Internal Revenue Service

Program Summary by Appropriations Account and Budget Activity

Dollars in thousands

Appropriation

 FY 2011

Enacted1 FY 2012

Enacted

FY 2013

Request

FY 2012 TO FY 2013

$ Change

% Change

Taxpayer Services $2,293,272 $2,239,703 $2,253,133 $13,430 0.60%

Pre-filing Taxpayer Assistance & Education $678,204 $632,414 $625,931 ($6,483) -1.03%

Filing & Account Services $1,615,068 $1,607,289 $1,627,202 $19,913 1.24%

Enforcement $5,492,992 $5,299,367 $5,701,670 $402,303 7.59%

Investigations $644,479 $636,067 $688,296 $52,229 8.21%

Exam & Collections $4,689,220 $4,510,245 $4,846,749 $336,504 7.46%

Regulatory $159,293 $153,055 $166,625 $13,570 8.87%

Operations Support $4,056,716 $3,947,416 $4,476,200 $528,784 13.40%

Infrastructure $926,190 $940,765 $987,730 $46,965 4.99%

Shared Services & Support $1,291,568 $1,242,470 $1,348,363 $105,893 8.52%

Information Services $1,838,958 $1,764,181 $2,140,107 $375,926 21.31%

Business Systems Modernization $263,369 $330,210 $330,210 $0 0.00%

Health Insurance Tax Credit Administration2 $15,481 $0 $0 $0 NA

Subtotal, Internal Revenue Service $12,121,830 $11,816,696 $12,761,213 $944,517 7.99%

Offsetting Collections - Reimbursables3 $141,078 $135,218 $135,218 $0 0.00%

Mandatory Appropriations – User Fees3 $285,805 $210,860 $218,450 $7,590 3.60%

Total Program Operating Level $12,548,713 $12,162,774 $13,114,881 $952,107 7.83%

Direct FTE 94,541 90,711 95,257 4,546 5.01%

Other Direct FTE4 582 863 7 (856) -99.2%

Reimbursable FTE3 782 743 743 0 0.00%

User Fees FTE3 221 196 196 0 0.00%

Total FTE 96,126 92,513 96,203 3,690 3.99%

1

FY 2011 Enacted represents the approved FY 2011 Operating Plan and inter-appropriation transfer. 2

In FY 2012, administrative resources for the health coverage tax credit program were moved to the Taxpayer Services appropriation under the 

Consolidated Appropriations Act, 2012 (Public Law 112-74). 3

FY 2011 user fee and reimbursable dollars and FTE represent actual realized and FY 2012 and FY 2013 represent user fee and reimbursable 

spend plans.

4

The FY 2011 and FY 2012 columns include Other Direct FTE funded from the Department of Health and Human Services (575 FTE in FY 2011 

and 856 FTE for FY 2012) and the Federal Highway Administration (7 FTE in FY 2011 and 7 FTE projected for FY 2012 and FY 2013).

Summary

The Internal Revenue Service (IRS) collects 

the revenue that funds the government and 

administers the nation’s tax laws. The IRS 

collected $2.415 trillion in taxes (gross 

receipts before tax refunds) in FY 2011, 

92 percent of federal government receipts. To

protect the flow of revenue to the government, 

the IRS delivers a robust service and 

enforcement agenda. The service agenda 

supports and protects the trillions in revenue 

that come into the Treasury each year 

voluntarily from taxpayers. The enforcement 

agenda vigorously pursues those who evade 

their responsibility to pay the taxes they owe. 
Both service and enforcement are key to 

supporting the Treasury Priority Goal, Increase 

Voluntary Tax Compliance.

Total resources to support the IRS activities for 

FY 2013 are $13,114,881,000, including 

$12,761,213,000 from direct appropriations, 

an estimated $135,218,000 from reimbursable 

programs, and an estimated $218,450,000

from user fees. The direct appropriation is 

$944,517,000 more than the FY 2012 enacted 

level of $11,816,696,000, and $639,383,000 

more than the FY 2011 enacted level of 

$12,121,830,000.

The IRS Strategic Plan 2009-2013 guides 

program and budget decisions and supports the 

Department of the Treasury Strategic Plan and 

Priority Goals.

Helping taxpayers understand their obligations 

under the tax law is critical to improving 

compliance and addressing the tax gap, the 

difference between taxes owed and taxes paid 

on time. Therefore, the IRS remains 

committed to a balanced program of assisting 

taxpayers to understand the tax law and remit 

the proper amount of tax. 

The IRS Strategic Plan goals and objectives 

are:

Improve Service to Make Voluntary 

Compliance Easier

Enforce the Law to Ensure Everyone 

Meets Their Obligation to Pay Taxes

To improve service 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 obligations to pay taxes, the IRS must:

• Enforce the law proactively 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 taxexempt 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.

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 appropriately allocate 

resources; and 

• Ensure the privacy and security of data 

and the safety and security of IRS 

employees.
The IRS President’s Budget request supports 

the following Department of the Treasury 

Strategic and Agency Priority Goals:

Strategic Goal: Pursue Comprehensive 

Tax and Fiscal Reform

Priority Goal: Increase Voluntary Tax 

Compliance

Strategic Goal: Manage the Government’s 

Finances in a Fiscally Responsible Manner

Enforcement Program: The FY 2013

request provides funding to restore revenue 

lost from FY 2012 reductions to examination 

audit and collection programs; implement 

enacted legislation; increase compliance by 

addressing offshore tax evasion; make use of 

new information reporting to reduce the 

underreporting tax gap; improve treatment of 

complex financial situations including transfer 

pricing and uncertain tax positions; protect 

revenue by identifying fraud and preventing 

issuance of questionable refunds including taxrelated identity theft; and strengthen return 

preparer compliance.

