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Internal Revenue Service

Summary

The Internal Revenue Service (IRS) collects 

the revenue to fund the government and 

administer the nation’s tax laws.

In FY 2014, the IRS processed more than 

199 million tax returns and collected

$3.1 trillion in taxes (gross receipts before tax 

refunds), 93 percent of federal government 

receipts. The IRS continues to focus on 

strengthening the public’s confidence in its 

effective administration of the Nation’s tax 

system.

Through taxpayer service and enforcement 

programs that protect the flow of revenue to 

the government, the IRS remains committed to 

Program Summary by Appropriations Account and Budget Activity

FY 2014 FY 2015 FY 2016

Budget Activity Actuals Enacted Request $ Change % Change 

Taxpayer Services $2,145,195 $2,156,554 $2,408,803 $252,249 11.70%

Pre-filing Taxpayer Assistance and Education 595,168 626,510 682,753 56,243 8.98%

Filing and Account Services 1,550,027 1,530,044 1,726,050 196,006 12.81%

Enforcement $4,914,497 $4,860,000 $5,399,832 $539,832 11.11%

Investigations 601,740 602,298 713,282 110,984 18.43%

Exam and Collections 4,154,342 4,104,453 4,513,376 408,923 9.96%

Regulatory 158,415 153,249 173,174 19,925 13.00%

Operations Support $3,722,599 $3,638,446 $4,743,258 $1,104,812 30.36%

Infrastructure 845,558 829,389 973,521 144,132 17.38%

Shared Services and Support 1,127,931 1,143,864 1,274,194 130,330 11.39%

Information Services 1,749,110 1,665,193 2,495,543 830,350 49.87%

Business Systems Modernization $145,235 $290,000 $379,178 $89,178 30.75%

Subtotal Internal Revenue Service $10,927,526 $10,945,000 $12,931,071 $1,986,071 18.15%

Reimbursables 97,840 119,000 127,000 8,000 6.72%

Offsetting Collections - Non Reimbursables 31,073 33,100 33,075 (25) -0.08%

User Fees 419,145 462,360 450,360 (12,000) -2.60%

Recovery from Prior Years 3,297

Unobligated Balances from Prior Years 241,022 408,926 385,763 (23,163) -5.66%

Transfers In/Out 17 7,561 (5,000) (12,561) -166.13%

Total Program Operating Level $11,719,920 $11,975,947 $13,922,269 $1,946,322 16.25%

Direct FTE 82,643 81,279 90,524 9,245 11.37%

Resources from Other Accounts 9 3 3

User Fee FTE1 1,151 191 191

Reimbursable FTE 619 730 768 38 5.21%

Unobligated Balances from Prior Years1 339

Total FTE 84,761 82,203 91,486 9,283 11.29%

Dollars in Thousands

1

FTE funded by User Fees and Unobligated Balances from Prior Years are included in the direct civilian full-time equivalent 

employment line of the President's Appendix.

FY 2015 TO FY 2016

2 Resources from Transfers In/Out include FY 2014 transfers betw een IRS and the Office of National Drug Control Policy 

(ONDCP) High Intensity Drug Trafficking Area (HIDTA) Program (net transfer $17K), FY 2015 transfers betw een IRS and 

Spectrum (net transfer $7.6M), and an FY 2016 transfer out to the Alcohol and Tobacco Tax and Trade Bureau (TTB) 

($5M).
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making the tax law easier to access and 

understand, to improve voluntary compliance 

in order to reduce the tax gap, the difference 

between taxes owed and taxes paid on time, 

and to pursue those who evade or misrepresent 

their tax responsibility. 

While the IRS continues to respond to new 

requirements and rapid changes, many of its

innovative and far-reaching programs risk 

delay or cancellation without adequate 

funding. Over the last several years, the IRS 

has experienced significant budget reductions 

that are creating serious obstacles to its ability 

to fulfill its mission. Fortunately, the IRS has 

been able to execute successful filing seasons,

despite these cuts, but this success is often at 

the expense of other important but less visible 

activities. Any deterioration in taxpayer 

services and enforcement creates a long-term 

risk for the U.S. tax system. 

Total resources requested to support IRS 

activities for FY 2016 are $13,922,269,000. 

This includes $12,931,071,000 from direct

appropriations, of which $667,297,000 is 

provided via a program integrity cap 

adjustment intended to improve the integrity of 

the tax system, an estimated $127,000,000 

from reimbursable programs, and an estimated 

$385,763,000 from unobligated balances from 

prior years, and an estimated $450,360,000

from user fees. The direct appropriation is 

$1,986,071,000 more than the FY 2015

enacted level of $10,945,000,000.

The IRS Strategic Plan guides program and 

budget decisions and supports the Department 

of the Treasury FY 2014 to 2017 Strategic 

Plan, and the Agency Priority Goal of 

“increasing self-service options for taxpayers”. 

The IRS strategic goals provide a central 

direction for the attainment of its mission and 

vision. Its strategic foundation for 

organizational excellence supplements the 

strategic goals and describes the internal 

initiatives required to support taxpayer-facing 

actions. 

Deliver high quality and timely service to 

reduce taxpayer burden and encourage 

voluntary compliance

Effectively enforce the law to ensure 

compliance with tax responsibilities and 

combat fraud

Each strategic goal is outcome-based and 

supported by several objectives. The strategic 

objectives to deliver high quality and timely 

service to reduce taxpayer burden and 

encourage voluntary compliance are:

• Design tailored service approaches 

with a focus on digital customer 

service to meet taxpayer needs, 

preferences, and compliance behaviors 

in order to facilitate voluntary 

compliance;

• Deliver clear and focused outreach, 

communications, and education 

programs to assist taxpayer 

understanding of tax responsibilities 

and awareness of emerging tax laws;

• Provide timely assistance through a 

seamless, multi-channel service 

environment to encourage taxpayers to 

meet their tax obligations and 

accurately resolve their issues;

• Strengthen refund fraud prevention and 

provide prompt assistance to support 

victims of identity theft;

• Reduce taxpayer burden and increase 

return accuracy at filing through timely 

and efficient tax administration 

processing; 

• Improve service delivery and support 

effective tax administration by 

fostering strong relationships with the

tax community and government 

partners; and
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• Enhance the quality of tax services by 

strengthening the outreach, education, 

and tools provided to the tax 

professional community.

The strategic objectives to effectively enforce 

the law and to ensure compliance with tax 

responsibilities and combat fraud are:

• Enforce domestic and international 

compliance by strengthening expertise, 

adopting innovative approaches, and 

streamlining procedures;

• Deter and promptly resolve 

noncompliance by protecting revenue 

from refund fraud and ensuring 

appropriate revenue collection;

• Build and maintain public trust by 

anticipating and addressing the 

tax-exempt sector’s need for a clear 

understanding of its tax law 

responsibilities;

• Identify trends, detect high-risk areas 

of noncompliance, and prioritize 

enforcement approaches by applying 

research and advanced analytics;

• Address noncompliance by improving 

data, information, and knowledge 

sharing with tax community and 

government partners; and

• Improve compliance and reduce the 

risk of fraud through strong 

partnerships with the tax professional 

community.

The IRS strategic foundation consists of the 

following objectives:

• Be the best place to work in 

government by building a highly 

talented, diverse workforce and 

cultivating an inclusive and 

collaborative environment;

• Ensure a secure environment that 

protects the safety of people and 

security of facilities;

• Implement and maintain a robust 

enterprise risk management program 

that identifies emerging risks and 

mitigates them before they impact 

performance;

• Realize operational efficiencies and 

effectively manage costs by improving 

enterprise-wide resource allocation and 

streamlining processes; 

• Invest in innovative, secure technology 

needed to protect taxpayer data and 

support taxpayer, partner, and business 

needs; and 

• Implement enterprise-wide analytics 

and research capabilities to make 

timely, informed decisions.

