Internal Revenue Service 

 Mission Statement 

Provide America’s taxpayers top-quality service by helping them understand and meet 

their tax responsibilities and enforce the law with integrity and fairness to all. 

Program Summary by Appropriations Account 

Dollars in Thousands 

Appropriations FY 2009 FY 2010 FY 2011

Internal Revenue Service ARRA Enacted1,2 Enacted Request $ Change % 

Taxpayer Services $2,293,000 $2,278,830 $2,321,975 $43,145 1.89%

Enforcement 5,117,267 5,504,000 5,797,400 293,400 5.33%

Operations Support 3,867,011 4,083,884 4,108,000 24,116 0.59%

Business Systems Modernization 229,914 263,897 386,908 123,011 46.61%

Health Insurance Tax Credit Administration 80,000 15,406 15,512 18,987 3,475 22.40%

Total Appropriated Resources $80,000 $11,522,598 $12,146,123 $12,633,270 $487,147 4.01%

FTE 94,189 95,070 96,419 1.42% 1 FY 2009 Enacted excludes the Recovery Act, Administration Expenses account, funded in the Treasury Departmental Offices ($122M). 2 FY 2009 Enacted represents the approved FY 2009 Operating Plan.

FY 2011 Priorities

The IRS collects the revenue that funds the government and administers the nation’s tax 

laws. In FY 2009, the IRS collected $2.345 trillion in taxes (gross receipts before tax 

refunds), 95 percent of federal government receipts. In order to protect the flow of 

revenues to the government, the IRS pursues a robust service and enforcement agenda. 

The service agenda supports and protects the trillions in revenue that already comes into 

the Treasury every year from hundreds of millions of taxpayers. The enforcement agenda 

vigorously pursues those who evade their responsibility to pay the taxes they owe. 

In its FY 2011 request, the IRS seeks additional funding for: 

• Taxpayer Service – Increase the telephone level of service and improve the IRS 

website where an increasing percentage of taxpayers find the help they need; 

• Enforcement – Expand efforts to address offshore tax evasion and expand the 

focus on corporate and high-wealth returns; and 

• Business Systems Modernization – Complete the new taxpayer account 

database. 

 
Table of Contents 

Section 1 – Purpose ........................................................................................................... 1

1A – Description of Bureau Vision and Priorities...................................................... 1

1B – Program History and Future Outlook ............................................................... 8

Section 2 – Budget Adjustments – Internal Revenue Service ..................................... 13

Program Summary by Appropriations Account and Budget Activity .................. 13

2.1 – Budget Adjustments Table ................................................................................ 14

2A – Budget Increases and Decrease Description .................................................... 15

Efficiencies and Savings ............................................................................................. 18

Program Reinvestment ............................................................................................... 20

Program Decrease ....................................................................................................... 20

Reduce Taxpayer Service Grant and Advocacy Programs ................................... 20

Program Increases ...................................................................................................... 21

Improve IRS.gov .................................................................................................... 21

Increase Telephone Level of Service ..................................................................... 25

Address Business and Individual International Compliance ................................ 26

Reduce the Reporting Compliance Tax Gap ......................................................... 33

Reduce the Nonfiling and Underpayment Tax Gap .............................................. 37

Support for Increased Enforcement Activities ...................................................... 40

Maintain Recovery Act Staffing ............................................................................ 41

Continue Migration from Aging Tax Administration System ............................... 44

2.2 – Operating Levels Table ..................................................................................... 50

2.3 – Appropriation Detail Table ............................................................................... 51

2B – Appropriation Language and Explanation of Changes .................................. 52

2C – Legislative Proposals.......................................................................................... 56

Section 3 – Budget and Performance Plan ................................................................... 58

Taxpayer Services ....................................................................................................... 58

2.1 – Budget Adjustments Table ............................................................................... 59 

2.2 – Operating Levels Table .................................................................................... 60 

2.3 – Appropriation Detail Table .............................................................................. 61 

3A – Pre-Filing Taxpayer Assistance and Education ............................................... 61 

3.2.1 – Budget and Performance Plan ....................................................................... 62 

3B – Filing and Account Services ............................................................................ 64 

3.2.2 – Budget and Performance Plan ....................................................................... 65 

Enforcement ................................................................................................................ 67

2.1 – Budget Adjustments Table ............................................................................... 68 

2.2 – Operating Levels Table .................................................................................... 69 

2.3 – Appropriation Detail Table .............................................................................. 70 

3C – Investigations ................................................................................................... 70 

3.2.3 – Budget and Performance Plan ....................................................................... 71 

3D – Exam and Collections ...................................................................................... 72 

3.2.4 – Budget and Performance Plan ....................................................................... 74 

3E – Regulatory ........................................................................................................ 77 

3.2.5 – Budget and Performance Plan ....................................................................... 77 

IRS-i 
IRS-ii 

Operations Support .................................................................................................... 79

2.1 – Budget Adjustments Table ............................................................................... 80 

2.2 – Operating Levels Table .................................................................................... 81 

2.3 – Appropriation Detail Table .............................................................................. 82 

3F – Infrastructure..................................................................................................... 82 

3.2.6 – Budget and Performance Plan ....................................................................... 83 

3G – Shared Services and Support ............................................................................ 83 

3.2.7 – Budget and Performance Plan ....................................................................... 85 

3H – Information Services ........................................................................................ 87 

3.2.8 – Budget and Performance Plan ....................................................................... 90 

Business Systems Modernization ............................................................................... 91

2.1 – Budget Adjustments Table ............................................................................... 92 

2.2 – Operating Levels Table .................................................................................... 93 

2.3 – Appropriation Detail Table .............................................................................. 94 

3I – Business Systems Modernization ...................................................................... 94 

3.2.9 – Budget and Performance Plan ..................................................................... 102 

Health Insurance Tax Credit Administration ........................................................ 104

2.1 – Budget Adjustments Table ............................................................................. 105 

2.2 – Operating Levels Table .................................................................................. 106 

2.3 – Appropriation Detail Table ............................................................................ 107 

3J – Health Insurance Tax Credit Administration .................................................. 107 

3.2.10 – Budget and Performance Plan ................................................................... 108 

Section 4 – Supporting Materials ................................................................................ 110

4A – Human Capital Strategy .................................................................................. 110

4B – Information Technology (IT) Strategy ........................................................... 115

4.1 – Summary of IT Resources Table .................................................................... 117

4.2 – Assessment and Improvement Actions .......................................................... 120

4.3 – IRS Performance Measure Table ................................................................... 129

4.4 – Cost of IRS Operating Activities .................................................................... 130

4.5 – Summary of IRS FY 2011 Budget Request ................................................... 131
Section 1 – Purpose 

1A – Description of Bureau Vision and Priorities 

The IRS Strategic Plan 2009-2013 guides program and budget decisions and supports the 

Department of the Treasury Strategic Plan. The IRS Strategic Plan recognizes the 

increasing complexity of tax laws, changing business models, expanding use of electronic 

data and related security risks, accelerating growth in international tax activities, and 

growing human capital challenges. 

The IRS Strategic Plan goals and objectives are: 

IRS Strategic Goals 

Improve Service to Make Voluntary Compliance Easier 

Enforce the Law to Ensure Everyone Meets Their Obligation to Pay Taxes 

To improve service to and make voluntary compliance easier, the IRS must: 

• Incorporate taxpayer perspectives to improve all service interactions; 

• Expedite and improve issue resolution across all interactions with taxpayers, 

making it easier to navigate the IRS; 

• Provide taxpayers with targeted, timely guidance and outreach; and 

• Strengthen partnerships with tax practitioners, tax preparers, and other third 

parties to ensure effective tax administration. 

To enforce the law to ensure everyone meets their obligation to pay taxes, the IRS must: 

• Proactively enforce the law in a timely manner while respecting taxpayer rights 

and minimizing taxpayer burden; 

• Expand enforcement approaches and tools; 

• Meet the challenges of international tax administration; 

• Allocate compliance resources using a data-driven approach to target existing and 

emerging high-risk areas; 

• Continue focused oversight of the tax-exempt sector; and 

• Ensure that all tax practitioners, tax preparers, and other third parties in the tax 

system adhere to professional standards and follow the law. 

IRS-1 
To achieve the service and enforcement goals, the IRS must: 

• Make the IRS the best place to work in government; 

• Build and deploy advanced information technology systems, processes, and tools 

to improve IRS efficiency and productivity; 

• Use data and research across the organization to make informed decisions and 

allocate resources; and 

• Ensure the privacy and security of data and safety and security of employees. 

FY 2011 Budget Request

The FY 2011 President’s Budget Request for the IRS is $12,633.3 million, 

$487.1 million, or 4.0 percent more than the FY 2010 enacted level. 

Appropriation Account ($ in Millions) 

Taxpayer Services $2,322.0 

Enforcement 5,797.4 

Operations Support 4,108.0 

Business Systems Modernization 386.9 

Health Insurance Tax Credit Administration 19.0

Total $12,633.3 

The $487.1 million increase consists of: 

• $32.4 million for changes to the base: 

o $219.5 million for the pay raise and inflation; 

o $3.5 million to support the American Recovery and Reinvestment Act 

(Recovery Act) Health Coverage Tax Credit (HCTC) Program Expansion; 

and 

o -$190.6 million for efficiency savings and non-recur activities. 

• $454.7 million for program changes: 

o $2.8 million for a submission processing consolidation reinvestment; 

o -$9.0 million reallocation from the Taxpayer Advocate Service (TAS) and 

Low-Income Taxpayer Clinic (LITC) Grants program, Tax Counseling for 

the Elderly (TCE) program, and the Volunteer Income Tax Assistance 

(VITA) Grants program relative to 2010 enacted levels to improve service 

performance by increasing the telephone level of service; 

o $45.9 million to increase the telephone level of service and to improve and 

redesign the IRS.gov website; 

o $247.4 to reduce the tax gap by investing in a strong compliance program; 

and 

o $167.6 million to complete development of the new taxpayer account 

database and continue investments in electronic filing systems. 

IRS-2 
The IRS requests $2.8 million to fund one-time separation costs associated with the 

September 30, 2011, closure of the Atlanta submission-processing site. An additional 

$20.9 million is requested to improve telephone level of service, increasing the level of 

service performance target to 75 percent from 70 percent in FY 2009 and 71 percent in 

FY 2010. This includes a program increase of $11.9 million, and a $9 million 

reallocation from TAS and the LITC, TCE, and VITA grant programs. Without the 

reallocation within the Taxpayer Services account, the IRS will achieve a lower 

telephone level of service, currently estimated to be 74 percent, meaning fewer taxpayers 

will be able to get through to the toll-free line. To continue the effort to move taxpayer 

service to the internet, and to support the Treasury effort to increase paperless 

transactions, an additional $25 million in Operations Support will be invested in 

improvements to the IRS.gov website infrastructure and to redesign the IRS.gov website 

to meet taxpayer needs and growing demand for more electronic services. 

The IRS requests $247.4 million for investments in strong compliance programs, 

including a robust international enforcement initiative to address offshore tax evasion. 

The additional enforcement initiatives will address underreporting of income associated 

with international activities and expand enforcement efforts on noncompliance among 

corporate and high-wealth taxpayers and the complex business enterprises they control 

(including corporations, partnerships, and trusts). These enforcement investments will 

bring in $1.9 billion, in additional annual enforcement revenue, with a return on 

investment (ROI) of 9.3 to 1, once new hires reach full potential in FY 2013. This 

estimate does not account for the deterrent effect of IRS enforcement programs, 

conservatively estimated to be at least three times larger than the direct revenue impact. 

Data and technology are central to the future of tax administration. The IRS requests 

$167.6 million to fund completion of the new taxpayer account database and continue 

investments in electronic filing systems. Completion of the core taxpayer account 

database is the cornerstone of IRS IT modernization that will expedite refunds to 

140 million individual taxpayers and a prerequisite for other major initiatives such as 

significant expansion of online paperless services. It will allow the IRS to expand its 

online services to manage increasing taxpayer service demands. In addition, next 

generation, more sophisticated compliance systems require the relational database 

structure and movement away from the legacy data storage model. The ability of the IRS 

to support increasingly complex taxpayer service and compliance initiatives will be 

severely limited until the new taxpayer account database is completed. 

Reducing the Tax Gap

Recent investments in IRS enforcement programs have yielded significant increases in 

enforcement revenue. Enforcement revenue was $48.9 billion in FY 2009 for a total 

IRS-wide return on investment (ROI) of 4.2 to 1. This number reflects only the direct 

revenue collected and does not take into account the deterrent effect of IRS enforcement 

programs such as Criminal Investigation. 

IRS-3 
In 2006, the IRS released updated results of its first study in two decades of the 

difference between taxes owed and taxes actually paid on a timely basis – the “tax gap.” 

The IRS estimated that taxpayers initially underpaid by $345 billion in 2001 see Tax Gap 

Map for Tax Year 2001, below. This equates to a voluntary compliance rate of 

almost 84 percent. Late payments and IRS enforcement action reduced this to a net tax 

gap of $290 billion. 

The three components of the tax gap are: 

• Underreporting – Not reporting one’s full tax liability on a timely filed return; 

• Nonfiling – Not filing required returns on time; and 

• Underpayment – Not timely paying the full amount of tax reported on a timely 

return. 

TAX GAP MAP for Tax Year 2001 (in $ Billions)

Actual Amounts 

Reasonable Estimates

Weaker Estimates

* IRS will continue to collect late payments 

for TY01 for years to come. This category 

includes tax paid late by taxpayers 

without IRS enforcement action. For 

comparison, $24.3B of tax was collected 

solely through enforcement in FY2001.

† Updated using Census tabulations

# No estimates available

Certainty of the Estimates

Estimates in Bold Boxes 

Have Been Updated 

Based on Detailed TY01 

NRP Results

Nonfiling †

$27

Individual

Income Tax †

$25

Corporation

Income Tax

#

Employment

Tax

#

Excise

Tax

#

Estate

Tax

$2

Underpayment

$33.3

Individual

Income Tax

$23.4

Corporation

Income Tax

$2.3

Employment

Tax

$5.0

Estate

Tax

$2.1

Excise

Tax

$0.5

Tax Paid Voluntarily & Timely

$1,767

(Voluntary Compliance Rate: VCR = 83.7%)

Gross Tax Gap: $345

(Noncompliance Rate: NCR = 16.3%)

Total Tax

Liability

$2,112

FICA

$14

Unemployment

Tax

$1 

Individual

Income Tax

$197

Non-Business

Income

$30.6

Business

Income

$65.3 

Corporation

Income Tax

$30

Estate

Tax

$4

Excise

Tax

#

Business

Income

$109

Large 

Corporations 

(Over $10M)

$25

Self-Employment

Tax

$39

Non-Business

Income

$56

Small 

Corporations

(Under $10M)

$5

Credits

$17

Adjustments,

Deductions,

Exemptions

$15

Underreporting

$285

Employment

Tax

$54

Enforced

& Other Late 

Payments

$55 *

Net Tax Gap

(Tax Not Collected)

$290

TAX GAP MAP for Tax Year 2001 (in $ Billions)

Actual Amounts 

Reasonable Estimates

Weaker Estimates

* IRS will continue to collect late payments 

for TY01 for years to come. This category 

includes tax paid late by taxpayers 

without IRS enforcement action. For 

comparison, $24.3B of tax was collected 

solely through enforcement in FY2001.

† Updated using Census tabulations

# No estimates available

Certainty of the Estimates

Actual Amounts 

Reasonable Estimates

Weaker Estimates

* IRS will continue to collect late payments 

for TY01 for years to come. This category 

includes tax paid late by taxpayers 

without IRS enforcement action. For 

comparison, $24.3B of tax was collected 

solely through enforcement in FY2001.

† Updated using Census tabulations

# No estimates available

Actual Amounts 

Reasonable Estimates

Weaker Estimates

Certainty of the Estimates

Estimates in Bold Boxes 

Have Been Updated 

Based on Detailed TY01 

NRP Results

Nonfiling †

$27

Individual

Income Tax †

$25

Corporation

Income Tax

#

Employment

Tax

#

Excise

Tax

#

Estate

Tax

$2

Nonfiling †

$27

Individual

Income Tax †

$25

Corporation

Income Tax

#

Employment

Tax

#

Excise

Tax

#

Estate

Tax

$2

Underpayment

$33.3

Individual

Income Tax

$23.4

Corporation

Income Tax

$2.3

Employment

Tax

$5.0

Estate

Tax

$2.1

Excise

Tax

$0.5

Underpayment

$33.3

Individual

Income Tax

$23.4

Corporation

Income Tax

$2.3

Employment

Tax

$5.0

Estate

Tax

$2.1

Excise

Tax

$0.5

Tax Paid Voluntarily & Timely

$1,767

(Voluntary Compliance Rate: VCR = 83.7%)

Gross Tax Gap: $345

(Noncompliance Rate: NCR = 16.3%)

Total Tax

Liability

$2,112

FICA

$14

Unemployment

Tax

$1 

Individual

Income Tax

$197

Non-Business

Income

$30.6

Business

Income

$65.3 

Corporation

Income Tax

$30

Estate

Tax

$4

Excise

Tax

#

Business

Income

$109

Large 

Corporations 

(Over $10M)

$25

Self-Employment

Tax

$39

Non-Business

Income

$56

Small 

Corporations

(Under $10M)

$5

Credits

$17

Adjustments,

Deductions,

Exemptions

$15

Underreporting

$285

Employment

Tax

$54

FICA

$14

Unemployment

Tax

$1 

Individual

Income Tax

$197

Non-Business

Income

$30.6

Business

Income

$65.3 

Corporation

Income Tax

$30

Estate

Tax

$4

Excise

Tax

#

Business

Income

$109

Large 

Corporations 

(Over $10M)

$25

Self-Employment

Tax

$39

Non-Business

Income

$56

Small 

Corporations

(Under $10M)

$5

Credits

$17

Adjustments,

Deductions,

Exemptions

$15

Underreporting

$285

Employment

Tax

$54

Enforced

& Other Late 

Payments

$55 *

Net Tax Gap

(Tax Not Collected)

$290

Enforced

& Other Late 

Payments

$55 *

Net Tax Gap

(Tax Not Collected)

$290

Enforced

& Other Late 

Payments

$55 *

Net Tax Gap

(Tax Not Collected)

$290

IRS-4 
Underreporting tax liability comprises 

82 percent of the gross tax gap 

($285 billion). The remainder is 

almost evenly divided between 

nonfiling (8 percent) and underpaying 

(10 percent). The IRS remains 

committed to finding ways to increase 

compliance and reduce the tax gap, 

while minimizing the burden on the 

vast majority of taxpayers who pay 

their taxes accurately and on time. 

Underreporting

82%

Underpayment

10%

Nonfiling

8%

Taxpayer Service and Enforcement Programs Complement Each Other 

The IRS serves individuals, businesses, non-profit organizations, and processed more 

than 236 million tax returns in 2009. The system of voluntary tax compliance requires 

the IRS to excel in taxpayer service for those who are trying to meet their obligations 

under the law and provide a robust enforcement program for those who shirk their 

responsibilities to their fellow citizens. Most taxpayers comply with the law by filing 

returns and paying their taxes on time, but some do not comply because they do not 

understand their obligations under the complex tax laws. Noncompliance can stem from 

a wide range of causes, including lack of knowledge, confusion, poor recordkeeping, 

differing legal interpretations, unexpected personal emergencies, and temporary 

cash-flow problems. 

Vigorous enforcement encourages voluntary compliance for those taxpayers who seek to 

avoid meeting their tax obligations under the law, further increasing revenue. IRS 

enforcement activities remain a high priority. 

IRS-5 
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59.2

60 56.4

25 48.9

48.7

50 47.3

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9.5 9.6 9.7 9.5 9.5 9.6 9.3 9.3

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TOTAL Enforcement Revenue Appropriated Adjusted for Inflation

Enforcement Revenue and IRS Budget FY 2002 through FY 2009

(Dollars in Billions)

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009

ROI 3.60 3.80 4.20 4.60 4.60 5.60 5.20 4.20

Increased resources for IRS enforcement programs yield a positive ROI. As shown in the 

table below, the proposed IRS FY 2011 enforcement initiatives will generate 

$1,946.2 million, an ROI of 9.3 to 1, in additional annual enforcement revenue once the 

new hires reach full potential in FY 2013. In addition to direct revenue, IRS enforcement 

activities yield indirect revenue by deterring noncompliance, and this effect is estimated 

to be at least three times the direct revenue impact. 

Return on Investment for IRS Enforcement Initiatives 

Dollars in Millions

First Year (FY 2011) Full Performance (FY 2013)

FY 2011 Enforcement Investment Cost Revenue ROI Cost Revenue ROI

All Enforcement Initiatives $247.4 $719.8 2.9 $209.6 $1,946.2 9.3

Direct Revenue Producing Initiatives $236.9 $719.8 3.0 $200.6 $1,946.2 9.7

Address Business and Individual International Compliance 121.1 300.8 2.5 101.3 812.2 8.0

Reduce the Reporting Compliance Tax Gap 77.7 211.7 2.7 65.8 659.6 10.0

Reduce the Nonfiling and Underpayment Tax Gap 38.1 207.3 5.4 33.5 474.4 14.2

Other Enforcement Initiatives $10.5 $0.0 0.0 $9.0 $0.0 0.0

IRS-6 
Providing quality taxpayer service is especially important to help taxpayers avoid making 

unintentional errors. Assisting taxpayers with their tax questions before they file their 

returns prevents inadvertent noncompliance and reduces burdensome post-filing notices 

and other correspondence from the IRS. Accordingly, the IRS provides year-round 

assistance to millions of taxpayers through many sources, including outreach and 

education programs, issuance of tax forms and publications, rulings and regulations, 

toll-free call centers, the IRS.gov website, Taxpayer Assistance Centers (TAC), 

Volunteer Income Tax Assistance (VITA) sites, and Tax Counseling for the Elderly 

(TCE) sites. Many of these sites provide information in Spanish as well as English. 

In January 2010, the IRS announced multiple recommendations to increase oversight of 

federal tax return preparers, including new registration, testing, and continuing education 

requirements. The recommendations are intended to better leverage the tax return 

preparer community with the twin goals of increasing taxpayer compliance and ensuring 

uniform and high ethical standards of conduct for tax return preparers. Planning and 

regulation preparation will proceed in FY 2010 with primary implementation of the initial 

changes anticipated in FY 2011. 

Helping taxpayers understand their obligations under the tax law is critical to improving 

compliance and addressing the tax gap. To this end, the IRS remains committed to a 

balanced program of assisting taxpayers to understand the tax law and remit the proper 

amount of tax and to pursue cases for which noncompliance is willful, even to the point 

of criminal tax evasion. The IRS remains committed to improving voluntary compliance 

and reducing the tax gap through both taxpayer service and enforcement. 

IRS-7 
1B – Program History and Future Outlook 

The IRS helps taxpayers understand and comply with federal income tax laws. Each year, 

IRS employees make millions of contacts with taxpayers and businesses. Thus, it is essential 

that correspondence, including e-notices, exam and collection notices and other tax-related 

correspondence, provide clear and accurate information to taxpayers. 

Taxpayer Service 

In FY 2009, the IRS Commissioner chartered a Taxpayer Communications Taskgroup 

(TACT) to study and improve the clarity, accuracy, and effectiveness of written 

communications to taxpayers. As a result of the TACT efforts, the IRS reduced the number 

of inserts included with the balance due notice from 13 to two, reducing the amount of paper 

while improving clarity and readability. This streamlining effort eliminated more than 

16 million pieces of paper per year and also reduced IRS annual postage costs by $570,000. 

In addition, the IRS rolled out in January 2010 nine redesigned notices as part of the TACT 

effort to improve IRS correspondence. The nine notices account for approximately two 

million pieces of correspondence and were rewritten to provide a clear and simple 

explanation of the purpose of the notice and what actions the taxpayer must take to resolve 

the issue. 

Call Volume (in Millions)

389 400

350

296

300

250

212 203

200 187

150

100

50

0

FY 2005 FY 2006 FY 2007 FY 2008 FY 2009

In FY 2009, the IRS continued to improve its services by providing year-round assistance to 

millions of taxpayers through multiple channels. Demand for telephone services remained 

high as taxpayers called to obtain information regarding economic stimulus payments, new 

Recovery Act credits, and prior year adjusted gross income (AGI) numbers needed for 

electronic filing. The significant increases in call demand stressed existing resources, 

resulting in a lower customer level of service. Despite the high call volume, the IRS 

continued to focus on the accuracy of information provided to taxpayers as both Toll-Free 

Tax Law and Toll-Free 

Accounts Accuracy 

performance surpassed 

FY 2008 record-breaking 

numbers. The following chart 

shows the call volume from 

FY 2005 through FY 2009. 

The Budget provides a 

significant investment to 

increase level of service by 

adding resources to meet the 

ever increasing demand and 

continuing to make efficiency 

improvements such as 

automated self-service applications that allow taxpayers to obtain information on less 

complex issues such as refund inquiries. These improvements free up staff to deal with the 

IRS-8 
more complex tax law issues stemming from the passage of the Recovery Act and the 

Worker, Homeownership, and Business Assistance Act of 2009. 

In FY 2009, there were more than 296 million visits to IRS.gov. Taxpayers visited the 

website to obtain information on the Recovery Rebate Credit, to determine if they qualify for 

the Earned Income Tax Credit (EITC), to track the status of their refunds using the Where’s 

My Refund? application, and to get the most up-to-date information on Recovery Act credits 

they may be entitled to. More than 54 million taxpayers used Where’s My Refund?, a 

39 percent increase over the same period last year. During FY 2009, the IRS received more 

than 296 million calls and helped more than 6.2 million taxpayers at 401 Taxpayer 

Assistance Centers. The Budget will continue supporting these self-service options as well 

as support the development of additional enhancements such as calculators, on-line tools and 

information on new legislation in an easy, accessible format. In addition, the Budget 

supports a multi-year effort to improve the IRS.gov website to meet taxpayer needs and the 

growing demand for more electronic services. The new web environment will improve 

customer satisfaction by providing an enhanced look and feel, making navigation on the site 

easier, and improve the user’s ability to locate desired information and access applications. 

Despite these challenges, the IRS delivered another successful filing season. During 

FY 2009, the IRS received 144.4 million individual returns, 11.2 million fewer than 2008, 

when millions of taxpayers filed solely to receive an Economic Stimulus Payment. The 

number of refunds issued increased 3.5 percent to 111.4 million. The percentage of 

individual returns filed electronically reached 66 percent, with more than 95 million 

individual tax returns filed electronically, compared to 89.6 million in 2008, an increase of 

6 percent. During 2009, home computer filing increased to more than 32.2 million, an 

increase of 19 percent. 

The IRS provided extensive media coverage and expanded electronic outreach activities 

to make taxpayers aware of new credits, deductions, and exclusions for which they 

qualified. A second Super Saturday event was held in FY 2009, and the IRS provided 

more than 11,000 taxpayers with tax assistance and return preparation. The event was the 

largest one-day outreach service event in IRS history. 

The IRS also provided assistance to million of taxpayers by expanding partnerships with 

nonprofit and community organizations, opening more than 12,100 free tax preparation 

sites nationwide. 

Enforcement 

Enforcement of the tax laws is an integral component of the IRS effort to enhance 

voluntary compliance. IRS enforcement activities, such as examination and collection, 

target elements of the tax gap and remain a high priority. In FY 2009, the IRS expanded 

its enforcement presence in the international field, continued to pursue high-wealth, 

noncompliant taxpayers, and initiated action to better leverage the tax return preparer 

community. 

IRS-9 
IRS Enforcement Revenue (Dollars in Billions)

59.2 60 56.4

48.7 48.9 50 47.3

43.1

40 37.6

34.1

30

20

10

0

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009

Total enforcement revenue was 

$48.9 billion in FY 2009. The 

IRS showed steady progress in 

increasing its audit coverage: 

• Total individual audits 

increased 2.6 percent; 

• Automated 

Underreporter (AUR) 

contact closures increased

2.6 percent; 

• High-wealth audits increased 11.2 percent; and 

• Large corporate audits increased 2.6 percent compared to 2008, a significant 

achievement given the size (more than $10 million) and complexity of these 

corporate entities. 

In FY 2009, the IRS placed extraordinary focus on detecting and bringing to justice those 

who hide assets overseas to avoid paying tax. As part of an overall IRS strategy to 

improve offshore compliance, the IRS implemented initiatives to identify U.S. taxpayers 

who engaged in offshore tax evasion schemes. In August 2009, the IRS reached 

agreement with Swiss authorities that will result in the IRS receiving an unprecedented 

amount of information on taxpayers who evaded their tax obligations by hiding money 

offshore at UBS. This represents a major step forward for the IRS in its efforts to combat 

offshore tax evasion and will send a clear message to people hiding income and assets 

offshore that the IRS will vigorously pursue tax cheats, no matter how remote or secret 

the location. 

At the same time, the IRS established an offshore voluntary disclosures/penalty 

framework for taxpayers to disclose their offshore activities. The framework provided 

taxpayers the opportunity to: 

• Calculate the total cost of resolving all offshore tax issues; 

• Become compliant with U.S. tax laws; 

• Make voluntary disclosures that will be used to further the IRS understanding of 

how foreign accounts and foreign entities are promoted to U.S. taxpayers as ways 

to avoid or evade tax; and 

• Provide data to be used in developing additional IRS strategies to inhibit 

promoters and facilitators from soliciting new clients. 

 

As a result of the offshore voluntary disclosure program that ran through 

October 15, 2009, more than 14,700 taxpayers with offshore accounts came forward to 

disclose information bringing them back into the U.S. tax system. A key aspect of future 

international offshore work will be mining the information from people who came 

IRS-10 
IRS-11 

forward to identify financial institutions, advisors, and others who promoted or otherwise 

helped U.S. taxpayers hide assets and income offshore. 

In FY 2009, the IRS continued to investigate tax, money laundering, and other financial 

crimes that adversely affect tax administration. Performance levels for the criminal 

investigation program remained high during FY 2009, with 3,848 completed criminal 

investigations and 2,105 convictions. 

Maintaining a strong enforcement presence in the tax-exempt sector is important to 

ensure that charitable organizations are not used for non-charitable or illegal purposes. 

During FY 2009, the IRS increased tax-exempt and government entities compliance 

contacts by 10 percent over FY 2008 levels. 

 

The Compliance Assurance Process (CAP) is a method of resolving tax issues through 

open and transparent interaction between the IRS and large corporations to identify and 

resolve issues before the filing of the return. CAP involves some of the largest U.S. 

corporations.

Compliance Assurance Process (CAP) Participation

110 102

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-10 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009

CAP participation expanded from 

17 corporations in 2005 to 102 

corporations in 2009 and is expected

to become a permanent program 

for Tax Year (TY) 2010. 

The CAP program benefits both 

the IRS and the taxpayer by 

fostering compliance, reducing the 

time it takes to process a return, 

and improving both customer and 

employee satisfaction while 

maintaining a high level of quality. 

Research allows the IRS to target specific areas of noncompliance to improve voluntary 

compliance and allocate resources more effectively to reduce the tax gap. Improved 

research data also refine the workload selection models to reduce audits of compliant 

taxpayers and ultimately help the IRS achieve high rates of return from its enforcement 

programs. Current National Research Program (NRP) efforts include analyzing 

individual income tax returns for tax years 2006 through 2008 as part of on-going 

reporting compliance studies. An employment tax reporting compliance study is in the 

planning stages. Results from these studies will be used to develop additional approaches 

to addressing the tax gap. In addition, efforts are underway to develop models to 

measure compliance time and expenses for small business taxpayers who file income and 

employment tax returns. 
Information Technology (IT) Infrastructure 

The technology environment at the IRS is extraordinarily complex because of high 

volumes, widely varying inputs from taxpayers (from simple records with just a few 

fields to complex documents many megabytes in size), seasonal processing with extreme 

variations in processing load, transaction rates on the order of billions per year, and 

storage measured in trillions of bytes. The IRS continues to improve the information 

technology infrastructure leading to greater efficiency and productivity. 

The IRS continues to replace its IT infrastructure using an ongoing review process that 

prioritizes funding of business needs. In FY 2009, 49 percent of IRS IT hardware assets 

were aged, with an average of 12 percent becoming aged each year. The IRS spent more 

than $170 million to replace more than 53,720 of these aged assets. The 53,720 aged 

assets that were replaced included network equipment, end-user equipment, and servers 

and storage equipment. 