Increased resources for the IRS compliance 

programs yield direct, measurable results 

through high return on investment activities. 

The new enforcement initiatives funded 

through a program integrity cap adjustment 

will generate more than $1.48 billion in 

additional annual enforcement revenue once 

the new hires reach full potential in FY 2015. 

These resources will achieve a return on 

investment (ROI) of $4.3-to-$1, but does not 

include the revenue effect of the deterrence 

value of these investments and other IRS 

enforcement programs, which is 

conservatively estimated to be at least three 

times the direct revenue impact. 

The tax law is complex and even sophisticated 

taxpayers can make honest mistakes on their 

tax returns. Accordingly, helping taxpayers 

understand their obligations under the tax law 

is critical to improving compliance. To this 

end, the IRS remains committed to a balanced 

program of assisting taxpayers to both 

understand the tax law and remit the proper 

amount of tax and compliance actions. 

Taxpayer Service Program: The FY 2013

request continues to deliver services to 

taxpayers using a variety of in-person, 

telephone, and web-based methods to help 

taxpayers understand their tax obligations, 

correctly file their returns, and pay taxes due 

in a timely manner. 

Providing quality taxpayer service is 

especially important to help taxpayers avoid 

making unintentional errors. Assisting 

taxpayers with their questions before they file 

their returns prevents inadvertent 

noncompliance and reduces burdensome postfiling notices and other correspondence from 

the IRS. The IRS is committed to supporting

the Treasury effort to expand the use of 

electronic transactions to include increasing 

the e-File rate and increasing taxpayer service 

options available through the internet. 

Technology enhancements to IRS.gov and the 

continued investments in electronic filing 

under the Business Systems Modernization 

(BSM) program will allow more taxpayers to 

reach the IRS through the IRS website. In 

2011, there were more than 319 million visits 

to The IRS website, and more than 77.9 million 

taxpayers checked their refund status by 

accessing Where’s My Refund? in English or in 

Spanish on the IRS website. Taxpayers also 

can use automated features found at 1-800-

829-1040. 

Business Systems Modernization: In 2012, 

the IRS delivered the most significant update 

to its core tax processing system in 

decades. Since the 1960s, the IRS has 

operated on a weekly batch cycle, which 

starting in 2012 transitioned to a daily 

processing cycle. Also, for the first time, IRS 

processing systems are accepting all 1040 
forms electronically through a modernized efiling capability, and will feed into a single 

consolidated taxpayer account database which 

will allow the next generation of taxpayer 

service and enforcement functions. In 2013, 

the IRS will build on this momentum by 

strategically investing in state-of-the-art 

capabilities, such as online taxpayer services, 

that can utilize the database infrastructure put 

in place in 2012. The IRS also will focus its 

efforts on the second phase of the Customer 

Account Data Engine 2 (CADE 2) initiative, 

which addresses risks associated with the 

continued legacy of antiquated technologies 

and programming languages in the current IRS 

environment. This next phase, known as 

Transition State 2, will ensure the long-term 

viability of the IRS tax processing systems.

IRS FY 2013 Budget Highlights

Dollars in thousands 

Appropriation

Taxpayer Services

$000

FTE

Enforcement

$000

FTE

Operations Support

$000

FTE

Business

Systems

Modernization

$000

FTE

Total

$000

FTE

FY 2012 Enacted $2,239,703 30,535 $5,299,367 47,586 $3,947,416 11,985 $330,210 605 $11,816,696 90,711

Changes to Base

Adjustment to Request - - - (110) (110)

Maintaining Current Levels (MCL's) $17,282 - $38,156 - $52,698 - $287 - $108,423 -

Efficiency Savings ($31,544) (395) ($31,489) (219) ($7,530) - ($287) - ($70,850) (614)

Increase e-File Savings (8,124) (177) - - (442) - - - (8,566) (177)

Reduce Travel (740) - - - (1,708) - (130) - (2,578) -

Targeted Program Reductions (22,680) (218) (31,489) (219) (5,380) - (157) - (59,706) (437)

Subtotal, Changes to Base ($14,262) (395) $6,667 (219) $45,168 - (110) $37,573 (724)

Total, FY 2013 Base $2,225,441 30,140 $5,306,034 47,367 $3,992,584 11,985 $330,210 495 $11,854,269 89,987

Program Changes

Restoration of FT 2012 Reductions to Enforcement 

Programs $12,257 201 $118,672 1,455 $69,552 24 $0 - $200,481 1,680

Restore Audit Coverage to Address Individual Tax 

Compliance Issues 388 6 83,265 882 43,519 24 - - 127,172 912

Restore Collection Coverage 11,869 195 35,407 573 26,033 - - - 73,309 768

Program Increases $15,435 229 $276,964 2,761 $414,064 600 $706,463 3,590

Enforcement Initiatives: $15,435 229 $276,964 2,761 $138,970 63 $0 - $431,369 3,053

