Internal Revenue Service

FY 2014 

President’s Budget
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Table of Contents

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

1A - Mission Statement.....................................................................................................1

1.1 – Appropriation Detail Table by Appropriation and Budget Activity ..................1

1B – Vision, Priorities and Context.................................................................................2

Section 2 – Budget Adjustments – Internal Revenue Service ................. 134

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

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

Non-Recur CR Increase .................................................................................................15

Maintaining Current Levels (MCLs)............................................................................15

IRS Overarching Strategy to Identify Operational Efficiencies and Savings...........15

Efficiencies and Savings .................................................................................................17

Increase e-File Savings.............................................................................................17

Business Systems Modernization (BSM) Savings .....................................................18

Reduce Information Technology (IT) Infrastructure ................................................22

Implement Human Capital Administrative Efficiencies............................................23

Targeted Personnel Savings .....................................................................................23

Savings from Space Optimization .............................................................................23

Reinvestment ...................................................................................................................24

Implement Space Optimization to Achieve Savings..................................................24

Program Increases..........................................................................................................25

Improve Taxpayer Service and Meet Increased Demand .........................................25

Implement Foreign Account Tax Compliance Act (FATCA)....................................28

Address International and Offshore Compliance Issues ..........................................31

Implement Merchant Card and Basis Matching.......................................................34

Address Impact of Affordable Care Act (ACA) Statutory Requirements..................37

Improve Identification and Prevention of Refund Fraud and Identity Theft ............40

Increase Audit Coverage to Address Tax Compliance Issues ..................................46

Increase Collection Coverage...................................................................................51

Expand Coverage of High-Wealth Individuals and Enterprises...............................55

Improve Coverage of Partnerships and Flow-Through Entities..............................57

Build Out Tax Return Preparer Compliance Activities............................................61

Leverage Data to Improve Case Selection................................................................63

Leverage Digital Evidence for Criminal Investigation (CI).....................................65

Implement IT Changes to Deliver Tax Credits and Other Requirements.................66

Develop New Online Services...................................................................................68

Develop Converged Telecommunication Networks..................................................70

Expand Virtual Services Delivery (VSD)..................................................................71

Transfer to TTB for High-Return on Investment (ROI) Tax Enforcement Activities73

2.2 – Operating Levels Table .........................................................................................74

2B – Appropriation Language and Explanation of Changes......................................75

2C – Legislative Proposals..............................................................................................79
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Section 3 – Budget and Performance Plan .................................................. 82

Taxpayer Services...........................................................................................................82

2.1 – Budget Adjustments Table...................................................................................83

2.2 – Operating Levels Table........................................................................................84

2.3 – Appropriation Detail Table ..................................................................................85

3A – Pre-Filing Taxpayer Assistance and Education ...................................................85

3.1.1 – Budget and Performance Report and Plan ........................................................86

3B – Filing and Account Services ................................................................................87

3.1.2 – Budget and Performance Report and Plan ........................................................89

Enforcement ....................................................................................................................91

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

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

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

3C – Investigations .......................................................................................................94

3.1.3 – Budget and Performance Report and Plan ........................................................95

3D – Exam and Collections ..........................................................................................96

3.1.4 – Budget and Performance Report and Plan ........................................................99

3E – Regulatory ..........................................................................................................103

3.1.5 – Budget and Performance Report and Plan ......................................................104

Operations Support ......................................................................................................105

2.1 – Budget Adjustments Table.................................................................................106

2.2 – Operating Levels Table......................................................................................107

2.3 – Appropriation Detail Table ................................................................................108

3F – Infrastructure.......................................................................................................108

3.1.6 – Budget and Performance Report and Plan ......................................................109

3G – Shared Services and Support..............................................................................110

3.1.7 – Budget and Performance Report and Plan ......................................................112

3H – Information Services..........................................................................................115

3.1.8 – Budget and Performance Report and Plan ......................................................118

Business Systems Modernization.................................................................................121

2.1 – Budget Adjustments Table.................................................................................121

2.2 – Operating Levels Table......................................................................................122

2.3 – Appropriation Detail Table ................................................................................123

3I – Business Systems Modernization ........................................................................123

3.1.9 – Budget and Performance Report and Plan......................................................125

Section 4 – Supplemental Information ...................................................... 127

4.1 – Summary of Capital Investments.......................................................................127

4.2 – Summary of Cost and Schedule Performance for Major Information 

Technology Systems......................................................................................................129

4A – Capital Investment Strategy ...............................................................................130

4B – IRS Aging Legacy Information Technology (IT) Infrastructure (non-BSM) 

Proposed Long-term Multiyear Funding Strategy and Timetable ..........................156

4C – Summary of FY 2012 Savings Realized .............................................................158

4.3 – IRS Performance Measure Table .......................................................................161

4.4 – IRS Evaluation Program.....................................................................................163
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4.5 – Cost of IRS Operating Activities........................................................................165

4.6 – Return on Investment (ROI) for IRS Major Enforcement Programs............166

4.7 – Alignment of the FY 2014 Initiatives to the IRS Strategic Goals....................168

4.8 – Summary of IRS FY 2010 – FY 2012 Affordable Care Act (ACA) Funding .169

4.9 – Summary of IRS FY 2014 Implementation of Affordable Care Act (ACA) ..169

4.10 – Summary of Program Integrity Cap Adjustment...........................................170

4.11 – Summary of IRS FY 2014 Budget Request .....................................................171
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Internal Revenue Service

Section 1 – Purpose

1A - 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.

1.1 – Appropriation Detail Table by Appropriation and Budget Activity

Dollars in thousands

Internal Revenue Service

Resources

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT New Appropriated Resources:

Taxpayer Services 30,290 $2,239,703 30,402 $2,253,510 32,575 $2,412,576 2,285 $172,873 7.54% 7.72%

Pre-Filing Taxpayer Assistance and Education 5,925 625,189 5,656 632,514 5,808 660,197 (117) 35,008 -1.97% 5.60%

Filing and Account Services 24,365 1,614,514 24,746 1,620,996 26,767 1,752,379 2,402 137,865 9.86% 8.54%

Enforcement 48,297 $5,299,367 46,702 $5,331,000 49,987 $5,666,787 1,690 $367,420 3.50% 6.93%

Investigations 4,354 636,386 3,791 611,233 4,048 661,631 (306) 25,245 -7.03% 3.97%

Exam and Collections 42,791 4,504,885 41,725 4,565,257 44,706 4,842,007 1,915 337,122 4.48% 7.48%

Regulatory 1,152 158,096 1,186 154,510 1,233 163,149 81 5,053 7.03% 3.20%

Operations Support 12,454 $3,947,416 12,240 $3,971,000 13,143 $4,480,843 689 $533,427 5.53% 13.51%

Infrastructure 929,634 916,269 939,182 9,548 1.03%

Shared Services and Support 5,879 1,214,514 5,774 1,239,929 5,759 1,305,701 (120) 91,187 -2.04% 7.51%

Information Services 6,575 1,803,268 6,466 1,814,802 7,384 2,235,960 809 432,692 12.30% 23.99%

Business Systems Modernization 605 $330,210 513 $332,231 513 $300,827 (92) ($29,383) -15.21% -8.90%

Subtotal New Appropriated Resources 91,646 $11,816,696 89,857 $11,887,741 96,218 $12,861,033 4,572 $1,044,337 4.99% 8.84%

Other Resources: Reimbursables 723 122,451 712 109,193 712 110,627 (11) (11,824) -1.52% -9.66%

User Fees 760 326,251 965 511,425 360 277,582 (400) (48,669) -52.63% -14.92%

Recovery from Prior Years 3,235 439 (3,235) -100.00%

Unobligated Balances from Prior Years 243,266 283,892 113,765 (129,501) -53.23%

Transfers In/Out2 193 (5,000) (5,193) Resources from Other Accounts2 668 21 21 (647) -96.86%

Subtotal Other Resources 2,151 $695,396 1,698 $904,949 1,093 $496,974 (1,058) ($198,422) -49.19% -28.53%

Total Budgetary Resources 93,797 $12,512,092 91,555 $12,792,690 97,311 $13,358,007 3,514 $845,915 3.75% 6.76%

1 FY 2012 Enacted represents the approved FY 2012 Operating Plan.

$ Change

FY 2012

to FY 2014

Annualized Enacted1 CR Rate Request to FY 2014

3

 Resources from Other Accounts include Other Direct FTE funded from the Department of Health and Human Services (664 FTE for FY 2012), the Federal Highway Administration (4 FTE in FY 2012 and 5 FTE

projected for FY 2013 and FY 2014), and Therapeutic Discovery Program Grants and Administration (16 FTE projected in FY 2013 and FY 2014).

2 Resources from Transfers In/Out include a FY 2012 transfer in from the Office of National Drug Control Policy (ONDCP) High Intensity Drug Trafficking Area (HIDTA) Program ($193K) and a FY 2014 transfer out to the 

Alcohol and Tobacco Tax and Trade Bureau (TTB) ($5M).

FY 2013 % Change

FY 2012 FY 2014 FY 2012
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IRS Strategic Goals

Improve Service to Make Voluntary Compliance Easier

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

1B – Vision, Priorities and Context

The Internal Revenue Service (IRS) Strategic Plan guides program and budget decisions and 

supports the Department of the Treasury Strategic Plan and Agency Priority Goals, including 

Increase Voluntary Tax Compliance. The current 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 current IRS Strategic Plan goals and objectives are:

The strategic objectives to meet the goal to improve service and make voluntary compliance 

easier are:

 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.

The strategic objectives to meet the goal to ensure everyone meets their obligations to pay 

taxes are:

 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 address 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.
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To achieve the service and enforcement goals, the IRS has a strategic foundation supporting 

the objectives to:

 Build and deploy advanced information technology systems, processes, and tools that 

further improve IRS efficiency and productivity;

 Ensure the privacy and security of data and the safety and security of employees;

 Use data and research across the organization to make more informed decisions and 

appropriately allocate resources; and

 Make the IRS the best place to work in Government. 

Treasury Strategic and Priority Goals

The IRS President’s Budget Request also supports the following Department of the Treasury 

Strategic and Agency Priority Goals. 

Strategic Goal: Pursue Comprehensive Tax and Fiscal Reform

Agency Priority Goal: Increase Voluntary Tax Compliance

 Make progress against the tax gap through improved service and enhanced 

enforcement of the tax laws:

o Achieve 4.3 million document matching closures in FY 2014. Where the IRS 

information does not match taxpayer-reported information, the IRS will 

contact the taxpayer to resolve the discrepancy. A document matching closure 

occurs when the discrepancy is resolved; and

o Achieve 50 percent daily processing for individual refund returns in FY 2014, 

which will provide faster refunds for millions of individual taxpayers.

 Assist Americans in voluntarily meeting their tax obligations:

o Achieve individual income tax filers’ American Customer Satisfaction Index 

score of 72 percent in FY 2014; and

o Deliver a telephone Level of Service (LOS) of 79 percent in FY 2014. LOS is 

a measure of services provided to taxpayers who call the IRS for live customer 

service representative assistance. 

Strategic Goal: Manage the Government’s Finances in a Fiscally Responsible Manner

Agency Priority Goal: Increase the Number of Electronic Transactions with the 

Public to Improve Service, Prevent Fraud, and Reduce Costs

 Achieve individual e-File rate of 81 percent in FY 2014.
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FY 2014 Priorities

The IRS collects the revenue that funds the Government and administers the nation’s tax laws. 

During FY 2012, the IRS processed 239 million tax returns and collected $2.524 trillion in 

taxes (gross receipts before tax refunds), 92 percent of Federal Government receipts. Through 

both taxpayer service and enforcement programs that protect the flow of revenue to the 

Government, the IRS remains committed to making the tax law easier to access and 

understand and to improving voluntary compliance and reducing the tax gap, the difference 

between taxes owed and taxes paid on time. The taxpayer service agenda supports and 

protects the trillions of dollars in revenue that come into the Treasury each year voluntarily 

from taxpayers by helping taxpayers understand their obligations under the tax law. The 

enforcement agenda vigorously pursues those who evade their responsibility to pay the taxes 

they owe. The IRS collected $50.2 billion in revenue in FY 2012. 

In the FY 2014 request, the IRS seeks funding for:

 Taxpayer Service to improve customer telephone level of service to meet taxpayer 

demand and assist taxpayers in understanding Affordable Care Act (ACA) issues; 

 Enforcement to implement enacted legislation; address offshore tax evasion; protect 

revenue by identifying fraud and preventing the issuance of questionable refunds,

including identity theft; enforce return preparer compliance; and partially restore

appropriate and balanced audit coverage rates across taxpayers with expanding 

coverage of high-wealth individuals and enterprises and partnership entities;

 Infrastructure to continue investments to implement the Affordable Care Act (ACA)

funded by the Department of Health and Human Services in FY 2012, develop new 

online capabilities, expand virtual taxpayer service delivery, and leverage 

telecommunication technology to reduce costs and enhance employee 

collaboration; and

 Business Systems Modernization to build on the momentum of implementing new 

daily processing during the calendar year 2012 filing season and the delivery of a new 

database for individual account data by continuing to progress toward Transition 

State 2 for CADE 2.
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FY 2014 Budget Request

The IRS FY 2014 President’s Budget request is $12,861 million, $1,044.3 million, 8.8 percent 

more than the FY 2012 Enacted Budget of $11,816.7 million. 

The $1,044.3 million increase consists of:

 -$162.7 million net decrease to the base:

o -$71 million to non-recur the CR Increase;

o +$125.6 million to fund the pay raise and non-pay inflation adjustment;

o -$254.8 million for efficiency savings; and

o +$37.5 million for a reinvestment needed to achieve the space optimization 

savings.

 +$1,136 million for program changes:

o +$177 million to improve customer level of service to meet taxpayer demand 

and assist taxpayers in understanding ACA tax issues; 

o +$605.3 million to implement enacted legislation, protect revenue by 

identifying fraud and preventing issuance of questionable refunds including 

tax-related identity theft, increase compliance by addressing offshore tax 

evasion, make use of new information reporting requirements to reduce 

underreporting, strengthen examination and collection programs, expand 

enforcement efforts on noncompliance among corporate and high-wealth 

taxpayers, and strengthen return preparer compliance;

o +$348.7 million to implement IT changes to deliver tax credits and other 

requirements, meet ongoing demand for online and self-assistance services, 

and leverage telecommunications technology; and

o +$5 million to transfer to the Alcohol and Tobacco Tax and Trade Bureau

(TTB) for high return on investment (ROI) tax enforcement program integrity 

activities. 

Reducing the Tax Gap

Investments in IRS enforcement programs have yielded significant increases in enforcement 

revenue. Enforcement revenue was $50.2 billion in FY 2012 for a total IRS-wide ROI of 

$4.2 to $1. The ROI estimate 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.
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In FY 2012, the IRS released updated estimates of the difference between taxes owed and 

taxes paid on a timely basis – the “tax gap.” The IRS estimated that taxpayers underpaid by 

$385 billion in 2006, net of late payments and IRS enforcement activities (see Tax Gap Map 

for Tax Year 2006 shown below). The voluntary compliance rate—the percentage of total tax 

revenue paid on time—for tax year 2006 was 83.1 percent. This rate is statistically 

unchanged from tax year 2001. The three components of the tax gap are:

 Underreporting – Not reporting the 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-filed 

return.

Tax Gap “Map”

Tax Year 2006 ($ billions)

Actual Amounts 

Updated Estimates

No Estimates Available

Categories of Estimates

Nonfiling

$28

Individual

Income Tax

$25

Corporation

Income Tax

#

Employment

Tax

#

Excise

Tax

#

Estate

Tax

$3

Underpayment

$46

Individual

Income Tax

$36

Corporation

Income Tax

$4

Employment

Tax

$4

Estate

Tax

$2

Excise

Tax

$0.1

FICA

Tax on Wages

$14

Unemployment

Tax

$1 

Individual

Income Tax

$235

Non-Business

Income

$30.6

Business

Income

$65.3 

Corporation

Income Tax

$67

Estate

Tax

$2

Excise

Tax

#

Business

Income

$122

Large 

Corporations 

(assets > $10m)

$48

Self-Employment

Tax

$57

Non-Business

Income

$68

Small 

Corporations

(assets < $10m)

$19

Credits

$28

Adjustments,

Deductions,

Exemptions

$17

Underreporting

$376

Employment

Tax

$72

Tax Paid Voluntarily & Timely: $2,210 Total Tax

Liability

$2,660

Enforced & Other

Late Payments of Tax

$65 

Net Tax Gap: $385

(Tax Never Collected)

(Net Compliance Rate = 85.5%)

Gross Tax Gap: $450

(Voluntary Compliance Rate = 83.1%)

#
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Underreporting tax liability ($376 billion) comprises 

84 percent of the gross tax gap ($450 billion). 

The remainder is almost evenly divided between 

nonfiling ($28 billion, 6 percent) and underpaying 

($46 billion, 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.

Taxpayer Service and Enforcement Programs

Complement Each Other

The IRS serves individuals, businesses, and tax-exempt entities. It processed 239 million tax 

returns in 2012. The system of voluntary tax compliance is most effective when the IRS is 

able to provide excellent taxpayer service for those who are trying to meet their obligations 

under the law and provide a robust and fair enforcement program for those who dodge 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.

Taxpayer Service

By assisting taxpayers with their tax questions before they file their returns, the IRS helps 

prevent 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, IRS.gov, 

Taxpayer Assistance Centers (TAC), Volunteer Income Tax Assistance (VITA) sites, and Tax 

Counseling for the Elderly (TCE) sites. 

The IRS delivered a successful filing season by: 

 Initiating and revising more than 700 tax products;

 Receiving more than 147.6 million individual returns and issuing more than 

121.6 million refunds totaling $333 billion;

 Responding accurately to 93.2 percent of tax law questions and 95.6 percent of 

account questions; 

 Processing more than 3.1 million free file returns; 

 Direct-depositing more than 82.8 million refunds compared to 78.9 million in 2011, an 

increase of 4.9 percent; and

 Receiving 80.5 percent of individual returns electronically, an increase of 4.7 percent.

Underreporting

 84%

Underpayment

 10%

 Nonfiling

 6%
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The IRS received more than 118.9 million individual tax returns electronically. Filing season 

electronic results increased compared to 2011. This included:

 Business returns electronically filed up 15 percent to 36.7 percent;

 Home-computer filing up 9.8 percent to 43.5 million tax returns; and

 Tax professional use of e-File up 5.4 percent, to 75.6 million returns.

The IRS continued to provide alternative service options by increasing the amount of tax 

information and services available to taxpayers through IRS.gov. Taxpayers viewed IRS.gov 

web pages more than 1.7 billion times as they used the website to:

 Get forms and publications. More than 347 million tax products were downloaded, 

an increase of 51 percent from FY 2011.

 Link to the Electronic Federal Tax Payment System (EFTPS). EFTPS processed 

more than 132.4 million electronic tax payments totaling $2.1 trillion.

 Get answers. Taxpayers made more than 1.1 million visits to the Interactive Tax 

Assistant introduction page where taxpayers can receive answers to tax law questions.

 Check on their refunds. Taxpayers used Where’s My Refund? more than 

132.3 million times to check on the status of their tax refunds.

The IRS is increasing communications with taxpayers who do 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 reaches these taxpayers and 

provides important service and compliance messages. In FY 2012, the IRS videos on the 

YouTube channel reached a milestone by topping 3.6 million total taxpayer views, making it 

the Federal Government’s fourth most-viewed YouTube channel.

Other notable accomplishments in FY 2012 include:

 Releasing an updated version of the IRS2GO Smartphone application with new 

features that let taxpayers interact with the IRS using their mobile device and resulted 

in more than 6.2 million applications launched;

 Posting a “When Will I Get My Refund?” video on YouTube, attracting 

approximately 713,000 views; and

 Administering a Facebook page directed at educating and informing return preparers, 

which currently has approximately 16,000 regular followers.

The IRS enhanced its outreach and educational services by collaborating with State taxing 

authorities, volunteer groups, and other organizations to address taxpayer needs. By 

supporting more than 3,900 local partners and a combined 13,143 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. 
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In FY 2012, nearly 99,000 volunteers prepared almost 3.3 million Federal returns and more 

than 2.5 million State returns, which represent increases over FY 2011 of 2.4 percent and 

5.9 percent, respectively. In addition, 95 percent of the Federal returns were filed 

electronically.

Enforcement

Return on Investment for FY 2014 Enforcement Initiatives

FY 2014 Revenue-Producing Initiatives

Vigorous enforcement efforts encourage voluntary compliance for those taxpayers who seek 

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

for traditional revenue-producing compliance programs yield direct, measurable results 

through high ROI enforcement activities such as examination and collection. 

The FY 2014 President’s Budget includes $129.9 million to implement enacted legislation

and $101.1 million to protect revenue, and $412 million for IRS initiatives funded through a 

program integrity cap adjustment that will reduce the deficit through above-base funding for 

high ROI tax enforcement and compliance programs, of which $5 million will be transferred

to TTB. The $407 million in IRS program integrity cap adjustment funding includes 

$322.6 million for traditional enforcement initiatives, $41.4 million for a revenue-enhancing 

enforcement initiative (excludes the $10.3 Taxpayer Services portion), and $43.1 million for 

other compliance program initiatives in the Operations Support account (see Section 4.10, 

Summary of Program Integrity Cap Adjustment). 

The FY 2014 traditional revenue-producing initiatives, not included in the program integrity 

cap adjustment, will generate $562.2 million in additional annual enforcement revenue by

implementing enacted legislation, achieving a return on investment (ROI) of $4.8 to $1.

Return on Investment for IRS FY 2014 Enforcement Initiatives to Implement Enacted Legislation

Dollars in Millions

Cost Revenue ROI Cost Revenue ROI

Revenue-Producing Enforcement Initiatives to Implement Enacted Legislation $129.9 $238.3 1.8 $117.9 $562.2 4.8

Implement Foreign Account Tax Compliance Act (FATCA) 35.2 49.6 1.4 31.5 115.4 3.7

Implement Merchant Card and Basis Matching 50.3 152.4 3.0 42.5 362.9 8.5

Address Impact of Affordable Care Act (ACA) Statutory Requirements 44.4 36.3 0.8 43.9 83.9 1.9

First Year (FY 2014) Full Performance (FY 2016)
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The $323 million requested for the IRS FY 2014 traditional enforcement initiatives funded 

through the program integrity cap adjustment will generate more than $1.6 billion in 

additional annual enforcement revenue, achieving a FY 2016 ROI of $6.0 to $1.

Return on Investment for IRS FY 2014 Cap Adjustment Enforcement Initiatives

FY 2014 Revenue-Protecting Initiative

In addition to the traditional revenue-producing initiatives, IRS activities to prevent the 

issuance of fraudulent returns related to identify theft allow the IRS to identify and resolve 

issues prior to issuing a taxpayer’s refund. While this number is not currently included in the 

IRS’s traditional ROI calculations, investment in these activities is projected to protect

$1.3 billion in revenue at a lower cost than the downstream enforcement actions, and achieve 

a revenue protection of $14.4 to $1.

FY 2014 Revenue-Protecting Initiative

FY 2014 Revenue-Enhancing Initiative

Improved technology also increases revenue collection by providing better case selection, 

issue identification, and enforcement case treatment. This technology allows the IRS to adapt 

quickly to changing taxpayer behavior and tax code misuse. While this number is not 

currently included in the IRS’s traditional ROI calculations, the FY 2014 revenue-enhancing 

initiatives will increase revenue by $75.7 million from technology investments that will 

analyze compliance data more efficiently and provide better case selection, issue 

identification, and treatment selection, achieving a revenue enhancement of $1.5 to $1. 

FY 2014 Revenue-Enhancing Initiative

Dollars in Millions

Cost Revenue ROI Cost Revenue ROI

Cap Adjustment Revenue-Producing Enforcement Initiatives $322.6 $776.2 2.4 $273.2 $1,646.6 6.0

Immediate and Directly Measurable Revenue-Producing Initiatives $299.7 $776.2 2.6 $254.1 $1,646.6 6.5

Address International and Offshore Compliance Issues 49.3 86.2 1.7 42.4 192.8 4.5

Increase Audit Coverage to Address Tax Compliance Issues 110.9 155.9 1.4 92.8 295.6 3.2

Increase Collection Coverage 60.5 221.5 3.7 53.3 496.3 9.3

Expand Coverage of High-Wealth Individuals and Enterprises 34.0 176.3 5.2 27.6 368.9 13.4

Improve Coverage of Controlled Partnerships and Flow-Through Entities 45.0 136.3 3.0 38.0 293.0 7.7

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

ROI, but clear long-term revenue effects)

$22.9 $0.0 0.0 $19.1 $0.0 0.0

Build Out Tax Return Preparer Compliance Activities 18.3 0.0 0.0 14.6 0.0 0.0

Leverage Digital Evidence for Criminal Investigation (CI) 4.6 0.0 0.0 4.5 0.0 0.0

First Year (FY 2014) Full Performance (FY 2016) Dollars in Millions

Cost Revenue ROI Cost Revenue ROI

Revenue Protecting Initiative (which protects taxpayer information, prevents identity 

theft, and results in long-term revenue protection)

$101.1 $631.0 6.2 $87.7 $1,261.0 14.4

Improve Identification and Prevention of Refund Fraud including Identity Theft 101.1 631.0 6.2 87.7 1,261.0 14.4

First Year (FY 2014) Full Performance (FY 2016)

Dollars in Millions

Cost Revenue ROI Cost Revenue ROI

Revenue Enhancing Initiatives (which leverages technology to improve case selection 

and analysis)

$51.7 $0.0 0.0 $50.0 $75.7 1.5

Leverage Data to Improve Case Selection 51.7 0.0 0.0 50.0 75.7 1.5

First Year (FY 2014) Full Performance (FY 2016)
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In addition to the new FY 2014 enforcement initiatives, the President’s Budget also proposes 

new tax enforcement and compliance initiatives for IRS and TTB funded via cap adjustments 

through 2018, with additional cap adjustments to sustain these initiatives from FY 2018

through 2023. In total, the proposal entails 10 years of cap adjustments costing $13.8 billion 

while saving $46.5 billion, for a net savings of $32.7 billion.

Enforcement of the tax law is an 

integral part of the IRS effort to 

enhance voluntary compliance. 

IRS enforcement activities, such 

as examination and collection, 

remain a high priority. In 

FY 2012, the IRS maintained its 

international enforcement 

presence, continued efforts to 

engage with the tax return 

preparer community, and made 

refund fraud and identity theft a 

top priority. In FY 2012, 

collections related to all enforcement activities exceeded $50 billion for the third consecutive 

year. Although enforcement collections declined in FY 2012, it should be noted that IRS 

funding was reduced by roughly $300 million compared to FY 2011.

The IRS has shown progress in several key enforcement programs and, as compared with 

FY 2011, the IRS increased:

 High income audits (income greater than $200,000) by 2.6 percent;

 Small Business audits (assets less than $10 million) by 19.5 percent;

 Large corporate audits by 5.0 percent; and

 Criminal investigations by 5.1 percent.

The IRS enhanced international compliance efforts by implementing new legislation and 

programs such as the Offshore Voluntary Disclosure Program (OVDP). In January 2012 the 

IRS reopened the OVDP indefinitely with tightened eligibility requirements in response to 

strong interest from taxpayers and tax practitioners. Since the program was established in 

2009, through the end of FY 2012, the OVDP has resulted in more than 38,000 disclosures of 

underpaid or unpaid taxes and the collection of more than $5 billion in back taxes, interest, 

and penalties.

In addition, the IRS is working closely with businesses and foreign governments to implement 

the Foreign Account Tax Compliance Act (FATCA). This legislation strengthens offshore 

compliance efforts by creating new information reporting requirements on foreign financial 

institutions (FFIs) with respect to U.S. accounts, and establishing new withholding, 

documentation, and reporting requirements for payments made to certain foreign entities. 

Total Enforcement Revenue Collected

47.3 48.7

59.2 56.4

48.9

57.6 55.2

50.2

10

20

30

40

50

60

FY

2005

FY

2006

FY

2007

FY

2008

FY

2009

FY

2010

FY

2011

FY

2012

In Billions
IRS-12

The IRS continued to implement its Return Preparer Program begun in FY 2011. The

foundation of this program is mandatory registration for all paid tax return preparers. 

Through September 2012, more than 860,000 preparers have requested Preparer Tax 

Identification Numbers (PTINs) using the online application system. This PTIN requirement 

provides an important and improved view of the return preparer community from which the 

IRS can leverage information to improve communications, analyze trends, spot anomalies, 

and detect potential fraud, including the refund fraud associated with the Earned Income Tax 

Credit (EITC) and identity theft. As a result of these efforts, the IRS initiated several hundred

criminal investigations into return preparers and achieved a 97.3 percent conviction rate. The 

IRS also leveraged real time data during the 2012 filing season to improve the compliance of 

more than 1,400 preparers with high numbers of EITC errors.

In FY 2012, the IRS expanded the Fresh Start initiative to assist struggling taxpayers with 

meeting their tax obligations. Changes included:

 Increasing the dollar threshold and repayment period for individual installment 

agreements;

 Providing more financial analysis flexibility for installment agreements and Offer in 

Compromise programs;

 Issuing new guidance to address unsecured debts such as student loans, credit cards,

and State/local taxes;

 Providing a six-month grace period on failure-to-pay penalties to certain wage earners 

and self-employed individuals; and

 Extending help to taxpayers eligible for Innocent Spouse Program by eliminating the 

two-year timeframe for consideration of certain innocent spouse claims.

In FY 2012 the IRS identified and stopped fraudulent return filings and refunds through the 

Accounts Management Taxpayer Assurance Program (AMTAP) and Questionable Refund 

Program (QRP). The FY 2012 results included:

 Using the electronic fraud detection system (EFDS), AMTAP stopped more than 

2.6 million fraudulent returns and more than $19.2 billion in fraudulent refunds;

 Identifying 1,708 QRP schemes comprising 2,045,080 individual returns;

 Detecting and preventing $12.3 billion in fraudulent QRP refunds;

 Achieving a 97.8 percent conviction rate, an 85.5 percent incarceration rate, and an 

88.5 percent publicity rate on adjudicated QRP cases; and

 Recovering $787 million from financial institutions returning fraudulent refunds to the 

IRS.

Business System Modernization

After 18 years, in February 2013, the GAO removed the IRS’s Business Systems 

Modernization program from its High-Risk List. GAO concluded that the IRS had made 

substantial progress in addressing weaknesses over the past several years and had 
IRS-13

demonstrated a commitment to sustained progress. The IRS has in place about 80 percent of 

the practices needed for an effective investment management process, including all of the 

processes needed for effective project oversight. In addition, the IRS improved its software 

development practices using the Carnegie Mellon University Software Engineering Institute’s 

Capability Maturity Model Integration (CMMI), which calls for disciplined software 

development and acquisition practices, which are considered industry best practices. In 

September 2012, the IRS’s application development organization reached CMMI maturity 

level 3, which the GAO acknowledges represents a high achievement by industry standards. 

IRS modernization efforts focus on building and deploying advanced information technology 

systems, processes, and tools to improve efficiency and productivity. FY 2012 successes 

included:

 Customer Account Data Engine 2 (CADE 2). After more than 50 years of weekly 

posting of returns, payments, and other transactions, CADE 2 Transition State 1 

successfully deployed its daily processing functionality in January 2012. Daily 

processing and posting of individual taxpayer accounts enabled faster refunds for more

taxpayers, more timely account updates, better information for customer service 

representatives, and faster issuance of taxpayer notices.

 Modernized e-File (MeF). Modernized e-File (MeF) Release 7 became operational for 

the FY 2012 filing season. The IRS completed the three-year migration of the 1040 

form family from the original e-file system to the MeF system. With this capability, 

plus significant performance improvements to support the anticipated volumes, the 

IRS will process all electronically enabled 1040 forms and schedules through MeF 

during filing season 2013. The IRS processed nearly 107 million individual Federal 

and State returns, and more than 14.3 million Business Master File returns through 

MeF, totaling 121 million in FY 2012. 

The IRS President’s Budget request for FY 2014 is $12,861,033,000 in direct appropriations 

and 96,218 FTE. This is an increase of $1,044,337,000 or 8.84 percent and 4,572 FTE more 

than the FY 2012 Enacted Budget of $11,816,696,000 and 91,646 FTE. 
IRS-14

Section 2 – Budget Adjustments – Internal Revenue Service

2.1 – Budget Adjustments Table

FTE Amount

FY 2012 Enacted 1 91,646 $11,816,696

FY 2013 Annualized CR Rate 89,857 $11,887,741

FY 2014 Changes to Base:

Non-Recur CR Increase: ($71,045)

Maintaining Current Levels (MCLs): $125,674

Pay Inflation Adjustment 79,673

Non-Pay Inflation Adjustment 46,001

Efficiencies/Savings: (857) ($254,864)

Increase e-File Savings (101) (5,040)

Business Systems Modernization (BSM) Savings (30,000)

Reduce Information Technology (IT) Infrastructure (57,500)

Implement Human Capital Administrative Efficiencies (73) (7,858)

Targeted Personnel Savings (683) (77,766)

Savings from Space Optimization (76,700)

Reinvestment: $37,500

Implement Space Optimization to Achieve Savings 37,500

Subtotal FY 2014 Changes to Base (857) ($162,735)

FY 2014 Current Services (Base) 89,000 $11,725,006

Program Changes:

Program Increases:

Taxpayer Service Initiative:

Improve Taxpayer Service and Meet Increased Demand 1,935 177,057

Subtotal Taxpayer Service Initiative 1,935 $177,057

Enforcement Initiatives:

Implement Foreign Account Tax Compliance Act (FATCA) 233 35,190

Address International and Offshore Compliance Issues 329 49,354

Implement Merchant Card and Basis Matching 536 50,279

Address Impact of Affordable Care Act (ACA) Statutory Requirements 283 44,420

Improve Identification and Prevention of Refund Fraud and Identity Theft 850 101,098

Increase Audit Coverage to Address Tax Compliance Issues 797 110,935

Increase Collection Coverage 573 60,474

Expand Coverage of High-Wealth Individuals and Enterprises 242 33,965

Improve Coverage of Partnerships and Flow-Through Entities 320 45,013

Build Out Tax Return Preparer Compliance Activities 124 18,315

Leverage Data to Improve Case Selection 227 51,701

Leverage Digital Evidence for Criminal Investigation (CI) 8 4,539

Subtotal Enforcement Initiatives 4,522 $605,283

Infrastructure Initiatives:

Implement IT Changes to Deliver Tax Credits and Other Requirements 722 305,645

Develop New Online Services 37 24,059

Develop Converged Telecommunication Networks 15,000

Expand Virtual Services Delivery (VSD) 2 3,983

Subtotal Infrastructure Initiatives 761 $348,687

Alcohol and Tobacco Tax and Trade Bureau Program Integrity Transfer:

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

Subtotal Alcohol and Tobacco Tax and Trade Bureau Program Integrity Transfer $5,000

Subtotal FY 2014 Program Changes 7,218 $1,136,027

Total FY 2014 Budget Request 96,218 $12,861,033

1 FY 2012 Enacted represents the approved FY 2012 Operating Plan.

Dollars in Thousands

Internal Revenue Service
IRS-15

2A – Budget Increases and Decreases Description

Initiative Costing Methodology

The IRS uses a variety of methods to cost its initiatives. 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 and type of staff are determined, along with the 

corresponding full-time equivalents (FTE), the full-year cost of the FTE is estimated using a 

Unit Cost Rate (UCR) calculator to project FTE salary and non-salary support cost and/or 

savings. The UCR calculator fully costs the salary, benefits, and support costs needed for 

each new FTE.

Total Changes to Base

-$162,735,000 / -857 FTE

Non-Recur CR Increase

-$71,045,000 / 0 FTE

The full year equivalent of the across-the-board 0.612 percent increase provided in the CR 

through March 27, 2013, is non-recurred.

Maintaining Current Levels (MCLs)

+$125,674,000 / 0 FTE 

Pay Inflation Adjustment +$79,673,000 / 0 FTE

The President's Budget proposes a one percent pay raise for Federal employees in 2014.

Non-Pay Inflation Adjustment +$46,001,000 / 0 FTE

Funds are requested for inflation adjustments in non-labor expenses such as GSA rent 

adjustments, postage, supplies, and equipment.

IRS Overarching Strategy to Identify Operational Efficiencies and Savings

The IRS strives to maintain the most fair and effective system of voluntary tax compliance in 

the world. The environment in which the IRS operates is complex and constantly changing, 

and the IRS must change with it. The IRS is committed to being as efficient as possible and 

to spending taxpayer dollars wisely, by identifying savings while continuing to invest in 

strategic priorities that allow the IRS to improve taxpayer service and voluntary compliance. 

Over the last several years, the IRS senior leadership has driven a “savings culture” across the 

IRS. Since FY 2009, budget requests have reflected strategic investments in the IRS that 

serve to reduce the deficit, along with achieving more than $1.1 billion in budget savings, 

efficiencies and other targeted reductions. These savings and efficiencies reflect an 
IRS-16

across-the-board commitment to finding better and more efficient ways to administer the tax 

system. To identify savings and efficiencies the IRS has:

 Established task forces and working groups to restructure and streamline operations;

 Identified ways of leveraging technology to improve service to taxpayers, 

productivity, and communications; 

 Conducted budget reviews of administrative and other non-labor expenses to further 

reduce or reinvest in mission-critical priorities; and

 Encouraged and offered incentives to employees to look at existing operations and 

submit ideas on how to reduce costs without sacrificing performance.

In FY 2012, the IRS enacted budget was $11,816.7 million, $305.1 million less than the 

FY 2011 enacted budget of $12,121.8 million. Most of the FY 2012 reductions were in the 

Enforcement and Operations Support appropriations. The IRS absorbed these reductions by 

focusing on spending reductions in areas that would minimize the impact on front-line 

taxpayer-facing activities:

 Decreasing full-time equivalents (FTEs) by more than 3.4 percent from FY 2011 

through targeted buyouts of more than 1,000 support functions and the use of attrition 

hiring freezes;

 Reducing travel costs through increased use of telework and video conferencing and 

using innovative ways to deliver training remotely; and

 Reducing the use of consulting services. 

To achieve the efficiencies and savings already realized, the IRS made upfront investments in 

activities that have generated savings without affecting performance, such as:

 Where’s My Refund? – IRS.gov online application that reduces the need for taxpayers 

to call the IRS;

 Server Virtualization – Technology that provides server space for applications 

without the need to purchase or maintain a physical server for each application, which 

translates into smaller physical data center space requirements and fewer systems 

administrators supporting fewer physical servers;

 Network Convergence – Consolidated telecommunication infrastructure that lowers 

telecommunication maintenance requirements and increases telework capability 

through the use of softphone technology;

 WiFi – Technology that allows the use of publicly available Internet access, which 

reduces or eliminates air card requirements; 

 Electronic IRS Forms and Publications – IRS.gov online availability of tax forms and 

publications that reduces printing and mailing costs; and 

 Telework – Alternative to traditional work environment that reduces office space 

needs, improves employee morale, reduces employee commuting costs, and helps 

employees balance home and work responsibilities. 
IRS-17

The IRS will continue to maintain a savings culture to meet future challenges with fewer 

resources. In addition to reducing the overall resources needed to provide service effectively 

to taxpayers and to administer the tax laws, the IRS will continue to look for opportunities to 

reinvest base savings to:

 Address the significant increase in refund fraud schemes in general and schemes 

involving identity theft in particular;

 Manage responsibilities in an increasingly global environment;

 Implement new legislative mandates and last-minute tax changes; and

 Continue to leverage technology to create more efficient work processes, improve case 

selection, utilize data analytics for decision making, increase employee collaboration, 

and reduce costs. 

