 - 66,762 8.5 -

Improve Coverage of Partnerships and Flow-Through Entities - 28,690 7,849 - 36,539 6.8 -

Expand Compliance Coverage in the Tax-Exempt Sector - 13,364 2,731 - 16,095 - -

Pursue Fraud Referrals, Employment Tax, and Abusive Tax Schemes - 9,275 8,537 - 17,812 - -

Build Out Tax Return Preparer Compliance and Professional 

Responsibility Activities - 14,765 2,772 - 17,537 - -

Implement Information Technology (IT) Changes to Deliver the Foreign 

Account Tax Compliance Act (FATCA) - - 32,223 - 32,223 - -

Leverage Digital Evidence for Criminal Investigation - 698 3,674 - 4,372 - -

Leverage Data to Improve Case Selection - 4,052 32,741 - 36,793 2.0a -

Infrastructure Initiatives -

Implement Information Technology (IT) Services - - 10,000 - 10,000 - -

Implement Campus Consolidation and Revitalization Strategy - - 10,000 - 10,000 - -

Implement e-Government and Other Administration Priorities - - 31,011 - 31,011 - -

Maintain Integrity of Revenue Financial Systems - - 12,136 - 12,136 - -

Expand Virtual Service Delivery (VSD) - - 7,701 - 7,701 - -

Alcohol and Tobacco Tax and Trade Bureau Program Integrity Transfer -

Transfer to TTB for High-Return on Investment (ROI) Tax Enforcement 

Activities - 5,000 5,000 - -

Total Fiscal Year 2015 Cap Adjustment $237,838 $241,689 $479,527 n/a -

Table 9: Funding Requested for New Initiatives Predicated on a Cap Adjustment (Dollars in Thousands)

Legend: n/a = not applicable. Note: Numbers may not add due to rounding.

Source: Fiscal year 2015 congressional justification for IRS.

Note:a IRS considers leveraging data to improve case selection a revenue-enhancing initiative.
Page 33 GAO-14-534R Internal Revenue Service

Page 30

Appendix VI: Five Proposed Initiatives for $654 Million Are 

Not Predicated on a Cap Adjustment

Description of budget adjustments Appropriation Account

Total

Projected

enforcement 

revenue 

ROI for 

fiscal year 

2017

Projected 

protected 

revenue

ROI for 

fiscal year 

2017

Taxpayer 

services 

account

Enforcement 

account

Operations 

support 

account

Business 

Systems 

Modernization

‘

New initiatives $167,382 $53,545 $417,780 $15,679 $654,386 n/a

Improve Taxpayer Services and Return Processing 153,482 - 57,776 - 211,258 - -

Prevent Identity Theft and Refund Fraud 13,900 16,971 34,005 - 64,876 - 22.4

Continue Migration from Aging Tax Administration Systems 

– Enhance Online Services - - 829 15,679 16,508

Address Impact of Patient Protection and Affordable Care 

Act (PPACA) Statutory Requirements - 36,574 19,525 - 56,099 2.3 14.0

Implement Information Technology (IT) Changes to Deliver 

Tax Credits and Other Requirements - - 305,645 - 305,645 -

Non-Recur FY 2014 Additional Appropriation -34,000 - -58,000 -92,000 n/a -

Maintaining Current Levels 46,483 105,719 69,382 1,593 223,177 n/a -

Base Adjustment -29,221 29,221 -

Savings and efficiencies, net reinvestment -18,786 -18,233 -42,156 -95,200 n/a -

Total Request Before Cap Adjustment $2,317,633 $5,133,988 $4,215,169 $330,210 $11,997,000 n/a -

Table 10: Funding Requested for New Initiatives Not Predicated on a Program Integrity Cap Adjustment (Dollars in Thousands)

Legend: n/a = not applicable. ROI=return on investment. FY=Fiscal Year

Source: Fiscal year 2015 congressional justification for IRS.

Note: Numbers may not add due to rounding.
Page 34 GAO-14-534R Internal Revenue Service

Page 31

Appendix VII: IRS Continues to Report Actual Return on 

Investment (ROI) Data for Three Enforcement Programs

Fiscal year 2010 Fiscal year 2011 Fiscal year 2012 Fiscal year 2013

Enforcement program Cost Revenue ROI Cost Revenue ROI Cost Revenue ROI Cost Revenue ROI

Examination $4,371 $23,563 5.4 $4,333 $18,924 4.4 $4,232 $14,476 3.4 $3,965 $16,662 4.2

Collection 1,948 29,105 14.9 1,939 31,060 16.0 1,742 30,442 17.5 1,660 31,396 18.9

Automated Underreporter 262 4,924 18.8 270 5,245 19.4 267 5,269 19.7 258 5,287 20.5

IRS total $6,581 $57,592 8.8 $6,543 $55,229 8.4 $6,242 $50,187 8.0 $5,883 $53,345 9.1

Table 11: Actual Return on Investment (ROI) for Major IRS Enforcement Programs (Dollars in Millions)

Source: Fiscal year 2015 congressional justification for IRS.