Business System Modernization 

IRS modernization efforts continue to focus on core tax administration systems designed 

to provide more sophisticated tools to taxpayers and to IRS employees. The following 

highlights the IRS accomplishments in FY 2009: 

• Customer Account Data Engine (CADE) – In FY 2009, CADE posted more than 

40.0 million returns and issued 34.9 million refunds, totaling $58.6 billion. In 

addition, the IRS revised its CADE strategy to implement a new taxpayer account 

database by the end of 2011 for the 2012 filing season. The new database will 

allow the migration of all 140 million individual taxpayers to a modernized, 

relational database that will support daily processing and result in faster refunds 

for all individual refund filers. 

• Modernized e-File (MeF) – The IRS deployed MeF Release 5.5 that included the 

redesigned Form 990, Return of Organization Exempt from Income Tax, in time 

for the filing season. MeF processed Form 1120 and 990 returns at much higher 

volumes than expected. The volume of Form 1120 returns increased 38 percent 

and Form 990 increased 307 percent from 2008. Returns submitted through MeF 

have an average 7 percent processing error rate, compared to 19 percent for 

transcription-based paper processing. MeF return receipts increased to about 

4.5 million. 

• Account Management Services (AMS) – The IRS completed the 2009 releases of 

AMS, providing additional real-time address changes to CADE by the conversion 

of account transcripts from paper to electronic format. AMS processed more than 

2.3 million accounts since deployment and more than 2.2 million electronic 

transcript cases were distributed. In addition, AMS delivered the capability to 

update account address data on a daily cycle. AMS added a new component to its 

organization in FY 2009, the Integrated Automation Technologies (IAT) Branch. 

The IAT developed tools to support the implementation of Recovery Act 

including the First-Time Home Buyer Credit tool, which systematically 

researches amended returns for specific criteria to identify unallowable or 

fraudulent claims.

IRS-12 
Section 2 – Budget Adjustments – Internal Revenue Service 

The IRS Budget Request for FY 2011 is $12,633,270,000 in direct appropriations and 

96,419 FTE. This is an increase of $487,147,000 or 4.01 percent, and 1,349 FTE more 

than the FY 2010 enacted budget of $12,146,123,000 and 95,070 FTE. 

Program Summary by Appropriations Account and Budget Activity 

Dollars in Thousands 

Appropriations FY 2009 FY 2010 FY 2011

Internal Revenue Service ARRA Enacted1,2 Enacted Request $ Change % Change 

Taxpayer Services $2,293,000 $2,278,830 $2,321,975 $43,145 1.89%

 Pre-filing Taxpayer Assistance and Education 661,000 685,063 693,753 8,690 1.27%

 Filing and Account Services 1,632,000 1,593,767 1,628,222 34,455 2.16%

Enforcement $5,117,267 $5,504,000 $5,797,400 $293,400 5.33%

 Investigations 611,601 637,694 651,966 14,272 2.24%

 Exam and Collections 4,355,186 4,706,350 4,974,618 268,268 5.70%

 Regulatory 150,480 159,956 170,816 10,860 6.79%

Operations Support $3,867,011 $4,083,884 $4,108,000 $24,116 0.59%

 Infrastructure 875,538 900,852 889,929 (10,923) -1.21%

 Shared Services and Support 1,269,642 1,296,629 1,337,776 41,147 3.17%

 Information Services 1,721,831 1,886,403 1,880,295 (6,108) -0.32%

Business Systems Modernization $229,914 $263,897 $386,908 $123,011 46.61%

Health Insurance Tax Credit Administration $80,000 $15,406 $15,512 $18,987 $3,475 22.40%

Total Appropriated Resources $80,000 $11,522,598 $12,146,123 $12,633,270 $487,147 4.01%

Total FTE 94,189 95,070 96,419 1.42% 1 FY 2009 Enacted excludes the Recovery Act, Administration Expenses account, funded in the Treasury Departmental Offices ($122M). 2 FY 2009 Enacted represents the approved FY 2009 Operating Plan.

 

IRS-13 
2.1 – Budget Adjustments Table 

 Dollars in Thousands 

Internal Revenue Service 

FTE Amount

FY 2009 Enacted 94,189 $11,522,598

FY 2010 President's Budget Request 95,081 $12,126,000

Congressional Action (11) 20,123

FY 2010 Enacted Budget (P.L. 111-117) 95,070 $12,146,123

Changes to Base:

Maintaining Current Levels $219,523

Pay Annualization 47,473

Pay Inflation Adjustment 119,537

Non-Pay Inflation Adjustment 36,121

FERS Increased Participation 16,392

Other Adjustments (318) $3,494

Resource Adjustment to Support Recovery Act-HCTC Program Expansion 3,494

Technical FTE Adjustments (318)

Efficiencies/Savings (472) ($190,638)

Non-Recur Savings (32,680)

Increase e-File Savings (472) (22,808)

IT Infrastructure and Process Improvements (75,000)

Reduce Procurement/Contracting (25,000)

Reduce Printing, Travel, and Training (10,000)

Reduce Tuition Assistance Program (5,150)

Eliminate Selective Mailing of Forms and Publications (20,000)

Subtotal Changes to Base (790) $32,379

Total FY 2011 Base 94,280 $12,178,502

Program Changes:

Program Reinvestment: $2,792

Submission Processing Consolidation (Atlanta) 2,792

Program Decrease: ($9,000)

Reduce Taxpayer Service Grant and Advocacy Programs (9,000)

Program Increases:

Taxpayer Service Initiatives $45,945

Improve IRS.gov 25,000

Increase Telephone Level of Service 20,945

Enforcement Initiatives 1,983 $247,446

Address Business and Individual International Compliance 781 121,086

Reduce the Reporting Compliance Tax Gap 700 77,679

Reduce the Nonfiling and Underpayment Tax Gap 406 38,181

Support for Increased Enforcement Activities 65 5,000

Maintain Recovery Act Staffing 31 5,500

Business Systems Modernization (BSM) Initiative 156 $167,585

Continue Migration from Aging Tax Administration System 156 167,585

Subtotal Program Changes 2,139 $454,768

Total FY 2011 Request 96,419 $12,633,270

Adjustments to Request

User Fees 194,100

Total FY 2011 96,419 $12,827,370

IRS-14 
2A – Budget Increases and Decrease Description 

Treasury Strategic Goals and Outcome 

The IRS FY 2011 initiatives support the Treasury Strategic Goal of Effectively Managed 

U.S. Government Finances and the Treasury Strategic Outcome of Revenue collected 

when due through a fair and uniform application of the law. 

The table that follows lists FY 2011 resources by Strategic Goal, Objective and Outcome 

outlined in the FY 2007-2012 Treasury Strategic Plan. The Treasury Strategic Plan is a 

corporate-level plan for the Department that provides a description of what the agency 

intends to accomplish over the five year period. 

Budget by Strategic Outcome 

Dollars in Thousands 

Treasury Strategic Outcome FY 2010 FY 2011 Percent 

Enacted Request Change

11,876,695 12,361,836 4.1%

Revenue collected when due through a fair and uniform application of the law

Removed and reduced threats to national security from terrorism, proliferation of 269,428 271,434 0.7% weapons of mass destruction, drug trafficking, and other criminal activity on the part 

of rogue regimes, individuals, and their support networks

Total Request $12,146,123 $12,633,270 4.0%

Treasury High Priority Performance Goals

 

The IRS budget request includes resources to achieve the following FY 2011 Treasury 

High Performance Goals: 

 

Increase voluntary tax compliance 

• Make progress against the Tax Gap through improved service and enhanced 

enforcement of the tax laws: 

o Achieve more than four million document matching closures in FY 2011 

(where IRS information does not match taxpayer reported information). 

• Assist Americans in voluntarily meeting their tax obligations: 

o Increase individual income tax filers' American Customer Satisfaction 

Index to 69 percent; and 

o Improve telephone level of service to 75 percent by the end of FY 2011. 

Significantly increase the number of paperless transactions with the public

• Increase individual e-File rate to 81 percent in 2011. 

IRS-15 
Initiative Costing Methodology 

The IRS applies a variety of methodologies to cost its initiatives based on the type of 

initiative. Costs for initiatives that require labor funding are calculated by converting the 

workload to the number and type of staff (e.g., Revenue Agents, Revenue Officers, or 

Special Agents) needed to deliver targeted performance goals. Once the number of 

full-time equivalents (FTE) and type of staff are determined, the cost of the FTE is 

estimated using a Unit Cost Rate (UCR) calculator, a tool for projecting FTE salary and 

non-salary support cost and/or savings. The UCR calculator fully costs the salary, 

benefits, and support costs needed for each FTE. 

IRS-16 
Total Changes to Base +$32,379,000 / -790 FTE 

Maintaining Current Levels (MCLs) +$219,523,000 / 0 FTE 

This request funds the estimated cost of pay and benefits increases and non-pay inflation. 

This amount includes: 

• $47,473,000 to fund annualization of the 2.0 percent January 2010 federal pay 

raise in FY 2011; 

• $119,537,000 to fund the assumed 1.4 percent January 2011 federal pay raise; 

• $36,121,000 to fund the 1.1 percent FY 2011 non-pay inflation adjustment for 

items such as rent, utilities, communications, contracts, travel, supplies, and 

equipment; and 

• $16,392,000 to fund the increase in agency retirement contribution percentages 

for GS employees from 11.2 percent to 11.5 percent for FY 2011 as required by 

Office of Personnel Management. 

Other Adjustments +$3,494,000 / -318 FTE

 

Resource Adjustment to Support Recovery Act-HCTC Program Expansion 

+$3,494,000 / 0 FTE 

This temporary base increase will provide additional contractor funding for the continued 

support, sustainability, administration and operation of the Health Coverage Tax Credit 

(HCTC) program. Taxpayer participation in the HCTC program is expected to grow 

because of the American Recovery and Reinvestment Act of 2009 (Recovery Act) 

(Public Law 111-5). The additional resources will allow the IRS to serve the increasing 

number of taxpayers: including handling phone calls, processing enrollment documents, 

and processing payments to health plans. The increased workload stems from the 

Recovery Act legislation expanding the scope and scale of the HCTC and job losses from 

the economic downturn. 

Participation in the HCTC program is increasing. The number of individuals claiming 

the monthly HCTC has increased by more than 50 percent, from 13,600 in December 

2008 to approximately 20,600 in November 2009. Additionally, the work required to 

deliver the HCTC Program effectively is growing. For example, HCTC received more 

than two to three times the number of calls and registration attempts in October 2009 than 

in October 2008. The trend appears to be accelerating, as the past three months have 

been the busiest in the program’s history. 

IRS-17 
Technical FTE Adjustments 

$0 / -318 FTE 

This adjustment reflects permanent changes to ensure FTE levels are fully funded in the 

base budget. 

Efficiencies and Savings 

 -$190,638,000 / -472 FTE 

Non-Recur Savings 

-$32,680,000 / 0 FTE 

This is the net reduction of non-recurring, one-time costs associated with the IRS 

FY 2010 enforcement initiatives (e.g., IT equipment and training). 

Increase e-File Savings 

-$22,808,000 / -472 FTE 

 

This decrease is a result of savings from increased electronic filing (e-File), which is 

projected to lead to fewer returns filed on paper in FY 2011. The number of 

electronically filed returns is expected to increase substantially in FY 2011 with the 

enactment of the Worker, Homeownership, and Business Assistance Act of 2009 

(Public Law 111-92). This legislation requires tax return preparers who file more than 

10 individual tax returns during a calendar year to file electronically. As taxpayers file 

fewer returns on paper and file more returns electronically, the IRS requires fewer 

resources to process paper returns. The projected decrease in paper return filing and 

increase in electronic filing translates into a reduced need of 472 FTE in submission 

processing, generating a savings of $22.8 million. The IRS will reinvest $2.8 million of 

the savings to cover the costs of Submission Processing Consolidation (Atlanta). 

Information Technology (IT) Infrastructure and Process Improvements

-$75,000,000 / 0 FTE

The IRS will reduce costs through process improvements in IT infrastructure. Initiatives 

such as the Information Technology Infrastructure Library (ITIL) will allow the IRS to 

improve the quality of IT services. In addition, the IRS is working to achieve a 

Capability Maturity Model Integrated (CMMI) certification that will yield efficiencies in 

software engineering. 

Reduce Procurement/Contracting 

-$25,000,000 / 0 FTE 

In accordance with Presidential guidance on controlling contracting costs, the IRS will 

generate savings by improving the effectiveness of existing acquisition practices and 

reducing the cost of contracts. 

IRS-18 
Reduce Printing, Travel and Training 

-$10,000,000 / 0 FTE 

The IRS will generate printing savings of $6 million by reducing agency-wide printing of 

selected internal manuals, selected training materials, and other items. The IRS will 

generate travel savings of $2 million by reducing non-case related travel, as well as 

training savings of $2 million by reducing non-technical training. 

Reduce Tuition Assistance Program (TAP) 

-$5,150,000 / 0 FTE 

The TAP provides funding to employees for courses that support both career 

development and the IRS mission. Funding is provided for college tuition/fees and books 

for approved participants. The IRS was projected to spend $10.3 million on the TAP 

program in FY 2011. The restructuring of this program will generate a savings of 

$5.2 million. 

Eliminate Selective Mailing of Forms and Publications 

-$20,000,000 / 0 FTE 

The projected savings of $20 million will be generated by: 

• Eliminating Non-Mandated Notice Inserts 

The IRS mails more than 200 million notices each year that weigh from one 

ounce to three ounces. About a third of taxpayer notices weigh two or more 

ounces. By eliminating inserts, the notice could fall into a lower weight category 

and thereby save the IRS 12.5 cents per notice. 

• Eliminating Automatic Mailing of Form 1040, U.S. Individual Tax Return, 

Tax Packages 

Each year the IRS mails more than 17 million tax packages to taxpayers who have 

not used e-filing software or a tax practitioner. By eliminating the automatic 

distribution of Form 1040 tax packages, the IRS could save postage costs of 

44 cents per package. 

• Eliminating the Automatic Mailing of Business Tax Products 

Each year the IRS mails out more than 31 million business tax products. By 

eliminating the automatic distribution of business tax products the IRS could save 

about 26 cents per package in postage costs. 

IRS-19 
Program Reinvestment 

+$2,792,000 / 0 FTE 

Submission Processing Consolidation (Atlanta) 

+$2,792,000 / 0 FTE 

Increased use of e-File has led to consolidation of the individual return processing sites. 

A portion of the Increased e-File Savings will be reinvested to fund one-time separation 

costs associated with the September 30, 2011 closure of the Atlanta submission 

processing site. As the Atlanta consolidation approaches, the IRS will continue to assist 

employees in finding employment either in or outside the organization. 

Program Decrease 

-$9,000,000 / 0 FTE 

Reduce Taxpayer Service Grant and Advocacy Programs 

-$9,000,000 / 0 FTE 

The funds provided in FY 2010 included an additional $3,500,000 to expand the 

Taxpayer Advocate Service (TAS) case processing activities, an additional $500,000 to 

increase the Low-Income Taxpayer Clinic (LITC) grants program, an additional 

$1,000,000 to increase the Tax Counseling for the Elderly (TCE) program, and an 

additional $4,000,000 to increase the Volunteer Income Tax Assistance (VITA) grants 

program. This program decrease will realign the programs to the 2009 enacted level so 

that the IRS can reallocate these resources to fund the Increase Telephone Level of 

Service initiative. 

 

IRS-20 
Program Increases 

+$460,976,000 / +2,139 FTE 

Improve IRS.gov 

+$25,000,000 / 0 FTE 

INITIATIVE SUMMARY

This initiative requests $25 million to initiate the migration of IRS web content and 

applications from the current outdated portal infrastructures to a new consolidated IRS 

web environment. These funds will allow the IRS to complete the first phase of the 

migration of the taxpayer-facing content and applications and to initiate the second phase 

of the migration that includes the incremental build-out of the new environment for the 

Registered User Portal that provides secure public and partner-facing portals. 

INITIATIVE DETAIL

The IRS web environment consists of the three portals: 

• Public User Portal – Communicates non-sensitive information to taxpayers, tax 

practitioners, businesses, and government partners in a readily-available format; 

• Registered User Portal – Provides tax administration services to taxpayers, tax 

practitioners, businesses and government partners in a secure portal environment 

utilizing the proper identification; and 

• Employee User Portal – Enables IRS employees to access tax administration 

services in order to assist taxpayers, tax practitioners, businesses and government 

partners in a secure portal environment. 

In FY 2011, the IRS plans to build a new infrastructure for hosting the taxpayer-facing 

public portal of the IRS.gov website, including a new Content Management System 

(CMS). The CMS is a tool that will allow IRS to manage and update IRS.gov content in a 

real-time environment. In FY 2012, the IRS plans to expand the new IRS web 

environment infrastructure to host the applications currently on the Registered User Portal 

and the Employee User Portal. 

IRS-21 
The IRS will complete the consolidation of all IRS.gov content and applications in the 

three existing portal environments into the new web environment infrastructure in three 

phases. This FY 2011 initiative supplies the funding needed to complete Phase 1 and 

initiate Phase 2. 

Phase Portal Fiscal Year

1 Public User Portal 2011

2 Registered User Portal 2011/2012

3 Employee User Portal 2012 

Phase 1 – Public User Portal ($4.1 million / 0 FTE)

This initiative will complete Phase 1 and allow IRS to make full use of the new 

infrastructure and transition the IRS.gov web site content and applications to the new 

environment. To successfully migrate IRS.gov content and applications to the new web 

environment, this initiative will fund the following three major activities: 

IRS.gov Information Model will configure the new CMS to accommodate the new, more 

robust IRS.gov architecture. This will establish a much more flexible structure for the 

new CMS database than the current Content Management Application (CMA) allows. 

The IRS will then be able to enhance IRS.gov content at the same time it is being 

migrated from the current CMA. 

IRS.gov Redesign will make use of added flexibility provided by the new CMS in 

managing design elements of the site. This will result in enhanced look, feel, and 

navigation on the site thereby improving user ability to locate desired information. By 

leveraging the new web environment, the IRS will ensure that IRS.gov can adapt to meet 

user expectations. As use of the internet grows, taxpayers form expectations about their 

“user experiences” based on web sites they visit, and those expectations directly affect 

their willingness to use a web site to address their needs. The current design uses 

architecture from 2001 and a display design from 2005. IRS.gov is a highly-used, 

cost-effective channel for providing information to taxpayers; however, to maintain its 

effectiveness, IRS.gov must continue to evolve to meet taxpayer expectations. 

IRS.gov Usability will enable the IRS to create a mobile usability lab to test and assess 

the design and user interface of the new site during development to allow continuous 

improvement of IRS.gov. Online tools and tax information on IRS.gov result in fewer 

telephone calls, both to the IRS.gov Help Desk and the toll-free tax assistance lines. 

User-experience management will result in cost savings for new web applications and 

other functionality by reducing the need to make costly post-launch fixes. 

IRS-22 
Phase 2 – Registered User Portal ($20.9 million / 0 FTE) 

This initiative also will allow the IRS to begin the second phase of migration by 

incrementally building the new consolidated web environment for hosting secure 

public/partner-facing applications that are hosted on the Registered User Portal and 

transitioning approximately 35 percent of the current Registered User Portal applications 

to the new environment. 

The Registered User Portal includes three “self-authenticating” applications that 

taxpayers and tax professionals can access without pre-registration (generally through 

“shared secrets” known by both IRS and the user), and two major categories of 

applications that require pre-registration and approval by IRS. 

The three self-authenticating applications are: 

• Where’s My Refund? – Allows authorized users to look up the status of refunds 

reported on their (or their client’s) tax return; 

• Online EIN Application – Allows users to apply online for a new Employer 

Identification Number and in most cases receive the new number immediately; 

and 

• Online Payment Agreement – Allows qualified users who cannot pay the entire 

amount of taxes owed to apply online for a payment agreement that will allow 

them to make payments over time. 

The two categories of partner-facing applications requiring pre-registration are: 

• Modernized e-File – Allows authorized partners to transmit electronic tax returns 

to IRS for processing. This environment is an enhanced replacement of the 

legacy e-File environment). 

• e-Services – Allows authorized partners to access a suite of applications that 

enable them to conduct business electronically with IRS. Specific e-Services 

applications include: 

o Registration – Allows tax professionals to register online to gain access to 

other e-Services applications (for which they meet standard requirements). 

o Online e-file Application – Allows tax professionals to apply online to 

become an authorized e-File Electronic Return Originator (ERO). 

o TIN Matching Application – A pre-filing service offered to payers and/or 

authorized agents who submit any of six information returns subject to 

backup withholding, allowing users to compare payee Taxpayer 

Identification Number and name combinations before submitting 

information returns. 

o Disclosure Authorization – Allows eligible tax professionals to complete 

authorization forms, view and modify existing forms, and receive 

IRS-23 
acknowledgement of accepted submissions immediately. Disclosure 

Authorization allows tax professionals to submit Form 2848, Power of 

Attorney and Declaration of Representative, and Form 8821, Tax 

Information Authorization electronically. This e-service expedites 

processing and issues a real-time acknowledgment of accepted 

submissions. 

o Electronic Account Resolution – Allows tax professionals to expedite 

closure on clients’ account problems by electronically sending and 

receiving account related inquiries. Tax professionals may inquire about 

individual or business account problems, refunds, installment agreements, 

missing payments or notices. The IRS response is delivered to an 

electronic secure mailbox within three business days. 

o Transcript Delivery System – Allows eligible tax professionals with a 

Power of Attorney authorization on file with the IRS to request and 

receive account transcripts, wage and income documents, tax return 

transcripts, and verification of non-filing letters for a client. 

After running a pilot with one self-authenticating application and one registered user 

application. The IRS will migrate up to 35 percent of the Registered User Portal 

applications. In FY 2012, migration of the remaining Registered User Portal applications 

would be completed and the transition of all Employee User Portal applications to the 

new web environment would occur. 

EXPECTED BENEFITS

This initiative will leverage the new IRS web environment to improve self-service, 

reduce taxpayer burden, increase compliance, reduce costs, and continue to position 

IRS.gov as the preferred choice for taxpayer service. It will improve customer 

satisfaction with IRS.gov, including navigation, content quality, and search capabilities. 

The initiative will also support the Department of the Treasury’s efforts to increase the 

number of paperless transactions with the public, including progress toward the 

High-Priority Performance Goal of 81 percent of individual returns e-filed by the end of 

FY 2011. 

Transitioning IRS.gov taxpayer-facing content and applications to the new web 

environment will: 

• Replace infrastructure that has reached its end-of-life or end-of-support period; 

• Allow IRS.gov to meet the changing needs and rising expectations of its 

customers and increase customer satisfaction; and 

• Establish user experience standards and techniques that will be used to 

continually make improvements to content and applications in the new web 

environment. 

IRS-24 
Increase Telephone Level of Service 

+$20,945,000 / 0 FTE 

INITIATIVE SUMMARY

Recent legislation has led to an unprecedented demand for telephone services over the 

past few years. In addition, the additional complexity of – and time needed to resolve –

many phone calls, resulted in a decline in the telephone level of service. This initiative 

will improve the telephone level of service from a projected 71 percent in FY 2010 to a 

target of 75 percent in FY 2011 through a program increase of $11.9 million and a 

$9.0 million reallocation from TAS and the LITC, TCE and VITA grant programs. 

Without the $9.0 million reallocation, the FY 2011 level of service performance target 

would be 74 percent. 

INITIATIVE DETAIL

This initiative provides funding for the extension of seasonal employees and overtime in 

FY 2011 to allow the IRS to increase the telephone level of service, respond to increased 

workload, and enhance taxpayer service. The IRS has dealt with significant challenges 

during the past several years because of the economic downturn and legislative mandates. 

From FY 2006 to FY 2009, demand for assistor services on the telephone lines increased 

by more than 30 percent, from 45 million to more than 60 million. 

The IRS effectively addressed some of the rising demand by automating certain taxpayer 

and employee activities, including the web-based Where’s My Refund? and Employee 

Identification Number (EIN) applications, and integrated automation technology tools. 

These efficiency improvements were not sufficient to offset the increased workload 

demands. In addition, the composition of the workload has become more complex 

because of the increased automation of the less complex issues. 

The telephone Level of Service (LOS) performance measure remained above 80 percent 

from FY 2003 through FY 2007. With the increasing demand for services, the LOS 

steadily declined and customer wait times increased. In FY 2009, LOS was 70 percent 

with a customer wait time of approximately nine minutes. As wait times increase and 

LOS decreases, retries from callers increase demand and further erode telephone 

performance. 

EXPECTED BENEFITS

This investment will allow the IRS to achieve a 75 percent LOS and maintain a 

94 percent Customer Satisfaction for Toll Free Telephone Service. Without the 

$9 million reallocation from the TAS and the LITC, TCE and VITA grant programs, the 

IRS will achieve a 74 percent LOS and without the additional $11.9 million the IRS will 

achieve a 72 percent LOS. 

IRS-25 
Address Business and Individual International Compliance 

+$121,086,000 / +781 FTE 

INITIATIVE SUMMARY

This initiative requests an increase of $121.1 million and 781 FTE to support the 

Presidential priority to address offshore tax evasion and builds on the IRS FY 2010 

international enforcement initiative. It will allow the IRS to continue its multi-year 

investment in international tax compliance activities. It increases coverage of the most 

strategically important international issues, including large enterprises with international 

components operated by businesses and investors through multiple interrelated financial 

and tax entities and high-wealth individuals and the complex business enterprises they 

control. Once the new hires reach full potential in FY 2013, they will increase the 

examination of these types of returns by 4,864 and will produce an additional 

$812.2 million in estimated revenue for a return on investment (ROI) of 8.0 to 1. 

The IRS resources needed to carry out this initiative are shown below: 

Dollars in Thousands

FY 2011

Position Type/Other Costs FTE Dollars

Revenue Agent 442 $70,454 

Appeals Officer 8 1,352 

Customer Service Representative 40 3,593 

Tax Compliance Officer 57 6,031 

Special Agent 51 11,838 

Attorney 82 16,374 

Other Support Staff 69 6,515 

Data Capture Process Improvements 29 2,200 

Research Technology 3 2,729 

Total 781 $121,086 

INITIATIVE DETAIL 

The use of multi-tiered structures and transactions surfaces repeatedly in high-profile 

areas such as multinational corporations, financial vehicles, high-wealth individuals, and 

the use of domestic and international tax avoidance or evasion strategies. The IRS will 

increase coverage by addressing the compliance risk of the entire global enterprise with 

emphasis on the pass-through entity components of these businesses. Many high-wealth 

individuals have global business and financial interests or are involved in international 

transactions affecting their U.S. tax liability. To achieve proper risk assessment in 

complex enterprises, each component tax return needs to be identified and evaluated in 

terms of the information available across all of the tax returns filed by the enterprise. In 

addition, the IRS will expand the pre-filing compliance review processes, such as the 

IRS-26 
Compliance Assurance Program, to detect high-risk issues through improved 

data gathering and analysis that will complement increased corporate governance. 

Complex enterprises and transactions affect both domestic entities and global enterprises. 

In-depth analysis of the international and domestic components of foreign structures will 

improve the IRS ability to address both foreign enterprise and foreign resident 

compliance for complex reporting, filing, and payment avoidance tactics in a global 

environment. 

Underreporting – Improve Identification and Coverage of Complex Enterprise Structures 

and Transactions (+$82.5 million / +566 FTE)

The first component of this initiative will allow the IRS to address underreporting and 

improve voluntary compliance. The 566 FTE will play a vital role in addressing these 

issues on the increasing number of business and individual returns with international 

features. 

This initiative will combine skills of Tax Compliance Officers (TCO) and Revenue 

Agents (RA) as well as international examiners, flow-through return and financial 

products specialists, valuation experts, research analysts, technical advisors and subject 

matter experts to enable the IRS to increase its ability to ensure proper tax reporting of 

complex structures and transactions. This initiative will allow the IRS to: 

• Examine highly complex returns to address the non-compliant entities; 

• Address compliance risk at the enterprise level; 

• Increase coverage of pass-through entities; 

• Expand Enterprise Risk Assessment of high-wealth individuals; 

• Expand the Compliance Assurance Program to detect high-risk issues through 

improved data analysis that will complement increased corporate governance; 

• Address laws and regulations that have not kept pace with developments in 

business structures such as limited liability companies (LLCs), series LLCs (an 

LLC that organizes itself with separate pools of assets and liabilities that stands 

alone economically within a single LLC entity), and targeted allocations that do 

not follow the regulatory safe harbor for special allocations; and 

• Enable the IRS to better address foreign resident compliance. 

Partnerships, LLCs, S Corporations, and Trusts, are “pass-through” entities. The 

pass-through entity does not pay taxes on its income; instead, a pass-through entity is a 

legal form where income “passes through” to investors. The pass-through entity files an 

information return to the IRS and provides a Schedule K-1, Shareholder’s/Beneficiary’s/ 

Partner’s Share of Income, Deductions, Credits, to each owner allocating the share of 

certain specified income, loss, deduction, and credit items. The pass-through entity is 

frequently owned by individuals. The S Corporation may be owned only by individuals 

IRS-27 
and certain trusts for individuals. Partnerships may be owned by individuals, 

corporations, partnerships, and trusts. 

The complexity of enterprise structures and transactions reduces transparency and creates 

opportunities for underreporting and non-reporting. The enormous amount of money that 

flows through pass-through entities and is held in different countries adds to the 

complexity of tax administration and increases the opportunities for underreporting of 

income. In tax year 2006, these pass-through entities filed 10.8 million returns (Forms 

1065, U.S. Return of Partnership Income; Forms 1120S, U.S. Income Tax Return for an 

S Corporation; and Forms 1041, U.S. Income Tax Returns for Estates & Trusts) with 

total income of $4.1 trillion and ordinary business income (taxable income for Forms 

1041) available to shareholders/beneficiaries of more than $753 billion. The IRS projects 

a small increase, 1.2 percent, in total Form 1120, U.S. Corporation Income Tax Return, 

filings from FY 2007 through FY 2015. In contrast, the pass-through entity population 

increase for the same period is expected to be much larger. For example, Forms 

1120S are projected to increase by 38.1 percent, and Forms 1065 are projected to increase 

49.1 percent. 

In recent years, the IRS has observed the following trends: 

• In tax year 2007, partnership returns indicated that 72.1 percent of the 

pass-through entity filing population are multi-tiered in such a way that the 

entities themselves are either members/partners/shareholders of higher-level 

entities, or have members/ partners/shareholders that are pass-through entities 

themselves; 

• In tax year 2006, more than 3.1 million partnerships earned ordinary business 

income of more than $369 billion for their individual partners;

• In tax year 2006, more than 4 million S Corporations earned ordinary business 

income of approximately $302 billion for their individual shareholders; and 

• In tax year 2006, almost 3.7 million Estates and Trusts earned nearly $82.3 billion 

in taxable income for their beneficiaries. 

Complex enterprises often operate in multiple jurisdictions. The entity might choose a 

structure regarded as a corporation in the U.S. and a partnership in another country, or the 

reverse. Such hybrid structures must be considered in a risk assessment. An indicator of 

risk for international aspects of complex enterprises is found in the December 2008 

Government Accountability Office (GAO) report GAO-09-157, Large U.S. Corporations 

and Federal Contractors with Subsidiaries in Jurisdictions Listed as Tax Havens or 

Financial Privacy Jurisdictions. The report indicates that 83 of the 100 largest 

publicly-traded U.S. corporations, in terms of 2007 revenue, reported having subsidiaries 

in jurisdictions listed in low-or-no tax countries or financial privacy jurisdictions. The 

requirement of Schedule M-3, Net Income(Loss) Reconciliation, Part I lines 5 and 6 to 

disclose related-party information, including foreign entities, will increase transparency 

and will improve the identification of risks on the entire enterprise structure. 

 

IRS-28 
Complex business structures are not limited to the corporate arena. Tax-exempt 

organizations and employee pension plans may initiate complex business arrangements of 

their own, or they may be used in complex arrangements by third parties for the purposes 

of tax avoidance. This initiative will provide additional examination resources to 

improve the IRS ability to detect, pursue, and rectify noncompliance using certain 

tax-exempt arrangements. Some potential areas for increased scrutiny and enforcement 

include: 

• Rollovers as business startup (ROBS) plans are established to allow plan 

participants to access qualified plan retirement funds while avoiding the 

assessable taxes and penalties that are attached to the distribution. Funds are used 

to startup a new business; 

• Maintenance of domestic trusts by foreign entities sponsoring qualified pension 

plans; 

• Use of disregarded entities by charities and other exempt organizations; 

• Transfers of highly appreciated property to charitable family-limited partnerships, 

a large percentage of which is then gifted to genuine charitable (501(c)) 

organizations; and 

• Transferring ownership of gifts-in-kind through multiple charities to inflate 

charitable activities on Form 990, Return of Organization Exempt from Income 

Tax. 