Taxpayer Service Program: The FY 2016

President’s Budget request will allow the IRS 

to further improve customer service to meet 

taxpayer demand and continue delivering 

services to taxpayers.

Providing quality taxpayer service is 

especially important to help taxpayers avoid 

making unintentional errors. Assisting 

taxpayers with their questions before they file 

their returns prevents inadvertent 

noncompliance and reduces burdensome 

post-filing notices and other correspondence 

from the IRS. Taxpayer demand for 

self-service and electronic service options at 

the IRS has dramatically increased in recent 

years. The IRS continues its commitment to 

increasing the service options available 

through the IRS website and mobile 

application, allowing more taxpayers to reach 

the IRS through the internet. In FY 2014, 

there were more than 437 million visits to 

www.IRS.gov, and taxpayers checked their 

refund status more than 189 million times by 

accessing the Where’s My Refund? web 
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application in English or in Spanish on the IRS 

website. Taxpayers also used the automated 

features on the IRS toll-free phone system. 

Additionally, the IRS2Go mobile application 

has been downloaded 5.4 million times since 

its release. 

Enforcement Program: The FY 2016

request provides funding to implement Foreign 

Account Tax Compliance (FATCA) (Public 

Law 111-147), Affordable Care Act (ACA)

(Public Law 111-148), and Information Return 

Document Matching (IRDM) of merchant 

payment card and third party reimbursements 

and basis reporting; protect revenue by 

reducing the instances of refund fraud, 

including tax-related identity theft; restore 

eroding examination and collection 

enforcement programs; expand criminal 

investigation capabilities; and address 

compliance issues in the tax-exempt sector. 

Increased resources for the IRS compliance 

programs yield direct, measurable results 

through high return on investment (ROI) 

activities. The FY 2016 Budget includes a 

$667 million program integrity cap adjustment 

that will reduce the deficit through above-base 

funding for high-ROI tax enforcement and 

compliance programs, of which $5 million will 

be transferred to the Alcohol and Tobacco Tax 

and Trade Bureau (TTB). Of the remaining 

$662 million requested in the program 

integrity cap adjustment, $421 million is for 

traditional revenue-producing initiatives 

estimated to generate $2,799 million in 

additional annual enforcement revenue, 

achieving an FY 2018 ROI of $6.4 to $1.0. 

Notably, the ROI is likely understated because 

it only includes amounts received; it does not 

reflect the effect enhanced enforcement has on 

deterring non-compliance. This deterrent

effect helps to ensure the continued payment 

of over $3 trillion in taxes paid each year 

without direct enforcement measures. The 

program integrity cap also includes $91

million to protect revenue, $37 million for a 

revenue-enhancing initiative, and $315 million 

for other compliance-related initiatives in the 

Operations Support account. 

New investments are also proposed beyond 

FY 2016, with cap adjustments through FY 

2020 and sustained through additional 

adjustments through 2025. The activities and 

new initiatives funded out of the cap 

adjustments through 2025 will generate

approximately $60 billion in additional 

revenue over 10 years and will cost about $19

billion for an estimated net savings of $41 

billion. 

Business Systems Modernization: IRS 

modernization efforts focus on building and 

deploying advanced information technology 

systems, processes, and tools to improve 

efficiency and enhance productivity. The 

FY 2016 request will allow the IRS to 

continue leveraging new technologies to 

develop critical information technology 

systems needed to support the IRS’s taxpayer 

service and enforcement programs. As part of 

the $88 million increased funding, the IRS 

plans to invest in an enterprise case 

management system that will provide a 

standardized solution for performing case 

management functions. The Enterprise Case 

Management (ECM) solution will address the 

need to modernize, upgrade, and consolidate 

multiple aging IRS case management systems. 

In addition, the request will allow the IRS to 

expand the capabilities of the Customer 

Account Data Engine 2 (CADE 2) relational 

database which will be replacing other 

antiquated systems and become the tax data 

system-of-record, as well as address a 

financial material weakness. Funding will 

lead the IRS transition to digital government

through web applications that will enhance the 

taxpayer’s online experience, provide secure 

digital communications, and add more 

interactive capabilities to existing web 

self-service products. Additional resources 

will enhance the development, testing, and 
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deployment of various estate and gift tax 

forms for electronic acceptance and increase 

fraud detection, resolution, and prevention 

through use of the Return Review Program 

(RRP).

IRS FY 2016 Budget Highlights

Dollars in Thousands

Appropriation

$000 FTE $000 FTE $000 FTE $000 FTE $000 FTE

FY 2015 Enacted $2,156,554 28,274 $4,860,000 40,564 $3,638,446 12,043 $290,000 398 $10,945,000 81,279

FY 2016 Changes to Base:

Maintaining Current Levels (MCLs): $52,822 $81,120 $65,512 $1,223 $200,677

Pay Annualization 4,837 11,875 4,093 197 21,002

Pay Raise (1.3%) 18,910 46,428 16,004 770 82,112

Non-Pay 3,571 5,171 39,968 48,710

FERS Contribution Increase 7,362 16,488 5,447 256 29,553

Federal Employees Health Benefits (FEHB) Program Modification 18,142 1,158 19,300

Efficiencies/Savings: ($18,399) (61) ($32) ($18,431) (61)

Increase e-File Savings (2,374) (46) (32) (2,406) (46)

HCTC Program Termination (16,025) (15) (16,025) (15)

Reinvestment: $16,025 $16,025

Expand Telecom Infrastructure to Handle Increased Demand 16,025 16,025

Subtotal FY 2016 Changes to the Base $34,423 (61) $81,120 $81,505 $1,223 $198,271 (61)

FY 2016 Current Services (Base) $2,190,977 28,213 $4,941,120 40,564 $3,719,951 12,043 $291,223 398 $11,143,271 81,218

Program Changes:

Program Increases Before Cap Adjustment: $217,826 3,072 $106,612 1,075 $708,110 1,490 $87,955 178 $1,120,503 5,815

Improve Taxpayer Services 183,142 2,806 118,381 164 301,523 2,970

Leverage New Technologies to Advance the IRS Mission 3,618 87,955 178 91,573 178

Implement Information Technology (IT) Changes to Deliver Tax Credits and Other Requirements 305,645 818 305,645 818

Improve Upfront Identification and Resolution of Identity Theft Returns 15,562 193 3,322 18,884 193

Implement Foreign Account Tax Compliance Act (FATCA) 33,625 321 37,380 140 71,005 461

Sustain Critical Information Technology (IT) Infrastructure 188,514 157 188,514 157

Address Impact of Affordable Care Act (ACA) Statutory Requirements 108 1 44,775 432 22,323 50 67,206 483

Enhance Service Options for Taxpayers 13,891 45 2,352 9 16,243 54

Restore Staffing for Essential Support Programs 19,938 152 19,938 152

Increase Service for Low-Income Taxpayers and Taxpayers in Need of Hardship Relief 5,123 27 596 5,719 27

Implement Merchant Card and Basis Matching 28,212 322 6,041 34,253 322

Total Request Before Cap Adjustment $2,408,803 31,285 $5,047,732 41,639 $4,428,061 13,533 $379,178 576 $12,263,774 87,033

Cap Adjustment Program Increases:

Enforcement Initiatives: $347,100 3,161 $203,123 229 $550,223 3,390

Prevent Identity Theft and Refund Fraud 47,738 358 34,424 62 82,162 420

Increase Audit Coverage 97,353 1,038 64,456 61 161,809 1,099

Improve Audit Coverage of Large Partnerships 13,722 107 2,527 16,249 107

Address International and Offshore Compliance Issues 35,206 238 5,451 40,657 238

Enhance Collection Coverage 83,236 986 39,594 48 122,830 1,034

Leverage Data to Improve Case Selection 5,111 14 33,949 45 39,060 59

Address Compliance Risks in the Tax-Exempt Sector 15,511 146 7,951 13 23,462 159

Pursue Employment Tax and Abusive Tax Schemes 8,677 52 8,509 17,186 52

Enhance Investigations of Transnational Organized Crime (TOC) 37,161 194 5,367 42,528 194

Ensure Ethical Standards of Conduct for Practitioners 3,385 28 895 4,280 28

Infrastructure Initiatives: $112,074 101 $112,074 101

Consolidate and Modernize IRS Facilities 85,456 74 85,456 74

Maintain Integrity of Revenue Financial Systems 12,162 7 12,162 7

Implement Agency Wide Shared Services Priorities 10,992 9 10,992 9

Implement Federal Investigative Standards 3,464 11 3,464 11

$5,000 $5,000

Transfer to TTB for High-Return on Investment (ROI) Tax Enforcement Activities 5,000 5,000

Subtotal FY 2016 Cap Adjustment $352,100 3,161 $315,197 330 $667,297 3,491

Total FY 2016 Budget Request $2,408,803 31,285 $5,399,832 44,800 $4,743,258 13,863 $379,178 576 $12,931,071 90,524

Alcohol and Tobacco Tax and Trade Bureau (TTB) Program Integrity Transfer:

Taxpayer Services Enforcement Operations Support Total Business Systems 

Modernization
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FY 2016 Budget Adjustments

Maintaining Current Level (MCLs)

Pay Annualization +$21,002,000 / 0 FTE

Funds are requested for annualization of the 

January 2015 pay raise.

Pay Raise +$82,112,000 / 0 FTE

Funds are requested for the proposed January 

2016 pay raise.

Non-Pay +$48,710,000 / 0 FTE

Funds are requested for inflation adjustments 

in non-labor costs such as travel, contracts, 

rent, supplies, and equipment.

FERS Contribution Increase 

+$29,553,000 / 0 FTE

Funds are requested for increases in agency 

contributions to the Federal Employee 

Retirement System based on updated actuarial 

estimates.

Federal Employees Health Benefits (FEHB) 

Program Modification +$19,300,000 / 0 FTE

Funds are requested to modify eligibility for 

coverage under the Federal Employees Health 

Benefits (FEHB) Program to certain 

temporary, seasonal, and/or intermittent 

employees.

Efficiency Savings

Increase e-File Savings 

-$2,406,000 / -46 FTE

These savings are a result of reduced paper 

returns. The IRS projects a total of 1,026,100 

fewer returns filed on paper 

(525,100 individual and 501,000 business 

returns). 

HCTC Program Termination

-$16,025,000 / -15 FTE

This program was terminated January 1, 2014, 

as provided by the Trade Adjustment 

Assistance Extension Act of 2011 (TAA 

Reauthorization) (Public Law 112-40). 

Reinvestment

Expand Telecom Infrastructure to Handle 

Increased Demand +$16,025,000 / 0 FTE

This reinvestment expands the Customer 

Service Representative (CSR) toll-free call 

center telecommunication infrastructure to 

allow the IRS to answer the additional 

telephone calls expected to result from

implementation of the ACA (Public Law 111-

148). The requested funding covers expanded 

telecommunications infrastructure and 

equipment, hardware for high-speed internet 

connections, and encryption technology.

Program Increases

Improve Taxpayer Services

+$301,523,000 / +2,970 FTE

This initiative will fund additional staff to 

increase the CSR telephone level of service 

(LOS) to 80 percent. Resources are needed to

meet the increased demand for taxpayer face 

to face assistance resulting from ACA 

implementation; expand staffing to assist with 

managing the ACA submission processing 

workload; provide advanced technology to 

electronically receive amended returns; and 

increase outreach and communications 

activities.

Leverage New Technologies to Advance the 

IRS Mission +$91,573,000 / +178 FTE

This initiative will implement an Enterprise 

Case Management (ECM) solution for 

performing standard case management 

functions across the IRS; expand the 

capabilities of the CADE 2 relational database 

and address a financial material weakness; 

enhance the taxpayer’s online experience and 

provide secure digital communications; 

complete the design and development of 

various Estate and Gift tax forms for electronic 

acceptance; and increase fraud detection, 

resolution, and prevention through use of the 

RRP. 
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Implement Information Technology (IT)

Changes to Deliver Tax Credits and Other 

Requirements +$305,645,000 / +818 FTE

This initiative will allow the IRS to continue to 

implement the new tax law provisions 

contained in the ACA. While the Department 

of Health and Human Services is responsible 

for the health care policy and insurance 

provisions in the legislation, the IRS 

administers more than 45 specific tax 

provisions and numerous cross-agency 

sections related to tax administration. This 

investment supports the administration of one 

of the largest refundable tax credits the IRS 

has administered. The investment touches all 

submission, fraud, and compliance tax 

administration processes to receive, validate, 

and handle individual and business tax returns. 

The investment also will provide enhanced 

technology infrastructure and applications 

support and allow necessary, major 

modifications to existing IRS tax 

administration systems.

Improve Upfront Identification and 

Resolution of Identity Theft Returns

+$18,884,000 / +193 FTE

This initiative strengthens the integrity of the 

tax system by improving IRS’s ability to 

detect and prevent improper refunds. 

Resources will allow the IRS to expand 

programs to prevent identity theft-related 

refund fraud, protect taxpayer identities, and 

assist victims of identity theft. 

Implement Foreign Account Tax Compliance 

Act (FATCA) +$71,005,000 / +461 FTE

This initiative provides funding for 

enforcement staff to implement new reporting, 

disclosure, and withholding requirements 

mandated by FATCA that were enacted in the 

Hiring Incentives to Restore Employment Act 

of 2010 (Public Law 111-147). This initiative 

will allow the IRS to address foreign 

withholding compliance and expand coverage 

of international tax return filings. 

This initiative is expected to produce 

additional annual enforcement revenue of 

$155.1 million once the new hires reach full 

potential in FY 2018, an ROI of $2.3 to $1.

Sustain Critical Information Technology (IT) 

Infrastructure +$188,514,000 / +157 FTE

This initiative will restore resources for 

mainframes, servers, laptops, network devices, 

and communication equipment to keep IT 

infrastructure (hardware and software) current 

for existing and newly developed IRS IT 

systems. The IRS’s IT division provides 

technology services and solutions that drive 

effective tax administration, improve service, 

modernize systems, and ensure the security 

and resiliency of IRS information systems and 

data. Funding will enhance systems security

to help anticipate evolving threats; increase 

reliability of enterprise infrastructures to 

support the increasing number of tax forms 

submitted electronically; improve risk 

mitigation capabilities; increase the use of 

cloud and virtual environments; and expand 

the use of the next generation of advanced 

telecommunication technologies.

Address Impact of ACA Statutory 

Requirements +$67,206,000 / +483 FTE

As the tax law changes, the IRS must 

implement programs to ensure that taxpayers 

understand the new laws, and that the IRS can 

address noncompliance. The new ACA tax 

provisions strengthen oversight of tax exempt 

hospital organizations and include new fees on 

manufacturers and importers of branded 

prescription drugs and health insurers. This 

initiative also expands the compliance 

coverage of tax-exempt hospital organizations 

by refining the community benefit reviews and 

by leveraging this data to conduct 

examinations; expands coverage of new 

provisions related to the premium tax credit, 

individual responsibility requirement, and 

large employer insurance; and addresses new 
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audit requirements related to the shared 

employer responsibility payment. 