Note: Numbers may not add due to rounding.

• For the fiscal year 2015 congressional justification, IRS continued to calculate direct actual ROI for 

the Examination, Collection, and Automated Underreporter programs, but has not completed this 

calculation for other programs or at lower levels.

• IRS is not yet able to calculate average or marginal direct actual ROI of new enforcement program 

initiatives, but is in the process of completing a feasibility study to identify steps necessary to 

measure actual revenue and ROI for new enforcement initiatives.

• IRS will continue to use revenue protection and revenue enhancement ROI projections.
Page 35 GAO-14-534R Internal Revenue Service

Page 32

Appendix VIII: IRS Estimated Future ROI for New 

Enforcement Initiatives 

Figure 13: Prevent Identity Theft and 

Refund Fraud (Protected Revenue)

Dollars (in Millions) ROI

Source: GAO analysis of IRS data.

Dollars (in Millions)

Figure 14: Address Impact of Affordable 

Care Act Statutory Requirements 

(Protected Revenue)

Source: GAO analysis of IRS data.

ROI

Figure 15: Expand Audit Coverage 

(Protected Revenue)

Dollars (in Millions) ROI

Source: GAO analysis of IRS data.

64.9 65.4 65.3

548.0

1,097.0

1,462.0

8.4

16.8

22.4

0

5

10

15

20

25

0

500

1,000

1,500

2,000

2,500

2015 2016 2017

Fiscal year

Cost Revenue ROI

4.4 5.1 5.1

22.2

57.2

71.5

5.0

11.2

14.0

0

5

10

15

20

25

0

50

100

150

200

250

2015 2016 2017

Fiscal year

Cost Revenue ROI

4.5 5.2 5.2

33.8

85.3

106.6

7.5

16.4

20.5

0

5

10

15

20

25

0

50

100

150

200

250

2015 2016 2017

Fiscal year

Cost Revenue ROI
Page 36 GAO-14-534R Internal Revenue Service

Page 33

Appendix VIII: IRS Estimated Future ROI for New 

Enforcement Initiatives (continued)

ROI

Source: GAO analysis of IRS data.

Dollars (in Millions)

Figure 17: Expand Audit Coverage 

(Enforcement Revenue) 

Figure 16: Address Impact of Affordable 

Care Act Statutory Requirements 

(Enforcement Revenue)

Source: GAO analysis of IRS data.

Dollars (in Millions) ROI

51.7 56.3 55.9 50.2

94.9

129.2

1.0

1.7

2.3

0

1

2

3

0

50

100

150

200

250

2015 2016 2017

Fiscal year

Cost Revenue ROI

93.3 100.7 94.8

210.0

511.2

674.3

2.3

5.1

7.1

0

2

4

6

8

0

250

500

750

1,000

2015 2016 2017

Fiscal year

Cost Revenue ROI
Page 37 GAO-14-534R Internal Revenue Service

Page 34

Appendix VIII: IRS Estimated Future ROI for New 

Enforcement Initiatives (continued)

Figure 18: Address International and 

Offshore Compliance Issues 

(Enforcement Revenue)

Dollars (in Millions) ROI

Source: GAO analysis of IRS data.

Dollars (in Millions)

Figure 19: Expand Coverage of High 

Wealth Individuals and Enterprises 

(Enforcement Revenue)

Source: GAO analysis of IRS data.

ROI

Figure 20: Enhance Collection Coverage 

(Enforcement Revenue) 

Dollars (in Millions) ROI

Source: GAO analysis of IRS data.

56.8 63.2 60.9

87.5

194.0

292.8

1.5

3.1

4.8

0

1

2

3

4

5

0

100

200

300

400

500

2015 2016 2017

Fiscal year

Cost Revenue ROI

21.0 23.0 21.6

78.5

159.9

243.9

3.7

7.0

11.3

0

3

6

9

12

15

0

100

200

300

400

500

2015 2016 2017

Fiscal year

Cost Revenue ROI

66.8 73.4 72.6

174.6

489.0

616.8

2.6

6.7

8.5

0

2

4

6

8

10

0

200

400

600

800

1,000

2015 2016 2017

Fiscal year

Cost Revenue ROI
Page 38 GAO-14-534R Internal Revenue Service

Page 35

Appendix VIII: IRS Estimated Future ROI for New 

Enforcement Initiatives (continued)

ROI

Source: GAO analysis of IRS data.