Data Capture Process Improvements (+$2.2 million / +29 FTE)

The second component of this initiative includes 29 FTE for data capture to support 

critical compliance information systems. This will allow the IRS to increase the use of 

existing systems to capture other electronic data through scanning and imaging of 

residual paper documents. These residual paper returns include international information 

returns, paper-filed Schedule M-3s, certain flow-through filings, and returns not 

mandated to be filed electronically. Capturing the data will allow better and quicker 

identification of abusive transactions related to complex enterprise structures and 

transactions. 

Combat Multi-Jurisdictional Tax Evasion Schemes (+$12.3 million / +56 FTE) 

The last component of this initiative funds additional Special Agents to combat tax 

evasion involving taxpayer entities or transactions that are complex and 

multi-jurisdictional. These entities have an international nexus requiring sensitive 

cross-border coordination by providing resources to: 

• Develop and coordinate investigations through two expanded Criminal 

Investigation (CI) task forces focusing on taxpayers and transactions with an 

international nexus: 

IRS-29 
o The International Task Force, located on the East Coast, with a geographic 

focus on Europe and the Middle East; and 

o The Pacific Rim Task Force located on the West Coast, with a geographic 

focus on Pacific Rim countries, particularly those in Southeast Asia. 

• Handle the increased investigative workload in Field Offices generated from: 

o Expanded examinations of international transactions on large and mid-size 

complex business returns, individual foreign residents and nonresident 

aliens, and small pass-through entities and corporations with significant 

international activity; 

o Expanded attaché presence overseas; 

o Expanded international task forces; and 

o The IRS Whistleblower Program. 

Tax planning is becoming increasingly focused on worldwide tax rate minimization. As 

a result, taxpayers often have an incentive to adopt structures (parallel banking schemes, 

such as the Black Market Peso Exchange) or arrangements (abusive trust transactions) 

that maximize U.S. expenses or shift income abroad. While many cross-border 

transactions are clearly addressed under U.S. domestic law or treaty provisions, others 

involve emerging issues that may constitute unacceptable tax avoidance or evasion and 

pose an increasingly serious risk to the U.S. tax base. 

In addition to protecting the tax base, these resources will allow the IRS to work more 

effectively with other Department of the Treasury organizations, the Department of 

Justice, and other law enforcement partners to combat corporate fraud, terrorist financing 

and financial aspects of other criminal activity. Globalization of the world economy and 

financial systems has allowed tax evaders and money launderers to exploit domestic and 

international funds transfer methods to hide illicit and untaxed monies. Money 

laundering allows criminals and criminal organizations to conceal illegal income in an 

untaxed underground economy and is an essential part of many tax evasion schemes. 

CI’s International Task Force has been very successful in developing working 

relationships with many sources from which it receives information to develop 

investigations. Current investigations have the potential of additional forfeitures of 

hundreds of millions of dollars. Additionally, the policies of some offshore banks likely 

will change as they are held accountable. While the taskforce has been very successful, 

many potential cases were not pursued because of insufficient resources. 

The Pacific Rim Grand Jury Task Force will target offshore financial schemes involving 

individuals using foreign financial accounts, credit or debit cards, trusts, corporations, 

partnerships, and other entities. It will analyze leads, investigate subjects and coordinate 

judicial actions across the U.S. for these complex and multi-jurisdictional cases. 

IRS-30 
There is a significant positive spillover effect on tax compliance when successful 

criminal enforcement actions are reported in the media. Recent successes with complex, 

sensitive international investigations have led to increases in voluntary disclosures. 

This initiative will allow the IRS to increase its ability to identify and pursue remedies for 

emerging complex international issues that may constitute unacceptable tax avoidance or 

evasion. Prosecutions with the associated publicity will allow the IRS to maximize the 

deterrent effect of its activities, increase voluntary disclosures, increase numbers of 

potential tax evaders identified, and increase tax revenue dollars collected. Remedies 

also will include increased seizure of assets where appropriate, and the application of 

pressure for policy changes by financial institutions in tax haven countries through 

increased legal actions that hold them accountable by all legal means. 

This initiative will increase the number of investigations worked in the complex 

international arena, and will result in 51 more case closures in FY 2013. 

OTHER DIRECT COSTS

The IRS Appeals division (+$1.7 million / +10 FTE) The IRS activity associated with 

this initiative will generate a minimum of 81 new Partnership, S Corporation and 

C Corporation cases and 84 related cases to Appeals. Although the increase in the 

number of cases is small, the workload increase is substantial, with each case and tiered 

entity requiring, on average, several hundred hours of work. An additional ten Appeals 

Officer positions are required to work the projected additional 165 cases. 

The Taxpayer Advocate Service (TAS) (+$0.1 million / +1 FTE) will ensure the IRS 

follows appropriate procedures and does not create unnecessary burden or compromise 

taxpayer rights. TAS uses a workload projection model to project TAS inventory based 

on expected IRS operating division work. Applying this ratio to the FY 2011 increase 

yields an additional 159 TAS cases attributable to this initiative. 

The IRS Office of Chief Counsel (+$19.6 million / +116 FTE) Counsel will provide 

increased legal advice and assistance to the teams and technical advisors engaged in these 

complex examinations. Counsel attorneys will assist in all phases of the examination 

process. They will assist in the development of technical advice, litigation positions, and 

published guidance to address significant issues arising from the increased coverage of 

complex enterprises and high-risk taxpayers. The complex nature of the taxpayers and 

returns examined under this initiative will generate highly technical questions that will 

need to be addressed on a national level. 

The IRS Office of Research Analysis and Statistics (+$2.7 million / +3 FTE) The 

identification of abusive transactions in corporations, partnerships, high-wealth 

individuals, and tax-exempt entities is extremely difficult. Many schemes are complex 

and frequently cross-operational boundaries. The economic enterprise of many abusive 

transactions does not correlate to the IRS data structure of Individual and Business 

Master Files (IMF and BMF) which were not designed to identify abuse hidden in the 

relationship between the entities. Rather, these master files process tax return data on a 

IRS-31 
given taxpayer, one at a time. The volume of data associated with schemes can be so 

voluminous that the analysis of the data and the presentation of its complexities in an 

understandable, cohesive manner can only be accomplished using advanced computer 

technologies. 

This initiative funds the technology needed for examiners to use specialized tools and 

technologies to detect unknown abuses and trends. 

Combining tools for a focused strategy to identify tax avoidance transactions is a key 

element in the initiative to promote compliance with large and wealthy taxpayers. The 

applications will provide research capabilities to all parts of the IRS that need to address 

complex entities. A variety of workload selection and issue detection models will 

provide a queue of cases to be reviewed by issue specialists. Existing workload selection 

rules and filters will be augmented with additional data sources to develop a case file. 

This research will: 

• Allow the IRS to identify abusive transactions and emerging trends; 

• Promote collaboration for cases that cross operating divisions; 

• Centralize several disparate data sets into a cohesive data sharing strategy; and 

• Eliminate the need for separate, narrowly-focused applications by creating an 

enterprise-wide database with technologies that can be used by all divisions 

working complex cases involving flow-through and high-wealth issues. 

EXPECTED BENEFITS

Once the new hires reach full potential in FY 2013, they will increase the number of 

examinations of corporate, pass-through, international, individual and other related 

returns by 4,864, producing an additional $812.2 million in revenue and provides an 

expected ROI of 8.0 to 1. 

 

ROI 

$900 $812.2

$800

$700 $623.5

s

$600

nio

$500

ill m

$400 $300.8

in

$300

$200 $121.1 $103.8 $101.3

$100

$0

FY 2011 FY 2012 FY 2013

Cost

8.0 to 1

6.0 to 1

2.5 to 1

Enforcement Revenue

IRS-32 
Reduce the Reporting Compliance Tax Gap 

+$77,679,000 / +700 FTE 

INITIATIVE SUMMARY

This initiative requests an increase of $77.7 million and 700 FTE to improve compliance 

by increasing audit coverage in critical areas including business and high-income audits. 

The additional resources will increase enforcement capacity to reduce the reporting 

compliance tax gap. Individual return filings from FY 2008 through FY 2011 are 

expected to grow 5 percent. The IRS needs these additional examination resources to 

maintain the current audit coverage rate of approximately 1 percent for individual returns. 

Once the new hires reach full potential in FY 2013, this initiative will produce 

305,600 more audits, producing additional annual enforcement revenue of $659.6 million 

with an ROI of 10.0 to 1 by increasing: 

• Examinations of businesses, high-income individuals, and specialty program 

returns; 

• Audits involving flow-through entities; and 

• Coverage of the Automated Underreporter (AUR) Program 

INITIATIVE DETAIL

Underreporting Compliance (+$59.0 million / +527 FTE)

This initiative will increase staff by 212 Revenue Agents (RAs), 36 Tax Compliance 

Officers (TCOs), 90 Specialty Field Examination Attorneys, RAs and TCOs, 

125 Correspondence Examination Tax Examiners, and 64 support personnel. These 

resources will preserve the balanced coverage approach of all taxpayer segments with a 

focus on addressing high-risk tax gap areas. In FY 2011, this increase will generate 

additional revenue of $109.2 million, and once staff reach full potential in FY 2013, this 

investment would produce 71,600 more audits and generate $433.9 million each year. 

Field Examination 

The RAs will focus on high-priority segments of the tax gap such as Abusive Tax 

Avoidance Transactions (ATAT), structured transactions, and corporate and high-income 

examinations involving flow-through entities (e.g., trusts, partnerships, and 

S Corporations). 

The RAs and TCOs FTE will examine an additional 5,800 individual income tax returns 

and 900 business income tax returns in FY 2011. Once new hires reach full potential in 

FY 2013, this investment is projected to generate additional revenue of $210.7 million 

and produce an additional 8,100 individual return audits and 1,200 business return audits. 

IRS-33 
Specialty Tax Programs 

Specialty Programs address the tax gap by examining tax returns and addressing 

compliance issues in the Employment, Excise, and Estate and Gift Tax Programs. 

• Employment Tax Program - The Employment Tax Program will work with 

external stakeholders to update and improve the voluntary tip agreements offered 

to taxpayers and to develop new agreements that improve compliance and reduce 

taxpayer burden. The program will address additional workload from large and 

medium-sized business nonfilers and the Combined Annual Wage Report 

program. It will focus on the major reporting compliance areas of fringe benefits, 

officer compensation, tip audits and worker classification. 

The additional Employment Tax RA and TCO FTE will conduct approximately 

7,500 more tax audits in FY 2011 and generate $14.5 million more in revenue. 

Once new hires reach full potential in FY 2013, this investment is projected to 

generate additional revenue of $31.1 million and produce an additional 

8,300 return audits. 

• Excise Tax Program - Excise taxes are taxes paid on purchases of a specific good, 

such as gasoline. Excise taxes are often included in the price of the product. There 

are also excise taxes on activities, such as on wagering or on highway usage by 

trucks. In FY 2011, the IRS will continue to address the fuel tax gap and extend 

tax compliance efforts by establishing an international group focusing on foreign 

insurance products and foreign entities owing aviation tax. 

The additional Excise Tax RAs and TCOs FTE will conduct approximately 

600 new examinations in FY 2011 generating $2.9 million in revenue. Once new 

hires reach full potential in FY 2013, this investment is projected to generate 

additional revenue of $6.7 million and produce an additional 800 return audits. 

• Estate and Gift Program - There has been erosion in the estate tax audit rate 

because filing volumes have not declined as expected, and the planned 28 percent 

coverage rate for estates of more than $5 million is projected to slip to 22 percent 

in FY 2009 and FY 2010. 

Additional resources in FY 2011 would restore the 28 percent coverage rate for 

estates of more than $5 million. The additional attorneys will conduct 

approximately 100 audits in FY 2011, generating revenue of $11.6 million. Once 

new hires reach full potential in FY 2013, this investment is projected to generate 

additional revenue of $25.6 million and produce an additional 200 return audits. 

Correspondence Examination 

The Correspondence Examination program addresses the tax gap through increased 

enforcement presence in priority segments of individual reporting compliance, including 

itemized deductions and education credits. These resources will deter more taxpayers 

from evading their tax obligations, and thereby support the IRS goal of increased 

voluntary compliance. The additional FTE will examine approximately 20,000 more 

IRS-34 
cases in FY 2011 with an estimated $73.5 million in additional revenue. Once new hires 

reach full potential in FY 2013, this investment is projected to generate additional 

revenue of $159.8 million and produce an additional 53,000 individual return audits. 

 

Automated Underreporter (AUR) (+$10.6 million / +116 FTE)

The objective of the AUR program is to minimize revenue loss through document 

matching of taxpayer account information. Approximately 7.7 million Small 

Business/Self-Employed (SB/SE) taxpayers may currently misreport their income based 

on third party information returns. Of those, the SB/SE AUR program processes 

approximately 2.5 million taxpayer cases, leaving an unaddressed gap of 5.2 million 

taxpayers. 

This investment will increase staff resources by 110 Tax Examiners and 6 support FTE, 

who will reconcile approximately 193,000 additional tax returns, generating 

approximately $102.5 million in revenue. Once new hires reach full potential in 

FY 2013, this investment is projected to produce an additional 234,000 individual return 

audits, generating $225.7 million in revenue. 

 

Implement Legislative Proposals to Improve Compliance (+$2.1 million / +19 FTE)

The IRS will establish a new unit in the AUR program to implement the requirements 

contained in Section 3091 of the Housing and Economic Recovery Act of 2008 (Public 

Law 110-289). This legislation requires merchant payment card and third party network 

card entities to report the amount of transactions and the name, address and Taxpayer 

Identification Number (TIN) of each payee receiving payments from reportable 

transactions. This new AUR unit will test and validate the software and evaluate the new 

procedures essential to working with business taxpayers before full implementation of 

this new document-matching program in FY 2012. 

OTHER DIRECT COSTS

The IRS Appeals Division (+$3.1 million / +21 FTE) supports examination efforts on 

key compliance areas focused on improving voluntary compliance. Appeals additional 

resources will yield resolution of Examination Appeals and Docketed Tax Court cases. 

The IRS Office of Chief Counsel (+$2.4 million / +13 FTE) will provide legal advice 

and assistance to Field Examination at the audit stage of cases involving abusive tax 

avoidance transactions, corporate and high-income examinations involving pass-through 

entities, and structured transactions; litigate those cases that are not resolved at the audit 

or appeals stages and advise examiners hired to do employment tax examinations in the 

Specialty Tax Program. 

Funding for the Taxpayer Advocate Service (+$0.5 million / +4 FTE) will be applied to 

examination programs to ensure the IRS follows appropriate procedures and does not 

create unnecessary burdens or compromise taxpayers’ rights. 

IRS-35 
EXPECTED BENEFITS

This request will produce 305,600 more audits and generate $659.6 million in additional 

annual enforcement revenue once new hires reach full potential in FY 2013 for an 

expected 10.0 to 1 ROI. 

ROI 

$700 $659.6

$600 $519.6

$500

snio

$400

lli m

$300

ni

$211.7

$200

$77.7 $100 $68.6 $65.8

$0

FY 2011 FY 2012 FY 2013

Cost

10.0 to 1

7.6 to 1

2.7 to 1

Enforcement Revenue

IRS-36 
Reduce the Nonfiling and Underpayment Tax Gap

+$38,181,000 / +406 FTE 

INITIATIVE SUMMARY

This initiative requests $38.2 million and 406 FTE to allow the IRS to broaden its 

collection coverage and address the tax gap more effectively by increasing the resources 

for field collection and the Automated Collection System (ACS) program. The additional 

resources will allow the IRS to increase efforts to bring taxpayers who fail to file or fail 

to pay their tax debt into compliance, laying the foundation for future voluntary 

compliance. At full performance in FY 2013, this initiative will produce 166,500 more 

case closures and generate $474.4 million in additional revenue for an ROI of 14.2 to 1. 

INITIATIVE DETAIL

Nonfiling/Underpayment (+$30.3 million / +318 FTE)

This investment will increase staff resources in field collection by 26 Revenue Officers. 

ACS campus compliance staff resources will increase by 238 Customer Service 

Representatives and 54 support personnel to complete the investment made in the 

FY 2010 budget for the build out of two Automated Collection sites. These additional 

resources will increase the coverage of high income non-filers and work cases generated 

by balance due and delinquent return notices. It will provide an increased focus on 

decreasing nonfiling and improving voluntary compliance. 

In recent years, non-filers with high incomes and higher amounts of net tax due have 

dominated the non-filer population. Revenue Officers and Campus Compliance 

employees use an array of techniques to address nonfiling, including the creation of 

compliance assessments based upon available internal and third-party information. 

Additional staffing will increase coverage of potentially collectible inventory (PCI). PCI 

represents total unpaid assessments available for collection actions. PCI increased from 

$81 billion in 2004 to $113 billion in 2008. New PCI compliance assessments increased 

from $14 billion in 2004 to $26 billion in FY 2008. 

Field Collection 

The additional Field Collection staff will produce an estimated 700 additional tax 

delinquency accounts (TDA) (i.e., balance due accounts where returns were filed, but the 

taxes have not been paid) and 400 additional tax delinquency investigations (TDI) 

(i.e., investigations of taxpayers with unfiled returns and who have not responded to a 

notice) in FY 2011 generating revenue of $7.3 million. Once new hires reach full 

potential in FY 2013, this investment is projected to produce an additional 1,000 TDAs 

and 500 TDIs, generating $17.7 million in revenue. 

IRS-37 
Automated Collection System (ACS) 

The additional ACS staff will produce approximately 48,000 tax delinquency accounts 

and 10,800 tax delinquency investigations in FY 2011 yielding approximately 

$200.0 million in revenue. Once new hires reach full potential in FY 2013, this 

investment is projected to produce an additional 143,000 TDAs and 22,000 TDIs, 

generating $456.6 million in revenue. 

Centralized Offer in Compromise (COIC) (+$4.2 million / +50 FTE)

The challenges existing within the economy have led to changes in the Offer in 

Compromise (OIC) program. In conjunction with the IRS Commissioner’s Economic 

Challenge initiative, there has been a significant increase in the number of OIC 

submissions. In addition to taxpayers experiencing greater difficulty in meeting their tax 

obligations, more requests are being considered and worked to final disposition. 

FY 2009 OIC receipts have increased 9 percent over projections, and a 3 percent increase 

is expected in future years. 

The Commissioner’s initiative is an effort to consider reduced asset equity, primarily 

personal residences, as a basis for reviewing financial analysis statements. COIC will 

take extra measures to ensure that values placed on properties are realistic and offers 

previously rejected due to inflated equity values will be reconsidered. These efforts are 

expected to provide taxpayers with an increased incentive for improving voluntary 

compliance. 

Centralized Insolvency Operation (+$2.5 million / +30 FTE)

The state of the economy has led to significant increases in bankruptcy filings. FY 2009 

receipts in the Insolvency Unit increased 35 percent, and bankruptcy filings increased 

24 percent with expectations that this trend will continue. The additional resources will 

protect IRS interests in collection cases, provide litigation transcripts, and discharge or 

dismiss cases when appropriate. 

OTHER DIRECT COSTS

Appeals (+$0.5 million / +4 FTE) will address filing and payment compliance by 

supporting the increased coverage of taxpayers who fail to file returns or who underpay 

their tax liability. These additional FTE are necessary if Appeals is to adjudicate 

successfully the more than 350 projected Appeals cases generated by this initiative. 

The IRS Office of Chief Counsel (+$0.6 million / +3 FTE) will provide legal advice and 

assistance in litigating the increased number of cases, support for additional tax shelter 

litigation, published guidance, and will conduct tax reform-related work pertaining to 

cases involving small business and self employed taxpayers. 

Counsel will provide Field Collection with legal advice and assistance in high-risk and 

high-yield collection cases and cases involving the collection of taxes due from abusive 

IRS-38 
trusts, as well as by supporting the Department of Justice in litigating such cases. 

Collection Due Process cases involving employment tax issues have recently been 

transferred from the United States District Courts to the United States Tax Court. 

The Taxpayer Advocate Service (+$0.1 million / +1 FTE) will ensure that the IRS 

follows appropriate procedures and does not create unnecessary burdens or compromise 

taxpayer rights. 

EXPECTED BENEFITS

This request will produce 166,500 more case closures and generate $474.4 million in 

enforcement revenue with an ROI of 14.2 to 1 once new hires reach full potential in 

FY 2013.

ROI 

$500 $474.4

$450

$400 $369.5

$350

sn

$300

lioil

$250 $207.3

 m

$200

in

$150

$100 $38.1 $50 $33.5 $33.5

$0

FY 2011 FY 2012 FY 2013

Cost

14.2 to 1

11.0 to 1

5.4 to 1

Enforcement Revenue

IRS-39 
Support for Increased Enforcement Activities 

+$5,000,000 / +65 FTE 

INITIATIVE SUMMARY

This initiative requests $5.0 million and 65 FTE to fund the Accounts Management staff 

needed to support rapidly expanding enforcement activities. This funding is required to 

assist taxpayers to resolve issues early in the enforcement process and respond to and 

close various enforcement actions. Improving the response to taxpayers who have 

received enforcement notices should increase revenue and reduce interest paid. 

INITIATIVE DETAIL

Most tax enforcement actions result in downstream Accounts Management activities, 

including account adjustments, assisted phone calls, amended returns, and installment 

agreement preparation. The IRS sends notices to taxpayers as the primary method to 

collect taxes due and resolve taxpayer issues. The IRS receives 123 phone calls from 

taxpayers for every 1,000 notices mailed. 

The increase in enforcement activities has contributed significantly to the more than 

35 percent increase in notices sent to taxpayers since FY 2004 with 95 percent of the 

notices referring the recipient to a taxpayer service phone line. In 2009, the IRS: 

• Mailed more than 126 million notices to taxpayers, a 12 percent increase over 

FY 2008; 

• Established more than $6.0 billion in installment agreements, a 21 percent 

increase over FY 2008, and Taxpayer Service answered questions from taxpayers 

for 79 million enforcement-related notices; 

• Adjusted almost 12 million post-filing tax accounts through assisted service and 

processed 8 percent more individual amended returns; and 

• Answered 11.6 percent more phone calls, with individual “balance due” calls 

alone exceeding 3.9 million. 

Insufficient staffing of taxpayer service is costly. Late processing of amended returns in 

2009 resulted in interest payments to taxpayers of $35.4 million, a 9.6 percent increase 

over FY 2007. Without this initiative, insufficient staff levels may result in reduced 

revenue collected, increased interest paid, and a delay for taxpayers attempting to resolve 

enforcement issues. 

EXPECTED BENEFITS

This initiative will allow the IRS to help taxpayers resolve issues faster and improve 

customer satisfaction. 

IRS-40 
Maintain Recovery Act Staffing 

+$5,500,000 / +31 FTE 

INITIATIVE SUMMARY

This initiative requests $5.5 million and 31 FTE to extend staffing resources the IRS 

received in the American Recovery and Reinvestment Act of 2009 (Recovery Act) 

(Public Law 111-5). Before the Recovery Act, the value of outstanding tax-exempt debt 

had soared to more than $2.7 trillion in 2008. The Recovery Act and other economic 

recovery proposals incorporated significant infrastructure investments that will accelerate 

this trend. In addition, the Recovery Act added many new types of bond financings (such 

as clean renewable energy bonds) that also will increase activity in this area. 

Among other responsibilities, the IRS is mandated by the Recovery Act to administer 

these new bond provisions. The IRS is required to issue a direct payment to the bond 

issuer. For example, under the Build America Bond provisions, the IRS will issue a 

35 percent payment and under the Recovery Zone Economic Development Bond 

provisions, the IRS will issue a 45 percent payment to bond issuers. The unique nature of 

this new role requires continuous compliance reviews and verification throughout the 

administrative life of the bonds. 

 

INITIATIVE DETAIL

The IRS will administer the Build America Bonds (BABs) program and implement 

compliance programs related to several new types of tax credit bonds. The initial 

compliance begins with eligibility reviews of the following bonds: 

• Build America Bonds Recovery; 

• Recovery Zone Economic Development Bonds; 

• Tribal Economic Development Bonds; 

• Qualified School Construction Bonds; 

• Qualified Zone Academy Bonds; 

• Qualified Energy Conservation Bonds; and 

• New Clean Renewable Energy Bonds (CREBs). 

In addition to the initial eligibility verification, the IRS implemented a compliance 

system to administer, process, and monitor requests for direct federal credit payments. 

Through Forms 8038-CP, Return for Credit Payments to Issuers of Qualified Bonds, 

issuers of BABs may opt to receive a direct payment from the IRS equivalent to 

35 percent of the interest costs. The IRS performs a compliance check of each request 

before issuance of the credit payment and, when appropriate, refers the underlying return 

for audit. The IRS began making these payments in July 2009. Due to the length of bond 

maturities, the compliance system may need to operate for 30 years or more. 

IRS-41 
By continuing to staff current levels for Build America Bonds, the IRS will further 

enhance compliance with the development of a multi-faceted compliance program, which 

will implement the following improvements: 

• Enhance the payment process, the compliance process, and the process for 

tracking tax credits, particularly, as it relates to tax credit stripping (packaging and 

remarketing of tax credits); 

• Perform compliance contacts for all BABs direct pay issuances within one year of 

their issuance through compliance check questionnaires; 

• Develop focused examination initiatives based on compliance issues identified 

from the questionnaires and other sources; 

• Develop classification guidelines for a general examination program and initiate 

examination programs directed towards achieving an appropriate rate of coverage 

of BABs and other types of tax-credit bonds; and 

• Enhance monitoring of Form 8038-CP, Return for Credit Payments to Issuers of 

Qualified Bonds, for federal credit payments requests. 

The IRS needs to retain the staffing funded by the Recovery Act since these bond 

financings are expected to comprise a significant portion of the bond market. Issuers of 

new bond financings are now required by law to file information returns, Form 8038-G, 

Information Return for Tax-Exempt Governmental Obligations. The IRS is responsible 

for processing volume cap applications, coordinating form revisions, return processing, 

and providing taxpayer assistance and outreach with respect to these financings. In 

addition, because of the length of maturity for some of these bonds, resources may be 

necessary to provide ongoing tax administration and enforcement for 30 years or more. 

EXPECTED BENEFITS

This initiative will address the tax administration responsibilities required by the 

Recovery Act. The additional resources will achieve the following benefits: 

• Provide resources to increase total enforcement contacts to include compliance 

contacts related to BAB and other new tax credit bonds. 

• Meet the IRS goal of 100 percent compliance checks on Forms 8038-CP (filed 

semi-annually). The IRS projects the issuance of 500 BABs in FY 2009 and the 

doubling of BAB issuances each year through 2013. 

• Revise the voluntary compliance programs, coordinate the publication of 

regulations and other formal guidance with Chief Counsel, and provide new 

education and outreach programs to the tax-exempt bond market to assist 

taxpayers in understanding and complying with applicable tax laws. 

• Increase prevention, detection, and remediation of noncompliant bond 

transactions. 

IRS-42 
• Prevent shifting resources from the Tax Exempt Bond (TEB) division general 

program to Recovery Act administration to ensure adequate oversight of the new 

requirements. Shifting resources from the general program to meet the underlying 

Recovery Act demand would decrease the number of general program 

examinations from 550 in FY 2009 to zero in FY 2012; and the number of TEB 

non-Recovery Act compliance checks from 275 in FY 2009 to zero in FY 2012. 

This would widen the coverage gap in the tax-exempt bond market and potentially 

dramatically increase the undetected abusive transactions. 

IRS-43 
Continue Migration from Aging Tax Administration System 

+$167,585,000 / +156 FTE 

INITIATIVE SUMMARY 

This initiative requests $167.6 million and 156 FTE for Business Systems Modernization 

(BSM) to: 

• Continue the development and deployment of BSM projects ($122.1 million and 

156 FTE in the BSM appropriation and $3.5 million in the Operations Support 

appropriation for overhead costs related to the new hires); and 

• Fund the Operations and Maintenance (O&M) costs of deployed modernization 

systems ($42.0 million in the Operations Support appropriation). 

The $123 million increase to the BSM appropriation (the BSM program increase of 

$122.1 million plus inflation of $.889 million) is a 46.6 percent increase from the 

FY 2010 enacted level. This increase requests a total appropriation of $386.9 million and 

is allocated as shown below. 

FY 2011 BSM Project Activities

FY 2011 $ Change FY 2009 FY 2010 President's Project Business Systems Modernization Initiatives Enacted Enacted 1 FY 2010 to Budget 

Request2,3 FY 2011

CADE 2

(Taxpayer Account Complete the taxpayer account database for 2012 filing season. 29.500 58.100 152.119 94.019

Database)

Current CADE Implement tax law changes and enhance the overall security posture. 48.600 38.000 40.000 2.000

Complete Form 1040 Phase III, including 137 more supporting schedules 

and forms that will expand the reach of Modernized e-File to 100 percent 

Modernized e-File of the e File population, or approximately 98.3 million filers. Funding also 25.000 50.000 39.100 -10.900

includes work to begin logical design to deliver Form 94X family of forms, 

Employment/ Unemployment Tax .

Provide services in architecture, engineering and deployment of 

standardized, consolidated, virtual and secure modernized development 

Core Infrastructure environments (DITE) and shared infrastructure components (Employee 43.250 32.000 38.500 6.500

User Portal, Registered User Portal, and Security) of the production 

environments. 

Provide system engineering management capabilities including systems 

strategy, architecture, and engineering capabilities across IT Infrastructure, 

Business Applications, Data Management and IT Security. Provide Architecture, Integration, project integration and management processes and tools including 35.000 28.085 37.000 8.915 and Management governance, enterprise lifecycle support, tiered program management, 

business rules and requirements, transition management, cost estimation, 

configuration/change management and risk management.

Management Reserve 3.358 11.712 10.000 -1.712

Subtotal Capital Investments 184.708 217.897 316.719 98.822

 Total BSM Labor 45.206 46.000 70.189 24.189

Total BSM 229.914 263.897 386.908 123.011

1

 The FY 2010 Enacted column reflects proposed allocation based on $10.223 million increase received in enacted budget.

2

 The BSM appropriation excludes $3,463,200 for the overhead costs related to the new hires and $42,000,000 for the operations and maintenance of deployed 

modernization project releases. These costs are included in the Operations Support appropriation.

3 BSM labor Includes $889,000 of inflation costs. 

IRS-44 
INITIATIVE DETAIL

The BSM increase is a top priority of the IRS and will allow completion of the new 

taxpayer account database for the 2012 filing season. The new taxpayer account database 

will expedite refunds to 140 million individual taxpayers, improve service accuracy and 

timeliness, enhance data security, and make progress toward addressing the financial 

statement audit material weakness. Completion of the core taxpayer account database is 

the cornerstone of modernization, and a prerequisite for other major initiatives such as 

significant expansion of online paperless services and next generation enforcement 

technologies. The ability of the IRS to support increasingly complex taxpayer service 

and compliance initiatives will be severely limited until it is completed. 

Customer Account Data Engine (CADE) 2 (+ $94.0 million)

This initiative funds completion of the new taxpayer account database for the 2012 filing 

season. The new database will operate in a daily processing environment. This daily 

processing cycle will enhance taxpayer service by allowing all individual taxpayers who 

file electronically to receive direct deposit refunds in less than 10 days, on average five 

days faster than in the legacy system. More timely, accurate, and complete data will 

result in improved service to taxpayers (e.g., faster account adjustments and faster 

resolution of taxpayer account issues). 

The new database will provide a single source of authoritative individual core taxpayer 

data in a relational database, will support sophisticated next-generation compliance 

systems and will move the IRS away from the legacy, flat-file data storage model. 

CADE 2 will: 

• Continue the IRS focus on moving away from 1960s technology (i.e., aging 

infrastructure, applications and sequential, flat file processing); 

• Address financial material weaknesses, demonstrate compliance with Federal 

Financial Management System Requirements (FFMSR), and maintain the IRS 

clean audit opinion; 

• Improve data security and privacy posture; 

• Establish a solid data foundation for the future by leveraging the relational 

database processing capabilities; and 

• Demonstrate substantive progress toward achieving long-term viability. 

These goals will be met as CADE 2 delivers the following functionality and activities: 

• Establish an authoritative database for individual taxpayer accounts; 

• Replace the current individual master file applications, as well as current CADE 

applications with a single, state-of-the art solution; 

IRS-45 
• Expand the Integrated Production Module (IPM) to include additional data 

elements not currently in IMF and build an interface from the authoritative 

database for individual taxpayer accounts to IPM;

• Provide daily outputs to the Integrated Data Retrieval System (IDRS) and other 

downstream systems as they are able to support daily processing. 

