Department of the Treasury – Budget in Brief

Internal Revenue Service

Program Summary by Budget Activity

Dollars in Thousands

FY 2016 FY 2017 FY 2018 FY 2017 TO FY 2018

Budget Activity Enacted1 Annualized 

CR2 Request $ Change % Change 

Taxpayer Services $2,333,376 $2,328,940 $2,212,311 ($116,629) -5.01%

Pre-filing Taxpayer Assistance and Education 620,338 625,829 600,717 (25,112) -4.01%

Filing and Account Services 1,713,038 1,703,111 1,611,594 (91,517) -5.37%

Enforcement $4,714,936 $4,855,688 $4,706,500 ($149,188) -3.07%

Investigations 596,417 624,462 606,747 (17,715) -2.84%

Exam and Collections 3,981,257 4,083,908 3,967,808 (116,100) -2.84%

Regulatory 137,262 147,318 131,945 (15,373) -10.44%

Operations Support $3,896,688 $3,739,565 $3,946,189 $206,624 5.53%

Infrastructure 848,191 861,229 860,643 (586) -0.07%

Shared Services and Support 1,110,811 1,014,139 1,011,411 (2,728) -0.27%

Information Services 1,937,686 1,864,197 2,074,135 209,938 11.26%

Business Systems Modernization $290,000 $289,449 $110,000 ($179,449) -62.00%

Subtotal Internal Revenue Service $11,235,000 $11,213,642 $10,975,000 ($238,642) -2.13%

Reimbursables 104,358 116,286 122,099 5,813 5.00%

Offsetting Collections - Non Reimbursables 19,212 28,134 29,541 1,407 5.00%

User Fees 343,642 503,076 525,650 22,574 4.49%

Recovery from Prior Years 27,751 4,773 

- (4,773) -100.00%

Unobligated Balances from Prior Years 451,869 374,465 268,875 (105,590) -28.20%

Transfers In/Out3 126 

-

 

-

 

- N/A

Total Program Operating Level $12,181,958 $12,240,376 $11,921,165 ($319,211) -2.61%

Direct FTE 77,400 76,838 71,035 (5,803) -7.55%

Reimbursable FTE 640 684 711 27 3.95%

Offsetting Collections - Non Reimbursables 

-

 

-

 

-

 

- N/A

User Fee FTE 524 170 164 (6) -3.53%

Unobligated Balances from Prior Years -

 

-

 

-

 

- N/A

Resources from Other Accounts4 2 

-

 

-

 

- N/A

Total FTE 78,566 77,692 71,910 (5,782) -7.44%

1

FY 2016 Enacted includes $290 million in Section 113 Administrative Provision funding in the following amounts: $176.8 million in 

Taxpayer Services, $4.9 million in Enforcement, and $108.2 million in Operations Support. FY 2016 Enacted includes the approved interappropriation transfer of $150 million from Enforcement to Operations Support. 2

A full-year 2017 appropriation for this account was not enacted at the time the budget was prepared; therefore, the budget assumes this 

account is operating under the Further Continuing Appropriations Act, 2017 (P.L. 114–254). The amounts included reflect the annualized 

level provided by the continuing resolution. FY 2017 Annualized CR also includes $289.5 million in Section 113 Administrative Provision 

funding in the following amounts: $208.9 million in Taxpayer Services and $80.6 million in Operations Support.

3

Resources from Transfers In/Out include a FY 2016 transfers between IRS and the Office of National Drug Control Policy (ONDCP) High 

Intensity Drug Trafficking Area (HIDTA) Program (obligations $7000).

4

Resources from Other Accounts include Other Direct FTE funded by the Federal Highway Administration (2 FTE in FY 2016).
Department of the Treasury – Budget in Brief

Summary

The IRS FY 2018 President’s Budget request 

is $10.975 billion, $239 million or 2.1 percent 

below the FY 2017 Annualized Continuing 

Resolution level. The IRS will continue to 

seek less costly ways of delivering taxpayer 

service and maintaining enforcement using 

technology, training, and internal efficiencies. 