This initiative includes a $60.8 million initial 

investment in traditional revenue-producing 

activities that are expected to annually produce 

additional enforcement revenue of 

$181.7 million, once the new hires reach full 

potential in FY 2018, an ROI of $2.8 to $1, 

and an initial investment of $6.4 million in 

revenue-protecting activities that are expected 

to protect $88.7 million of revenue, a protected 

ROI of $12.2 to $1.

Enhance Service Options for Taxpayers 

+$16,243,000 / +54 FTE

The IRS is developing a customer-centric 

strategy known as Service on Demand (SOD) 

strategy. SOD will focus on improving the 

taxpayer experience by understanding their 

wants, needs, and service channel preferences. 

By creating new digital capabilities and 

reducing the burden on taxpayers, SOD will 

change the IRS’s relationship with taxpayers 

and will allow earlier and more frequent 

engagement. This initiative will improve the 

speed and convenience of interacting with the 

IRS.

Restore Staffing for Essential Support 

Programs +$19,938,000 / +152 FTE

This initiative will provide staffing for IRS 

support organizations to address base 

functional requirements that have been 

challenged by the staffing constraints 

experienced since FY 2011. In order to 

continue to provide services at an optimal 

level, additional staffing is required to provide 

effective procurement, security, and employee 

support services; develop and enhance human 

capital and financial management; support 

research to improve tax administration; and 

protect taxpayer privacy.

Increase Service for Low-Income Taxpayers 

and Taxpayers in Need of Hardship Relief 

+5,719,000 / +27 FTE

This initiative provides funding to support 

taxpayers facing financial hardship by 

increasing funding for the Low Income 

Taxpayer Clinic (LITC) Grant Program from 

$10 million to $12 million. It also increases 

funding for the Taxpayer Advocate Service 

(TAS) by $3.4 million for the TAS to address 

the anticipated workload resulting from 

increased IRS enforcement activities requested 

in the Budget.

Implement Merchant Card and Basis 

Matching +$34,253,000 / +322 FTE

This initiative will allow the IRS to take 

advantage of the reporting provisions for

merchant payment card and third party 

reimbursements enacted in the Housing and 

Economic Recovery Act of 2008 (Public Law 

110-289); and basis reporting on security sales 

enacted in the Emergency Economic 

Stabilization Act of 2008 (Public Law 110-343). 

These efforts will ensure business and 

individual taxpayers meet their tax obligations;

investigate discrepancies related to payment 

card and securities basis reporting issues; and

address fraud and criminal violations that will 

be uncovered as the IRS establishes broader 

compliance programs. This initiative is 

expected to produce additional annual 

enforcement revenue of $321.6 million, once 

the new hires reach full potential in FY 2018, 

an ROI of $11.1 to $1.

Prevent Identity Theft and Refund Fraud 

+$82,162,000 / +420 FTE

This initiative provides staffing and advanced

technologies to handle the increased workload 

associated with identity theft and refund fraud. 

This initiative will improve upfront 

identification and resolution of identity theft; 

help the IRS address the backlog of identity 

theft cases associated with pre-refund and 

post-refund compliance activities; recover 
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funds related to questionable refunds from 

external sources; prevent false tax returns filed 

by prisoners and reduce erroneous tax refunds; 

focus on bank accounts that receive multiple 

Automated Clearinghouse (ACH) or tax 

refund check deposits; continue the expansion 

of the specialized Criminal Investigation (CI) 

Identity Theft Clearinghouse that processes 

identity theft leads; and invest in information 

technology projects that will protect taxpayer 

information, help verify potentially fraudulent 

identity theft tax returns, and reduce erroneous 

payments.

This initiative includes a $2.7 million initial 

investment in traditional revenue-producing 

activities that are expected to produce 

additional annual enforcement revenue of 

$63.8 million, once the new hires reach full 

potential in FY 2018, an ROI of $20.6 to $1, 

and an initial investment of $79.4 million in 

revenue-protecting activities that are expected 

to protect nearly $1.0 billion in revenue, a 

protected ROI of $13.2 to $1.

Increase Audit Coverage 

+$161,809,000 / +1,099 FTE

This initiative will allow the IRS to increase its 

examination program coverage over a broad 

range of compliance priorities. Tight budget 

constraints have eroded the examination staff 

available to conduct audits causing the 

individual audit coverage to decline below 

0.9 percent. Due to growth in individual 

returns filed and the time required for new 

hires to reach full-working level, this initiative 

will still result in an individual coverage rate 

below 1.0 percent. Reduced coverage causes 

increased risk to the integrity of the voluntary 

tax compliance system. This initiative will 

provide additional field employees to reverse 

the decline in individual audit coverage; 

expand coverage of Employment tax returns 

and Estate and Gift tax returns; expand 

examinations; increase individual and business 

document matching programs to identify and 

reduce income misreporting; provide an 

imaging solution to support collaboration and 

improve exam efficiency; and improve the 

effectiveness of the litigation program by 

expediting both the analysis and sharing of 

electronic data during the lifecycle of Tax 

Court cases. 

This initiative includes a $150.7 million initial 

investment in traditional revenue-producing 

activities that are expected to annually produce 

additional enforcement revenue of 

$1,266.7 million, once the new hires reach full 

potential in FY 2018, an ROI of $8.0 to $1, 

and an initial investment of $11.1 million in 

revenue-protecting activities that are expected 

to protect revenue of $112.1 million, a 

protected ROI of $8.8 to $1.

Improve Audit Coverage of Large 

Partnerships +$16,249,000 / +107 FTE

The resources requested in this initiative will 

increase the number of agents with specialized 

knowledge in partnership law, and strengthen 

enforcement activities relating to flow-through 

entities and improve compliance by enhancing 

Tax Equity and Fiscal Responsibility 

(TEFRA) procedures. This initiative is 

expected to produce additional annual 

enforcement revenue of $129.1 million, once 

the new hires reach full potential in FY 2018, 

an ROI of $7.6 to $1.

Address International and Offshore 

Compliance Issues +$40,657,000 / +238 FTE

This initiative will expand coverage of entities 

with undisclosed offshore accounts to ensure 

their compliance with required U.S. tax 

reporting. Funding will allow the IRS to 

promote voluntary compliance with U.S. laws 

through strategic enforcement actions directed 

at identifying U.S. taxpayers involved in 

abusive offshore tax schemes through banks, 

other financial institutions, and third party 

structures; expand information gathering and 

data analysis to identify promoters or 
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facilitators of abusive offshore schemes; and 

expand the pursuit of international tax and 

financial crimes as well as grow the IRS 

Attaché presence. 

This initiative is expected to produce 

additional annual enforcement revenue of 

$159.6 million, once the new hires reach full 

potential in FY 2018, an ROI of $3.7 to $1.

Enhance Collection Coverage

+$122,830,000 / +1,034 FTE

This initiative will ensure that the IRS has 

sufficient resources to work the collection 

inventory and bring taxpayers who fail to pay 

their tax debt into compliance. These 

resources will allow the IRS to address 

growing collection case inventories and call 

volumes that have resulted from reduced 

staffing levels in recent years; increase 

coverage of the growing volume of 

employment tax cases among business 

taxpayers; improve service to taxpayers calling 

the Automated Collection System (ACS) to 

resolve their account delinquencies; provide 

resources for Campus Collection to reach out 

to taxpayers earlier in the collection process;

help taxpayers experiencing economic 

hardship to resolve their liabilities through the 

Offers in Compromise (OIC) program; 

increase opportunities to expand new 

collection streams; develop IT solutions to 

provide better analytic models, case routing, 

and case resolution tools and techniques; 

expand the data available in the Compliance 

Data Warehouse (CDW); and improve the 

capability to identify nonfilers of business 

returns.