Completing the taxpayer account database for the 2012 filing season is the first step in 

achieving these goals. As a result of the transition to a daily processing environment, the 

Integrated Data Retrieval System will receive more timely and accurate data. In addition, 

the data population of the Integrated Production Module will provide more tools to 

enhance compliance and improve customer service. Enhanced data security also will be 

in place. 

Current CADE (+$2.0 million)

The IRS requests $40 million total, $2 million more than 2010 enacted, to fund updates to 

current CADE for any tax law changes and the operations and maintenance of the system. 

Modernized e-File (MeF) (-$10.9 million)

MeF provides a standard filing structure for all IRS return types, a robust platform, 

enhanced and up-to-date technologies, and customer service benefits. MeF stores all tax 

return data in XML format in a modernized Tax Return Database allowing all authorized 

viewers of the data to see an entire tax return online over the internet. 

The IRS has completed the implementation of MeF Form 1120, U.S. Corporation Income 

Tax Return, Form 1120-S, U.S. Income Tax Return for an S Corporation, Form 990, 

Return of Organization Exempt from Income Tax and Form 1065, U.S. Return of 

Partnership Income. In January 2008, MeF Release 5 added Form 1120-F, U.S. Income 

Tax Return of a Foreign Corporation along with the Federal Form 990 N, Electronic 

Notice (e-Postcard) for Tax-Exempt Organizations Not Required to File Form 990 or 

990-EZ. 

FY 2011 funding will start the migration of the 94X family of forms, Employment/ 

Unemployment Tax, to the MeF platform, which includes annual and quarterly filings. 

When implemented, the IRS projects that more than 8 million of 94X forms will be filed 

through MeF. 

Currently, the IRS is implementing the Form 1040, U.S. Individual Income Tax Return, 

on the MeF platform in three phases. The first phase, which began in FY 2007, is 

scheduled to deploy in January 2010, and will implement the Form 1040 and 21

supporting forms and schedules, which will reach an estimated 61 percent of the e-File 

population. In addition to these additional forms, the completion of this phase will 

include delivery of all interfaces, an interim Disaster Recovery capability, and code 

optimization. 

IRS-46 
The second phase will begin in FY 2010 and will include Tax Year 2010 changes for the 

Form 1040 and supporting forms and schedules implemented in 2010. This phase will 

deploy additional hardware, the final phase for Disaster Recovery, and optimization code 

necessary to support the anticipated volume of returns in 2012. Also in FY 2010, work 

will begin on phase three, the final phase, of the 1040-related development effort. This 

phase will deploy the 1040A, the 1040EZ and 135 Form 1040-related forms and 

schedules on the MeF platform. Once this phase is complete, MeF will reach 100 percent 

of the 1040 e-File population. 

Core Infrastructure (+$6.5 million)

Core infrastructure supplies the design, engineering, standardized deployment, and 

production environments for BSM projects. The modernized infrastructure provides a 

complete environment (hardware, software, processes, and management) for developing, 

testing, deploying, operating and monitoring applications, including standardizing 

telecommunication services, security, operations management, and updating access 

portals. This approach allows the IRS to develop shared infrastructure and common 

business service solutions that are usable across multiple BSM projects. The Core 

infrastructure consists of Infrastructure Shared Services (ISS) and Development, 

Integration and Testing Environment (DITE). 

• Infrastructure Shared Services (ISS) – ISS provides design, engineering, and 

deployment services in a standardized, consolidated, virtual and secure 

modernized production environment for BSM projects. In FY 2011, ISS will 

build common shared IT infrastructure services (i.e., audit, security, case 

management, and authentication services) in support of completion of the new 

taxpayer account database. The FY 2011 funding will allow common IT 

infrastructure and security and application services to access and leverage the IRS 

systems and data repositories across heterogeneous environments. In addition, 

ISS will address the effect on the infrastructure of the increase in electronic 

documents, on-line transactions, and on-line tax filers. 

• Development, Integration, and Testing Environment (DITE) – The DITE is a 

standardized development and test environment composed of the modernized 

infrastructure components for use by BSM projects. Increased funding is required 

in FY 2011 to address the increased demand on DITE resources to support the 

completion of the taxpayer account database. The IRS will increase the 

virtualization of DITE components and support dynamic allocation of storage 

required by BSM projects for development and testing. DITE also will improve 

the efficiency of server administration, engineering, installation, maintenance, 

refresh and support of core DITE infrastructure. This will include web portals 

and common IT infrastructure services and provide a mechanism for remote 

access to core DITE data by authorized users. 

IRS-47 
Architecture, Integration, and Management (+$8.9 million)

The increased funding will allow the Architecture, Integration, and Management (AI&M) 

program to deliver build-out of the Enterprise Target Architecture Integration Roadmap, 

Enterprise Transition Strategy, Release Architecture, As-built Architecture, Enterprise 

Standards Profile, Service Oriented Architecture Roadmap, and Segment Architectures. 

In addition, data strategy is as a key component of modernization. The BSM projects to 

be included in the FY 2011 Data Strategy roadmap are the build out of the tax return 

store, a prototype for the metadata program, and expansion of users for the Integrated 

Production Model (IPM). These new data management capabilities allow IRS to reuse 

data for BSM projects, reduce the complexity of data schema development for MeF 

releases, create the physical data model for the Customer Account Data Engine, and 

support efforts to reduce the tax gap with new releases of the IPM. 

Finally, funding also will be used to implement automation geared toward proactive 

security evaluation and instrumentation of applications, projects and system compliance 

with internal and external security and privacy standards, policies, and related federal 

directives (e.g., FISMA, NIST, DHS, OMB, GAO, and Treasury). This security initiative 

designs and implements remediation plans to ensure that a project or system passes the 

security test and evaluation processes. Other planned FY 2011 deliverables include 

“defense-in-depth” improvements through, updated infrastructure engineering security 

standards, IRS Enterprise Architecture Security and Privacy Guidance updates, and 

refinements to the IRS Security Domain Segment Architecture. 

Management Reserve (-$1.7 million)

Given the size and complexity of the taxpayer account database project, the management 

reserve funding is needed to cover unanticipated cost adjustments. 

BSM Labor (+$24.2 million / +156 FTE)

The IRS requests $23.3 million for BSM labor and $0.9 million for FY 2011 inflation 

costs. These funds provide for government labor costs associated with the design, 

development, test, preparation and testing of the infrastructure of the Customer Account 

Data Engine project. These funds also include $3.5 million in one-time overhead costs 

associated with the hiring and equipping of the 156 FTE (funded in the Operations 

Support appropriation). 

O&M of Deployed Modernization Systems (+$42 million)

This increase provides funding in the Operations Support appropriation for the O&M 

costs of deployed modernization systems. The base funding in the Operations Support 

appropriation is no longer sufficient to support these costs without placing other critical 

systems development and support at risk. Since 2007, the IRS Operations Support 

appropriation has funded the operation and maintenance requirements for these deployed 

IRS-48 
BSM systems. BSM systems are implemented incrementally, and therefore, each 

individual segment does not achieve full functionality to replace legacy systems. The 

IRS, then, is forced to incur in O&M costs for both the legacy systems and the deployed 

BSM system releases. The deployment of multiple BSM systems has depleted the 

original O&M funding levels. 

EXPECTED BENEFITS

Completion of the relational taxpayer account database is fundamental to significant 

transformation opportunities in IRS service and enforcement functions. The new 

database will operate in a daily processing environment that will improve taxpayer 

service through the faster disbursement of refunds, the increased timeliness and accuracy 

of taxpayer transactions, and faster resolution of taxpayer issues. The relational database 

also will provide increased capacity to leverage expanded data collected from 

information returns to increase the effectiveness of compliance efforts. Finally, the 

modernized environment will improve the security posture of the IRS and improve the 

efficiency of IT operations by faster integration into a single tax processing environment. 

IRS-49 
2.2 – Operating Levels Table 

Dollars in Thousands 

% 

Congressional FY 2010 Change 

FY 2009 Appropriation Title: Internal Revenue Service FY 2009 FY 2010 Action FY 2010 Proposed FY 2011 FY 2010 

ARRA Enacted President's including Enacted Proposed Operating Request to 

Level Level1 Budget Rescission Level Reprogram. Level Level FY 2011

FTE 94,189 95,081 (11) 95,070 0 95,070 96,419 1.4%

Object Classification:

11.1 Full-Time Permanent Positions $0 $5,795,347 $6,094,684 $278 $6,094,962 $0 $6,094,962 $6,394,057 4.9%

11.3 Other than Full-Time Permanent Positions 0 412,025 422,984 0 422,984 0 422,984 423,013 0.0%

11.5 Other Personnel Compensation 1,000 277,965 287,172 0 287,172 0 287,172 308,396 7.4%

11.8 Special Personal Services Payments 0 14,999 18,164 0 18,164 0 18,164 18,445 1.5%

11.9 Personnel Compensation (Total) $1,000 $6,500,336 $6,823,004 $278 $6,823,282 $0 $6,823,282 $7,143,911 4.7%

12.0 Personnel Benefits 0 1,730,179 1,788,144 (277) 1,787,867 0 1,787,867 1,937,543 8.4%

13.0 Benefits to Former Personnel 0 50,728 56,137 0 56,137 0 56,137 57,106 1.7%

21.0 Travel 0 257,116 260,693 2,500 263,193 0 263,193 255,980 -2.7%

22.0 Transportation of Things 0 31,052 34,611 0 34,611 0 34,611 33,170 -4.2%

23.1 Rental Payments to GSA 0 631,857 668,154 0 668,154 0 668,154 676,738 1.3%

23.2 Rent Payments to Others 0 769 538 0 538 0 538 592 10.0%

23.3 Communications, Utilities, & Misc 2,000 436,018 453,214 0 453,214 0 453,214 434,883 -4.0%

24.0 Printing & Reproduction 2,000 71,427 70,495 0 70,495 0 70,495 67,503 -4.2%

25.1 Advisory & Assistance Services 0 169,052 190,158 0 190,158 0 190,158 126,385 -33.5%

25.2 Other Services 73,000 743,246 740,872 12,123 752,995 0 752,995 718,802 -4.5%

25.3 Purchase of Goods & Services from Govt. Accounts 0 167,261 120,050 0 120,050 0 120,050 204,826 70.6%

25.4 Operation & Maintenance of Facilities 0 182,873 185,552 0 185,552 0 185,552 217,899 17.4%

25.5 Research & Development Contracts 0 10,916 10,799 0 10,799 0 10,799 8,478 -21.5%

25.6 Medical Care 0 13,328 11,187 0 11,187 0 11,187 12,616 12.8%

25.7 Operation & Maintenance of Equipment 0 68,963 81,485 0 81,485 0 81,485 129,660 59.1%

25.8 Subsistence & Support of Persons 0 7,082 7,063 0 7,063 0 7,063 6,500 -8.0%

26.0 Supplies and Materials 2,000 70,079 71,892 0 71,892 0 71,892 70,555 -1.9%

31.0 Equipment 0 326,471 472,711 0 472,711 0 472,711 476,244 0.7%

32.0 Lands and Structures 0 22,613 48,682 0 48,682 0 48,682 17,857 -63.3%

33.0 Investments & Loans 0 0 0 0 0 0 0 0 0.0%

41.0 Grants, Subsidies 0 22,605 22,606 5,499 28,105 0 28,105 28,105 0.0%

42.0 Insurance Claims & Indemn 0 2,027 2,866 0 2,866 0 2,866 2,712 -5.4%

43.0 Interest and Dividends 0 0 0 0 0 0 0 0 0.0%

44.0 Refunds 0 0 0 0 0 0 0 0 0.0%

91.0 Unvouchered 0 6,600 5,087 0 5,087 0 5,087 5,205 2.3%

Total Budget Authority $80,000 $11,522,598 $12,126,000 $20,123 $12,146,123 $0 $12,146,123 $12,633,270 4.0%

Appropriations:

Taxpayer Services $0 $2,293,000 $2,269,830 $9,000 $2,278,830 $0 $2,278,830 $2,321,975 1.9%

Enforcement 0 5,117,267 5,504,000 0 5,504,000 0 5,504,000 5,797,400 5.3%

Operations Support 0 3,867,011 4,082,984 900 4,083,884 0 4,083,884 4,108,000 0.6%

Business Systems Modernization 0 229,914 253,674 10,223 263,897 0 263,897 386,908 46.6%

Health Insurance Tax Credit Administration 80,000 15,406 15,512 0 15,512 0 15,512 18,987 22.4%

Total Budget Authority $80,000 $11,522,598 $12,126,000 $20,123 $12,146,123 $0 $12,146,123 $12,633,270 4.0%

1 FY 2009 Enacted represents the approved FY 2009 Operating Plan.

IRS-50 
2.3 – Appropriation Detail Table 

 Dollars in Thousands 

Internal Revenue Service % Change

FY 2009 FY 2009 FY 2010 FY 2011 FY 2010

Resources Available for Obligation Obligations Enacted1,2 Enacted Request to FY 2011

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

New Appropriated Resources:

Taxpayer Services 32,422 $2,279,806 32,622 $2,293,000 31,206 $2,278,830 30,668 $2,321,975 -1.72% 1.89%

Enforcement 47,361 5,109,680 48,952 5,117,267 51,200 5,504,000 52,863 5,797,400 3.25% 5.33%

Operations Support 12,101 3,796,412 12,267 3,867,011 12,316 4,083,884 12,384 4,108,000 0.55% 0.59%

Business Systems Modernization 322 131,138 333 229,914 333 263,897 489 386,908 46.85% 46.61%

Health Insurance Tax Credit Administration 10 15,374 15 15,406 15 15,512 15 18,987 0.0% 22.40%

Subtotal New Appropriated Resources 92,216 $11,332,410 94,189 $11,522,598 95,070 $12,146,123 96,419 $12,633,270 1.42% 4.01%

Other Resources:

Recoveries 882

Offsetting Collections - Reimbursable 792 113,896 792 113,896 956 142,169 961 144,592 0.52% 1.70%

Available multi-year/no-year funds 88 75,830 86,327 196,128 105,497 -46.21%

50% Carryover 15,744 15,744

Transfers In/Out 3,641 7,878

Mandatory Appropriations - User Fees 273 135,648 165,521 187,100 194,100 3.74%

Subtotal Other Resources 1,153 $344,759 792 $390,248 956 $525,397 961 $444,189 0.00% -15.46%

Total Resources Available for Obligation 93,369 $11,677,169 94,981 $11,912,846 96,026 $12,671,520 97,380 $13,077,459 1.41% 3.20% 1 FY 2009 Enacted excludes the Recovery Act, Administration Expenses account, funded in the Treasury Departmental Offices ($122M). 2 FY 2009 Enacted represents the approved FY 2009 Operating Plan.

IRS-51 
2B – Appropriation Language and Explanation of Changes 

Appropriations Language Explanation of Changes 

DEPARTMENT OF THE TREASURY 

INTERNAL REVENUE SERVICE 

TAXPAYER SERVICES 

(including transfer of funds) 

For necessary expenses of the Internal Revenue Service 

to provide taxpayer services, including pre-filing 

assistance and education, filing and account services, 

taxpayer advocacy services, and other services as 

authorized by 5 U.S.C. 3109, at such rates as may be 

determined by the Commissioner, 

[$2,278,830,000]$2,321,975,000, of which not less than 

[$6,100,000]$5,100,000 shall be for the Tax Counseling 

for the Elderly Program, of which not less than 

[$10,000,000]$9,500,000 shall be available for lowincome taxpayer clinic grants, of which not less than 

[$12,000,000]$8,000,000, to remain available until 

September 30, [2011]2012, shall be available for a 

Community Volunteer Income Tax Assistance matching 

grants[ demonstration] program for tax return 

preparation assistance, and of which [not less than 

$205,954,000 shall be available for operating expenses 

of the Taxpayer Advocate Service]up to $6,000,000 may 

be transferred as necessary from this account to 

“Health Insurance Tax Credit Administration” upon 

advance notification of the Committees on 

Appropriations: Provided, That this transfer authority 

shall be in addition to any other transfer authority 

provided in this Act. (Department of the Treasury 

Appropriation Act, 2010.) 

ENFORCEMENT 

(including transfer of funds) 

For necessary expenses for tax enforcement activities of 

the Internal Revenue Service to determine and collect 

owed taxes, to provide legal and litigation support, to 

conduct criminal investigations, to enforce criminal 

statutes related to violations of internal revenue laws and 

other financial crimes, to purchase (for police-type use, 

not to exceed 850) and hire passenger motor vehicles 

The IRS supports adequate 

funding for the Taxpayer 

Advocate Service. Specifying 

the TAS funding level in law 

prevents the IRS from 

proposing an operating plan 

that allocates resources in the 

best interest of taxpayers. 

This change represents a 

contingency in case the 

increased workload related to 

the American Recovery and 

Reinvestment Act continues in 

FY 2011. 

The Budget Request for the 

Enforcement account is 

$5,797,400,000 including a 

program integrity allocation 

adjustment of $790,000,000 

which, when combined with 

the $325,000,000 allocation 

IRS-52 
(31 U.S.C. 1343(b)), and to provide other services as 

authorized by 5 U.S.C. 3109, at such rates as may be 

determined by the Commissioner, 

[$4,904,000,000]$5,007,400,000, of which not less than 

[$59,206,000]$60,257,000 shall be for the Interagency 

Crime and Drug Enforcement program[; and of which 

not to exceed $126,500 shall be for official reception 

and representation expenses associated with hosting the 

Leeds Castle Meeting in the United States during 2010]: 

Provided, That up to $10,000,000 may be transferred as 

necessary from this account to "Operations Support" 

solely for the purposes of the Interagency Crime and 

Drug Enforcement program: Provided further, That this 

transfer authority shall be in addition to any other 

transfer authority provided in this Act. 

In addition to amounts made available above, 

[$600,000,000]$790,000,000 shall be made available for 

additional and/or enhanced tax enforcement activities. 

(Department of the Treasury Appropriations Act, 2010.) 

OPERATIONS SUPPORT

For necessary expenses of the Internal Revenue Service 

to support taxpayer services and enforcement programs, 

including rent payments; facilities services; printing; 

postage; physical security; headquarters and other IRSwide administration activities; research and statistics of 

income; telecommunications; information technology 

development, enhancement, operations, maintenance, 

and security; the hire of passenger motor vehicles (31 

U.S.C. 1343(b)); and other services as authorized by 5 

U.S.C. 3109, at such rates as may be determined by the 

Commissioner; [$4,083,884,000]$4,108,000,000, of 

which up to $75,000,000 shall remain available until 

September 30, [2011]2012, for information technology 

support; of which up to $65,000,000 shall remain 

available until expended for acquisition of real property, 

equipment, construction and renovation of facilities; of 

which not to exceed $1,000,000 shall remain available 

until September 30, [2012]2013, for research; of which 

not [less than]to exceed $2,000,000 shall be for the 

Internal Revenue Service Oversight Board; of which not 

to exceed $25,000 shall be for official reception and 

representation[; and of which $290,000,000 shall be 

made available to support enhanced tax enforcement 

activities]: Provided, That of the amounts provided 

adjustment in the Operations 

Support account, totals 

$1,115,000,000 in additional 

enforcement activities. 

The Leeds Castle Meeting 

was a one-time event hosted 

by the IRS in FY 2010. The 

language addressing this prior 

year requirement is deleted. 

This change will ensure full 

funding at real estate project 

inception in compliance with 

OMB Circular A-11 

requirements for capital 

projects, align IRS 

appropriation language with 

that of other agencies that 

fund similar longer-term 

projects, and accommodate 

the schedule uncertainty 

inherent in real estate projects. 

Recent changes in GSA rules 

for obligating the agency 

share of facilities costs make 

it difficult to fully fund and 

obligate all of the cost of a 

project in the first year, 

further exacerbating the need 

for the change. 

IRS-53 
under this heading, such sums as are necessary shall be 

available to fully support tax enforcement[ and 

enhanced tax enforcement] activities, including not less 

than $325,000,000 to support additional and/or 

enhanced tax enforcement activities. (Department of the 

Treasury Appropriations Act, 2010.)

BUSINESS SYSTEMS MODERNIZATION 

For necessary expenses of the Internal Revenue 

Service's business systems modernization program, 

[$263,897,000]$386,908,000, to remain available until 

September 30, [2012]2013, for the capital asset 

acquisition of information technology systems, 

including management and related contractual costs of 

said acquisitions, including related Internal Revenue 

Service labor costs, and contractual costs associated 

with operations authorized by 5 U.S.C. 3109: Provided, 

That, with the exception of labor costs, none of these 

funds may be obligated until the Internal Revenue 

Service submits to the Committees on Appropriations[, 

and such Committees approve,] a plan for expenditure 

that: (1) meets the capital planning and investment 

control review requirements established by the Office of 

Management and Budget, including Circular A-11; (2) 

complies with the Internal Revenue Service's enterprise 

architecture, including the modernization blueprint; (3) 

conforms with the Internal Revenue Service's enterprise 

life cycle methodology; (4) is approved by the Internal 

Revenue Service, the Department of the Treasury, and 

the Office of Management and Budget; (5) has been 

[reviewed]received by the Government Accountability 

Office; and (6) complies with the acquisition rules, 

requirements, guidelines, and systems acquisition 

management practices of the Federal Government. 

(Department of the Treasury Appropriations Act, 2010.)

HEALTH INSURANCE TAX CREDIT 

ADMINISTRATION 

For expenses necessary to implement the health 

insurance tax credit included in the Trade Act of 2002 

(Public Law 107-210), [$15,512,000]$18,987,000. 

(Department of the Treasury Appropriations Act, 2010.)

The Budget Request includes 

additional resources for 

increased tax enforcement 

through a program integrity 

allocation adjustment, of 

which $325,000,000 is in the 

Operations Support account. 

 

 

IRS-54 
ADMINISTRATIVE PROVISIONS - INTERNAL 

REVENUE SERVICE 

(including transfer of funds) 

Sec. 101. Not to exceed 5 percent of any appropriation 

made available in this Act to the Internal Revenue 

Service or not to exceed 3 percent of appropriations 

under the heading “Enforcement” may be transferred to 

any other Internal Revenue Service appropriation upon 

the advance [approval]notification of the Committees on 

Appropriations. 

Sec. 102. The Internal Revenue Service shall maintain a 

training program to ensure that Internal Revenue Service 

employees are trained in taxpayers' rights, in dealing 

courteously with taxpayers, and in cross-cultural 

relations. 

Sec. 103. The Internal Revenue Service shall institute 

and enforce policies and procedures that will safeguard 

the confidentiality of taxpayer information. 

Sec. 104. Funds made available by this or any other Act 

to the Internal Revenue Service shall be available for 

improved facilities and increased staffing to provide 

sufficient and effective 1-800 help line service for 

taxpayers. The Commissioner shall continue to make the 

improvement of the Internal Revenue Service 1-800 

help line service a priority and allocate resources 

necessary to increase phone lines and staff to improve 

the Internal Revenue Service 1-800 help line service. 

Sec. 105. Of the funds made available by this Act to the 

Internal Revenue Service, not less than 

[$7,100,000,000]$8,235,000,000 shall be available only 

for tax enforcement[. In addition, of the funds made 

available by this Act to the Internal Revenue Service, 

and subject to the same terms and conditions, 

$890,000,000], of which not less than $1,115,000,000

shall be available for additional and/or enhanced tax 

law enforcement, to be expended subject to the periods 

of availability applicable under each account.

[Sec. 106. None of the funds made available in this Act 

may be used to enter into, renew, extend, administer, 

implement, enforce, or provide oversight of any 

qualified tax collection contract (as defined in section 

6306 of the Internal Revenue Code of 1986).] 

(Department of the Treasury Appropriations Act, 2010.)

 

This program was terminated 

in March 2009, therefore this 

language is no longer needed. 

IRS-55 
2C – Legislative Proposals 

The FY 2011 President’s Budget includes a number of legislative proposals intended to 

improve tax compliance with minimum taxpayer burden. These proposals will 

specifically target the tax gap and generate nearly $26 billion over the next ten years. 

Among other proposals, the Administration proposes to expand information reporting, 

improve compliance by businesses, strengthen tax administration, and expand penalties. 

Expand information reporting – Compliance with the tax laws is highest when payments 

are subject to information reporting to the IRS. Specific information reporting proposals 

would: 

• Require information reporting for private separate accounts of life insurance 

companies; 

• Require information reporting on payments for services to corporations; 

• Require a certified Taxpayer Identification Number (TIN) from contractors; 

• Require increased information reporting on certain government payments; 

• Increase information return penalties; and 

• Require information reporting on expense payments relating to rental property. 

Improve compliance by businesses – Improving compliance by businesses of all sizes is 

important. Specific proposals to improve compliance by businesses would: 

• Provide Treasury regulatory authority to require that information returns be filed 

electronically; 

• Require corporations and partnerships with assets of $10 million or more that are 

required to file Schedule M-3 to file their tax returns electronically; 

• Provide Treasury regulatory authority to reduce the current threshold, filing 

250 or more returns during a calendar year, to require electronic filing of certain 

other large taxpayers not required to file Schedule M-3 (such as exempt 

organizations); 

• Implement standards clarifying when employee leasing companies can be held 

liable for their clients’ federal employment taxes; and 

• Increase certainty about the rules pertaining to classification of employees as 

independent contractors. 

IRS-56 
Strengthen tax administration – The IRS has taken a number of steps under existing law 

to improve compliance. These efforts would be enhanced by specific tax administration 

proposals that would: 

• Expand IRS access to information in the National Directory of New Hires for tax 

administration purposes; 

• Make repeated willful failure to file a tax return a felony; 

• Facilitate tax compliance with local jurisdictions; 

• Extend statutes of limitations where state tax adjustments affect federal tax 

liability; 

• Improve the investigative disclosure statute; 

• Repeal the requirement of a partial payment with an application for an 

offer-in-compromise; 

• Allow assessment of criminal restitution as tax; and 

• Codify “economic substance” doctrine. 

Expand penalties – Penalties play an important role in discouraging intentional 

noncompliance. A specific proposal to expand penalties would: 

• Impose a penalty on failure to comply with electronic filing requirements; and 

• Clarify that the bad check penalty applies to electronic checks and other forms of 

payment. 

Improve Tax Administration and Other Miscellaneous Proposals 

The Administration has put forward additional proposals relating to IRS administrative 

reforms. These proposals would: 

• Improve the foreign trust reporting penalty; 

• Apply the Federal Payment Levy Program to contractors before providing 

Collection Due Process; and 

• Clarify that a vendor levy on “goods and services” would not exclude “property”. 

IRS-57 
Section 3 – Budget and Performance Plan 

Taxpayer Services 

Appropriation Description 

The Taxpayer Services appropriation provides funding for taxpayer service activities and 

programs. This includes printing forms and publications, processing tax returns and 

related documents, offering filing and account services, ensuring the availability of 

taxpayer assistance, and providing taxpayer advocacy services. 

The Taxpayer Services Budget Request for FY 2011 is $2,321,975,000 in direct 

appropriations and 30,668 FTE. This is an increase of $43,145,000, or 1.89 percent, 

more than the FY 2010 enacted level of $2,278,830,000, and 538 FTE fewer than the 

FY 2010 enacted level of 31,206 FTE. 

IRS-58 
2.1 – Budget Adjustments Table 

Dollars in Thousands 

Taxpayer Services FTE Amount

FY 2009 Enacted 32,622 $2,293,000

FY 2010 President's Budget Request 31,217 $2,269,830

Congressional Action (11) 9,000

FY 2010 Enacted Budget (P.L. 111-117) 31,206 $2,278,830

Changes to Base:

Maintaining Current Levels $50,054

Pay Annualization 11,643

Pay Inflation Adjustment 30,534

Non-Pay Inflation Adjustment 2,495

FERS Increased Participation 5,382

Other Adjustments (169)

Resource Adjustment to Support Recovery Act-HCTC Program Expansion

Technical FTE Adjustments (169)

Efficiencies/Savings (472) ($28,023)

Increase e-File Savings (472) (23,186)

Reduce Procurement/Contracting (2,878)

Reduce Printing, Travel, and Training (523)

Reduce Tuition Assistance Program (1,436)

Subtotal Changes to Base (641) $22,031

Total FY 2011 Base 30,565 $2,300,861

Program Changes:

Program Reinvestment: $2,792

Submission Processing Consolidation (Atlanta) 2,792

Program Decrease: ($9,000)

Reduce Taxpayer Service Grant and Advocacy Programs (9,000)

Program Increases:

Taxpayer Service Initiatives $20,945

Increase Telephone Level of Service 20,945

Enforcement Initiatives 103 $6,377

Address Business and Individual International Compliance 30 1,779

Reduce the Reporting Compliance Tax Gap 7 769

Reduce the Nonfiling and Underpayment Tax Gap 1 91

Support for Increased Enforcement Activities 65 3,738

Subtotal Program Changes 103 $21,114

Total FY 2011 Request 30,668 $2,321,975

Adjustments to Request

User Fees 127,000

Total FY 2011 30,668 $2,448,975

IRS-59 
2.2 – Operating Levels Table 

Dollars in Thousands 

% 

Congressional FY 2010 Change 

FY 2009 Appropriation Title: Taxpayer Services FY 2010 Action FY 2010 Proposed FY 2011 FY 2010 

Enacted President's including Enacted Proposed Operating Request to 

Level1 Budget Rescission Level Reprogram. Level Level FY 2011

FTE 32,622 31,217 (11) 31,206 31,206 30,668 -1.7%

Object Classification:

11.1 Full-Time Permanent Positions $1,284,613 $1,281,991 $278 $1,282,269 $0 $1,282,269 $1,309,132 2.1%

11.3 Other than Full-Time Permanent Positions 308,132 309,849 0 309,849 0 309,849 304,283 -1.8%

11.5 Other Personnel Compensation 86,246 88,518 0 88,518 0 88,518 98,503 11.3%

11.8 Special Personal Services Payments $0 0 0 0 0 0 0

11.9 Personnel Compensation (Total) $1,678,991 $1,680,358 $278 $1,680,636 $0 $1,680,636 $1,711,918 1.9%

12.0 Personnel Benefits 385,276 350,315 (277) 350,038 0 350,038 391,504 11.8%

13.0 Benefits to Former Personnel 2,351 7,362 0 7,362 0 7,362 8,199 11.4%

21.0 Travel 34,106 31,763 2,500 34,263 0 34,263 31,269 -8.7%

22.0 Transportation of Things 5,726 6,541 0 6,541 0 6,541 5,564 -14.9%

23.1 Rental Payments to GSA 00 00000

23.2 Rent Payments to Others 48 45 0 45 0 45 46 2.2%

23.3 Communications, Utilities, & Misc 743 3,709 0 3,709 0 3,709 3,607 -2.8%

24.0 Printing & Reproduction 9,925 9,009 0 9,009 0 9,009 9,091 0.9%

25.1 Advisory & Assistance Services 21,723 28,951 0 28,951 0 28,951 3,923 -86.4%

25.2 Other Services 44,563 100,853 1,000 101,853 0 101,853 46,993 -53.9%

25.3 Purchase of Goods & Services from Govt. Accounts 68,660 13,968 0 13,968 0 13,968 67,939 386.4%

25.4 Operation & Maintenance of Facilities 48 95 0 95 0 95 95 0.0%

25.5 Research & Development Contracts 00 00000

25.6 Medical Care 00 00000

25.7 Operation & Maintenance of Equipment 0 675 0 675 0 675 673 -0.3%

25.8 Subsistence & Support of Persons 1,355 1,494 0 1,494 0 1,494 1,487 -0.5%

26.0 Supplies and Materials 16,281 11,432 0 11,432 0 11,432 10,899 -4.7%

31.0 Equipment 477 578 0 578 0 578 587 1.6%

32.0 Lands and Structures 50 00000

33.0 Investments & Loans 00 00000

41.0 Grants, Subsidies 22,600 22,601 5,499 28,100 0 28,100 28,100 0.0%

42.0 Insurance Claims & Indemn 122 81 0 81 0 81 81 0.0%

43.0 Interest and Dividends 00 00000

44.0 Refunds 00 00000

91.0 Unvouchered 00 00000

Total Budget Authority $2,293,000 $2,269,830 $9,000 $2,278,830 $0 $2,278,830 $2,321,975 1.9%

Budget Activities:

Pre-filing Taxpayer Assistance & Education $661,000 $676,063 $9,000 $685,063 $0 $685,063 $693,753 1.3%

Filing & Account Services 1,632,000 1,593,767 0 1,593,767 0 1,593,767 1,628,222 2.2%

Total Budget Authority $2,293,000 $2,269,830 $9,000 $2,278,830 $0 $2,278,830 $2,321,975 1.9%

1 FY 2009 Enacted represents the approved FY 2009 Operating Plan.

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

IRS-60 
2.3 – Appropriation Detail Table 

Dollars in Thousands 

Taxpayer Services % Change

FY 2009 FY 2009 FY 2010 FY 2011 FY 2010

Resources Available for Obligation Obligations Enacted1,2 Enacted Request to FY 2011

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

New Appropriated Resources:

Pre-Filing Taxpayer Assistance and Education 5,978 $648,685 6,142 $661,000 6,164 $685,063 6,200 $693,753 0.58% 1.27%

Filing and Account Services 26,444 1,631,121 26,480 1,632,000 25,042 1,593,767 24,468 1,628,222 -2.29% 2.16%

Subtotal New Appropriated Resources 32,422 $2,279,806 32,622 $2,293,000 31,206 $2,278,830 30,668 $2,321,975 -1.72% 1.89%

Other Resources:

Recoveries 160

Offsetting Collections - Reimbursable 499 24,454 499 24,454 646 33,513 649 34,159 0.46% 1.93%

Available multi-year/no-year funds 88 14,236 14,137 8,011 8,010 -0.01%

50% Carryover 1,874 1,874

Transfers In/Out (Multiyear funds) 363 4,433

Mandatory Appropriations - User Fees 253 123,000 127,000 127,000 127,000 0.00%

Subtotal Other Resources 840 $163,927 499 $172,058 646 $168,524 649 $169,169 0.46% 0.38%

Total Resources Available for Obligation 33,262 $2,443,733 33,121 $2,465,058 31,852 $2,447,354 31,317 $2,491,144 -1.68% 1.79% 1 FY 2009 Enacted excludes the Recovery Act, Administration Expenses account, funded in the Treasury Departmental Offices ($122M). 2 FY 2009 Enacted represents the approved FY 2009 Operating Plan.