The IRS collects revenue to fund the 

government and administers the nation’s tax 

laws. During FY 2016, the IRS collected more 

than $3.3 trillion in tax revenue, processed 

more than 244 million tax returns and other 

forms, and issued more than $426 billion in 

tax refunds and outlays, equating to 93 percent 

of total federal government receipts. The IRS

vision is to uphold the integrity of the nation’s 

tax system and preserve the public trust. Even 

with the increasing complexity of tax laws, 

changing business models, expanding use of 

electronic data and the related security risks, 

accelerating growth in international tax 

activities, and growing human capital 

challenges, the IRS remains focused on 

serving and helping the taxpayer understand 

and meet their tax responsibility with integrity 

and fairness in order to close the nation’s 

estimated $458 billion tax gap through 

voluntary compliance. 

The IRS remains committed to strengthening 

the public’s confidence by protecting the 

privacy rights of all taxpayers. While many of 

these rights are stated in law, the IRS 

recognizes that compliance with legal 

requirements alone is not enough. 

The Department of the Treasury is in the 

process of developing a new strategic plan for 

FYs 2018 – 2022. The IRS will publish its 

FY 2018 – FY 2022 strategic plan by June of 

2018. The IRS is soliciting extensive input on 

the plan from its employees as well as from 

external stakeholders. The plan will serve as a 

roadmap to guide IRS operations to meet the 

changing needs and expectations of the 

nation’s taxpayers and those in the tax 

community who serve them. 

In FY 2016, the IRS delivered a successful 

filing season and opened on time on 

January 19, 2016. Increased funding in

enabled the IRS to provide a higher level of 

service (LOS) during the filing season. During 

the summer and fall of 2015, the IRS revised

635 tax products, including the tax provisions 

associated with the Protecting Americans from 

Tax Hikes (PATH) Act of 2015, and 

implemented more than 400 changes. During 

the 2016 filing season, the IRS:

• Received more than 29.9 million business 

returns, 3.2 percent more than in 2015;

• Processed more than 17.5 million 

electronically-filed business returns, 

7.6 percent more than in 2015; and

• Issued more than 97 million refunds in 

total, with an average value of $2,711. 

During the FY 2017 filing season, the IRS 

received more than 135 million individual tax 

returns and issued over 97 million refunds 

totaling over $268 billion. Over 90 percent of 

individual returns received were filed 

electronically. Filing season LOS reached 79 

percent, its highest level since 2007.
Department of the Treasury – Budget in Brief

IRS FY 2018 Budget Highlights

Dollars in Thousands

FY 2018 Budget Adjustments

Adjustments to Request

Maintaining Current Level (MCLs)

Pay-Raise +$122,449,000 / +0 FTE

Funds are requested for the proposed January 

2018 pay-raise. 

Pay Annualization +$44,877,000 / +0 FTE

Funds are requested for annualization of the

January 2017 pay-raise.

Non-Pay +$52,709,000 / +0 FTE

Funds are requested for non-labor expenses 

such as travel, contracts, rent, supplies, and 

equipment. 

Resource Adjustments

Base Realignment for Support Services

$0 / 0 FTE

In recent years, the IRS has relied on transfers 

of resources from the Enforcement

appropriations account to maintain core 

functions, information technology, and related 

support services. These transfers have enabled

the IRS to provide front-line employees with 

the tools, equipment, analytics, secure

facilities, and technology support necessary to

serve taxpayers and to maintain taxpayer 

customer service. In lieu of a similar transfer 

in FY 2018, the IRS proposes to permanently 

realign $145 million from Enforcement to 

Operations Support ($55 million) and 

Taxpayer Services ($90 million).