Efficiencies and Savings

-$254,864,000 / -857 FTE

Increase e-File Savings 

-$5,040,000 / -101 FTE

These savings are a result of reduced paper returns. The IRS projects taxpayers will file 

1,587,800 fewer paper returns (666,200 individual and 921,600 business) and instead choose 

to e-file. As a result, the IRS would need 101 fewer FTE in submission processing, 

generating a savings of $5,040,000.
IRS-18

Business Systems Modernization (BSM) Savings

-$30,000,000 / 0 FTE

This reduction provides an FY 2014 funding level of $300.8 million and 513 FTE that is 

required for the IRS to continue modernization of critical information technology systems that 

support the nation’s revenue base. The IRS FY 2014 BSM request funds the projects listed in 

the table below.

Customer Account Data Engine 2 (CADE 2) ($129.0 million)

In FY 2013, the IRS will continue to build on Transition State 1 (TS 1) momentum by 

strategically investing in state-of-the-art capabilities, such as online taxpayer services, which 

will utilize the CADE 2 daily processing capabilities and the CADE 2 modernized relational 

database infrastructure put in place in 2012. In FY 2014, the IRS will focus effort on 

preparing the CADE 2 modernized relational database so that it can be placed into full filing 

season production in 2014. The IRS also will make progress on the second phase of the 

CADE 2 initiative, which addresses the risks associated with the continued legacy of 

antiquated systems and programming languages in the current IRS environment. This next 

phase, known as Transition State 2 (TS 2), will ensure the long-term viability of the 

modernized IRS tax processing systems.

Dollars in Thousands

Business Systems Modernization FY 2012 

Enacted

FY 2013 

Annualized CR 

Rate

FY 2014 

President's 

Budget 

Request

CADE 2 (Taxpayer Account Database)

In FY 2014, the IRS will continue the design and development of applications that will modernize 

core tax processing application architecture, address financial material weaknesses and expand 

capabilities in leveraging the CADE 2 relational database.

$139,500 $134,000 $129,000

Modernized e-File (MeF)

In FY 2014, MeF will complete the deployment of Release 9 (Form 94X - Employment/ 

Unemployment Tax and Form 1041 - U.S. Income Tax Return for Estates and Trusts), continue 

the development of Release 10 (1040X - Amended U.S. Individual Income Tax Return) and begin 

design of Release 11 (implementation of an assortment of forms).

Core Infrastructure

Provide services in architecture, engineering, and deployment of standardized, consolidated, 

virtual, and secure modernized Development, Integration, and Testing Environments (DITE) 

and shared infrastructure components (Employee User Portal, Registered User Portal, and 

Security) of the production environments. 

37,700 37,750 34,000

Architecture, Integration, and Management (AI&M)

Provide system engineering management capabilities, including systems strategy, architecture, 

and engineering capabilities, across IT Infrastructure, Business Applications, Data Management, 

and IT Security. Provide portfolio control and management processes and tools, including 

governance, enterprise lifecycle support, tiered program management, business rules and 

requirements, transition management, cost estimation, configuration/change management, 

and risk management.

Management Reserve 7,780 6,307 4,000

Subtotal Capital Investments $236,525 $248,142 $221,000

 BSM Labor1 93,685 84,089 79,827

Total BSM $330,210 $332,231 $300,827

1BSM FY 2014 Labor includes $617,000 of inflation costs. 

27,645 29,385 26,000

23,900 40,700 28,000
IRS-19

In FY 2014, the IRS requests funds to design and develop applications that expand the 

capabilities of the CADE 2 relational database, while addressing current financial material 

weakness. Among other things, these funds will:

 Complete programming and deploy the Common Code Penalty and Interest Module to 

ensure all systems use the same computations to calculate penalty and interest,

reducing errors through the elimination of manual calculations.

 Deliver programming to expand the Individual Master File database structure to 

capture data and populate the CADE 2 database with Integrated Data Retrieval System 

(IDRS) status history, such as taxpayer notices, collection status updates, and 

installment agreements.

 Conduct planning for enhancements needed for financial tracking, which will allow 

association of specific payments and credits with individual assessments.

 Continue development of analytical tools to replace the existing Master File extracts 

that feed numerous downstream systems.

 Conduct a proof of concept to test whether business rules and requirements for the 

relational database can be developed by retrieving computer code from the IRS’s 

Individual Master File of taxpayer data, rather than asking Subject Matter Experts to 

write the business rules and requirements for the relational database into computer 

code, a more time consuming and expensive process. 

 Conduct a proof of concept to test the Data Access Layer, to develop a data 

distribution framework to define the standard sets of data CADE 2 will produce and 

determine how those standard sets of data will be provided to downstream systems. 

Proving the Data Access Layer works is an important piece of replacing the Individual 

Master File and moving to the CADE 2 database as the single source of authoritative 

data for downstream tax processing systems.

Modernized e-File (MeF) ($28.0 million) 

The first phase of the implementation of Form 1040, U.S. Individual Income Tax Return, onto 

the MeF platform took place in January 2010. In FY 2011, the IRS implemented the second 

phase by providing enhanced disaster recovery capabilities to ensure appropriate management 

of operational risk and the optimization code necessary to support the anticipated volume of 

returns in 2012. The third and final phase was the migration of the 125 remaining 1040 forms 

and schedules, including Forms 1040A, U.S. Individual Income Tax Return, and 1040EZ, 

Income Tax Return for Single and Joint Filers With No Dependents. This phase took place in 

January 2012, expanding the reach of MeF to all of the individual e-file population, or 

approximately 98.3 million filers.

MeF Release 8 deployed as planned in January 2013. The release improved system 

performance by implementing storage management, added stability by segregating tasks, and 

improved monitoring by significantly increasing the performance and operational metrics 

captured. These changes will ensure MeF can support the projected Filing Season 2013 

volume of e-filed returns.
IRS-20

The FY 2014 request for MeF will:

Complete Milestone 5 (Deployment) of Release 9, which will include Form 940, 

Employer’s Annual Federal Unemployment (FUTA) Tax Return; Form 941, Employer’s 

Quarterly Federal Tax Return; Form 943, Employer’s Annual Federal Tax Return for 

Agricultural Employees; Form 944, Employer’s Annual Federal Tax Return; Form 945, 

Annual Return of Withheld Federal Income Tax; and Form 1041, U.S. Income Tax Return 

for Estates and Trusts. The FY 2014 request will fund the physical design, development, 

and deployment of Release 10 and the implementation of Form 1040X, Amended U.S. 

Individual Income Tax Return. Further, the FY 2014 request will fund requirements 

gathering and the logical design of assorted forms to be determined later. 

By adding Form 94X, Form 1041, and Form 1040X to the MeF platform, taxpayers will 

realize the following benefits:

 Extensive error checking to improve the accuracy of the tax return;

 Sophisticated math error validation checking, which increases the likelihood that the 

tax return will be successfully processed; 

 Ability to attach all necessary documents supporting the data on the tax returns; 

 Capability to provide a justification to the taxpayer/trading partner when the IRS 

rejects the tax return; and

 Form receipt acknowledgments provided to transmitters within minutes during 

non-peak days (within 2 hours during peak days), instead of 24-48 hours under the 

legacy system;

 Expanded availability of electronic filing, beyond the traditional legacy e-file 

shutdown dates;

 Ability to e-file the current and two prior tax years; and

 Ability to e-file a balance due return, and, at the same time, authorize an electronic 

funds withdrawal from the taxpayer’s bank account.

Productivity and IRS efficiency gains include: 

 Improving Customer Service – Once MeF processes forms 941, 1041, and 1040X, the 

IRS Customer Service Representatives (CSRs) will have access to all of the 

information included on each form. This will allow the CSRs to provide faster 

responses to taxpayers by viewing the most current 94X, 1041, and 1040X data online, 

eliminating the need for back-end rekeying and data entry. 

 Enhancing Compliance and Enforcement Operations – Online capabilities and 

100 percent data access to 94X, 1041, and 1040X forms will enhance compliance and 

enforcement activities by allowing access to taxpayer data in a timely and accurate 

manner.

 Retiring the Legacy 94X and 1041 e-File system – Adding 94X and 1041 to MeF will 

allow the IRS to retire the legacy Electronic Management System (EMS) and reduce 
IRS-21

future operations and maintenance budgets. The EMS cannot be retired until MeF can 

support these forms. 

 Implementing Modernized Data Standards – MeF uses the widely accepted, 

industry-standard Extensible Markup Language (XML) format for identifying, storing, 

and transmitting data. XML provides improved data accuracy and protection of 

taxpayer information. MeF provides more information to correct taxpayers’ returns, 

including expanded error code explanations that pinpoint the location of errors.

Core Infrastructure ($34.0 million)

The Core Infrastructure program provides mission-critical services for designing, engineering, 

testing, and deploying standardized, consolidated, virtual, and secure modernized 

development and production environments for use by BSM projects. 

The IRS is modernizing taxpayer applications to take advantage of web-based technologies 

that allow taxpayers to communicate with the IRS through the Internet using commercially 

available technology. The modernized infrastructure provides a complete environment 

(hardware, software, processes, and management) for developing, testing, deploying, 

operating, and monitoring both customer and internal applications in support of business 

practices. This includes continuing to update the web portal environment and standardizing 

services, security, and operations management. 

This approach facilitates the IRS’s ability to develop a shared infrastructure and common 

business service solutions that are usable across multiple BSM projects. The core 

infrastructure consists of two primary program elements – Infrastructure Shared Services 

(ISS) and the Development, Integration and Testing Environment (DITE). In FY 2014, the 

IRS will continue to invest in:

 ISS to provide capacity planning and performance engineering services for BSM 

projects. This includes additional unit, integration, and testing support to increase the 

reliability of deployed systems. 

 DITE to engineer, install, maintain, and support the development and test 

environments needed for each BSM project through deployment and acceptance in the 

production environment. 

Architecture, Integration and Management (AI&M) ($26.0 million)

In FY 2014, AI&M will continue to support BSM projects. The AI&M program provides 

engineering management capabilities essential to delivering a program of the magnitude and 

complexity of BSM. It also 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. 

The AI&M program translates enterprise and project objectives into targeted, actionable 

investments to provide the necessary framework and direction for a cohesive, successful 

modernization. 
IRS-22

Management Reserve ($4.0 million) 

The IRS request provides funds for the management reserve to cover unanticipated cost 

adjustments. 

Labor ($79.8 million / 513 FTE) 

The IRS requests $79.8 million to provide the Government labor costs associated with the 

development of projects within the BSM portfolio. This includes $0.617 million for the 

one percent pay increase. 

Reduce Information Technology (IT) Infrastructure

-$57,500,000 / 0 FTE

In FY 2014, IRS IT will continue to implement industry best practices to shape the future of 

information technology development and ongoing operational support to provide a more 

robust foundation for expanding IT capabilities in the future. In FY 2014, reductions to IT 

resources will be managed through streamlining operational requirements with efforts to 

standardize, consolidate, and virtualize the infrastructure and application portfolio by 

employing technology to accomplish tasks in a more resource-efficient manner. By adopting 

common technologies, managing demand, and strategic procurement opportunities the IRS 

will make more efficient use of its resources. Projects include:

 Extending the laptop and desktop computer replacement timeframe from three to four 

years; 

 Providing data storage as a service rather than a commodity – this approach allows for 

efficient and effective management of IT servers; 

 Virtualizing servers instead of purchasing a server for each application;

 Adopting common platforms for technology development; 

 Standardizing the technical expertise required; and 

 Adopting an efficient telecommunications infrastructure that will allow the 

replacement of outdated communications capabilities. 
IRS-23

Implement Human Capital Administrative Efficiencies

-$7,858,000 / -73 FTE

The IRS will achieve human capital administrative efficiencies by reducing costs and 

streamlining operations. The IRS will:

 Partner with Treasury to eliminate the redundant costs of collecting duplicate HR 

reporting data from the National Finance Center;

 Implement improvements in the Human Capital employment program;

 Redesign manager and employee training programs to generate staff, contract services, 

and travel savings; and 

 Streamline existing human resources processes by using technology and eliminating 

redundancy. 

Targeted Personnel Savings

-$77,766,000 / -683 FTE

Although the budget requests increased staffing resources to support a number of strategic 

priorities, at the same time, the IRS has been very focused on managing personnel costs and 

reducing staffing across many operational areas. These personnel savings are the result of the 

annualization of FY 2013 attrition savings. To achieve these reductions, the IRS reduced 

overall staffing by:

 Filling critical vacancies only; 

 Streamlining the workforce by reducing administrative, analyst, and other support 

positions;

 Realigning mission-critical occupations by eliminating positions vacated by 

employees with outdated skills and hiring employees who have the background and 

skills to support the IRS in meeting its strategic goals, objectives and priorities; and 

 Decreasing non-labor costs, such as travel, office supplies, and training services, 

associated with targeted personnel savings.

Savings from Space Optimization

-$76,700,000 / 0 FTE

The IRS has 648 offices throughout the U.S. and, during peak filing season, more than 

101,000 employees (full-time and seasonal), not including contract employees. In an effort to 

promote more efficient use of the Government’s real estate assets and to generate savings, the 

IRS plans to close, consolidate, and reduce the IRS’s space inventory. 

IRS office closures, consolidations, and space reductions fall into the following three primary 

categories:

 Small posts-of-duty (offices with 25 or fewer employees). The IRS considers such 

factors as distance to the next closest post-of-duty, number of employees affected, 
IRS-24

square feet per employee, timing of lease, alteration costs, and ease of accommodating 

relocated staff. Of the 43 small posts-of-duty selected for closure in FY 2012, many 

of the employees in these posts-of-duty were reassigned to posts-of-duty within the 

commuting area, or, where no other IRS office exists in the commuting area, will be 

offered a new option to work “Home as post-of-duty” to avoid reassignment to a 

post-of-duty outside of the commuting area.

 Mid-size and large posts-of-duty (those typically exceeding 40,000 square feet). 

To reduce space in these locations, the IRS considered those posts-of-duty where there 

were a high percentage of vacant workstations and/or a high number of field-based 

employees. Currently, 22 space reduction projects fall into this category.

 Space reduction projects. These projects will be initiated because of lease expirations, 

relocations, review of training space needs, and other miscellaneous reasons. The IRS 

has identified an additional 58 space reduction projects.

Reinvestment

Implement Space Optimization to Achieve Savings

+$37,500,000 / 0 FTE

To achieve the space optimization savings identified above, the IRS will require a one-time 

reinvestment of $37.5 million to implement rent reduction and mid-size post-of-duty closure 

projects in FY 2014 and reduce future annual rent costs by $76.7 million from the FY 2012 

actual rent expenditures. These resources will be used to build out new and consolidated 

space and relocate employees.
IRS-25

Position Type/Other Costs FTE $000

Meet Increased Taxpayer Service and 

Outreach Demand 1,810 $156,143

Increase Level of Service (LOS) 861 66,625

Customer Service Representatives 510 43,248

Customer Service Representative - 

Seasonal 351 23,377

Assist Taxpayers Understanding ACA 

Issues 949 89,518

Customer Service Representative - 

Seasonal 237 17,481

Customer Service Representatives 

Support Staff 438 40,252

Individual Taxpayer Advisory Specialists 

Analysts 52 5,158

Individual Taxpayer Advisory Specialists 

Analysts - Seasonal 27 2,268

ACA Grant Funds 6,000

Data Transcribers 120 7,752

Other Support 75 10,607

Reduce Correspondence Inventories 94 $7,971

Customer Service Representatives 94 7,971

IT Projects 31 $12,943

Authentication Retention (AR) 15 8,676

Computer Telephone Integation (CTI) 16 4,267

Total 1,935 $177,057

Program Increases

+$1,136,027,000 / +7,218 FTE

Improve Taxpayer Service and Meet Increased Demand

+$177,057,000 / +1,935 FTE

Funding to Improve Taxpayer Service and 

Meet Increased Demand will provide 

resources to the IRS to meet the expected 

demand increase for taxpayer services and 

will increase the Customer Service 

Representative (CSR) Level of Service 

(LOS) in FY 2014 from the 67.6 percent 

LOS achieved in FY 2012 to a projected 

79 percent. Resources are needed to address 

the projected growth in demand for 

traditional taxpayer services such as 

answering tax law questions and resolving 

accounts as well as $89.5 million to enhance

taxpayer assistance and outreach to 

individuals, businesses, and third parties 

affected by the implementation of the 

Affordable Care Act (ACA) 

(Public Law 111-148) tax provisions 

(including provisions related to health 

insurance exchanges). It also expands use of community-based partners to assist taxpayers in 

applying for advanced tax credits in FY 2014 and provides resources for reducing paper 

correspondence inventories and developing new technologies to improve service to taxpayers.

Meet Increased Taxpayer Service and Outreach Demand (+$156.1 million / +1,810 FTE)

Providing taxpayers with access to quality customer service is one of the IRS’s most 

important responsibilities and is one of the cornerstones of voluntary compliance. Taxpayers 

need access to effective services to help them understand their tax obligations and pay their 

taxes on time. As wait times increase and CSR LOS decreases, callback attempts from 

taxpayers increase the demand for services and further erode telephone accessibility.

Significantly, more taxpayers are calling the IRS to resolve tax account issues and to request 

installment payment agreements. Assisting these taxpayers earlier in the tax administration 

process through taxpayer service venues, rather than through more costly compliance 

activities, allows the IRS to resolve customer inquiries more quickly and cost-effectively. 

In FY 2014, the IRS expects to answer an estimated 35.5 million non-ACA related telephone 

calls and deliver a 79 percent level of service. 
IRS-26

Telephone-based customer service provides critical support for IRS enforcement activities. 

In FY 2012, the IRS:

 Mailed more than 162.5 million notices to taxpayers;

 Established more than 1.7 million installment agreements for $5.3 billion;

 Adjusted more than 10.2 million post-filing tax accounts through assisted service,

including processing 4.0 million amended returns; and 

 Answered 30.8 million phone calls, with individual "balance due" calls alone

exceeding 4.0 million.

Many tax enforcement actions result in downstream IRS service activities, including account 

adjustments, amended returns, and installment agreement preparation. Inadequate staffing of 

taxpayer service is costly and results in reduced revenue collected, increased interest paid, and 

delays for taxpayers attempting to resolve enforcement issues. 

In 2014, several significant tax law provisions related to the ACA will become effective, 

including the new premium tax credit. Based on the Congressional Budget Office (CBO) 

estimate for subsidized individuals in 2014, the IRS expects to answer approximately 

7.7 million ACA-related telephone calls, with 4.7 million calls answered using automated 

services and about 3.0 million calls answered by telephone customer service representatives. 

This initiative provides staffing to ensure proper management and administration of ACA 

implementation and will allow the IRS to:

 Respond to tax-related questions anticipated during the enrollment and initial 

reporting processes from individuals, businesses and third parties (including State 

exchanges and Navigators);

 Provide outreach efforts to inform taxpayers and associated third parties about ACA 

tax filing requirements for filing season 2015;

 Initiate operational readiness preparation necessary for a successful 2015 filing 

season;

 Process current and new non-exchange forms and handle non-exchange related 

inquiries; and

 Develop training materials, tactical plans and business rules for ACA processes both 

at filing and for related downstream compliance.

This initiative also requests $6 million to expand the Community Volunteer Income Tax 

Assistance (VITA) matching grant program from $12 million to $18 million to allow the IRS 

to prepare community and volunteer-based organizations to assist taxpayers with their filing 

requirements under ACA. 

Reduce Correspondence Inventories (+$8.0 million / +94 FTE)

Additional resources are needed to timely address taxpayer claims and inquiries submitted 

through paper correspondence requests, while maintaining a 79 percent telephone level of 

service.
IRS-27

Telephone services and paper correspondence compete for resources and during FY 2012 

paper correspondence inventory level increased to more than 1.02 million. Taxpayers 

generally submit anywhere from 10 to 16 million pieces of correspondence each year. 

Increased volumes and complexity of written requests can result in further delays in inventory 

processing.

Customer satisfaction surveys indicate that taxpayers consider minimizing the length of time 

to resolve their tax issues a high priority. These additional resources would allow the IRS to 

expedite resolution of taxpayer correspondence issues and result in improved customer 

satisfaction. In FY 2012, the IRS adjusted more than 10.2 million post-filing tax accounts 

through correspondence assistance, including processing 4.0 million amended returns. 

IT Projects (+$12.9 million / +31 FTE)

The following IT projects related to customer service will enhance the experience of 

taxpayers by minimizing the length of time it takes to resolve their tax issues:

 Authentication Retention (AR) 

This technology will allow taxpayers to provide identifying information to the IRS 

only once per call to authenticate or verify their identity, while still protecting 

taxpayer privacy. Decreasing the number of times an agent has to authenticate callers 

will reduce taxpayer burden and the risk of identity theft and fraud, and improve 

efficiency. AR technology creates a seamless taxpayer experience during interactions 

with assistors and is estimated to affect more than 31 million callers annually. AR 

technology will allow the IRS to resolve the Treasury Inspector General Tax 

Administration (TIGTA) finding that telephone authentication practices need 

improvement to prevent unauthorized disclosures.

 Computer Telephone Integration (CTI) 

This technology provides online screen displays of taxpayer account-related data. 

CTI, which is dependent upon AR implementation, performs basic taxpayer-related 

research to provide the CSR with current account information to improve response 

time for taxpayer inquiries.

Other Direct Costs

There are no other direct costs associated with this initiative.
IRS-28

Position Type/Other Costs FTE $000

Withholding of Tax on Nonresident Aliens and 

Foreign Corporations, and Reporting 

Requirements of Foreign Financial Institutions 204 $23,472

Revenue Agent 59 10,896

Tax Examiner 130 11,242

Support Staff 15 1,334

Information Technology Costs 29 $11,718

IT Specialist 29 4,583

Training 15

Contractual Services 6,260

Equipment 860

Total 233 $35,190

Implement Foreign Account Tax Compliance Act (FATCA)

+$35,190,000 / +233 FTE

Funding to Implement Foreign Account Tax 

Compliance Act (FATCA) will provide the 

resources for the IRS to implement changes 

required by enactment of FATCA included 

in the Hiring Incentives to Restore 

Employment (HIRE) Act of 2010 

(Public Law 111-147). 

New reporting, disclosure, and withholding 

requirements are expected to produce 

additional annual enforcement revenue of $115.4 million once the new hires reach full 

potential in FY 2016, an ROI of $3.7 to $1.

Major Activities

Projected

Revenue

$M

Individual 

Returns

Specialty 

Returns

Withholding of Tax on Nonresident Aliens and Foreign 

Corporations, Reporting Requirements of Foreign 

Financial Institutions 115.4 2,800 117

 Total $115.4 2,800 117

ROI 

$49.6

$85.6

$115.4

$32.3 $31.5 $35.2

$0.0

$20.0

$40.0

$60.0

$80.0

$100.0

$120.0

$140.0

FY 2014 FY 2015 FY 2016

in millions

Cost Enforcement Revenue

1.4 to 1

2.7 to 1

3.7 to 1
IRS-29

Withholding of Tax on Nonresident Aliens and Foreign Corporations, and Reporting 

Requirements of Foreign Financial Institutions (+$23.5 million / +204 FTE)

This initiative will allow the IRS to address foreign withholding compliance and expand 

coverage of international tax return filings. The Foreign Account Tax Compliance Act 

(FATCA) seeks to improve offshore compliance by imposing new information reporting 

requirements on foreign financial institutions (FFIs) with respect to U.S. accounts and new 

withholding, documentation, and reporting requirements for payments made to certain foreign 

entities. 

FATCA seeks to improve offshore compliance by imposing a 30 percent withholding tax on 

U.S. source payments to foreign financial institutions unless the institution agrees to disclose 

information on U.S. account holders or certifies that it does not have any U.S. customers. 

All FFIs that report U.S. source income must enter into an agreement with the Treasury to 

report to the IRS all accounts of U.S. persons or the withholding tax penalty will apply. Since 

foreign investment information is difficult to come by as investment flows may pass through 

chains of foreign intermediaries, the U.S. Qualified Intermediary program works to enforce 

compliance with U.S. source-based taxation laws. 

FATCA creates new information reporting requirements and imposes tax-withholding 

penalties on FFIs that do not disclose holdings by U.S. individuals or firms. To avoid the 

withholding requirements, the FFIs must enter into an agreement with the Department of the 

Treasury to identify all U.S. accounts held by it or its affiliates and report annually to the 

Treasury on each account. Further, the FFI must comply with requests by the Treasury for 

additional information regarding each U.S. account and must attempt to obtain from each 

holder of a U.S. account a waiver of any bank secrecy law that would otherwise prevent such 

a report. If a waiver cannot be obtained from each holder of a U.S. account, the account will 

be closed. This initiative funds enforcement of these reporting requirements. 

Additional resources also will provide new coverage for discrepancies identified through third

party data matching and will enhance and centralize coverage for non-filer taxpayers and for 

those with withholding-related issues. The funding also will allow the IRS to handle the 

calls/communications resulting from notices sent to taxpayers. The IRS will compile data and 

reports that will provide more complete background information during the initial set up of 

related audit case files. 

Further, these resources will help the IRS address potential under withholding of U.S. source 

income flowing to undisclosed jurisdictions and unknown recipients offshore. The initiative 

will involve a systematic analysis of the process surrounding the Form 1042-S, Foreign 

Person's U.S. Source Income Subject to Withholding, to better target compliance and 

enforcement activities. 

Development and Improvement of IT Systems and Specialized Tools 

(+$11.7 million / +29 FTE)

These resources fund the staffing and support of the ongoing information technology (IT) 

implementation costs related to FATCA. These resources will be used to develop the first 
IRS-30

iteration of technology systems required to make use of information returns filed by FFIs for 

compliance risk analysis. 

Other Direct Costs

There are no other direct costs associated with this initiative.
IRS-31

Address International and Offshore Compliance Issues

+$49,354,000 / +329 FTE

Funding to Address International and 

Offshore Compliance Issues will strengthen 

enforcement activities to address offshore 

tax evasion and expand the IRS’s global 

presence and pursuit of international tax and 

financial crimes.

The IRS continues to address tax-avoidance 

schemes involving offshore activity. This 

request will address the significant growth in 

international activities in the global tax 

environment and produce additional annual 

enforcement revenue of $192.8 million once 

the new hires reach full potential in FY 2016, 

an ROI of $4.5 to $1.

Major Activities

Projected

Revenue

$M

Individual 

Returns

Investigations

Completed

Strengthen Coverage of Offshore Compliance

Increased Coverage of Offshore Individual and Business Compliance Issues 23.6 1,180

Maintain the Offshore Voluntary Disclosure Program (OVDP) 169.2 4,000

Expand Offshore Criminal Investigations 28

 Total $192.8 5,180 28

Position Type/Other Costs FTE $000

Strengthen Coverage of Offshore Compliance 191 $24,973

Revenue Agent 122 18,697

Tax Examiner 26 2,329

Tax Compliance Officer 19 1,988

Manager and Analyst 24 1,959

Expand Offshore Criminal Investigation 78 $12,368

Special Agent 22 5,739

IT Specialist 19 2,561

Computer Operations Administrator (COA) 4 540

Analyst 33 3,528

Other Direct Costs 60 $12,013

Appeals Officer 11 1,956

Attorney 49 10,057

Total 329 $49,354

ROI 

$86.2

$128.7

$192.8

$49.3 $44.1 $42.4

$0.0

$50.0

$100.0

$150.0

$200.0

$250.0

FY 2014 FY 2015 FY 2016

in millions

Cost Enforcement Revenue

1.7 to 1

4.5 to 1

2.9 to 1
IRS-32

Strengthen Coverage of Offshore Compliance (+$25.0 million / +191 FTE)

 Increased Coverage of Offshore Individual and Business Compliance Issues

With the increased mobility of people and transactions, offshore and cross-border tax 

issues affect a growing number of taxpayers. The additional resources in this 

initiative will allow the IRS to: 

o Ensure proper application of treaty benefits, foreign tax credits and foreign 

earned income exclusion; 

o Verify withholding before the release of refund requests;

o Increase pre-refund audit coverage; 

o Establish centralized classification and case building unit; and 

o Increase use of soft letters to promote voluntary compliance.

 Maintain the Offshore Voluntary Disclosure Program (OVDP)

In 2009 and 2011, the IRS implemented OVDP to encourage taxpayers with hidden 

offshore assets and income to come back into the tax system voluntarily. Building on 

these successes, in 2012, the IRS reopened the OVDP for an indefinite period. 

The additional resources will allow the IRS to:

o Reinforce ongoing efforts with the Justice Department to pursue criminal 

prosecution of international tax evasion;

o Provide taxpayers an open-ended opportunity to voluntarily come back into 

compliance with U.S. tax law; and

o Continue raising awareness related to tax filing obligations and educating all 

taxpayers so that they understand their U.S. tax responsibilities. 

Without this funding, the IRS will be unable to maintain audit coverage in other tax gap 

categories and the number of Examination closures will decrease. The IRS needs more 

resources for international cases because of the additional time and expertise required 

compared to other categories of work.

Expand Offshore Criminal Investigations (+$12.3 million / +78 FTE)

These funds will provide resources to expand Criminal Investigation’s (CI) pursuit of 

international tax and financial crimes to include:

 Supporting additional workload from the international law enforcement community

CI's International Operations has seen substantial growth in the number of 

international assistance requests from the field and international law enforcement 

agencies. This initiative will support the IRS’s commitment to provide training and 

comply with investigative requests received from the international law enforcement 

community. 
IRS-33

 Expanding CI’s overseas enforcement presence

To fight transnational crime, CI must expand its presence in overseas locations to meet 

the growing demand for criminal investigative cooperation and information sharing. 

Building CI’s overseas enforcement presence will facilitate an influx of international 

leads that will result in greater case development, prosecutions, and more publicity to 

deter those taxpayers who evade their U.S. tax obligations. 

Other Direct Costs (+$12.0 million / +60 FTE)

IRS Activity Cost FTE Explanation

Appeals $2.0 11 Support examination efforts on key compliance areas 

focused on improving offshore voluntary compliance. 

Chief Counsel $10.0 49 Litigate those cases that are not resolved at the audit or 

appeals stages.

Total $12.0 60

Dollars in Millions
IRS-34

Implement Merchant Card and Basis Matching

+$50,279,000 / +536 FTE

This initiative requests the necessary funding to 

allow the IRS to take advantage of the reporting 

provisions for merchant payment card and third 

party reimbursements enacted in the Housing and 

Economic Recovery Act of 2008 

(Public Law 110-289); and basis reporting on 

security sales enacted in the Emergency Economic 

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

These efforts will ensure that the IRS will be able to:

 Expand new compliance programs to ensure 

business and individual taxpayers meet their 

tax obligations;

 Investigate cases related to payment card and 

securities basis reporting issues and address 

discrepancies not suitable for resolution 

through the document matching verification 

process; 

 Address fraud and criminal violations that 

will be uncovered as the IRS establishes 

broader compliance programs; and

 Leverage technology through the increased 

development and deployment of workforce 

tools, issue management systems, and 

management information systems.

This initiative is expected to produce additional annual 

enforcement revenue of $362.9 million, once the new 

hires reach full potential in FY 2016, an ROI of 

$8.5 to $1.

Major Activities

Projected

Revenue

$M Closures

Investigations

Completed

Document Analysis 140.5 170,633

Additional Examination Resources 222.4 104,742

Criminal Investigation 74

 Total $362.9 275,375 74

ROI 

$152.4

$272.7

$362.9

$50.3 $43.0 $42.5

$0.0

$50.0

$100.0

$150.0

$200.0

$250.0

$300.0

$350.0

$400.0

FY 2014 FY 2015 FY 2016

in millions

Cost Enforcement Revenue

3.0 to 1

6.3 to 1

8.5 to 1

Position Type/Other Costs FTE $000

Document Analysis 268 $18,854

Tax Examiner 140 10,526

Seasonal 108 6,415

Manager and Analyst 2 196

Support Staff 18 1,717

Conduct Additional Examinations 150 $13,893

Tax Examiner 89 7,104

Revenue Agent 40 4,679

Tax Compliance Officer 18 1,863

Support Staff 3 247

Criminal Investigation 40 $8,328

Special Agent 40 8,328

IT Project - Business Master File 

Case Creation Nonfile Identification 

Process (BMF CCNIP) 13 $3,191

IT Specialist 13 3,053

Contractual Services 138

Other Direct Costs 65 $6,013

Tax Examiner 2 171

Revenue Agent 1 119

Appeals Officer 3 412

Paralegal 3 276

Seasonal 34 2,264

Attorney 8 1,310

Taxpayer Advocate Specialist 14 1,461

Total 536 $50,279
IRS-35

Document Analysis (+$18.9 million / +268 FTE)

The IRS is modifying existing systems to perform new types of analysis related to merchant 

card payment transactions. Underreporting of gross receipts significantly contributes to the 

tax gap. The enacted legislation allows the IRS to identify businesses with a high likelihood 

of underreported gross receipts through analysis of their payment card receipts and network 

transactions as reported by payment card processors and third party settlement organizations.

The legislation requiring information reporting on merchant card and third party 

reimbursements will help reduce the tax gap in three ways:

 Provide businesses with an official year-end statement of merchant card payments and 

third party network transactions to avoid underreporting of income they may have 

overlooked; 

 Provide the IRS information to perform business income validation through document 

analysis; and 

 Provide the IRS information to identify a business that evades its tax obligations by 

not filing or understating its income. 

This investment is projected to produce an additional 170,633 closures once new hires reach 

full potential in FY 2016.

Conduct Additional Examinations (+$13.9 million / +150 FTE)

Some underreporting discrepancies involving payment cards may require an examination of 

the return. These resources will increase the ability of the IRS to ensure that complicated 

transactions are properly reported for tax purposes and allow the IRS to address complex 

financial transactions with a specific focus on difficult accounting and tax law issues. 

This initiative requests resources to conduct additional correspondence, field, and nonfiler 

examinations. 

 Correspondence Examinations

These funds will allow the Correspondence Exam program to investigate less 

complicated cases involving payment card and securities basis reporting issues and 

address discrepancies that cannot be reconciled in a verification process. These 

resources will ensure transactions are reported properly for tax purposes and will help 

maintain adequate examination coverage of individuals and small businesses by 

closing 21,160 more cases once new hires reach full potential in FY 2016. 

 Field Examination

The improved data from filings allows the IRS to assess risks in taxpayer returns and 

deliver the returns to the field more quickly for compliance action where warranted.

The improved information will enhance the IRS’s ability to allocate resources and 

better assess the necessary scope and depth of the audits or other compliance actions. 
IRS-36

These resources will produce approximately 1,972 additional closures per year once 

new hires reach full potential in FY 2016. 

 Nonfiler Examination

The additional information reporting will enhance the IRS’s ability to detect business 

non-filers. The resources requested are estimated to produce 81,610 closures once 

new hires reach full potential in FY 2016.

Criminal Investigation (+$8.3 million / +40 FTE)

Special agents in Criminal Investigation address fraud and criminal violations that will be 

uncovered as the IRS establishes broader compliance programs related to the Merchant Card 

and Securities Basis Reporting legislation. IRS special agents will identify and investigate

individuals and business entities with indications of fraud.

IT Project – Business Master File Case Creation Nonfiler Identification Process 

(BMF CCNIP) (+$3.2 million / +13 FTE) 

This initiative requests resources to upgrade the BMF CCNIP program to target more 

nonfilers of business returns more efficiently, including previously unidentified nonfilers who 

may be delinquent in filing their required tax returns. The upgrade to the BMF CCNIP 

system will provide new capability by extending and enhancing the algorithms and datasets 

currently in use, including available State return data. This program will become the system 

where cases are created, prioritized, selected, and maintained. The enhanced system will 

increase the number of taxpayers that meet filing obligations by detecting a higher number of 

nonfilers and assigning employees to the best cases, thereby reducing the no-change rate for 

these cases. 

Other Costs (+$6.0 million / +65 FTE)

IRS Activity Cost FTE Explanation

Appeals $0.7 6

Support examination efforts on key compliance areas focused 

on improving voluntary compliance. 

Chief Counsel $1.8 14

Provide advice to revenue agents, revenue officers and the 

Department of Justice for District Court cases, review 

Notices of Deficiencies and litigate cases in the Tax Court.

Taxpayer Advocate Service $1.2 11 Handle taxpayer issues that arise from new compliance 

programs.

Wage & Investment $2.3 34

Support examination efforts by ensuring staffing to handle

downstream affect on collection, accounts management, 

and submission processing operations. 

Total $6.0 65

Dollars in Millions
IRS-37

ROI 

$36.3

$61.3

$83.9

$44.4 $43.9 $43.9

$0.0

$10.0

$20.0

$30.0

$40.0

$50.0

$60.0

$70.0

$80.0

$90.0

FY 2014 FY 2015 FY 2016

in millions

Cost Enforcement Revenue

0.8 to 1

1.9 to 1

1.4 to 1

Major Activities

Projected

Revenue

$M

Individual 

Audits

Business

Audits

Community 

Benefit 

Reviews Closures

Administering New Fees on Drug 

Manufacturers and Health Insurers 225 

Stengthen Oversight of Exempt Hospitals 1,200 1,400 

Promoting Compliance with Other New 

Provisions 83.9 900 525 1,425 

Total $83.9 900 1,950 1,400 1,425 

Address Impact of Affordable Care Act (ACA) Statutory Requirements

+$44,420,000 / +283 FTE

As the tax law changes, the IRS must 

implement programs to ensure that taxpayers 

understand the new laws and that the IRS can 

address noncompliance. Funding for this 

initiative will promote compliance activities 

related to new provisions included in the

ACA, such as new requirements for 

tax-exempt hospitals, a new fee on 

manufacturers and importers of branded 

prescription drugs, the excise tax on indoor 

tanning, and address new compliance 

responsibilities from the non-exchange related 

tax law changes. 

These resources are expected to produce 

additional annual enforcement revenue of 

$83.9 million once the new hires reach full 

potential in FY 2016, an ROI of $1.9 to $1.

Position Type/Other Costs FTE $000

Address Impact of ACA Legislative 

Requirements 212 $31,846

Administer New Fees on Drug Manufacturers 

and Health Insurers 9 $1,281

Revenue Agent 7 1,105

Manager and Analyst 2 176

Strengthen Oversight of Exempt Hospitals 44 $5,804

Revenue Agent 18 2,635

Tax Law Specialist 7 1,113

Tax Technician 14 1,361

Manager and Analyst 4 629

Support Staff 1 66

Promoting Compliance with Other New 

Provisions 125 $14,441

Revenue Agent 50 6,426

Revenue Officer 1 127

Tax Examiner 27 2,442

Tax Technician 5 718

Customer Service Representative (CSR) 20 1,761

Manager and Analyst 22 2,967

Program Management Office (PMO) 34 $10,320

Manager and Analyst 34 5,950

Contractual Services 4,370

Implement Statutorily-Mandated Data Protection 13 $3,440

Program Analyst 13 2,151

Contractor Services 1,289

Other Direct Costs 58 $9,134

Attorney 27 4,933

Appeals Officer 20 3,048

Manager and Analyst 3 383

Taxpayer Advocate Specialist 1 164

Support Staff 7 606

Total 283 $44,420
IRS-38

Affordable Care Act (ACA) Tax Law Changes (+$31.9 million / +212 FTE)

This funding will allow the IRS to address compliance issues and new responsibilities arising 

from the recent tax law changes included in the ACA. In FY 2014 the ACA Program 

Management Office (PMO) will continue to analyze and address compliance issues and new 

responsibilities for the non-exchange tax law changes and to prepare the IRS for 2014 and 

2015 exchange-related activities including compliance. These tax code changes include:

 Administer New Fees on Drug Manufacturers and Health Insurers

The IRS must continue to administer a new aggregate annual fee on businesses 

engaged in manufacturing and importing branded prescription drugs sold to specified 

Government programs. The fee, set at $3.0 billion for 2014, represents a significant 

new source of revenue. The IRS will receive and process information from 

manufacturers/importers and specific Government programs (Veterans Affairs, 

Medicare Parts D and B, Medicaid, Department of Defense, and TriCare) to determine 

each manufacturer’s fee assessment. Continuing administration includes IRS 

collection of data, computation of each entity’s fee amount, and notification of 

payment due. In addition, the IRS must administer a new annual fee on health 

insurance policies and self-insured health plans based on the average number of 

covered lives, which is effective for policy years ending after September 30, 2012. 