3A – Pre-Filing Taxpayer Assistance and Education ($693,753,000 in direct 

appropriations and an estimated $1,459,000 from reimbursable programs): This budget 

activity funds services to assist with tax return preparation, including tax law 

interpretation, publication production, and advocate services. This includes the following 

program activities: 

• Pre-Filing Services Management supports headquarters management associated 

with Customer Assistance Relationship and Education (CARE). CARE provides 

pre-filing taxpayer assistance and education. 

• Taxpayer Communication and Education researches customer needs; prepares tax 

forms and publications; develops and manages educational programs; establishes 

partnerships with stakeholder groups; and disseminates tax information to 

taxpayers and the general public through a variety of media, including 

publications and mailings, websites, broadcasting, and advertising. 

• Media and Publications develops and produces notices, forms, and publications 

for printed and electronic tax materials, and provides media production services to 

taxpayers. 

• Taxpayer Advocacy provides advocate services to taxpayers by identifying the 

underlying causes of taxpayer problems and participating in the development of 

systematic and/or procedural remedies. 

IRS-61 
• Account Management and Assistance – Field Assistance provides face-to-face 

assistance, education, and compliance services to taxpayers. It includes return 

preparation, answering tax questions, resolving account and notice inquiries, and 

supplying forms and publications to taxpayers. 

• Taxpayer Advocate Case Processing provides advocate services to taxpayers to 

resolve taxpayer problems through prompt identification, referral, and settlement. 

• W&I HQ Management and Administration provides staffing, training, and direct 

support for W&I management activities of strategic planning, communications 

and liaison, finance, human resources, EEO and diversity, business 

modernization, and embedded training. 

• National Distribution Center processes orders for IRS forms and publications 

received from individual taxpayers, tax practitioners, and IRS tax return 

preparation partners. 

3.2.1 – Budget and Performance Plan 

Dollars in Thousands 

Pre-Filing Taxpayer Assistance & Education Budget Activity

FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011

Resource Level Obligations Obligations Obligations Obligations Enacted Request

Appropriated Resources $559,249 $573,685 $628,286 $648,685 $685,063 $693,753

Reimbursable Resources 1,038 843 774 876 1,431 1,459

Mandatory Appropriations - User Fees 1,201 12,827 18,703

Total Resources $560,287 $575,729 $641,887 $668,264 $686,494 $695,212

Pre-Filing Taxpayer Assistance & Education Budget Activity FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011

Measure Actual Actual Actual Actual Target Target

Timeliness of Critical Filing Season Tax Products to the Public (Ot) 83.0% 83.5% 92.4% 96.8% 94.0% 94.0%

Timeliness of Critical TE/GE & Business Tax Products to the Public (Ot 61.2% 84.0% 89.5% 95.2% 90.0% 91.0%

Taxpayer Self Assistance Rate (E) (L) 46.8% 49.5% 66.8% 69.3% 61.3% 62.7%

Percent of Eligible Taxpayers Who File for EITC (Oe) * * * N/A 75% - 80% 75% - 80%

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure, and L - Long Term Goal

*The methodology for estimating the eligibility rate is being revised. Data not available.

IRS-62 
Description of Performance 

The IRS enhanced its outreach and educational services through partnerships with the 

public to increase understanding of and compliance with the tax law. The IRS partners 

with organizations such as state taxing authorities and volunteer groups to serve taxpayer 

needs. Through its Volunteer Income Tax Assistance (VITA) and Tax Counseling for the 

Elderly (TCE) sites, the IRS provided free tax assistance to the elderly, disabled, and 

limited English proficient individuals and families. During FY 2009, more than 

82,000 volunteers filed more than 3 million returns, a 13 percent decrease from FY 2008 

because last year’s figure included returns related to the Economic Stimulus Payment 

(ESP) activity. 

The IRS also reached out to those taxpayers eligible for the Earned Income Tax Credit 

(EITC), implementing a vigorous outreach strategy that included: 

• Creating EITC products and services designed to target underserved groups such 

as rural taxpayers, childless workers, and limited English proficient filers; 

• Conducting a third annual EITC Awareness Day to promote the EITC that may be 

a critical financial lifeline to many taxpayers. Community coalitions and IRS 

partners across the nation marked the day with a series of local news conferences 

and news releases promoting this refundable tax credit for low-wage taxpayers. 

The organizations operated free tax preparation sites for low and 

moderate-income individuals, seniors and other eligible taxpayers in every state; 

and 

• Increasing electronic filing of EITC returns by 8.2 percent. 

The IRS increased the number of Facilitated Self-Assistance workstations and phones to 

50 sites, allowing nearly 12,500 taxpayers to access IRS.gov at Taxpayer Assistance 

Centers, a 420 percent increase from 2008. 

In FY 2009, taxpayers viewed more than 1.7 billion IRS.gov pages, and more than 

54 million taxpayers used Where’s My Refund?, an increase of 39 percent, with 

453,000 taxpayers using the Spanish version. 

The FY 2009 Super Saturday event resulted in the largest one-day outreach service event 

in IRS history. Successes from Super Saturday include: 

• Assisted more than 11,000 taxpayers with a variety of services including tax 

advice and return preparation; 

• Answered more than 33,000 calls and prepared more than 53,000 returns for 

taxpayers needing assistance; 

• Promoted and achieved approximately 200 media stories on Super Saturday; and 

• Used more than 1,700 VITA sites across the country. 

IRS-63 
3B – Filing and Account Services ($1,628,222,000 in direct appropriations, an 

estimated $32,700,000 from reimbursable programs, and an estimated $127,000,000 

from user fees): This budget activity funds programs that provide filing and account 

services to taxpayers, processes paper and electronically submitted tax returns, issue 

refunds, and maintains taxpayer accounts. This includes the following program 

activities: 

• Filing and Account Services Management administers filing and account services 

programs. 

• Submission Processing processes paper and electronically-submitted tax returns 

and supplemental documents, accounts for tax revenue, processes information 

documents, and issues refunds and tax notices. 

• Account Management and Assistance – Electronic/Correspondence Assistance

provides education and assistance to taxpayers through telephone, paper, and 

internet correspondence to resolve account and notice inquiries. 

• Electronic Products and Services Support (EPSS) provides centralized operations 

and support capabilities for the IRS suite of electronic products. EPSS includes 

e-help desk, technology support, and operations support. 

• Electronic Tax Administration (ETA) markets and administers electronic tax 

administration products and services. 

• Pre-Refund provides coordination support for the pre-refund activities to ensure 

timely issuance of refunds and credits that are legally due to taxpayers. The 

pre-refund activity is now a part of the ETA office. 

• Joint Operations Center (JOC) provides service, support, and technology for 

telephone, correspondence, and electronic media inquiries; real time monitoring 

and routing of inbound calls; monitoring of Customer Service Representative 

accuracy; and management of the enterprise telephone database. 

• Files Most Efficient Organization (MEO) provides staffing, training, and direct 

support for the management associated with the MEO for files in Submission 

Processing. This organization stores the administrative files and the most recent 

tax returns in process, which are most likely to be requested for research by 

various IRS organizations until they are forwarded to the federal records centers. 

IRS-64 
3.2.2 – Budget and Performance Plan 

Dollars in Thousands 

Filing and Account Services Budget Activity

FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011

Resource Level Obligations Obligations Obligations Obligations Enacted Request

Appropriated Resources $1,568,209 $1,559,779 $1,545,478 $1,631,121 $1,593,767 $1,628,222

Reimbursable Resources 24,242 20,081 36,037 23,578 32,082 32,700

Mandatory Appropriations - User Fees 63,458 139,109 104,297 127,000 127,000

Total Resources $1,592,451 $1,643,318 $1,720,624 $1,758,996 $1,752,849 $1,787,922

Filing and Account Services Budget Activity FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011

Measure Actual Actual Actual Actual Target Target

Percent Individual Returns Processed Electronically (Oe) (L) 54.1% 57.1% 57.6% 65.9% 70.2% 81.0%

Percent of Business Returns Processed Electronically (Oe) (L) 16.6% 19.1% 19.4% 22.8% 24.3% 25.4%

Customer Accuracy - Tax Law Phones (Ot) 90.9% 91.2% 91.2% 92.9% 91.2% 91.2%

Customer Accuracy - Accounts (Phones) (Ot) 93.2% 93.4% 93.7% 94.9% 93.7% 93.7%

Customer Contacts Resolved per Staff year (E) 7,414 7,648 12,634 12,918 9,398 10,181

Customer Service Representative (CSR) Level of Service (Oe) (L) 82.0% 82.1% 52.8% 70.0% 71.0% 75.0%

Refund Timeliness - Individual (paper) (Ot) 99.3% 98.9% 99.1% 99.2% 98.4% 98.4%

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure, and L - Long Term Goal

Description of Performance 

The IRS delivered a successful 2009 filing season, rising to challenges posed by the 

residual effects of the 2008 Economic Stimulus Payment program and the 

implementation of the Recovery Act. 

Results of the 2009 filing season include: 

• Processed 144.4 million individual returns and issued 111.4 million refunds; 

• Achieved a 70 percent telephone level of service while answering 39 million 

assistor calls and 29 million automated calls; 

• Responded correctly to 92.9 percent of tax law questions and 94.9 percent of 

account questions received via the telephone; 

• Provided free tax assistance to more than 6.2 million taxpayers at 401 Taxpayer 

Assistance Centers; and 

IRS-65 
• Provided free tax assistance, including the preparation of more than 3 million tax 

returns, at the more than 12,100 VITA and TCE sites. 

Increased electronic filing: 

• Individual returns electronically filed surpassed 65.9 percent; 

• Total number of individual returns filed electronically reached 95 million; 

• Home-computer filing increased to 32.2 million returns, a 19 percent increase 

over 2008; and 

• Tax professional use of e-File increased to 63.2 percent. 

In FY 2009, the IRS Commissioner chartered a Taxpayer Communications Taskgroup 

(TACT) to study and improve the clarity, accuracy, and effectiveness of written 

communications to taxpayers. As a result of the TACT efforts, the IRS reduced the number 

of inserts included with the balance due notice from 13 to two, reducing the amount of paper 

while improving clarity and readability. This streamlining effort eliminated more than 

16 million pieces of paper per year and also reduced IRS annual postage costs by $570,000. 

In addition, the IRS rolled out in January 2010 nine redesigned notices as part of the TACT 

effort to improve IRS correspondence. The nine notices account for approximately two 

million pieces of correspondence and were rewritten to provide a clear and simple 

explanation of the purpose of the notice and what actions the taxpayer must take to resolve 

the issue. 

IRS-66 
Enforcement 

Appropriation Description 

The Enforcement appropriation provides funding for the examination of tax returns, both 

domestic and international; administrative and judicial settlement of taxpayer appeals of 

examination findings; technical rulings; monitoring of employee pension plans; 

determination of qualifications of organizations seeking tax-exempt status; examination 

of tax returns of exempt organizations; enforcement of statutes relating to detection and 

investigation of criminal violations of the internal revenue laws; identification of 

underreporting of tax obligations; securing of unfiled tax returns; and collecting unpaid 

accounts. 

The Enforcement Budget Request for FY 2011 is $5,797,400,000 in direct appropriations 

and 52,863 FTE. This is an increase of $293,400,000 or 5.33 percent and 1,663 FTE 

more than the FY 2010 enacted level of $5,504,000,000 and 51,200 FTE. 

IRS-67 
2.1 – Budget Adjustments Table 

Dollars in Thousands 

Enforcement FTE Amount

FY 2009 Enacted 48,952 $5,117,267

FY 2010 President's Budget Request 51,200 $5,504,000

Congressional Action

FY 2010 Enacted Budget (P.L. 111-117) 51,200 $5,504,000

Changes to Base:

Maintaining Current Levels $110,506

Pay Annualization 27,964

Pay Inflation Adjustment 69,255

Non-Pay Inflation Adjustment 4,460

FERS Increased Participation 8,827

Other Adjustments (208)

Technical FTE Adjustments (208)

Efficiencies/Savings ($7,092)

Reduce Procurement/Contracting (2,246)

Reduce Printing, Travel, and Training (1,979)

Reduce Tuition Assistance Program (2,867)

Subtotal Changes to Base (208) $103,414

Total FY 2011 Base 50,992 $5,607,414

Program Changes:

Enforcement Initiatives 1,871 $189,986

Address Business and Individual International Compliance 747 97,527

Reduce the Reporting Compliance Tax Gap 688 59,687

Reduce the Nonfiling and Underpayment Tax Gap 405 28,166

Maintain Recovery Act Staffing 31 4,606

Subtotal Program Changes 1,871 $189,986

Total FY 2011 Request 52,863 $5,797,400

Adjustments to Request

User Fees

Total FY 2011 52,863 $5,797,400

IRS-68 
2.2 – Operating Levels Table 

Dollars in Thousands 

% 

Congressional FY 2010 Change 

FY 2009 Appropriation Title: Enforcement FY 2010 Action FY 2010 Proposed FY 2011 FY 2010 

Enacted President's including Enacted Proposed Operating Request to 

Level1 Budget Rescission Level Reprogram. Level Level FY 2011

FTE 48,952 51,200 51,200 51,200 52,863 3.2%

Object Classification:

11.1 Full-Time Permanent Positions $3,441,653 $3,732,481 $0 $3,732,481 $0 $3,732,481 $3,938,661 5.5%

11.3 Other than Full-Time Permanent Positions 88,810 89,273 0 89,273 0 89,273 91,365 2.3%

11.5 Other Personnel Compensation 157,188 166,157 0 166,157 0 166,157 173,549 4.4%

11.8 Special Personal Services Payments 14,999 18,164 0 18,164 0 18,164 18,445 1.5%

11.9 Personnel Compensation (Total) $3,702,650 $4,006,075 $0 $4,006,075 $0 $4,006,075 $4,222,020 5.4%

12.0 Personnel Benefits 1,014,514 1,092,263 0 1,092,263 0 1,092,263 1,173,634 7.4%

13.0 Benefits to Former Personnel 0 0 0 0 0 0 00

21.0 Travel 177,693 190,851 0 190,851 0 190,851 181,570 -4.9%

22.0 Transportation of Things 5,055 6,792 0 6,792 0 6,792 6,607 -2.7%

23.1 Rental Payments to GSA 530 0 0 0 0 0 0 0

23.2 Rent Payments to Others 407 486 0 486 0 486 502 3.3%

23.3 Communications, Utilities, & Misc 6,275 3,978 0 3,978 0 3,978 4,131 3.8%

24.0 Printing & Reproduction 6,694 6,432 0 6,432 0 6,432 6,546 1.8%

25.1 Advisory & Assistance Services 28,595 33,770 0 33,770 0 33,770 25,464 -24.6%

25.2 Other Services 80,201 84,121 0 84,121 0 84,121 72,609 -13.7%

25.3 Purchase of Goods & Services from Govt. Accounts 39,502 27,914 0 27,914 0 27,914 49,902 78.8%

25.4 Operation & Maintenance of Facilities 187 194 0 194 0 194 196 1.0%

25.5 Research & Development Contracts 3,675 2,974 0 2,974 0 2,974 3,007 1.1%

25.6 Medical Care 148 77 0 77 0 77 78 1.3%

25.7 Operation & Maintenance of Equipment 1,520 2,048 0 2,048 0 2,048 2,110 3.0%

25.8 Subsistence & Support of Persons 5,393 4,313 0 4,313 0 4,313 4,692 8.8%

26.0 Supplies and Materials 31,670 29,053 0 29,053 0 29,053 29,733 2.3%

31.0 Equipment 4,625 5,506 0 5,506 0 5,506 7,301 32.6%

32.0 Lands and Structures 0 0 0 0 0 0 00

33.0 Investments & Loans 0 0 0 0 0 0 00

41.0 Grants, Subsidies 5 5 0 5 0 5 50

42.0 Insurance Claims & Indemn 1,328 2,061 0 2,061 0 2,061 2,088 1.3%

43.0 Interest and Dividends 0 0 0 0 0 0 00

44.0 Refunds 0 0 0 0 0 0 00

91.0 Unvouchered 6,600 5,087 0 5,087 0 5,087 5,205 2.3%

Total Budget Authority $5,117,267 $5,504,000 $0 $5,504,000 $0 $5,504,000 $5,797,400 5.3%

Budget Activities:

Investigations $611,601 $637,694 0 $637,694 $0 $637,694 $651,966 2.2%

Exam & Collections 4,355,186 4,706,350 0 4,706,350 0 4,706,350 4,974,618 5.7%

Regulatory 150,480 159,956 0 159,956 0 159,956 170,816 6.8%

Total Budget Authority $5,117,267 $5,504,000 $0 $5,504,000 $0 $5,504,000 $5,797,400 5.3%

1 FY 2009 Enacted represents the approved FY 2009 Operating Plan.

. 0%

.0%

.0%

.0%

.0%

.0%

.0%

IRS-69 
2.3 – Appropriation Detail Table 

Dollars in Thousands 

Enforcement % Change

FY 2009 FY 2009 FY 2010 FY 2011 FY 2010

Resources Available for Obligation Obligations Enacted1 Enacted Request to FY 2011

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

New Appropriated Resources:

Investigations 4,228 $615,544 4,241 $611,601 4,284 $637,694 4,088 $651,966 -4.58% 2.24%

Exam and Collections 41,931 4,342,021 43,481 4,355,186 45,652 4,706,350 47,463 4,974,618 3.97% 5.70%

Regulatory 1,202 152,115 1,230 150,480 1,264 159,956 1,312 170,816 3.80% 6.79%

Subtotal New Appropriated Resources 47,361 $5,109,680 48,952 $5,117,267 51,200 $5,504,000 52,863 $5,797,400 3.25% 5.33%

Other Resources:

Recoveries 2

Offsetting Collections - Reimbursable 128 49,078 128 49,078 141 60,508 142 61,506 0.71% 1.65%

Available multi-year/no-year funds 1,132 4,382 3,413 265 -92.24%

50% Carryover

Transfers In/Out 11 178

Mandatory Appropriations - User Fees 19 3,103 5,621 10,100 0 -100.00%

Subtotal Other Resources 147 $53,324 128 $59,261 141 $74,021 142 $61,771 0.71% -16.55%

Total Resources Available for Obligation 47,508 $5,163,004 49,080 $5,176,528 51,341 $5,578,021 53,005 $5,859,171 3.24% 5.04% 1 FY 2009 Enacted represents the approved FY 2009 Operating Plan.

3C – Investigations ($651,966,000 in direct appropriations and an estimated 

$50,567,000 from reimbursable programs): This budget activity funds the IRS Criminal 

Investigation (CI) programs that explore potential criminal violations of tax laws, enforce 

criminal statutes relating to violations of tax laws, and recommend prosecution as 

warranted. This includes the following program activities: 

• General Management and Administration supports the headquarters management 

activities of strategic planning, communications, finance, and human resources for 

CI activities. 

• Criminal Investigations supports the enforcement of criminal statutes relating to 

violations of internal revenue laws and other financial crimes. CI investigates 

cases of suspected intent to defraud that involve both legal and illegal sources of 

income and recommends prosecution as warranted. This activity includes the 

investigation and prosecution of tax and money-laundering violations associated 

with narcotics organizations. 

• Criminal Tax Legal Support provides staffing, training, and direct support to 

Counsel and CI. 

• International Investigations supports international investigations involving U.S. 

citizens residing abroad, non-resident aliens, expatriates, and investigations 

involving other international issues including legal support (e.g., Foreign Tax 

Credit and Foreign Earned Income Exclusion). 

IRS-70 
• Accounts Management Taxpayer Assurance Program provides support to 

Accounts Management for the review of questionable refunds. 

3.2.3 – Budget and Performance Plan 

Dollars in Thousands 

Investigations Budget Activity

FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011

Resource Level Obligations Obligations Obligations Obligations Enacted Request

Appropriated Resources $599,878 $573,469 $601,436 $615,544 $637,694 $651,966

Reimbursable Resources 33,306 32,441 49,404 39,639 49,776 50,567

Mandatory Appropriations - User Fees

Total Resources $633,184 $605,910 $650,840 $655,183 $687,470 $702,533

Investigations Budget Activity FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011

Measure Actual Actual Actual Actual Target Target

Criminal Investigations Completed (Ot) (L) 4,157 4,269 4,044 3,848 3,900 3,900

Number of Convictions (Oe) (L) 2,019 2,155 2,144 2,105 2,135 2,135

Conviction Rate (Oe) (L) 91.5% 90.2% 92.3% 87.2% 92.0% 92.0%

Conviction Efficiency Rate ($) (E) (L) $328,750 $301,788 $315,751 $327,328 $331,000 340,000

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure, L - Long Term Goal

Description of Performance 

The IRS continued to investigate vigorously egregious tax, money laundering, and other 

financial crimes that adversely affect tax administration. Improved case development and 

selection methods, coupled with heightened fraud awareness resulted in the successful 

prosecution of taxpayers involved in significant abusive tax schemes, high income 

non-filers, employment tax evasion cases, and other flagrant forms of tax evasion. Using 

its unique statutory jurisdiction and financial expertise, the IRS made significant 

contributions to important national law enforcement priorities. Performance levels for 

the IRS Criminal Investigation (CI) program remained high in FY 2009: 

• Completed 3,848 criminal investigations; 

• Achieved a conviction rate of 87.2 percent; 

• Maintained a Department of Justice acceptance rate of 91.7 percent and a U.S. 

Attorney acceptance rate of 88.7 percent, which compares favorably with other 

federal law enforcement agencies; 

• Obtained 2,105 convictions; and 

• Increased tax-exempt and government entities compliance contacts 10 percent. 

IRS-71 
The Questionable Refund Program (QRP), a nationwide multifunctional program 

designed to identify fraudulent returns and to stop payment of fraudulent refunds, 

continued to show positive results in FY 2009. 

QRP accomplishments include: 

• Identification of more than 414,000 potentially fraudulent returns claiming more 

than $2.7 billion in total refunds of which more than $2.3 billion in 

fraudulent refunds were stopped; and 

• Initiation of 418 QRP investigations, an 86.6 percent conviction rate, 

a 78.8 percent incarceration rate, and an 87.2 percent publicity rate on adjudicated 

cases. 

3D – Exam and Collections ($4,974,618,000 in direct appropriations and an estimated 

$10,245,000 from reimbursable programs): This budget activity funds programs that 

enforce tax laws through examination and collection programs that ensure proper 

payment and tax reporting. This budget activity also supports appeals and litigation 

activities associated with exam and collection. This includes the following program 

activities: 

• Compliance Services Management supports management associated with 

compliance program activities. 

• Payment Compliance – Correspondence Collection supports IRS collection 

activities by initiating contact and collecting delinquent taxpayer liabilities 

through written notices and other means. 

• Automated Collections and Support supports the IRS centralized Automated 

Collection System (ACS) by initiating contact and collecting delinquent taxpayer 

liabilities through automated means. 

• Payment Compliance – Field Collection conducts field investigations and 

collection efforts associated with delinquent taxpayer and business entity 

liabilities, including direct taxpayer contact and outreach programs to protect the 

interest of the federal government in delinquent tax liability situations. 

• Tax Reporting Compliance – Document Matching supports the Automated 

Underreporter (AUR), Combined Annual Wage Reporting (CAWR), Federal 

Unemployment Tax Act (FUTA), and other Document Matching Programs. 

• Tax Reporting Compliance – Electronic/Correspondence Exam initiates written 

correspondence with taxpayers related to tax issues arising from claims on their 

tax returns. 

• Tax Reporting Compliance – Field Exam compares taxpayer income levels and 

corresponding tax liabilities to ensure accuracy of taxpayer returns. 

IRS-72 
• Fraud/Bank Secrecy Act enforces the anti-money laundering provisions of the 

Bank Secrecy Act of 1970 (BSA), and the USA Patriot Act of 2001. It examines 

non bank financial institutions for compliance with these laws, receives and 

processes more than 15 million financial reports annually, and manages a 

centralized database of that information for the Financial Crimes Enforcement 

Network (FinCEN). The Fraud program follows the “money trail” to support the 

criminal investigation of tax evasion operations. Fraud Technical Advisors and 

Revenue Agents provide investigative leads and referrals to federal, state, and 

local law enforcement agencies. 

• Appeals provides an administrative review process that provides a channel for 

impartial case settlement before a case is docketed in a court of law. 

• Litigation provides legal support for the IRS in litigation of cases, including 

interpretation of the tax law. 

• Specialty Programs – Exams examines federal tax returns of businesses and 

individuals responsible for the filing and payment of employment, excise, estate, 

and gift taxes. 

• International Collection supports international field collection efforts associated 

with delinquent taxpayer and business entity liabilities from U.S. citizens residing 

abroad, non-resident aliens, expatriates, and those involving other international 

issues (e.g., Foreign Tax Credit and Foreign Earned Income Exclusion). 

• International Exams supports the international exam program involving U.S. 

citizens residing abroad, non-resident aliens, expatriates and other examinations 

involving other international issues including legal support (e.g., Foreign Tax 

Credit and Foreign Earned Income Exclusion). 

• Unit General Management and Administration provides staffing, training, and 

direct support for headquarters management activities of strategic planning, 

communication and liaison, finance, human resources, EEO and diversity, 

business system planning, and embedded training. 

• EITC Management & Administration supports headquarters management 

associated with administering EITC program service-wide. 

• Whistleblower provides staffing, training, and direct support to process, assess, 

and analyze tips from individuals who identify tax problems in the course of their 

daily personal business, regardless of where encountered (including the 

workplace). 

• Communications and Liaison coordinates local government and liaison 

relationships; manages congressional, state, and national stakeholder relationships 

and issues; coordinates crosscutting issues, including audit management and 

legislative implementation; manages national media contacts and local media 

relationships; and ensures IRS compliance with disclosure and privacy laws. 

IRS-73 
3.2.4 – Budget and Performance Plan 

Dollars in Thousands 

Exam and Collections Budget Activity

FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011

Resource Level Obligations Obligations Obligations Obligations Enacted Request

Appropriated Resources $3,925,839 $3,932,874 $4,030,648 $4,342,021 $4,706,350 $4,974,618

Reimbursable Resources 9,851 8,764 8,302 8,970 10,051 10,245

Mandatory Appropriations - User Fees 5,452 12,679 3,103 10,100

Total Resources $3,935,690 $3,947,090 $4,051,629 $4,354,094 $4,726,501 $4,984,863

Exam and Collections Budget Activity FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011

Measure Actual Actual Actual Actual Target Target

Examination Coverage - Individual (Oe) (L) 1.0% 1.0% 1.01% 1.0% 1.1% 1.1%

Field Exam National Quality Review Score (Oe) (L) 85.9% 85.9% 86.0% 85.1% 86.3% 86.3%

Office Exam National Quality Review Score (Oe) (L) 88.2% 89.4% 90.0% 92.1% 90.9% 90.9%

Examination Quality - Industry (Oe) (L) 85.0% 87.0% 88.0% 88.0% 89.0% 89.0%

Examination Quality - Coordinated Industry (Oe) (L) 96.0% 96.0% 97.0% 95.0% 96.0% 96.0%

Examination Coverage - Business (Oe) (L) 7.3% 6.8% 6.1% 5.6% 5.1% 5.0%

Automated Underreporter Efficiency (E) (L) 1,832 1,956 1,982 1,905 1,868 1,945

Automated Underreporter Coverage (E) (L) 2.4% 2.5% 2.55% 2.6% 3.0% 3.4%

Examination Efficiency - Individual (E) (L) 128 137 138 138 132 128

Collection Coverage - Units (Ot) (L) 54.0% 54.0% 55.2% 54.2% 50.5% 51.5%

Collection Efficiency - Units (E) (L) 1,677 1,828 1,926 1,845 1,898 1,884

Field Collection National Quality Review Score (Ot) (L) 84.2% 84.0% 79.0% 80.5% 81.0% 82.0%

Automated Collection System (ACS) Accuracy (Oe) 91.0% 92.9% 95.3% 94.3% 92.5% 94.0%

Key: Oe - Outcome Measure, E - Efficiency Measure, L - Long Term Goal, Ot - Output/Workload Measure

IRS-74 
Description of Performance 

Enforcement of the tax laws is an integral component of the IRS effort to enhance 

voluntary compliance. IRS enforcement activities, such as examination and collection, 

target elements of the tax gap and remain a high priority. In FY 2009, the IRS expanded 

its enforcement presence in the international field, continued to pursue high-wealth 

noncompliant taxpayers, and initiated action to better leverage the tax return preparer 

community. 

In FY 2009, the IRS placed extraordinary focus on detecting and bringing to justice those 

who hide assets overseas to avoid paying tax. As part of an overall IRS strategy to 

improve offshore compliance, initiatives were implemented to identify U.S. taxpayers 

that engaged in offshore tax evasion schemes. In August 2009, the IRS reached 

agreement with the Swiss authorities that will result in the IRS receiving an 

unprecedented amount of information on taxpayers who evaded their tax obligations by 

hiding money offshore at UBS. This represents a major step forward for the IRS in its 

efforts to combat offshore tax evasion and will send a clear message to people hiding 

income and assets offshore that the IRS will vigorously pursue tax cheats, no matter how 

remote or secret the location. 

At the same time, the IRS established an offshore voluntary disclosures/penalty 

framework for taxpayers to disclose their offshore activities. The framework provided 

taxpayers the opportunity to: 

• Calculate the total cost of resolving all offshore tax issues; 

• Become compliant with U.S. tax laws; 

• Make voluntary disclosures that will be used to further the IRS understanding of 

how foreign accounts and foreign entities are promoted to U.S. taxpayers as ways 

to avoid or evade tax; and 

• Provide data to be used in developing additional IRS strategies to inhibit 

promoters and facilitators from soliciting new clients. 

As a result of the offshore voluntary disclosure program that ran through 

October 15, 2009, more than 14,700 taxpayers with offshore accounts voluntarily came 

forward to disclose information bringing them back into the U.S. tax system. A key 

aspect of future international offshore work will be mining the information from people 

who came forward to identify financial institutions, advisors, and others who promote or 

otherwise helped U.S. taxpayers hide assets and income. 

Total enforcement revenue was $48.9 billion in FY 2009. The IRS showed steady 

progress in increasing its audit coverage: 

• Total individual audits by 2.6 percent; 

• Automated Underreporter (AUR) contact closures by 2.6 percent; 

• High-wealth audits by 11.2 percent; and 

IRS-75 
• Large corporate audits by 2.6 percent, a significant achievement given the size 

(more than $10 million) and complexity of these corporate entities. 

With many people facing financial difficulties, the IRS took several steps to help people 

who owed back taxes, especially those who have complied in the past and were facing 

unusual hardships. Some of the actions IRS took to help taxpayers included: 

• Postponement of Collection Actions — The IRS suspended collection actions in 

certain hardship cases where taxpayers were unable to pay. 