 

Adjustment for Administrative Provision

Section 113 $0 / 0 FTE

Section 113 of the Consolidated 

Appropriations Act, 2016 at the FY 2017 

annualized continuing resolution level 

provides $289.5 million to improve the 

customer service representative LOS rate, 

improve the identification and prevention of 

refund fraud and identity theft, and enhance 

cybersecurity to safeguard taxpayer data. This 

funding is assumed in the FY 2018 base and 

includes $208.9 million in Taxpayer Services 

(an increase of $32.1 million over FY 2016) 

Amount FTE Amount FTE Amount FTE Amount FTE Amount FTE

FY 2017 Annualized CR $2,328,940 28,455 $4,855,688 36,349 $3,739,565 11,441 $289,449 593 $11,213,642 76,838

Changes to Base:

Maintaining Current Levels (MCLs) $46,342 - $96,845 - $75,423 - $1,425 - $220,035 -

Pay Raise 31,005 - 65,828 - 24,573 - 1,043 - 122,449 -

Pay Annualization 11,363 - 24,126 - 9,006 - 382 - 44,877 -

Non-Pay Inflation Adjustment 3,974 - 6,891 - 41,844 - - - 52,709 -

Resource Adjustments $122,378 - ($149,936) - $27,558 - - - - -

Base Realignment for Support Services 90,000 - (145,000) - 55,000 - - - - -

Adjustments for Administrative Provision 

Section 113 32,378 - (4,936) - (27,442) - - - - -

Subtotal Changes to Base $168,720 - ($53,091) - $102,981 - $1,425 - $220,035 -

Total FY 2018 Base $2,497,660 28,455 $4,802,597 36,349 $3,842,546 11,441 $290,874 593 $11,433,677 76,838

Program Changes:

Program Increase:

Realignment to Support Aging IT 

Infrastructure - - - - 179,449 266 - - 179,449 266

Program Decreases:

Actions to Achieve Workforce 

Management Goals (285,349) (4,063) (96,097) (1,300) (75,806) (342) (1,425) (9) (458,677) (5,714)

Realignment to Support Aging IT 

Infrastructure - - - - - - (179,449) (355) (179,449) (355)

Subtotal Program Changes ($285,349) (4,063) ($96,097) (1,300) $103,643 (76) ($180,874) (364) ($458,677) (5,803)

Total FY 2018 Request $2,212,311 24,392 $4,706,500 35,049 $3,946,189 11,365 $110,000 229 $10,975,000 71,035

Taxpayer Services Enforcement Operations Support Business Systems 

Modernization Total

Internal Revenue Service 
Department of the Treasury – Budget in Brief

and $80.6 million in Operations Support (a 

decrease of $27.6 million) for customer 

service. 

Program Changes

Program Increases +$179,449,000 / +266 

FTE

The IRS will make progress towards 

decreasing the backlog of deferred software 

and hardware updates by realigning $179 

million and 266 FTE from the BSM 

appropriation to the Operations Support 

appropriation in FY 2018. 63 percent of IRS 

IT hardware systems are aged and out of 

warranty and 32 percent of software products 

are two or more releases behind the industry 

standard, with 15 percent more than four 

releases behind. Every year, another 

20 percent of hardware moves to a status of 

aged beyond the manufacturers recommended 

useful life, if not replaced. This aging 

infrastructure puts the American tax system at 

risk of failure. Such conditions introduce 

security risks, excessive system downtime, 

systems and hardware no longer supported by 

the vendor, and incompatibilities across 

systems and programs. 

Program Decreases 

Realignment to Support Aging IT 

Infrastructure -$179,449,000 / -355 FTE

An estimated $179 million will be realigned to 

the Operations Support appropriation to 

decrease the backlog of deferred software and 

hardware updates, which are a critical priority 

and must be prioritized before development 

and modernization of new systems. With the 

FY 2018 request, the IRS will pause the 

development of Enterprise Case Selection, 

Event Driven Architecture, and Modernized 

eFile. The IRS will continue development of 

Customer Account Data Engine 2, Return 

Review Program and Web Applications, 

supported by Architecture Integration and 

Management, Core Infrastructure. In addition, 

IRS will continue to explore alternative 

Enterprise Case Management solutions.

Actions to Achieve Workforce Management 

Goals -$458,677,000 / -5,714 FTE

The IRS will realize reductions in Taxpayer 

Services, Enforcement, Operations Support,

and Business Systems Modernization (BSM) 

by reducing costs and streamlining operations. 