Promote Offshore Compliance - - 81,738 700 29,001 - - - 110,739 700

Improve International Compliance - - 33,033 223 5,851 - - - 38,884 223

Implement Tax Legislative Changes 8,366 189 51,694 619 68,806 49 - - 128,866 857

Implement Revenue Protection Strategy 7,069 40 60,490 832 21,297 13 - - 88,856 885

Build Out Tax Return Preparer Program - - 29,190 228 5,976 - - - 35,166 228

Address Appeals Workload - - 16,466 - 3,858 - - - 20,324 132

Implement Uncertain Tax Position Reporting 

Requirements - - 3,576 20 454 - - - 4,030 20

Leverage Digital Evidence for Criminal Investigation (CI) - - 777 7 3,727 1 - - 4,504 8

Infrastructure Initiatives: $0 - $0 - $275,094 537 $0 - $275,094 537

Implement IT and Operational Infrastructure to Deliver 

New Tax Credits - - - - 266,894 537 - - 266,894 537

Implement IT Changes Needed for Individual Coverage 

Requirement - - - - 8,200 - - - 8,200 -

Subtotal, Program Changes $27,692 430 $395,636 4,216 $483,616 624 $0 - $906,944 5,270

Total, FY 2013 Request $2,253,133 30,570 $5,701,670 51,583 $4,476,200 12,609 $330,210 495 $12,761,213 95,257
FY 2013 Budget Estimates

FY 2012 Enacted 

The FY 2012 Enacted Level for IRS is 

$11,816,696,000, supporting and estimated

90,711 FTE.

Adjustment to Request 

Technical Dollar and FTE Adjustments +$0 / 

-110 FTE

The FTE adjustment reduces the FY 2012 

Business Systems Modernization (BSM) FTE 

level to reflect the labor required to support 

the BSM program in FY 2013. The FTE 

assigned to BSM in FY 2012 will be absorbed 

in the Operations Support appropriation to 

work on other IRS information technology 

projects.

Maintaining Current Levels (MCLs) 

Maintaining Current Levels +$108,423,000 / 

+0 FTE

Funds are requested for inflation adjustments 

(1.7 percent) in non-labor expenses such as 

GSA rent adjustments, postage, supplies and 

equipment and health benefits and the increase 

in Federal Employees Retirement System 

participation. Funds are also requested for the 

proposed 2013 pay raise (0.5 percent).

Efficiency Savings 

Increase e-File Savings -$8,566,000 / -177 

FTE

These savings are a result of increased 

electronic filing (e-File). The IRS projects 

taxpayers will file 635,000 fewer paper returns 

in FY 2013 (466,900 individual and 

168,100 business) and instead choose to e-file. 

Savings are based on e-File projected growth, 

modernization, and the completion of the 

phased implementation of the Worker, 

Homeowner, and Business Assistance Act of 

2009 (Public Law 111-92), that requires 

electronic filing by tax return preparers. As a 

result, the IRS would need 177 fewer FTE in 

submission processing, generating a savings 

of $8,566,000.

Reduce Travel -$2,578,000 / +0 FTE

The IRS will reduce non-case related travel by 

making greater use of technology and 

increasing the use of alternative workspace, 

including hoteling.

Targeted Program Reductions -$59,706,000 / 

-437 FTE

The IRS will achieve reductions in the 

Taxpayer Service, Enforcement, and Business 

Systems Modernization (BSM) programs by 

increasing efficiency, reducing costs and 

streamlining operations.

Restoration of FY 2012 Reductions to 

Enforcement Programs

Restore Audit Coverage to Address Individual 

Tax Compliance Issues +$127,172,000 / 

+912 FTE

This initiative will ensure individual 

examination coverage does not decline and 

that critical non-compliance issues are 

effectively addressed. Apart from detecting 

non-compliance directly, maintaining 

examination coverage also promotes voluntary 

compliance both by increasing the likelihood

that intentional non-compliance will be 

detected and reassuring compliant taxpayers 

of the fairness of the tax administration 

system. This initiative will restore resources 

to traditional field examination programs to 

ensure consistent audit coverage; address the 

compliance risks of complex business 

networks operated by high-wealth individuals; 

and expand the IRS’s correspondence 

examination program to provide focused 

attention on refundable credits. Together, 

these investments will restore annual 

enforcement revenue of $661.7 million, an 

ROI of $6.3-to-$1.

Restore Collection Coverage +$73,309,000 / 

+768 FTE
This initiative will ensure that the IRS has 

sufficient resources to work the collection 

inventory to bring taxpayers who fail to pay 

their tax debt into compliance. This initiative 

includes staffing to address increased 

workload in the Automated Collection System 

(ACS) handling growing collection case 

inventories and incoming call volumes; 

Withholding Compliance Program (WHC) 

handling balance due correspondence and 

phone work; installment agreement calls; 

Offers in Compromise (OIC) Program which 

helps taxpayers, experiencing economic 

hardship, resolve their tax liabilities; and 

Accounts Management (AM) assisting 

taxpayers in resolving enforcement-related 

notices. It will restore additional annual 

enforcement revenue of $486.9 million, an 

ROI of $7.6-to-$1.