That fee is expected to raise more than $2.6 billion in the years 2013 to 2019 to fund 

the new Patient Centered Outcomes Research Institute. Further, the IRS must also 

establish the systems and processes needed to administer a new aggregate annual fee 

based on net premiums written by health insurance providers, set at $8 billion 

for 2014.

 Strengthen Oversight of Exempt Hospitals 

The ACA establishes new requirements for tax-exempt hospitals, which include a 

majority of the hospitals in the United States. IRS submission processing operations 

will need additional staff to process the newly required reports. In addition, the IRS is 

required to review at least once every three years the community benefit activities of 

tax-exempt hospital organizations to which new Section 501(r) applies (estimated at 

more than 3,300 hospital organizations, many with multiple facilities). The first cycle 

of community benefits activities reviews is scheduled for completion by 

December 2013. Additionally, the IRS (in consultation with the HHS) must develop 

and deliver a new annual report to the Congress on levels of charity care in the 

hospital sector. 

 Enhance Compliance with Other New Provisions 

The IRS must implement several new provisions that take effect during FY 2013. 

For example, beginning in January 2013 the IRS must administer a new tax on net 

investment income for taxpayers with an adjusted gross income over certain thresholds 

($200,000 for individual taxpayers, $250,000 for married filing joint). A second 

provision establishes an additional Medicare Tax on wages above the same thresholds, 

for which employers must implement new withholding. Existing individual and 

employer compliance processes must be modified to support implementation. 
IRS-39

In addition, the IRS must continue to promote compliance with previously 

implemented provisions of the ACA, including modifying processes in response to 

filing and compliance trends in the initial processing years. This initiative provides 

resources for additional tax examiners to detect fraud and identify and examine 

returns with the highest compliance risk. The examiners will focus on provisions 

already in effect, such as the Small Business Health Tax Credit (SBHTC) and the 

excise tax on indoor tanning services that will reach the compliance stage in 2014. 

Implement Statutorily-Mandated Data Protection (+$3.4 million / +13 FTE)

This funding will allow the IRS to provide oversight and outreach to ACA agencies, insurance 

exchanges and State and Federal agencies. It will ensure that the ACA agencies and 

insurance exchanges receiving Federal tax information are appropriately protecting Federal 

tax information and that the State and Federal agencies that are new to receiving Federal tax 

information subject to safeguard have completed the statutorily required documentation and 

are protecting the Federal tax information within their control, as required.

Disclosure of certain tax return information is necessary as part of the eligibility 

determination process for enrollment in a Qualified Health Plan (QHP) through an exchange 

(either a State-based or Federally-facilitated exchange). The IRS will continue to administer 

Internal Revenue Code 6103, Safeguarding Federal Tax Information, passed to non-IRS

recipients, which will require advance inspections, data sharing agreements, and monitoring 

by the IRS.

Other Direct Costs (+$9.1 million / +58 FTE)

IRS Activity Cost FTE Explanation

Appeals $3.0 20

Appeals case receipts will increase because of new 

Collection closures that will require adjudication in the 

appeals process.

Chief Counsel $5.5 34 Counsel will provide legal advice to identify pockets of 

noncompliance and equitable resolutions. 

Taxpayer Advocate Service $0.2 1 Staffing will handle additional case receipts.

Human Capital Office $0.4 3 Handle increased workload to hire and support staff. 

Total $9.1 58

Dollars in Millions
IRS-40

Major Activities

Projected

Revenue

$M

Individual 

Pre-Refund

Fraud

Reviews

Investigations

Completed

Prevent Identity-Related Refund Fraud 1,261.0 326,145 158

 Total $1,261.0 326,145 158

Position Type/Other Costs FTE $000

Prevent Identity-Related Refund Fraud 622 $63,791

Revenue Agent 14 1,592

Customer Service Representative (CSR) 52 4,139

CSR - Seasonal 55 3,637

Special Agent 70 14,574

Tax Examiner 307 25,827

Tax Examiner - Seasonal 60 3,564

Program Analyst 16 1,967

Investigative Analyst 9 1,213

IT Specialist 30 4,044

Manager and Support Staff 8 741

Tax Law Specialist 1 172

Training and Travel 253

Contractual Services 2,068

Enhance Revenue Protection Strategy 44 $7,318

Tax Examiner 20 1,550

Manager, Analyst, and Support Staff 24 3,168

Contractual Services 2,600

IT Projects 61 $16,613

Electronic Check Processing (ECP) and 

Dishonored Check Processing (DCP) 20 7,207

Improved Access to SSA Data 16 4,016

Electronic Fraud 8 2,195

Integrated Automated Technology (IAT) Tools 17 3,195

Other Direct Costs 123 $13,376

Taxpayer Advocate Specialist 100 10,950

Attorney 9 1,341

Paralegal 2 184

Seasonal 9 572

Support Staff 3 329

Total 850 $101,098

Improve Identification and Prevention of Refund Fraud and Identity Theft

+$101,098,000 / +850 FTE

Funding for the Improve Identification and 

Prevention of Refund Fraud and Identity 

Theft initiative supports the IRS’s efforts to 

prevent identity-related refund fraud, protect 

taxpayers’ identities and assist victims of 

identity theft, and enhance the revenue 

protection strategy implemented in FY 2012. 

It will support the development and 

implementation of technology enhancements 

to identify noncompliant returns before 

refunds are issued; manage and track 

workload and case results; send notification 

letters to taxpayers; and allow third party 

data to be used earlier in the filing season. 

This will both improve the detection of 

fraudulent returns and reduce delays of 

legitimate refunds due to pre-refund 

compliance activities.

While this initiative is not included in the 

IRS’s traditional ROI calculations, 

investment in these activities is projected to 

protect $1.3 billion in revenue, once the new 

hires reach full potential in FY 2016, a protected 

revenue ROI of $14.4 to $1. Revenue Protection 

$1,261.0

$101.1 $88.3 $87.7

$631.0

$946.0

$0.0

$200.0

$400.0

$600.0

$800.0

$1,000.0

$1,200.0

$1,400.0

FY 2014 FY 2015 FY 2016

in millions

Cost Enforcement Revenue

6.2 to 1

10.7 to 1

14.4 to 1
IRS-41

Prevent Identity-Related Refund Fraud (+$63.8 million / +622 FTE)

These resources will allow the IRS to establish fraud technical advisors at IRS campuses, 

acquire new software tools and advanced analytics to expedite determination of the legitimate 

return on a suspected identity case, and expand programs to prevent identity-related refund 

fraud, protect taxpayer identities, and assist victims of identity theft. This initiative provides 

funding for the following programs:

 Expand Identity Protection Specialized Unit (IPSU) 

The IPSU’s inventory grew from 217,000 cases in FY 2010 to more than 

959,000 cases in FY 2012. In response to the growing number of identity theft cases, 

in FY 2011, the IRS increased the number of internal reviews to identify false tax 

returns before issuing tax refunds. This increased focus on detection helped victims of 

identity theft refund schemes and has encouraged taxpayers to self-identify as identity

theft victims. The resources requested in FY 2014 will allow the IRS to answer 

64,000 more identity theft-related telephone calls and adjust 50,000 more tax accounts 

for victims or potential victims of identity theft.

 Complete Additional Manual Reviews of Tax Returns to Protect Identity Theft 

Victims 

The IRS has expanded the use of the Identity Protection Personal Identification 

Number (IP PIN) to protect victims of identity theft and prevent perpetrators from 

repeatedly victimizing the same taxpayers. The IRS also has implemented a new 

proactive processing indicator to identify and reroute fraudulent returns submitted by 

potential identity thieves for further review when it appears social security numbers 

(SSNs) of deceased taxpayers are being misused. The additional resources will allow 

the IRS to complete an additional 250,000 required manual reviews of tax returns with 

IP PIN or decedent issues.

 Expand Taxpayer Protection Unit

In FY 2012, the IRS implemented a set of filters to identify, before posting, returns 

that have a high likelihood of being identity theft returns and established an 

organization to address these returns. These resources will expand staffing for the 

Taxpayer Protection Unit. Tax returns determined to be identity theft returns will not 

post, avoiding the need for adjustments and preventing delay when the true taxpayer 

files later. The data on these returns will be archived so that if the IRS determines that 

the return was set aside in error, it will be able to process the return without delay. 

This will prevent 88,000 identity theft returns from posting, reduce post-processing 

adjustments, and protect $500 million in revenue.

 Address Identity Theft Case Backlog 

The prevention and resolution of identity theft cases is one of the highest priorities for 

the IRS. The rapid growth of tax-related identity theft has resulted in a backlog of 

more than 228,000 cases. To address this backlog and future cases, the IRS requests 

resources to increase the specialized teams dedicated to resolving identity theft cases. 

These teams will ensure that taxpayers affected by identity theft have their issues 

resolved timely and will not be burdened with the same issues from year to year. 
IRS-42

The specialized teams will address identity theft by:

o Researching thousands of taxpayer social security numbers received through 

enforcement actions to detect false tax returns;

o Resolving incidents identified through the normal process of filing tax returns;

o Improving case resolution tracking; and

o Supporting the Identity Protection PIN program to help past identity theft 

victims avoid subsequent filing issues.

 Establish an Identity Theft Clearinghouse

The IRS also will establish a specialized Identity Theft Clearinghouse in the Criminal 

Investigation (CI) Division to process, analyze, and evaluate all identity theft leads 

received from special agents in the field, other IRS organizations, and external 

sources. This unit will monitor emerging identity theft refund schemes and track 

activity using compromised identifying information to assist in preventing the release 

of fraudulent refunds. The unit also will combat organized and complex identity theft 

schemes where fraudulently obtained refunds are used to finance other illegal 

activities including narcotics trafficking.

These resources will allow the IRS to increase its participation in multi-agency task 

forces dedicated to tax administration and cooperation with State and local law 

enforcement agencies in jurisdictions where prosecutorial actions would have the 

greatest influence. The task forces will obtain information about criminal activity 

involving Federal and State tax refunds to expedite prosecution by the Department of 

Justice while the criminal activity is still ongoing. These teams will target larger-scale 

crime rings for maximum compliance results and publicity. In addition, special agents 

will extend outreach efforts to practitioners from filing season only to year-round to 

provide information and address return preparer concerns.

 Protect Federal Tax and Other Sensitive Information 

Recent legislation and data sharing agreements have added multiple State and Federal 

agencies and exchanges that are new to receiving Federal tax information. These 

agencies must complete the statutorily required documentation and protect Federal tax 

information within their control. Additional staff are critically needed to safeguard 

and effectively manage IRS documentation. 

Additional resources also will improve IRS operations to protect sensitive information 

of taxpayers and IRS employees. The IRS will continue to eliminate SSNs from 

notices, evaluate unencrypted information leaving the IRS for vulnerabilities, and 

increase employee awareness of the importance of protecting personally identifiable 

information (PII). As part of an effort to eliminate and reduce the display of taxpayer 

SSNs on IRS notices, the IRS will continue to replace the printed SSN on notices with 

a two-dimensional barcode. The IRS also has requested $7.9 million in FY 2014 to 

provide IT resources for the third phase of this multiyear effort (see the Increase

Collection Coverage initiative). 

The IRS will use a cybersecurity tool to analyze outgoing e-mail and identify those 

that contain sensitive information that is not properly encrypted. Use of this tool will 
IRS-43

increase the confidence that data leaving the IRS is properly encrypted, enhance 

protection of taxpayer information, and reduce the opportunity for identity theft and 

harm to taxpayers. The oversight of unencrypted PII leaving the IRS will allow timely 

assessment of identity theft risk or other potential harm to taxpayers. 

In addition, the IRS will utilize updated dynamic communication to educate 

employees on the protection of PII information. This will increase employee 

accountability for protecting PII, reduce the number of Unauthorized Accesses 

(UNAX) to taxpayer information, and decrease the number of data loss incidents. 

Enhance Revenue Protection Strategy (+$7.3 million / +44 FTE)

These resources will prevent fraud and abuse of refundable credits and modify the Return 

Review Program (RRP) system. 

 Revenue Protection 

The IRS continues to improve its capabilities related to preventing fraud and abuse of 

refundable credits. The IRS requests additional resources to develop alternative 

streamlined processes that will prevent the issuance of erroneous refund payments. 

The new staff will identify trends, coordinate and follow leads from banks and other 

sources, and develop recommendations on how to address the findings (i.e., issue 

taxpayer notices, modify existing systems, etc.). They also will conduct case reviews 

to validate the potential areas of abuse and pilot the new recommended procedures. 

In addition, these resources will allow the IRS to expand and expedite access to third

party income and withholding information during the filing season.

 Business Support to Optimize Use of Return Review Program 

The business support component of this initiative will ensure that the new RRP system 

meets the needs of both the compliance and criminal investigation programs. The new 

RRP supports a cross-functional approach to coordinating and addressing criminal and 

civil tax noncompliance. The RRP allows analysis and support of case processing 

needs in criminal prosecution, revenue protection, accounts management, and taxpayer 

communications. This support will ensure that RRP's new capabilities to protect 

revenue can be used by affected IRS organizations. 

IT Projects (+$16.6 million / +61 FTE)

 Electronic Check Processing (ECP) and Dishonored Check Processing (DCP)

These resources will leverage technology, such as Electronic Check Processing (ECP) 

(formerly Campus Bulk Remittance Processing) and Dishonored Check Processing 

(DCP), to improve protection of taxpayer information, enhance efficiency, and reduce 

erroneous refunds. 

ECP is a proposed system for bulk processing of paper checks in the IRS submission 

processing centers. ECP will convert current paper processing methods to electronic 

processing using high-speed scanners, modernized data capture, and imaging 

technology. Most paper checks will no longer need to be shipped to banks via 

couriers, which will ensure taxpayer PII is protected.
IRS-44

ECP also supports efforts by the Fiscal Service Bureau (FSB) to modernize cash 

management practices through the use of Electronic Fund Transfer (EFT) for all 

collections. FSB is required by law (United States Code, Title 31, Money and Finance, 

Section 37 Claims) to charge agencies for the cost of payment delays. FSB has a 

provision to collect an inefficiency charge of $1.00 per transaction not converted to 

EFT. Converting IRS payment processing to ECP would not only improve efficiency, 

but also allow the IRS to avoid potential FMS charges. 

Once the electronic check image is presented to the bank using Electronic Check 

Presentment (ECP) technology and the bank determines there are insufficient funds in 

the account to pay the check, the bank will return the electronic check image to the 

IRS. The Dishonored Check Processing (DCP) technology will allow the IRS to use 

the electronic check image to automatically post the insufficient funds debit to the 

taxpayer’s account with no manual process involved. Currently, this is a manual 

process in which the banks mail the checks back to the IRS, taxpayer accounts are 

posted manually, and the cases are assigned to Tax Examiners to research. The 

Remittance Strategy for Paper Check Conversion (RS-PCC) system technology will 

be leveraged to provide a fast, systemic transfer of insufficient fund information to the 

IRS Dishonored Check File (DCF). The use of DCP will greatly improve the IRS’s

ability to efficiently process dishonored checks and prevent erroneous refunds caused 

by invalid payments.

 Improved Access to Social Security Administration (SSA) Data

These resources will fund additional IT equipment and programming support to allow 

the IRS to get SSA Form W-2, Wage and Tax Statement, and SSA Form W-3, 

Transmittal of Wage and Tax Statement data more quickly. Getting the data more 

quickly will accelerate the verification of wages and withholding on potentially 

fraudulent tax returns and shorten the processing time for legitimate refunds. 

 Electronic Fraud

This component will allow programming to flag upfront electronically filed refund 

claims that show a higher likelihood of being fraudulent identity theft claims. This 

new programming capability is expected to result in $780 million in revenue protected 

per year.

 Integrated Automated Technology (IAT) Tools 

IAT tools are desktop productivity-enhancing tools that automate certain taxpayer 

account processing activities. Funding for IAT technical resources supports the 

design, development, and deployment of additional software tools to support 

anti-identity theft activities throughout the IRS.

IAT-developed software programs are needed to match wage and withholding 

information, automate additional taxpayer correspondence, and identify potential 

identity theft cases. These additional resources will increase IAT's capacity for 

technology development by approximately three software programs per year.
IRS-45

Other Direct Costs (+$13.4 million / +123 FTE)

IRS Activity Cost FTE Explanation

Chief Counsel $1.6 11

Provide legal assistance and analysis, respond to legal 

issues arising from implementation of strategies, support 

campus operations, and aid in the investigation and 

proving of refund fraud. 

Taxpayer Advocate Service $11.2 103 Handle additional case receipts.

Wage & Investment $0.6 9

Support examination efforts by ensuring staffing to handle 

downstream affect on collection, accounts management, 

and submission processing operations. 

Total $13.4 123

Dollars in Millions
IRS-46

Increase Audit Coverage to Address Tax Compliance Issues

+$110,935,000 / +797 FTE

Funding to Increase Audit Coverage to 

Address Tax Compliance Issues will ensure 

the IRS maintains individual examination 

coverage and that critical noncompliance 

issues are addressed effectively and 

partially restores enforcement resources to

levels found several years ago prior to large 

budget cuts. Apart from detecting 

noncompliance directly, maintaining 

examination coverage also promotes 

voluntary compliance both by increasing 

the likelihood that intentional 

noncompliance will be detected and 

reassuring compliant taxpayers of the 

fairness of the tax administration system. 

This initiative will allow the IRS to increase 

staffing levels in traditional field 

examination programs to ensure consistent 

audit coverage; expand the IRS 

correspondence examination program to 

provide focused attention on refundable 

credits; expand voluntary compliance of tax 

exempt organizations; and address 

increasing Appeals workload. This initiative 

will produce annual enforcement revenue of 

$295.6 million, an ROI of $3.2 to $1.

ROI 

$155.9

$258.6

$295.6

$110.9 $97.7 $92.8

$0.0

$50.0

$100.0

$150.0

$200.0

$250.0

$300.0

$350.0

FY 2014 FY 2015 FY 2016

in millions

Cost Enforcement Revenue

1.4 to 1

3.2 to 1

2.6 to 1

Position Type/Other Costs FTE $000

Expand Correspondence Examinations of 

Refundable Credits 314 $30,439

Revenue Agent 4 551

Tax Compliance Officer 33 3,965

Tax Examiner 225 19,715

Manager 30 4,201

Support Staff 22 2,007

Field Examination 305 $35,062

Revenue Agent 192 23,013

Tax Compliance Officer 113 12,049

Strengthen Voluntary Compliance for Tax Exempt 

and Government Entities 61 $9,006

Revenue Agent 23 3,737

Tax Compliance Officer 22 2,421

General Attorney, Technical 5 1,120

Tax Law Specialist 8 1,446

Support Staff 3 282

Address Appeals Workload 66 $8,929

Settlement Officer 46 6,100

Appeals Officer 20 2,829

IT Projects 24 $23,508

2D Barcoding 6 8,603

Document Imaging 13 9,717

Examination Technology Enhancements 5 5,188

Other Direct Costs 27 $3,991

Appeals Officer 13 1,856

Attorney 9 1,646

Paralegal 3 311

Support Staff 2 178

Total 797 $110,935

Major Activities Projected

Revenue

$M

Protected

Revenue

$M

Individual

Audits

Pre-Refund 

& Post 

Refund 

Closures

Voluntary 

Compliance 

Closures

Voluntary 

Correction 

Follow-up 

Exams

Cases 

Completed

Expand Correspondence Examinations 

of Refundable Credits 146.6 146.6 79,500 

Field Examination 130.7 16,587 

Expand Voluntary Compliance 

Opportunities 18.3 2,875 105 

Address Appeals Workload 10,600 

Total $295.6 $146.6 16,587 79,500 2,875 105 10,600 
IRS-47

Expand Correspondence Examinations of Refundable Credits 

(+$30.4 million / +314 FTE)

This component will provide additional campus examination resources to conduct 

correspondence examinations of refundable credit issues. When certain tax credits exceed the 

total tax liability, the excess is refundable and the Government incurs an outlay in the form of 

a refundable tax credit. To maximize the effectiveness of its refund compliance programs, the 

IRS established a new Return Integrity function to develop a comprehensive and integrated 

compliance strategy to administer refundable credits, improve filters to identify questionable 

credits and rapidly address refund schemes. 

Establishing an office dedicated to refundable credit work will allow the IRS to address 

noncompliance and fraud trends that emerge from existing and future refundable credits. 

Once the new hires reach full performance in 2016, the IRS will complete 39,750 more 

post-refund audits, generating annual enforcement revenue of $146.6 million. The additional 

39,750 pre-refund audits will protect an additional $146.6 million in revenue.

The additional staffing will allow the IRS to maintain broad exam coverage by meeting the 

challenges of administering new credits without reducing coverage of existing issues. 

The IRS will work both individual and small business cases related to refundable credits.

The initiative funding:

 Expedites pre-refund credit review and processing;

 Reduces the time to notify taxpayers of their eligibility for the credit; and

 Increases the number of post-refund audits. 

Field Examination (+$35.1 million / +305 FTE)

Additional Field Examination resources (192 revenue agents and 113 tax compliance officers) 

will allow the IRS to maintain balanced coverage across taxpayer segments with a focus on 

effectively addressing the individual taxpayer portion of the tax gap. Revenue agents will 

continue to concentrate on priority areas of underreporting compliance for individual 

taxpayers. These resources will ensure that the IRS can maintain broad-based coverage of the 

individual filing population.

Once the new hires reach full performance in FY 2016, this investment will produce an 

additional 16,587 closures annually.

Strengthen Voluntary Compliance for Tax Exempt and Government Entities 

(+$9.0 million / +61 FTE) 

Tax-exempt organizations, employee retirement plans, and government entities account for a 

significant share of the U.S. economy (controlling approximately $8 trillion in assets). 

While not subject to income tax, these entities are responsible for employment and excise 

taxes and must satisfy a complex set of other legal requirements. To efficiently promote 

compliance within this segment, the IRS has created a number of voluntary correction 
IRS-48

programs. These programs provide opportunities for taxpayers to voluntarily self-report and 

correct compliance failures. They allow these taxpayers to comply with Federal tax and 

reporting requirements with less burden and at less cost to the IRS than an examination. This 

request will support employment tax compliance by these entities, improve compliance within 

retirement plans, and address compliance issues resulting from the restructuring of tax exempt 

bond debts by distressed State and local governments. 

This initiative will provide opportunities for:

 Employers to voluntarily correct employment tax issues and reclassify their workers 

as employees so that their income and employment taxes are reported and withheld 

correctly; 

 Sponsors of retirement plans to voluntarily correct governmental retirement plan 

failures, prohibited transactions within retirement plans, and compliance failures in 

both Individual Retirement Arrangements (IRA) and Tax Sheltered Annuity Plans 

(also known as 403(b) retirement plans); and

 State and local governments to voluntarily correct compliance failures resulting from 

the restructuring of their tax exempt bond debt obligations, including failures relating 

to the inadvertent reissuance of tax-advantaged bonds. 

This initiative will benefit IRS taxpayers including the 6.1 million employers who pay 

$1.7 trillion in employment taxes annually, participants in retirement plans that hold nearly 

$7.8 trillion in retirement plan assets, and residents of financially distressed states and 

localities. 

In addition to protecting the retirement benefits of participants and helping State and local 

governments decrease their tax liabilities, this request will provide additional annual revenue 

of $18.3 million and will allow the IRS to complete 2,875 additional voluntary compliance 

closures and 105 additional examinations once the new hires reach full potential in FY 2016. 

Address Appeals Workload (+$8.9 million / +66 FTE) 

The Appeals function at the IRS is a critical outlet for taxpayers to get an independent, second 

review of examination decisions without burdening the court system. Appeals’ workload has 

grown significantly over the last five years, up 32 percent from FY 2007 to FY 2012. The 

IRS requests additional staff to effectively manage the increasing inventory and case receipts. 

This request will result in closure of an additional 10,600 cases in FY 2016.
IRS-49

IT Projects (+$23.5 million / +24 FTE)

 Two Dimensional (2D) Barcode project 

The 2D Barcode, Campus Bulk Remittance Processing and Modernized e-File 

enhancement projects, implemented in conjunction with increased data capture, will 

allow the IRS to:

o Provide the means to convert data from paper tax returns into electronic formats

more efficiently by adding coded information to computer-generated paper returns, 

allowing the IRS to capture the information on the return more accurately;

o Scan barcodes on computer-generated tax returns for a faster and less 

labor-intensive process than current manual data entry, which will result in fewer 

transcription errors;

o Process paper payments electronically; and

o Allow the IRS to accept and store individual amended returns electronically. 

Increased data capture and faster, more accurate processing will improve audit 

effectiveness by ensuring examination programs have the most recent and most 

complete return data available. This additional data will support improved case 

selection approaches, improve the quality of data available to tax examiners and 

revenue agents, and expedite the examination process by reducing reliance on paper 

files.

 Implement Document Imaging 

Document Imaging (DI) will allow all of the IRS business units to share a common, 

modernized infrastructure for scanning, imaging, and managing documents. DI also 

will allow IRS employees to collaborate and resolve compliance cases more 

efficiently. It will establish a common document and imaging infrastructure that can 

support many projects simultaneously and improve customer support. Projects that 

will benefit from the common document imaging infrastructure include: 

o Content Management & Collaboration (CMC) – A web-based tool used by audit 

teams to facilitate collaboration by integrating document management, forums, 

calendars, and other interpersonal communication and productivity tools; 

o Taxpayer Advocate Service Integrated Systems (TASIS) – A Taxpayer Advocate 

case management system that uses document imaging to facilitate collaboration 

within the IRS so that cases can be resolved faster for taxpayers experiencing 

financial hardship or burden; and

o Correspondence Imaging for Compliance (CIC) – An imaging solution that 

provides a central repository for imaged correspondence and stored images used 

by legacy compliance systems.

Further, this resource will improve the efficacy of search queries across applications, 

indices, and database servers by sharing server content. DI significantly reduces the 

time, complexity, and costs of current document management and imaging processes, 

and contributes to improved customer service.
IRS-50

 Examination Technology Enhancements 

The Partnership Control System (PCS) replacement system will increase productivity 

by supporting electronic processing, and the processing of larger Global High-Wealth 

and High Income High-Wealth cases by providing enhanced functionality to a wider 

range of users. Electronic processing has many advantages including:

o Improving staff efficiency by not having to physically transfer work between sites;

o Providing the capability to create and generate ad hoc reports allowing 

management to monitor inventory;

o Reducing the cost to maintain the new system; and 

o Reducing printing costs by adding the capability of storing electronic copies of 

correspondence instead of generating paper copies. 

Additionally, the IRS will invest in software tools to improve the efficiency of 

examinations and reduce the need for traditional paper records. 

Other Direct Costs (+$4.0 million / +27 FTE)

IRS Activity Cost FTE Explanation

Appeals $1.9 13

Appeals case receipts will increase by new examination closures 

completed by initiative hires that will require adjudication in the 

appeals process.

Chief Counsel $2.1 14

Counsel will litigate cases, provide technical guidance, address the 

use of trusts and aggressive estate planning techniques, and 

resolve issues involving employment taxes to partners and 

employees of pass-through entities.

Total $4.0 27

Dollars in Millions
IRS-51

Position Type/Other Costs FTE $000

Automated Collection Systems Operations 257 $20,356

Tax Examiner 29 2,440

Customer Service Representative 225 17,577

Support Staff 3 339

Compliance Services Collection Operations 150 $14,467

Tax Examiner 128 12,356

Support Staff 22 2,111

Centralized Offers in Compromise 154 $13,023

Tax Examiner 116 9,610

Support Staff 38 3,413

IT Projects $10,968

Compliance Data Warehouse 3,868

Eliminate SSN from Taxpayer Mailings 7,100

Other Direct Costs 12 $1,660

Attorney 2 371

Revenue Officer 9 1,199

Support Staff 1 90

Total 573 $60,474

Major Activities

Projected

Revenue

$M

TDA 

Closures

TDI 

Closures

Calls 

Answered Closures

Compliance Service Collection Operation 429.3 120,670 19,587 422,500 21,664 

Centralized Offers in Compromise 67.0 15,352 

Total $496.3 120,670 19,587 422,500 37,016 

ROI 

$221.5

$397.0

$496.3

$60.5 $53.6 $53.3

$0.0

$100.0

$200.0

$300.0

$400.0

$500.0

$600.0

FY 2014 FY 2015 FY 2016

in millions

Cost Enforcement Revenue

3.7 to 1

9.3 to 1

7.4 to 1

Increase Collection Coverage

+$60,474,000 / +573 FTE

Funding to Increase Collection Coverage 

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 and partially restores 

enforcement resources to levels found 

several years ago prior to large budget cuts. 

This initiative includes staffing to address:

 Growing collection case inventories 

and incoming call volumes in the 

Automated Collection Systems 

(ACS);

 Balance due correspondence and 

phone work and installment agreement 

calls in the Compliance Services 

Collection Operation (CSCO) Program; 

and

 Increased workload in the Offers in 

Compromise (OIC) Program, which 

helps taxpayers experiencing economic 

hardship resolve their tax liabilities.

This initiative will produce additional annual

enforcement revenue of $496.3 million, an 

ROI of $9.3 to $1.
IRS-52

Automated Collection Systems (ACS) Operations (+$20.4 million / +257 FTE)

These funds will allow the IRS to address growing collection case inventories and call 

volumes by expanding the ACS program to address the underpayment and non-filing portions 

of the tax gap, estimated at $74 billion. 

The ACS is a call site operation and is the most productive IRS program for revenue 

collection. The ACS inventory has increased 7 percent from FY 2011 to FY 2012. These 

ACS resources will address the growing workload generated by increased balance due and 

delinquent return notices and the expansion of the international examination program. 

Additional resources also will allow ACS to address the increased volume of correspondence 

from taxpayers seeking alternative resolutions to their accounts, reducing processing delays 

that generate additional taxpayer calls and rework.

In FY 2016, this investment is projected to address an additional 120,670 tax delinquent 

accounts (TDA) and 19,587 tax delinquent investigations (TDI).

Compliance Services Collection Operations (CSCO) (+$14.5 million / +150 FTE)

These funds will allow the IRS to expand CSCO to address non-filing and underpayment of 

taxes in the notice process by addressing the increased balance due work and expanding the 

following programs: 

 Withholding Compliance Program (WHC) – This automated program brings taxpayers 

with serious under-withholding problems into compliance by correcting their Federal 

income tax withholding and prevents them from becoming delinquent on the payment 

of future taxes by issuing a letter requiring the employer to withhold a specific, 

appropriate amount from the taxpayer’s pay. During a five-year period from Tax Year 

2006 to 2010, the number of balance due returns from taxpayers in the current WHC 

program decreased 64 percent and returns with a zero balance or refund increased 

246 percent. These resources will allow the IRS to add an additional 90,000 taxpayers 

to the WHC program. 

 Non-Streamlined Installment Agreement (NSIA) Phones – By increasing the number 

of balance due calls answered by CSCO, particularly in the case of NSIA calls, the IRS 

will resolve taxpayer tax matters more efficiently. The NSIA phone line, worked by 

CSCO employees, replaces a paperwork handoff from Accounts Management to 

CSCO with a telephone process that evaluates taxpayer Currently-Not-Collectible and 

NSIA requests sooner. By eliminating the handoff and processing delays, 

time-sensitive collections can begin sooner. With these resources, by FY 2016, the 

IRS will answer an estimated 422,500 NSIA calls.

Centralized Offers in Compromise (OIC) (+$13.0 million / +154 FTE)

The Offers in Compromise (OIC) program processes taxpayer requests to reduce or eliminate 

their tax liabilities because of extreme circumstances or hardship. In addition to changes 

made to the offer process in 2009, the IRS continues to focus on assistance to unemployed 

taxpayers, understanding their struggle to pay past and present liabilities in which has 
IRS-53

contributed to the continued increase in COIC requests. COIC receipts have increased 

30 percent since FY 2008 while staffing has declined slightly. As a result, the percentage of 

cases closed within six months has decreased from 92 percent in December 2008, to 

62 percent in December 2011. Further enhancements to the offer program will encourage 

more unemployed taxpayers to file a COIC in an effort to settle their tax debts. These 

resources will allow the IRS to help taxpayers experiencing hardship resolve their tax 

liabilities. 

IT Projects (+$11.0 million / 0 FTE)

 Compliance Data Warehouse 

These funds will allow the IRS to purchase hardware and storage capacity to expand 

the data available from the Compliance Data Warehouse. The purpose of the 

Compliance Data Warehouse is to provide high-quality data and information services 

to the IRS Research community in support of projects, analyses, and studies related to 

tax administration, enforcement, and customer service, including analysis of the 

collection stream to improve effectiveness, treatment selection, and segmentation of 

the delinquent taxpayer population. This additional data will facilitate new studies to 

improve the effectiveness and productivity of IRS service and enforcement programs. 

 Eliminate Social Security Number (SSN) from Taxpayer Mailings 

These funds will provide resources for the third phase of a multiyear effort to 

implement the social security number (SSN) Elimination and Reduction 2D Barcoding 

project. This project consists of the creation and application of a 2D barcode on 

outgoing individual taxpayer notices and the elimination and reduction of the SSN. 

Funding will provide resources for software, infrastructure, and other related support.

This project is being implemented in three phases. Phases I and II will reduce the 

display of social security numbers (SSNs) on notices. Phase III will reduce the display 

of SSNs on notices requesting a payment from the taxpayer, print barcodes on 

additional outgoing notices, and will create a system that reads 2D barcodes in the 

payment processing systems. In addition, the third phase will reduce the use of SSNs 

on 85 notice types, eliminating the use of SSNs on notices to 74.1 million taxpayers. 

Overall, this project will reduce the use of SSNs on 155 notice types, eliminating the 

use of SSNs on notices mailed to 106.6 million taxpayers. 

The IRS is required to eliminate unnecessary collection, use, and display of SSNs 

within systems, programs, notices, letters, and forms to comply with the Office of 

Management and Budget (OMB) mandate as described in OMB M-07-16, 

Safeguarding Against and Responding to the Breach of Personally Identifiable 

Information. Safeguarding Personally Identifiable Information (PII) in the possession 

of the Government is essential to ensure that the Government retains the trust and 

confidence of the American public. 
IRS-54

Other Direct Costs (+$1.6 million / +12 FTE)

IRS Activity Cost FTE Explanation

Appeals $1.2 9

Appeals case receipts will increase because of new 

Collection closures that will require adjudication in the 

appeals process.

Chief Counsel $0.4 3

Counsel will provide legal advice to identify pockets of 

noncompliance and equitable resolutions. 

Total $1.6 12

Dollars in Millions
IRS-55

Position Type/Other Costs FTE $000

Global High-Wealth 242 $33,965

Revenue Agent 172 28,089

Tax Examiner 32 2,451

Program Analyst 38 3,425

Total 242 $33,965

Major Activities

Projected

Revenue

$M

Individual

Audits

Business

Audits

Global High-Wealth 368.9 126 177

 Total $368.9 126 177

Expand Coverage of High-Wealth Individuals and Enterprises

+$33,965,000 / +242 FTE

Funding to Expand Coverage of High-Wealth 

Individuals and Enterprises continues the 

IRS’s efforts to focus on high-wealth taxpayers 

by increasing risk identification, case building, 

and examination capabilities. High-wealth 

individuals frequently operate complex 

enterprises consisting of multiple, interrelated 

businesses and flow-through entities that often 

have international components. The IRS takes

a unified look at the entire web of business 

entities controlled by high-wealth individuals 

to better assess the risks of noncompliance. 

This initiative allows the IRS to:

 Conduct examinations of high-wealth 

individuals and related entities;

 Refine a risk assessment process for global 

high-wealth enterprises;

 Examine highly complex returns to address the noncompliant entities; and 

 Address noncompliance stemming from 

multi-jurisdictional tax evasion schemes.

This initiative will produce additional annual enforcement revenue of $368.9 million once the 

new hires reach full potential in FY 2016, an ROI of $13.4 to $1. 

This request will increase coverage of the global high-wealth (GHW) taxpayer population. 

The IRS takes a multifaceted approach to address the high-income, high-wealth population to 

understand better the entire economic picture of the enterprise controlled by the wealthy 

individual and assess tax compliance. This initiative will:

 Improve identification of the GHW population;

 Enhance understanding of the complex strategies used by the GHW population;

 Increase coverage of high-income, high-wealth individuals;

ROI 

$176.3

$243.0

$368.9

$34.0 $29.6 $27.6

$0.0

$50.0

$100.0

$150.0

$200.0

$250.0

$300.0

$350.0

$400.0

FY 2014 FY 2015 FY 2016

in millions

Cost Enforcement Revenue

5.2 to 1

8.2 to 1

13.4 to 1
IRS-56

 Increase coverage of flow-through entities (including partnerships, trusts and 

subchapter S corporations), individuals engaged in multinational transactions, 

foundations, and other related entities;

 Expand issue identification and coverage of international structures and cross-border 

transactions;

 Improve compliance with Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA)

procedures;

 Increase specialized expertise in conducting enterprise examinations;

 Improve identification of issues involving enterprise structures; and

 Improve coverage of international transactions involving offshore accounts and 

entities.

Other Direct Costs

There are no other direct costs associated with this initiative.
IRS-57 Major Activities

Projected

Revenue

$M

Individual 

Closures

Flow 

Through 

Closures

Improve Coverage of Partnerships and 

Flow-Through Entities 293.0 691 1,597 

 Total $293.0 691 1,597 

Improve Coverage of Partnerships and Flow-Through Entities

+$45,013,000 / +320 FTE

Partnership businesses continue to be the 

fastest growing segment of all tax returns 

filed. Funding to Improve Coverage of 

Partnerships and Flow-Through Entities will 

increase identification and audit coverage of 

partnerships and flow-through entities. This 

initiative will:

 Increase identification and coverage 

of controlled partnerships and related 

entities;

 Increase the number of auditors with 

specialized knowledge in partnership 

law; and

 Strengthen enforcement activities 

relating to flow-through entities and 

improve compliance by enhancing 

Tax Equity and Fiscal Responsibility 

(TEFRA) procedures.

This initiative will produce additional annual enforcement revenue of $293.0 million, once the 

new hires reach full potential in FY 2016, an ROI of $7.7 to $1. 

ROI 

$45.0 $40.1 $38.0

$136.3

$191.3

$293.0

$0.0

$50.0

$100.0

$150.0

$200.0

$250.0

$300.0

$350.0

FY 2014 FY 2015 FY 2016

in millions

Cost Enforcement Revenue

3.0 to 1

4.8 to 1

7.7 to 1

Position Type/Other Costs FTE $000

Improve Identification and Coverage of 

Partnerships and Flow-Through Entities 161 $28,708

Revenue Agent 139 26,292

General Attorney, Technical 5 1,003

Tax Examiner 4 306

Program and Management Analyst 6 552

Management Assistant and Support Staff 7 555

Strengthen Enforcement Activities Related to 

TEFRA Workload 107 $9,165

Revenue Agent 8 1,134

Tax Examiner 71 5,594

Tax Technician, Tax Compliance Officer 1 116

Manager 2 199

Support Staff 25 2,122

Other Direct Costs 52 $7,140

Appeals Officer 21 2,881

Attorney 13 2,419

Revenue Agent 8 952

Tax Examiner 5 428

Paralegal 2 207

Counsel, Support Staff 3 253

Total 320 $45,013
IRS-58

There is a wide variety of business organizations operating in the United States and abroad 

with different filing requirements. These organizations include businesses, including sole 

proprietors, corporations, partnerships, and S-corporations, as well as trusts and non-profits. 

Partnership businesses continue to be the fastest growing segment of all tax returns filed.

In calendar year (CY) 2011, approximately 3.5 million partnership returns were filed, an 

increase of 2 percent from CY 2010. This growth is projected to continue at an average rate 

of 2.2 percent per year, reaching 3.9 million by CY 2016.

The most significant factor affecting the growth in partnerships is the rise of limited liability 

companies (LLCs) filing as partnerships. Over the last 20 years, the number of pass-through 

LLCs rose from virtually zero to more than 600,000 in 2000 and almost 2.0 million by 2009. 

Over the same period, business receipts reported by LLCs as a portion of all business receipts 

increased from zero to 8.2 percent. This increase corresponds to an ongoing decline in the 

business activity of corporations, some of which has shifted to partnerships they control.