The IRS will mitigate the effect of this 

reduction by allocating funding from user fees 

to critical performance areas. The IRS will 

reduce staffing, supply, and contractual cost in 

all four accounts by an estimated $220 million. 

Additionally, Taxpayer Services seasonal 

staffing costs will be reduced by an estimated 

by $239 million. The IRS will continue to 

provide service to taxpayers via a range of 

channels from the internet to telephones to 

face-to-face field assistance. The use and 

delivery of more online tools and other 

improved service channels, such as virtual tax 

assistance sites, will help the IRS operate in a 

cost effective manner.

Explanation of Budget Activities

Taxpayer Services

The FY 2018 President’s Budget request is 

$2,212,311,000 in direct appropriations, an 

estimated $38,497,000 from reimbursable 

programs, an estimated $67,600,000 from user 

fees, and an estimated $15,000,000 from 

unobligated balances from prior years for a 

total operating level of $2,333,408,000. This 

appropriation funds the following budget 

activities:

Pre-filing Taxpayer Assistance & 

Education ($600,717,000 from direct 

appropriations, an estimated $15,000 from 

reimbursable resources)

This budget activity funds services to assist 

taxpayers with understanding and meeting 

their tax obligations, including tax law 

interpretation, publication, production, and 

advocate services. 

Filing & Account Services ($1,611,594,000 

from direct appropriations, an estimated 

$38,482,000 from reimbursable resources, 
Department of the Treasury – Budget in Brief

and an estimated $67,600,000 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.

Enforcement

The FY 2018 President’s Budget request is 

$4,706,500,000 in direct appropriations, an 

estimated $43,717,000 from reimbursable 

programs, an estimated $29,541,000 from 

offsetting collections – non-reimbursables, an 

estimated $16,150,000 from user fees, and an 

estimated $18,321,000 from unobligated 

balances from prior years for a total operating 

level of $4,814,229,000. This appropriation 

funds the following budget activities: 

Investigations ($606,747,000 from direct 

appropriations and an estimated 

$42,993,000 from reimbursable resources)

This budget activity funds the Criminal 

Investigation (CI) programs that explore 

potential criminal and civil violations of tax 

laws, enforce criminal statutes relating to 

violations of tax laws and other financial 

crimes, and recommend prosecution when

warranted. These programs identify and 

document the movement of legal and illegal 

sources of income and instances of suspected 

intent to defraud. This budget activity also 

provides resources for international 

investigations involving U.S. citizens residing 

abroad, non-resident aliens, and expatriates, 

and includes investigation and prosecution of 

tax and money laundering violations 

associated with narcotics organizations. 

Exam & Collections ($3,967,808,000 from 

direct appropriations and an estimated 

$502,000 from reimbursable resources)

This budget activity funds programs that 

enforce the tax laws, increase compliance 

through examination and collection, and 

ensure proper payment and tax reporting. It 

also includes campus support of the 

Questionable Refund program and appeals and 

litigation activities associated with exam and 

collection. 

Regulatory ($131,945,000 from direct 

appropriations, an estimated $222,000 from 

reimbursable resources, and an estimated 

$16,150,000 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 

pre-filing agreements, determination letters, 

and advance pricing agreements. The Return 

Preparer Program is funded within this 

activity, as is the Office of Professional 

Responsibility, which identifies, 

communicates, and enforces Treasury 

Circular 230 standards of competence, 

integrity, and conduct of professionals 

representing taxpayers before the IRS. 

Operations Support

The FY 2018 President’s Budget request is 

$3,946,189,000 in direct appropriations, an 

estimated $39,885,000 from reimbursable 

programs, an estimated $441,900,000 from 

user fees, and an estimated $49,970,000 from 

unobligated balances from prior years for a 

total operating level of $4,477,944,000. This 

appropriation funds the following budget 

activities: 

Infrastructure ($860,643,000 from direct 

appropriations and an estimated $690,000 

from reimbursable resources)

This budget activity funds administrative 

services related to space and housing, rent and 
Department of the Treasury – Budget in Brief

space alterations, building services, 

maintenance, guard services, and non-IT 

equipment.