This initiative is expected to produce 

additional annual enforcement revenue of 

$1,179.7 million, once the new hires reach full 

potential in FY 2018, an ROI of $9.0 to $1.

Leverage Data to Improve Case Selection 

+$39,060,000 / +59 FTE

This initiative will improve data accessibility 

and usability for better case selection, issue 

identification, and treatment assignment. 

Taxpayer behaviors, including those of 

individuals, small businesses, and large 

corporate taxpayers, are constantly changing. 

The IRS must adapt quickly to changing 

taxpayer behavior to prevent fraud and tax 

code misuse. This initiative will increase the 

digital availability of tax return information; 

allow the IRS to identify taxpayer behavioral 

changes and test compliance responses 

promptly; optimize compliance case 

identification and treatment assignment to 

increase effectiveness while reducing 

risk-related costs; enhance IRS large corporate 

taxpayer issue identification/return selection 

activities; and provide skilled staff in areas 

such as machine learning, statistical modeling, 

and data mining.

Improved use of analytics will increase 

revenue collection and, while this is not 

included in the IRS’s traditional ROI 

calculations, this initiative is projected to 

increase revenue by $75.4 million in FY 2018, 

achieving an ROI of $1.8 to $1.

Address Compliance Risks in the 

Tax-Exempt Sector +$23,462,000 / +159 FTE

This initiative will help the IRS build and 

maintain public trust by anticipating and 

addressing the tax-exempt sector’s needs, 

encourage voluntary compliance, and

effectively enforce the law to ensure

compliance. It will enhance the streamlined 

application process for exempt organizations 

seeking tax-exempt status; protect taxpayer 

donations to charities; protect participants in 

retirement plans and their assets, which total 

over $23 trillion; provide voluntary correction 

opportunities related to employment taxes and 

retirement plans; improve service by 

integrating three separate determination 

application systems into one end-to-end 
11

system; and focus resources on areas with the 

greatest risk and ensure that all resources in 

the Tax Exempt and Government Entities 

arena are developed and deployed 

appropriately.

Pursue Employment Tax and Abusive Tax 

Schemes +$17,186,000 / +52 FTE

This initiative will enhance overall 

enforcement efforts, increase the number of 

convictions and assessments, and allow the 

IRS to apply network analysis to the 

investigation of abusive tax schemes. 

Network analysis software will proactively 

identify potentially noncompliant taxpayers in 

multiple program areas. These resources will 

improve the sharing of information among IRS 

operating divisions and expand the IRS’s 

capability to identify significant tax cases.

Enhance Investigations of Transnational 

Organized Crime (TOC) 

+$42,528,000 / +194 FTE

This initiative will address the growth in 

criminal activity of a global nature by allowing 

IRS to hire special agents who will support the 

U.S. National Drug Control Strategy, the 

President’s Strategy to Combat Transnational 

Organized Crime, and the National Money 

Laundering Strategy; increase investigations of 

third party money launderers and international 

banks; work with international partners to 

identify illicit financial networks that are 

utilized to launder the proceeds of TOC 

organizations; and strengthen the IRS’s 

partnerships with domestic and international 

law enforcement agencies to more effectively 

fight transnational narcotics, money 

laundering, and terrorist organizations 

worldwide.

Ensure Ethical Standards of Conduct for 

Practitioners +$4,280,000 / +28 FTE

This initiative will allow the IRS’s Office of 

Professional Responsibility (OPR) to conduct 

oversight of return preparers who represent 

taxpayers and are subject to Circular 230, 

Regulations Governing Practice Before the 

Internal Revenue Service. These resources 

will provide additional staff to handle the 

growing number of cases requiring litigation; 

establish three satellite offices strategically 

located across the country to handle 

disciplinary case conferences and related 

negotiations; and invest in technology to 

provide video conference capability and a 

system interface that will allow OPR to 

increase research capability and exchange 

referrals and other pertinent information 

electronically with the Return Preparer Office.

Consolidate and Modernize IRS Facilities

+$85,456,000 / +74 FTE

This initiative will provide space renovation 

resources needed to alter and reduce office 

space throughout the IRS inventory and realize 

an estimated annual rent savings of 

$23 million. The IRS plans to reinvest the 

rent savings from this initiative to fund rent 

increases for the remaining buildings and for 

other new space reduction projects. Major 

reductions and consolidations are achievable at 

IRS occupied buildings where the following 

strategies can be implemented: reducing 

workstation size in accordance with revised 

National Workplace Standards; workspace 

sharing for frequent teleworkers and 

employees who work outside of their assigned 

post of duty more than 80 hours per month; 

and realignment of occupied workspace and 

consolidation of vacant workspace. In order 

for the IRS to take advantage of large scale 

rent reduction opportunities, additional 

funding will be needed.

Maintain Integrity of Revenue Financial 

Systems +$12,162,000 / +7 FTE

This initiative will support and improve the 

IRS’s revenue financial accounting systems to 

ensure timely and accurate reporting of tax 

data. The revenue financial and accounting 

systems include the general ledger, which is 
12

required to reconcile and report to the 

Department of the Treasury on $3.1 trillion in 

revenue before refunds and $374 billion in 

individual and business tax refunds in 

FY 2014; produce the annual audited financial 

statements; and perform other operational and 

financial reporting on unpaid tax assessments 

currently identified by GAO as a material 

weakness. This initiative will allow the IRS to 

make the necessary system and programming 

changes to comply with OMB mandates, and 

to stay current with internal changes made to 

IRS’s tax processing systems for tax 

administration that also affect financial 

reporting.

Implement Agency Wide Shared Services 

Priorities +$10,992,000 / +9 FTE

This initiative will allow the IRS to implement 

security measures to protect IRS employees, 

facilities, operations and information. This 

initiative consists of countermeasures to 

address the security risks identified during the 

FY 2010 Facility Risk Assessment in 191 IRS 

buildings, impacting over 70,000 employees. 

Resources will replace outdated security 

systems and implement solutions to 

vulnerabilities in the IRS facilities. 

Implement Federal Investigative Standards 

+$3,464,000 / +11 FTE

This initiative will provide resources to 

support the financial responsibility 

determination required by Executive Order 

13467, Reforming Processes Related to 

Suitability for Government Employment, 

Fitness for Contractor Employees, and 

Eligibility for Access to Classified National 

Security Information (June 30, 2008). The 

IRS will receive requests, and process and 

provide results to federal agencies conducting 

background investigations. The resources will 

establish a project office to define the process 

for completing and uploading consent-based 

tax check authorizations in accordance with 

IRC Section 6103 (c) to a central repository; 

establish standards for defining tax 

compliance, create an automated tax 

compliance extract; create a summary report 

that will be used by various federal agencies to 

support a suitability determination or grant a 

security clearance; and conduct associated 

federal tax compliance activities for 

employees and contractors if needed.

Transfer to TTB for High-Return on 

Investment (ROI) Tax Enforcement Activities 

+$5,000,000 / 0 FTE

The IRS will transfer $5 million to TTB for 

those high-ROI tax enforcement activities that 

produce additional revenue through program 

activities designated to narrow the federal 

excise tax gap on alcohol and tobacco 

commodities. More detailed information can 

be found in the TTB chapter of this volume. 
13

Explanation of Budget Activities

Taxpayer Services

The FY 2016 President’s Budget request is 

$2,408,803,000 in direct appropriations, an 

estimated $34,600,000 from reimbursable 

programs, an estimated $55,595,000 from user 

fees, and an estimated $14,100,000 from 

unobligated balances from prior years for a 

total operating level of $2,513,098,000. This

appropriation funds the following budget 

activities.

Pre-filing Taxpayer Assistance & Education 

($682,753,000 from direct appropriations)

This budget activity funds services to assist 

with tax return preparation, including tax law 

interpretation, publication, production, and 

advocacy services. In addition, funding for 

these programs supports taxpayer education, 

outreach, volunteer support time and locations, 

and pre-filing taxpayer support through 

electronic media.