• Lien Relief for Homeowners trying to Refinance or Sell — In an effort to raise 

taxpayer awareness of the availability of the discharge and lien subordination 

process, the IRS conducted various outreach efforts and sought feedback from the 

National Society of Accountants, the American Bar Association, and the National 

Associations of Enrolled Agents and Tax Professionals; resulting in a 20.8 percent 

increase in lien discharge applications and a 5.3 percent increase in lien 

subordination. 

• Added Flexibility for Missed Payments — Previously compliant individuals in 

existing Installment Agreements in certain cases were allowed to skip payments 

or pay a reduced monthly payment amount without automatically suspending the 

Installment Agreement. 

• Prevention of Offer in Compromise (OIC) Defaults — Taxpayers who were 

unable to meet the payment terms of an accepted OIC received a letter outlining 

options to avoid default. 

• Expedited Levy Releases — The IRS released levies in an expedited manner for 

taxpayers suffering financial hardships. 

• Offering Installment Agreements — The IRS offered installment agreements at 

the end of an audit to taxpayers having difficulty paying their tax liability. 

The Compliance Assurance Process (CAP) is a method of resolving tax issues through an 

open and transparent interaction between the IRS and large corporations to identify and 

resolve issues before the filing of a return. CAP involves some of the largest U.S. 

corporations. CAP participation has been expanded from 17 in 2005 to 102 in 2009 and 

is expected to become a permanent program for Tax Year (TY) 2010.

The CAP program benefits both the IRS and the taxpayer by fostering compliance, 

reducing the time it takes to process a return, and improving both customer and employee 

satisfaction while maintaining a high level of quality. 

In FY 2009, the IRS developed a comprehensive set of recommendations to ensure 

consistent standards for tax preparer qualifications, ethics and service. The 

recommendations were developed using information obtained from a large and diverse 

constituent community that included those licensed by state and federal authorities, 

unlicensed tax preparers, software vendors, consumer groups and taxpayers. More 

than 450 taxpayers and tax professionals and 600 IRS employees responded to the IRS 

IRS-76 
request for comments to help leverage the tax return preparer community with the twin 

goals of increasing taxpayer compliance and ensuring uniform and high ethical standards 

of conduct for tax preparers. 

3E – Regulatory ($170,816,000 in direct appropriations and an estimated $694,000 

from reimbursable programs): This budget activity funds the development and printing 

of published IRS guidance materials; interpretation of tax laws; advice on general legal 

servicing, ruling, and agreements; enforcement of regulatory rules, laws, and approved 

business practices; and support for taxpayers in the areas of pre-filing agreements, 

determination letters, and advance pricing agreements. This includes the following 

program activities: 

• Tax Law Interpretation and Published Guidance interprets the tax law through 

published guidance, technical advice, and other technical legal services. 

• General Legal Services provides advice to the IRS on non-tax legal issues, 

including procurement, personnel, labor relations, equal employment opportunity, 

fiscal law, tort claims and damages, ethics, and conflict of interest. 

• Rulings and Agreements applies the tax law to specific taxpayers in the form of 

pre-filing agreements, determination letters, advance pricing agreements, and 

other pre-filing determinations and advice. 

• International Regulatory Legal Support supports Counsel’s work in tax law 

interpretation and rulings and agreements related to international issues. 

• Office of Professional Responsibility identifies, communicates, and enforces 

Treasury Circular 230 standards of competence, integrity, and conduct of those 

who represent taxpayers before the IRS, including attorneys, Certified Public 

Accountants (CPAs), enrolled agents, enrolled actuaries and appraisers, and other 

professionals. 

3.2.5 – Budget and Performance Plan 

Dollars in Thousands 

Regulatory Budget Activity

FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011

Resource Level Obligations Obligations Obligations Obligations Enacted Request

Appropriated Resources $150,115 $146,213 $145,036 $152,115 $159,956 $170,816

Reimbursable Resources 151 255 435 469 681 694

Mandatory Appropriations - User Fees 168

Total Resources $150,266 $146,468 $145,639 $152,584 $160,637 $171,510

Regulatory Budget Activity FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011

Measure Actual Actual Actual Actual Target Target

TE/GE Determination Case Closures (Ot) 108,462 109,408 100,050 96,246 140,465 99,491

Key: Ot - Output/Workload Measure

IRS-77 
Description of Performance 

The IRS continues to help pension plans, exempt organizations, and government entities 

comply with tax laws. In FY 2009, the IRS: 

• Released the results of its nonprofit hospital study. The research presented 

demographics of nonprofit hospitals and their community benefit and executive 

compensation reporting and practices that can be used by Congress and others to 

revise community benefit and reasonable compensation standards.

• Created a new category of practitioner, “Enrolled Retirement Plan Agent” 

(ERPA). This new category allows practitioners who have administrative or 

financial information about a plan to have a limited practice before the IRS under 

the safeguard of Circular 230. In addition, ERPAs provide valuable information 

to the IRS with respect to the administrative and financial issues affecting 

retirement plans. 

The IRS implemented the Build America Bonds (BAB) program as well as other 

Recovery Act tax credit bond provisions. This included: 

• Coordination of the development of a new direct payment processing system; 

• Development of a new return, Form 8038-CP, and instructions; 

• Implementation of new compliance programs related to BABs and other new 

forms of tax credit bonds; 

• Presentation of Recovery Act information to several groups, including 

underserved territories and tribes; and 

• Development of seven notices and several educational documents related to the 

new bond provisions.

In FY 2009, TE/GE closed approximately 35,900 enforcement contacts, a 14 percent 

improvement from the FY 2008 level and 21 percent above plan. Total exam closures 

surpassed last year’s accomplishment by 17 percent and the plan by 22 percent. 

IRS-78 
Operations Support 

Appropriation Description 

The Operations Support appropriation provides funding for overall planning, direction, 

and support for the IRS, including shared service support related to facilities services, 

rent payments, printing, postage, and security. This appropriation funds headquarters 

policy and management activities such as corporate support for strategic planning, 

communications and liaison, finance, human resources, Equal Employment Opportunity 

(EEO) and diversity; research and statistics of income; and necessary expenses for 

information systems and telecommunication support, including development, security, 

and maintenance of the IRS information systems. 

The Operations Support Budget Request for FY 2011 is $4,108,000,000 in direct 

appropriations and 12,384 FTE. This is an increase of $24,116,000 or 0.59 percent and 

68 FTE more than the FY 2010 enacted level of $4,083,884,000 and 12,316 FTE. 

IRS-79 
2.1 – Budget Adjustments Table 

Dollars in Thousands 

Operations Support FTE Amount

FY 2009 Enacted 12,267 $3,867,011

FY 2010 President's Budget Request 12,316 $4,082,984

Congressional Action 900

FY 2010 Enacted Budget (P.L. 111-117) 12,316 $4,083,884

Changes to Base:

Maintaining Current Levels $57,884

Pay Annualization 7,608

Pay Inflation Adjustment 19,127

Non-Pay Inflation Adjustment 29,026

FERS Increased Participation 2,123

Other Adjustments 59

Technical FTE Adjustments 59

Efficiencies/Savings ($155,314)

Non-Recur Savings (32,680)

Increase e-File Savings 378

IT Infrastructure and Process Improvements (75,000)

Reduce Procurement/Contracting (19,697)

Reduce Printing, Travel, and Training (7,468)

Reduce Tuition Assistance Program (847)

Eliminate Selective Mailing of Forms and Publications (20,000)

Subtotal Changes to Base 59 ($97,430)

Total FY 2011 Base 12,375 $3,986,454

Program Changes:

Taxpayer Service Initiatives $25,000

Improve IRS.gov 25,000

Enforcement Initiatives 9 $51,083

Address Business and Individual International Compliance 4 21,780

Reduce the Reporting Compliance Tax Gap 5 17,223

Reduce the Nonfiling and Underpayment Tax Gap 9,924

Support for Increased Enforcement Activities 1,262

Maintain Recovery Act Staffing 894

Business Systems Modernization (BSM) Initiative $45,463

Continue Migration from Aging Tax Administration System 45,463

Subtotal Program Changes 9 $121,546

Total FY 2011 Request 12,384 $4,108,000

Adjustments to Request

User Fees 67,100

Total FY 2011 12,384 $4,175,100

IRS-80 
2.2 – Operating Levels Table 

Dollars in Thousands 

% 

Congressional FY 2010 Change 

FY 2009 FY 2010 Appropriation Title: Operations Support Action FY 2010 Proposed FY 2011 FY 2010 

Enacted President's including Enacted Proposed Operating Request to 

Level1 Budget2 Rescission Level Reprogram. Level Level FY 2011

FTE 12,267 12,316 12,316 12,316 12,384 0.6%

Object Classification:

11.1 Full-Time Permanent Positions $1,032,735 $1,044,177 $0 $1,044,177 $0 $1,044,177 $1,089,960 4.4%

11.3 Other than Full-Time Permanent Positions 14,307 23,007 0 23,007 0 23,007 26,496 15.2%

11.5 Other Personnel Compensation 33,933 31,770 0 31,770 0 31,770 35,147 10.6%

11.8 Special Personal Services Payments 0 0 0 0 0 0 00.0%

11.9 Personnel Compensation (Total) $1,080,975 $1,098,954 $0 $1,098,954 $0 $1,098,954 $1,151,603 4.8%

12.0 Personnel Benefits 321,992 335,790 0 335,790 0 335,790 357,973 6.6%

13.0 Benefits to Former Personnel 48,377 48,775 0 48,775 0 48,775 48,907 0.3%

21.0 Travel 45,170 37,928 0 37,928 0 37,928 42,852 13.0%

22.0 Transportation of Things 20,271 21,278 0 21,278 0 21,278 20,999 -1.3%

23.1 Rental Payments to GSA 631,327 668,154 0 668,154 0 668,154 676,738 1.3%

23.2 Rent Payments to Others 314 7 0 7 0 7 44 528.6%

23.3 Communications, Utilities, & Misc 428,987 445,527 0 445,527 0 445,527 426,745 -4.2%

24.0 Printing & Reproduction 54,778 55,054 0 55,054 0 55,054 51,666 -6.2%

25.1 Advisory & Assistance Services 118,586 127,437 0 127,437 0 127,437 96,998 -23.9%

25.2 Other Services 428,041 416,456 900 417,356 0 417,356 390,480 -6.4%

25.3 Purchase of Goods & Services from Govt. Accounts 59,099 78,168 0 78,168 0 78,168 86,985 11.3%

25.4 Operation & Maintenance of Facilities 182,638 185,263 0 185,263 0 185,263 217,608 17.5%

25.5 Research & Development Contracts 7,241 7,825 0 7,825 0 7,825 5,471 -30.1%

25.6 Medical Care 13,180 11,110 0 11,110 0 11,110 12,538 12.9%

25.7 Operation & Maintenance of Equipment 67,443 68,184 0 68,184 0 68,184 110,905 62.7%

25.8 Subsistence & Support of Persons 334 1,256 0 1,256 0 1,256 321 -74.4%

26.0 Supplies and Materials 22,074 31,399 0 31,399 0 31,399 29,916 -4.7%

31.0 Equipment 312,999 395,013 0 395,013 0 395,013 360,851 -8.6%

32.0 Lands and Structures 22,608 48,682 0 48,682 0 48,682 17,857 -63.3%

33.0 Investments & Loans 0 0 0 0 0 0 00.0%

41.0 Grants, Subsidies 0 0 0 0 0 0 00.0%

42.0 Insurance Claims & Indemn 577 724 0 724 0 724 543 -25.0%

43.0 Interest and Dividends 0 0 0 0 0 0 00.0%

44.0 Refunds 0 0 0 0 0 0 00.0%

91.0 Unvouchered 0 0 0 0 0 0 00.0%

Total Budget Authority $3,867,011 $4,082,984 $900 $4,083,884 $0 $4,083,884 $4,108,000 0.6%

Budget Activities:

Infrastructure $875,538 $900,852 0 $900,852 $0 $900,852 $889,929 -1.2%

Shared Services & Support 1,269,642 1,296,629 0 1,296,629 0 1,296,629 1,337,776 3.2%

Information Services 1,721,831 1,885,503 900 1,886,403 0 1,886,403 1,880,295 -0.3%

Total Budget Authority $3,867,011 $4,082,984 $900 $4,083,884 $0 $4,083,884 $4,108,000 0.6%

1 FY 2009 Enacted represents the approved FY 2009 Operating Plan.

IRS-81 
2.3 – Appropriation Detail Table 

Dollars in Thousands 

Operations Support % Change

FY 2009 FY 2009 FY 2010 FY 2011 FY 2010

Resources Available for Obligation Obligations Enacted1 Enacted Request to FY 2011

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

New Appropriated Resources:

Infrastructure $859,093 $875,538 $900,852 $889,929 0.00% -1.21%

Shared Services and Support 5,710 1,257,040 5,977 1,269,642 5,977 1,296,629 6,003 1,337,776 0.44% 3.17%

Information Services 6,391 1,680,279 6,290 1,721,831 6,339 1,886,403 6,381 1,880,295 0.66% -0.32%

Subtotal New Appropriated Resources 12,101 $3,796,412 12,267 $3,867,011 12,316 $4,083,884 12,384 $4,108,000 0.55% 0.59%

Other Resources:

Recoveries 720

Offsetting Collections - Reimbursable 165 40,364 165 40,364 169 48,148 170 48,927 0.59% 1.62%

Available multi-year/no-year funds 60,462 67,808 68,455 65,455 -4.38%

50% Carryover 13,870 13,870

Transfers In/Out 3,267 3,267

Mandatory Appropriations - User Fees 1 9,545 32,900 50,000 67,100 34.20%

Subtotal Other Resources 166 $127,508 165 $158,929 169 $166,603 170 $181,482 0.59% 8.93%

Total Resources Available for Obligation 12,267 $3,923,920 12,432 $4,025,940 12,485 $4,250,487 12,554 $4,289,482 0.55% 0.92% 1 FY 2009 Enacted represents the approved FY 2009 Operating Plan.

3F – Infrastructure ($889,929,000 in direct appropriations, an estimated $398,000 from 

reimbursable programs and an estimated $16,100,000 from user fees): This budget 

activity funds administrative services related to space and housing, rent and space 

alterations, building services, maintenance, guard services, and non-IT equipment. This 

includes the following program activities: 

• Building Delegation oversees and manages the IRS GSA-delegated buildings, 

including cleaning, maintenance, utilities, protection, administrative, and 

recurring and one-time repair costs. 

• Rent provides resources for all IRS rent needs. 

• Space and Housing/Non-IT Equipment provides management of all IRS building 

services, maintenance, space alterations, guard services, custodial overtime, utility 

services needs, and Non-IT equipment. 

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3.2.6 – Budget and Performance Plan 

Dollars in Thousands 

Infrastructure Budget Activity

FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011

Resource Level Obligations Obligations Obligations Obligations Enacted Request

Appropriated Resources $837,320 $808,254 $809,039 $859,093 $900,852 $889,929

Reimbursable Resources 103 121 149 14,120 393 398

Mandatory Appropriations - User Fees 13,049 16,100 16,100

Total Resources $837,423 $808,375 $822,237 $873,213 $917,345 $906,427

Description of Performance 

The IRS continued to achieve cost savings in FY 2009 with its rent management 

strategy. These savings, coupled with those of previous years, have helped offset the 

increased costs associated with infrastructure improvement initiatives such as 

the Philadelphia Consolidation. Workstation utilization increased in 2009 as the IRS was 

able to place most attrition hires and new hires into existing space. The FY 2009 hiring 

initiatives increased rent because the IRS had to obtain additional space in some 

locations. 

Rent costs, including the cost of facility security, increased 0.56 percent, from 

$659.6 million in FY 2008, to $663.2 million in FY 2009. The IRS achieved rent savings 

by identifying and completing 25 space reduction projects, releasing a cumulative total of 

179,260 square feet. These projects have annualized savings estimated at $4.1 million. 

While the IRS plans to achieve additional cost savings in FY 2010 by continuing its rent 

management strategy, these savings will be more than offset by expected increases 

associated with relocations because of expiring leases, acquisition of new space to 

permanently house new hires, operating cost increases, and the cost of bringing the new 

Philadelphia Consolidated Campus facility on-line beginning in late FY 2010. The net 

result of this will be a substantial increase in rent and security costs in FY 2010, which is 

expected to continue in FY 2011. In FY 2011, the annualization of the rent increase 

associated with the consolidated Philadelphia facility and other GSA-driven rent 

increases are the primary reason costs will increase. 

3G – Shared Services and Support ($1,337,776,000 in direct appropriations and an 

estimated $33,110,000 from reimbursable programs): This budget activity funds policy 

and management, IRS-wide support for research, strategic planning, communications and 

liaison, finance, human resources, and equal employment opportunity and diversity 

services and programs. It also funds printing and postage, business systems planning, 

security, corporate training, legal services, procurement, and employee benefits 

programs. This includes the following program activities: 

• National Headquarters Management and Administration directs the management 

activities of strategic planning, communications and liaison, finance, human 

IRS-83 
resources, EEO and diversity, and business systems planning and embedded 

training. This activity sets policies and goals, provides leadership and direction 

for the IRS and builds partner relationships with key stakeholders (Congress, 

GAO, OMB). It provides policy guidance for conducting IRS planning and 

budgeting strategies, conducting analysis of programs and investments to support 

strategic decision-making, and developing and managing human resources. It 

also includes official reception and representation expenses. 

• Real Estate & Facilities Management provides services and supplies required to 

manage IRS facilities. 

• Procurement supports the procurement function of the IRS. 

• EEO & Diversity Field Operations plans and manages the IRS EEO and Diversity 

Program. 

• Communications and Liaison coordinates local government and liaison 

relationships; handles congressional, state, and national stakeholder relationships 

and issues; coordinates cross-cutting issues, including managing audits and 

legislative implementation; handles national media contacts and local media 

relationships; and ensures IRS-wide compliance with disclosure and privacy laws. 

• Employee Support Services plans and manages financial services, including 

relocation, travel, imprest fund, purchase cards, corporate express, and employee 

clearances. 

• Treasury Complaint Mega Centers plan and manage the Treasury Complaint 

Centers. 

• Shared Support not provided by Agency-Wide Shared Services provides resources 

for shared cross-functional support such as copiers, postage meters, shredders, 

courier services, and post office boxes. 

• Printing and Postage – Media and Publications provides operating divisions with 

printing and postage, including shipping of taxpayer and internal use materials. 

• Statistics of Income provides resources for researching annual income, financial, 

and tax data from tax returns filed by individuals, corporations, and tax-exempt 

organizations. 

• Research provides resources for market-based research to identify compliance 

issues, for conducting tests of treatments to address noncompliance, and for the 

implementation of successful treatments of taxpayer non-compliant behavior. 

• Security protects employees, facilities and assets, and the confidentiality of 

taxpayer information. 

• W & I Business Modernization Support provides staffing, training, and direct 

support for W&I’s enterprise-wide business modernization efforts including 

Customer Account Data Engine (CADE), technology solutions and re-engineered 

business processes. 

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• Benefit Payments provides resources to fund Workers’ Compensation benefits and 

Unemployment Compensation for federal employee payments. 

• Shared Services provides additional services such as Public Transit Subsidy and 

Career Counselor Contract. 

3.2.7 – Budget and Performance Plan 

Dollars in Thousands 

Shared Services and Support Budget Activity

FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011

Resource Level Obligations Obligations Obligations Obligations Enacted Request

Appropriated Resources $1,154,616 $1,154,724 $1,279,800 $1,257,040 $1,296,629 $1,337,776

Reimbursable Resources 17,836 13,649 30,796 20,763 32,573 33,110

Mandatory Appropriations - User Fees 19,114 2

Total Resources $1,172,452 $1,168,373 $1,329,710 $1,277,805 $1,329,202 $1,370,886

Description of Performance 

Through support activities that include management and administration of human 

resources, security, and research, the IRS continues to provide shared services to all IRS 

programs. 

In FY 2009, the IRS began implementing Workforce of Tomorrow initiatives for 

both short and long-term improvements in the areas of attracting, developing, and 

retaining the best people, and enhancing the role of IRS managers and growing future 

leaders. Recent accomplishments include: 

• Establishment of a new Centralized Recruiting Office; 

• Implementation of a revamped five-step hiring process; 

• Revision of all communications used in the hiring process; 

• Pilot of an accelerated leadership program in Criminal Investigation with 

additional organizations launching accelerated leadership pilots in FY 2010; 

• Redesign of the Front Line Manager Curriculum, which included piloting three 

new components of the curriculum – a web-based Manager Orientation, 

Fundamental Management Skills, and Front Line Manager course training; and 

• Streamline of the Leadership Competency Model from 21 competencies to 

four core competencies supported by 13 key leader behaviors. 

The IRS actively ensures the security of its infrastructure and IT systems. The IRS 

collects a tremendous amount of sensitive information, and protecting this information is 

vital to maintaining the public trust. Public trust encourages voluntary compliance with 

the tax law and enables the IRS to conduct business effectively. 

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In FY 2009, to protect the tax administration systems from unauthorized access, 

disruption, and modification the IRS: 

• Continued risk assessments of business processes to address identity protection 

and analyzed the use of social security numbers for reduction and elimination 

where possible; 

• Completed a corrective action plan to address IT security training, systems 

auditing, access controls, system security configuration control, and IT systems 

disaster recovery; and 

• Established agency-wide security policies and standards. 

The IRS takes the issue of identity theft very seriously. In FY 2009, to preserve and 

enhance public confidence, the IRS advocated the protection and proper use of identity 

information by: 

• Establishing Opened Identity Protection Specialized Units (IPSUs) and a 

dedicated toll-free number to provide guidance and assistance to taxpayers 

affected by identity theft. These units assist taxpayers who have experienced tax 

administration issues or problems as a result of identity theft. In the first year, the 

IRS responded to 120,000 calls and opened nearly 34,000 cases for further action. 

• Placing markers on more than 231,300 taxpayer accounts to alert employees the 

account belongs to a substantiated identity-theft victim. The IRS also provided a 

portfolio of identity protection services for taxpayers, including letters to 

individuals triggered by the account marker informing taxpayers that their 

personal information was used by another individual to file a return or may have 

been compromised through phishing scams. In FY 2009, the IRS sent nearly 

79,600 letters. 

• Eliminating the use of social security numbers (SSNs) on more than 8 million 

forms, notices, and letters. This is the first large-scale effort to eliminate and 

reduce the use of SSNs on taxpayer correspondence. Over the next 2 to 5 years, 

the IRS will eliminate the use of SSNs on more than 90 million notices 

and forms. 

The Office of Online Fraud Detection and Prevention (OFDP) protects the IRS and 

taxpayers from increasing and evolving online threats. Through the OFDP, the IRS shut 

down 3,444 phishing web sites in FY 2009 (1,578 domestic sites and 1,866 international 

sites), compared to 2,926 sites in 2008. The median shut down time was 2.35 hours for 

domestic phishing sites and 6.85 hours for international sites. By monitoring, identifying, 

and mitigating fraudulent sites and phishing scams, OFDP helps to reduce the number of 

taxpayers who fall victim to online fraud schemes. 

The IRS continues to conduct research to improve services to taxpayers and develop 

better ways to identify noncompliance and reduce the tax gap. 

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During FY 2009, the IRS continued its research studies of filing, payment, and reporting 

compliance, including the National Research Program (NRP), to provide a 

comprehensive picture of overall taxpayer compliance levels. Research allows the IRS to 

target specific areas to improve voluntary compliance and to allocate resources more 

effectively to reduce the tax gap. In FY 2009, the NRP included analyzing individual 

income tax returns for tax years 2006 through 2008 as part of an on-going reporting 

compliance study and studies of employment taxes and their contribution to the tax gap. 

The IRS also began an NRP study to address cases with the highest compliance risk by 

providing an identification process for returns filed by U.S. persons living abroad. 

The IRS is studying the effects of its taxpayer services (internet, walk-in sites, and 

toll-free hotline) on voluntary compliance, including identifying why taxpayers make 

errors and exploring the relationships between errors made and unclear correspondence. 

The IRS will use the results to develop new approaches to service. 

As part of its continuing effort to measure the burden associated with meeting federal tax 

obligations, the IRS surveyed 7,000 individual and self-employed taxpayers to measure 

time and expense in meeting filing requirements. Efforts are underway to develop models 

to measure time and expenses for small-business taxpayers who file income and 

employment tax returns. Estimates are scheduled to be released in FY 2010. 

3H – Information Services ($1,880,295,000 in direct appropriations, an 

estimated $15,419,000 from reimbursable programs and an estimated $51,000,000 from 

user fees): 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. Under this budget activity staff develops and maintains the millions of lines of 

programming code that support all aspects and phases of tax processing. They are 

responsible for operating and administering the hardware infrastructure of mainframes, 

servers, personal computers, networks, and a variety of management information 

systems. 

Modernization & Information Technology Services (MITS) is responsible for 

information systems and technology, ranging from cyber security and networks to 

applications development and end user equipment and services. This includes the 

following program activities: 

• Customer Relationship and Service Delivery Management provides services in an 

integrative manner to improve service delivery processes to seek performance 

improvement. 

• Security Services ensures effective security policies and programs to safeguard 

taxpayer records, business processes, and IT systems. The program establishes a 

governance process to perform vulnerability assessments and provide 

service-wide mission assurance as well as security support to IRS systems 

modernization. Security management provides executive direction for 

enterprise-wide IT security policy development and implementation, operations, 

and services. 

IRS-87 
• Tier B provides support to single-owner, small to medium investment projects 

using core data to support specialized functions. 

• Management Services provides for the design, development, delivery, and 

evaluation of a wide range of human resource programs for the MITS 

organization. These programs include workforce planning, recruitment and 

retention, career management, performance management, labor/employee 

relations, position management, workplace improvement, succession management 

and service-wide IT training and education. 

• National Headquarters (NHQ) IT Management provides for the management and 

oversight of investments in IT for the Chief of Staff and Research, Analysis and 

Statistics (RAS). The program enables NHQ to manage and leverage IT solutions 

that are responsive to IRS-wide management, tax compliance, enforcement, and 

strategic and tactical research projects. 

• MITS Executive Oversight provides support to the immediate office of the Chief 

Technology Officer, as well as the direct reports for EEO and Diversity, and the 

Director, Stakeholder Management (including Communications Services and 

Program Oversight). The program provides executive direction for the MITS 

organization, enabling MITS to be a customer-focused supplier of IT solutions 

that are responsive to customer business priorities and effectively meet functional 

and operational needs. 

• Application Development performs the analysis, design, development, testing, and 

implementation of approximately 85,000 application programs supporting critical 

tax processing, management information reporting, and financial and management 

support systems for the IRS. This program also supports external trading partner 

data exchanges with federal government agencies, state and local governments, 

and other third-party entities. The program controls application source code and 

deploys applications to the production environment. 

• Enterprise Operations designs, develops, and maintains IT that supports critical 

tax processing, management information reporting, and financial and management 

support systems for the IRS. The program supports data exchanges with external 

organizations, such as other federal agencies, state and local governments, and 

external entities (e.g., employers and banks), and includes a comprehensive 

disaster recovery capability to ensure continued operations in the event of a major 

interruption of service. 

• Enterprise Network provides telecommunications service delivery to all customer 

segments, including management of day-to-day operations and execution of 

routine modifications to the telecommunications infrastructure and applications. 

It addresses all phases of engineering, acquisition, implementation, and operation 

of telecommunications systems and services, including voice, video, and data 

communications. 

• Enterprise Services plans and manages service and delivery methods used across 

the MITS organization, including demand analysis, enterprise architecture, 

configuration management, project reporting, enterprise life cycle management, 

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release management, systems engineering, dashboard reporting, and internal 

management. 

• End User Equipment and Services maintains the IRS automated business 

processes at headquarters and field sites by providing technical systems support 

and applications software support to end users, legacy operations maintenance, 

local and corporate systems administration activities, email and domain user 

account maintenance, network and systems monitoring administration, asset 

management activities, and support and maintenance of the voice and data 

infrastructure at the territory offices. 

• Strategy and Planning provides the management and oversight of investments in 

IT, human capital investment, and other MITS operational priorities. 

• IT Security Certification and Accreditation provides design and operations of 

security controls and the technical mechanisms used by the IRS systems and 

applications as part of the system security plan, system risk assessment, and IT 

contingency plan. It also supports security testing and evaluation as part of the 

certification process, including time preparing system documentation, 

interviewing with contractors, and responding to information requests. 

• IT Operational Security oversees Federal Information Security Management Act 

(FISMA) reporting, including preparing for, conducting, and reporting National 

Institute of Standards and Technology (NIST) 800-26 self-assessments and annual 

testing of controls. 

• IT Security Training provides training for FISMA reporting purposes. 

• IT Homeland Security Presidential Directive-12 oversees the use of Personal 

Identity Verification (PIV) technology for physical access to federally-controlled 

facilities and logical access to information systems for all federal employees and 

contractors who require long-term access. 

• IT Infrastructure funds the replacement of IRS IT infrastructure that has reached 

or surpassed its useful life cycle. The resources achieved through efficiencies in 

various parts of MITS are centralized to ensure that replacement of the aging 

infrastructure is addressed corporately. 

• Treasury Working Capital Fund is a centralized functional area for separating 

from the Information Services base budget the resources required to pay Treasury 

billings for services provided through the working capital fund. 

• Integrated Document Solutions Enterprise (IDSE) Campus Operations Most 

Efficient Organization (MEO) captures savings resulting from IDSE MEO 

activities. 

IRS-89 
IRS-90 

3.2.8 – Budget and Performance Plan 

Dollars in Thousands 

Information Services Budget Activity

FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011

Resource Level Obligations Obligations Obligations Obligations Enacted Request

Appropriated Resources $1,510,449 $1,551,603 $1,678,744 $1,680,279 $1,886,403 $1,880,295

Reimbursable Resources 3,330 14,006 14,310 5,481 15,182 15,419

Mandatory Appropriations - User Fees 66,678 50,000 9,543 33,900 51,000

Total Resources $1,513,779 $1,632,287 $1,743,054 $1,695,303 $1,935,485 $1,946,714

Description of Performance 

The IRS continues to replace its IT infrastructure using an ongoing review process that 

prioritizes funding of business unit needs. In FY 2009, 49 percent of IRS IT hardware 

assets were aged, with an average of 12 percent becoming aged each year. The IRS spent 

more than $170 million to replace more than 53,720 of these aged assets. The 

53,720 aged assets included network equipment, end-user equipment, and servers and 

storage equipment. 

Future funding will be used to replace aging IT and telecommunication equipment in line 

with current business standards. The backlog of aged and outdated IT and 

telecommunication equipment is growing every year. Without investing in an ongoing 

replacement program, the IRS runs the risk of increased maintenance costs, an inability to 

accommodate the increasing interaction and information exchange with taxpayers and tax 

preparers or failure to comply with government-wide standards and industry best 

practices. 

In FY 2009, the IRS completed security certification and accreditation for 98 percent of 

its IT systems. All FISMA 2009 reporting activities were completed and validated before 

the June 30, 2009 deadline. 
Business Systems Modernization 

Appropriation Description 

The Business Systems Modernization (BSM) appropriation provides resources for the 

planning and capital asset acquisition of IT to modernize the IRS business systems. 

The BSM Budget Request for FY 2011 is $386,908,000 in direct appropriations and 

489 FTE. This is a net increase of $123,011,000 or 46.6 percent and 156 FTE more than 

the FY 2010 enacted level of $263,897,000 and 333 FTE. 