While the number and complexity of partnership filings have increased significantly since 

2000, audit coverage for this segment has remained flat. The IRS has examined an average of 

0.34 percent of all partnership returns annually since 2000. With few exceptions, the 

percentage of partnership returns examined each year has been lower than other types of tax 

returns. This initiative provides resources to increase coverage of partnership returns. 

Number of Domestic Partnerships by Partnership Type 

Tax Years 2000 through 2009

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

2,000,000

2,200,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Tax Year

Number of Partnerships

General Partnerships Limited Liability Companies Other [1]

Limited Partnerships Limited Liability Partnerships

[1] Data for "Other" partnerships include foreign partnerships, as well as partnerships which 

checked the "Other" box, Form 1065, Schedule B, line 1, Type of Entity, or did not check a box.
IRS-59

Improve Identification and Coverage of Partnerships and Flow-Through Entities

(+$28.7 million / +161 FTE)

This initiative funds additional revenue agents to be devoted solely to working partnership

cases, and as appropriate, other flow-through returns that are part of this network of returns. 

This will allow the IRS to increase the number of revenue agents with specialized knowledge 

in partnerships, and to address the inherent complexity associated with partnership tax law 

and administrative procedures. 

Multiple layers of partnerships have increased the complexity of flow-through examinations. 

Subchapter K of the Internal Revenue Code provides specific rules applicable to the tax 

treatment of partnerships and partners. Because of the controlled networks of partnership 

enterprises, it creates a significant challenge for the IRS to understand, recognize and address 

risk, and treat noncompliance. For partnerships filed in 2007, 72.1 percent were members, 

partners or shareholders of pass-through entities or had partners that were pass-through 

entities. 

This complexity requires a disproportionate amount of time and effort for a revenue agent to 

understand − even one who is sophisticated in tax matters with many years of experience in 

the tax field. It also provides an opportunity for taxpayers who pursue tax-sheltering 

activities and has inspired many of the most abusive transactions in recent history. In 

addition to the complexities associated with Subchapter K, revenue agents also must deal with 

procedural complexity and difficulties associated with complex networks of related 

partnerships. This IRS-wide effort to address noncompliance by controlled partnerships will 

allow the IRS to:

 Enhance IRS-wide collaboration leading to efficiency and effectiveness in addressing 

compliance by controlled partnerships and related persons and entities;

 Identify high-risk workload for examination by developing processes that allow the 

scoring and risk assessment of partnerships controlled by corporations and related 

individuals; and

 Improve taxpayer compliance in high-risk related return structures comprised of 

multi-tiered controlled partnerships through issue-focused examinations by expert 

partnership examiners. 

Strengthen Enforcement Activities Related to TEFRA Workload (+$9.2 million / +107 FTE)

The Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) established unified audit 

rules applicable to all but certain small partnerships. The TEFRA audit rules add an entire 

subchapter to the Internal Revenue Code and consist of thirteen intertwined sections and 

extensive accompanying Treasury regulations.

Revenue agents handling partnership cases must understand both the TEFRA partnership 

audit rules and the normal audit rules that apply outside the partnership context. It is not 

always clear when TEFRA rules apply and when they do not. Tax shelter promoters have 

been known to take advantage of the complex TEFRA rules through the use of a combination 

of trusts, S corporations, limited liability companies, partnerships and other entities, often 
IRS-60

arranged in complex networks, for the tax benefit of a single investor or a small group of 

investors. This deliberate addition of complexity can hamper IRS efforts to pursue investors 

in abusive transactions. While the IRS has made progress in training examiners in the 

TEFRA rules, maintaining TEFRA proficiency among non-specialist revenue agents is an 

ongoing challenge. 

This initiative strengthens enforcement activities pertaining to flow-through entities and 

improves compliance by enhancing procedures. The additional resources will provide 

administrative assistance to the field examiners to identify the interrelated and tiered entities 

and provide notice requirements to investors within timeframes. 

Other Direct Costs (+$7.1 million / +52 FTE) 

IRS Activity Cost FTE Explanation

Appeals $4.2 34 Support examination efforts on key compliance areas 

focused on improving voluntary compliance. 

Chief Counsel $2.9 18

Provide advice to revenue agents, revenue officers and the 

Department of Justice for District Court cases, review 

Notices of Deficiencies and litigate cases in the Tax Court.

Total $7.1 52

Dollars in Millions
IRS-61 Major Activities

Preparer

Visits

Investigations

Completed

Enforce Tax Return Preparer Compliance 2,000

Pursue Tax Return Preparer Fraudulent Activity 44

 Total 2,000 44

Build Out Tax Return Preparer Compliance Activities

+$18,315,000 / +124 FTE

Funding to Build Out Tax Return Preparer 

Compliance Activities will improve taxpayer 

compliance and the accuracy of returns filed 

by tax professionals; protect taxpayers by 

establishing a registered community of tax

professionals; and foster a 

stakeholder-driven culture that encourages 

voluntary compliance. With this request, the 

IRS will ensure uniform, high ethical 

standards of conduct for tax preparers by 

enforcing preparer compliance with IRS 

rules, increasing preparer examinations, and 

monitoring and pursuing preparers engaged 

in fraudulent activities, including noncompliant Earned Income Tax Credit (EITC) return 

preparers. This initiative is core to the IRS tax gap strategy and will ensure the IRS’s ability 

to deliver high-priority, preparer-related enforcement activities. 

Key activities and deliverables of this initiative include deploying a coordinated return 

compliance strategy by:

 Developing techniques to detect return preparer errors;

 Coordinating return preparer enforcement actions; 

 Prioritizing activities through a return preparer enforcement work plan;

 Updating detection tools and selection logic; and

 Determining effective measurement strategies.

Position Type/Other Costs FTE $000

Enforce Tax Return Preparer Compliance 79 $10,765

Revenue Agent 60 8,946

Tax Examiner 6 460

Tax Compliance Officer 4 410

Revenue Officer 2 226

Analyst 1 147

Manager 1 201

Support Staff 5 375

Pursue Tax Return Preparer Fraudulent Activity 25 $5,096

Special Agent 24 4,997

Analyst 1 99

Enforce Ethical Standards of Conduct for 

Practitioners 20 $2,454

Analyst 20 2,454

Total 124 $18,315
IRS-62

Enforce Tax Return Preparer Compliance (+$10.8 million / +79 FTE)

Given the important role that tax return preparers play in federal tax administration, the IRS 

has a significant interest in identifying tax return preparers and monitoring their tax return 

preparation activities. These funds allow the IRS to deploy a coordinated return preparer 

compliance strategy by conducting on-site visits and investigating suspicious activity, 

especially of abusive return preparers. 

The IRS identifies preparer cases through programs and referrals from field staff, taxpayers, 

and Criminal Investigation (CI). Revenue agents and special agents conduct preparer audits 

and visits. Specific planned program activities are:

 Coordinated Compliance Strategy 

IRS field revenue agents and CI special agents will conduct visits to return preparers 

where there are compliance-related concerns. Providing adequate resources will 

ensure that these visits can be conducted without pulling resources from other 

high-value compliance activities.

 Dedicated Return Preparer Campus Groups

Where the IRS has identified noncompliance among return preparers, administrative 

resources are needed to review the returns of the clients of those preparers and 

determine the appropriate penalty amounts. 

Pursue Tax Return Preparer Fraudulent Activity (+$5.1 million / +25 FTE)

These funds provide resources for CI to form multi-agency taskforces dedicated to tax 

administration by seeking prosecution at the State and Federal levels to prevent fraudulently 

obtained refunds (refundable credits are a large percentage) from financing and supporting 

criminal activity in some areas of the country. Special agents will conduct outreach efforts 

that address return preparer concerns while working with State taxing agencies to leverage 

resources and seek prosecution at both the Federal and State levels as appropriate. 

These teams will target larger-scale crime rings for maximum compliance results and 

publicity. 

Enforce Ethical Standards of Conduct for Practitioners (+$2.4 million / +20 FTE)

This initiative addresses the growth in the population of practitioners who will become subject 

to the ethical standards contained in Circular 230 as a result of expanding the definition of 

practice to include return preparation. This additional staffing will handle conduct cases and 

the associated appeals, conferences, allegations, negotiations, administrative hearing 

preparation, and support the return preparer regulatory recommendations.

Other Direct Costs

There are no other direct costs associated with this initiative.
IRS-63

Revenue Enhancement 

$0.0

$63.2

$75.7

$51.7 $50.2 $50.0

$0.0

$10.0

$20.0

$30.0

$40.0

$50.0

$60.0

$70.0

$80.0

FY 2014 FY 2015 FY 2016

in millions

Cost Enforcement Revenue

0.0 to 1

1.3 to 1

1.5 to 1

Leverage Data to Improve Case Selection

+$51,701,000 / +227 FTE

Funding Leverage Data to Improve Case 

Selection will provide the resources to leverage 

technology to improve data accessibility and 

usability for better case selection, issue 

identification, and treatment assignment. 

Taxpayer behavior, including noncompliant

behavior, is constantly changing. The IRS must 

adapt quickly to changing taxpayer behavior to 

prevent fraud and tax code misuse.

This initiative will: 

 Significantly increase the digital 

availability of tax return information;

 Create an analytical computing and data testing

environment to allow the IRS to identify 

taxpayer behavioral changes more quickly and 

test compliance responses promptly; and

 Optimize compliance case identification 

and treatment assignment to increase 

effectiveness while reducing risk and costs.

Improved use of analytics will increase revenue 

collection and, while this is not included in the IRS’s 

traditional ROI calculations, this initiative is projected

to increase revenue by $75.7 million in FY 2016, an 

ROI of $1.5 to $1.

Improve Data Availability (+$24.8 million / +199 FTE)

These resources allow the IRS to increase the data available for research and analysis by 

funding the following three projects:

 Enhance Electronic Data Capture 

While the rate of electronic filing continues to increase, the IRS will continue to 

receive some tax returns on paper. These resources provide staffing to transcribe data 

as well as programming enhancements to allow existing systems to accept the 

additional transcribed data. The additional data transcription will include form types 

and data that will generate the greatest return on investment.

Position Type/Other Costs FTE $000

Improve Data Availability 199 $24,750

IT Specialist 35 5,480

Data Transcriber 164 9,742

Contractual Services 9,528

Design and Pilot New Ways to Identify & 

Prioritize Cases 13 $10,149

Data Analyst 10 1,624

IT Specialist 3 525

Hardware & Software Acquisition 5,000

Contractual Services 3,000

Optimize Case Selection and Assignment to 

Appropriate Treatment Streams 15 $16,802

IT Specialist 15 2,302

Hardware & Software Acquisition 9,000

Contractual Services 5,500

Total 227 $51,701
IRS-64

 Allow Electronic Filing of Three Employee Retirement Income Security Act (ERISA) 

Information Returns

Currently, taxpayers must use different means and go to different Government 

agencies to file employee plan returns depending on the type of form they are filing, 

placing an undue burden on taxpayers. Unlike other Form 5500 series returns, which 

are filed electronically with the Department of Labor (DOL), Form 5500-EZ, Annual 

Return of One-Participant Retirement Plan, is filed with IRS either on paper or 

through the IRS Filing Information Returns Electronically (FIRE) system. These 

resources will consolidate electronic filing of Form 5500-EZ and two other retirement 

plan-related forms on DOL’s EFAST2 platform. Allowing retirement plan-related 

forms to be filed in one, electronic location will improve taxpayer service, improve 

case selection, and reduce processing and transcription errors. 

 Expand the Compliance Data Environment (CDE) and the Modernized Taxpayer 

Return Database (MTRDB) to include all e-filed data and make it accessible for 

research and identification of emerging trends

Analysis of e-filed data will allow the IRS to develop appropriate compliance 

strategies. The MTRDB is a database of all tax returns used for case selection 

purposes. The MTRDB improvements will make all e-File return data available and 

accessible. Campus and field personnel will be able to replicate complete copies of 

e-filed returns as needed, relieving taxpayers who e-file from the burden of providing 

copies of prior-year returns for an examination.

Design and Pilot New Ways to Identify and Prioritize Cases (+$10.1 million / +13 FTE) 

This initiative provides resources to develop an analytical computing and data-testing 

environment that will allow the IRS to rapidly analyze and apply data extracts and third party 

data to evolving compliance programs. To do this, the IRS must develop an analytical 

computing environment to test this technology before full implementation and deployment. 

Once completed, this technology will enhance the IRS’s ability to study the most difficult tax 

administration challenges. Experiments conducted in this analytical computing environment 

will assist the IRS in quantifying proposed changes to processes and policies. 

Taxpayer behavior, including noncompliant behavior, is constantly changing. These resources 

will allow the IRS to identify changing taxpayer behavior quickly to prevent fraud and tax 

code misuse. Currently much of the IRS's data analysis takes place several years after the 

returns are filed. Analyzing data that is more current would increase awareness of emerging 

fraudulent behaviors. 

The IRS will conduct pilot testing of new case selection methods. Pilot tests as part of 

carefully designed studies allow the IRS to test new hypotheses, processes, and procedures 

under rigorous methods designed to measure and assess the results. The results of the pilots 

will provide the data to determine the benefits from tested changes and allow leadership to 

make informed decisions about implementing new concepts. 
IRS-65

Optimize Case Selection and Assignment to Appropriate Treatment Streams 

(+$16.8 million / +15 FTE) 

This initiative will provide the flexibility to redirect casework to functions that can handle it 

most effectively or to functions with available capacity. Developing new business rules will 

allow the most efficient selection and distribution of cases into the most effective enforcement 

activity. Once cases complete their cycle, data visualization will allow for comparison of the 

effectiveness of the treatment streams. 

The ability to adapt to the changing compliance environment and to address a changing 

noncompliant population depends on new business and technology models for case selection, 

issue identification and case treatment/assignment. The new business and technology models 

will support the organization across individual business units. Currently, IRS compliance 

tools are focused on individual business units with inadequate linkage across the operating 

boundaries of the organization. Moving to these new models requires integration and 

development of common business services. This investment in business tools 

(e.g., rules-based engines, statistical analysis packages and data visualization) will enhance 

secure data access across the IRS organization and provide a common process by which to 

identify cases in production.

Other Direct Costs 

There are no other direct costs associated with this initiative.

Leverage Digital Evidence for Criminal Investigation (CI)

+$4,539,000 / +8 FTE

Funding to Leverage Digital Evidence for 

Criminal Investigation (CI) will automate 

current CI processes by implementing a 

virtual digital evidence processing

environment. This will allow the IRS to 

expedite and enhance the analysis of

electronic data by special agents, computer 

investigative specialists, and other investigative staff assigned to an investigation. 

By using these virtual machines, agents will be able to analyze and sanitize contaminated or 

unknown third party data more efficiently before moving it to the CI network. This new 

secure workspace also will allow agents to call in support from forensic specialists or other 

remote agents without incurring travel costs. 

In FY 2013, the IRS has a limited production virtual digital evidence-processing environment. 

A number of CI cases are currently housed on the environment being monitored by the 

e-Crimes Lab in Alexandria, Virginia. CI case agents and computer investigative specialists 

access the system to review electronically seized digital information. The funding for 

FY 2014 will allow the IRS to expand this environment to all agents nationwide and provide a 

computer forensic analysis platform for IRS.

Position Type/Other Costs FTE $000

Leverage Digital Evidence for Criminal 

Investigation 8 $4,539

Analyst 7 944

IT Specialist 1 156

Rent, Communications and Utilities 3,143

Contractual Services 296

Total 8 $4,539
IRS-66

Other Direct Costs

There are no other direct costs associated with this initiative.

Implement IT Changes to Deliver Tax Credits and Other Requirements

+$305,645,000 / +722 FTE

Funding to Implement IT Changes to Deliver 

Tax Credits and Other Requirements will 

allow the IRS to implement the new tax law 

provisions contained in the Affordable Care 

Act (ACA) (Public Law 111-148). While the 

Department of Health and Human Services is

responsible for the health care policy and insurance provisions in the legislation, the IRS 

administers the various provisions related to tax administration. There are more than 

45 specific tax provisions and numerous cross-agency sections. Many of these involve new 

technology systems or modifications to existing operational systems. Funding will support 

investments in new technology (infrastructure and applications) and major modifications to 

existing IRS tax administration systems. 

The IRS IT organization is currently supporting five major releases scheduled for 

implementation over the next several years. Some provisions are highly complex and require 

multiple projects and systems to address them. Some of the work these project teams are 

doing includes building and implementing systems infrastructure; developing new IT systems 

and applications; implementing security accreditation; testing and evaluating applications; 

working integration components; modifying existing systems; and maintaining systems in 

operations and maintenance mode once production activities are complete. 

This effort requires implementing new technologies and complex systems changes to current 

operational systems. This IT initiative will support implementation of the following:

 New premium assistance tax credit claimed on individual tax returns filed in 2015; 

 New penalties related to individual and employer responsibility provisions; 

 New Insurance Provider Fees; 

 New information reporting requirements for Federal and State exchanges, certain large 

employers, and insurance issuers; and 

 Changes to the rules for small business tax credit for employers. 

Much of the IRS IT work will support the new Health Exchange system. This IT initiative 

will support the following: 

 An exchange eligibility process for financial assistance by providing income and 

family size information from recent tax returns;

 Ensuring the safeguarding of Federal tax information provided to non-IRS entities;

Position Type/Other Costs FTE $000

Implement IT Changes to Deliver Tax Credits 

and Other Requirements 722 $305,645

IT Specialists 722 105,361

Contractor Services 200,284

Total 722 $305,645
IRS-67

 Processing tax returns claiming premium tax credits and reconciling advance 

payments; 

 Administering the individual and employer coverage responsibility provisions; and 

 Administering information reporting requirements for exchanges, insurers, and large 

employers.

The IRS will implement requirements through development of new systems and changes to 

approximately 80 current production systems across all submission, fraud, and compliance tax 

administration process areas to receive, validate, and process individual and business tax 

returns. These efforts will facilitate prompt and accurate application of the premium tax 

credit to eligible citizens while protecting against erroneous and potentially fraudulent tax 

credit claims. Components of the investment include: 

 Building and maintaining a tax data repository (database) to store data about 

household-level income that will help determine eligibility for and reconciliation of 

the premium tax credit. Also, the database will store periodic data received from the 

Federal and State exchanges which will be used to validate individual claims for 

premium tax credit, and ACA-related information returns data. 

 Building and maintaining new IT systems and infrastructure components to validate 

household income, conduct consistency checks, calculate estimated penalties and 

payments, and determine the amount of advance payments of premium tax credit a 

recipient should receive during the coverage year and before taxes are filed. 

 Building and maintaining new IT systems and infrastructure to take in and process 

new forms and schedules (information reports) from Federal and State exchanges, 

insurance providers, and employers. 

 Updating existing IT systems to indicate employers who are eligible to claim the small 

business health care credit as well as updating existing IT systems, such as Account 

Management Services, to maintain/access account information and provide notices 

and letters to taxpayers as required by law, and providing customer service through 

telephone and self-service applications. 

 Integrating new information reporting into current IT systems to allow data to be 

processed effectively and posted to the Information Returns Master File. 

 Modifying and updating tax account systems to assess and collect penalties and fees, 

such as the Individual and Employer Responsibility Requirement Payment. 

 Expanding tax account and case management systems to respond to taxpayer inquires. 

 Modifying compliance systems to detect potential fraud and noncompliance activities 

associated with the refundable credits.

This initiative will fund the significant revisions to existing tax administration systems and 

invest in building and maintaining the new technology necessary to implement new tax law 

provisions contained in the ACA.
IRS-68

Other Direct Costs

There are no other direct costs associated with the initiative. 

Develop New Online Services

+$24,059,000 / +37 FTE

Funding to Develop New Online Services 

will deliver new online products and 

services on IRS.gov, which will simplify 

the taxpayer online experience, facilitate

self-service transactions, and meet 

increasing taxpayer demands for more 

online and self-service applications. To 

keep up with the ever-changing state of web 

technology, the IRS must develop online 

capabilities and deliver new online services 

to taxpayers, tax practitioners, and internal IRS stakeholders. These funds will improve IRS 

infrastructure and capabilities while delivering new services. This initiative will provide a 

number of strategic and operational benefits such as:

 Protection and prevention of improper access to taxpayer information (Fraud/Identity 

Theft);

 Self-service applications for the taxpayer that do not exist today including applications 

related to Power of Attorney (PoA), Online Payment Agreements/Installment 

Agreements, viewable eTranscripts, and/or Automated Underreporter (AUR) tools;

 Redirect live assistance to resolving more complex taxpayer issues by deflecting 

potential callers with simpler issues to an expanded suite of online self-service 

tools; and

 Efficiencies for IRS operations in paper handling (e.g., Collaborative Browsing/Web 

Chat, the availability of more online self-service tools and the ability for authorized 

practitioners to reduce or eliminate rejected e-filed returns by verifying business 

names through the use of a four-digit identifier).

By providing information and transactional applications on the web, the IRS will promote 

voluntary compliance, reduce taxpayer burden, and improve overall taxpayer satisfaction. 

Online service initiatives are categorized across five taxpayer “touch points,” including:

 Get Tax Information;

 Access Account;

 File/Submit Forms;

 Get Refund/Make Payment; and

 Correspond/Interact.

Position Type/Other Costs FTE $000

Develop a New Suite of Online Self-Service 

Options on IRS.gov 24 $17,913

Program Analyst 24 3,180

Contractual Services 14,733

Develop a New Suite of Online Self-Service 

Options for Practitioners 13 $6,146

Program Analyst 5 740

IT Specialist 8 947

Contractual Services 4,459

Total 37 $24,059
IRS-69

Certain online applications are already available but are limited in scope to specific taxpayer 

segments. The focus of the online service efforts is to expand these services to a broader 

audience and create new online services, as appropriate. 

Successful delivery of new online services requires the IRS to fully staff critical IT functions 

that include product management, user experience design, information architecture, content 

development, and editorial content. 

Develop a New Suite of Online Self-Service Options on IRS.gov

(+$17.9 million / +24 FTE)

The creation of new online options on IRS.gov consists of two main efforts:

 A simplified online experience; and

 Self-service transactional web applications.

The IRS has the challenge of providing informative, timely, and innovative online services in 

an environment of limited budget resources. In FY 2013, the IRS will deploy eAuthentication 

to authenticate taxpayer identities to ensure a secure online taxpayer experience. In FY 2014, 

the IRS requests resources to continue improvements to its infrastructure and develop 

additional capabilities, such as:

 eTranscripts Viewing Phase 2 – Expands the web-based request tool to allow viewing 

of transcripts online. Individual taxpayer account-related calls comprise a significant 

portion of Customer Service Representative (CSR) assistor calls and include account 

adjustments, refund allocation questions, backup withholding, credits, payments, and 

refunds. Providing taxpayers with the ability to view transcripts (or portions thereof) 

could resolve many of these calls. 

 Online Payment Agreement/Installment Agreement – Allows taxpayers to submit a 

request for a streamlined installment agreement with the IRS. This capability makes it 

easier for taxpayers and the IRS to interact, exchange information, and establish or 

reinstate installment agreements online by integrating with the Voice Balance Due call 

center application. Currently, taxpayers can request an installment agreement online 

but cannot enter into an installment agreement without using offline paper-based 

and/or telephone services to complete the process.

 Automated Underreporter (AUR) Online – Allows taxpayers to view and verify 

income information in response to AUR or Automated Substitute for Return (ASFR) 

notices. Online review and verification of documents reduces the time required to 

resolve cases.

Develop a New Suite of Online Self-Service Options for Practitioners

(+$6.2 million / +13 FTE)

Through better tools and online experiences, the IRS intends to generate awareness of 

IRS.gov as a viable channel for practitioners who wish to conduct tax administration business. 

As more and more practitioners move to the web in their interactions with the IRS, they will 
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have access to more information in a timely manner and consequently practitioners will be 

able to relay important compliance information to their individual clients. 

The IRS intends to develop a simpler online experience with more transactional tools for the 

practitioner community. This includes:

 Power of Attorney (POA) and Tax Information Authorization (TIA) Online – Improves

current capability by providing practitioners with a secure method to submit forms and 

revoke privileges online and will reduce the amount of paper requests submitted 

annually.

 Business Account Features – Name Control – Allows authorized representatives to 

input an Employer Identification Number (EIN) and retrieve the associated name 

control. The application will significantly reduce the number of e-filed returns rejected 

at first transmission and substantially reduce the volume of telephone calls to the IRS 

eHelp desk and/or Customer Service Representatives (CSR).

Other Direct Costs

There are no other direct costs associated with this initiative. 

Develop Converged Telecommunication Networks

+$15,000,000 / 0 FTE

Funding to Develop Converged 

Telecommunication Networks will allow 

the IRS to complete the replacement of 

failing infrastructure with converged 

telecommunication networks. The IRS is 

leveraging the Treasury Network (TNet) as 

a foundation for merging data services onto 

a shared, enterprise-wide network platform. Merging data, voice, and multimedia into a 

single infrastructure will allow all IRS sites to share a common, cost-effective 

communications infrastructure. In addition, it will provide operating efficiencies and 

advanced functionality to customers. 

Converged networks will allow the organization to manage all employee collaboration on a 

single data network. Employees will:

 Make and receive phone calls from their laptops anywhere;

 Retrieve voice mail messages directly from their laptops;

 Use a single common number accessible to any communication device (laptop and 

phone – e.g., desk, home, cell, Smartphone); and

 Have a single click dial-back capability from their laptop.

Converged networks reduce the IRS’s exposure to future maintenance and repair costs. This 

technology will provide cost savings by reducing the risk of phone service failure; lessening 

Position Type/Other Costs FTE $000

Develop Converged 

Telecommunications Networks $15,000

Contractual Services 3,970

IT Equipment 8,600

Telecommunications 2,430

Total $15,000
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Position Type/Other Costs FTE $000

Virtual Services Delivery 2 $3,983

IT Specialist 2 298

Contractual Services 474

VSD Workstation Installation 125

IT Equipment 2,938

Software 148

Total 2 $3,983

network provider costs for long distance and video transmission; and decreasing 

voice-network infrastructure costs and complexity by centralizing calling using Internet 

Protocol (IP) voice services. In addition, the IRS will achieve operational service 

enhancements by consolidating multiple contracts and vendor services; and improving the 

overall monitoring, capacity planning and telecommunication cost management through 

centralized monitoring and capacity management of voice, data, and video services and 

elimination of underutilized distributed telecommunication circuits.

Converged networks will:

 Provide all employees, especially those in geographically-dispersed locations, with a 

highly collaborative and mobile workplace;

 Leverage the next generation of advanced telecommunication technologies 

(i.e., mobile broadband, wireless, commercial Internet Service Providers (ISPs) and 

Enterprise Remote Access Program (ERAP) to increase employee efficiency);

 Reduce employee travel;

 Standardize employee skill sets and training;

 Centralize management and licensing of the infrastructure;

 Eliminate end of life-cycle infrastructure;

 Increase enterprise system uptime; and

 Support all new IT initiatives for all business lines.

This investment will produce an estimated cost avoidance of $37 million over the next three 

years. Without the requested resources for network convergence, the current practice of 

operating and replacing obsolete telecommunication equipment would cost $191 million over 

those three years. The cost avoidance estimate was based on lower capital costs and transition 

costs for convergence in the three-year period compared to the one-for-one replacement of 

aged infrastructure. 

Other Direct Costs

There are no other direct costs associated with this initiative.

Expand Virtual Services Delivery (VSD)

+$3,983,000 / +2 FTE 

Funding to Expand Virtual Services Delivery 

(VSD) will facilitate the deployment of 

100 new video technology units. These VSD 

units allow face-to-face contact between IRS

employees and taxpayers at remote sites 

through two-way video conferencing. By 

placing VSD units in understaffed and 

unstaffed at Taxpayer Assistance Centers (TACs), Taxpayer Advocate Service (TAS) sites, 
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and Low Income Tax Clinic (LITC) locations, the IRS will be able to resolve taxpayer issues 

virtually. VSD video technology also will allow the IRS to explore conducting virtual tax 

examinations and other interactions with taxpayers. The use of this technology is expected to 

save a considerable amount of time and travel costs for employees and taxpayers. 

The VSD technology aligns with the Agency Priority Goal of Increasing Voluntary 

Compliance by improving service to make voluntary compliance easier for taxpayers. It will 

enhance the taxpayer experience in the following areas:

Virtual TACs

The IRS conducted a VSD pilot program from October 2011 to May 2012 to test this 

alternative service delivery in TACs and partner locations. The pilot program included 

providing virtual face-to-face contact with taxpayers using video communication technology. 

IRS currently has 26 VSD sites (19 Taxpayer Assistance Centers and 7 partner locations) 

offering tax and accounts services to taxpayers. VSD has proven to be a viable and practical 

service delivery vehicle that integrates technology, leverages resources to reach more 

taxpayers, and provides more face-to-face services. Focus group feedback received through 

the end of the pilot program noted that 91 percent of taxpayers indicated they would use video 

assistance again during a future visit. 

Some TACs are not permanently staffed, which requires the IRS to provide coverage by 

circuit-riding (employees travel from their posts-of-duty to the unstaffed locations) and then 

reimbursing employees for their travel expenses. Additionally, some TACs are not 

sufficiently staffed to handle taxpayer demand, resulting in long wait times for taxpayers. 

Placing VSD in strategically selected TACs, as an alternative to “live” face-to-face service,

will help address these staffing issues and maximize IRS resources. 

Virtual TAS Sites

Using VSD technology to establish virtual TAS sites supports the National Taxpayer 

Advocate’s goal of increasing taxpayer opportunities for face-to-face service options. TAS is 

required to have local taxpayer advocates in each State to assist taxpayers in resolving issues

with the IRS, to identify areas in which taxpayers have problems dealing with the IRS and, to 

the extent possible, to propose changes in the administrative practices of the IRS to mitigate 

the problems identified. TAS currently maintains 65 geographic locations nationwide for 

face-to-face interaction with taxpayers and taxpayer representatives, as well as 10 campus 

locations. 

In FY 2012, TAS connected its Jacksonville, Florida office to a TAC in Tampa, Florida, 

where it does not maintain a physical presence, to provide service to taxpayers through VSD. 

An expansion of VSD will further help TAS meet its obligations under the law and benefit

taxpayers by increasing their opportunities for personal interaction. 

Virtual LITCs

In FY 2012, VSD sites connected clients of two LITCs in Washington and Tennessee with 

Appeals offices in the Fresno and Memphis Campuses to conduct Collection Due Process 
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hearings. Resources for Virtual LITCs will provide VSD capability in more locations and 

increase the types of issues worked virtually by LITCs. 

Virtual Tax Examinations 

The IRS also is exploring the use of VSD technology in the tax examination process. The 

IRS will test the delivery of tax examinations virtually by deploying VSD in geographic areas 

with high value work and limited staff. To ensure the success of virtually delivered audits, the 

IRS needs additional resources to expand functionality to allow the two-way exchange of 

documents, online scheduling of taxpayer appointments, and printing capability at the 

taxpayer’s location.

VSD technology provides the capability to achieve the future vision of face-to-face video 

interaction delivered through a web-based framework. This framework provides an 

integration of multiple service channels (e.g., video, phone, live chat) allowing taxpayers to 

choose how, when, and where they want to interact with the IRS. VSD technology has the 

potential to expand from the point-to-point configuration described in this initiative to 

integration of video with other channels, including access to the contact center environment 

and transferring to the next available agent to improve issue resolution. A transition from a 

private video network to an IRS network will allow devices to provide document sharing and 

capture and route electronic survey results. In addition, the design of self-contained kiosks 

may provide increased privacy and the opportunity to implement VSD in non-traditional sites.

Other Direct Costs

There are no other direct costs associated with this initiative.

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

+$5,000,000 / 0 FTE 

Funding for Transfer to TTB for 

High-Return on Investment (ROI) Tax 

Enforcement Activities will transfer 

$5 million to Alcohol and Tobacco Tax and 

Trade Bureau (TTB) for those high-ROI tax 

enforcement activities that produce 

additional revenue through program 

activities designated to narrow the Federal excise tax gap on alcohol and tobacco 

commodities. More detailed information can be found in the TTB FY 2014 Congressional 

Justification. 

Position Type/Other Costs FTE $000

Alcohol and Tobacco Tax and Trade Bureau 

Program Integrity Transfer $5,000

Special Agent 2,699

Training 220

Training Service Contracts 2,041

Support Supplies 8

Equipment 32

Total $5,000
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2.2 – Operating Levels Table

Dollars in Thousands

Appropriation Title: Internal Revenue Service FY 2012 

Actuals

FY 2013 

Annualized

 CR Rate

FY 2014

Request

FTE 91,003 91,534 97,290

Object Classification:

11.1 Full-Time Permanent Positions $6,300,099 $6,436,177 $6,790,226

11.3 Other than Full-Time Permanent Positions 96,800 101,373 101,717

11.5 Other Personnel Compensation 292,290 287,774 302,428

11.8 Special Personal Services Payments 16,070 18,386 18,515

11.9 Personnel Compensation (Total) $6,705,259 $6,843,710 $7,212,886

12.0 Personnel Benefits 2,091,601 2,147,280 2,277,477

13.0 Benefits to Former Personnel 94,055 49,097 49,385

21.0 Travel 139,490 198,431 231,003

22.0 Transportation of Things 20,797 24,735 25,869

23.1 Rental Payments to GSA 662,644 649,550 645,641

23.2 Rent Payments to Others 13,589 14,139 14,377

23.3 Communications, Utilities, & Misc 391,883 393,785 376,692

24.0 Printing & Reproduction 35,015 36,089 39,782

25.1 Advisory & Assistance Services 862,370 948,617 822,598

25.2 Other Services 164,504 245,556 295,959

25.3 Purchase of Goods & Services from Govt. Accounts 170,473 163,759 175,655

25.4 Operation & Maintenance of Facilities 168,363 177,262 179,613

25.5 Research & Development Contracts 4,008 3,041 3,089

25.6 Medical Care 13,933 14,408 16,081

25.7 Operation & Maintenance of Equipment 87,603 124,521 119,798

25.8 Subsistence & Support of Persons 1,447 3,791 5,019

26.0 Supplies and Materials 63,892 71,107 76,391

31.0 Equipment 405,858 465,858 462,959

32.0 Lands and Structures 40,011 59,605 49,339

33.0 Investments & Loans 1,609 0 0

41.0 Grants, Subsidies 30,175 27,893 33,893

42.0 Insurance Claims & Indemn 3,855 3,325 3,381

43.0 Interest and Dividends 0 0 0

44.0 Refunds 0 18 18

91.0 Unvouchered 9,426 12,878 3,049

Total Budget Resources $12,181,860 $12,678,455 $13,119,954

Appropriations:

Taxpayer Services $2,435,806 $2,473,216 $2,585,178

Enforcement 5,365,778 5,438,489 5,745,754

Operations Support 4,029,276 4,441,504 4,481,762

Business Systems Modernization 351,000 325,246 307,260

Total Budget Resources $12,181,860 $12,678,455 $13,119,954
IRS-75

2B – Appropriation Language and Explanation of Changes

Appropriations Language Explanation of Changes

DEPARTMENT OF THE TREASURY

INTERNAL REVENUE SERVICE

TAXPAYER SERVICES

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, and to administer the tax credit in title II of 

division A of the Trade Act of 2002 (Public Law 107-210),

$2,412,576,000, of which not less than $5,600,000 shall be 

for the Tax Counseling for the Elderly Program, of which 

not less than $9,750,000 shall be available for low-income 

taxpayer clinic grants, of which not less than $18,000,000, 

to remain available until September 30, 2015, shall be 

available for a Community Volunteer Income Tax 

Assistance matching grants program for tax return 

preparation assistance.

ENFORCEMENT

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 (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, $5,666,787,000, of which not less than 

$60,257,000 shall be for the Interagency Crime and Drug 

Enforcement program: Provided, That, of the amounts 

provided under this heading, not less than $245,904,000, of 

which $5,000,000 shall be transferred to the Alcohol and 

Tobacco Tax and Trade Bureau, shall be for an additional 

appropriation for tax activities, including tax compliance 

to address the Federal tax gap, as specified for purposes of 

Section 251(b)(2) of the Balanced Budget and Emergency 

Deficit Control Act of 1985, as amended. 

The Budget Request includes 

additional resources for the 

Community Volunteer Tax 

Assistance matching grants 

program to leverage and 

educate community-based 

partnerships on the tax 

provisions to support ACA 

health coverage enrollment and 

tax filing seasons. 

The Budget Request includes 

$5,000,000 under the program 

integrity cap adjustment to fund 

the Alcohol and Tobacco Tax 

and Trade Bureau (TTB) tax 

enforcement activities. This 

language will allow the IRS to 

transfer these funds to TTB.

The Budget Request for the 

Enforcement account is 

$5,666,787,000 including a 

program integrity cap 

adjustment of $245,904,000

which, when combined with the 

$166,086,000 cap adjustment in 

the Operations Support account, 

totals $411,990,000 in 

additional appropriation for tax 

enforcement and compliance 

activities.
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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 

IRS-wide 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, $4,480,843,000, of which up to 

$250,000,000 shall remain available until September 30, 

2015, 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, 2016, for 

research; of which not less than $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 expenses: Provided, That not later than 30

days after the end of each quarter of each fiscal year, the 

Internal Revenue Service shall submit a report to the 

House and Senate Committees on Appropriations and the 

Comptroller General of the United States detailing the cost 

and schedule performance for its major information 

technology investments, including the purpose and lifecycle stages of the investments; the reasons for any cost 

and schedule variances; the risks of such investments and 

strategies the Internal Revenue Service is using to mitigate 

such risks; and the expected developmental milestones to 

be achieved and costs to be incurred in the next quarter: 

Provided further, That the Internal Revenue Service shall 

include, in its budget justification for fiscal year 2015, a 

summary of cost and schedule performance information for 

its major information technology systems: Provided, That, 

of the amounts provided under this heading, such sums as 

are necessary shall be available to fully support tax 

enforcement and compliance activities, including not less 

than $166,086,000 for an additional appropriation for tax 

activities, including tax compliance to address the Federal 

tax gap, as specified for purposes of Section 251(b)(2) of 

the Balanced Budget and Emergency Deficit Control Act of 

1985, as amended.

To provide sufficient time to 

verify the data and compile the 

cost and schedule performance 

information for its major 

information technology 

investments, the IRS requests 

16 additional days to submit the 

quarterly report to the House 

and Senate Committees on 

Appropriations. 

The Budget Request for the 

Operations Support account is 

$4,480,843,000 including a 

program integrity cap 

adjustment of $166,086,000

which, when combined with the 

$245,904,000 cap adjustment in 

the Enforcement account, totals 

$411,990,000 in additional 

appropriation for tax 

enforcement and compliance 

activities.
IRS-77

BUSINESS SYSTEMS MODERNIZATION

For necessary expenses of the Internal Revenue Service's 

business systems modernization program, $300,827,000, to 

remain available until September 30, 2016, 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 

not later than 30 days after the end of each quarter of each 

fiscal year, the Internal Revenue Service shall submit a 

report to the House and Senate Committees on 

Appropriations and the Comptroller General of the United 

States detailing the cost and schedule performance for 

CADE 2 and Modernized e-File information technology 

investments, including the purposes and life-cycle stages of 

the investments; the reasons for any cost and schedule 

variances; the risks of such investments and the strategies 

the Internal Revenue Service is using to mitigate such 

risks; and the expected developmental milestones to be 

achieved and costs to be incurred in the next quarter. 

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 

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 and protect 

taxpayers against identity theft.

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 

To provide sufficient time to 

verify the data and compile the 

cost and schedule performance 

information for its capital asset 

acquisition of information 

technology systems, the IRS 

requests 16 additional days to 

submit the quarterly report to 

the House and Senate 

Committees on Appropriations. 
IRS-78

line service a priority and allocate resources necessary to 

improve the Internal Revenue Service 1-800 help line 

service.

SEC. 105. Section 9503(a) of title 5, United States Code, is 

amended by striking the clause “before July 23, 2013” and 

inserting “before September 30, 2018”.