Filing & Account Services ($1,726,050,000

from direct appropriations)

This budget activity funds programs that 

provide filing and account services to 

taxpayers, process paper and electronically 

submitted tax returns, issue refunds, and 

maintain taxpayer accounts.

Enforcement

The FY 2016 President’s Budget request is 

$5,399,832,000 in direct appropriations, an 

estimated $39,400,000 from reimbursable 

programs, an estimated $33,075,000 from nonreimbursable offsetting collections, an 

estimated $13,010,000 from unobligated 

balances from prior years, an estimated 

$16,240,000 from user fees, and a $5,000,000 

transfer out to the TTB for a total operating 

level of $5,496,557,000. To reduce future 

deficits, a portion of this appropriation, 

$352,100,000, is requested as part of the 

$667,297,000 total program integrity cap 

adjustment for the IRS, which is an above-base 

investment in tax enforcement and compliance 

programs, including a $5,000,000 transfer to 

TTB for high return on investment 

enforcement activities. In conjunction with 

Return on Investment (ROI) for IRS FY 2016 Enforcement Initiatives

Dollars in Millions

Cost Revenue ROI Cost Revenue ROI

FY 2016 Revenue Producing Enforcement Initiatives $586.7 $1,117.9 1.9 $595.0 $3,457.3 5.8

Revenue-Producing Enforcement Initiatives to Implement Enacted Legislation $166.1 $256.5 1.5 $160.4 $658.4 4.1

Implement Foreign Account Tax Compliance Act (FATCA) 71.0 67.7 1.0 66.6 155.1 2.3

Implement Merchant Card and Basis Matching 34.3 124.2 3.6 29.0 321.6 11.1

Address Impact of Affordable Care Act (ACA) Statutory Requirements 60.8 64.6 1.1 64.8 181.7 2.8

Cap Adjustment Enforcement Initiatives $420.6 $861.4 2.0 $434.6 $2,798.9 6.4

Immediate and Directly Measurable Revenue-Producing Initiatives $333.1 $861.4 2.6 $352.8 $2,798.9 7.9

Address International and Offshore Compliance Issues 40.7 49.3 1.2 43.1 159.6 3.7

Increase Audit Coverage 150.7 397.5 2.6 158.5 1,266.7 8.0

Enhance Collection Coverage 122.8 345.9 2.8 131.2 1,179.7 9.0

Improve Audit Coverage of Large Partnerships 16.2 44.5 2.7 16.9 129.1 7.6

Prevent Identity Theft and Refund Fraud 2.7 24.2 9.0 3.1 63.8 20.6

Strategic Revenue-Producing Initiatives (which do not have immediately measurable 

ROI, but clear long-term revenue effects)

$87.5 $0.0 0.0 $81.8 $0.0 0.0

Address Compliance Risks in the Tax-Exempt Sector 23.5 0.0 0.0 24.6 0.0 0.0

Pursue Fraud Referrals, Employment Tax, and Abusive Tax Schemes 17.2 0.0 0.0 16.2 0.0 0.0

Enhance Investigations of Transnational Organized Crime 42.5 0.0 0.0 35.9 0.0 0.0

Ensure Ethical Standards of Conduct for Practitioners 4.3 0.0 0.0 5.1 0.0 0.0

First Year (FY 2016) Full Performance (FY 2018)
14

specified funds provided in the IRS Operations 

Support account, the program integrity cap 

adjustment will support tax compliance 

initiatives expected to generate high returns on 

investment in the form of increased tax 

revenues. This appropriation funds the 

following budget activities.

Investigations ($713,282,000 from direct 

appropriations)

This budget activity funds the CI programs 

that explore potential criminal and civil 

violations of tax laws; enforce criminal 

statutes relating to violations of tax laws and 

other financial crimes; and recommend 

prosecution as warranted. These programs 

identify and document the movement of legal 

and illegal sources of income and instances of 

suspected intent to defraud. This budget 

activity also provides resources for 

international investigations involving U.S. 

citizens residing abroad, non-resident aliens, 

and expatriates, and includes investigation and 

prosecution of tax and money laundering 

violations associated with narcotics 

organizations.

Exam & Collections ($4,513,376,000 from

direct appropriations)

This budget activity funds programs that 

enforce the tax laws and increase compliance 

through examination and collection and ensure 

proper payment and tax reporting. It also 

includes programs such as specialty tax 

examinations (employment tax, excise tax, and 

estate and gift tax exams), international 

collections, and international examinations. 

The budget activity also provides for campus 

support of the Questionable Refund program 

and associated appeals and litigation activities.

Regulatory ($173,174,000 from direct 

appropriations)

This budget activity funds the development 

and printing of published IRS guidance 

materials; interpretation of tax laws; internal 

advice to the IRS on general non-tax legal 

issues such as procurement, personnel, and 

labor relations; enforcement of regulatory 

rules, laws, and approved business practices; 

and support of taxpayers in the areas of 

pre-filing agreements, determination letters, 

and advance pricing agreements. The Return 

Preparer Program is funded within this activity 

in addition to the Office of Professional 

Responsibility, which identifies, 

communicates, and enforces the Treasury 

Circular 230 standards of competence, 

integrity, and conduct of professionals 

representing taxpayers before the IRS.

Operations Support

The FY 2016 President’s Budget request is 

$4,743,258,000 in direct appropriations, an 

estimated $53,000,000 from reimbursable 

programs, an estimated $378,525,000 from 

user fees, and an estimated $131,787,000 from 

unobligated balances from prior years for a 

total operating level of $5,306,570,000. A 

portion of this appropriation, $315,197,000, is 

requested as part of the $667,297,000 program

integrity cap adjustment for the IRS tax 

enforcement and compliance programs, which 

provides an above-base investment in these 

programs to reduce future deficits. In 

conjunction with specified funds provided to 

the IRS Enforcement account, the program 

integrity cap adjustment will support new tax 

compliance initiatives that are expected to 

generate high returns on investment in the 

form of increased tax revenues. This 

appropriation funds the following budget 

activities.

Infrastructure ($973,521,000 from direct 

appropriations)

This budget activity funds administrative 

services related to space and housing, rent and 

space alterations, building services, 

maintenance, guard services, and non-IT 

equipment.
15

Shared Services & Support ($1,274,194,000

from direct appropriations)

This budget activity funds policy management, 

IRS-wide support for research, strategic 

planning, communications and liaison, 

protection of sensitive information and the 

privacy of taxpayers and employees, finance, 

human resources, and equity, diversity, and 

inclusion programs. It also funds printing and 

postage, business systems planning, security, 

corporate training, legal services, procurement, 

and specific employee benefits programs.

Information Services ($2,495,543,000 from 

direct appropriations)

This budget activity funds staffing, equipment, 

and related costs to manage, maintain, and 

operate the information systems critical to the 

support of tax administration programs. This 

includes the design and operation of security 

controls and disaster recovery planning. This 

budget activity funds the development and 

maintenance of the millions of lines of 

programming code that support all aspects and 

phases of tax processing and the operation and 

administration of the mainframes, servers, 

personal computers, networks, and a variety of 

management information systems.

Business Systems Modernization

The FY 2016 President’s Budget request is 

$379,178,000 in direct appropriations. This 

appropriation funds the following budget 

activity.

Business Systems Modernization

($379,178,000 from direct appropriations)

This budget activity funds the planning and 

capital asset acquisition of information 

technology (IT) to modernize IRS business 

systems, including labor and related 

contractual costs. It funds investments to 

systems which enhance the IRS’s capability to 

detect, resolve, and prevent tax 

noncompliance, simplify the taxpayer’s online 

experience, provide secure digital 

communications, and add more interactive 

capabilities to existing web self-service 

products. This budget activity ensures the IRS 

continues to move forward and use 

technologies to improve performance and 

change how taxpayers interact with the IRS.