Program Increases 

Promote Offshore Compliance +$110,739,000 

/ +700 FTE

This initiative will allow the IRS to strengthen 

enforcement activities to address offshore tax 

evasion; expand the IRS’s global presence and 

pursuit of international tax and financial 

crimes; and implement changes required by 

the enactment of Foreign Account Tax 

Compliance Act (FATCA) included in the 

Hiring Incentives to Restore Employment 

(HIRE) Act of 2010 (Public Law 111-147).

The IRS continues to address tax-avoidance 

schemes involving offshore activity. New 

reporting, disclosure and withholding 

requirements coupled with strengthened 

compliance efforts related to offshore activity 

will produce additional annual enforcement 

revenue of $583.8 million once the new hires 

reach full potential in FY 2015, an ROI of 

$6.4-to-$1.

Promote Offshore Compliance +$110,739,000 

/ +700 FTE

This initiative strengthens international tax 

compliance for business entities by providing 

additional international technical specialists to 

increase coverage of complex international 

transactions, including cross-border business 

arrangements and transfer pricing (i.e.,

transactions between U.S. multinationals and 

their foreign subsidiaries, and foreigncontrolled corporations doing business in the 

U.S. and transactions with their foreign 

parent). This request will address the 

significant growth in international activities in 

the global tax environment and produce 

additional annual enforcement revenue of 

$263.5 million once the new hires reach full 

potential in FY 2015, an ROI of $8.8-to-$1.

Implement Tax Legislative Changes 

+$128,866,000 / +857 FTE

As the tax law changes, the IRS must 

implement programs to ensure that taxpayers 

understand the new laws, and that the IRS can 

address non-compliance. This initiative will 

promote compliance activities related to a 

number of tax law changes implemented over 

the last several years, including the:

• Information Reporting Document 

Matching (IRDM) ($43.5 million and 

535 FTE) to implement the reporting 

provisions included on merchant payment 

card and third party reimbursements 

enacted in the Housing and Economic 

Recovery Act of 2008 (Public Law 110-

289) and basis reporting on security sales 

enacted in the Emergency Economic 

Stabilization Act of 2008 (Public Law 

110-343); and

• Affordable Care Act (ACA) (Public 

Law 111-148) ($85.4 million and 

322 FTE) to address compliance issues 

and new responsibilities arising from the 

non-exchange related tax law changes 

included in the ACA. 

These initiatives will produce additional 

annual enforcement revenue of $424 million, 
once the new hires reach full potential in 

FY 2015, an ROI of $3.5-to-$1.

Implement Revenue Protection Strategy 

+$88,856,000 / +885 FTE

The tax withholding program allows the IRS 

to identify and resolve issues prior to issuing a 

taxpayer’s refund, thereby protecting revenue 

at a lower cost than downstream enforcement 

collections. This initiative supports the 

implementation of the Return Review 

Program (RRP), the Accounts Management 

Taxpayer Assurance Program (AMTAP), 

Identity Theft, and the Prisoner Tax 

Compliance Strategy. It will help prevent 

erroneous refund payments, including noncompliant and fraudulent claims by prisoners 

and ineligible taxpayers claiming the Earned 

Income Tax Credit (EITC). 

In FY 2011, AMTAP reviewed almost 

1.8 million questionable refund returns valued 

at more than $14 billion. The IRS protected 

almost $3.8 billion in revenue through EITC 

enforcement efforts (examinations, document 

matching reviews and math error processing).

This request will produce additional annual 

enforcement revenue of $146.5 million once 

the new hires reach full potential in FY 2015, 

an ROI of $1.9-to-$1, in addition to billions of 

dollars of prevented fraudulent refunds.

Build Out Tax Return Preparer Program 

+$35,166,000 / +228 FTE

This initiative improves taxpayer compliance 

and the accuracy of returns filed by tax 

professionals; protects taxpayers by 

establishing a registered community of 

qualified tax professionals; and fosters a 

stakeholder-driven culture that encourages 

voluntary compliance. This initiative will 

ensure uniform, high ethical standards of 

conduct for tax return preparers by enforcing 

preparer compliance with the IRS rules, 

increasing preparer examinations, and 

monitoring and pursuing preparers engaged in 

fraudulent activities, including noncompliant 

EITC return preparers. This initiative is core 

to the IRS’s tax gap strategy and will increase 

government revenue while ensuring 

high-priority, preparer-related enforcement 

activities are funded to execute the appropriate 

treatment effectively. This initiative will 

produce additional direct enforcement revenue 

of $62.2 million once the new hires reach full 

potential in FY 2015, an ROI of $2.3-to-$1, in 

addition to the much larger indirect return that 

will result from higher professional standards 

among the tax return preparer community.

Address Appeals Workload +$20,324,000 / 

+132 FTE

The Appeal’s function at the IRS is a critical 

outlet for taxpayers to get an independent, 

second review of examination decisions 

without burdening the court system. Appeal’s

workload continues to grow at a steady rate, 

with growth averaging 8.9 percent a year over 

the past five fiscal years. Anticipating that 

workload will continue to grow at this rate, the 

IRS requests additional staff to manage 

incoming case receipts effectively and 

additional resources to expand automated data 

capture.