SEC. 106. Section 9503(a)(5) of title 5, United States Code, 

is amended by inserting before the semicolon the following: 

“renewable for an additional two years, based on a critical 

organizational need”. 

SEC. 107. Section 9505(a) of title 5, United States Code, is 

amended by striking “Before July 23, 2013” and inserting 

“Before September 30, 2018”.

Section 105 was deleted from 

the IRS Administrative 

Provisions and added to the 

Treasury Administrative 

Provisions since the program 

integrity cap adjustment 

includes funds for TTB.

The IRS requests a five-year 

extension to the Streamlined 

Critical Pay (SCP) authority, 

which expires July 23, 2013. 

Without SCP the IRS would not 

be able to continue paying 

approximately 30 senior 

employees, principally in 

information technology, at the 

salaries they have earned over 

several years. The high 

potential for attrition 

jeopardizes the IRS’s ability to 

continue modernizing its 

critical IT systems, which were 

just recently removed by GAO 

from its High-Risk list. The IRS 

also requests to extend the SCP 

appointment term to five years 

because four years is 

insufficient to complete 

projects.
IRS-79

2C – Legislative Proposals 

The FY 2014 President’s Budget request includes a number of legislative proposals intended 

to reduce the tax gap and improve tax compliance with minimal taxpayer burden. The 

Treasury Office of Tax Analysis (OTA) estimates these new tax gap proposals will generate 

$77.9 billion over the next 10 years which includes $46.5 billion generated by program

integrity cap adjustments. The IRS estimates the implementation cost for the tax gap 

proposals included in the FY 2013 President’s Budget that have not yet been enacted, to be 

$84.1 million over three years, including the initial startup, processing, and compliance 

operational costs (the cost for these legislative proposals is provided below). 

The Administration proposes to expand information reporting, improve compliance by 

businesses, and strengthen tax administration. Should the Congress enact these provisions, 

Treasury requests that the amounts below be included as part of the authorizing legislation. 

The Budget also proposes to amend the Balanced Budget and Emergency Deficit Control Act 

of 1985 (BBEDCA), as amended, to provide 10-years (FYs 2014-2023) of discretionary caps 

to permit program integrity cap adjustments costing $13.8 billion and delivering $46.5 billion

in additional revenue, thereby generating $32.7 billion in net savings over the ten-year budget 

window. 

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 ($0);

 Require a certified Taxpayer Identification Number (TIN) from contractors and allow 

certain withholding ($11.5 million); and

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

Statement (new in 2014).

Improve compliance by businesses – Improving compliance by businesses of all sizes is 

important. Specific proposals to improve compliance by businesses would:

 Provide Treasury with the regulatory authority to require that certain information 

returns be filed electronically ($0);

 Provide Treasury with the regulatory authority to reduce the current threshold of 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)

($0.3 million);

 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 ($0.3 million);

 Provide Treasury with the regulatory authority to require additional information to be 

included in electronically filed Form 5500, Annual Return/Report of Employee Benefit 

Plan, and electronic filing of certain other employee benefit plan reports

($11.2 million); 
IRS-80

 Implement standards that clarify when employee leasing companies can be held liable 

for their clients’ Federal employment taxes ($2.9 million); 

 Increase certainty about the rules pertaining to classification of employees as 

independent contractors ($1.9 million);

 Repeal special estimated tax payment provision for certain insurance companies 

($2.2 million); and

 Require all Form 990 series tax and information returns be filed electronically and 

provide IRS with regulatory authority to make the electronically filed Form 990 series 

returns publicly available in a machine readable format in a timely manner. (new in 

2014). 

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:

 Impose liability on shareholders participating in “Intermediary Transaction Tax 

Shelters” to collect unpaid corporate income taxes (new in 2014);

 Increase levy authority for payments to Medicare provides with delinquent tax debt 

(included in the Department of the Treasury FY 2013 General Explanations of the 

Administration’s Revenue Proposals and is new in 2014 as an IRS legislative

proposal);

 Implement a program integrity statutory cap adjustment for tax administration 

($13.8 billion);

 Streamline audit and adjustment procedures for large partnerships ($2.5 million);

 Revise offer-in-compromise application rules ($17.8 million);

 Expand the IRS’s access to information in the National Directory of New Hires for tax 

administration purposes ($12.0 million);

 Make repeated willful failure to file a tax return a felony ($0);

 Facilitate tax compliance with local jurisdictions ($1.2 million);

 Extend statutes of limitations where State tax adjustments affect Federal tax liability

($0); 

 Improve the investigative disclosure statute ($0);

 Require taxpayers who prepare their returns electronically, but file their returns on 

paper, to print their returns with a 2-D bar code ($6.8 million); 

 Allow the IRS to absorb credit card processing fees for certain tax payments 

($9.6 million); 

 Extend IRS math error authority in certain circumstances ($1.4 million);

 Impose a penalty on failure to comply with electronic filing requirements

($2.5 million);
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 Restrict access to Death Master File (DMF) (new in 2014);

 Provide whistleblowers with protection from retaliation (new in 2014);

 Provide stronger protection from improper disclosure of taxpayer information in 

whistleblower actions (new in 2014);

 Index all penalties to inflation (new in 2014);

 Extend paid preparer Earned Income Tax Credit (EITC) due diligence requirements to 

the child tax credit (new in 2014);

 Extend IRS authority to require truncated Social Security Number (SSN) on Form 

W-2, Wage and Tax Statement (new in 2014); 

 Add tax crimes to the Aggravated Identity Theft Statute (new in 2014); and

 Impose a civil penalty on tax identity theft crimes (new in 2014).
IRS-82

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 President’s Budget request for FY 2014 is $2,412,576,000 in direct 

appropriations and 32,575 FTE. This is an increase of $172,873,000, or 7.72 percent, and 

2,285 FTE more than the FY 2012 Enacted Budget of $2,239,703,000 and 30,290 FTE.
IRS-83

2.1 – Budget Adjustments Table 

FTE Amount

FY 2012 Enacted 1 30,290 $2,239,703

FY 2013 Annualized CR Rate 30,402 $2,253,510

FY 2014 Changes to Base:

Non-Recur CR Increase: ($13,807)

Maintaining Current Levels (MCLs): $22,391

Pay Inflation Adjustment 19,277

Non-Pay Inflation Adjustment 3,114

Efficiencies/Savings: (251) ($18,208)

Increase e-File Savings (101) (4,969)

Targeted Personnel Savings (150) (13,239)

Subtotal FY 2014 Changes to Base (251) ($9,624)

FY 2014 Current Services (Base) 30,151 $2,243,886

Program Changes:

Program Increases:

Taxpayer Service Initiative:

Improve Taxpayer Service and Meet Increased Demand 1,863 130,306

Subtotal Taxpayer Service Initiative 1,863 $130,306

Enforcement Initiatives:

Implement Merchant Card and Basis Matching 153 7,643

Address Impact of Affordable Care Act (ACA) Statutory Requirements 8 1,124

Improve Identification and Prevention of Refund Fraud and Identity Theft 236 19,269

Leverage Data to Improve Case Selection 164 10,348

Subtotal Enforcement Initiatives 561 $38,384

Subtotal FY 2014 Program Changes 2,424 $168,690

Total FY 2014 Budget Request 32,575 $2,412,576

1 FY 2012 Enacted represents the approved FY 2012 Operating Plan.

Dollars in Thousands

Taxpayer Services 
IRS-84

2.2 – Operating Levels Table

Dollars in Thousands

Appropriation Title: Taxpayer Services FY 2012 

Actuals

FY 2013 

Annualized 

CR Rate

FY 2014

Request

FTE 31,311 31,536 33,234

Object Classification:

11.1 Full-Time Permanent Positions $1,559,270 $1,591,962 $1,664,466

11.3 Other than Full-Time Permanent Positions 46,738 45,083 45,669

11.5 Other Personnel Compensation 96,928 90,727 98,908

11.8 Special Personal Services Payments 0 0 0

11.9 Personnel Compensation (Total) $1,702,936 $1,727,772 $1,809,043

12.0 Personnel Benefits 540,569 548,931 560,961

13.0 Benefits to Former Personnel 5,331 150 151

21.0 Travel 17,845 25,002 28,226

22.0 Transportation of Things 1,213 994 1,012

23.1 Rental Payments to GSA 0 0 0

23.2 Rent Payments to Others 18 23 24

23.3 Communications, Utilities, & Misc 2,451 2,037 2,076

24.0 Printing & Reproduction 7,990 9,161 9,478

25.1 Advisory & Assistance Services 31,566 14,864 15,123

25.2 Other Services 25,079 43,000 46,946

25.3 Purchase of Goods & Services from Govt. Accounts 61,363 61,920 66,029

25.4 Operation & Maintenance of Facilities 2 2 3

25.5 Research & Development Contracts 0 0 0

25.6 Medical Care 0 0 0

25.7 Operation & Maintenance of Equipment 0 0 0

25.8 Subsistence & Support of Persons 391 1,568 1,609

26.0 Supplies and Materials 7,691 7,915 8,583

31.0 Equipment 534 762 776

32.0 Lands and Structures 336 292 297

33.0 Investments & Loans 0 0 0

41.0 Grants, Subsidies 30,175 27,893 33,893

42.0 Insurance Claims & Indemn 316 930 948

43.0 Interest and Dividends 0 0 0

44.0 Refunds 0 0 0

91.0 Unvouchered 0 0 0

Total Budget Resources $2,435,806 $2,473,216 $2,585,178

Budget Activities:

Pre-filing Taxpayer Assistance & Education $652,007 $642,611 $670,295

Filing & Account Services 1,783,799 1,830,605 1,914,883

Total Budget Resources $2,435,806 $2,473,216 $2,585,178
IRS-85

2.3 – Appropriation Detail Table

3A – Pre-Filing Taxpayer Assistance and Education ($660,197,000 in direct 

appropriations, an estimated $98,000 from reimbursable programs, and an estimated 

$10,000,000 from user fees): This budget activity funds services to assist with tax return 

preparation, including tax law interpretation, publication, production, and advocate services. 

The program activities include the following:

 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; 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.

 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 Wage and Investment management activities of strategic planning, 

communications and liaison, finance, human resources, equity, diversity and inclusion, 

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.

Dollars in thousands

Taxpayer Services

Resources 

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT New Appropriated Resources: Pre-Filing Taxpayer Assistance and Education 5,814 $611,653 5,925 $625,189 5,656 $632,514 5,808 $660,197 (117) $35,008 -1.97% 5.60%

Filing and Account Services 24,422 1,610,904 24,365 1,614,514 24,746 1,620,996 26,767 1,752,379 2,402 137,865 9.86% 8.54%

Subtotal New Appropriated Resources 30,236 $2,222,557 30,290 $2,239,703 30,402 $2,253,510 32,575 $2,412,576 2,285 $172,873 7.54% 7.72%

Other Resources: Reimbursables 456 20,855 456 20,855 453 21,144 453 21,360 (3) 505 -0.66% 2.42%

User Fees 619 174,596 619 174,596 681 198,562 206 151,242 (413) (23,354) -66.72% -13.38%

Recovery from Prior Years 4 (4) -100.00%

Unobligated Balances from Prior Years 17,798 17,977 7,404 7,400 (10,577) -58.84%

Transfers In/Out Resources from Other Accounts 34 34 (34) -100.00%

Subtotal Other Resources 1,109 $213,249 1,109 $213,432 1,134 $227,110 659 $180,002 (450) ($33,430) -40.58% -15.66%

Total Budgetary Resources 31,345 $2,435,806 31,399 $2,453,135 31,536 $2,480,620 33,234 $2,592,578 1,835 $139,443 5.84% 5.68%

Actuals

$ Change % Change

FY 2012 FY 2012 FY 2012

FY 2013 Annualized CR Rate

FY 2014 Enacted1 Request to FY 2014 to FY 2014

1 FY 2012 Enacted represents the approved FY 2012 Operating Plan.

FY 2012
IRS-86

FY 2014 Program Changes by Budget Activity

3.1.1 – Budget and Performance Report and Plan

Description of Performance

For FY 2012, the IRS timely delivered 97.2 percent of the Critical Individual Filing Season 

Tax Products to the public by the fifth workday of January. During FY 2012, the IRS 

released early products not affected by legislation to devote more time to analyze, develop, 

and post or print the tax products affected by legislation. The FY 2013 and FY 2014 goals of 

95 percent were set based on a review of current year data and available resources. To 

achieve future targets the IRS will continue to release products not affected by legislation 

early to devote more time to tax products affected by legislation. 

The IRS Timeliness of Critical TE/GE and Business Filing Season Tax products to the Public 

reached 94.5 percent, exceeding the FY 2012 target of 93 percent. The IRS is increasing its 

target for FY 2013 and FY 2014 to 95 percent based on past performance. To achieve future 

targets the IRS will continue to release products not affected by legislation early to have more 

time to analyze, develop, and post or print the tax products affected by legislation. 

FTE Amount

Taxpayer Service Initiative 111 $16,815

Improve Taxpayer Service and Meet Increased Demand 111 16,815

Enforcement Initiatives 127 $13,345

Implement Merchant Card and Basis Matching 11 1,027

Address Impact of Affordable Care Act (ACA) Statutory Requirements 8 1,124

Improve Identification and Prevention of Refund Fraud and Identity Theft 108 11,194

238 $30,160

Dollars in Thousands

Taxpayer Services

Pre-filing Taxpayer Assistance and Education

Total FY 2014 Program Changes

Dollars in Thousands

Pre-Filing Taxpayer Assistance & Education FY 2013

FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 Annualized FY 2014

Resource Level 1, 2 Enacted Enacted Enacted Enacted Enacted Enacted CR Rate Request

Appropriated Resources $576,537 $645,253 $661,000 $679,924 $678,204 $625,189 $632,514 $660,197

Reimbursable Resources 843 774 796 862 1,135 96 97 98

User Fees 1,201 12,827 18,700 5,514 22,460 10,000 10,000

Budget Activity Total $578,581 $658,854 $680,496 $686,300 $679,339 $647,745 $642,611 $670,295

Pre-Filing Taxpayer Assistance & Education

FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014

Measure Actual Actual Actual Actual Actual Actual Target Target

Timeliness of Critical Filing Season Tax Products to the Public (Ot) 83.5% 92.4% 96.8% 95.3% 96.3% 97.2% 95.0% 95.0%

Timeliness of Critical TE/GE & Business Tax Products to the Public (Ot) 84.0% 89.5% 95.2% 97.7% 96.4% 94.5% 95.0% 95.0%

Taxpayer Self-Assistance Rate (E) (L) 49.5% 66.8% 69.3% 64.4% 70.1% 78.5% 80.0% 80.5%

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure, and L - Long Term Goal

1 The FY 2007 - FY 2012 Appropriated Resources represents the approved Operating Plan.

2 The FY 2007 - FY 2012 columns represent realized resources for reimbursable and user fees.
IRS-87

Taxpayer Self-Assistance Rate reached 78.5 percent in FY 2012, exceeding the target of 

72.2 percent. This increase is attributed to a 70 percent increase in the use of the Where’s My 

Refund? application. The IRS expects performance to increase as more taxpayers choose to 

use automated applications to resolve issues and questions instead of more traditional 

methods such as contact with the IRS by telephone and written correspondence. To achieve 

future targets, the IRS will continue to increase the self-service applications provided to 

taxpayers through IRS.gov and release new Smartphone applications such as IRS2Go, which 

lets taxpayers interact with the IRS where and when they want. Through continued use of 

automation and based on past performance, the IRS is increasing its FY 2013 and FY 2014 

targets to 80.0 percent and 80.5 percent respectively. 

3B – Filing and Account Services ($1,752,379,000 in direct appropriations, an estimated

$21,262,000 from reimbursable programs, and an estimated $141,242,000 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. 

The program activities include the following:

 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 and resolves accounts and notice 

inquiries through telephone, paper, and Internet correspondence.

 Electronic Products and Services Support provides centralized operations and support 

capabilities for the IRS suite of electronic products, including 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.

 Health Insurance Tax Credit Administration (HITCA) provides funds to administer the 

health insurance tax credit portion of the Trade Adjustment Assistance Reform Act of 

2002. 

 Joint Operations Center (JOC) provides service, support, and technology for 

telephone, correspondence, and electronic media inquiries; real time monitoring and 
IRS-88

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 the returns most often requested for research by various 

IRS organizations before forwarding to Federal records centers.

FY 2014 Program Changes by Budget Activity

FTE Amount

Taxpayer Service Initiative 1,752 $113,491

Improve Taxpayer Service and Meet Increased Demand 1,752 113,491

Enforcement Initiatives 434 $25,039

Implement Merchant Card and Basis Matching 142 6,616

Improve Identification and Prevention of Refund Fraud and Identity Theft 128 8,075

Leverage Data to Improve Case Selection 164 10,348

2,186 $138,530

Dollars in Thousands

Taxpayer Services

Filing and Account Services

Total FY 2014 Program Changes
IRS-89

3.1.2 – Budget and Performance Report and Plan

Description of Performance

Millions of individual and business taxpayers file their returns electronically. The IRS 

achieved an 80.5 percent individual e-file rate and a 36.7 percent business e-file rate in

FY 2012, exceeding the targets for both measures. The increase in individual returns filed 

electronically for FY 2012 can be attributed to a new law requiring paid tax return preparers 

who anticipate filing eleven or more returns for individuals to electronically file Federal 

income tax returns and more taxpayers taking advantage of e-filing their tax returns 

themselves. Continued business e-file growth is the result of States mandating e-filing of 

State submissions and the overall benefits of e-file (i.e. faster refunds, greater accuracy, 

secure and confidential submission, quick confirmation, and the ability to file amended, 

superseded, and prior year returns) continue to drive performance for this measure. The IRS

is promoting the benefits of e-filing via social media such as IRS2Go. Based on the most 

recent filing projections and past performance, the IRS will increase the individual e-filing 

target to 80 percent for FY 2013 and to 81 percent for FY 2014 and the business e-filing 

target to 38 percent for FY 2013 and 40 percent for FY 2014.

Filing and Account Services FY 2013

FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 Annualized FY 2014

Resource Level 1, 2, 3 Enacted Enacted Enacted Enacted Enacted Enacted CR Rate Request

Appropriated Resources $1,576,557 $1,561,067 $1,647,406 $1,614,418 $1,630,549 $1,614,514 $1,620,996 $1,752,379

Reimbursable Resources 20,081 36,037 37,094 21,993 27,857 20,759 21,047 21,262

User Fees 63,458 139,109 108,300 115,998 128,966 152,136 188,562 141,242

Budget Activity Total $1,660,096 $1,736,213 $1,792,800 $1,752,409 $1,787,372 $1,787,409 $1,830,605 $1,914,883

Filing and Account Services

FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014

Measures Actual Actual Actual Actual Actual Actual Target Target

Percent Individual Returns Processed Electronically (Oe) (L) 57.1% 57.6% 65.9% 69.3% 76.9% 80.5% 80.0% 81.0%

Percent of Business Returns Processed Electronically (Oe) (L) 19.1% 19.4% 22.8% 25.5% 31.8% 36.7% 38.0% 40.0%

Customer Accuracy - Tax Law Phones (Ot) 91.2% 91.2% 92.9% 92.7% 93.4% 93.2% 93.0% 93.0%

Customer Accuracy - Accounts (Phones) (Ot) 93.4% 93.7% 94.9% 95.7% 96.0% 95.6% 95.0% 95.0%

Customer Contacts Resolved per Staff Year (E) 7,648 12,634 12,918 10,744 12,419 16,320 16,754 17,198

Customer Service Representative Level of Service (Oe) (L) 1 82.1% 52.8% 70.0% 74.0% 70.1% 67.6% 70.0% 79.0%

Refund Timeliness - Individual (Paper) (Ot) 98.9% 99.1% 99.2% 96.1% 99.4% 99.7% 98.0% 98.0%

Cost per Taxpayer Served ($) (HCTC) (E) $14.90 $16.94 $13.79 $9.52 $12.36 $14.43 $15.00 N/A

Sign-up Time (Days) - Customer Engagement (HCTC) (Ot) 93.3 94.0 91.3 124.0 117.0 116.0 125.0 N/A

1

 Beginning in FY 2013, target includes an increase in base user fees.

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure, and L - Long Term Goal

N/A - HCTC program is scheduled to end on December 31, 2013.

2 The FY 2007 - FY 2012 columns represent realized resources for reimbursable and user fees.

3

In FY 2012, the resources to administer the health insurance tax credit program were moved to the Taxpayer Services appropriation under the P.L. 112-74. For comparison 

purposes, FY 2007 through FY 2011 include these resources.

Dollars in Thousands

1 The FY 2007 - FY 2012 Appropriated Resources represents the approved Operating Plan.
IRS-90

The IRS correctly answered 93.2 percent of tax law questions and 95.6 percent of account 

questions via the telephone, exceeding the FY 2012 targets. The IRS expects to maintain 

high-performance through ongoing efforts to focus on promoting coding consistency of 

product reviews and providing training to managers and employees to ensure quality service 

to customers. Although responding to legislative changes in tax laws will continue to be a 

major challenge moving forward, the IRS has set the tax law accuracy targets at 93 percent 

and the accounts accuracy targets at 95 percent for FY 2013 and FY 2014.

The IRS Customer Contacts Resolved Per Staff Year reached 16,320, exceeding the FY 2012

target and FY 2011 performance. This measure includes activities such as automated and 

assistor calls answered and web services completed. For FY 2012, performance improved 

31.4 percent compared to FY 2011 because of a significant increase in web usage, up more 

than 57 percent compared to last year. The IRS is increasing its FY 2013 and FY 2014 targets 

to 16,754 and 17,198, respectively based on FY 2012 performance and the expectation that 

more taxpayers will use self service applications on IRS.gov. To achieve these targets, the 

IRS will continue to provide efficient responses to customer contacts with the resources 

available and provide more self-service applications on IRS.gov.

The Customer Service Representative Level of Service was 67.6 percent for FY 2012 

exceeding the FY 2012 target of 61.0 percent. With additional base user fees, the IRS 

increased its FY 2013 target to 70.0 percent, while requested initiative funding will increase 

the FY 2014 target to 79.0 percent. The IRS will maintain a balance between responding to 

taxpayer telephone demand and the paper correspondence received to achieve future level of 

service targets. 

In FY 2012, Refund Timeliness reached 99.7 percent, exceeding the FY 2012 target of 

98 percent due in part to the decline in the number of paper refunds issued. For FY 2013 and 

FY 2014, the target will remain at 98.0 percent as the IRS makes additional efforts to ensure 

identity verification before releasing the refund to the taxpayer. The IRS will continue to 

monitor Individual Master File (IMF) return cycles and inventories through various reports 

and production meetings to ensure the year-end target is met.

For the Health Insurance Tax Credit Administration (HITCA) program, IRS exceeded last 

year’s performance and the FY 2012 target for Sign-up Time, but fell short of this year’s 

target for Cost per Taxpayer Served (CPTS). In FY 2012, Sign-up Time (the median number 

of days between the first program kit mailing and the first payment received from the 

participant) improved compared to FY 2011 while the CPTS was higher ($14.43 vs. $12.36). 

The increase in cost is attributed to a decline in the number of taxpayers served while program 

costs remained the same. The Trade Adjustment Assistance Extension Act of 2011 modified 

the IRS code, which eliminates the credit after December 31, 2013. The program will collect 

the last monthly payment from participants in November 2013 for December 2013 coverage. 

While Health Coverage Tax Credit (HCTC) program operation activities (i.e., support Master 

File, decommission HCTC systems, etc.) will continue beyond the 2013 filing season, no 

payment and/or enrollment activity will take place, rendering both the Cost per Taxpayer 

Served and Customer Engagement Days (Sign-Up Time) measures obsolete starting in 

FY 2014. The FY 2013 target is set at 125 days for Sign-up Time and $15.00 for CPTS.
IRS-91

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; collecting unpaid accounts; and providing campus 

support of the Questionable Refund program.

The Enforcement President’s Budget request for FY 2014 is $5,666,787,000 in direct 

appropriations and 49,987 FTE. This is a $367,420,000, or 6.93 percent, and 1,690 FTE

increase from the revised FY 2012 Enacted Budget of $5,299,367,000 and 48,297 FTE. 

To reduce future deficits, a portion of this appropriation, $245,904,000, is requested as part of 

the $411,990,000 total program integrity cap adjustment for IRS, which includes an 

above-base investment in tax enforcement and compliance programs, of which 

$5,000,000 will be transferred to the Alcohol and Tobacco Tax and Trade Bureau for 

High-Return on Investment (ROI) enforcement activities. In conjunction with specified funds 

provided in the IRS Operations Support account, this increment will support tax compliance 

initiatives expected to generate high ROI in the form of increased tax revenues.
IRS-92

2.1 – Budget Adjustments Table

FTE Amount

FY 2012 Enacted 1 48,297 $5,299,367

FY 2013 Annualized CR Rate 46,702 $5,331,000

FY 2014 Changes to Base:

Non-Recur CR Increase: ($31,633)

Maintaining Current Levels (MCLs): $50,551

Pay Inflation Adjustment 45,802

Non-Pay Inflation Adjustment 4,749

Efficiencies/Savings: (460) ($56,605)

Targeted Personnel Savings (460) (56,605)

Subtotal FY 2014 Changes to Base (460) ($37,687)

FY 2014 Current Services (Base) 46,242 $5,293,313

Program Changes:

Program Increases:

Taxpayer Service Initiative:

Improve Taxpayer Service and Meet Increased Demand 32 3,250

Subtotal Taxpayer Service Initiative 32 $3,250

Enforcement Initiatives:

Implement Foreign Account Tax Compliance Act (FATCA) 204 19,600

Address International and Offshore Compliance Issues 329 43,311

Implement Merchant Card and Basis Matching 370 30,275

Address Impact of Affordable Care Act (ACA) Statutory Requirements 223 26,084

Improve Identification and Prevention of Refund Fraud and Identity Theft 538 48,361

Increase Audit Coverage to Address Tax Compliance Issues 773 71,453

Increase Collection Coverage 573 36,261

Expand Coverage of High-Wealth Individuals and Enterprises 242 29,456

Improve Coverage of Partnerships and Flow-Through Entities 320 39,136

Build Out Tax Return Preparer Compliance Activities 124 15,982

Leverage Data to Improve Case Selection 10 4,474

Leverage Digital Evidence for Criminal Investigation (CI) 7 831

Subtotal Enforcement Initiatives 3,713 $365,224

Alcohol and Tobacco Tax and Trade Bureau Program Integrity Transfer:

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

Subtotal Alcohol and Tobacco Tax and Trade Bureau Program Integrity Transfer $5,000

Subtotal FY 2014 Program Changes 3,745 $373,474

Total FY 2014 Budget Request 49,987 $5,666,787

1 FY 2012 Enacted represents the approved FY 2012 Operating Plan.

Dollars in Thousands

Enforcement
IRS-93

2.2 – Operating Levels Table

Dollars in Thousands

Appropriation Title: Enforcement FY 2012 

Actuals

FY 2013 

Annualized 

CR Rate

FY 2014

Request

FTE 47,456 47,129 50,284

Object Classification:

11.1 Full-Time Permanent Positions $3,602,124 $3,660,288 $3,842,679

11.3 Other than Full-Time Permanent Positions 40,413 44,694 45,008

11.5 Other Personnel Compensation 165,159 162,127 168,811

11.8 Special Personal Services Payments 16,070 18,386 18,515

11.9 Personnel Compensation (Total) $3,823,766 $3,885,495 $4,075,013

12.0 Personnel Benefits 1,164,208 1,198,856 1,279,028

13.0 Benefits to Former Personnel 15,120 0 0

21.0 Travel 95,966 136,600 164,196

22.0 Transportation of Things 1,792 3,087 4,656

23.1 Rental Payments to GSA 829 836 849

23.2 Rent Payments to Others 532 711 737

23.3 Communications, Utilities, & Misc 4,949 6,147 6,355

24.0 Printing & Reproduction 4,546 3,812 4,099

25.1 Advisory & Assistance Services 81,484 27,512 31,016

25.2 Other Services 62,805 69,471 73,807

25.3 Purchase of Goods & Services from Govt. Accounts 43,696 47,049 47,913

25.4 Operation & Maintenance of Facilities 174 191 195

25.5 Research & Development Contracts 4,008 3,007 3,055

25.6 Medical Care 5 93 94

25.7 Operation & Maintenance of Equipment 1,609 1,503 1,624

25.8 Subsistence & Support of Persons 1,042 2,008 3,192

26.0 Supplies and Materials 27,917 23,679 26,265

31.0 Equipment 18,453 13,026 18,044

32.0 Lands and Structures 13 543 551

33.0 Investments & Loans 1,609 0 0

41.0 Grants, Subsidies 0 0 0

42.0 Insurance Claims & Indemn 1,829 1,967 1,998

43.0 Interest and Dividends 0 0 0

44.0 Refunds 0 18 18

91.0 Unvouchered 9,426 12,878 3,049

Total Budget Resources $5,365,778 $5,438,489 $5,745,754

Budget Activities:

Investigations $702,546 $680,374 $715,176

Exam & Collections 4,499,111 4,584,736 4,848,553

Regulatory 164,121 173,379 182,025

Total Budget Resources $5,365,778 $5,438,489 $5,745,754
IRS-94

2.3 – Appropriation Detail Table

3C – Investigations ($661,631,000 in direct appropriations and an estimated

$58,402,000 from reimbursable programs): 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 as warranted. The program activities include the following:

 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 legal advice and support from IRS Counsel to 

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, Corporations, Non-Profits, Pension Plans, etc.).

Dollars in thousandsEnforcement

Resources 

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT New Appropriated Resources:

Investigations 4,237 $637,846 4,354 $636,386 3,791 $611,233 4,048 $661,631 (306) $25,245 -7.03% 3.97%

Exam and Collections 41,814 4,482,881 42,791 4,504,885 41,725 4,565,257 44,706 4,842,007 1,915 337,122 4.48% 7.48%

Regulatory 1,138 150,903 1,152 158,096 1,186 154,510 1,233 163,149 81 5,053 7.03% 3.20%

Subtotal New Appropriated Resources 47,189 $5,271,630 48,297 $5,299,367 46,702 $5,331,000 49,987 $5,666,787 1,690 $367,420 3.50% 6.93%

Other Resources: Reimbursables 143 63,940 143 63,940 143 64,702 143 65,619 1,679 2.63%

User Fees 124 19,417 124 19,417 284 41,205 154 18,205 30 (1,212) 24.19% -6.24%

Recovery from Prior Years 76 109 9 (109) -100.00%

Unobligated Balances from Prior Years 10,669 12,085 1,582 (12,085) -100.00%

Transfers In/Out2 46 180 (5,000) (5,180) Resources from Other Accounts 179 179 5 5 (174) -97.21%

Subtotal Other Resources 446 $94,148 446 $95,731 432 $107,498 302 $78,824 (144) ($16,907) -32.29% -17.66%

Total Budgetary Resources 47,635 $5,365,778 48,743 $5,395,098 47,134 $5,438,498 50,289 $5,745,611 1,546 $350,513 3.17% 6.50%

FY 2012 Actuals Enacted CR Rate 1 Request to FY 2014

1 FY 2012 Enacted represents the approved FY 2012 Operating Plan.

to FY 2014

2 Resources from Transfers In/Out include a FY 2012 transfer in from the Office of National Drug Control Policy (ONDCP) High Intensity Drug Trafficking Area (HIDTA) Program ($180K) and a FY 2014 transfer out to the Alcohol and 

Tobacco Tax and Trade Bureau (TTB) ($5M).

FY 2013 % Change

FY 2012 Annualized FY 2014 FY 2012

$ Change

FY 2012
IRS-95

FY 2014 Program Changes by Budget Activity

3.1.3 – Budget and Performance Report and Plan

Description of Performance

Criminal Investigations (CI) serves the American public by investigating potential criminal 

violations of the Internal Revenue Code and related financial crimes in a manner that fosters 

confidence in the tax system and compliance with the law. The following measures are used 

to evaluate the success of achieving its mission. 

The Number of Criminal Investigations Completed in FY 2012 (4,937) increased 5 percent 

compared to FY 2011 and exceeded the FY 2012 target by 23 percent. Approximately 

75 percent of the investigations completed consisted of prosecutions that were recommended 

to the Department of Justice (DOJ). The increase was attributed to a larger number of 

investigations initiated in FY 2010 and FY 2011. To achieve future targets, CI will continue 

to leverage interagency partnerships and develop case selection methods using advanced 

FTE Amount

Enforcement Initiatives 267 $42,245

Address International and Offshore Compliance Issues 80 11,301

Implement Merchant Card and Basis Matching 42 7,603

Improve Identification and Prevention of Refund Fraud and Identity Theft 113 17,982

Build Out Tax Return Preparer Compliance Activities Address Appeals Workload 25 4,528

Leverage Digital Evidence for Criminal Investigation (CI) Leverage Digital Evidence for Criminal Investigation (CI) 7 831

Alcohol and Tobacco Tax and Trade Bureau Program Integrity Transfer $5,000

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

267 $47,245

Dollars in Thousands

Enforcement 

Investigations

Total FY 2014 Program Changes

Investigations FY 2013

FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 Annualized FY 2014

Resource Level 1, 2 Enacted Enacted Enacted Enacted Enacted Enacted CR Rate Request

Appropriated Resources $576,785 $592,906 $611,601 $639,363 $644,479 $636,386 $611,233 $661,631

Reimbursable Resources 32,441 49,404 39,639 67,549 63,146 56,895 57,559 58,402

User Fees 6,935 10,000

Budget Activity Total $609,226 $642,310 $651,240 $706,912 $707,625 $700,216 $678,792 $720,033

Investigations

FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014

Measure Actual Actual Actual Actual Actual Actual Target Target

Criminal Investigations Completed (Ot) (L) 4,269 4,044 3,848 4,325 4,697 4,937 4,350 4,350

Number of Convictions (Oe) (L) 2,155 2,144 2,105 2,184 2,350 2,634 2,400 2,400

Conviction Rate (Oe) (L) 90.2% 92.3% 87.2% 90.2% 92.7% 93.0% 92.0% 92.0%

Conviction Efficiency Rate ($) (E) (L) $301,788 $315,751 $327,328 $324,776 $310,029 $270,511 $285,000 $285,000

1 The FY 2007 - FY 2012 Appropriated Resources represents the approved Operating Plan.

Dollars in Thousands

2 The FY 2007 - FY 2012 columns represent realized resources for reimbursable and user fees.

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure, L - Long Term Goal
IRS-96

technologies. Based on last year’s performance and available resources, the IRS will increase 

its FY 2013 and FY 2014 targets to 4,350. 

The Number of Convictions in FY 2012 (2,634) was 12 percent higher compared to FY 2011 

and 21 percent above the FY 2012 target. Heightened legislative priority by the Congress on 

Identity Theft has led the Department of Justice and the U.S. Attorney's Office to prioritize 

such cases for prosecution. This increased focus on Identity Theft cases contributed to the 

number of convictions exceeding the FY 2012 target. To achieve future targets, managers 

will continue to review and monitor performance on a monthly basis and make adjustments, 

as necessary, to keep on plan. Based on last year’s performance and available resources, the 

IRS will increase its FY 2013 and FY 2014 targets to 2,400. 

The Conviction Rate in FY 2012 was 93 percent, a slight increase over FY 2011 performance. 

During this period, convictions increased 12.1 percent and dismissals increased 6.7 percent 

compared to FY 2011. To achieve future targets, CI will continue to pursue our core mission 

of tax enforcement, as well as participate in multi-agency investigations of national and 

international importance. In FY 2013 and FY 2014, the IRS expects to meet its target of 

92 percent using this strategy.

The Conviction Efficiency Rate is the cost of the criminal investigation program divided by 

the Number of Convictions. The FY 2012 year-end target for the Conviction Efficiency Rate 

was set lower than FY 2011 target because of decreases in the overall CI financial plan and 

reimbursable monies. In FY 2012, CI was able to complete 2,634 convictions and decrease 

the Conviction Efficiency Rate to $270,511, exceeding the year-end target by 17 percent. To 

achieve the FY 2013 and FY 2014 goal of $285,000, CI will continue to monitor its 

performance and adjust program focus and resources as necessary to ensure efforts garner the 

greatest deterrent effect possible.

3D – Exam and Collections ($4,842,007,000 in direct appropriations, an estimated 

$6,541,000 from reimbursable programs, and an estimated $5,000 from user fees): 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. This 

budget activity also includes campus support of the Questionable Refund program and 

appeals and litigation activities associated with exam and collection. The program activities

include the following:

 Compliance Services Management supports management associated with exam and 

collection 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 initiates contact and collects delinquent taxpayer 

liabilities through the centralized Automated Collection System (ACS). 

 Payment Compliance – Field Collection conducts field investigations and collection 

efforts associated with delinquent taxpayer and business entity liabilities, including 
IRS-97

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 the accuracy of taxpayer returns.

 Fraud/Bank Secrecy Act assists and supports compliance employees IRS-wide in 

protecting the integrity of the U.S. tax administration system. The Bank Secrecy Act 

Program examines non bank financial institutions and nonfinancial trades and 

businesses for compliance with the anti-money laundering provisions of the Bank 

Secrecy Act of 1970 (BSA) and the USA Patriot Act of 2001. It processes and 

provides customer support for Reports of Foreign Bank and Financial Accounts 

(FBARs) and Form 8300, Report of Cash Payments Over $10,000 Received in a Trade 

or Business. The National Fraud Program provides oversight and direction for fraud 

policy and operations IRS-wide.

 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, Corporations, Non-Profits, Pension Plans, etc).

 Unit General Management and Administration provides staffing, training, and direct 

support for headquarters management activities of strategic planning, communication 

and liaison, finance, human resources, equity, diversity and inclusion, business system 

planning, and embedded training.

 EITC Management and Administration supports headquarters management associated 

with administering the Earned Income Tax Credit (EITC) program IRS-wide.
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 Accounts Management Taxpayer Assurance Program provides support to Accounts 

Management for the review of questionable refunds including Identity Theft functions.

 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.

FY 2014 Program Changes by Budget Activity

FTE Amount

Taxpayer Service Initiative 32 $3,250

Improve Taxpayer Service and Meet Increased Demand 32 3,250

Enforcement Initiatives 3,374 $312,954

Implement Foreign Account Tax Compliance Act (FATCA) 204 19,600

Address International and Offshore Compliance Issues 240 30,323

Implement Merchant Card and Basis Matching 328 22,672

Address Impact of Affordable Care Act (ACA) Statutory Requirements 184 20,484

Improve Identification and Prevention of Refund Fraud and Identity Theft 425 30,379

Increase Audit Coverage to Address Tax Compliance Issues 771 71,201

Increase Collection Coverage 573 36,261

Expand Coverage of High-Wealth Individuals and Enterprises 242 29,456

Improve Coverage of Partnerships and Flow-Through Entities Build Out Tax Return Preparer Program 318 38,804

Build Out Tax Return Preparer Compliance Activities Address Appeals Workload 79 9,300

Leverage Data to Improve Case Selection Implement Uncertain Tax Position Reporting Requirements 10 4,474

3,406 $316,204

Dollars in Thousands

Enforcement 

Exam and Collections

Total FY 2014 Program Changes
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3.1.4 – Budget and Performance Report and Plan

Description of Performance

The IRS Strategic goal, Enforce the Law to Ensure Everyone Meets Their Obligation to Pay 

Taxes, drives the IRS effort to enhance voluntary compliance. The IRS enforcement 

activities, such as examination and collection, target elements of the tax gap and remain a 

high priority. These programs make sure taxpayers pay what they owe and assist individuals 

who may have trouble meeting their tax liabilities because of hardship situations.