Dollars (in Millions)

Figure 22: Leverage Data to Improve 

Case Selection (Enforcement 

Revenue) 

Figure 21: Improve Coverage of 

Partnerships and Flow-Through Entities

(Enforcement Revenue) 

Source: GAO analysis of IRS data.

Dollars (in Millions) ROI

36.5 41.3 39.6

84.4

174.8

267.8

2.3

4.2

6.8

0

2

4

6

8

0

100

200

300

400

500

2015 2016 2017

Fiscal year

Cost Revenue ROI

36.8 38.6 38.6

0.0

63.0

75.4

0.0

1.6

2.0

0

1

2

3

4

0

50

100

150

200

250

2015 2016 2017

Fiscal year

Cost Revenue ROI
Page 39 GAO-14-534R Internal Revenue Service

Page 36

Appendix IX: Patient Protection and Affordable Care Act 

(PPACA)1 Spending, Fiscal Years 2010 through 2012

Table 12: Patient Protection and Affordable Care Act (PPACA) Spending, Fiscal Years 2010 through 2012 (in Millions)

Legend: FY = fiscal year.

Source: Fiscal year 2014 congressional justification for IRS.

Notes: PPACA was enacted on March 23, 2010. IRS received funding for PPACA implementation activities from the Department of Health and Human Services' Health 

Insurance Reform Implementation Fund in fiscal years 2010 to 2012. Numbers may not add to due rounding.

PPACA Initiatives FY 2010 actual FY 2011 actual FY 2012 actual Total

Administer new fees on drug manufacturers and health insurers $0.3 $0.7 $1.1 $2.1

Strengthen oversight of exempt hospitals 0.4 4.5 4.0 9.0

Promoting compliance with other new provisions 0.8 11.6 8.3 20.8

Program management 0.1 8.4 17.9 26.4

Support of implementation of taxpayer issues (e.g. Counsel, Appeals) 2.4 5.0 5.2 12.5

Customer service support (outreach, phones, and other support) 1.3 6.0 4.7 12.0

Information technology, operations, and support and infrastructure, deliver new tax 

credits and individual coverage requirement 15.3 131.9 258.0 405.2

Total $20.7 $168.2 $299.2 $488.1

1PPACA, Pub. L. No. 111-148, 124 Stat. 119 (Mar. 23, 2010), as amended by the Health Care and Education Reconciliation Act (HCERA), Pub. L. No. 111-152, 124 

Stat. 1029 (Mar. 30, 2010). All references to PPACA include amendments by HCERA. 
Page 40 GAO-14-534R Internal Revenue Service

Page 37

Appendix X: PPACA Spending and Request by Account 

and Initiatives, Fiscal Years 2013 through 2015

Table 13: PPACA Spending and Request by Account and Initiative (in Millions)

Taxpayer Services Enforcement Operations Support Total 

PPACA initiatives

FY 2013 

actual

FY 2014 

requested

FY 2015 

requested

FY 2013

actual

FY 2014 

requested

FY 2015 

requested

FY 2013 

actual

FY 2014 

requested

FY 2015 

requested

FY 2013 

actual

FY 2014 

requested FY 2015 requested 

Improve taxpayer 

service and meet 

increased demand 

(PPACA portion of 

initiative) $3.8 $70.3 $58.2 $0 $3.2 $0 $0 $16.0 $15.7 $3.8 $89.5 $73.9

Address impact of 

PPACA statutory 

requirements 0.5 1.1 0 19.3 26.1 36.6 11.8 17.2 19.5 31.6 44.4 56.1

Implement IT 

changes to deliver 

tax credits and other 

requirements 0 0 0 0 0 0 248.6 305.6 305.6 248.6 305.6 305.6

Expand telecom 

infrastructure to 

handle increased 

demand 0 0 0 0 0 0 0 0 16.0 0 0 16.0

Total PPACA 

budget request $4.3 $71.4 $58.2 $19.3 $29.3 $36.6 $260.4 $338.8 $356.9 $284 $439.6a $451.7

Source: IRS data on PPACA spending for fiscal year 2013 and fiscal years 2014 and 2015 congressional justifications for IRS.