Implement Uncertain Tax Position Reporting 

Requirements +$4,030,000 / +20 FTE

This initiative will allow the IRS to increase 

its capacity to provide guidance and certainty 

on areas where there is uncertainty in the tax 

law. This request complements a new 

requirement that certain large business 

taxpayers report information about their 

uncertain tax positions that could affect their 

U.S. federal income tax liability. It is a 

critical part of the IRS’s work to foster greater 

transparency into large corporate tax returns.

Leverage Digital Evidence for Criminal 

Investigation (CI) +$4,504,000 / +8 FTE

This initiative will automate current Criminal 

Investigation (CI) processes by implementing 

a virtual digital evidence processing 
environment. This will allow CI to expedite 

and enhance the analysis of electronic data by 

special agents, computer investigative 

specialists, and other investigative staff 

assigned to an investigation.

Implement IT and Operational Infrastructure 

to Deliver New Tax Credits +$266,894,000 / 

+537 FTE

The Affordable Care Act (ACA) provides a 

new premium assistance tax credit to help 

certain individuals afford health insurance 

starting in 2014. With requested funding, the 

IRS will continue the development of new 

information technology systems and 

modification and enhancement of existing 

systems. System changes are required to 

support income verification for the premium 

assistance tax credit, and design systems to 

ensure accurate credit delivery, while 

detecting and addressing non-compliance.

Implement IT Changes Needed for Individual 

Coverage Requirement +$8,200,000 / +0 FTE

This initiative will fund the development of 

the information technology, infrastructure, and 

systems to implement the provisions of 

Subtitle F of Title I of the Affordable Care Act 

(ACA) (Public Law 111-148) that establishes 

an individual coverage requirement.

Dollars in Millions

FY 2013 Enforcement Investment Cost Revenue ROI Cost Revenue ROI

All Enforcement Initiatives $631.9 $1,214.1 1.9 $540.5 $2,628.6 4.9

Restoration of FY 2012 Reductions to Enforcement Programs $200.5 $540.7 2.7 $168.2 $1,148.6 6.8

Restore Audit Coverage to Address Individual Tax Compliance Issues 127.2 320.1 2.5 104.3 661.7 6.3

Restore Collection Coverage 73.3 220.6 3.0 63.9 486.9 7.6

Immediate and Directly Measurable Revenue-Producing Initiatives $402.6 $673.4 1.7 $346.0 $1,480.0 4.3

Promote Offshore Compliance 110.7 264.9 2.4 90.9 583.8 6.4

Improve International Compliance 38.9 130.3 3.3 30.0 263.5 8.8

Implement Tax Legislative Changes 128.9 177.3 1.4 120.4 424.0 3.5

Implement Revenue Protection Strategy 88.9 73.7 0.8 78.2 146.5 1.9

Build Out Tax Return Preparer Program 35.2 27.2 0.8 26.5 62.2 2.3

Strategic Revenue-Producing Initiatives (which do not have immediately 

measurable ROI, but clear long-term revenue effects $28.8 $0.0 0.0 $26.3 $0.0 0.0

Address Appeals Workload 20.3 0.0 0.0 18.2 0.0 0.0

Implement Uncertain Tax Position Reporting Requirements 4.0 0.0 0.0 3.7 0.0 0.0

Leverage Digital Evidence for Criminal Investigation (CI) 4.5 0.0 0.0 4.4 0.0 0.0

First Year (FY 2013) Full Performance (FY 2015)

Return on Investment for Enforcement Initiatives

Explanation of Budget Activities

Taxpayer Services

The FY 2013 President’s Budget request is 

$2,253,133,000 in direct appropriations, an 

estimated $24,050,000 from reimbursable

programs, and an estimated $142,742,000 

from user fees, for a total operating level of 

$2,419,925,000. This appropriation funds the 

following budget activities.

Pre-filing Taxpayer Assistance & Education 

($625,931,000 from direct appropriations, 

$1,151,000 from reimbursable resources)

This budget activity funds services to assist 

with tax return preparation, including tax law 

interpretation, publication, production, and 

advocate services. In addition, funding for 

these programs continues to emphasize 

taxpayer education, outreach, increased 

volunteer support time and locations, and 

enhancing pre-filing taxpayer support through 

electronic media.
Filing & Account Services ($1,627,202,000 

from direct appropriations, $22,899,000 from 

reimbursable resources, and an estimated 

$142,742,000 from user fees)

This budget activity funds programs that 

provide filing and account services to 

taxpayers, process paper and 

electronically-submitted tax returns, issue 

refunds, and maintain taxpayer accounts. The 

IRS continues to make progress in decreasing 

paper returns and increasing the use of 

electronic filing and payment methods. This 

budget activity also provides operating 

resources to administer the advance payment 

feature of the Trade Act of 2002 (Public Law 

107-210) health insurance tax credit program, 

which assists dislocated workers with their 

health insurance premiums.

Enforcement

The FY 2013 President’s Budget request is 

$5,701,670,000 in direct appropriations and an 

estimated $73,604,000 from reimbursable 

programs, and an estimated $17,750,000 from 

user fees, for a total operating level of 

$5,793,024,000. The total direct 

appropriations level includes an additional 

appropriation for tax enforcement and 

compliance activities funded through a 

program integrity cap adjustment totaling 

$691,028,000, of which $276,964,000 will be 

funded from the Enforcement account. This 

appropriation funds the following budget 

activities.