Legislative Proposals

The FY 2016 President’s Budget request 

includes a number of legislative proposals 

intended to reduce the tax gap and improve tax 

compliance with minimal taxpayer burden. 

The Treasury Office of Tax Analysis (OTA) 

estimates these new tax gap proposals will 

increase revenue by $84.3 billion over the next 

ten years, which includes $59.7 billion 

generated by program integrity cap 

adjustments. The IRS estimates the 

implementation costs for the FY 2016

President’s Budget tax gap proposals to be 

$157.5 million (excluding the program 

integrity cap adjustments ten-year cost) over 

three years, including the initial startup, 

processing, and compliance operational costs. 

Note that in a few cases estimates are not yet 

available due to timing. The Administration 

proposes to expand information reporting and 

sharing, improve compliance by businesses,

and strengthen tax administration. The Budget 

also proposes to amend the Balanced Budget 

and Emergency Deficit Control Act of 1985 

(BBEDCA), as amended, to provide 10-years 

(FYs 2016-2025) of discretionary caps to 

permit program integrity cap adjustments, 

which cost about $19 billion while generating

approximately $60 billion, for a net savings of

$41 billion over the 10-year budget window. 

The IRS requests Streamlined Critical Pay 

(SCP) authority through September 30, 2020. 

This SCP authority expired September 30, 

2013. Currently there are approximately 30 

senior employees under SCP appointments. If 

the SCP is not renewed, the IRS will not be 

able to recruit and retain top-level talent, 

especially IT professionals who can help 

protect taxpayer data from cyber-attacks and 
16

who are working to modernize the IRS's IT 

infrastructure. According to Treasury 

Inspector General for Tax Administration 

report 2015-IE-R001, The Internal Revenue 

Service’s Use of Its Streamlined Critical Pay 

Authority, “Private sector expertise had been 

crucial to introducing new leadership to 

supplement in-house expertise, and the IRS 

had taken advantage of the private sector 

expertise by retaining the critical pay 

appointees whenever feasible.”

IRS Performance by Program

Description of Performance

In FY 2014, the IRS continued to provide 

quality service to taxpayers and enforce the 

laws in a balanced manner, but was unable to 

maintain some of its performance levels due to 

resource constraints. Nevertheless, IRS 

continued to deliver in key areas, including 

international, tax exempt, and refund fraud, 

including identity theft.

Taxpayer Services

Providing taxpayers top-quality service and 

helping them understand and meet their tax 

obligations remain top priorities for the IRS. 

The IRS strives to deliver high quality and 

timely service to taxpayers and stakeholders. 

Although the IRS had significant 

accomplishments serving taxpayers in 

FY 2014, budget constraints forced the IRS to

focus on its top priorities and reduce funding 

in many areas.

The IRS process for programming and testing 

systems was delayed by a month due to the 

lapse in federal appropriations in October 

2013. Despite this delay and significant 

resource constraints, the IRS achieved the 

following results through September 2014:

• Posted 137.9 million individual returns 

and issued more than 114.8 million 

refunds totaling $315.6 billion;

• Achieved a 64.4 percent LOS, although 

average wait times increased to almost 

20 minutes;

• Answered 23.1 million assistor calls, 

• Achieved accuracy rates of

95.0 percent for tax law questions and 

96.2 percent of account questions 

received via the telephone; and 

• Direct deposited more than 

$244.8 billion in refunds.

The number of individual and business returns 

filed electronically (e-file) continues to grow. 

Quicker refunds and a more efficient way for 

taxpayers to file accurate returns, coupled with 

innovative technology, such as home computer 

filing, contribute to the increase in e-file 

returns. FY 2014 results included:

Programs Performance Measure

Taxpayer Services Customer Service Representative 

(CSR) Level of Service (%) 70.1 67.6 60.5 64.4 38.0 80.0

Taxpayer Services Percent of Individual Returns 

Processed Electronically (%) 76.9 80.5 82.5 84.1 84.6 85.0

Enforcement Automated Collection System

(ACS) Accuracy (%) 94.9 94.7 94.4 95.2 94.0 94.0

Enforcement Examination Coverage - 

Individual (%) 1.1 1.0 1.0 0.9 0.8 0.8

Enforcement Conviction Rate (%) 92.7 93.0 93.1 93.4 92.0 92.0 

FY 2011

 Actual

FY 2012

 Actual

FY 2013

Actual

FY 2014 

Actual

FY 2015 

Target

FY 2016 

Target
17

• Individual returns electronically filed 

increased to 84.1 percent of filings, an 

increase of 1.9 percent;

• Business returns filed electronically 

increased to 43.1 percent of filings, an 

increase of 7.2 percent;

• Home-computer filing increased to 

48.0 million tax returns, an increase of 

6.0 percent; and

• Tax professional use of e-file increased 

by 1.2 percent, to 77.8 million returns.

The IRS continued to enhance digital 

self-service options by increasing the amount 

of tax information and services available to 

taxpayers through IRS.gov and the mobile app, 

IRS2Go. The IRS developed and launched 

new web and mobile tools allowing taxpayers 

and third parties to transact with the IRS 

including:

• Get Transcript. Provides current 

digital display and print of an 

individual’s tax record across five 

transcript types using enterprise-wide 

authentication. Since the January 2014 

launch, more than 18.6 million 

transcripts have been generated 

through this application, which 

represents more than 79 percent of all 

transcript requests during that time 

period.

• IRS2Go. Provides a “Where’s my 

Refund” tracker and locator for 

voluntary tax assistance on a 

re-engineered mobile tool. The

IRS2Go mobile application has been 

downloaded 5.4 million times since its 

release.

• Direct Pay. An individual taxpayer 

can make a payment fully 

electronically without paying a fee. 

Payment scheduling and payment 

lookup features have been added. 

Direct Pay has collected more than 

$2.7 billion since the November 2013 

launch.

• e-Authentication. Provides secure 

access to IRS online tools and 

applications. Since the January 2014 

launch, more than 5.8 million 

knowledge-based authentications have 

occurred.

• Payment Mix Comparison Tool. 

This tool will encourage accurate 

reporting by payment recipients 

according to Form 1099-K, Payment 

Card and Third Party Network 

Transactions, and help reduce the tax 

gap.

• Online Payment Agreement 

improvement. Provides the taxpayer 

the ability to fully submit an 

application for an installment 

agreement online.

The FY 2014 Service Approach identified in 

the IRS Strategic Plan allowed the IRS to 

reserve person-to-person service for those who 

had issues that only the IRS could resolve (e.g. 

assisting taxpayers who have received a 

notice). Savings from these initiatives were 

reinvested into improving service on the 

phones and at walk-in sites. It allowed the IRS 

to use the right mix of technology, employees, 

and IRS partners to best serve customers in the 

face of changing resources. Comprehensive 

engagement and communication efforts have 

helped both employees and taxpayers migrate 

towards alternative self-service channels. 

The IRS continues to improve and expand its 

outreach and educational services through 

partnerships with state taxing authorities, 

volunteer groups, and other organizations. 

Volunteer Income Tax Assistance (VITA) and 

Tax Counseling for the Elderly (TCE) sites 

provided free tax assistance for the elderly, 

disabled, and limited English proficient 

individuals and families. More than 

3.6 million tax returns were filed at Volunteer 
18

Income Tax Assistance/Tax Counseling for the 

Elderly volunteer sites, representing a 

7.4 percent increase over last year while 

maintaining a 92.2 percent accuracy rate.