Notes: IRS did not receive funding for PPACA implementation activities in fiscal years 2013 or 2014. IRS received funding from the Department of Health and 

Human Services in fiscal years 2010 to 2012. Numbers may not add due to rounding. 

aActual total fiscal year 2014 PPACA spending through February 28, 2014 is $59.2 million.
Page 41 GAO-14-534R Internal Revenue Service

Page 38

Appendix XI: Summary of Major IT Investments 

Total funding for all investments from fiscal years 2009 to 2015 is about $11 billion.

Source: GAO’s analysis of fiscal year 2015 congressional justification for IRS.

aFiscal year 2014 appropriation is the amount IRS plans to fund out of its own accounts (e.g., user fees and other budget accounts). bActual obligations to date through fiscal year 2013. cIRS uses the acronym “ACA” to refer to the Patient Protection and Affordable Care Act in its reports. dIn this report, we are not evaluating the healthcare.gov initiative headed by the Centers for Medicare and Medicaid Services.

Investment name

Fiscal year 2014 

appropriationa

Actual 

obligations 

to dateb

Fiscal year 2015 

projected lifecycle cost 

Projected

useful life 

(year)

Account Management Services (AMS)

Enhances customer support by providing applications that enable IRS employees to access, validate, and update 

individual taxpayer accounts on demand. $17 $11 $204 2017

Patient Protection and Affordable Care Act (PPACA)c

Encompasses the planning, development, and implementation of IT systems needed to support IRS’s tax administration 

responsibilities associated with the act.d 345 651 1,987 2018

Customer Account Data Engine 2 (CADE 2) 

Provides timely access to authoritative individual taxpayer account information and enhances IRS’s ability to address 

technology, security, financial material weaknesses, and long-term architectural planning and viability. 165 687 1,022 2020 

Electronic Fraud Detection System (EFDS) 

Assists in detecting fraud at the time that tax returns are filed in order to eliminate the issuance of fraudulent tax refunds. 16 111 162 2021

e-Services (e-SVS) 

Comprises several web-based self-assisted services that are intended to allow authorized individuals to do business with 

the IRS electronically. 11 173 207 2019

Foreign Account Tax Compliance Act (FATCA) 

Intended to implement provisions of the Foreign Account Tax Compliance Act regarding financial institutions reporting to 

IRS information about financial accounts held by U.S. taxpayers, or foreign entities in which U.S. taxpayers hold a 

substantial ownership interest. 47 17 162 2020

Implement Return Review Program (RRP) (Replaces EFDS) 

Currently under development, is intended to maximize fraud detection at the time that tax returns are filed to eliminate 

issuance of questionable refunds. 68 103 253 2020

Individual Master File (IMF) 

Represents the authoritative data source for individual tax account data. All other IRS information systems that process 

IMF data depend on output from this source. This investment is a critical component of IRS’s ability to process tax returns. 14 82 166 2019

Information Reporting and Document Matching (IRDM) 

Intended to establish a new business information matching program in order to increase voluntary compliance and 

accurate income reporting. 23 70 186 2019

Table 14: Summary of IRS’s Major IT Investments (in Millions)
Page 42 GAO-14-534R Internal Revenue Service

Appendix XI: Summary of Major IT Investments (continued) 

Page 39

Investment name

Fiscal year 

2014 

appropriation

Actual

obligations 

to-date

Fiscal year 

2015 

projected 

life-cycle 

cost 

Projected

useful life

(year)

Integrated Customer Communication Environment (ICCE) 

Includes several projects that are intended to simplify voluntary compliance using voice response, Internet, and other 

computer technology such as the Modernized Internet Employee Identification Number, which allows third parties to act on 

the behalf of taxpayers. $15 $482 $524 2019

Integrated Data Retrieval System (IDRS) 

Intended to provide systemic review, improve consistency in case control, alleviate staffing needs, issue notices to taxpayers, 

and allow taxpayers to see status of refunds. It is a mission-critical system used by 60,000 IRS employees. 18 202 336 2020 

Integrated Financial System/CORE Financial System (IFS) 

Used by IRS for budget, payroll, accounts payable/receivable, general ledger functions, and financial reporting; also used to

report on the cost of operations and to manage budgets by fiscal year. 15 414 494 2019

Integrated Submission and Remittance Processing System (ISRP) 

Processes paper tax returns, and updates tax forms to comply with tax law changes. 10 143 188 2019

IRS End User Systems and Services (EUSS) 

Supports products and services necessary for daily functions for over 100,000 IRS employees at headquarters and field sites. 182 705 1,933 2019