Exam and Collections FY 2013

FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 Annualized FY 2014

Resource Level 1, 2 Enacted Enacted Enacted Enacted Enacted Enacted CR Rate Request

Appropriated Resources $3,959,741 $4,037,812 $4,355,186 $4,700,345 $4,689,220 $4,504,885 $4,565,257 $4,842,007

Reimbursable Resources 8,764 8,302 8,970 8,729 11,163 6,385 6,474 6,541

User Fees 5,452 12,679 3,103 49 13,005 5

Budget Activity Total $3,973,957 $4,058,793 $4,367,259 $4,709,123 $4,700,383 $4,511,270 $4,584,736 $4,848,553

Exam and Collections

FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014

Measure Actual Actual Actual Actual Actual Target Target Target

Examination Coverage - Individual (Oe) (L) 1.0% 1.0% 1.0% 1.1% 1.1% 1.0% 1.0% 1.0%

Field Exam National Quality Review Score (Oe) (L) 85.9% 86.0% 85.1% 84.9% 85.8% 87.4% 86.9% 87.3%

Office Exam National Quality Review Score (Oe) (L) 89.4% 90.0% 92.1% 91.6% 90.4% 91.3% 91.1% 91.1%

Examination Quality - Industry (Oe) (L) 87.0% 88.0% 88.0% 87.0% 90.0% 90.0% N/A1 N/A1

Examination Quality - Coordinated Industry (Oe) (L) 96.0% 97.0% 95.0% 95.0% 96.0% 96.0% N/A1 N/A1

Examination Coverage - Business (Assets > $10 million) (Oe) (L) 6.8% 6.1% 5.6% 5.7% 6.2% 6.2% 4.6% 4.9%

Automated Underreporter (AUR) Efficiency (E) (L) 1,956 1,982 1,905 1,924 2,007 2,041 2,035 2,001

Automated Underreporter (AUR) Coverage (E) (L) 2.5% 2.6% 2.6% 3.0% 3.3% 3.2% 2.9% 3.1%

Examination Efficiency - Individual (E) (L) 137 138 138 140 139 142 145 145

Collection Coverage - Units (Ot) (L) 54.0% 55.2% 54.2% 50.1% 50.0% 48.1% 46.4% 47.1%

Collection Efficiency - Units (E) (L) 1,828 1,926 1,845 1,822 1,952 1,997 2,049 2,039

Field Collection National Quality Review Score (Ot) (L) 84.0% 79.0% 80.5% 80.6% 80.3% 80.4% 80.4% 80.4%

Automated Collection System (ACS) Accuracy (Oe) 92.9% 95.3% 94.3% 95.9% 94.9% 94.7% 94.5% 94.5%

N/A1 - In FY 2013, these measures were combined and the new measure, Examination Quality - Large Business, will be reported in the FY 2015 Treasury Submission.

1 The FY 2007 - FY 2012 Appropriated Resources represents the approved Operating Plan.

Key: Oe - Outcome Measure, E - Efficiency Measure, L - Long Term Goal, Ot - Output/Workload Measure

Dollars in Thousands

2 The FY 2007 - FY 2012 columns represent realized resources for reimbursable and user fees.
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Exam

The Examination program provides taxpayers top quality service by helping them understand 

and meet their tax responsibilities and by applying the tax law with integrity and fairness. 

The IRS uses the performance goals below to gauge the Examination program performance. 

The IRS met the FY 2012 Individual Exam Coverage target of 1.0 percent. Individual 

coverage has been stable from FY 2008 through FY 2012. Future plans include leveraging 

the National Research Program data to improve return selection criteria, streamlining 

automation, an emphasis on multiyear noncompliance, and utilization of risk 

analysis/assessment in all business processes. To maintain a 1.0 percent coverage rate for 

FY 2013 and FY 2014 the IRS will place more emphasis on closing and monitoring cycle 

time, Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) returns, and Offshore 

Banking activity returns. In addition, resources will be devoted to working identity theft 

Individual Master File (IMF) cases.

In FY 2012, the Field Exam National Quality Review Score (NQRS) reached 87.4 percent, 

exceeding the FY 2012 target. This increase is because of increased focus on improving the 

lowest scoring quality attributes, and continued focus on the attribute pertaining to Income 

Determination (Attribute 300). Field Exam will work to maintain FY 2012 improvements and 

focus additional efforts upon improving Attribute 510 (Time Span). Beginning in FY 2013, 

there is a change in the quality scoring methodology, reducing the number of attributes from 

18 to 17. The IRS adjusted the FY 2013 target to 86.9 percent and FY 2014 target to 

87.3 percent to reflect recent quality improvements.

In FY 2012, Office Exam National Quality Review Score reached 91.3 percent, exceeding the 

FY 2012 target. This increase is because of continued quality improvement efforts initiated in 

FY 2011 that focused on the weakest attributes. Field Exam will work to maintain FY 2012 

improvements and focus additional efforts upon improving Attribute 510 (Time Span). 

Beginning in FY 2013, there is a change in the quality scoring methodology, reducing the 

number of attributes from 18 to 17. The IRS adjusted the FY 2013 and FY 2014 targets to 

91.1 percent to reflect recent quality improvements.

In FY 2012, the Examination Quality - Industry (IC) Score met the year-end target of 

90 percent. The IRS continues to focus on the importance of meeting the quality measure 

through direct feedback and outreach to field teams and partnering with the industries on 

quality improvement efforts. In recent years, the IRS’s Large Business & International 

(LB&I) operating division expanded to take on new program responsibilities and their

traditional taxpayer base of large business taxpayers also expanded to include certain 

individual and small business taxpayers with international activity. At the same time, 

constrained resources and changing compliance risks have prompted LB&I to begin shifting 

program priorities to address coverage and compliance needs of the expanded taxpayer 

population. Therefore, beginning in FY 2013, Examination Quality Industry and Examination 

Quality Coordinated Industry will be combined and reporting will start in the FY 2015 budget 

cycle. The new measure will be called “Examination Quality – Large Business”.
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The IRS achieved a score of 96 percent for the FY 2012 Examination Quality - Coordinated 

Industry measure, missing the FY 2012 target by one percent. Factors contributing to the 

FY 2012 shortfall include: Corporate officers’ individual returns not being secured and 

inspection results documented; issue status not being updated on the mid-cycle risk analysis; 

penalty consideration not documented; and report writing procedures not being followed on 

the Revenue Agents Report (Form 4549) for informal claims and No-Change cases. The 

quality management staff continues to focus on the importance of meeting the quality 

measures through direct feedback to field teams, partnering with the Industries in quality 

improvement efforts, and outreach to field teams. Over the past couple of years, LB&I 

expanded to take on new program responsibilities and their traditional taxpayer base of large 

business taxpayers also expanded to include certain individual and small business taxpayers

with international activity. At the same time, constrained resources and changing compliance 

risks have prompted LB&I to begin shifting program priorities to address coverage and 

compliance needs of the expanded taxpayer population. Beginning in FY 2013, Examination 

Quality Industry and Examination Quality Coordinated Industry will be combined and 

reporting will start in the FY 2015 budget cycle. The new measure will be called 

“Examination Quality – Large Business”.

In FY 2012, the IRS achieved a 6.2 percent rate for Examination Coverage – Business (assets 

greater than $10 million), consistent with FY 2011 results and exceeding the FY 2012 plan. 

LB&I exceeded its planned closures because of hiring at the end of FY 2010 that led to a 

build up of new starts and pipeline inventory that generated more closures than expected. 

In FY 2013, LB&I will reallocate resources to work Offshore Voluntary Disclosure Initiative 

(OVDI) returns which are more complex and take more time to work. As such, the FY 2013 

and FY 2014 targets were adjusted to 4.6 percent and 4.9 percent to account for the 

reallocation of these FTE.

The IRS fell short of the FY 2012 target for Automated Underreporter (AUR) Efficiency, 

reaching 2041 per FTE. The FY 2012 target assumed attrition hiring early in the year.

However, the hiring could not be completed because of funding availability. Resources were 

realigned to address the reduction in FTE, but without the additional closures anticipated from 

the new hires, the IRS fell short of the target. The IRS will leverage the process 

improvements implemented in previous years to improve workload selection and productivity. 

A reduction in AUR resources to staff Identity Theft and Business Master File (BMF) AUR 

pilots will result in a decrease in closures and coverage. The FY 2013 and FY 2014 targets 

were adjusted to 2,035 and 2,001. 

The IRS met the FY 2012 target for AUR Coverage even as the number of individual filings 

increased 1.9 percent compared to FY 2011. AUR data is cyclical, with larger closure 

volumes occurring later in the fiscal year. As mentioned for AUR Efficiency, because of a 

reduction in AUR resources to staff Identity Theft and BMF AUR pilots, the FY 2013 and 

FY 2014 targets were adjusted to 2.9 percent and 3.1 percent. The business operating 

divisions will continue to work collaboratively to ensure the targets are met by realigning 

resources and workload as needed.

The IRS exceeded the FY 2012 target of 134 for Individual Exam Efficiency, as closures 

declined at a slower rate than FTE. In FY 2013, Small Business Field Exam will focus on 
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business returns and more complex individual work. This work will require increased time 

because of the probability of in-depth income examinations, which will reduce the volume of 

individual returns that close. However, OVDI closures will offset a portion of the decline. 

Domestic & International Business Compliance (IBC) individual return delivery is expected 

to increase. To maintain coverage, the IRS will place more emphasis on closing and 

monitoring cycle time, Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) returns 

and Offshore Banking activity returns. For FY 2013 and FY 2014, the IRS expects to meet 

the target of 145. In addition, resources will be devoted to working identity theft IMF cases.

Collection

The Collection program collects delinquent taxes, secures delinquent tax returns through the 

fair and equitable application of the tax laws, and provides education to customers to 

encourage future compliance, thereby protecting and promoting public confidence in the 

American tax system. The performance goals that the IRS uses to gauge collection program 

performance are discussed below.

In FY 2012, Collection Coverage reached 48.1 percent, exceeding the target of 47.8 percent. 

In FY 2013, to ensure continued improvement each functional area plans to increase 

productivity 1.5 percent. Field Collection is delivering management training focused on tools 

to improve group level performance. Automated Collection System (ACS) programs plan to 

improve efficiency with automated checklists, tools, and e-guides and improve management 

of priority inventory through site-level timeliness goals. The FY 2013 target of 46.4 percent 

was set as a result of redirecting ACS staff to Accounts Management Toll-free in support of 

the Identify Theft program. The IRS expects to meet the FY 2013 target and the FY 2014 

target of 47.1. 

In FY 2012, the Collection Efficiency target was not met. Attrition replacement hires did not 

come on board until late in the fiscal year. Although there was an increase in the number of 

FTE due to attrition hiring, due to the timing of the arrival of the attrition replacement hires, 

Collection did not receive a corresponding increase in the number of closures and therefore 

efficiency decreased. In addition, delinquent return notice dispositions fell short of plan 

because of the reallocation of resources in the campus from return delinquency programs to 

balance due programs and programming issues related to case creation and notice issuances 

earlier in the year. To ensure continued improvement, each business unit plans for a 

1.5 percent productivity increase. Field Collection is delivering management training focused 

on tools to improve group performance. ACS plans to improve efficiency using automated 

checklists, tools, and e-guides, and improve management of priority inventory through 

site-level timeliness goals. The FY 2013 and FY 2014 targets were increased based on last 

year’s performance to 2,049 and 2,039 based on the planned improvements.

At 80.4 percent, FY 2012 results exceeded the Field Collection NQRS target by 

2.4 percentage points. The number of quality attributes reviewed decreased 33 percent from 

FY 2011 because of process improvements. The IRS experienced improvements in the top 

five attributes, which contributed to the improved score. To emphasize continual quality 

improvement, front line managers participated in a Leadership CPE course in September 2012 

that provided additional tools in this area, including how to prepare a quality action plan and 
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better monitor group performance. FY 2013 and FY 2014 targets will remain the same at 

80.4 percent based on the FY 2012 results.

The IRS exceeded the FY 2012 ACS target, reaching 94.7 percent. Results for this measure 

have been consistently above 94 percent for the last five years. To achieve future targets, the 

IRS will continue to focus on process and performance reviews to maintain the highest 

accuracy rate possible. Enhanced collaboration and information sharing between ACS sites 

will be key to meeting the FY 2013 and FY 2014 targets of 94.5 percent.

3E – Regulatory ($163,149,000 in direct appropriations, an estimated $676,000 from 

reimbursable programs, and an estimated $18,200,000 from user fees): This budget activity 

funds the development and printing of published IRS guidance materials; interpretation of tax 

laws; internal advice to IRS on general non-tax legal issues; 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. The program activities

include the following:

 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.

 Return Preparer Strategy provides staffing, training, and direct support associated 

with the Return Preparer Strategy.

 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.
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FY 2014 Program Changes by Budget Activity

3.1.5 – Budget and Performance Report and Plan

Description of Performance

Tax Exempt and Government Entities (TEGE) Determination Closures include both 

applications for tax-exempt status for employee retirement plans and applications from 

various charitable entities seeking tax-exempt status. Applications are reviewed to determine 

their eligibility and closed upon approval or disapproval. FY 2012 results exceeded the target 

by 32 percent. Contributing factors include: 

 Exempt Organizations (EO) – Additional overtime hours worked and the utilization of 

clerical resources to assist with closing determination cases led to an increase in 

closures; and 

 Employee Plans (EP) – TEGE implemented improvements, such as changing 

submission procedures to better control receipts and inventory levels while enhancing 

business rules to close cases faster. 

As more focus is placed on reducing aged inventory, the FY 2013 and FY 2014 targets are set 

at 62,473 and 67,922, respectively. 

FTE Amount

Enforcement Initiatives 72 $10,025

Address International and Offshore Compliance Issues 9 1,687

Address Impact of Affordable Care Act (ACA) Statutory Requirements 39 5,600

Increase Audit Coverage to Address Tax Compliance Issues 2 252

Improve Coverage of Partnerships and Flow-Through Entities Build Out Tax Return Preparer Program 2 332

Build Out Tax Return Preparer Compliance Activities Address Appeals Workload 20 2,154

72 $10,025

Dollars in Thousands

Enforcement 

Regulatory

Total FY 2014 Program Changes

Regulatory FY 2013

FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 Annualized FY 2014

Resource Level 1, 2 Enacted Enacted Enacted Enacted Enacted Enacted CR Rate Request

Appropriated Resources $149,951 $149,282 $150,480 $164,292 $159,293 $158,096 $154,510 $163,149

Reimbursable Resources 255 435 469 574 654 660 669 676

User Fees 168 13,249 12,482 18,200 18,200

Budget Activity Total $150,206 $149,885 $150,949 $164,866 $173,196 $171,238 $173,379 $182,025

Regulatory

FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014

Measure Actual Actual Actual Actual Actual Target Target Target

TE/GE Determination Case Closures (Ot) 109,408 100,050 96,246 105,247 91,205 87,000 62,473 67,922

Dollars in Thousands

Key: Ot - Output/Workload Measure

1 The FY 2007 - FY 2012 Appropriated Resources represents the approved Operating Plan.

2 The FY 2007 - FY 2012 columns represent realized resources for reimbursable and user fees.
IRS-105

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; equity, diversity and inclusion; research and statistics of 

income; and necessary expenses for information systems and telecommunication support, 

including development, security, and maintenance of the IRS’s information systems.

The Operations Support President’s Budget request for FY 2014 is $4,480,843,000 in direct 

appropriations and 13,143 FTE. This is an increase of $533,427, or 13.51 percent, and 

689 FTE more than the FY 2012 Enacted Budget of $3,947,416,000 and 12,454 FTE.

A portion of this appropriation, $166,086,000, is requested as part of the $411,990,000 

program integrity cap adjustment for the IRS tax enforcement and compliance programs, 

which includes an above-base investment in these programs to reduce future deficits. In 

conjunction with specified funds provided to the IRS Enforcement account, this increment 

will support new tax compliance initiatives that are expected to generate high returns on 

investment in the form of increased tax revenues. This appropriation funds the following 

budget activities. 
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2.1 – Budget Adjustments Table

FTE Amount

FY 2012 Enacted 1 12,454 $3,947,416

FY 2013 Annualized CR Rate 12,240 $3,971,000

FY 2014 Changes to Base:

Non-Recur CR Increase: ($23,584)

Maintaining Current Levels (MCLs): $52,115

Pay Inflation Adjustment 13,977

Non-Pay Inflation Adjustment 38,138

Efficiencies/Savings: (146) ($150,051)

Increase e-File Savings (71)

Reduce Information Technology (IT) Infrastructure (57,500)

Implement Human Capital Administrative Efficiencies (73) ($7,858)

Targeted Personnel Savings (73) (7,922)

Savings from Space Optimization (76,700)

Reinvestment: $37,500

Implement Space Optimization to Achieve Savings 37,500

Subtotal FY 2014 Changes to Base (146) ($84,020)

FY 2014 Current Services (Base) 12,094 $3,886,980

Program Changes:

Program Increases:

Taxpayer Service Initiative:

Improve Taxpayer Service and Meet Increased Demand 40 43,501

Subtotal Taxpayer Service Initiative 40 $43,501

Enforcement Initiatives:

Implement Foreign Account Tax Compliance Act (FATCA) 29 15,590

Address International and Offshore Compliance Issues 6,043

Implement Merchant Card and Basis Matching 13 12,361

Address Impact of Affordable Care Act (ACA) Statutory Requirements 52 17,212

Improve Identification and Prevention of Refund Fraud and Identity Theft 76 33,468

Increase Audit Coverage to Address Tax Compliance Issues 24 39,482

Increase Collection Coverage 24,213

Expand Coverage of High-Wealth Individuals and Enterprises 4,509

Improve Coverage of Partnerships and Flow-Through Entities 5,877

Build Out Tax Return Preparer Compliance Activities 2,333

Leverage Data to Improve Case Selection 53 36,879

Leverage Digital Evidence for Criminal Investigation (CI) 1 3,708

Subtotal Enforcement Initiatives 248 $201,675

Infrastructure Initiatives:

Implement IT Changes to Deliver Tax Credits and Other Requirements 722 305,645

Develop New Online Services 37 24,059

Develop Converged Telecommunication Networks 15,000

Expand Virtual Services Delivery (VSD) 2 3,983

Subtotal Infrastructure Initiatives 761 $348,687

Subtotal FY 2014 Program Changes 1,049 $593,863

Total FY 2014 Budget Request 13,143 $4,480,843

1 FY 2012 Enacted represents the approved FY 2012 Operating Plan.

Dollars in Thousands

Operations Support
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2.2 – Operating Levels Table

Dollars in Thousands

Appropriation Title: Operations Support FY 2012 

Actuals

FY 2013 

Annualized 

CR Rate

FY 2014

Request

FTE 11,640 12,356 13,259

Object Classification:

11.1 Full-Time Permanent Positions $1,072,941 $1,127,155 $1,226,945

11.3 Other than Full-Time Permanent Positions 8,284 9,741 9,808

11.5 Other Personnel Compensation 27,249 31,227 31,418

11.8 Special Personal Services Payments 0 0 0

11.9 Personnel Compensation (Total) $1,108,474 $1,168,123 $1,268,171

12.0 Personnel Benefits 368,585 383,117 421,307

13.0 Benefits to Former Personnel 73,604 48,897 49,234

21.0 Travel 24,741 34,586 37,307

22.0 Transportation of Things 17,792 20,654 20,201

23.1 Rental Payments to GSA 661,815 648,714 644,792

23.2 Rent Payments to Others 13,019 13,393 13,607

23.3 Communications, Utilities, & Misc 384,483 383,447 367,242

24.0 Printing & Reproduction 22,459 23,093 26,189

25.1 Advisory & Assistance Services 536,271 727,591 592,444

25.2 Other Services 76,102 132,299 174,863

25.3 Purchase of Goods & Services from Govt. Accounts 65,360 54,711 61,631

25.4 Operation & Maintenance of Facilities 168,181 177,069 179,415

25.5 Research & Development Contracts 0 34 34

25.6 Medical Care 13,928 14,315 15,987

25.7 Operation & Maintenance of Equipment 83,451 119,374 116,361

25.8 Subsistence & Support of Persons 14 215 218

26.0 Supplies and Materials 28,284 39,254 41,380

31.0 Equipment 341,341 393,420 402,453

32.0 Lands and Structures 39,662 58,770 48,491

33.0 Investments & Loans 0 0 0

41.0 Grants, Subsidies 0 0 0

42.0 Insurance Claims & Indemn 1,710 428 435

43.0 Interest and Dividends 0 0 0

44.0 Refunds 0 0 0

91.0 Unvouchered 0 0 0

Total Budget Resources $4,029,276 $4,441,504 $4,481,762

Budget Activities:

Infrastructure $952,858 $972,156 $934,528

Shared Services & Support 1,235,708 1,288,613 1,348,498

Information Services 1,840,710 2,180,735 2,198,736

Total Budget Resources $4,029,276 $4,441,504 $4,481,762
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2.3 – Appropriation Detail Table

3F – Infrastructure ($939,182,000 in direct appropriations, an estimated $1,044,000 from

reimbursable programs, and an estimated $17,137,000 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. The program activities include:

 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.

 Security covers building security costs related to contract guard services.

Dollars in thousands Operations Support

Resources

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT New Appropriated Resources:

Infrastructure $894,365 $929,634 $916,269 $939,182 $9,548 1.03%

Shared Services and Support 5,308 1,187,959 5,879 1,214,514 5,774 1,239,929 5,759 1,305,701 (120) 91,187 -2.04% 7.51%

Information Services 6,191 1,681,195 6,575 1,803,268 6,466 1,814,802 7,384 2,235,960 809 432,692 12.30% 23.99%

Subtotal New Appropriated Resources 11,499 $3,763,519 12,454 $3,947,416 12,240 $3,971,000 13,143 $4,480,843 689 $533,427 5.53% 13.51%

Other Resources: Reimbursables 124 37,656 124 37,656 116 23,347 116 23,648 (8) (14,008) -6.45% -37.20%

User Fees 17 132,238 17 132,238 271,658 108,135 (17) (24,103) -100.00% -18.23%

Recovery from Prior Years 1,178 2,081 94 (2,081) -100.00%

Unobligated Balances from Prior Years 94,685 95,005 177,498 2,006 (92,999) -97.89%

Transfers In/Out 13 (13) -100.00%

Resources from Other Accounts 455 455 (455) -100.00%

Subtotal Other Resources 596 $265,757 596 $266,993 116 $472,597 116 $133,789 (480) ($133,204) -80.54% -49.89%

Total Budgetary Resources 12,095 $4,029,276 13,050 $4,214,409 12,356 $4,443,597 13,259 $4,614,632 209 $400,223 1.60% 9.50%

FY 2013 % Change

CR Rate

FY 2012

$ Change Annualized Enacted Request to FY 2014 1 Actuals to FY 2014

1 FY 2012 Enacted represents the approved FY 2012 Operating Plan.

2 Resources from Transfers In/Out include a FY 2012 transfer in from the Office of National Drug Control Policy (ONDCP) High Intensity Drug Trafficking Area (HIDTA) Program ($13K).

FY 2012 FY 2014 FY 2012 FY 2012
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FY 2014 Program Changes by Budget Activity

3.1.6 – Budget and Performance Report and Plan

Description of Performance

In FY 2012, the IRS completed 72 space reduction projects, releasing approximately 

600,000 rentable square feet of space with annualized savings of $13.2 million. 

In FY 2013, there are currently 54 space reduction projects that have been approved for 

implementation, which would result in the release of approximately 470,000 rentable square 

feet of space with annualized savings of $13.3 million. The IRS will continue to implement 

high priority projects in FY 2014 if funds become available. Project identification will occur 

closer to the budget year.

FTE Amount

Taxpayer Service Initiative $12,772

Improve Taxpayer Service and Meet Increased Demand 12,772

Enforcement Initiatives $29,058

Implement Foreign Account Tax Compliance Act (FATCA) 1,538

Address International and Offshore Compliance Issues 2,171

Implement Merchant Card and Basis Matching 3,538

Address Impact of Affordable Care Act (ACA) Statutory Requirements 1,159

Improve Identification and Prevention of Refund Fraud and Identity Theft 5,530

Increase Audit Coverage to Address Tax Compliance Issues 5,260

Increase Collection Coverage 3,783

Expand Coverage of High-Wealth Individuals and Enterprises 1,598

Improve Coverage of Partnerships and Flow-Through Entities Build Out Tax Return Preparer Program 2,112

Build Out Tax Return Preparer Compliance Activities Address Appeals Workload 818

Leverage Data to Improve Case Selection Implement Uncertain Tax Position Reporting Requirements 1,498

Leverage Digital Evidence for Criminal Investigation (CI) Leverage Digital Evidence for Criminal Investigation (CI) 53

Infrastructure Initiatives $3,148

Implement IT Changes to Deliver Tax Credits and Other Requirements 2,766

Develop New Online Services 244

Expand Virtual Services Delivery (VSD) 138

$44,978

Dollars in Thousands

Operations Support

Infrastructure

Total FY 2014 Program Changes

Infrastructure FY 2013

FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 Annualized FY 2014

Resource Level 1, 2 Enacted Enacted Enacted Enacted Enacted Enacted CR Rate Request

Appropriated Resources $845,203 $826,313 $875,538 $895,202 $926,190 $929,634 $916,269 $939,182

Reimbursable Resources 121 149 14,120 505 880 1,016 1,027 1,044

User Fees 13,049 23,290 57,477 16,867 17,137

Budget Activity Total $845,324 $839,511 $889,658 $895,707 $950,360 $988,127 $934,163 $957,363

2 The FY 2007 - FY 2012 columns represent realized resources for reimbursable and user fees.

Dollars in Thousands

1 The FY 2007 - FY 2012 Appropriated Resources represents the approved Operating Plan.
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The IRS also intends, where possible, to place new hires in existing space and renew leases at 

existing sites rather than move to new locations, when cost effective. These and other actions 

will help offset the projected rent costs in FY 2013 and beyond, as well the cost of future 

campus consolidation projects.

3G – Shared Services and Support ($1,305,701,000 in direct appropriations, an estimated 

$15,806,000 from reimbursable programs, and an estimated $31,520,000 from user fees): 

This budget activity funds policy and 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 employee benefits programs. The 

program activities include the following:

 National Headquarters Management and Administration directs the management 

activities of strategic planning, communications and liaison, finance, human resources, 

equity, diversity and inclusion programs, 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, and the Oversight Board). It provides policy guidance for conducting 

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 and Facilities Management provides services and supplies required to 

manage IRS facilities.

 Procurement supports the procurement function of the IRS.

 Equity, Diversity and Inclusion Field Services: This activity provides staffing, 

training, and direct support to plan and manage the IRS’s Equity, Diversity and 

Inclusion program.

 Communications and Liaison coordinates local government and liaison relationships; 

handles congressional, State, and national stakeholder relationships and issues; 

coordinates crosscutting 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, purchase cards, corporate express, and employee clearances.

 Treasury Complaint 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.
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 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 noncompliant behavior.

 Security Administration and Management manages and oversees the staffing, training, 

equipment, and direct support for the protection of IRS employees, facilities, and 

assets, and the protection and proper use of identity information.

 Wage and Investment (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 2 (CADE 2), and Account Management 

Services (AMS) technology solutions, and re-engineered business processes.

 Benefit Payments provides resources to fund Workers’ Compensation benefits and 

Unemployment Compensation for Federal employee payments.

 Shared Services provides additional services, such as the Public Transit Subsidy.
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FY 2014 Program Changes by Budget Activity

3.1.7 – Budget and Performance Report and Plan

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.

Human Capital

The IRS made significant progress toward achieving the strategic goal of becoming the “Best 

Place to Work in Government” and fostering high employee engagement. In FY 2012, the 

IRS:

FTE Amount

Taxpayer Service Initiative 9 $9,650

Improve Taxpayer Service and Meet Increased Demand 9 9,650

Enforcement Initiatives 72 $63,864

Implement Foreign Account Tax Compliance Act (FATCA) 1,722

Address International and Offshore Compliance Issues 2,419

Implement Merchant Card and Basis Matching 3,759

Address Impact of Affordable Care Act (ACA) Statutory Requirements 52 15,045

Improve Identification and Prevention of Refund Fraud and Identity Theft 20 9,633

Increase Audit Coverage to Address Tax Compliance Issues 9,893

Increase Collection Coverage 15,072

Expand Coverage of High-Wealth Individuals and Enterprises 1,875

Improve Coverage of Partnerships and Flow-Through Entities Build Out Tax Return Preparer Program 2,434

Build Out Tax Return Preparer Compliance Activities Address Appeals Workload 995

Leverage Data to Improve Case Selection Implement Uncertain Tax Position Reporting Requirements 978

Leverage Digital Evidence for Criminal Investigation (CI) Leverage Digital Evidence for Criminal Investigation (CI) 39

Infrastructure Initiatives $1,772

Implement IT Changes to Deliver Tax Credits and Other Requirements 1,579

Develop New Online Services 185

Expand Virtual Services Delivery (VSD) 8

Total FY 2014 Program Changes 81 $75,286

Dollars in Thousands

Operations Support

Shared Services and Support Shared Services and Support FY 2013

FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 Annualized FY 2014

Resource Level 1, 2 Enacted Enacted Enacted Enacted Enacted Enacted CR Rate Request

Appropriated Resources $1,179,216 $1,291,296 $1,269,642 $1,311,127 $1,291,568 $1,214,514 $1,239,929 $1,305,701

Reimbursable Resources 13,649 30,796 20,763 20,315 19,957 31,486 15,618 15,806

User Fees 19,114 17,887 4,588 14,938 31,520 31,520

Budget Activity Total $1,192,865 $1,341,206 $1,290,405 $1,349,329 $1,316,113 $1,260,938 $1,287,067 $1,353,027

2 The FY 2007 - FY 2012 columns represent realized resources for reimbursable and user fees.

Dollars in Thousands

1 The FY 2007 - FY 2012 Appropriated Resources represents the approved Operating Plan.
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 Revised the All Employee Survey into a new 15 question Workgroup Questionnaire, 

the results of which will be used to focus employee engagement efforts and workplace 

improvements, establish business priorities, and address barriers to achieving goals 

and objectives.

 Established Geographic Leadership Communities (GLCs) comprised of 

33 cross-functional groups of executives that host development opportunities and 

community building workshops in specific geographic areas to improve engagement 

and networking and better leverage local resources and talent. 

 Added an assessment revalidation option to the Leadership Succession Review (LSR) 

system, reducing the time to complete an assignment by 30 percent. The revalidation 

option provides the employee and the employee’s manager the opportunity to review 

the previous year’s LSR assessment (leadership skills, competencies, and bench 

strengths) and make changes, if necessary.

 Increased use of online training courses, resulting in reduced travel costs and 

providing timely, convenient, and accessible training for all employees. There were 

over 355,000 learning completions of courses in FY 2012, an increase of 21.5 percent

from FY 2011. The IRS received the Bersin & Associates 2012 Learning Leaders 

Award for utilizing innovative, efficient, and effective approaches to employee 

learning and talent management. 

 Initiated the Compliance Management Operations (CMO) pilot program, to identify 

more effective and efficient means for return selection, risk analysis, and case 

selection.

 Developed products and services to improve the work life of employees with 

disabilities through the IRS Disability Initiative.

The IRS will continue to support its mission by investing in human capital strategies and tools 

for engaging, recruiting, hiring, developing, and retaining a highly-skilled and 

high-performing workforce.

Physical, Information, and Cyber Security

Security of employees, taxpayer information, and tax processing systems is a top priority of 

the IRS. Through monitoring, identifying, and mitigating fraudulent schemes, the IRS protects 

its systems and taxpayers from increasing and evolving online fraud and identity theft 

schemes and helps to reduce the number of taxpayers who fall victim to them. 

The IRS installed new Enterprise Physical Access Control Systems (ePACS) in 88 prioritized 

IRS locations nationwide to comply with the Homeland Security Presidential Directive-12 

(HSPD-12), which mandates use of the Personal Identity Verification SmartID credentials by 

employees and contractors as a reliable form of identification and access control. The new 

ePACS system replaces the legacy proxy card based physical access systems and features IRS 

Wide Area Network (WAN) Connectivity, which provides interoperability between identity 

systems so that applications and systems have a reliable, up-to-date view of users and their 

rights. 
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Because the IRS has the unique position as the custodian and administrator of Federal tax 

information for all taxpayers, it has an immense responsibility for protecting Federal tax 

information from threats and vulnerabilities. Criminals are increasingly focused on accessing 

personal data and have expanded their attempts to steal identities and obtain private tax 

information. Protecting this information is vital to maintaining the public trust. 

In FY 2012, the IRS processed and mitigated emerging threats posed by more than 

2,300 cyber incidents and blocked IRS employee access to over 8,100 websites to prevent 

access to malicious or compromised sites.

The IRS dramatically improved threat intelligence gathering capabilities to quickly take down 

servers and web sites that were sending out fraudulent emails from all around the world and 

posing as IRS to defraud innocent taxpayers. In FY 2012, identity thieves changed their 

tactics by sending phishing emails posing as tax preparers in addition to setting up fraudulent 

websites and sending phishing emails posing as legitimate e-file providers. Working directly 

with Internet service providers, 18,810 fraudulent domestic websites were taken down 

including 13,077 fraudulent malware websites, compared to 9,272 in FY 2011. 

In FY 2012, the IRS took additional steps to prevent further identity theft including:

 Masking social security numbers (SSNs) in a two-dimensional (2D) barcode on 

46 nonpayment notices, affecting 18.9 million annual taxpayer notices; 

 Collaborating with State and law enforcement officials on data and perpetrator 

information sharing to gain additional insight into the growth of tax related identity 

theft crimes; and

 Releasing several new communications regarding identity theft to help affected

taxpayers, including special tips on IRS.gov and YouTube videos.

Research

During FY 2012, the IRS released an updated estimate of the tax gap, the amount of true tax 

liability faced by taxpayers that is not paid on time. This estimate, based on tax year 

(TY) 2006 liabilities, reflects a gross tax gap of $450 billion. The voluntary compliance rate 

for TY 2006 was 83.1 percent. The IRS continues to conduct 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. The NRP efforts include analyzing individual income tax 

returns for TY 2006 – 2010 as part of an on-going reporting compliance study, an 

employment tax compliance study for TY 2008 – 2010, and preparing to begin reporting 

compliance studies of corporate income tax and fuel excise tax.

In FY 2012, the IRS continued to develop tools and models to detect noncompliance, to 

identify emerging issues related to compliance activities (with a focus on international issues), 

to analyze results of implemented compliance efforts, and to support the Return Preparer 

Strategy. Research efforts in FY 2012 also concentrated on data analytics in emerging areas of 

interest, including the analysis of liens, identity theft, the Compliance Assurance Process, 
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taxpayer compliance costs, and the relationship between service and compliance. In addition, 

research provides taxpayer-based information and analyses that are necessary to implement 

new tax laws; in particular, health care-related legislation and provisions of the American 

Recovery and Reinvestment Act of 2009. 

3H – Information Services ($2,235,960,000 in direct appropriations, an estimated

$6,798,000 from reimbursable programs, and an estimated $59,478,000 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 the 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. 

Information Technology (IT) is responsible for information systems and technology, ranging 

from cyber security and networks to applications development and end user equipment and 

services. The program activities include the following:

 Security Services ensures effective security policies and programs to safeguard 

taxpayer records, IRS employees, facilities, business processes, systems and other 

resources. The program is responsible for corrective action efforts to establish 

adequate service-wide security, including Security Policy Support and Oversight, 

Mission Assurance, and Modernization Security. Policies are set using a governance 

process including executive steering committees. Compliance review teams perform 

vulnerability assessments. Mission assurance activities include operation of the 

Computer Systems Incident Response and Situation Awareness and Management 

Centers, as well as coordination of service-wide disaster recovery and business 

continuity planning. Operational programs include security training and awareness, 

sensitive system certification and accreditation with Treasury on the Federal Critical 

Infrastructure Protection Program.

 Tier B provides support for small to medium new investment projects (not Operations 

& Maintenance (O&M)), using core data, Business Master File (BMF) and Individual 

Master File (IMF), to support specialized functions (Submission Processing, 

Enforcement, and Taxpayer Service).

 Management Services provides for the design, development, delivery, and evaluation 

of a wide range of human resource programs for the IT 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 allows NHQ to manage and leverage IT solutions that 

are responsive to IRS-wide management, tax compliance, enforcement, and strategic 

and tactical research projects.
IRS-116

 Affordable Care Act – Program Management Office (PMO) manages the strategic 

planning, development, and implementation of new information systems in support of 

business requirements with regard to the healthcare reform initiative.

 IT Executive Oversight provides support to the immediate Office of the Chief 

Technology Officer, as well as the direct reports for equity, diversity and inclusion, 

and the Director, Stakeholder Management (including Communications Services and 

Program Oversight). The program provides executive direction for the IT 

organization, enabling IT to be a customer-focused supplier of IT solutions that are 

responsive to customer business priorities and meet functional and operational needs

effectively.

 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 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 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 of the telecommunications 

environment. This includes the operation of equipment and services to meet business 

user needs and the execution of routine changes for scheduled and unscheduled 

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 

IT organization, including demand analysis, enterprise architecture, configuration 

management, project reporting, enterprise life cycle management, release 

management, systems engineering, dashboard reporting, and internal management.

 User and Network Services maintains the IRS automated business processes at 

headquarters and field sites, effectively allowing the IRS to fulfill its missions. The 

support includes technical systems and applications software support to end users, 

maintaining legacy operations, local and corporate systems administration activities, 

email and domain user account maintenance. This activity monitors IRS network and 

systems administration by utilizing automated management tools. It performs asset 

management activities, and maintenance of the voice and data infrastructure at the 

territory offices. 
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 Strategy and Planning provides the management and oversight of investments in IT, 

demand analysis, project reporting, portfolio management and other IT 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 development 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 

contractors, and responding to information requests. 

 Disaster Recovery supports activities related to Enterprise Disaster Recovery 

planning, including testing, evaluations, plan development, and technical and business 

impact assessments.

 IT Security Training provides training for Federal Information Security Management 

Act (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 IRS centralizes the resources achieved through 

efficiencies in various parts of IT 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

(i.e., activities that reduce FTE, re-engineer processes, and enhances use of 

technology).
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FY 2014 Program Changes by Budget Activity

3.1.8 – Budget and Performance Report and Plan

Description of Performance

The IRS taxpayer service and enforcement programs rely heavily on information systems that 

fall into the non-business systems modernization (BSM) major products categories to process 

tax and information returns, account for tax revenues collected, send bills for taxes owed, 

issue refunds, assist in the selection of tax returns for audit, and provide telecommunication 

services for all business activities, including the public’s toll-free access to tax information. 

FTE Amount

Taxpayer Service Initiative 31 $21,079

Improve Taxpayer Service and Meet Increased Demand 31 21,079

Enforcement Initiatives 176 $108,753

Implement Foreign Account Tax Compliance Act (FATCA) 29 12,330

Address International and Offshore Compliance Issues 1,453

Implement Merchant Card and Basis Matching 13 5,064

Address Impact of Affordable Care Act (ACA) Statutory Requirements 1,008

Improve Identification and Prevention of Refund Fraud and Identity Theft 56 18,305

Increase Audit Coverage to Address Tax Compliance Issues 24 24,329

Increase Collection Coverage 5,358

Expand Coverage of High-Wealth Individuals and Enterprises 1,036

Improve Coverage of Partnerships and Flow-Through Entities Build Out Tax Return Preparer Program 1,331

Build Out Tax Return Preparer Compliance Activities Address Appeals Workload 520

Leverage Data to Improve Case Selection Implement Uncertain Tax Position Reporting Requirements 53 34,403

Leverage Digital Evidence for Criminal Investigation (CI) Leverage Digital Evidence for Criminal Investigation (CI) 1 3,616

Infrastructure Initiatives 761 $343,767

Implement IT Changes to Deliver Tax Credits and Other Requirements 722 301,300

Develop New Online Services 37 23,630

Develop Converged Telecommunication Networks 15,000

Expand Virtual Services Delivery (VSD) 2 3,837

Total FY 2014 Program Changes 968 $473,599

Dollars in Thousands

Operations Support

Information Services Information Services FY 2013

FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 Annualized FY 2014

Resource Level 1, 2 Enacted Enacted Enacted Enacted Enacted Enacted CR Rate Request

Appropriated Resources $1,520,416 $1,723,500 $1,721,831 $1,877,555 $1,838,958 $1,803,268 $1,814,802 $2,235,960

Reimbursable Resources 14,006 14,310 14,612 17,231 16,286 5,154 6,702 6,798

User Fees 66,678 50,000 9,543 36,081 26,764 59,823 223,271 59,478

Budget Activity Total $1,601,100 $1,787,810 $1,745,986 $1,930,867 $1,882,008 $1,868,245 $2,044,775 $2,302,236

2 The FY 2007 - FY 2012 columns represent realized resources for reimbursable and user fees.

Dollars in Thousands

1 The FY 2007 - FY 2012 Appropriated Resources represents the approved Operating Plan.
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In addition, in FY 2012, the IRS provided new applications and services to make it easier for 

taxpayers to get assistance and secure tax information. 