Investigation ($688,296,000 from direct 

appropriations, and an estimated $61,633,000 

from reimbursable resources)

This budget activity funds the criminal 

investigations programs that uncover criminal 

violations of the internal revenue tax laws and 

other financial crimes, enforce criminal 

statutes relating to these violations, and 

recommend prosecution as warranted. These 

programs identify and document the 

movement of both legal and illegal sources of 

income to identify and document cases of 

suspected intent to defraud. It provides 

resources for international investigations 

involving U.S. citizens residing abroad, nonresident aliens and expatriates and includes 

investigation and prosecution of tax and 

money-laundering violations associated with 

narcotics organizations.

Exam & Collections ($4,846,749,000 from 

direct appropriations, and an estimated 

$11,307,000 from reimbursable resources)

This budget activity funds programs that 

enforce the tax laws and increase compliance 

through examination and collection programs 

that ensure proper payment and tax reporting. 

It includes programs such as specialty 

program examinations (employment tax, 

excise tax and estate and gift exams), 

international collections and international 

examinations. The budget activity also 

supports appeals and litigation activities 

associated with exam and collection.

Regulatory ($166,625,000 from direct 

appropriations, an estimated $664,000 from 

reimbursable resources, and an estimated 

$17,750,000 from user fees)

This budget activity funds the development 

and printing of published IRS guidance 

materials; interpretation of tax laws; internal 

advice to the IRS on general non-tax legal 

issues such as procurement, personnel, and 

labor relations; enforcement of regulatory 

rules, laws, and approved business practices; 

and support of taxpayers in the areas of prefiling agreements, determination letters, and 

advance pricing agreements. The Return 

Preparer Strategy initiative is funded within 

this activity in addition to the Office of 

Professional Responsibility who is responsible 

for identifying, communicating, and enforcing 

the Treasury Circular 230 standards of 

competence, integrity, and conduct of 

professionals representing taxpayers before 

the IRS.
Operations Support

The FY 2013 President’s Budget request is 

$4,476,200,000 in direct appropriations, an 

estimated $37,564,000 from reimbursable 

programs, and an estimated $57,958,000 from 

user fees, for a total operating level of 

$4,571,722,000. The direct appropriations 

level includes an additional appropriation for 

tax enforcement and compliance activities 

funded through a program integrity cap 

adjustment totaling $691,028,000, of which 

$414,064,000 will be funded from the 

Operations Support account. This 

appropriation funds the following budget 

activities.

Infrastructure ($987,730,000 from direct 

appropriations, an estimated $889,000 from 

reimbursable resources, and an estimated 

$21,867,000 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.

Shared Services & Support ($1,348,363,000 

from direct appropriations, an estimated 

$20,207,000 from reimbursable resources, and 

an estimated $11,700,000 from user fees)

This budget activity funds policy 

management, IRS-wide support for research, 

strategic planning, communications and 

liaison, finance, human resources, and equity, 

diversity and inclusion programs. It also 

funds printing and postage, business systems 

planning, security, corporate training, legal 

services, procurement, and specific employee 

benefits programs.

Information Services ($2,140,107,000 from 

direct appropriations, an estimated 

$16,468,000 from reimbursable resources, and 

an estimated $24,391,000 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. This 

includes the design and operation of security 

controls and disaster recovery planning. This 

budget activity funds the development and 

maintenance of the millions of lines of 

programming code that support all aspects and 

phases of tax processing and the operation and 

administration of the mainframes, servers, 

personal computers, networks, and a variety of 

management information systems.

Business Systems Modernization

The FY 2013 President’s Budget request is

$330,210,000 in direct appropriations. This 

appropriation funds the following budget 

activity.

Business Systems Modernization 

($330,210,000 from direct appropriations)

This budget activity funds the planning and 

capital asset acquisition of information 

technology (IT) to continue the modernization 

of IT systems, including labor and related 

contractual costs. In FY 2013, the IRS will 

strategically invest in state-of-the-art 

capabilities, such as online taxpayer services 

and focus on the second phase of the core 

taxpayer account database, CADE 2, 

Transition State 2, to ensure the long-term 

viability of IRS tax processing systems.

Legislative Proposals

The FY 2013 President’s Budget request 

includes a number of legislative proposals 

intended to improve tax compliance with 

minimal taxpayer burden. These proposals 

will target the tax gap and generate more than 

$12 billion over the next ten years. The IRS 

estimates the implementation cost for the 

proposals to be $80.2 million over three years, 

including the initial startup, processing and 

compliance operational costs. The 

Administration proposes to expand 

information reporting, improve compliance by 

businesses, strengthen tax administration, and 
expand penalties. The Budget also proposes 

to amend the Balanced Budget and 

Emergency Deficit Control Act of 1985 

(BBEDCA), as amended by the Budget 

Control Act (BCA) of 2011, to allow 

adjustments to the 9-year (FYs 2013-2021) 

discretionary caps to permit program integrity 

cap adjustments in support of additional IRS 

investments.