IRS Main Frames and Servers Services and Support (MSSS) 

Intended to support the design, development, and deployment of server storage infrastructures, software, databases, and 

operating systems. 406 4,094 7,317 2019

IRS Telecommunications Systems and Support (TSS) 

Supports IRS’s broad and local network infrastructure such as servers, and switches for voice, data, and video servicing of 

about 1,000 IRS sites. 302 1,007 2,388 2019

IRS.Gov - Portal Environment 

Provides web-based services such as tax filing and refund tracking, to internal and external users, such as IRS employees 

and other government agencies, taxpayers, and business partners. 16 487 651 2017

Modernized e-File (MeF) 

Provides a secure web-based platform for electronic tax filing of individual and business tax and information returns by 

registered Electronic Return Originators. 40 376 639 2020

Service Center Recognition/Image Processing System (SCRIPS) 

Used as a data capture, management, and image storage system using high-speed scanning and digital imaging to convert 

data from the 940, 941, K-1, and paper returns from Information Returns Processing, into electronic format. 9 157 203 2019

Table 14 (continued): Summary of IRS’ Major IT Investment (in Millions)

Source: GAO’s analysis of fiscal year 2015 congressional justification for IRS.
Page 43 GAO-14-534R Internal Revenue Service

Page 40

Appendix XII: GAO Conducted Analyses Related to 12 of 

38 Legislative Proposals in the Fiscal Year 2015 Budget 

Request 

Table 15: Legislative Proposals Related to Prior GAO Work (in Millions)

Source: GAO analysis based on IRS fiscal year 2015 congressional justification and Department of the Treasury, General Explanations of the 

Administration’s Fiscal Year 2015 Revenue Proposals (Washington, D.C.: March 2014).

IRS legislative proposals related to prior GAO work Projected revenues over 10 years Projected costs over 3 years Related GAO reports 

Modify reporting of tuition expenses and scholarships of Form 1098-T, 

Tuition Statement

$606 $0.2 GAO-10-225

Authorize the Department of Treasury to require additional information 

to be included in electronically filed Form 5500 annual reports and 

electronic filing of certain other employee benefit plan reports.

No revenue effect 11.2 GAO-05-491

Increase certainty with respect to worker classification 9,610 1.9 GAO-09-717

Require taxpayers who prepare their returns electronically, but file their 

returns on paper, to print their returns with a scannable code

No revenue effect 14.6 GAO-12-33

Allow IRS to absorb credit card processing fees for certain tax 

payments

19 9.6 GAO-10-11

Provide IRS with greater flexibility to address correctable errors 173 1.4 GAO-11-481

Provide whistleblowers with protection from retaliation Negligible revenue effect 0 GAO-11-683

Provide stronger protection from improper disclosure of taxpayer 

information in whistleblower actions

No revenue effect 0 GAO-11-683

Add tax crimes to the Aggravated Identity Theft statute Negligible revenue effect 0 GAO-13-132T

Impose a civil penalty on tax identity theft crimes Negligible revenue effect 2.7 GAO-13-132T

Explicitly provide that the Department of Treasury and IRS have 

authority to regulate all paid return preparers. 

Negligible revenue effect Not available GAO-14-467T, GAO-08-

781 

Rationalize tax return filing due dates so they are staggered. 2,581 Not available GAO-13-515
Page 44 GAO-14-534R Internal Revenue Service

(451096)

Page 41

Appendix XIII: Implementing Open Matters for Congress 

and Recommendations to IRS Could Result in Financial 

Benefits

• We highlighted several areas 

where IRS could achieve cost 

savings and revenue 

enhancements in our reports on 

duplication, overlap, and 

fragmentation.1

• As of March 2014, 37 GAO 

products contain 10 matters for 

Congress and 72 

recommendations to IRS with a 

potential financial benefit. In 

addition, we have made multiple 

recommendations that could 

improve IRS operations if 

implemented.

• Since March 2013, 34 

recommendations were 

implemented.

Figure 23: Recommendations to IRS and Open Matters for Congress with a 

Financial Benefit

1See GAO, GAO, 2014 Annual Report: Additional Opportunities to Reduce Fragmentation, Overlap, and Duplication and Achieve Other Financial Benefits, GAO-14-343SP

(Washington, D.C.: Apr. 8, 2014). 

15

5

14

1

6

4

37

0

10

20

30

40

50

60

70

80

IRS Congress

Number of 

matters and 

recommendations

Indirect financial benefit

Increase savings and revenue

Increase savings

Increase revenue

Source: GAO analysis of GAO open recommendations.
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