Shared Services & Support ($1,011,411,000 

from direct appropriations, an estimated 

$17,520,000 from reimbursable resources, 

and an estimated $11,900,000 from user 

fees)

This budget activity funds policy management, 

IRS-wide support for research, strategic 

planning, communications and liaison, 

protection of sensitive information and the 

privacy of taxpayers and employees, finance, 

human resources, and equity, diversity, and 

inclusion programs. It also funds printing and 

postage, business systems planning, physical 

security, corporate training, legal services, 

procurement, and employee benefits programs.

Information Services ($2,074,135,000 from 

direct appropriations, an estimated 

$21,675,000 from reimbursable resources, 

and an estimated $430,000,000 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. 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 mainframes, servers, 

personal computers, networks, and a variety of 

management information systems.

Business Systems Modernization 

The FY 2018 President’s Budget request is 

$110,000,000 in direct appropriations and an 

estimated $185,584,000 from unobligated 

balances from prior years for a total operating 

level of $295,584,000. This appropriation 

funds the following budget activity:

Business Systems Modernization 

($110,000,000 in direct appropriations)

This budget activity funds the planning and 

capital asset acquisition of IT to modernize 

IRS business systems, including labor and 

related contractual costs. It funds investments 

in systems that enhance the IRS’s capability to 

detect, resolve, and prevent tax refund fraud 

and protect U.S. Treasury revenue, simplify 

the taxpayer’s online experience, provide 

secure digital communications, and add more 

interactive capabilities to existing web 

self-service products. 

Legislative Proposals

The IRS requests Streamlined Critical Pay 

(SCP) authority through September 30, 2021. 

This authority allowed the IRS to recruit and 

retain IT and other senior professionals and 

limited this authority to 40 positions. The 

authority to make new SCP appointments 

expired September 30, 2013. Currently there 

are seven senior employees under SCP 

appointments, down from a high of 30. If the 

SCP is not renewed, the IRS will face 

additional challenges recruiting and retaining 

top level talent as the remaining SCP term 

appointments expire, especially IT 

professionals who can help protect taxpayer 

data from cyberattacks and who can assist with 

modernizing the IRS's IT infrastructure. 

According to Treasury Inspector General for 

Tax Administration report 2015 IE-R001, The 

Internal Revenue Service’s Use of Its 

Streamlined Critical Pay Authority, “private 

sector expertise had been crucial to 

introducing new leadership to supplement in 

house expertise, and the IRS had taken 

advantage of the private sector expertise by 

retaining the critical pay appointees whenever 

feasible.”
Department of the Treasury – Budget in Brief

IRS Performance Highlights 

Budget Activity Performance Measure FY 2014 FY 2015 FY 2016 FY 2016 FY 2017 FY 2018

Actual Actual Actual Target Target Target

Filing and 

Account Services

Customer Accuracy -

Accounts (Phones) 96.2 95.5 96.1 94.0 95.0 95.0

Filing and 

Account Services

Customer Service 

Representative (CSR) 

Level of Service (%) 

64.4 38.1 53.4 47.0 64.0 39.0

Filing and 

Account Services

Percent of Individual 

Returns Processed 

Electronically (%) 

84.1 85.3 86.4 86.0 87.0 88.0

Exam and 

Collections

Automated Collection 

System

(ACS) Accuracy (%) 

95.2 95.3 95.4 95.0 95.0 95.0

Exam and 

Collections

Automated Underreporter 

(AUR)

Coverage (%) 

2.6 2.3 2.3 2.2 2.0 2.0

Exam and 

Collections

Examination Efficiency -

Individual (Form 1040) 138 148 143 122 118 126

Description of Performance

In FY 2016, the IRS continued to provide 

quality service to taxpayers and enforce the 

law with integrity and fairness but was unable 

to maintain some performance levels due to 

resource constraints. Nevertheless, the IRS 

continued to deliver in key areas, including 

international, tax exempt, refund fraud, and 

identity theft. 