IRS Performance by Program

Program Performance Measure FY 2009 FY 2010 FY 2011 FY 2012 FY 2013

Actual Actual Actual Target Target

Taxpayer Services Customer Contacts Resolved Per 

Staff Year

12,918 10,744 12,419 13,300 14,400

Taxpayer Services Customer Service Representative 

(CSR) Level of Service (%)

70.0 74.0 70.1 61.0 63.0

Taxpayer Services Percent Individual Returns 

Processed Electronically (%)

65.9 69.3 76.9 79.0 80.0

Enforcement Automated Collection System 

(ACS) Accuracy (%)

94.3 95.9 94.9 94.5 95.0

Enforcement Automated Underreporter (AUR) 

Coverage (%)

2.6 3.0 3.3 3.2 3.2

Enforcement Examination Efficiency - Individual 

(Form 1040) 

138 140 139 134 134

Description of Performance

In FY 2011, the IRS continued to provide 

quality service to taxpayers and enforced the 

laws in a balanced manner. The following is a 

summary of significant program performance 

improvements.

Enforcement

Business System Modernization

IRS modernization efforts focus on building 

and deploying advanced information 

technology systems, processes, and tools to 

improve efficiency and productivity. The 

2012 delivery follows up on a number of 

important accomplishments in FY 2011: 

The IRS criminal investigation program 

investigates potential criminal violations of the 

Internal Revenue Code, and related financial 

crimes such as money laundering, currency 

violations, tax-related identity theft fraud and 

terrorist financing that adversely affect tax 

administration. Using its unique statutory 

jurisdiction and financial expertise, the IRS 

makes significant contributions to important 

national law enforcement priorities. 

Performance in the criminal investigation 

program remained high in FY 2011. As 

compared with FY 2010, the IRS:

• Completed 4,697 criminal investigations, 

an increase of 8.6 percent;

• Achieved a conviction rate of 92.7 percent, 

an increase of 2.5 percentage points; and

• Obtained 2,350 convictions, exceeding the 

FY 2011 target.

One of the most important initiatives that the 

IRS has undertaken in recent years is the 

Return Preparer Initiative, the foundation of 
which is mandatory registration for all paid tax

return preparers to obtain a Preparer Tax 

Identification Number (PTIN). In September 

2010, the IRS launched the new online PTIN 

application system. By the end of September 

2011, more than 735,000 preparers had 

registered. The PTIN registration process 

gives the IRS an important and improved view 

of the return preparer community from which 

IRS can leverage information to improve 

communications, analyze trends, spot 

anomalies and detect potential fraud. In 

addition, the IRS is in the final stages of 

developing requirements to establish 

mandatory competency testing for preparers to 

ensure that taxpayers are hiring preparers who 

are educated in the tax law. 

In FY 2011, the IRS made its six-year old 

Compliance Assurance Process (CAP) pilot 

program permanent. CAP allows large 

corporate taxpayers to resolve tax issues prior 

to filing a tax return. Since the IRS started 

CAP, the number of participating corporations 

has grown each year to the current 140 

participants. Participating corporations cite 

their primary interest in CAP as the 

opportunity to achieve tax certainty sooner. 

In FY 2011, the IRS took steps to assist 

individual taxpayers who may be facing 

financial hardship in the struggling economy 

by implementing a Fresh Start initiative. Fresh 

Start helps taxpayers who owe money by 

providing greater access to installment 

agreements and easing regulations on lien 

filing.

The changes included: 

• Increasing the dollar threshold at which 

liens are generally filed;

• Making it easier for taxpayers to obtain

lien releases after paying a tax bill;

• Withdrawing liens in most cases where 

a taxpayer enters into a Direct Debit 

Installment Agreement;

• Creating easier access to Installment

Agreements for struggling small 

businesses; and 

• Expanding a streamlined Offer in 

Compromise program to cover more 

taxpayers.

Taxpayer Service

Providing taxpayers top-quality service and 

helping them understand and meet their tax 

responsibilities remain top priorities for the 

IRS. 

The IRS delivered another successful filing 

season in 2011, rising to challenges posed by 

tax legislation enacted in late December 2010. 

The IRS took the necessary steps to minimize 

disruptions for taxpayers and ensure a smooth 

filing season. Results of the 2011 filing 

season included:

• Processing more than 144.7 million 

individual returns and issuing more 

than 109.3 million refunds totaling 

$345 billion compared to 109.5 million 

refunds totaling $366 billion for the 

same period in 2010;

• Answering 42.3 million automated 

calls and 34.2 million assistor calls;

• Responding accurately to 93.4 percent 

of tax law questions and 96 percent of 

account questions; and

• Direct-depositing more than 79 million 

refunds compared to 74.6 million in 

2010, an increase of almost 6 percent 

over 2010.

In FY 2011, the IRS processed more than 

111 million individual tax returns 

electronically, setting a new record. Filing 

season results targeting electronic filing 

included:

• Individual returns electronically filed 

increased to 76.9 percent, up 

7.6 percentage points from 2010;
• Business returns filed electronically at 

a rate of 31.8 percent, up from 25.5 

percent in 2010;

• Home-computer filing increased to 

39.6 million returns, 13.9 percent more 

than 2010; 

• Tax professional use of e-file increased 

15 percent from the previous year, 

reaching 71.7 million returns; and

• Registrations to purchase U.S. Savings 

Bonds through direct deposit reached 

45,499, almost twice as many as 

FY 2010. Taxpayers, taking advantage 

of this opportunity, requested 

136,326 bonds totaling approximately 

$11.2 million. 