 For the first time, Customer Service Representatives (CSR) can provide taxpayers 

with timely status updates on amended returns. The IRS is developing the Where’s 

My Amended Return? telephone and online application.

 The Virtual Service Delivery (VSD) pilot, where taxpayers may receive tax assistance 

at certain Taxpayer Assistance Centers (TAC) and Volunteer Income Tax Assistance 

(VITA) locations from employees located in other sites, ended May 2012. More than 

12,500 taxpayers were served during the pilot period. Quality results met goals in 

Accuracy of Tax Law Contacts and Accuracy of Accounts Contacts. Based on 

customer and employee feedback, the IRS plans to upgrade and expand VSD in 2013.

 The IRS is providing assistance to taxpayers at TACs and VITA sites through 

Facilitated Self Assistance (FSA) kiosks. Treasury recognized FSA as an area of 

customer service improvement.

 IRS implemented the Teletypewriter (TTY) One Call Solution. Deaf and Hard of 

Hearing taxpayers can now make a single call to the IRS to gain access to a CSR.

 IRS launched the VITA Site Locator on IRS.gov. This tool allows taxpayers to search 

for sites within a 5 to 100 mile radius of the zip code entered.

 To address the increasing Identity Theft issues, the IRS is implementing new 

processes and screening filters to improve its ability to identify potentially fraudulent 

returns.

 The IRS implemented e-Fax, allowing phone assistors to provide taxpayers a 

direct fax number so the taxpayer can provide case-related information to the 

assistor while on the phone, resulting in quicker case resolution. Also, e-Fax provides 

quicker relief with outgoing capabilities that allow employees to fax levy releases 

directly from their desktop while on the phone with the taxpayers.

 During filing season, companies offering free commercial online tax preparation and 

electronic filing services to taxpayers overseas clearly labeled on the IRS Free File 

webpage. A tag line—“U.S. Citizens and resident aliens with foreign addresses” was 

included on the webpage to help foreign taxpayers obtain the necessary information on 

free tax preparation services.

Through September 2012, the IRS had a consistent record-managing cost and schedule 

variance for the 26 non-BSM, information service projects that are part of major programs as 

illustrated in the chart below. These projects comprise a significant component of the overall 

IT funding total and receive the same management approach and scrutiny as the more public 

BSM activity.
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The IRS continues to strengthen management of its IT Infrastructure by implementing an 

Enterprise Infrastructure Strategy. This strategy incorporates a risk-based approach to the 

replacement and upgrade of hardware and software in the infrastructure and includes 

assessments of aging components together with consideration of new technology and 

customer demand. 

For FY 2013 and beyond, the IRS will use the newly implemented Enterprise Infrastructure 

Strategy to assess the need to replace/upgrade hardware and software in the most effective 

manner. 

Fiscal Year

Percent Within +/- 10%

Cost Variance

Percent Within +/- 10%

Schedule Variance

2010 89% 100%

2011 90% 99%

2012 84% 99%

Non-BSM Major Projects
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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 President’s Budget request for FY 2014 is $300,827,000 in direct appropriations

and 513 FTE. This is a decrease of $29,383,000, or 8.90 percent, and 92 FTE fewer from the

FY 2012 Enacted Budget of $330,210,000 and 605 FTE.

2.1 – Budget Adjustments Table 

FTE Amount

FY 2012 Enacted 1 605 $330,210

FY 2013 Annualized CR Rate 513 $332,231

FY 2014 Changes to Base:

Non-Recur CR Increase: ($2,021)

Maintaining Current Levels (MCLs): $617

Pay Inflation Adjustment 617

Efficiencies/Savings: ($30,000)

Business Systems Modernization (BSM) Savings (30,000)

Subtotal FY 2014 Changes to Base ($31,404)

FY 2014 Current Services (Base) 513 $300,827

Subtotal FY 2014 Program Changes

Total FY 2014 Budget Request 513 $300,827

1 FY 2012 Enacted represents the approved FY 2012 Operating Plan.

Budget Adjustments Table

Dollars in Thousands

Business Systems Modernization
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2.2 – Operating Levels Table 

Dollars in Thousands

Appropriation Title: Business Systems Modernization FY 2012 

Actuals

FY 2013 

Annualized 

CR Rate

FY 2014

Request

FTE 596 513 513

Object Classification:

11.1 Full-Time Permanent Positions $65,764 $56,772 $56,136

11.3 Other than Full-Time Permanent Positions 1,365 1,855 1,232

11.5 Other Personnel Compensation 2,954 3,693 3,291

11.8 Special Personal Services Payments 0 0 0

11.9 Personnel Compensation (Total) $70,083 $62,320 $60,659

12.0 Personnel Benefits 18,239 16,376 16,181

13.0 Benefits to Former Personnel 0 50 0

21.0 Travel 938 2,243 1,274

22.0 Transportation of Things 0 0 0

23.1 Rental Payments to GSA 0 0 0

23.2 Rent Payments to Others 20 12 9

23.3 Communications, Utilities, & Misc 0 2,154 1,019

24.0 Printing & Reproduction 20 23 16

25.1 Advisory & Assistance Services 213,049 178,650 184,015

25.2 Other Services 518 786 343

25.3 Purchase of Goods & Services from Govt. Accounts 54 79 82

25.4 Operation & Maintenance of Facilities 6 0 0

25.5 Research & Development Contracts 0 0 0

25.6 Medical Care 0 0 0

25.7 Operation & Maintenance of Equipment 2,543 3,644 1,813

25.8 Subsistence & Support of Persons 0 0 0

26.0 Supplies and Materials 0 259 163

31.0 Equipment 45,530 58,650 41,686

32.0 Lands and Structures 0 0 0

33.0 Investments & Loans 0 0 0

41.0 Grants, Subsidies 0 0 0

42.0 Insurance Claims & Indemn 0 0 0

43.0 Interest and Dividends 0 0 0

44.0 Refunds 0 0 0

91.0 Unvouchered 0 0 0

Total Budget Resources $351,000 $325,246 $307,260

Budget Activities:

IT Investments $351,000 $325,246 $307,260

Total Budget Resources $351,000 $325,246 $307,260
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2.3 – Appropriation Detail Table 

3I – Business Systems Modernization ($300,827,000 in direct appropriations): This budget 

activity funds the planning and capital asset acquisition of information technology (IT) to 

modernize IRS business systems, including labor and related contractural costs.

BSM uses best practices and expertise in business solutions and internal management from 

the IRS, businesses, and technology sectors to develop a world-class tax administration 

system. The program provides value to taxpayers, the business community, and government 

and it plays an integral role in reducing the tax gap. This program has delivered improved 

taxpayer service, electronic filing capacity, and data analysis capability and it has maintained 

successful performance in delivering projects within acceptable cost, schedule, and 

performance estimates. 

The following projects are supported by the FY 2014 BSM request of $300.8 million:

Customer Account Data Engine 2 (CADE 2) (Taxpayer Account Database): The CADE 2 

program implements a single, data-centric solution that provides daily processing of taxpayer 

accounts. A major component of the CADE 2 program is an authoritative database and data 

model for all individual taxpayers that provides the foundation for more efficient and effective 

tax administration. The CADE 2 authoritative database will provide a capability to view the 

taxpayer account data stored in the CADE database, and will feed downstream systems such 

as the Integrated Data Retrieval System (IDRS) for online transaction processing by IRS 

customer service representatives and an analytical data store for more meaningful business 

intelligence and expanded opportunities to increase compliance and accelerate the 

identification of fraudulent trends.

The second phase of the CADE 2 initiative, Transition State 2, will ensure the long-term 

viability of the IRS tax processing systems by addressing risks associated with the antiquated 

legacy core tax processing systems and associated programming languages in the current IRS 

environment. The IRS will continue the design and development of applications that expand 

the capabilities of the relational database while addressing current financial material 

weakness. 

Modernized e-File (MeF): MeF provides a standard filing structure for all IRS return types, a 

robust platform that can meet performance and capacity needs, enhanced and up-to-date 

Dollars in thousands Business Systems Modernization

Resources

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT New Appropriated Resources:

Business Systems Modernization 562 $250,537 605 $330,210 513 $332,231 513 $300,827 (92) ($29,383) -15.21% -8.90%

Subtotal New Appropriated Resources 562 $250,537 605 $330,210 513 $332,231 513 $300,827 (92) ($29,383) -15.21% -8.90%

Other Resources: Reimbursables User Fees Recovery from Prior Years 1,041 336 (1,041) -100.00%

Unobligated Balances from Prior Years 34 100,463 118,199 97,408 104,359 (13,840) 7.14%

Transfers In/Out Resources from Other Accounts

Subtotal Other Resources 34 $100,463 $119,240 $97,744 $104,359 ($14,881) -12.48%

Total Budgetary Resources 596 $351,000 605 $449,450 513 $429,975 513 $405,186 (92) ($44,264) -15.21% -9.85%

Enacted1 Request to FY 2014

FY 2012 FY 2012

1 FY 2012 Enacted represents the approved FY 2012 Operating Plan.

FY 2012 Annualized FY 2014 FY 2012 Actuals CR Rate to FY 2014

FY 2013 $ Change % Change
IRS-124

technologies, and customer service benefits that are of great appeal to external customers and 

stakeholders. With MeF, the IRS stores all tax return data in XML format in a Modernized 

Tax Return Database (MTRDB) allowing all authorized viewers of the data to see an entire 

tax return online over the Internet. Once fully implemented, all tax returns and transmission 

files will adhere to IRS rules/schemas.

Core Infrastructure: The Core Infrastructure provides mission-critical services to BSM 

projects. In FY 2014, this activity will continue to provide mission-critical services in 

designing, engineering, testing, and deploying standardized, consolidated, virtual and secure 

modernized development and production environments for use by BSM projects. 

The IRS is modernizing taxpayer applications to take advantage of web-based technologies 

that allow taxpayers to communicate with the IRS through the Internet using commercially 

available technology. The modernized infrastructure provides a complete environment 

(hardware, software, processes, and management) for developing, testing, deploying, 

operating, and monitoring both customer and internal applications in support of business 

practices. This includes updating the access portals and standardizing services, security, and 

operations management. 

This approach facilitates the IRS’s ability to develop a shared infrastructure and common 

business service solutions that are usable across multiple BSM projects. The core 

infrastructure consists of two primary program elements – Infrastructure Shared Services 

(ISS), and the Development, Integration and Testing Environment (DITE):

 ISS provides integrated architectural and engineering services required to deploy and 

deliver the BSM projects, including infrastructure requirements identification and 

management, security engineering, systems engineering, performance engineering, 

capacity planning, transition management support, configuration management, and 

expanded e-services and online filing. The continued development and management 

of this infrastructure incorporates the identification and development of common 

infrastructure, security, and application integration services for use and reuse by the 

BSM projects and reduces delivery time, application development, and operations and 

maintenance costs.

 DITE is comprised of a Virtual Development Environment (VDE) and an Enterprise 

Integration and Test Environment (EITE). The VDE provides a software development 

environment for modernization projects such as MeF and CADE 2 that allows 

geographically distributed developers access to standardized tools, information, and 

services. EITE provides the more structured, production-like, comprehensive 

integration and testing environment necessary to test end-to-end system capabilities 

and performance before release into the BSM production environment. The enhanced 

environment allows for the execution of extensive performance and capacity tests in a 

more production like environment, increasing the probability of success when the 

product is moved into the production environment. This approach provides for 

significant cost savings when compared to replicating the production environment on a 

project-by-project basis.
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Architecture, Integration and Management (AI&M): The AI&M program provides 

engineering management capabilities essential to delivering a program of the magnitude and 

complexity of BSM. It also 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. The AI&M 

program translates enterprise and project objectives into targeted, actionable investments to 

provide the necessary framework and direction for a cohesive, successful modernization. 

Management Reserve: The management reserve allows the IRS some flexibility to cover 

unanticipated cost adjustments. 

Labor: This activity provides the labor costs associated with the development of projects 

within the BSM portfolio.

3.1.9 – Budget and Performance Report and Plan

Description of Performance

The IRS’s modernization efforts focus on building and deploying advanced information 

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

For the Business Systems Modernization program (BSM), the IRS met 50 percent (1 of 2) of 

its BSM targets for FY 2012. These targets pertain to the two budget level measures which 

track the percentage of major BSM projects that are within the +/-10 percent Cost and 

Schedule variance threshold. The IRS met its Schedule variance target while falling short of 

the Cost variance target. As listed in the tables below, there were four project segments 

completed in FY 2012.

In FY 2012, two out of four (50.0 percent) project segments met the cost variance threshold. 

Two of the project segments exceeded the cost variance threshold. The two project segments

that did not meet the cost variance threshold are associated with MeF. 

Business Systems Modernization FY 2013

FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 Annualized FY 2014

Resource Level 1, 2 Enacted Enacted Enacted Enacted Enacted Enacted CR Rate Request

Appropriated Resources $212,569 $267,090 $229,914 $263,897 $263,369 $330,210 $332,231 $300,827

Reimbursable Resources

User Fees 88,948

Budget Activity Total $212,569 $267,090 $229,914 $263,897 $352,317 $330,210 $332,231 $300,827

Business Systems Modernization

FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014

Measure Actual Actual Actual Actual Actual Target Target Target

Percent of BSM Projects within +/- 10% Cost Variance (E) * 92.0% 60.0% 40.0% 71.4% 50.0% 90.0% 90.0%

Percent of BSM Projects within +/- 10% Schedule Variance (E) * 92.0% 90.0% 100.0% 100.0% 90.0% 90.0% 90.0%

Key: E - Efficiency Measure

Dollars in Thousands

*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.

1 The FY 2007 - FY 2012 Appropriated Resources represents the approved Operating Plan.

2 The FY 2007 - FY 2012 columns represent realized resources for reimbursable and user fees.
IRS-126

 MeF Release R7 Milestone 4b was 18 percent over expected costs because of 

additional funds needed to conduct unplanned testing to ensure the system could 

support the anticipated filing season volume and the purchase of additional hardware 

to ensure the disaster recovery environment has the same processing capabilities as the 

production environment. 

 MeF Release R7 Milestone 5 was 103 percent over expected costs because of 

hardware and software purchases planned for prior milestones along with unplanned 

and unfunded costs associated with various support activities to ensure milestone 

completion.

In FY 2012, the IRS completed 100 percent of all project segments within the schedule 

variance threshold, exceeding the goal of 90 percent, as improved planning and project 

management continues to have a positive effect on the projects.

To meet future targets, the IRS will continue to improve on its modernization efforts by 

implementing new practices, such as the Capability Maturity Model Integration (CMMI) and 

the Information Technology Infrastructure Library (ITIL), which help to improve areas such 

as development, services, and acquisitions. In FY 2013 and FY 2014, the IRS expects to meet 

a target of 90 percent for Cost and Schedule Variance through improved project management 

and oversight.

MeF R7 4b 12/29/11 12/29/11 0 0% YES

MeF R7 5 05/17/12 05/17/12 0 0% YES

MeF R8 3-4a 07/16/12 07/16/12 0 0% YES

CADE 2 Trans. State 1 4b 01/31/12 02/09/12 7 3% YES

Within 

Acceptable 

Tolerance

Schedule Variance for Project Segments Completed in FY 2012

Project Release M S

Planned 

Finish 

Date

Current 

Finish 

Date

Variance 

(days)

Variance 

(%)

MeF R7 4b 22,100 26,076 3,976 18% NO

MeF R7 5 7,000 14,175 7,175 103% NO

MeF R8 3-4a 8,700 8,700 0 0% YES

CADE 2 Trans. State 1 4b 41,362 39,565 (1797) -4% YES

Cost Variance for Project Segments Completed in FY 2012

Project Release MS

Planned 

Cost 

($000)

Current 

Cost 

($000)

Variance 

($000)

Variance 

(%)

Within 

Acceptable 

Tolerance
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Section 4 – Supplemental Information

4.1 – Summary of Capital Investments

Dollars in Thousands

Investments / Funding Source

FY 2011 

Actuals FY 2012 Actuals

% Change from 

FY11 to FY12

FY 2013 

Annualized 

CR Rate

% Change 

from FY12 to 

FY13

FY 2014 CJ 

Request

% Change from 

FY13 to FY14

Major IT Investments 

Account Management Services (AMS) $18,162 $19,734 8.7% $18,786 -4.8% $24,850 32.3%

IRS BSM 015-45-0921 059 000 000 000

IRS Operations Support 015-45-0919 18,103 19,734 18,786 24,850

CADE 2 $214,409 $214,928 0.2% $245,502 14.2% $250,797 2.2%

IRS BSM 015-45-0921 214,406 210,482 205,980 187,273

IRS Operations Support 015-45-0919 003 4,446 39,522 40,024

IRS Operations Support User Fees 015-45-5432 000 000 000 23,500

e-Services $17,033 $13,093 -23.1% $12,104 -7.6% $12,179 0.6%

IRS BSM 015-45-0921 002 000 000 000

IRS Operations Support 015-45-0919 17,031 13,093 12,104 12,179

Electronic Fraud Detection System (EFDS) $13,212 $17,832 35.0% $18,700 4.9% $18,937 1.3%

IRS Operations Support 015-45-0919 9,555 14,317 15,071 15,250

IRS EITC 015-45-0919-0 3,657 3,515 3,629 3,687

Return Review Program (RRP) $24,015 $23,740 -1.1% $45,452 91.5% $29,614 -34.8%

IRS Operations Support 015-45-0919 24,015 23,739 18,052 19,614

IRS EITC 015-45-0919-0 000 001 000 000

IRS Operations Support User Fees 015-45-5432 000 000 27,400 10,000

Individual Master File (IMF) $8,143 $8,055 -1.1% $9,017 11.9% $9,119 1.1%

IRS Operations Support 015-45-0919 8,143 8,055 9,017 9,119

Information Reporting and Document Matching (IRDM) $24,354 $21,760 -10.7% $22,981 5.6% $23,058 0.3%

IRS Operations Support 015-45-0919 24,354 21,757 22,981 23,058

IRS EITC 015-45-0919-0 000 003 000 000

IRS End User Systems and Services (EUSS) $274,004 $235,612 -14.0% $194,398 -17.5% $186,178 -4.2%

IRS Operations Support 015-45-0919 274,004 235,606 186,398 186,178

IRS Operations Support User Fees 015-45-5432 000 000 8,000 000

IRS EITC 015-45-0919-0 000 006 000 000

IRS Main Frames and Servers Services and Support 

(MSSS) $443,418 $481,790 8.7% $413,013 -14.3% $396,608 -4.0%

IRS Operations Support 015-45-0919 383,669 432,328 355,637 351,955

IRS BSM 015-45-0921 59,561 48,900 41,574 37,855

IRS Operations Support User Fees 015-45-5432 000 000 9,100 000

IRS Operations Support Reimbursables 015-45-0919 000 000 6,702 6,798

IRS Private Collection Agent Program 015-45-5510 188 562 000 000

IRS Telecommunications Systems and Support $329,442 $336,736 2.2% $289,800 -13.9% $304,280 5.0%

IRS Operations Support 015-45-0919 327,262 334,750 282,728 303,190

IRS Operations Support User Fees 015-45-5432 000 000 6,000 000

IRS Private Collection Agent Program 015-45-5510 1,053 764 000 000

IRS EITC 015-45-0919-0 1,081 1,073 1,072 1,090

IRS Txpyr. Scvs., Enfor.(0912, 0913) Multi-yr, Health 

Care/ACA(09A9), Rcvry., Asset Forfeiture 046 149 000 000

Integrated Customer Communications Environment 

(ICCE) $16,321 $16,622 1.8% $16,285 -2.0% $16,447 1.0%

IRS Operations Support 015-45-0919 16,320 16,622 16,285 16,447

IRS BSM 015-45-0921 001 000 000 000

Integrated Data Retrieval Systems (IDRS) $18,627 $18,098 -2.8% $18,516 2.3% $18,669 0.8%

IRS Operations Support 015-45-0919 18,627 18,098 18,516 18,669

Internal Revenue Service

FY 2014 Congressional Justification Submission

Capital Investments
IRS-128

Investments / Funding Source

FY 2011 

Actuals FY 2012 Actuals

% Change from 

FY11 to FY12

FY 2013 

Annualized 

CR Rate

% Change 

from FY12 to 

FY13

FY 2014 CJ 

Request

% Change from 

FY13 to FY14

Integrated Financial System/CORE Financial System 

(IFS) $26,579 $17,495 -34.2% $15,667 -10.4% $15,908 1.5%

IRS Operations Support 015-45-0919 26,579 17,261 15,667 15,908

IRS BSM 015-45-0921 000 234 000 000

Integrated Submission and Remittance Processing 

System (ISRP) $17,458 $16,087 -7.9% $11,697 -27.3% $11,824 1.1%

IRS Operations Support 015-45-0919 $17,458 $16,087 $11,697 $11,824

Internal Revenue Service.gov (IRS.gov) $52,470 $63,534 21.1% $73,100 15.1% $57,887 -20.8%

IRS Operations Support 015-45-0919 52,470 63,534 38,100 57,887

IRS Operations Support User Fees 015-45-5432 000 000 35,000 000

Foreign Account Tax Compliance Act (FATCA) $0,897 $7,120 693.9% $27,200 282.0% $4,441 -83.7%

IRS Operations Support 015-45-0919 897 7,120 15,500 4,441

IRS Operations Support User Fees 015-45-5432 000 000 11,700 000

Modernized e-File (MeF) $89,347 $77,885 -12.8% $67,272 -13.6% $72,518 7.8%

IRS BSM 015-45-0921 68,067 57,186 37,348 34,700

IRS Operations Support 015-45-0919 21,280 20,699 29,924 31,318

IRS Operations Support User Fees 015-45-5432 000 000 000 6,500

Service Center Recognition/Image Processing System 

(SCRIPS) $16,047 $18,209 13.5% $9,667 -46.9% $9,733 0.7%

IRS Operations Support 015-45-0919 16,047 18,209 9,667 9,733

Subtotal, Major IT Investments $1,603,936 $1,608,329 0.3% $1,509,157 -6.2% $1,463,047 -3.1%

Non-Major IT Investments $779,145 $869,734 11.6% $1,035,046 19.0% $1,140,215 10.2%

TOTAL IT Investments $2,383,081 $2,478,063 4.0% $2,544,203 2.7% $2,603,262 2.3%

Major Non-IT Investments

Criminal Investigations Capital Assets $7,089 $756 -89.3% -100.0% $193 0.0%

IRS Operations Support (One Year) 42 193

IRS Enforcement (Reimbursable) 7,089 714

Security Equipment $3,701 $2,500 -32.5% $2,800 12.0% $2,486 -11.2%

IRS Operations Support (One Year) 3,701 2,500 2,800 2,486

Leasehold Improvements $27,277 $12,400 -54.5% $11,100 -10.5% $55,357 398.7%

IRS Operations Support (One Year) 27,277 12,400 11,100 55,357

Total Major Non-IT Investments $38,067 $15,656 -58.9% $13,900 -11.2% $58,036 317.5%

Total Capital Investments $2,421,148 $2,493,719 3.0% $2,558,103 2.6% $2,661,298 4.0%

Internal Revenue Service

FY 2014 Congressional Justification Submission

Capital Investments
IRS-129

4.2 – Summary of Cost and Schedule Performance for Major Information Technology 

Systems

Investment

FY 2013

 Funding 

Type1

Cost 

Variance

 % 

Schedule 

Variance

 %

Account Management Services (AMS) O 0.11% 0.00%

Customer Account Data Engine 2 (CADE 2) B 0.00% 0.00%

e-Services (e-SVS) B 0.00% -5.22%

Electronic Fraud Detection System (EFDS) O 33.62% 6.90%

Foreign Account Tax Compliance Act (FATCA) D 25.63% 6.53%

Implement RRP (Replaces EFDS) D 1.93% 0.00%

Individual Master File (IMF) B 0.00% 0.00%

Information Reporting and Document Matching (IRDM) B 1.38% 0.00%

Integrated Customer Communication Environment 

(ICCE) B 0.00% 0.00%

Integrated Data Retrieval System (IDRS) B 2.32% 0.00%

Integrated Financial System/CORE Financial System 

(IFS) B 1.63% 0.00%

Integrated Submission and Remittance Processing 

System (ISRP) B 0.00% 0.00%

IRS End User Systems and Services (EUSS) O 0.00% 0.00%

IRS Main Frames and Servers Services and Support 

(MSSS) O 0.00% 0.00%

IRS Telecommunications Systems and Support (TSS) O 0.00% -33.23%

IRS.GOV - Portal Environment B 0.00% 0.00%

Modernized e-File (MeF) B 0.00% 0.00%

Service Center Recognition/Image Processing System 

(SCRIPS) B -2.78% -32.56%

Based on data submitted to Treasury, February 2013

1

 D – Development/Modernization/Enhancement (DME)

 O – Operations and Maintenance (O&M)

 B – Both DME and O&M
IRS-130

4A – Capital Investment Strategy

Information Technology (IT)

IT is a key enabler for efficient and effective tax administration. Today, the role of IT is more 

important than ever as the IRS faces the increasing complexity of tax administration, 

accelerating globalization, and an explosion in electronic data, online interactions, and related 

security risks. IRS IT investments address these new challenges, while ensuring that the IRS 

continues to deliver on its core mission and meets ongoing business needs. The IRS evaluates 

new technologies to deliver comprehensive IT solutions that focus on improving electronic 

filing of tax returns, enhancing services to taxpayers and third party practitioners, and 

strengthening compliance and criminal enforcement of tax laws. To ensure the public trust, 

the IRS also is making significant investments to secure infrastructure, data, and applications. 

With continued investment in new technologies and the modernization of existing IT systems, 

the IRS is improving service to taxpayers, achieving productivity gains, and distinguishing 

itself as a model of tax administration around the world.

The IRS also has established world-class practices and tools to manage and implement its 

portfolio of IT investments more efficiently. One element of the strategy, the Integrated 

Release Plan (IRP), provides a multiyear view of essential technology initiatives noting 

schedule, budgetary and human capital data and a link to the IT Technology Roadmap. The 

IRS continues to develop and refine the IRP by it to encompass a larger proportion of its IT 

investments each year. The IRP allows the IRS to assess proposed and current essential 

investments, assuring alignment to strategic goals, while illuminating budget or staffing 

constraints. This improves the IRS’s ability to use limited resources efficiently and practice 

sound investment management.
IRS-131

IT Technology Roadmap

Another tool, the IT Technology Roadmap (shown below), provides a multiyear strategic 

view defined in 18-month segments or waves. Each wave identifies the critical people, 

process, and technology needed to support the IRS mission. This guiding strategic document 

integrates with the more tactical Integrated Release Plan.

Technology Roadmap 2011 – 2017

Delivering a Balanced Portfolio of Investments

While the annual tax-filing season and legislative changes are IRS’s highest priorities each 

year, the IT strategy ensures the IRS also explores new technologies in areas such as

communications to complement its existing portfolio of IT investments. For example, 

projects such as Bring Your Own Device enable employees to use their personal smart phones 

and tablets for both professional and personal communications; Network Convergence

embraces the power of the Internet for voice, data, and visual communications; and IRS portal 

modernization is streamlining navigation and enhancing search capabilities to make it easier 

for taxpayers and other stakeholders to find information and resources quickly. The IRS 

balances these technologically-advanced investments, which enable more effective use of 

resources, against other IT investments that support revenue collections, such as third party 

tax information reporting and document matching, faster return reviews in processing to 

prevent tax refund fraud, and foreign account tax reporting.
IRS-132

Managing Performance as part of IRS’s IT Strategy

The IRS monitors major IT investments using baselines identified in OMB Exhibit 300B, IT 

Capital Asset Performance Measurement Report. The monthly review includes a comparison 

of the projected cost, schedule, and performance estimates to those in the approved business 

case and generates reports for internal and external stakeholders. Every month an Executive 

Steering Committee (ESC) reviews the overall status, cost, schedule, and scope for each 

investment and makes needed recommendations. Any changes to the cost, schedule, or scope 

of the investment require a formal Baseline Change Request (BCR). The IRS employs 

remediation strategies for investments that are not meeting their stated performance goals, 

including conducting internal TechStat meetings for investments with a “yellow” (or below) 

rating in the areas of cost, schedule, or Treasury CIO rating.

IRS Portfolio of Major Investments

Following is a comprehensive list of assets that make up the foundation of IRS’s investment 

strategy. Also included are details regarding the immediate and full life-cycle costs, projected 

useful life, anticipated benefit(s), performance measurement criteria, and remediation strategy 

specific to each asset.

Account Management Services 

Account Management Services (AMS) is a strategic program that delivers improved customer 

support for managing taxpayer accounts by leveraging existing IRS applications. It is a 

web-based resource that brings various IRS systems together into one common view. The 

AMS application enables IRS case managers to access and update taxpayer accounts 

instantaneously, provides data presentation services to display and validate updates, and 

facilitates management actions (such as assignments, transfers, case creation and closure, and 

the generation of letters to taxpayers). AMS provides front-end functions for adjustments, 

penalties, interest, abatements, credit and debit transfers, name and address changes, 

bankruptcies, installment agreements, changes to the automated treatment streams, follow-up 

activity or deferred actions and many other taxpayer account-related functions required for 

customer service and compliance. 

The immediate cost (defined as the base FY 2013 budget plus the FY 2014 request) as 

well as the full life cycle cost of the asset:

FY 2013 - FY 2014: $43,635,403

Life-cycle Cost: $211,833,520 

The projected useful life of the current asset: estimated 2019. 
IRS-133

Timeframe for the “development, modernization, and enhancement” (DME) or 

“operations and maintenance” (O&M) phase of the investment for FY 2014: 

AMS deployed in December 2010 and is now in the O&M phase. 

The anticipated benefit(s) of the investment:

AMS cost-effectively and expeditiously decreases taxpayer burden and improves taxpayer 

service by providing customer service representatives and other users, such as tax 

examiners, with tools to access taxpayer and filer data. AMS supports the IRS’s mission 

to provide America's taxpayers quality service by helping them understand and meet their 

tax responsibilities and enforce the law with integrity and fairness.

How performance will be measured and evaluated: 

 Core Application Availability: The percentage of uptime that the AMS system is 

available for users. The Core Application allows users to handle a variety of account 

management actions. This measure indicates the percentage of available, scheduled 

up-time and considers the application servers and the infrastructure components of the 

AMS Core Application.

 Databases Availability: This technical measure indicates the percentage of scheduled 

up-time of the four AMS databases that provide the data needed by users.

 Imaging Inventory Application Availability: More than 8,000 users respond to 

taxpayers using the Imaging Inventory. This measure indicates the percentage of 

scheduled up-time that the application is available to customer service representatives. 

This technical measure considers the availability of the application servers, workflow 

system, and content management system components of the Imaging Inventory.

 Accuracy of adjustments and responses to Taxpayer Correspondence: The percent of 

adjustments to taxpayer accounts and answers to taxpayer issues provided by 

correspondence units that are accurate.

 Telephone Level of Service: The percent of time that taxpayers calling IRS toll-free 

operations successfully reach a live assister.

Customer Account Data Engine 2

The Customer Account Data Engine (CADE 2) program implements a single, data-centric 

solution that provides daily processing of taxpayer accounts. CADE 2 is one of the key IRS 

modernization programs. Once fully implemented, it will provide state-of-the-art individual 

taxpayer account processing and will provide a solid data foundation for the future. It will 

allow the IRS to collect, consolidate, access, and analyze taxpayer data more effectively, to 

drive improvements in service to taxpayers and enhancements in tax administration. After 

50+ years of weekly posting of returns, payments, and other types of transactions, CADE 2 

moved the IRS to a daily cycle for tax processing and posting of individual taxpayer accounts 
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and for feeding downstream systems. This means application programs that formerly took 

hours or days to complete now run in minutes or seconds. The new CADE 2 daily processing 

capability enhances IRS tax administration and improves service by enabling faster refunds 

for more taxpayers.

The IRS will implement CADE 2 through two Transition States. The first phase is Transition 

State 1 (TS1), which established the target CADE 2 data model, database, and uses the data to 

provide individual taxpayer account information to select external systems. Updated daily 

from the individual taxpayer account core processing applications, the database establishes 

the foundation for developing the CADE 2 solution and is critical to addressing the IRS 

financial statement audit material weakness. The TS1 solution primarily leverages security 

controls provided by existing systems, including the Security and Communications System 

(SACS) for account viewing. Transition State 2 (TS2), builds upon the foundation established 

in TS1. Core applications will directly access and update the CADE 2 database implemented 

in TS1. TS2 will focus on the hardest and more critical financial management applications 

and address financial material weaknesses. Capturing taxpayer account data on a daily basis 

and storing it in new multi-level, connected and relatable formats will enable the IRS to do 

sophisticated searches and comparisons to identify trends revealing critical areas of 

noncompliance.

The immediate cost (defined as the base FY 2013 budget plus the FY 2014 request) as 

well as the full life-cycle cost of the asset:

FY 2013 - FY 2014: $496,298,988

Life-cycle Cost: $1,479,340,951

The projected useful life of the current asset: estimated 2019. 

The anticipated benefit(s) of the investment:

With the exit of Milestone 5, the IRS met its goals for CADE 2 TS1 by providing the 

following business functionality and benefits: a single database that stores all individual 

taxpayer accounts; enhanced processing, including daily batch processing; more timely 

posted data to IRS's key customer service operational database, IDRS; tools for business 

users to access the CADE 2 Database and Integrated Production Model (IPM) for 

analytical reporting; enhanced data security; and downstream systems feeds to support 

daily processing. 
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How performance will be measured and evaluated:

 Faster Notices: The number of daily notices generated by CADE 2 (versus weekly 

notices);

 Faster Refunds: The percentage of refunds processed daily;

 Increased percentage of transactions processed daily: The percentage of transactions 

processed daily compared to the total transactions processed by IRS;

 Daily Updates to IDRS: The percent of business days the CADE 2 solution will 

process transactions within 48 hours of receipt from submissions processing for days 

in which there are transactions to process; and

 Individual Accounts Viewable: The percent of individual taxpayers that will have 

individual account data stored in the CADE 2 relational database and usable by IRS 

employees for viewing.

e-Services

e-Services is a suite of web-based, self-assisted services that allow authorized individuals to 

conduct business with the IRS electronically. Currently, e-Services products are available to 

tax practitioners, payers, and other third parties. The services include Registration, Tax 

Identification Number (TIN) Matching, e-File Application, Disclosure Authorization (DA), 

Electronic Account Resolution (EAR), Transcript Delivery System (TDS), Reporting Agents, 

and Automated Electronic Fingerprinting.

The immediate cost (defined as the base FY 2013 budget plus the FY 2014 request) as 

well as the full life-cycle cost of the asset:

FY 2013 - FY 2014: $24,283,012

Life-cycle Cost: $211,434,389

The projected useful life of the current asset: estimated 2019. 

The anticipated benefit(s) of the investment: 

e-Services provides a faster way for authorized individuals to interact and conduct 

business electronically with the IRS.
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How performance will be measured and evaluated:

 The number of e-Services transactions processed through the Registered User Portal 

(to represent the usage of the Internet applications);

 The percentage of transcripts delivered by the re-engineered Transcript Delivery 

System;

 The percentage of scheduled e-Services Transcript Delivery System availability per 

the approved Service Level Agreement as documented monthly by IRS Enterprise 

Services;

 The percentage of external merchants receiving transcripts electronically; and

 Reduction in the number of transmittals or requests for corrective changes to the 

production environment.

Electronic Fraud Detection System 

The Electronic Fraud Detection System (EFDS) is a major, steady state, automated client 

server-based system used to maximize fraud detection at the time that tax returns are filed to 

eliminate the issuance of fraudulent tax refunds. EFDS supports the Department of the 

Treasury strategic goal to “Manage the Government's Finances Effectively.” EFDS allows 

IRS Criminal Investigation Investigative Aides/Analysts and Wage and Investment (W&I), 

Business 

Performance Solutions, and Accounts Management Taxpayer Assistance Program (AMTAP) 

Tax Examiners to protect Government revenue by detecting potentially fraudulent tax refund 

claims and preventing the issuance of fraudulent tax refunds. 

The immediate cost (defined as the base FY 2013 budget plus the FY 2014 request) as 

well as the full life-cycle cost of the asset:

FY 2013 - FY 2014: $37,636,862

Life-cycle Cost: $149,601,593

The projected useful life of the current asset: estimated 2015.

Timeframe for the DME or O&M phase of the investment for FY 2014:

The EFDS investment is 100 percent O&M funded for FY 2014.

The anticipated benefit(s) of the investment:

The EFDS will protect Government revenue by detecting potentially fraudulent tax refund 

claims and stopping the issuance of fraudulent tax refunds at the time a return is filed. As 

of August 2012, EFDS stopped fraudulent refunds totaling $11.2 billion during Filing 

Season 2012.
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How performance will be measured and evaluated:

 Number of confirmed fraudulent returns identified by the data models.

 Percentage of Questionable Refund Program refunds identified as false that AMTAP 

stops.

 Percentage of scheduled system availability per the approved Service Level 

Agreement.

 Percentage of completed verifications that is potentially fraudulent.

 Percentage of primary investigations accepted by CI as subject criminal investigations.

Foreign Account Tax Compliance Act

The Foreign Account Tax Compliance Act (FATCA) project is a system under development 

that will improve tax compliance by identifying U.S. taxpayers that attempt to shield or divert 

assets by depositing funds in foreign accounts. The system will consist of a registration 

component and a document-matching component. FATCA legislation requires foreign 

financial institutions to report to the IRS information regarding financial accounts held by 

U.S. taxpayers or foreign entities in which U.S. taxpayers hold a substantial ownership 

interest. 

The immediate cost (defined as the base FY 2013 budget plus the FY 2014 request) as 

well as the full life-cycle cost of the asset:

FY 2013 - FY 2014: $31,641,500

Life-cycle Cost: $91,485,794

The projected useful life of the current asset: estimated 2019. 

Timeframe for the DME or O&M phase of the investment for FY 2014:

The FATCA investment is 100 percent Development, Modernization, and Enhancement 

(DME) funded for FY 2014.

The anticipated benefit(s) of the investment:

The primary beneficiaries of this investment are the Federal Government and the U.S. 

taxpayers. FATCA will allow the agency to increase international service and 

enforcement through examinations of employment tax; specialty program audits, 

individual audits, business audits, and criminal investigation case closures, ensuring 

taxpayers meet their tax obligations.
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How performance will be measured and evaluated:

The FATCA investment has yet to deploy and performance measures are under 

development. 

Implement Return Review Program

The Return Review Program (RRP) is a system that uses leading-edge technologies to 

advance IRS effectiveness in detecting, addressing, and preventing tax refund fraud and 

protecting United States Treasury revenue. It will replace the legacy EFDS which was built 

in the mid-1990s. The entirely new RRP fraud framework is critical for IRS success in 

tackling ever-evolving tax schemes in a sophisticated, scalable, and adaptable manner. Based 

on specific business models from the Office of Criminal Investigation and the Return Integrity 

and Correspondence Services (RICS) Office, RRP will support the new cross-functional 

approach to criminal and civil tax noncompliance, including identity theft. With RRP, 

predictive fraud detection models will seek out subtle data patterns to determine the reliability 

of return data, including the filer's identity. RRP will generate a scorecard for questionable 

returns, evaluating consistency and dependability on each. RRP will evaluate returns against 

the prior three years of filing history and other external data sources to provide a robust 

perspective. The IRS will be able to respond to multiple issues of noncompliance on a single 

return. Using massively parallel processing, the system's capacity will promote speed, even 

during the peak of tax filing season. This speed will serve taxpayers not only by supporting 

fast refunds, but also by quickly recognizing patterns and redirecting fraudulently filed 

returns. The database query speed will be more than 10 times that of the current EFDS 

system.