IRS-91 
2.1 – Budget Adjustments Table 

Dollars in Thousands 

Business Systems Modernization FTE Amount

FY 2009 Enacted 333 $229,914

FY 2010 President's Budget Request 333 $253,674

Congressional Action 10,223

FY 2010 Enacted Budget (P.L. 111-117) 333 $263,897

Changes to Base:

Maintaining Current Levels $889

Pay Annualization 243

Pay Inflation Adjustment 589

Non-Pay Inflation Adjustment

FERS Increased Participation 57

Subtotal Changes to Base $889

Total FY 2011 Base 333 $264,786

Program Changes:

Business Systems Modernization (BSM) Initiative 156 $122,122

Continue Migration from Aging Tax Administration System 156 122,122

Subtotal Program Changes 156 $122,122

Total FY 2011 Request 489 $386,908

Adjustments to Request

User Fees

Total FY 2011 489 $386,908

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2.2 – Operating Levels Table

Dollars in Thousands 

% 

Congressional FY 2010 Change 

FY 2009 Appropriation Title: Business Systems Modernization FY 2010 Action FY 2010 Proposed FY 2011 FY 2010 

Enacted President's including Enacted Proposed Operating Request to 

Level1 Budget Rescission Level Reprogram. Level Level FY 2011

FTE 333 333 333 333 489 46.8%

Object Classification:

11.1 Full-Time Permanent Positions $34,020 $33,672 $0 $33,672 $0 $33,672 $53,905 60.1%

11.3 Other than Full-Time Permanent Positions 766 855 0 855 0 855 869 1.6%

11.5 Other Personnel Compensation 575 703 0 703 0 703 1,173 66.9%

11.8 Special Personal Services Payments 0 0 0 0 0 0 0 0.0%

11.9 Personnel Compensation (Total) $35,361 $35,230 $0 $35,230 $0 $35,230 $55,947 58.8%

12.0 Personnel Benefits 8,044 9,416 0 9,416 0 9,416 14,058 49.3%

13.0 Benefits to Former Personnel 0 0 0 0 0 0 0 0.0%

21.0 Trave l 0 0 0 0 0 0 78 100.0%

22.0 Transp o rtatio n o f Thing s 0 0 0 0 0 0 0 0.0%

23.1 Rental Payments to GSA 0 0 0 0 0 0 0 0.0%

23.2 Rent Payments to Others 0 0 0 0 0 0 0 0.0%

23.3 Communications, Utilities, & Misc 0 0 0 0 0 0 0 0.0%

24.0 Printing & Reproduction 0 0 0 0 0 0 0 0.0%

25.1 Advisory & Assistance Services 148 0 0 0 0 0 0 0.0%

25.2 Other Services 177,944 126,836 10,223 137,059 0 137,059 193,348 41.1%

25.3 Purchase of Goods & Services from Govt. Accounts 0 0 0 0 0 0 0 0.0%

25.4 Operation & Maintenance of Facilities 0 0 0 0 0 0 0 0.0%

25.5 Research & Development Contracts 0 0 0 0 0 0 0 0.0%

25.6 Medical Care 0 0 0 0 0 0 0 0.0%

25.7 Operation & Maintenance of Equipment 0 10,578 0 10,578 0 10,578 15,972 51.0%

25.8 Subsistence & Support of Persons 0 0 0 0 0 0 0 0.0%

26.0 Supplies and Materials 47 0 0 0 0 0 0 0.0%

31.0 Equipment 8,370 71,614 0 71,614 0 71,614 107,505 50.1%

32.0 Lands and Structures 0 0 0 0 0 0 0 0.0%

33.0 Investments & Loans 0 0 0 0 0 0 0 0.0%

41.0 Grants, Subsidies 0 0 0 0 0 0 0 0.0%

42.0 Insurance Claims & Indemn 0 0 0 0 0 0 0 0.0%

43.0 Interest and Dividends 0 0 0 0 0 0 0 0.0%

44.0 Refunds 0 0 0 0 0 0 0 0.0%

91.0 Unvouchered 0 0 0 0 0 0 0 0.0%

Total Budget Authority $229,914 $253,674 $10,223 $263,897 $0 $263,897 $386,908 46.6%

Budget Activities:

IT Investments $229,914 $253,674 $10,223 $263,897 $0 $263,897 $386,908 46.6%

Total Budget Authority $229,914 $253,674 $10,223 $263,897 $0 $263,897 $386,908 46.6%

1 FY 2009 Enacted represents the approved FY 2009 Operating Plan.

IRS-93 
2.3 – Appropriation Detail Table 

Dollars in Thousands 

Business Systems Modernization % Change

FY 2009 FY 2009 FY 2010 FY 2011 FY 2010

Resources Available for Obligation Obligations Enacted1 Enacted Request to FY 2011

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

New Appropriated Resources:

Business Systems Modernization 322 $131,138 333 $229,914 333 $263,897 489 $386,908 46.85% 46.61%

Subtotal New Appropriated Resources 322 $131,138 333 $229,914 333 $263,897 489 $386,908 46.85% 46.61%

Other Resources:

Recoveries

Offsetting Collections - Reimbursable

Available multi-year/no-year funds 116,249 31,767 -72.67%

50% Carryover

Transfers In/Out

Mandatory Appropriations - User Fees

Subtotal Other Resources 0 $0 0 $0 0 $116,249 0 $31,767 0.00% -72.67%

Total Resources Available for Obligation 322 $131,138 333 $229,914 333 $380,146 489 $418,675 46.85% 10.14% 1 FY 2009 Enacted represents the approved FY 2009 Operating Plan.

3I – Business Systems Modernization ($386,908,000 in direct appropriations): This 

budget activity funds the planning and capital asset acquisition of IT to modernize the 

IRS business systems, including labor and related contractual costs. The IRS is required 

to submit an annual BSM expenditure plan that justifies the projects for which resources 

are requested. 

The IRS depends on the core tax administration systems to deliver its mission, which 

require ongoing, long-term commitment to ensure that the IRS maintains its tax 

administration systems. The FY 2011 BSM request of $386.9 million funds the projects 

listed in the table below. 

Project

FY 2011 

President's 

Budget 

Request

CADE 2 (Taxpayer Account Database) $152.1

Current CADE 40.0

Modernized e-File 39.1

Core Infrastructure 38.5

Architecture, Integration and Management 37.0

Management Reserve 10.0

Labor 70.2

Total $386.9

IRS-94 
CADE 2 (New Taxpayer Account Database) 

The IRS requests $152.1 million to complete the new taxpayer account databases in 

2011 in time for the 2012 filing season. The IRS will begin migration of 140 million 

individual taxpayer accounts into the relational database in a daily processing 

architecture. The daily processing cycle allows taxpayers to receive refunds in less than 

10 days, five days faster than in the legacy system, if they file electronically with direct 

deposit. In addition to faster refunds, daily processing will provide more timely, 

accurate, and complete data to the key customer service database. This will result in 

improved taxpayer service through faster resolution of taxpayer account issues, 

elimination of notices based on out-of-date information, and daily mailing of notices, 

which will reduce spikes in telephone call volumes associated with the current weekly 

mailing of notices. 

The new taxpayer account database will serve as the central repository of tax account 

information for all individual taxpayers. Completion of the core taxpayer account 

database will allow the IRS to expand its online services and develop next generation, 

more sophisticated compliance systems. The ability of the IRS to support increasingly 

complex taxpayer service and compliance initiatives will be severely limited until the 

core taxpayer account database is completed. 

The Integrated Production Model (IPM) is an important component of the CADE 

strategy. This application extracts data from the Individual Master File (IMF) and 

Business Master File (BMF) and reformats it into the necessary relational structure. The 

goal of IPM is to develop an integrated data solution that will replace costly IRS data 

extracts. It also will allow the IRS to modernize its development language tools, enhance 

security, and standardize data names. These improvements will allow the IRS to use and 

share data more effectively. In FY 2011, the IRS will expand its capabilities for data 

sharing, data understanding, and data analytics. The IRS also will leverage its new daily 

processing capability, new relational database, and tools to access the IPM analytic data 

store. 

Current CADE 

The IRS requests $40.0 million to fund the filing season changes and the operations and 

maintenance of the current Customer Account Data Engine system. The IRS has 

addressed filing season changes each year with updates to the current Customer Account 

Data Engine by planning and budgeting for anticipating changes to the tax law. Over the 

past few years, the IRS has realized a significant amount of tax law changes, which must 

be implemented to the current Customer Account Data Engine in January of each year. 

Modernized e-File (MeF) 

The IRS requests $39.1 million to continue development and deployment of the MeF 

web-based platform. MeF allows electronic tax filing and provides a single point of 

transmission for the electronic submission of federal corporate, non-profit, and 

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partnership returns and the associated state returns for a limited number of states. MeF 

stores tax return data in a modernized Tax Return Database, allowing IRS employees to 

see an entire tax return online. 

The following forms have been migrated onto the modernized platform: 

• Form 1120, U.S. Corporation Income Tax Return, Form 1120-S, U.S. Income Tax 

Return for an S corporation (2004-2006); 

• Form 990, Return of Organization Exempt from Income Tax (2004-2006); 

• Form 1065, U.S. Return of Partnership Income (2007); and 

• Form 1120-F, U.S. Income Tax Return of a Foreign Corporation along with the 

Non-Profit e-Postcard (990N) (2008). 

The IRS is implementing the Form 1040, U.S. Individual Income Tax Return, onto the 

MeF platform in three phases. 

Phase I (MeF Release 6.1) began in FY 2007 with deployment scheduled in 

January 2010. Phase I consists of the Form 1040 and 22 of the most common forms and 

schedules used by 61 percent of the e-File population such as Schedule A, Itemized 

Deductions, Schedule B, Interest and Ordinary Dividends, and Schedule D, Capital 

Gains and Losses. Phase I also includes enhancements to infrastructure and disaster 

recovery and development of the interfaces for all three 1040 phases. 

Phase II (MeF Release 6.2) will begin in FY 2010 and is scheduled for implementation in 

January 2011. This Phase will enhance the deployment of disaster recovery capability 

delivered in Phase I and continue code optimization. 

Phase III (MeF Release 7) also will begin in FY 2010 and is scheduled to deploy in 

January 2012. This phase will complete the implementation of the 1040 family of forms. 

After Phase III implementation, all Form 1040 taxpayers will be able to file 

electronically using MeF. 

Once forms are migrated to the MeF platform, tax preparers and taxpayers will realize the 

following benefits: 

• Extensive business rule validation and error checking to ensure the accuracy of 

the tax return; 

• Sophisticated math error validation checking to increase the likelihood that the tax 

return will be successfully processed; 

• Explanations for rejected returns; 

• Ability to submit all necessary supporting documentation with the tax return; and 

• Faster response times to the external community. 

IRS-96 
The IRS benefits from the continued migration of forms from the legacy e-File 

applications to MeF. MeF eliminates the need to match paper tax return-related 

documents with e-filed tax returns; makes tax return data needed for compliance purposes 

available sooner to front-line enforcement staff; and includes tools and help-desk 

capabilities to provide more timely information to taxpayers on the status of their return. 

In FY 2011, the IRS will begin migration of the 94X family of forms (Release 8), 

Employment/ Unemployment Tax, to the MeF platform, which includes annually and 

quarterly filings. When implemented, the IRS projects that more than 8 million 94X 

forms will be filed through MeF. 

Core Infrastructure 

The IRS requests $38.5 million to provide a complete environment (hardware, software, 

and management) for developing, testing, deploying, operating, and monitoring both 

customer and internal applications in support of the IRS shift in business practices. This 

investment supports the architecture, engineering and integration of BSM projects 

(Customer Account Data Engine 2, and MeF Releases 7 and 8). It also includes funding 

for annual software licenses fees and hardware maintenance purchased in 2009 and 

2010 for releases of MeF that have not yet transitioned to production. This includes 

standardizing telecommunication services, security, and operations management as well 

as updating the access portals. This allows the IRS to develop infrastructure and 

common business service solutions that are usable across multiple major projects. Core 

infrastructure consists of two programs, Infrastructure Shared Services (ISS) and 

Development, Integration and Testing Environment (DITE). 

ISS provides mission critical services in designing, engineering and deploying a 

standardized, consolidated, virtual and secure modernized production environment for the 

BSM projects. In FY 2011, ISS will place increased emphasis on common information 

technology infrastructure services, security, and infrastructure enhancement initiatives 

that affect the BSM projects, while continuing to support efforts beginning in FY 2010 

related to enhanced availability and portal improvements. The ISS will address the effect 

on the modernized infrastructure environments because of an increase in the number of 

electronic documents, on-line transactions, and on-line tax filers. During FY 2011, ISS 

will continue to provide capacity planning and performance engineering services for 

BSM projects and will include support for integration and security testing. ISS will 

provide subject matter experts and institute security measures to protect the modernized 

infrastructure from intrusion and unauthorized access.

In FY 2011, ISS will increase its capabilities by building new common shared IT 

infrastructure services (i.e., audit, security, case management, and authentication 

services) in support of the BSM projects. Failure to implement common IT infrastructure 

services results in dissonant implementation of solutions and loss of business efficiencies. 

The FY 2011 funding enables common IT infrastructure and security and application 

services to access and leverage the IRS systems and data repositories across 

IRS-97 
heterogeneous environments. Using the ISS, BSM projects have avoided the need to 

develop costly customized solutions for each required interface to data, other application 

services, and security components. 

Common IT infrastructure integration services provide the ability for BSM applications 

to isolate data sources from front-end applications, access multiple data stores via a single 

service request, and generate application level authentication and authorization to service 

requests. These abilities result in improved employee productivity, improved customer 

service through new and differentiated service options, and improved taxpayer 

compliance by reducing inaccuracy and latency. Using ISS, the BSM projects will 

improve response time and reduce application development, operations and maintenance 

costs, as well as eliminate unnecessary duplicative functionalities. In addition, as the 

BSM projects broaden their respective capabilities, standardized, integrated, and secure 

infrastructure underlie the IRS ability to deliver consistently high-quality, cost-effective, 

and trusted services to its employees, partners, and filers. 

DITE is a standardized development and test environment composed of all of the 

modernized infrastructure components and services needed by BSM projects that plan to 

use and integrate into the modernized production environment. The DITE uses 

streamlined processes and standard tools that allow thorough development and testing in 

a controlled environment, to ensure projects work effectively and seamlessly within the 

modernized production environment. 

DITE is comprised of a Virtual Development Environment (VDE) and an Enterprise 

Integration and Test Environment (EITE). The VDE provides a software development 

environment that allows geographically distributed developers access to standardized 

tools, information, and services in support of the BSM projects. The EITE provides a 

more structured, production-like, comprehensive integration and testing environment 

necessary to test rigorously system capabilities before release into production. 

In FY 2011, DITE will continue to engineer, install, maintain, and support the 

development and test environments needed for each BSM project through deployment 

and acceptance in the production environment. The IRS will improve the efficiency of 

server administration, engineering, installation, maintenance, refresh and support of core 

DITE infrastructure. This will include web portals and common IT infrastructure 

services and provide a mechanism for remote access to core DITE data by authorized 

users. It also will provide maintenance of Rational Tools Suite and Rational Subject 

Matter Expert support to BSM projects. 

Funding is required to support the BSM projects and releases that use the DITE to 

support development, integration and testing needs of the core DITE infrastructure 

components, FISMA compliance, and virtualized environments for remote BSM 

application developers. To address the increased demand on DITE resources in FY 2011, 

the IRS will continue to increase the virtualization of DITE components and to support 

dynamic allocation of storage required by BSM projects for development and testing. 

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Architecture, Integration, and Management (AI&M) 

The IRS requests $37.0 million to provide continued support to the AI&M program. This 

program provides engineering management capabilities essential to delivering a program 

of the magnitude, nature, and complexity of BSM and delivers essential IRS systems 

strategy, architecture, and engineering capabilities to the major modernization projects 

across all technology platforms: IT Infrastructure, Business Applications, Data 

Management, and IT Security. AI&M translates enterprise and project objectives into 

targeted, actionable investments to provide the necessary enterprise technical framework 

and direction for cohesive and successful modernization. Major AI&M components are: 

• Architecture and Integration (A&I) — The A&I ensures systems solutions meet 

business needs and provides a single authoritative source of guidance for 

effectively integrating each project as it moves from the development to the 

business environment. This program produces the principles, strategies, and 

standards to guide the construction and delivery of coherent and integrated 

enterprise systems. Key FY 2011 deliverables include continued build-out of 

Enterprise Target Architecture Integration Roadmap, Enterprise Transition 

Strategy, Release Architecture, As-built Architecture, Enterprise Standards 

Profile, Service Oriented Architecture Roadmap, and Segment Architectures. The 

Architecture also includes data, security, business architecture, and engineering 

support. 

• Enterprise Data Management — Data Management delivers several essential 

elements of the IRS Data Strategy Roadmap and implements common repositories 

for use by all IRS applications. The Data Management Strategy defines an 

enterprise-wide data environment to easily and efficiently organize, identify, 

share, reuse and correlate data that enables IRS compliance functions to consume 

information and maximize value to the agency. 

The BSM projects included in the FY 2011 Data Strategy Roadmap are building 

out the tax return store; prototyping the metadata program; and expanding users 

for the IPM, in which data from different data stores (accounts, tax returns, and 

information returns) will be combined in a single environment. These new data 

management capabilities allow reuse of services for BSM projects so information 

is readily shared. The FY 2011 Enterprise Data Strategy will focus on increasing 

data security and closing the gap on key capabilities needed by the IRS 

compliance functions, such as deeper integration of data and better case selection. 

• Security — IT Security is implementing automation to allow proactive cyber 

security evaluation and instrumentation of applications, projects and system 

compliance with internal and external security and privacy standards, policies, 

and related federal directives (e.g., Federal Information Security Management 

Act, National Institute of Standards and Technology, Department of Homeland 

Security, OBM, GAO, and the Department of the Treasury). It also designs and 

implements remediation plans to ensure that the project or system passes the 

security test and evaluation processes. Other planned FY 2011 deliverables 

include “defense-in-depth” improvements through updated infrastructure 

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engineering security standards, IRS Enterprise Architecture Security and Privacy 

Guidance updates, and refinements to the IRS Security Domain Segment 

Architecture. 

• Business Integration (BI) — BI processes and standards allow the IRS to define, 

manage, and deliver its Information Technology portfolio successfully. Activities 

include IT portfolio investment management, cost estimation, transition 

management and risk management. The IRS will develop an IT risk management 

strategy to establish a consistent and enterprise approach for identification and 

mitigation of risks for BSM projects and releases. BI also will provide an 

integrated IT portfolio assessment of organizational capacity for delivering BSM 

capabilities. This IT portfolio assessment is critical to ensure the technical impact 

of BSM program decisions to the current production environment are understood 

and considered fully. Engineering analyses and resource estimates are integral to 

ensuring organizational capacity needs are incorporated into both plans and 

budgets to deliver an integrated portfolio, including maintaining current 

operations, delivering filing season readiness, addressing significant legislative 

proposals, and supporting BSM initiatives. 

• Requirements and Demand Management (RADM) (formerly referred to as 

Business Rules and Requirements Management (BRRM) — RADM improves the 

conduct of business analysis, process redesign, business rules harvesting and 

management, and business requirements elicitation, definition and management. 

RADM standards and expertise allow the IRS to incorporate requirements 

engineering industry best practices into the Enterprise Life Cycle for consistent 

systems development processes, apply business rules methods, tools and 

processes to BSM projects, and develop enterprise policy and standards for 

requirements and business rules management. 

RADM provides requirements planning and management support, business 

process redesign, rules and requirements development, business modeling, 

requirements training and outreach, requirements baseline management, and 

solution development support. In addition, RADM will be responsible for 

integrating the technical requirements engineering process into RADM 

methodology. A thorough review of both processes and all related assets are 

necessary in FY 2011 to ensure Customer Account Data Engine 2 shows a 

seamless traceability from the Enterprise Architecture to the physical design. 

• Management Processes (MP) — MP provides management disciplines leading to 

consistent quality, managed risk, increased stakeholder satisfaction, and delivery 

of modernized business systems within established cost and schedule parameters. 

The IRS is continually working to strengthen its management processes through 

the development and deployment of processes and procedures such as Earned 

Value Management (EVM) and Enterprise Life Cycle (ELC). The dynamic 

nature of modernization drives BSM to continually assess its operation and 

implement continuous improvements. 

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• Program Management (PM) — PM provides financial planning and management 

oversight to all BSM projects. PM will address the risk management 

methodology, which uses common risks, and management process tools to track 

issues and action items. 

• Federally Funded Research & Development Center (FFRDC) — FFRDC 

provides national experts in systems engineering, architectural design and 

development, security, and other technical disciplines that are critical to 

modernization success. The Center’s broad visibility, deep domain knowledge, 

and objectivity provide an independent voice to executive management staff and 

provide management guidance on difficult issues. Key services include support 

of institutionalizing and maturing processes and risk mitigation. 

Management Reserve 

The IRS requests $10.0 million to fund the management reserve to cover unanticipated 

cost adjustments given the size and complexity of the taxpayer account database project. 

BSM Labor 

The IRS requests $70.2 million to fund the staffing level for BSM labor ($69.3 million) 

and inflation costs ($0.9 million). 

IRS-101 
3.2.9 – Budget and Performance Plan 

Dollars in Thousands 

Business Systems Modernization Budget Activity

FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011

Resource Level Obligations Obligations Obligations Obligations Enacted Request

Appropriated Resources $113,702 $158,758 $170,576 $131,138 $263,897 $386,908

Reimbursable Resources

Mandatory Appropriations - User Fees

Total Resources $113,702 $158,758 $170,576 $131,138 $263,897 $386,908

Business Systems Modernization Budget Activity FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011

Measure Actual Actual Actual Actual Target Target

Percent of BSM Projects within +/- 10% Cost Variance (E) * * 92.0% 60.0% 90.0% 90.0%

Percent of BSM Projects within +/- 10% Schedule Variance (E) * * 92.0% 90.0% 90.0% 90.0%

Key: E - Efficiency Measure

*

 Prior to FY 2008, Cost and Schedule Variance was reported separately for each project. In FY 2008, these measures were changed to reflect an 

overall percentage of all major BSM projects that were within the +/- 10% threshold. 

Description of Performance 

IRS modernization efforts continue to focus on core tax administration systems designed 

to provide more sophisticated tools to taxpayers and to IRS employees. Customer 

Account Data Engine (CADE), Modernized e-File (MeF), and Account Management 

Services (AMS) modernization projects delivered the required changes for the filing 

season, supported implementation of the Recovery Act provisions, and provided audit 

trails addressing security vulnerabilities. FY 2009 successes include: 

• Customer Account Data Engine (CADE) – CADE processed more than 

40.0 million returns, issued more than 34.9 million refunds using a modernized 

account database, and processed more than 7 million payments totaling 

$58.6 billion. In addition, the IRS revised its CADE strategy to implement a new 

taxpayer account database by the end of 2011 for the 2012 filing season. The new 

database will result in the migration of 140 million individual taxpayers to a 

modernized, relational database that will support daily processing and result in 

faster refunds for all individual refund filers. 

• Modernized e-File (MeF) – The IRS deployed MeF Release 5.5 that included the 

redesigned Form 990, Return of Organization Exempt from Income Tax, in time 

for the filing season. MeF processed Form 1120 and 990 returns at much higher 

volumes than expected. The volume of Form 1120 returns increased 38 percent 

and Form 990 increased 307 percent from 2008. Returns submitted through MeF 

have an average 7 percent processing error rate, compared to 19 percent for 

transcription-based paper processing. MeF return receipts increased to about 

4.5 million. 

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• Account Management Services (AMS) – The IRS completed the 2009 releases 

of AMS providing additional real-time address changes to CADE by the 

conversion of account transcripts from paper to electronic format. AMS 

processed more than 2.3 million accounts since deployment and more than 

2.2 million electronic transcript cases were distributed. In addition, AMS 

delivered the capability to update account address data on a daily cycle. AMS 

added a new component to its organization in FY 2009, the Integrated 

Automation Technologies (IAT) Branch. The IAT developed tools to support the 

implementation of the Recovery Act including the First-Time Home Buyer Credit 

tool, that systematically researches amended returns for specific criteria to 

identify unallowable or fraudulent claims. 

IRS-103 
Health Insurance Tax Credit Administration 

Appropriation Description 

The Health Insurance Tax Credit Administration (HITCA) appropriation provides 

funding for contractor support to develop and administer the advance payment option for 

the Health Coverage Tax Credit (HCTC) included in Public Law 107-210, the Trade 

Adjustment Assistance Act (Trade Act of 2002). 

The IRS administers the enrollment, payment, and compliance components of this credit. 

The Department of Labor, state workforce agencies, and the Pension Benefit Guaranty 

Corporation (PBGC) are responsible for determining potentially eligible HCTC 

taxpayers. This credit was expanded by the Recovery Act.

The HITCA Budget Request for FY 2011 is $18,987,000 in direct appropriations and 

15 FTE. This is an increase of $3,475,000 or 22.4 percent more than the FY 2010 

enacted level of $15,512,000 and 15 FTE. This amount does not include 

$80,000,000 provided by the Recovery Act for fiscal years 2009 and 2010. 

IRS-104 
2.1 – Budget Adjustments Table 

Dollars in Thousands 

Health Insurance Tax Credit Administration FTE Amount

FY 2009 Enacted 15 $15,406

FY 2010 President's Budget Request 15 $15,512

Congressional Action

FY 2010 Enacted Budget (P.L. 111-117) 15 $15,512

Changes to Base:

Maintaining Current Levels $190

Pay Annualization 15

Pay Inflation Adjustment 32

Non-Pay Inflation Adjustment 140

FERS Increased Participation 3

Other Adjustments $3,494

Resource Adjustment to Support Recovery Act-HCTC Program Expansion 3,494

Efficiencies/Savings ($209)

Reduce Procurement/Contracting (179)

Reduce Printing, Travel, and Training (30)

Subtotal Changes to Base $3,475

Total FY 2011 Base 15 $18,987

Program Changes:

Subtotal Program Changes

Total FY 2011 Request 15 $18,987

Adjustments to Request

User Fees

Total FY 2011 15 $18,987

IRS-105 
2.2 – Operating Levels Table 

Dollars in Thousands 

% 

Congressional FY 2010 Change Appropriation Title: Health Insurance Tax Credit FY 2009 FY 2009 FY 2010 Action FY 2010 Proposed FY 2011 FY 2010 

Administration ARRA Enacted President's including Enacted Proposed Operating Request to 

Level Level1 Budget Rescission Level Reprogram. Level Level FY 2011

FTE 15 15 15 15 15 0.0%

Object Classification:

11.1 Full-Time Permanent Positions $0 $2,326 $2,363 $0 $2,363 $0 $2,363 $2,399 1.5%

11.3 Other than Full-Time Permanent Positions 0 10 0 0 0 0 0 0 0.0%

11.5 Other Personnel Compensation 1,000 23 24 0 24 0 24 24 0.0%

11.8 Special Personal Services Payments 0 0 0 0 0 0 0 0 0.0%

11.9 Personnel Compensation (Total) $1,000 $2,359 $2,387 $0 $2,387 $0 $2,387 $2,423 1.5%

12.0 Personnel Benefits 0 353 360 0 360 0 360 374 3.9%

13.0 Benefits to Former Personnel 0 0 0 0 0 0 0 0 0.0%

21.0 Travel 0 147 151 0 151 0 151 211 39.7%

22.0 Transportation of Things 0 0 0 0 0 0 0 0 0.0%

23.1 Rental Payments to GSA 0 0 0 0 0 0 0 0 0.0%

23.2 Rent Payments to Others 0 0 0 0 0 0 0 0 0.0%

23.3 Communications, Utilities, & Misc 2,000 13 0 0 0 0 0 400 100.0%

24.0 Printing & Reproduction 2,000 30 0 0 0 0 0 200 100.0%

25.1 Advisory & Assistance Services 0 0 0 0 0 0 0 0 0.0%

25.2 Other Services 73,000 12,497 12,606 0 12,606 0 12,606 15,372 21.9%

25.3 Purchase of Goods & Services from Govt. Accounts 0 0 0 0 0 0 0 0 0.0%

25.4 Operation & Maintenance of Facilities 0 0 0 0 0 0 0 0 0.0%

25.5 Research & Development Contracts 0 0 0 0 0 0 0 0 0.0%

25.6 Medical Care 00 0 00000

25.7 Operation & Maintenance of Equipment 0 0 0 0 0 0 0 0 0.0%

25.8 Subsistence & Support of Persons 0 0 0 0 0 0 0 0 0.0%

26.0 Supplies and Materials 2,000 7 8 0 8 0 8 7 -12.5%

31.0 Equipment 0 0 0 0 0 0 0 0 0.0%

32.0 Lands and Structures 0 0 0 0 0 0 0 0 0.0%

33.0 Investments & Loans 0 0 0 0 0 0 0 0 0.0%

41.0 Grants, Subsidies 0 0 0 0 0 0 0 0 0.0%

42.0 Insurance Claims & Indemn 0 0 0 0 0 0 0 0 0.0%

43.0 Interest and Dividends 0 0 0 0 0 0 0 0 0.0%

44.0 Refunds 0 0 0 0 0 0 0 0 0.0%

91.0 Unvouchered 0 0 0 0 0 0 0 0 0.0%

Total Budget Authority $80,000 $15,406 $15,512 $0 $15,512 $0 $15,512 $18,987 22.4%

Budget Activities:

Health Insurance Tax Credit Administration $80,000 $15,406 $15,512 $0 $15,512 $0 $15,512 $18,987 22.4%

Total Budget Authority $80,000 $15,406 $15,512 $0 $15,512 $0 $15,512 $18,987 22.4%

1 FY 2009 Enacted represents the approved FY 2009 Operating Plan.

0. 0%

IRS-106 
2.3 – Appropriation Detail Table 

Dollars in Thousands 

Health Insurance Tax Credit Administration % Change

FY 2009 FY 2009 FY 2010 FY 2011 FY 2010

Resources Available for Obligation Obligations Enacted1 Enacted Request to FY 2011

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

New Appropriated Resources:

Health Insurance Tax Credit Administration 10 $15,374 15 $15,406 15 $15,512 15 $18,987 0.00% 22.40%

Subtotal New Appropriated Resources 10 $15,374 15 $15,406 15 $15,512 15 $18,987 0.00% 22.40%

Other Resources:

Recoveries

Offsetting Collections - Reimbursable

Available multi-year/no-year funds

50% Carryover

Transfers In/Out

Mandatory Appropriations - User Fees

Subtotal Other Resources 0 $0 0 $0 0 $0 0 $0 0.00% 0.00%

Total Resources Available for Obligation 10 $15,374 15 $15,406 15 $15,512 15 $18,987 0.00% 22.40% 1 FY 2009 Enacted represents the approved FY 2009 Operating Plan.

3J – Health Insurance Tax Credit Administration ($18,987,000 in direct 

appropriations): The HITCA budget activity funds costs to administer a refundable tax 

credit created by the Trade Act of 2002 to purchase health insurance for eligible 

taxpayers. This activity maintains the administrative and direct support for the HITCA 

program office and the staff charged with managing the program for the IRS. 

IRS-107 
3.2.10 – Budget and Performance Plan 

Dollars in Thousands 

 

Health Insurance Tax Credit Administration Budget Activity

FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011

Resource Level Obligations Obligations Obligations Obligations Enacted Request

Appropriated Resources $19,993 $14,850 $15,223 $15,374 $15,512 $18,987

Reimbursable Resources

Mandatory Appropriations - User Fees

Total Resources $19,993 $14,850 $15,223 $15,374 $15,512 $18,987

Health Insurance Tax Credit Administration Budget Activity FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011

Measure Actual Actual Actual Actual Target2 Target

Cost per Taxpayer Served ($) (E) $13.71 $14.90 $16.94 $13.79 Baseline1 TBD1

Sign-up Time (days) - Customer Engagement (Ot) 98.7 93.3 94.0 91.3 Baseline1 TBD1

Key: E - Efficiency Measure, Ot - Output/Workload Measure

1

An increase in participation is expected due to the Recovery Act. IRS will establish a new baseline in FY 2010.

Description of Performance 

The Department of Labor, state workforce agencies, and the PBGC are responsible for 

determining potentially eligible HCTC participants. The IRS administers the HCTC by 

working with health plan administrators to arrange for direct payment of health plan 

premiums. 

In FY 2009, HCTC underwent significant changes. First, the economic downturn led to 

an increased number of potentially eligible taxpayers and increased operational volumes. 

In February 2009, the Recovery Act included changes to extend the accessibility and 

affordability of the HCTC program, which further increased the eligible population and 

operational volumes. 

In FY 2009, the IRS processed approximately 10 million HCTC eligibility records, made 

almost 174,000 HCTC payments on behalf of taxpayers, handled almost 132,000 inbound 

HCTC telephone calls, and mailed almost 640,000 pieces of outbound correspondence. 

Though these volumes are higher than in FY 2008, the IRS maintained an HCTC 

program customer satisfaction level of more than 90 percent. 

The FY 2009 cost per taxpayer served (CPTS) was $13.79, more than $3 lower than the 

FY 2009 target of $17.00. CPTS is expected to remain lower than planned as the number 

of taxpayers served remains higher than projected. 

Sign-up time was 91 days in FY 2009, 6 percent below the year-end target of 97 days. 

Sign-up time is measured as the median number of days between the first program kit 

mailing and the first payment received from the participant. Better results are a 

consequence of a larger number of new enrollees submitting registration forms more 

IRS-108 
rapidly after receiving program kits. The economic downturn may be influencing 

taxpayers to return registration forms more quickly. 