Enforcement

In FY 2014, the IRS collected more than 

$57.1 billion, a 7 percent increase from 

FY 2013 through the same period. This is the 

fifth consecutive year the IRS exceeded 

$50 billion in enforcement revenue for a total 

IRS-wide ROI of $5.1 to $1. It is important to 

note, however, that a variety of factors beyond 

IRS’s control impact enforcement revenue 

collections, including changes in tax policy 

and the health of the macroeconomy. Thus, 

this trend should not be interpreted to suggest 

that budget cuts have not reduced IRS’s 

enforcement capabilities. In fact, the 

individual examination coverage rate has 

steadily declined from 1.11 percent in 

FY 2010 to 0.86 percent in FY 2014. If IRS 

enforcement funding had remained at FY 2010 

levels, FY 2014 collections would have been 

higher. 

The ROI estimate does not include the revenue 

effect of the indirect deterrence value of these 

investments and other IRS enforcement 

programs, which is conservatively estimated to 

be at least three times the direct revenue 

impact.

The IRS CI program investigates potential 

criminal violations of the Internal Revenue 

Code and related financial crimes such as 

money laundering, currency violations, 

tax-related identity theft fraud, and terrorist

financing that adversely affect tax 

administration. Highlights of IRS CI’s 

Enforcement performance through FY 2014, 

compared to FY 2013, include:

• Completing 4,606 criminal 

investigations, a decrease of 

17.1 percent;

• Achieving a conviction rate of 

93.4 percent, similar to FY 2013;

• Maintaining a Department of Justice 

acceptance rate of 93.1 percent with a 

U.S. Attorney acceptance rate of 

90.5 percent; and

• Obtaining 3,110 convictions, similar to 

FY 2013.

The IRS made changes to the offshore 

voluntary compliance programs, providing 

new options to help taxpayers residing 

overseas and in the United States. Key 

changes included:

• Eliminating the required risk 

questionnaire and a requirement that 

the taxpayer have $1,500 or less of 

unpaid tax per year; and

• Requiring the taxpayer to certify that 

previous failures to comply were due to 

non-willful conduct.

The IRS implemented several improvements 

to the Offshore Voluntary Disclosure Program 

(OVDP) by: 

• Requiring additional information from 

taxpayers applying to the program; 

• Eliminating the existing reduced 

penalty percentage for certain 

non-willful taxpayers; 

• Requiring taxpayers to submit all 

account statements and pay the 

offshore penalty at the time of the 

OVDP application; and

• Enabling taxpayers to submit 

voluminous records electronically 

rather than on paper.

The IRS streamlined the determination process 

for tax-exempt status applications. When an 

application cannot be completed on its initial 

merit, the applicant is directed to provide 

additional information and sign attestations 
19

guaranteeing truthfulness. The IRS also

piloted a pre-classification process to improve 

the content of information request letters; and

created Form 1023-EZ, a simplified two page 

version of the 26 page Form 1023, Application 

for Recognition of Exemption Under Section 

501(c)(3) of the Internal Revenue Code.

The IRS made significant process changes to 

address concerns about applications for tax 

exempt status (civic leagues, social welfare 

organizations, or local associations of 

employees) under Section 501(c)(4):

• Established a process documenting 

reasons why applications are selected 

for further review;

• Developed training and workshops 

identifying issue advocacy versus 

political campaign intervention and 

identifying applications for review of 

political campaign intervention 

activities;

• Established processing guidelines for 

applications involving potentially 

significant campaign intervention; and 

• Created a formal process for 

determinations personnel to request 

assistance from technical experts.

Congress passed FATCA in 2010 to improve 

tax compliance for foreign accounts and 

cross-border transactions. FATCA aims to 

ensure that offshore investment activities are 

properly captured for tax administration 

purposes by instituting reporting requirements 

for foreign financial institutions. In FY 2014, 

the IRS:

• Deployed the FATCA Foreign 

Financial Institutions Registration 

System;

• Established the concept of Global 

Intermediary Identification Numbers 

(GIINs) – a new international 

numbering scheme developed by the 

IRS to implement a standardized 

worldwide residence-based information 

reporting and approved and assigned 

GIINs to over 120,000 financial 

institutions to date; and

• Deployed the IRS Foreign Financial 

Institutions List Search and Download 

Tool.

During FY 2014, the IRS continued its 

implementation of the ACA and outreach 

activities to ensure that taxpayers were aware 

of the new tax provisions under the ACA. The 

IRS continued its work with the group of 

organizations set up to facilitate the purchase 

of health insurance in each state on the 

requirements and procedures for safeguarding 

federal tax information used in the Exchange 

(IRC 6103 (l)(21)), Disclosure of Return 

Information to Carry Out Eligibility 

Requirements for Health Insurance 

Affordability Programs). Also, IRS 

collaborated with the Department of Health 

and Human Services on outreach and IT 

deployment relating to the insurance market 

reforms and Exchange. In addition, IRS 

issued more than 30 items of published 

guidance on ACA Provisions, including final

regulations on Branded Prescription Drug Fee 

and Premium Tax Credit. 

In FY 2014, the IRS continued to follow its 

comprehensive identity theft strategy focused 

on preventing, detecting, and resolving 

identity theft cases. In an effort to help 

victims, the IRS launched the Identity 

Protection Personal Identification Number (IP 

PIN) application and has issued 

approximately 1.5 million IP PINs The IP PIN 

is a unique, six-digit number that is assigned 

annually to victims of identity theft with 

resolved cases for use when filing their federal 

tax return. The IP PIN allows these individuals 
20

to avoid delays in filing returns and receiving 

refunds. 

Taxpayers previously had to call the IRS to 

replace a lost or misplaced IP PIN. The new 

application allows taxpayers to quickly file 

their tax return with manual verification. . 

Additionally, taxpayers from Florida, Georgia 

and the District of Columbia have opted into 

the IP PIN pilot program. Additionally, the 

IRS is offering approximately 1.7 million 

taxpayers the opportunity to opt in to the IP 

PIN program in instances where the IRS has 

identified indications of identity theft on their 

accounts.

Business Systems Modernization

IRS modernization efforts continued in 

FY 2014:

• CADE 2 had a smooth filing season 

launch in January 2014. The project 

recently met criteria that provide a high 

level of confidence in the readiness and 

accuracy of the system’s performance, 

operational processes, and data quality.

In FY 2014, CADE 2 received more 

than 140.1 million returns and issued 

over 113.2 million refunds.

• Modernized e-File (MeF) MeF 

receives and processes all tax returns 

submitted electronically. For Filing 

Season 2014, a new MeF release was 

deployed and performed successfully. 

In FY 2014, taxpayers submitted more 

than 231.4 million individual returns 

and more than 19.1 million business 

returns.

Dollars in Thousands

$000 FTE $000 FTE $000 FTE $000 FTE

FY 2015 Enacted

Reinvestment:

Expand Telecom Infrastructure to Handle Increased Demand 16,025 16,025

Subtotal FY 2016 Changes to Base $16,025 $16,025

FY 2016 ACA Program Increases:

Improve Taxpayer Services 78,343 1,231 23,154 7 101,497 1,238

Address Impact of Affordable Care Act (ACA) Statutory Requirements 108 1 44,775 432 22,323 50 67,206 483

Implement Information Technology (IT) Changes to Deliver Tax Credits 

and Other Requirements 305,645 818 305,645 818

Subtotal FY 2016 ACA Program Increases $78,451 1,232 $44,775 432 $351,122 875 $474,348 2,539

Total FY 2016 ACA Budget Request $78,451 1,232 $44,775 432 $367,147 875 $490,373 2,539

TAXPAYER SERVICES ENFORCEMENT OPERATIONS 

SUPPORT

TOTAL

FY 2016 Affordable Care Act (ACA)