During FY 2011, the IRS updated forms to 

help taxpayers comply with filing 

requirements, converted forms for visually 

impaired taxpayers, translated more tax 

products into multiple languages, and reduced 

telephone wait time. 

The IRS continued to increase the amount of 

tax information and services available to 

taxpayers through IRS.gov, providing 

alternative service options. In FY 2011, the 

IRS received a Compuware Gomez “Best of 

the Web” award, which recognized IRS.gov as 

one of the best websites in government for 

performance and quality and first in 

consistency. In FY 2011, IRS.gov web pages 

were viewed more than 1.6 billion times as

taxpayers used the website to:

• Get forms and publications. More than

229 million tax products were 

downloaded, an increase of 7.5 percent 

from 2010; 

• Link to EFTPS. The Electronic 

Federal Tax Payment System (EFTPS) 

processed more than 129.8 million 

electronic tax payments totaling over 

$2 trillion; and 

• Get answers. More than 241,962 

taxpayers accessed the Interactive Tax 

Assistant in order to receive answers to 

tax law questions.
•

As shown in the chart, 77.9 million taxpayers 

used “Where’s My Refund?” to check on 

refunds in FY 2011, an increase of 253 percent 

from FY 2005.

The IRS is increasing communications with 

taxpayers who may not get their information 

from traditional sources, such as newspapers 

and broadcast and cable news. By employing 

social and new media, such as YouTube, 

Twitter, and iTunes, the IRS can reach these 

taxpayers and provide important service and 

compliance messages. In January 2011, the 

IRS also unveiled IRS2Go, its first smartphone 

application that lets taxpayers check on the 

status of their tax refund and obtain helpful tax 

information. During the 2011 filing season, 

IRS2Go averaged 4 out of 5 stars in hundreds 

of reviews and had more than 360,000 

downloads. This new application reflects IRS

commitment to modernizing the agency and 

engaging taxpayers where and when they 

want. 

The IRS continues to improve and expand on 

its outreach and educational services through 

partnerships with state taxing authorities, 

volunteer groups, and other organizations. 

Volunteer Income Tax Assistance (VITA) and 

Tax Counseling for the Elderly (TCE) sites 

provided free tax assistance for the elderly, 

disabled, and limited English proficient 

individuals and families. In FY 2011, more 

than $18 million VITA and TCE Grants were 

awarded to 210 organizations, a 23 percent

increase in the number of organizations from 

FY 2010. Assistors at more than 9,000 VITA 

and TCE Grant sites across the nation prepared 

more than one million tax returns.

The IRS conducted “Open House” events, 

both during and after the filing season. At 

these events, taxpayers could get help with 

preparing current and prior year federal and 

state tax returns, resolving account and 

balance due issues, and making Installment 

Agreement arrangements. 

Taxpayers took advantage of:

• Two open house days held during the 

filing season at 96 Taxpayer Assistance 

Center (TAC) locations. More than 

16,300 taxpayers were helped and 

more than 4,300 returns were prepared;

and

• One open house day was held after the 

filing season at 74 TAC locations with 

more than 4,000 taxpayers 

participating.

Through September 30, 2011, 104 redesigned 

and new notices were in production, 

representing 72 percent of the more than 

220 million notices sent each year. The 

February release included collection notices 

(CP50X series) with new language to help 

taxpayers better understand the collection 

process. The revised notices also use plain 

language about available payment options.

Each notice provides a web link to information 

about the notice, including why the taxpayer 

received the notice, answers to common 

questions, and tips to help taxpayers meet their 

tax obligations in future years. For highvolume notices, the IRS also included web 

links to translate the notice into five of the 

most common foreign languages (Spanish, 

Chinese, Korean, Vietnamese, and Russian).

Business System Modernization

IRS modernization efforts focus on building 

and deploying advanced information 

technology systems, processes, and tools to 
improve efficiency and productivity. The 

2012 delivery follows up on a number of 

important accomplishments in FY 2011: 

• Customer Account Data Engine 2 

(CADE 2) logical and physical designs 

were completed on time in December 

2010 and April 2011, respectively. 

The IRS successfully deployed CADE 

2 daily processing January 2012, and is 

in the process of moving to a single 

authoritative database for all individual 

taxpayer records, moving the IRS away 

from its legacy flat-file data storage 

model in the 2012 filing season. 

• Modernized e-File (MeF) Release 6.2 

increased performance in MeF for both 

individual and business returns to 

account for the anticipated increase in 

volume of returns in 2012. It also 

enhanced the disaster recovery 

capabilities that were delivered in a 

previous version. MeF accepted more 

than 18.5 million returns in 2011, a 262 

percent increase compared to the same 

period in 2010. The majority of 

growth was because of an increase in 

Form 1040 tax returns submitted. With 

the changes implemented for the 2012 

filing season, the IRS is anticipating a 

substantial increase in the use of the 

MeF platform for 2012.

• Customer Account Data Engine 

(CADE) Release 6.2 deployed in 

January 2011, with technical 

improvements to the infrastructure and 

availability of the system. CADE also 

facilitated a mid-season restart in 

February to implement Extender 

legislative changes affecting individual 

taxpayers. CADE posted more than 

40 million tax returns and issued more 

than 35.1 million refunds totaling in 

excess of $65.6 billion. CADE also 

posted 4.4 million payments submitted 

with taxpayer returns.