Future efforts will include: 

• Implementing the final Recovery Act provisions for HCTC; 

• Sustaining the FY 2009 ramp-up to continue handling increased operational 

volumes; 

• Completing a full technical refresh of HCTC systems; and 

• Expanding outreach to educate potential eligibles about recent program changes. 

IRS-109 
Section 4 – Supporting Materials 

4A – Human Capital Strategy 

 

Introduction 

The IRS Human Capital Business Plan for 2010-2014 was built upon the IRS Strategic 

Plan 2009-2013. To achieve the service and enforcement strategic goals the IRS must 

invest in high performance by effectively supporting the IRS workforce. To support 

“making IRS the best place to work in government,” the following four Human Capital 

pillars were developed to deliver the IRS mission today and in the future: 

 

• Recruit, Hire & Onboard – This pillar supports the IRS priority to achieve both 

the optimum mix of employee skill sets and diversity by continuing efforts to 

improve recruiting, hiring transition and other processes to ensure the right person 

is in the right job. 

• Engage, Develop & Retain – This pillar reflects the Human Capital commitment 

to enhance employee skills, address retention efforts, and increase employee 

engagement. It also reflects a commitment to support top quality managers with 

effective resources, recognition, and tools to lead an engaged workforce. 

• Develop and Promote Leaders – This pillar addresses the crucial support needed 

to provide leadership with effective resources, recognition, and tools to lead the 

IRS workforce. Without a stable, knowledgeable managerial infrastructure, the 

IRS ability to carry out its mission is compromised. 

• Facilitate Collaborative Environment – This pillar fosters an open exchange of 

innovative ideas and leveraging relationships to ensure that human capital plans 

and implementation efforts are fully integrated with the IRS mission, strategies 

and program goals. 

FY 2011 Challenges 

The key objectives for the IRS in FY 2011 are to: 

• Enhance productivity through the use of technology; 

• Design new processes to simplify the hiring experience; 

• Close skill and competency gaps in critical occupations; and 

• Compete with the private sector for a shrinking pool of accounting and 

information technology professionals. 

IRS-110 
Retirements 

The current economic climate affects retirements, attrition, and recruitment. At the 

beginning of FY 2010, 83 executives, or 28 percent of Senior Leadership, were eligible to 

retire. This group includes Senior Executives, Critical Pay, Senior Level, and Candidate 

Development Program participants. An additional 31 executives, or 10 percent of Senior 

Leadership, will be eligible to retire in FY 2011. Leadership continuity continues to be 

one of the IRS key areas of focus. 

Recruitment and Retention 

In August 2008, the Commissioner established the Workforce of Tomorrow task force to 

address recruitment and retention issues so that the IRS will have the necessary 

leadership and workforce to meet future challenges. Several projects were launched as a 

result of the Workforce of Tomorrow recommendations, including increasing the use of 

technology to streamline hiring, revamping Frontline Manager training, improving the 

new employee hiring process, and establishing a centralized recruiting office. The 

benefits expected from the new centralized recruiting office are: 

• Integrating business unit recruitment efforts; 

• Ensuring mission critical occupation, geography, and diversity needs are met; 

• Centralizing management of a national recruiting calendar and event logistics; and 

• Standardizing materials and messages, tailored to candidate segments. 

Employee Engagement 

Based on key initiatives recommended by the Workforce of Tomorrow, the IRS annual 

employee satisfaction survey (ESS) results, and the Federal Human Capital Survey 

(FHCS) results, the IRS is taking the following steps to increase employee satisfaction: 

• Reduction of Managerial Burden – Research indicates the primary influence on 

an employee’s engagement level is his/her manager. The IRS has taken the 

following steps to enable managers to develop and guide their employees: 

o Established a Manager Resource Center to provide dedicated staff to 

assist managers with questions as well as an interactive website. The 

iManage website pilot was launched on October 29, 2009. This pilot site 

contains four Communities of Practice (CoPs) that provide targeted 

information, advice, and interactive features for IRS managers to work 

more efficiently. The pilot site is now available to four IRS Operating 

Divisions: Agency-Wide Shared Services, Appeals, Human Capital Office 

and Taxpayer Advocate Service. Full implementation of the iManage

website is scheduled for deployment during the third quarter of FY 2010. 

The Managers Resource Center staff is also pursuing a telephone 

servicing solution that will reduce wait times for resolving Managers' 

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administrative issues. The anticipated release of the telephone hotline is 

scheduled for the first quarter of FY 2011. 

o Streamlined mandatory briefings that require significantly less 

management oversight and involvement. This effort was completed in 

July 2009. 

o Development of a Recognition Toolkit that centralizes all of the options 

and instructions for monetary and non-monetary recognition, including 

expanded options and streamlined instructions for planning and funding 

recognition ceremonies. The toolkit scheduled release is in the second 

quarter of FY 2010. 

o Numerous managerial training enhancements. Improvements in 

training for readiness program participants, new managers, existing 

managers, and administrative professionals are in development. 

Implementation is planned in phases. Phase 1 is scheduled for completion 

January 31, 2010. Phase 2 is targeted for completion by June 6, 2010. 

o Appointment of a Managerial Champion with permanent responsibility 

for managerial burden oversight. Establishment of this position in the 

Human Capital Office will ensure ongoing analysis of managerial burden 

issues and accountability for long-term oversight. This was completed in 

May 2009. 

• Expansion of Leadership Coaching – Participants in this program would 

include managers who are experiencing declining employee survey scores, have 

extenuating circumstances that warrant action or are high performers and can 

share best practices with others in the organization. Third-party consultants will 

work directly with managers and/or their teams, if desired. The IRS plans to 

analyze trends among groups receiving coaching and those who did not. 

• Increase Strategic Communications to Employees – The IRS is taking steps to 

better inform employees of service-wide and division level initiatives. Senior 

leaders are using different communication channels such as town halls, blogs, 

streaming videos and all-employee messages to reach staff. Leaders are also 

encouraged to share best practices and success stories on their internal websites 

and to recognize those who are moving the organization forward. 

• Improve Employee Recognition – The IRS awards and recognition program is 

being revised to reach more employees and to create a standard protocol for how 

employees are selected for different awards. A team is dedicated to this effort. 

Communication surrounding the simplified funding process for employee 

recognition ceremonies was completed in September 2009. Implementation of 

other recognition activities, e.g., web page recognizing employee successes, is 

scheduled throughout FY 2010. 

• Improve Training for New Employees – The IRS is also working on ways to 

better train new employees. The agency is revamping its on-boarding program 

and initiating an ambassador program to help familiarize new employees with 

IRS-112 
their specific jobs. Many of these programs were created with input from the 

National Treasury Employees Union. 

• Address Results of the IRS Annual Employee Survey – The IRS received its 

2009 survey results and each division within the agency during the fall of 2009 

held meetings with their workgroups to further discuss results and devise specific 

plans for addressing their particular issues. The IRS is also working with the 

Partnership for Public Service to further enhance its service-wide action planning 

process. 

Wellness Program 

• Description of Current Services 

The IRS currently provides a number of services and programs to address 

physical, emotional, financial and occupational wellness aimed at improving 

employee health and making positive behavior changes. These services include 

health screenings, health risk appraisals, smoking cessation, flu shots, fitness 

centers, lunch and learn wellness seminars, 24/7 counseling services, substance 

abuse prevention, stress management training, child and elder care referral 

services, work-life balance resources, financial on-line resources, pre-retirement 

seminars, occupational safety information, ergonomic tips and emergency 

preparedness. 

• Health and Wellness Performance Improvement Target 

Measure FY 2011 Goal 

Increase Employee Use of Wellness Services +5% 

The Wellness Program promotes individual well-being while improving morale, 

productivity, absenteeism and employee satisfaction. To meet the FY 2011 

performance target, the IRS completed an inventory of current wellness and 

health services/activities in July 2009. In September 2009, IRS researched 

external health resources and tools to supplement internal wellness activities. 

To increase employee awareness, both a detailed communication strategy and a 

wellness website highlighting the availability and benefits of these services will 

be implemented in March 2010. 

• IRS Wellness Program Evaluation 

To evaluate the progress of the IRS Wellness Program, the IRS will: 

o Survey new employees and employees leaving the IRS; 

o Measure the usage of Federal Occupational Health and Employee 

Assistance Program Services; and 

o Assess increases in the Federal Human Capital Survey Results. 

IRS-113 
• Action Plan 

 Examples of actions that are either underway or will be undertaken include:

o Linking services to National Health Observances; 

o Marketing and promoting benefits for employees and the organization; 

o Promoting personal responsibility for managing health and well-being as a 

key concept; 

o Encouraging participation and completion of wellness activities; and 

o Increasing employee awareness of internal and external wellness services 

and resources. 

Human Capital Occupations/Functions Contracted 

During periods of extensive hiring, workload transition, and heavy volumes of workload, 

the IRS employment offices utilize contractor employees to fill short-term needs. In 

FY 2009 and FY 2010, the IRS received enforcement funding to increase the number of 

Revenue Agents and Officers. Thousands of frontline positions were established under 

these hiring initiatives. The IRS used contractor employees across Employment 

Operations and Personnel Security to handle the surge in the workload. The number of 

contractor employees will depend on hiring demands. 

IRS-114 
4B – Information Technology (IT) Strategy 

The IRS information systems support all aspects of tax administration and are essential 

tools for taxpayer communication and transaction with the IRS. The IRS information 

technology (IT) and telecommunications services support existing operational 

information systems as well as the development of replacement systems. Major IT 

activities address both internal and external priorities, through a balanced investment 

portfolio that is fully aligned with the IRS Strategic Plan 2009-2013. In support of the 

IRS strategic priorities, the IT strategy focuses on: 

• Improving service to IRS customers; 

• Enhancing risk management; 

• Delivering improved business capabilities and governance; 

• Strengthening technology infrastructure; and 

• Ensuring effective organizational leadership. 

Developing the IRS IT Investment Portfolio 

The IRS IT Investment Strategy supports the IRS mission and strategic goals and 

communicates strategic priorities established by the IRS Senior Executive Team. The 

strategic priorities provide the foundation for making investment decisions to meet both 

IRS and business IT needs. By using this IT investment approach and aligning the 

investment portfolio with the strategic priorities, the IRS is able to ensure investments 

deliver strategic benefits for the organization. 

Governance Process 

In addition to the IT investment strategy, the IRS uses an integrated governance model 

that reflects industry best practices and assigns all projects to an appropriate governance 

body for oversight. The enterprise governance model: 

• Considers IT projects regardless of dollar value or life cycle phase; 

• Empowers governance bodies to make project cost, schedule, and scope decisions 

for “at risk” projects requiring rigorous oversight; and 

• Promotes accountability and decision-making at the program and project level, 

specifying the appropriate thresholds and governance bodies for elevating issues. 

Originally, the governance model was implemented to manage the major projects of the 

Business Systems Modernization (BSM) program, but it has been expanded to cover all 

IRS IT projects. As of January 2009, all identified IRS IT investments have risk and 

configuration management plans; and as of February 2009, approximately 98 percent of 

non-BSM investments are within established thresholds for cost variance and schedule 

IRS-115 
Health Assessments 

The IRS has implemented monthly health assessments to monitor project progress. 

These assessments focus on Key Performance Indicators (KPI) in the areas of cost, 

schedule, scope, risks and issues, organizational readiness and transition management, 

and technical status. Within each KPI, criteria codes are assigned that explain exactly 

what generated the health rating. Control and governance organizations review these 

ratings and take corrective actions. Metrics regarding cost and schedule variance are 

reported both internally and externally to oversight organizations. In addition to 

monitoring the health of the project, the IRS IT organization conducts quality assurance 

reviews of project data to monitor compliance with methodologies and assists project 

managers in implementing components of the IRS Enterprise Lifecycle methodology. 

To identify projects in potential need of remediation, the IRS governance and control 

organizations are provided with detailed project-level information. These organizations 

guide the project managers in remediation activities when certain thresholds have 

been met; starting with assessing the issues at hand and determining the appropriate 

actions to be taken. Project managers that require assistance may be required to 

participate in interviews with the control and/or governance organizations. 

Organization-wide issues are identified for remediation through the analysis of project 

specific data. Project assistance teams are formed as needed to identify and remediate 

project issues. 

IRS-116 
4.1 – Summary of IT Resources Table 

Dollars in Millions 

Major IT Investments / Funding Source Budget Activity FY 2008 & Earlier 

Enacted FY 2009 Actuals FY 2010 Enacted % Change from FY09 to FY10 FY 2011 Requested % Change from FY10 to FY11

Account Management Services (AMS) Information Technology

Investments 0.000 22.807 17.037 -25.3% 19.178 12.6%

IRS BSM 20-0921-0-1-803 Information Technology 

Investments 0.000 10.650 0.000 -100.0% 0.000 0.0%

IRS Operations Support 20-0919-0-1-803 Information Services

0.000 12.157 17.037 40.1% 19.178 12.6%

Automated Collection System (ACS) - Major Information Services 18.130 6.892 10.145 47.2% 7.534 -25.7%

Business Master File (BMF) Information Services 77.292 12.259 8.410 -31.4% 8.274 -1.6%

Counsel Automated Systems Environment (CASE) Information Services 83.035 26.513 27.951 5.4% 27.951 0.0%

Criminal Investigation Management Information System (CIMIS) - Major Information Services 4.447 2.767 0.247 -91.1% 0.230 -6.9%

IRS Enforcement 20-0913-0-1-999 1.615 0.000 0.000 0.0% 0.000 0.0%

IRS Operations Support 20-0919-0-1-803 2.832 2.767 0.247 -91.1% 0.230 -6.9%

Current CADE (previously known as Customer Account Data Engine (CADE)) Information Technology

Investments 651.517 61.430 48.207 -21.5% 49.996 3.7%

IRS BSM 20-0921-0-1-803 Information Technology 

Investments 577.056 58.100 47.788 -17.7% 49.647 3.9%

IRS Taxpayer Services 20-0912-0-1-803 13.215 0.000 0.000 0.0% 0.000 0.0%

IRS Operations Support 20-0919-0-1-803 Information Services 61.246 3.330 0.419 -87.4% 0.349 -16.7%

Customer Account Data Engine (MTA) / CADE 2 Information Technology

Investments 0.000 33.150 65.089 96.3% 185.864 185.6%

IRS BSM 20-0921-0-1-803 Information Technology 

Investments 0.000 33.150 65.089 96.3% 185.123 184.4%

IRS Taxpayer Services 20-0912-0-1-803 0.000 0.000 0.000 0.0% 0.000 0.0%

IRS Operations Support 20-0919-0-1-803 Information Services 0.000 0.000 0.000 0.0% 0.741 100.0%

IRS-117 
Continuation – 4.1 – Summary of IT Resources Table 

Dollars in Millions 

Major IT Investments / Funding Source Budget Activity FY 2008 & Earlier 

Enacted FY 2009 Actuals FY 2010 Enacted % Change from FY09 to FY10 FY 2011 Requested % Change from FY10 to FY11

e-Services Information Services 100.903 14.648 14.007 -4.4% 14.761 5.4%

Electronic Fraud Detection System (EFDS) Information Services 220.725 12.392 12.251 -1.1% 11.657 -4.9%

IRS Operations Support 20-0919-0-1-803 Information Services 150.795 8.754 8.594 -1.8% 7.946 -7.5%

IRS Operations Support (EITC) 20-09E9 69.930 3.639 3.657 0.5% 3.711 1.5%

Electronic Management System (EMS) Information Services 199.056 4.742 5.761 21.5% 4.639 -19.5%

Enterprise Data Access Strategy (EDAS) (Formerly:Enterprise Data Warehouse) Information Services 19.409 8.369 5.425 -35.2% 3.953 -27.1%

IRS Operations Support (EITC) 20-09E9 0.000 0.000 0.000 0.0% 0.000 0.0%

IRS Operations Support 20-0919-0-1-803 19.409 8.369 5.425 -35.2% 3.953 -27.1%

Excise Files Information Retrieval System (ExFIRS) - Major / Externally Funded 1/ Information Services 0.471 13.022 6.632 -49.1% 0.630 -90.5%

External Sources 0.471 13.018 6.139 -52.8% 0.000 -100.0%

IRS Operations Support 20-0919-0-1-803 0.000 0.004 0.493 12026.2% 0.630 27.7%

Exise Tax e-File & Compliance (ETEC) - Major All External Funding 7.927 0.000 0.000 0.0% 0.000 0.0%

Financial Management Information System (FMIS) Information Services 13.950 6.801 3.501 -48.5% 5.610 60.2%

Implement RRP (incorporates EFDS replacement) Information Services 0.000 0.000 17.947 100.0% 18.243 1.6%

Individual Master File (IMF) Information Services 62.109 13.357 10.982 -17.8% 10.789 -1.8%

IRS Operations Support (EITC) 20-09E9 Information Services 0.000 0.142 0.000 -100.0% 0.000 0.0%

IRS Operations Support 20-0919-0-1-803 Information Services 62.109 13.215 10.982 -16.9% 10.789 -1.8%

Information Returns Processing (IRP) Information Services 39.995 7.654 6.775 -11.5% 7.075 4.4%

Integrated Collection System (ICS) Information Services 33.205 7.484 9.104 21.6% 8.694 -4.5%

Integrated Customer Communications Environment (ICCE) Information Services 370.315 12.082 16.618 37.5% 12.451 -25.1%

Integrated Data Retrieval Systems (IDRS) Information Services 112.341 20.231 19.550 -3.4% 19.204 -1.8%

Integrated Financial System/CORE Financial System (IFS) IRS Business Systems 

Modernization

300.983 18.167 17.449 -4.0% 17.062 -2.2%

IRS BSM 20-0921-0-1-803 Information Technology

Investments 0.000 0.000 0.000 0.0% 0.000 0.0%

IRS Taxpayer Services 20-0912-0-1-803 47.317 0.000 0.000 0.0% 0.000 0.0%

IRS Operations Support 20-0919-0-1-803 Information Services 253.666 18.167 17.449 -4.0% 17.062 -2.2%

Integrated Submission and Remittance Processing System (ISRP) Information Services

63.654 18.981 17.939 -5.5% 17.805 -0.7%

Internal Revenue Service.gov (IRS.gov) Information Services

0.000 56.479 61.082 8.1% 80.380 31.6%

Interim Revenue Accounting Control System (IRACS) - BAC 99 Information Services

2.419 5.137 1.495 -70.9% 1.508 0.9%

IRS-118 
Continuation – 4.1 – Summary of IT Resources Table 

Dollars in Millions 

Major IT Investments / Funding Source Budget Activity FY 2008 & Earlier 

Enacted FY 2009 Actuals FY 2010 Enacted % Change from FY09 to FY10 FY 2011 Requested % Change from FY10 to FY11

Modernized e-File (MeF) Information Technology

Investments 0.000 47.117 70.986 50.7% 63.465 -10.6%

IRS BSM 20-0921-0-1-803 Information Technology 

Investments 0.000 29.500 56.332 91.0% 45.498 -19.2%

IRS Taxpayer Services 20-0912-0-1-803 0.000 0.000 0.000 0.0% 0.000 0.0%

IRS Operations Support 20-0919-0-1-803 Information Services 0.000 17.617 14.654 -16.8% 17.967 22.6%

Report Generation Software (RGS) Information Services 0.000 7.961 6.502 -18.3% 7.132 9.7%

IRS Operations Support (EITC) 20-09E9 Information Services 0.000 3.384 1.457 -56.9% 3.152 116.4%

IRS Operations Support 20-0919-0-1-803 Information Services 0.000 4.578 5.045 10.2% 3.980 -21.1%

Reporting Compliance Case Management System (RCCMS) (Formerly TE/GE Reporting and Electronic 

Exmaination System (TREES) Information Services

0.000 2.140 4.030 88.3% 2.749 -31.8%

Service Center Recognition/Image Processing System (SCRIPS) Information Services 74.855 16.632 16.818 1.1% 13.292 -21.0%

Tax Return Database (TRDB) - BAC 99 Information Services 31.242 4.250 5.212 22.6% 4.508 -13.5%

Travel Reimbursement and Accounting System (TRAS) - BAC 99 Information Services 4.299 0.000 0.000 0.0% 0.000 0.0%

Web Currency and Banking Retrieval System (WebCBRS) Information Services

0.000 7.550 7.756 2.7% 8.502 9.6%

IRS Taxpayer Services 20-0912-0-1-803 0.000 6.521 5.747 -11.9% 6.368 10.8%

IRS Operations Support 20-0919-0-1-803 0.000 1.029 2.009 95.2% 2.134 6.2%

Web Requisition Tracking System /Integrated Procurement System (WebRTS/IPS) Information Services 0.000 5.246 5.770 10.0% 5.398 -6.4%

Subtotal, Major IT Investments 2,492.279 476.263 520.679 9.3% 638.534 22.6%

Non-Major IT Investments 1,648.742 500.339 597.611 19.4% 612.876 2.6%

Infrastructure Investments

IRS Mainframes and Servers Services & Support (Formerly: IRS/Data Center Systems and Services 

(Consol) (for EITIO) Information Services 1,001.449 504.507 513.842 1.9% 518.518 0.9%

IRS/End User Systems and Services (for EITIO) Information Services 848.257 238.249 275.019 15.4% 237.012 -13.8%

IRS/Telecommunications Systems Services (for EITIO) Information Services 698.760 243.636 269.935 10.8% 276.624 2.5%

Infrastructure Investments - total 2,548.466 986.392 1,058.796 7.3% 1,032.154 -2.5%

Enterprise Architecture 13.287 2.443 2.491 2.0% 5.104 104.9%

1/ minus Externally Funded Major Investments -13.018 -6.139 -0.000

Total IT Investments 6,702.774 1,952.418 2,173.439 11.3% 2,288.667 5.3%

IRS-119 
4.2 – Assessment and Improvement Actions 

Program Name: Tax Collection

Assessment and Improvement Actions 

• Use audit results and intelligence from ongoing offshore initiatives to refine case 

identification and selection methods and to identify promoters, facilitators, and 

participants in abusive offshore arrangements.

• Implement improved case selection models in the Automated Collection System.

• Develop the FY 2010 Enterprise Collection Plan that includes resources and 

results for all collection activities, including a stronger link between program 

resources and outcomes.

IRS-120 
Program Name: Earned Income Tax Credit

Assessment and Improvement Actions 

• Continue testing the effects of education, compliance notices, and telephone 

contacts for Earned Income Tax Credit (EITC) first-time and low-risk paid 

preparers on the accuracy of returns prepared. 

• Increase the accuracy of EITC returns by refining EITC paid preparer 

treatment activities, including issuance of due diligence letters and compliance 

visits by revenue and criminal investigation agents, streamlined injunctions, 

and streamlining notice/phone contact treatments. 

• Implement an on-line training module for preparers that covers requirements 

and standards. 

IRS-121 
Program Name: Submission Processing

Assessment and Improvement Actions 

• Deliver Modernized e-File (MeF) Release 6.1 (Form 1040 Phase I), providing 

capability to process Form 1040 (including 22 other schedules and supporting 

forms), which will reach 61 percent of the e-File population. 

• Develop milestones necessary to complete the new taxpayer account database. 

• Deliver the production pilot for CADE release 5 adding capabilities that include 

allowing individual taxpayer refunds to be applied to the next year’s tax (Credit 

Elect) and refund hold capability for Criminal Investigation.

• Provide an automated application that allows taxpayers to obtain their PIN for 

use in electronically submitting their Tax Year 2009 returns.

IRS-122 
Program Name: Taxpayer Service

Assessment and Improvement Actions 

• Provide topical information, alternative resources, and expedited routing options 

through the toll-free telephone system. 

• Improve the taxpayer experience by implementing new quality initiatives at 

Taxpayer Assistance Centers and volunteer return preparation sites using 

sampling reviews of selected returns to determine the accuracy of returns 

prepared.

• Gather feedback from professional organizations that represent external 

stakeholders (i.e., Accountants, Reporting Agents, etc.) to simplify forms and the 

tax filing process. 

• Continue to develop informational products to inform taxpayers of tax credits for 

which they may be eligible. 

• Continue to operate Facilitated Self-Assistance in 50 sites to provide taxpayers 

with the ability to check the status of tax refunds, obtain forms and publications, 

apply for Employer Identification Numbers (EIN), set up payment arrangements, 

and use Free File to prepare tax returns. 

IRS-123 
Program Name: Taxpayer Advocate Service

Assessment and Improvement Actions 

• Implement a low-income filter that will exclude taxpayers that are more likely to 

experience a hardship if included in the Federal Payment Levy Program. 

• Complete and implement models to determine which SSA recipients to exclude 

from the Federal Payment Levy Program by FY 2011. 

• Engage a Government Sponsored vendor to help in the design of strategic 

measures. 

• Establish baselines for the revised quality standards that address the changes in 

casework and processing that have occurred since TAS began operating in 2000. 

• Continue to work jointly with the operating divisions to improve the systems 

associated with Amended Returns and the Combined Annual Wage Reporting 

(CAWR)/Federal Unemployment Tax Act (FUTA) compliance programs, 

identified sources of rework. 

IRS-124 
Program Name: Criminal Investigations 

Assessment and Improvement Actions 

• Use audit results and intelligence from ongoing offshore initiatives to refine case 

identification and selection methods and to identify promoters, facilitators, and 

participants in abusive offshore arrangements. 

• Include new security settings in the next Criminal Investigative Management 

Information System (CIMIS) release scheduled for February 2010. 

• Identify questionable preparers for treatments including streamlined injunctions, 

program action cases, and Knock & Talk Visits to stop erroneous return filings for 

the First-Time Homebuyer Credit and send a compliance message to the abusive 

preparer community. 

IRS-125 
Program Name: Examinations

Assessment and Improvement Actions 

• Modify Examination case selection and modeling to include cases where 

taxpayers claimed the First-Time Home Buyer Credit. 

• Implement improved analytics in Automated Underreporter case selection while 

continuing to test soft notices as an alternative to examinations. 

• Improve the way compliance risks are identified and addressed in large, complex 

global businesses and high wealth individuals. 

IRS-126 
Program Name: Retirement Savings Regulatory Program 

Assessment and Improvement Actions 

• Utilize investigations to identify promoters of abusive transactions involving 

retirement plans to deter the marketing of abusive promoter schemes. 

• Continue to address emerging compliance issues, including internationally 

sponsored pension plans, the movement of in-kind charitable gifts offshore, and 

cross-border commerce using Indian reservations.

• Undertake a thorough review of the revenue procedures for staggered remedial 

amendments with a goal of significantly simplifying the process for Individually 

Designed Plans. 

IRS-127 
IRS-128 

Program Name: Health Coverage Tax Credit Administration 

Assessment and Improvement Actions 

• Conduct focus groups and telephone surveys to gather information from taxpayers 

regarding program awareness, interest, usage, and satisfaction among current 

participants and potentially eligible individuals. Use findings from this research 

to drive enhancements to program materials and help understand barriers to 

enrollment. 

• Conduct additional outreach initiatives including implementation of an outreach 

communication plan across all stakeholder groups and the launch of training and 

education for Trade Adjustment Assistance and Pension Benefit Guarantee 

Corporation stakeholder groups. 

• Complete the first Health Coverage Tax Credit Report to Congress by October 

2010. 

• Implement self-service applications to reduce ongoing operational costs and 

provide service through preferred communication channels including an 

interactive voice response system and an e-payment solution. Other applications 

being considered include a web portal to allow taxpayers to determine eligibility 

for the credit, register for the monthly credit, check registration status, obtain 

payment information, and make payments online. 
4.3 – IRS Performance Measure Table 

The following table shows IRS performance measures achieved and projected from 

FY 2008 through FY 2011. 

Performance Measures Type of 

Measure

FY 2009 

Target

FY 2009 

Actual

FY 2010 

Planned

FY 2011 

Planned

Customer Service Representative Level of Service Oe, L 70.0% 70.0% 71.0% 75.0%

Customer Contacts Resolved per Staff Year E 10,386 12,918 9,398 10,181

Percent of Eligible Taxpayers Who File for EITC Oe 75% - 80% N/A 75% - 80% 75% - 80%

Customer Accuracy - Tax Law (Phones) Ot 91.0% 92.9% 91.2% 91.2%

Customer Accuracy - Accounts (Phones) Ot 93.5% 94.9% 93.7% 93.7%

Timeliness of Critical Filing Season Tax Products to the Public Ot 92.0% 96.8% 94.0% 94.0%

Timeliness of Critical TE/GE & Business Tax Products to the 

Public Ot 89.0% 95.2% 90.0% 91.0%

Percent Individual Returns Processed Electronically Oe, L 64.0% 65.9% 70.2% 81.0%

Cost per Taxpayer Served ($) (HCTC) E $17.00 $13.79 Baseline1 TBD1

Sign-Up Time (Days) - Customer Engagement (HCTC) Ot 97.0 91.3 Baseline1 TBD1

Percent of Business Returns Processed Electronically Oe, L 21.6% 22.8% 24.3% 25.4%

Refund Timeliness - Individual (Paper) Ot 98.4% 99.2% 98.4% 98.4%

Taxpayer Self-Assistance Rate E, L 64.7% 69.3% 61.3% 62.7%

Examination Coverage - Individual Oe, L 1.0% 1.0% 1.1% 1.1%

Field Exam Nat'l Quality Review Score Oe, L 87.0% 85.1% 86.3% 86.3%

Office Exam Nat'l Quality Review Score Oe, L 90.0% 92.1% 90.9% 90.9%

Examination Quality - Industry Oe, L 88.0% 88.0% 89.0% 89.0%

Examination Quality - Coordinated Industry Oe, L 96.0% 95.0% 96.0% 96.0%

Examination Coverage - Business Oe, L 5.8% 5.6% 5.1% 5.0%

Examination Efficiency - Individual E, L 132 138 132 128

Automated Underreporter Efficiency E, L 1,855 1,905 1,868 1,945

Automated Underreporter Coverage E, L 2.5% 2.6% 3.0% 3.4%

Collection Coverage (Units) Ot, L 54.4% 54.2% 50.5% 51.5%

Collection Efficiency (Units) E, L 1,872 1,845 1,898 1,884

Field Collection Nat'l Quality Review Score Ot, L 80.0% 80.5% 81.0% 82.0%

Automated Collection System Accuracy Oe 92.0% 94.3% 92.5% 94.0%

Criminal Investigations Completed Ot, L 3,900 3,848 3,900 3,900

Number of Convictions Oe, L 2,135 2,105 2,135 2,135

Conviction Rate Oe, L 92.0% 87.2% 92.0% 92.0%

Conviction Efficiency Rate ($) E, L $317,100 $327,328 $331,000 $340,000

TE/GE Determination Case Closures Ot 94,000 96,246 140,465 99,491

Percent of BSM Projects within +/- 10% Cost Variance E 90.0% 60.0% 90.0% 90.0%

Percent of BSM Projects within +/- 10% Schedule Variance E 90.0% 90.0% 90.0% 90.0%

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure, L - Long-Term Goal

1 An increase in participation is expected due to the Recovery Act. IRS will establish a new baseline in FY 2010.

IRS-129 
IRS-130 

4.4 – Cost of IRS Operating Activities 

FY 2009 Cost of IRS Operating Activities 

The following charts provide the FY 2009 cost of IRS operating activities by 

appropriation and by major expense category. The charts include all expenditures, 

regardless of the fiscal year the funds were appropriated, that occurred in FY 2009 except 

for imputed costs (i.e., costs associated with services obtained by other agencies such as 

the Department of the Treasury and the Office of Personnel Management that are 

provided to the IRS, but are not reimbursed). 

FY 2009 Expenses by Appropriation

(Excluding Imputed Costs)

Health Insurance Tax 

Credit Administraton, Business System 

Modernization, 1.93% 0.27%

Taxpayer Services, 

21.02%

Enforcement, 42.33%

Operations Support, 

34.44%

The second chart shows the FY 2009 actual costs by major expense category. 

FY 2009 Expenses by Category

(Excluding Imputed Costs)

Business Systems 

IT & Modernization (BSM)

Telecommunications 0.39%

8.00%

Enforcement**

Other* 43.44%

8.89%

Rent

6.87%

Taxpayer Service

19.50%

Health Care Tax Credit 

(HCTC)

Operations Support 0.01%

 12.90%

Note: 

 * Other includes Contractual Services, Supplies, Printing, Postage, Travel, and Training 

 ** Enforcement includes Non-Labor Enforcement Expense of $263 million (2.3%) 

 Labor Costs represent 73.9% of total expenses and include Taxpayer Services, Operations Support, 

Enforcement, BSM, and HCTC 

 
4.5 – Summary of IRS FY 2011 Budget Request 

IRS-131 

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