Taxpayer Services

Providing high quality service and helping 

taxpayers understand and meet their tax 

obligations remain priorities for the IRS. 

During FY 2016, the IRS collected more than 

$3.3 trillion in tax revenue, processed more 

than 244 million tax returns and other forms, 

and issued more than $426 billion in tax 

refunds. Other highlights include:

• Achieved an 86.4 percent individual e-file 

rate and a 50 percent business e-file rate;

• Delivered a telephone LOS of 53.4

percent; 

• Answered more than 13.1 million calls, 

5.3 million more calls than in 2015; and

• Correctly answered 96.1 percent of 

account questions over the telephone.

The IRS continues to improve and expand its 

outreach and educational services through 

partnerships with state taxing authorities, 

volunteer groups, and other organizations. 

Volunteer Income Tax Assistance (VITA) and 

Tax Counseling for the Elderly (TCE) sites 

provided free tax assistance for the elderly, 

disabled, and limited English proficient 

individuals and families. 

The IRS made steady progress on a number of 

efforts that will deliver service efficiently and 

effectively, such as:

• Launching Finding Out How Much You 

Owe on IRS.gov, which provides taxpayers 

with straightforward balance inquiries in a 

secure, easy, and convenient way. In 

nearly four weeks after launch in late 2016, 
Department of the Treasury – Budget in Brief

taxpayers checked their account balance 

nearly 54,000 times, and made more than 

6,700 tax payments, for more than 

$21 million, through Direct Pay; and

• Releasing the 100th eBook for mobile 

devices in the ePub format.

Enforcement

In FY 2016, the IRS collected more than 

$54.3 billion, for a total ROI of $5 to $1. The 

ROI estimate does not include the revenue 

effect of the indirect deterrence value of these 

investments and other IRS enforcement 

programs, which is conservatively estimated to 

be at least three times the direct revenue effect.

The IRS CI program investigates potential 

criminal violations of the Internal Revenue 

Code and related financial crimes, such as 

money laundering, currency violations, 

tax-related identity theft fraud, and terrorist 

financing that adversely affect tax 

administration. 

In FY 2016, results for criminal investigation 

completions are 2.1 percent below the 

year-end target and reflect a 17.1 percent 

decrease compared to FY 2015. Overall 

performance in FY 2016 was affected by a 

significant decrease in the number of Special 

Agents in recent years and a focus on more 

complex tax cases, which take longer to 

complete, and a working inventory still in the 

judicial process. CI obtained

2,672 convictions. 

During the past year, the IRS maintained its 

international enforcement presence, continued 

actions to leverage the tax return preparer 

community, and continued prioritizing refund 

fraud prevention. The IRS stopped $4 billion 

in fraudulent refunds claimed by identity 

thieves on 787,000 tax returns through new 

screening criteria. In addition, the IRS worked 

with its Security Summit partners from state 

tax agencies and the broader tax community to 

add extra layers of security protection for the 

filing season.

Business Systems Modernization

IRS modernization efforts continued in 

FY 2016. Protecting IRS systems and 

taxpayer data is essential for maintaining 

high-quality taxpayer service programs. In 

FY 2016, the IRS: 

• Deployed several CADE 2 Transition State 

2 projects for filing season 2016, which 

allowed a more effective way to record and 

retain taxpayer history, corrected 

automated failure to pay calculations for 

the adjusted refundable credits, and 

aggregated and provided taxpayer data to 

downstream systems across the IRS; and

• Deployed maintenance and enhancements 

for the Return Review Program in 

preparation for the 2016 filing season, 

which allowed for receipt of Forms W-2, 

Wage and Tax Statement, directly from 

reporting agents and other Form W-2 

issuers earlier in the filing season to verify 

income and reduce fraud and anomalies. 

Receiving the Form W-2 information 

earlier allowed the IRS to release good 

returns sooner in the fraud detection 

process, which reduced taxpayer burden.