The immediate cost (defined as the base FY 2013 budget plus the FY 2014 request) as 

well as the full life-cycle cost of the asset:

FY 2013 - FY 2014: $75,065,921

Life-cycle Cost: $169,127,670

The projected useful life of the current asset: estimated 2019. 

Timeframe for the DME or O&M phase of the investment for FY 2014:

The RRP investment is 100 percent DME funded for FY 2014.

The anticipated benefit(s) of the investment:

 IRS will be able to respond to multiple issues of noncompliance on a single return; and

 Using massively parallel processing, the system's capacity will promote speed, even 

during the peak of tax filing season. This speed will serve taxpayers not only by 

supporting fast refunds, but also by quickly recognizing patterns and redirecting 

fraudulently filed returns.
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How performance will be measured and evaluated:

The RRP investment has yet to deploy and the IRS is developing performance measures.

Individual Master File 

The Individual Master File (IMF) is the authoritative data source for individual taxpayer’s 

accounts. Within the IMF, accounts are updated, taxes are assessed, and refunds are 

generated as required each tax filing period. Virtually all IRS information system 

applications and processes depend on output, directly or indirectly, from this data source. 

IMF Daily Processing is a key component in the development efforts of CADE 2. While 

today IMF remains the system of record for individual taxpayer account data, CADE 2 will 

continue to migrate the IRS away from the current IMF tape-based architecture for tax

processing toward its target state of a more modern system architecture based on relational 

database technologies.

The immediate cost (defined as the base FY 2013 budget plus the FY 2014 request) as 

well as the full life-cycle cost of the asset:

FY 2013 - FY 2014: $18,135,736

Life-cycle Cost: $107,669,300

The projected useful life of the current asset: estimated 2019. 

The anticipated benefit(s) of the investment:

 Performs daily processing of tax returns allowing faster issuance of refunds; and

 Performs identity theft related checks on individual tax returns filed on paper.

How performance will be measured and evaluated:

 Completes planned processing schedule (e.g., daily, weekly) to meet refund, notice 

and online access deadlines. Measurement available on Enterprise Operations weekly 

reports;

 Refund Error rate with Systemic Errors: The error rate is the ratio of total incorrect 

refunds compared to the total number of refunds. Measurement data is provided by 

W&I and SB/SE in the Submission Processing Measures Analysis and Reporting

Tool (SMART) database. Systemic errors (errors attributed to incorrect programming, 

less than ideal products from properly working systems, and incorrect Internal Review 

Manual procedures are also included in the rates which indicate “with systemic 

errors”;
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 The percentage of scheduled system availability per the approved Service Level 

Agreement, as documented monthly by IRS Enterprise Services in the IT Performance 

Report; and

 Percent of Taxpayer refunds (paper returns only) issued within 40 days. Timeliness 

measured by sampling taxpayers receiving refunds. Measurement data is provided by 

W&I and Small Business/Self-Employed (SB/SE) in Submission Processing 

(SMART) database. The Business target for this measure is established by Customer 

Account Services (CAS) every January, with a yearly goal and cumulative planned 

projection for each month. The results report the variance against the target, and the 

monthly cumulative target is reported in the comments.

Information Reporting and Document Matching

Information Reporting and Document Matching (IRDM) is a program to improve business 

taxpayer compliance by automatically matching the tax return filings to third party 

information returns. The goals of IRDM are to increase voluntary compliance and enhance 

accurate reporting of income by establishing a new business tax return and information 

returns that focus on merchant card payments and securities basis reporting. IRDM supports 

IRS Business utilizing information systems that sort, match, identify, manage, and report on 

returns that are likely sources of tax gap-reducing revenue. Closing the tax gap through 

IRDM increases Federal Government revenues and benefits the vast majority of taxpayers 

who voluntarily file accurate returns. To accomplish this, the IRS requires operational 

resources and systems be put in place to implement business and technology changes that will 

expand and improve automated matching of data on information returns to the data submitted 

on tax returns filed. This automation will improve the use of third party data to increase 

compliance, provide improved access to information to enhance the quality of customer 

services, accelerate issue identification and resolution, and increase the productivity and 

quality of tax administration.

IRDM has many dependent relationships and interacts with other systems across the IRS, 

including data submission systems, databases, data transport functionality, and data 

processing systems.

IRDM relies heavily on submission processing systems, corporate data systems, and newly 

implemented infrastructure to identify potential under-reporters and non-filers. IRDM will 

utilize corporate data master file data such as Information Return Master File (IRMF) and 

Business Master File (BMF) extracted and stored in the Integrated Production Model (IPM). 

IRDM consists of new functionality developed to assimilate, correlate, select, and manage 

potential cases. In addition, it supplies data during the management process to as many as 

19 external systems to resolve cases and provide the disposition of a case to other systems 

within the IRS.

IRDM is a component of the overall tax gap initiative. The effectiveness of other efforts, as 

well as funding for compliance personnel will influence how much and how quickly IRDM 

reduces the tax gap. Reducing the tax gap through IRDM will increase Federal Government 

revenues and benefit the vast majority of taxpayers who voluntarily file accurate returns by 

improving the use of third party data to increase compliance and provide improved access to 
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information. This will enhance the quality of customer services, accelerate issue identification 

and resolution, and increase the productivity and quality of tax administration. 

The immediate cost (defined as the base FY 2013 budget plus the FY 2014 request) as 

well as the full life-cycle cost of the asset:

FY 2013 - FY 2014: $46,039,380

Life-cycle Cost: $186,485,472

The projected useful life of the current asset: estimated 2019. 

The anticipated benefit(s) of the investment: 

 Reduce the tax gap through IRDM, which will increase Federal Government revenues 

and benefit the vast majority of taxpayers who voluntarily file accurate returns; and

 Improve the use of third party data to increase compliance, provide improved access to 

information to enhance the quality of customer services, accelerate issue identification 

and resolution, and increase the productivity and quality of tax administration.

How performance will be measured and evaluated:

The IRDM investment has yet to deploy and the IRS is developing performance measures.

Integrated Customer Communication Environment

The Integrated Customer Communication Environment (ICCE) directly supports the IRS 

Strategic Goal of improving service to make voluntary compliance easier. Consolidating 

logic for telephone applications reduces overall costs because it applies standard solutions to 

what was a specialized arena. ICCE provides a set of telephone and web applications that 

allow individual taxpayers to interact directly with their accounts, as described below: 

 The Online Payment Agreement Application allows the taxpayer or authorized 

representative (i.e., Power of Attorney) to apply for and receive online approval for a 

short term extension of time to pay or set up a monthly installment agreement; 

 The Internet Refund Fact of Filing provides tax refund status information via the web 

to 1040 series filers;

 The Internet Refund Address change allows taxpayers who have not received paper 

refunds after a specific amount of time to initiate a refund trace; 

 The Personal Identification Number (PIN) applications are intended to be used as 

common modules, available for use by any Interactive Application, which callers use 

to establish their identity. Callers establish their identity by either correctly entering a 

previously established PIN or by successfully passing an automated Identification and 

Authentication Interview and establishing a PIN;
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 The Address Module supports multiple ICCE Web applications, providing taxpayers 

with the ability to initiate a change of address of record as well as information on 

refund status and undelivered refund checks; 

 The Modernized Internet Employer Identification Number application is a component 

of ICCE web applications and the business web application servers It allows the 

general public to apply for an Employer ID number over the web and receive the 

number in the same session; 

 The Send My Transcripts, eTranscript offers an additional method for requesting tax

return or tax account transcripts via the web. Taxpayers can request their current year 

and three prior years of tax account and/or tax return transcripts. The transcripts are 

delivered to a secured mailbox for retrieval by a third party; and

 The Foreign Account Tax Compliance Act Registered User Portal Application 

provides an online registration process for Foreign Financial Institution to register and 

enter into an agreement with the IRS to comply with FATCA regulations. 

The immediate cost (defined as the base FY 2013 budget plus the FY 2014 request) as 

well as the full life-cycle cost of the asset:

FY 2013 - FY 2014: $32,732,556 

Life-cycle Cost: $534,244,437

The projected useful life of the current asset: estimated 2019. 

The anticipated benefit(s) of the investment:

 Allows the taxpayer or an authorized representative (i.e., Power of Attorney) to apply 

for and receive online approval for a short term extension of time to pay or set up a 

monthly installment agreement;

 Allows taxpayers who have not received (lost or destroyed) paper refunds after a 

specific amount of time to initiate a refund trace (or re-issuance of their refund check); 

and

 Provides taxpayers the ability to initiate a change of address of record and provide a 

phone number (optional) based on a refund status that indicates an undeliverable 

refund check and other criteria have been met.
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How performance will be measured and evaluated:

 Customer Satisfaction (IRS.gov American Customer Satisfaction Index Score);

 The percentage of taxpayers utilizing IRS web applications and automated Phone 

Service versus Customer Service Representatives in order to find solutions and answer 

questions related to tax matters;

 The percentage of scheduled system availability per the approved Service Level 

Agreement, as documented monthly by IRS Enterprise Services in the IT Performance 

Report;

 The number of times a taxpayer accesses IRS web applications to request refund status 

and other web services: Internet Refund Fact of Filing, Internet Employee 

Identification Number, or Online Payment Agreement; and

 Reduction in the number of transmittals or requests for corrective changes to 

production environment, as evidence of improved efficiency.

Integrated Data Retrieval System 

Operational since 1973, the Integrated Data Retrieval System (IDRS) is a secure, reliable, 

flexible, mission-critical system consisting of databases and programs supporting IRS 

employees working active tax cases. It would not be possible to run the Federal Government 

tax filing season without IDRS or some equivalent system. About 60,000 of the 100,000 IRS 

employees rely on it daily to do their work. It provides for systemic review of case status, 

alleviating staffing needs and providing consistency in case control. For example, each time a 

taxpayer calls the IRS, the person answering the phone uses IDRS to log the call and answer 

questions. IDRS issues notices and processes installment agreements, offers in compromise, 

and adjustments. Actions taken via IDRS include penalty and interest computations and 

explanations, credit and debit transfers among accounts and research of taxpayer accounts for 

problem resolution of taxpayer inquiries. IDRS manages data retrieved from the tax master 

files (Business, Individual, and Employee Plan) allowing IRS employees to take actions on 

taxpayer issues, track status and post updates back to the master files. Using data analytics, 

IDRS allows the IRS to evaluate taxpayer data efficiently to inform enforcement and secure 

legal compliance, both domestically and internationally.

In addition to IRS employees, IRS Internet applications depend on IDRS to provide back-end 

services to enable them to help taxpayers. For example, tens of millions of taxpayers ask 

Where's My Refund? at IRS.gov annually and millions of business taxpayers obtain Employer 

Identification Numbers via IRS.gov instead of via paper. IDRS enables businesses providing 

payroll services to submit tax data on behalf of millions of taxpayers and collaborates with 

registered tax practitioners to reduce the burden of filing Powers of Attorney and Taxpayer 

information authorizations, allowing them to request access to other e-Services. IDRS 

produces many kinds of tax information to support sending and receiving information to and 

from other systems within the IRS, Social Security Administration, Financial Management 

Service, State and local governments, and tax practitioners.
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The immediate cost (defined as the base FY 2013 budget plus the FY 2014 request) as 

well as the full life-cycle cost of the asset:

FY 2013 – FY 2014: $37,184,289

Life-cycle Cost: $322,110,686

The projected useful life of the current asset: estimated 2019. 

The anticipated benefit(s) of the investment:

 Allows the IRS to evaluate taxpayer data efficiently to inform enforcement and secure 

legal compliance, both domestically and internationally; and

How performance will be measured and evaluated:

 Individual taxpayer usage of Where's My Refund? feature through IRS.gov, IRS2Go 

smartphone application, or automated, toll-free telephone number. This feature relies 

on IDRS to operate and provides convenient, high-quality, citizen-centered service 

without the assistance of a Federal employee. The target for this steady state 

performance metric is usage equal to 100 percent of the average usage during typical 

processing years;

 IRS staff usage of IDRS. IDRS enables approximately 60,000 taxpayer-facing IRS 

employees, using a variety of methods, to retrieve taxpayer records quickly, 

accurately, and securely to authorized staff while responding to taxpayer inquiries and 

conducting examinations. The command code TXMOD displays tax data for specific 

taxpayers for specific periods. The target for this steady state performance metric is 

TXMOD usage equal to 100 percent of the average usage during typical processing 

years;

 The percentage of scheduled system availability. To measure this steady state 

performance metric, calculate the cumulative average percentage of system 

availability per an approved service level agreement as documented by IRS 

Information Technology Enterprise Services for "Essential Business Systems”;

 Business taxpayer usage of IRS.gov to obtain Employer Identification Numbers 

(EINs). This feature relies on IDRS to operate and lets taxpayers obtain EINs without 

the assistance of a Federal employee or the mailing of form SS-4 "Application for 

EIN.” It reduces the expense and difficulty of doing business with the Government. 

The target for this steady state performance metric is usage equal to 100 percent of the 

average usage during typical processing years; and

 The percentage of certified letters printed centrally versus locally. These notify 

business and individual taxpayers of issues. This aligns with IRS goals to improve 

taxpayer service and enhance enforcement of tax law. To measure this steady state 
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performance metric, the IRS calculates the percentage of certified letters printed 

centrally versus locally out of all certified letters printed.

Integrated Financial System

The Integrated Financial System (IFS) is the core financial system used by the IRS for budget, 

payroll, accounts payable, accounts receivable, general ledger functions, and financial 

reporting. The IFS system provides accountants, budget, and financial management analysts 

the ability to effectively manage U.S. Government finances for the IRS and respond to audit 

requests in support of a clean audit opinion.

The immediate cost (defined as the base FY 2013 budget plus the FY 2014 request) as 

well as the full life-cycle cost of the asset:

FY 2013 - FY 2014: $31,574,976

Life-cycle Cost: $482,838,476

The projected useful life of the current asset: estimated 2019. 

The anticipated benefit(s) of the investment:

 Enables the IRS to make informed and timely performance-based business and 

budgetary decisions.

 Eliminates redundant data management by providing a single master data repository.

How performance will be measured and evaluated:

 Complete monthly financial close process and submit Treasury Information Executive 

Repository (TIER) report within 3 days after month end;

 The number of calendar days required to run cost assessment allocation cycles for 

internal and external customers;

 The percentage of scheduled system availability per the approved Service Level 

Agreement, as documented monthly by IRS Enterprise Services;

 Obtain clean audit opinion from GAO; and

 Percentage of end user issues (aka, Priority 1 and Priority 2 tickets, equating to 

severity) eliminated or remediated within timeframes established in the approved 

Service Level Agreement.

Integrated Submission and Remittance Processing System

The Integrated Submission and Remittance Processing (ISRP) system is a mission-critical 

operations and maintenance project that processes tens of millions of tax returns and deposits 

billions of dollars to the U.S. Treasury on a yearly basis. ISRP is an integrated suite of 
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hardware, software, and network components that provides the interfaces for data entry 

perfection and transmission of data to IRS Corporate data storage. ISRP Data Entry 

Operators enter the information from various paper documents that are then converted into 

electronic data used by downstream operations such as Financial Information Systems. ISRP 

also updates tax forms to comply with legislative changes in tax laws. 

The immediate cost (defined as the base FY 2013 budget plus the FY 2014 request) as 

well as the full life-cycle cost of the asset:

FY 2013 - FY 2014: $23,521,379

Life-cycle Cost: $191,856,671

The projected useful life of the current asset: estimated 2019. 

The anticipated benefit(s) of the investment:

 Processes tens of millions of “paper” tax returns supporting the core business of IRS.

 Processes billions of dollars of remittances to the U.S. Treasury on a yearly basis.

How performance will be measured and evaluated:

 The percentage of daily ISRP deposits made in accordance with Internal Revenue 

Manual (IRM) 3.0.275;

 Production Problem Resolution and Reporting - Number of high priority trouble 

tickets (P1) not closed within 4 hours;

 System Availability (Uptime) - Percent of up time hours (actual uptime hours/planned 

uptime hours);

 Production Problem Resolution and Reporting - Number of priority trouble tickets 

(P2) not closed timely within 24 hours; and

 Scanner/ Transport Hardware Response Timeliness – Percentage of Priority Trouble 

Tickets (P1) Maintenance Response within 2 hours.

IRS End User Systems and Services

The End User Systems and Services (EUSS) program supports the IRS’s day-to-day end user 

products, services, and support for over 100,000 IRS employees at headquarters and field 

sites.
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The immediate cost (defined as the base FY 2013 budget plus the FY 2014 request) as 

well as the full life-cycle cost of the asset:

FY 2013 - FY 2014: $380,575,962

Life-cycle Cost: $1,683,601,065

The projected useful life of the current asset: estimated 2025. 

Timeframe for the DME or O&M phase of the investment for FY 2014:

The EUSS investment is 100 percent O&M funded for FY 2014.

The anticipated benefit(s) of the investment:

 Provides the IT infrastructure to allow the IRS to process tax returns, collect revenue, 

and issue refunds;

 Decreases the obsolescence rate of “in use” assets;

 Optimizes use of technology and tools allowing incidents to be resolved remotely; and

 Equips high-mobility employees with tools and technologies for network connectivity 

from off-site locations.

How performance will be measured and evaluated:

 Obsolescence Asset Quantity - Percentage of obsolete UNS assets (those assets that 

are beyond end-of-life) identified as "in use" on the asset record. This includes nine 

groups of equipment. *If UNS improves the delivery of end user equipment, the 

organization should experience a decrease in the obsolescence rate of "in use" assets;

 Remote Closures - Percentage of incidents resolved remotely using a service delivery 

process that optimizes the use of technology and tools;

 Service Desk Speed of Answer - Average time a customer is waiting in the Service 

Desk queue before reaching a Service Desk Representative;

 Aircard Deployment - Number of wireless aircards provided to high-mobility 

employees for network connectivity from off-site locations; and

 First Contact Resolution - Percentage of calls and incidents resolved on first contact 

with the customer.
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IRS Mainframes and Servers, Services and Support

The Mainframes and Servers, Services and Support (MSSS) program provides for the design, 

development, and deployment of server, middleware and large systems as well as enterprise 

storage infrastructures, including systems software products, databases and operating systems 

for these platforms. 

The immediate cost (defined as the base FY 2013 budget plus the FY 2014 request) as 

well as the full life-cycle cost of the asset:

FY 2013 - FY 2014: $809,621,304

Life-cycle Cost: $6,015,836,109

The projected useful life of the current asset: estimated 2025. 

Timeframe for the DME or O&M phase of the investment for FY 2014:

The MSSS investment is 100 percent O&M funded for FY 2014.

The anticipated benefit(s) of the investment:

 Enables the IT infrastructure to allow the IRS to process tax returns, collect revenue, 

and issue refunds;

 Provides 24x7 IT Operations and Maintenance to all Tier I and Tier II production 

systems responsible for the daily operation of the IRS batch and online processing 

environments;

 Ensures server computer resources maintain sufficient capacity to meet system 

functional and performance demands; and

 Develops, installs, maintains, and modifies the infrastructure required for various 

ongoing Tax Processing Unisys mainframe systems.

How performance will be measured and evaluated:

 The percentage of Server Environment Virtualized;

 The percentage of Uptime for the ACS, ICS and IDRS Databases;

 The success Rate Percentage for Automated Deployment of Infrastructure Component 

Packages to Production - Using the Package Based Promotion Tool;

 The number of Standard Employee IDs with Elevated Access are Reduced; and

 The percentage of Priority Tickets that are Triaged/Resolved by Service Operations 

Command Center Systems Administrators.
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IRS Telecommunications Systems and Support

The TSS program falls under the jurisdiction of the Users and Networks Services (UNS) 

organization that is responsible for the management of voice and data networks, video 

services and engineering throughout the IRS. This includes providing remote access, voice 

telephony, voicemail, contact centers, cell phones, pagers, and video conferencing. UNS 

network is composed of wide area networks, local area networks, servers, switches, and 

control devices. The investment supports the IT Infrastructure services regarding the 

Federally mandated transition to IPV6. 

Network Convergence replaces aged voice, voicemail, and video infrastructure, and combines 

these services on a common network. It provides operational efficiencies, supports agency 

initiatives to reduce real estate (through projects including the shared workspaces initiative, 

universal workspace design, home as point of duty), and reduces risks posed by aged legacy 

assets. The Video Conferencing System (VCS) infrastructure has aged devices that need 

replacing. The original equipment manufacturer no longer supports these devices. The VCS 

refresh initiative is in alignment with the IRS’s Sustaining Infrastructure goal to retire aged

assets and reduce obsolescence enterprise-wide. Enterprise e-Fax provides desktop fax 

capability to IRS employees nationwide. The fax capability will help support decreases in 

paper, hardware, and toner costs and help support telework related initiatives. 

UNS manages a large-scale contact center infrastructure to assist its customers with 

tax-related problems and questions. It is in the planning stages of upgrading the existing 

Aspect Automated Call Distributor (ACD) platforms. ACDs distribute calls among local and 

remote agents at 30+ centers within the United States and Puerto Rico. The ACD platforms 

are reaching end-of-life and need replacing. Replacement will provide features necessary to 

replicate primary functionality of the ACDs, while supporting integration with the existing 

application and other Contact Center production systems. 

The immediate cost (defined as the base FY 2013 budget plus the FY 2014 request) as 

well as the full life-cycle cost of the asset:

FY 2013 - FY 2014: $594,080,041

Life-cycle Cost: $2,583,274,476

The projected useful life of the current asset: estimated 2021. 

Timeframe for the DME or O&M phase of the investment for FY 2014:

The TSS investment is 100 percent O&M funded for FY 2014.

The anticipated benefit(s) of the investment:

 Provides the IT infrastructure to allow the IRS to process tax returns, collect revenue, 

and issue refunds;
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 Supports agency initiatives to reduce real estate (through projects including the shared 

workspaces initiative, universal workspace design, and home as post of duty);

 Reduces risks posed by aged legacy assets; and

 Supports the IRS’s Sustaining Infrastructure goal to retire aged assets and reduce 

obsolescence enterprise-wide.

How performance will be measured and evaluated:

 Internet Access Availability - Average availability of the IRS to be able to reach a 

select number of external websites through the three Common Communications 

Gateways (CCG);

 LAN Availability - Availability based on Knowledge Incident Service Asset 

Management (KISAM) tickets and the customer impact on making the network 

available. Percent is derived from total number of hours per month X total number of 

sites/hours a site is not available;

 WAN Availability - Availability based on KISAM tickets and the customer impact on 

making the network available. Percent is derived from total number of hours per 

month X total number of sites/hours a site is not available; 

 Percent of GSP compliance - Guidance’s, Standards, and Procedures (GSP) - UNS 

Router/Switch GSPs exist to ensure standardized security configurations for the 

network devices used in the IRS User & Network Services. NetDoctor is the 

enforcement tool used for ensuring GSP compliance. It enforces the GSP rules against 

the IRS’s network device configurations;

 Total Network Usage (as a percentage of capacity) Average - Target is greater than or 

equal to 15 percent - It is the average of all sites based on bandwidth in and bandwidth 

out. Capacity is determined to ensure the IRS correctly sizes TNet circuits to 

accommodate user’s needs - too small a circuit means the network slows down. Too 

large means the IRS pays for unused capacity; and

 Total Network usage (as a percentage of capacity) Peak - Target is less than or equal 

to 65 percent - It is the average of all sites based on bandwidth in and bandwidth out. 

Capacity is determined to ensure the IRS correctly sizes TNet circuits to accommodate 

user’s needs - too small a circuit means the network slows down. Too large means the 

IRS pays unnecessary expenses for unused capacity.

IRS.gov - Portal Environment

The Integrated Enterprise Portals (IEP) are critical to the IRS mission and foundational to IRS 

electronic tax administration and to IRS business operations. IRS has adapted these 

mission-critical systems over the years to meet the changing needs of the tax paying 

population; however, current portal design limitations and available systems capacity will not 
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meet the needs of the future investment portfolio. The new IRS IEP will provide seamless 

one-stop, web-based services to internal and external users, such as taxpayers, business 

partners, IRS employees, and other Government agencies. The objective of the new portal 

project is to continue to maintain and operate secure and reliable portals to meet the goals of 

the agency by competitively acquiring managed services for the establishment and 

management of a new infrastructure, hosting, help desk, content management, search, and 

reporting solution, and the transition of the existing portal capabilities and services to the new 

IRS Web environment transparent to external users. By transitioning both to the new 

Integrated Enterprise Portal (IEP) environment, it improves the IRS capability to increase IT 

services to meet the changing needs of the taxpaying public. The IRS will build the new IEP 

environment in phases with the final phase to be completed FY 2013.

The immediate cost (defined as the base FY 2013 budget plus the FY 2014 request) as 

well as the full life-cycle cost of the asset:

FY 2013 - FY 2014: $130,986,829

Life-cycle Cost: $612,032,567

The projected useful life of the current asset: estimated 2020.

The anticipated benefit(s) of the investment:

 Improves web environment, efficiencies, effectiveness, quality, and process maturity. 

 Provides visibility into program cost drivers.

 Delivers year over year unit cost reductions to the IRS.

How performance will be measured and evaluated:

 The percentage of the calls answered by Help Desk representative within 40 seconds. 

Providing a public facing web portal environment availability of 99.99 percent that 

allows taxpayers to meet their tax obligations timely.

 Web portal environment is available 99.99 percent to meet the internal user's needs 

with minimum interruption.

 The percentage of the e-mails responded to within 24 business hours with scripted 

e-mail response.

 The percentage of all new applications successfully deployed in the IRS.Gov 

production environment within five business days, must equal 100 percent.
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Modernized e-File

The Modernized e-File (MeF) system is a mixed life-cycle investment that is the primary 

system to receive and process all tax returns submitted electronically. When MeF receives an 

electronic tax return, the system determines if it satisfies the acceptance rules required for 

further processing.

One of the benefits of MeF is the extensive error checking and data validation that occurs 

before the return is fully processed. MeF creates an acknowledgment telling the transmitter 

that the return was either accepted or rejected, and it provides information about the cause(s) 

of rejection. This acknowledgment is generally available to the transmitter within minutes of 

tax return submission. MeF forwards accepted returns to IRS systems used for processing tax 

returns. If MeF rejects a return due to errors, the transmitter can correct the identified issues 

and re-submit. These up-front checks help ensure successful processing of returns by 

downstream tax systems.

The MeF Program provides a secure, web platform for electronically filing tax and 

information returns by registered Electronic Return Originators (ERO). This system uses a 

browser-based and application-to-application solution to provide ERO end users with 

optimized return filing. MeF is becoming the primary system for electronic filing of business 

and individual tax returns and forms. 

The immediate cost (defined as the base FY 2013 budget plus the FY 2014 request) as 

well as the full life-cycle cost of the asset:

FY 2013 - FY 2014: $139,790,105

Life-cycle Cost: $575,302,667

The projected useful life of the current asset: estimated 2019.

The anticipated benefit(s) of the investment:

 Beneficiaries include the tax preparation community and the taxpayers they represent; 

 Benefits large corporations and tax-exempt organizations that are required at a specific 

asset threshold to file their tax returns or annual information returns electronically by 

reducing the handling/mailing of voluminous paper returns that sometimes exceed 

700 attachments/schedules; 

 Extensive error checking and data validation that occurs before the return is processed; 

and 

 The system delivers tax returns that do not pass these error checks to the transmitter 

for correction. These up-front checks help ensure successful processing of returns by 

the downstream tax systems.
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How performance will be measured and evaluated:

 The percent of business tax returns processed electronically by MeF;

 The average number of minutes within which electronic filers receive 

acknowledgement of their electronically filed tax returns;

 The percentage of scheduled system availability per the approved Service Level 

Agreement, as documented monthly by IRS Enterprise Services;

 Error rate for electronically filed tax returns;

 The percentage of individual tax returns processed electronically; and

 Total quarterly cost savings derived from electronically filed tax returns.

Service Center Recognition/Image Processing System

The Service Center Recognition/Image Processing System (SCRIPS) is a major paper input 

processing system specifically designed to automate the processing of Information Return 

Processing (IRP) forms, Schedule K-1's (Forms 1041 K-1, 1065 K-1, and 1120 K-1), Form 

941 (and associated Schedules B and Schedule R), and Form 940 (and associated Schedule A 

and Schedule R). SCRIPS scans and stores images of all tax documents processed, saving 

time by converting the scanned images and data to computer-readable code and providing 

hardcopy images when requested. This is accomplished using the Optical Character 

Recognition/Intelligent Character Recognition (OCR/ICR) engine in addition to utilizing 2D 

bar code recognition that optimizes and automates data entry of the taxpayer data.

SCRIPS is one of the front-end input systems that operates at four IRS Submission Processing 

Centers where the IRS receives, sorts, and sends forms to the scanning areas. SCRIPS sends 

the electronic taxpayer data to the IRS downstream tax processing systems, including 

Generalized Mainline Framework (GMF) and Master File for posting to the IRS database, and 

also Service-Wide Employment Tax Research System (SWETRS) and Statistics Of Income 

(SOI) for compliance. The IRS archives and retains the images on the system. IRS Customer 

Service Representatives can request hard copies of images through the IDRS. 

The immediate cost (defined as the base FY 2013 budget plus the FY 2014 request) as 

well as the full life-cycle cost of the asset:

FY 2013 - FY 2014: $19,399,137

Life-cycle Cost: $194,979,712

The projected useful life of the current asset: estimated 2019.
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The anticipated benefit(s) of the investment:

SCRIPS scans and stores images of all tax documents processed, saving time by 

converting the scanned images and data to computer-readable code and providing 

hardcopy images when requested.

How performance will be measured and evaluated:

 The average number of tax return-related documents processed per hour (for all sites);

 Maintain a character recognition error rate on scanned forms of no more than 

4 percent per month;

 The percentage of time the SCRIPS system is available per month for processing 

(system up-time);

 Number of High Priority (P1) trouble tickets not closed within 4 hours;

 Number of Moderate Priority (P2) trouble tickets not closed within 24 hours; and

 The percentage of tax return image print requests fulfilled within 2 days.

Criminal Investigations (CI) Capital Assets

These capital assets are used to protect CI special agents from threats and bodily injury when 

performing their law enforcement duties including conducting investigations concerning 

alleged criminal tax fraud violations, financial crimes, and other related offenses. CI special 

agents use law enforcement vehicles to conduct or participate in surveillance, armed escorts, 

undercover operations, execution of search and arrest warrants, seizures, etc. 

Security Equipment

The IRS purchases security equipment such as cameras, digital video recorder system 

(DVRs), access control panels, and card readers. The IRS uses facility-specific security 

assessments to prioritize asset needs and develop criteria for replacing equipment in a given 

facility. Additionally, emergency needs arise over the course of the year. These needs are 

ranked and funded according to the effect the equipment has on the overall security posture. 

Performance is measured through security reviews, testing, and the assessment of individual 

facilities for their overall security posture using a number of criteria including location, size, 

number of employees, and type of work done in the facility. These criteria are used to 

develop an overall security posture. This posture is then compared to existing equipment in 

the facility to determine additional needs. If a facility has a large divergence from the 

posture, equipment is ordered. Reviews are done on a regular basis to measure and evaluate 

performance. 
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The useful life of security equipment is usually five years. The need for equipment can arise 

at any time, such as when employees are moved into a new building, during internal moves, 

or intermittently when equipment needs to be replaced. The benefit of this capital asset 

investment is that it supports the IRS priority to provide a safe and secure environment for its 

employees, equipment, and facilities.

Leasehold Improvements

Many projects undertaken by IRS entail the design, alteration, and furnishing of space either 

upon acquisition, at lease renewal, or for other purposes, such as supporting space 

consolidation or reduction. The portion of the project that is captured as a capital asset is 

reflected in OMB Object Class 3200, Land and Structures, and includes alterations to 

buildings; fixtures such as elevators, plumbing, power-plant boilers, fire-alarm systems, 

lighting, heating systems, air-conditioning systems, flooring, and carpeting. The total figure 

is a sum of the expenditures in that object class for all IRS projects in that particular year. 

The IRS employs a scheme to rank projects in priority order and keeps a comprehensive list 

of projects across the territories. Projects are considered based on the critical need for the 

project. Projects approved but not funded in the current year are deferred to the following 

year. Proposed projects are identified throughout the year and are prioritized and added to list 

as appropriate.

Performance is measured utilizing the following measures: 

 Project Spend per total rentable square feet (RSF) in Portfolio;

 Project Spend per usable square feet (USF) on Closed Projects; 

 Total USF Touched by Projects; and

 Percent of Total USF Under Management; Percent Customers Satisfied With 

Completed Space Projects.

The useful life of these alterations is usually five years or the remaining fixed term of the 

lease. The fixed term of most leases is five years, with options to renew or to extend for some 

additional period. The need for alterations can arise at any time, including, but not limited to: 

 Adding personnel workspaces;

 Consolidating functions; and

 Addressing other space issues. 

The benefit of these alterations is that they provide the means for the business unit occupants 

to perform their mission efficiently and in user-friendly space. In some cases, a portion of the 

investment may provide a savings such as in the area of energy consumption.

A summary of capital investment resources, including major information technology and nontechnology investments is available.
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4B – IRS Aging Legacy Information Technology (IT) Infrastructure (non-BSM) 

Proposed Long-term Multiyear Funding Strategy and Timetable

The IRS established a Sustaining Infrastructure (SI) program to provide for long-term 

infrastructure viability with the flexibility to meet dynamically changing business 

requirements. The SI program includes a prioritization process to replenish aged assets that 

support the most critical IRS business needs. The prioritization process is a long-term 

funding strategy, within the Operations Support multiyear appropriation, to upgrade and 

modernize the aging legacy Information Technology (IT) infrastructure for non-Business 

System Modernization projects. The process is built on leading business practices that 

support the IRS mission and strategic objectives while ensuring compliance with Federal laws 

and agency oversight. 

The SI program establishes its infrastructure investment timetable by overlaying the annual 

budget into the prioritization process. Extending beyond legacy systems, investments in 

innovation such as network convergence and desktop virtualization allow the IRS to gain 

efficiencies such that foreseeable budgets will meet the requirements to replace aged assets. 

This innovation element, as part of the SI program, is a key component to the IRS’s long-term 

infrastructure viability. Each year the IRS assesses and funds projects in the following three 

portfolios:

Portfolio Name Description

Average 

Percentage of 

Portfolio

Sustaining Infrastructure Aged inventory beyond useful life 69%

Sustaining Architecture & 

Engineering

Aged inventory not past its useful 

life, but tied to production 

applications or critical business need

20%

Sustaining Other Operational Demand 11%

The objectives of the SI prioritization process are to:

 Achieve an acceptable level of aged assets (20 – 25 percent);

 Reduce the aged inventory of IRS infrastructure;

 Describe an IRS future infrastructure replacement decision model; 

 Focus replacement investment decisions on the future infrastructure vision; 

 Assist in preparing annual asset retirement goals; and 

 Make the most efficient infrastructure investments. 

The benefits of the SI prioritization process include:

 Reducing the overall operational infrastructure cost of the IT Organization (IT)

wherever possible; 

 Reducing equipment diversity and quantity; 
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 Improving infrastructure capacity; 

 Improving governance; 

 Increasing IT security;

 Improving disaster recovery operations; and 

 Directing infrastructure to a more efficient world-class environment.

The SI prioritization process is defined by four lifecycle phases: Pre-Select, Select, Control, 

and Evaluate. During each phase, the IRS governance bodies make decisions using defined 

processes and data regarding the investments under consideration. Approved investments 

become part of the larger SI investment portfolio and both new and ongoing investments are 

monitored continuously throughout their lifecycle against Key Performance Indicators (KPIs) 

for ACIO and IESC review. The IRS conducts post-implementation assessments to ensure 

that the Cost, Schedule, and Overall goals of the project were successfully completed. 

The four-lifecycle phases of the SI Prioritization Process are described below:

 The Pre-Select Phase assesses proposed IT solutions for unmet business requirements.

The pre-selection phase creates a portfolio of IT project investments designed to 

improve overall organizational performance. The three-step pre-selection process is: 

o Step 1 – Screen IT proposals for relevance and feasibility. A mature investment 

screening process prescribes the required amount of documentation and level of 

analytical rigor, depending on the project’s type (e.g., mission-critical 

infrastructure, etc.) and phase (e.g., initial concept, new, ongoing, and operational).

o Step 2 – Retain proposals with the highest potential to support the IRS critical 

mission and/or operations. If viable, the proposal moves into the Investment 

Management Plan (IMP) development stage.

o Step 3 – Prioritize the list of IT projects. After completing the analysis, the IRS 

develops a ranked listing of IT projects. 

 During the Select phase, an executive level, decision-making body determines which 

projects to fund based on the analyses completed during the pre-select phase. The 

process is used to prioritize IT investments to align with organizational priorities and 

strategic direction. Projects are funded based on budget constraints with consideration 

for technical soundness of projects, contribution to mission needs, performance 

improvement priorities, and overall available budget levels.

 The Control Phase begins once investments are selected and approved for funding. 

The Control Phase monitors ongoing IT projects during the planning, acquisition, 

deployment, and operation and maintenance stages of the IT investment life cycle. 

The primary objective is to assess the investment’s performance and enable effective 

management of all major IT investments within the IRS. If a project is late, over cost, 

or not being developed according to approved IMP’s projects may be modified or 

cancelled.
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 The Evaluate Phase includes two components, a Post Implementation Review (PIR) 

of implemented or cancelled investments, and an annual analysis of the performance 

of the IRS’s portfolio management process. During PIRs, data is collected, recorded, 

and analyzed to compare expected results against actual benefits and returns. Once 

investments are fully implemented or cancelled, actual versus expected results are 

evaluated to assess the investment’s impact on strategic performance, identify 

modifications that may be needed, and revise the investment management process 

based on lessons learned.

4C – Summary of FY 2012 Savings Realized

The IRS FY 2012 President’s Budget request of $13,283.9 million included $189.9 million 

and 523 FTE in reductions to the IRS FY 2011 base budget. However, the IRS FY 2012 

enacted budget was $11,816.7 million, $305.1 million less than the FY 2011 enacted budget 

of $12,121.8 million, and $372 million less in the three IRS operating appropriations of

Taxpayer Services, Enforcement, and Operations Support. Total actual savings in FY 2012 

were $426,012,831 and 4,420 FTE. FY 2012 savings were realized as follows:

Savings not fully realized: -$44,534,000 / -416 FTE. Actual savings: -$9,636,100 

/ -182 FTE.

Non-Recur Savings: -$22,090,000 / 0 FTE. Actual savings: -$1,636,100 / 0 FTE

These proposed savings were identified from non-recurring the one-time (e.g., IT 

equipment and training) costs associated the FY 2011 enforcement hiring initiatives as 

well as a small savings generated by non-recurring second year one-time costs 

associated with the FY 2010 enforcement initiatives. As the IRS did not receive any 

funding for enforcement initiatives in FY 2011, the non-recur savings associated with 

these initiatives were not realized.

Increased e-File Savings: -$22,444,000 / -416 FTE. Actual savings realized: 

-$8,000,000 / -182 FTE. The IRS projected FY 2012 e-File savings based on 

anticipated fewer paper filed returns as well as an increased electronically-filed returns 

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

2009 (Public Law 111-92). In FY 2012, the IRS received 2.4 million fewer paper 

returns compared to FY 2011 and an increase of 7.7 million returns filed electronically

for actual savings of $8 million and 182 FTE. The IRS realized the majority of the 

projected savings from enactment of the Worker, Homeownership, and Business 

Assistance Act of 2009 in FY 2011. In FY 2011 the IRS projected savings of 

$22.8 million and 472 FTE and realized $42.4 million and 960 FTE. The combined 

savings for FY 2011 and FY 2012 was $50.4 million and 1,142 FTE – exceeding the

two-year increased savings projection by $5.1 million and 254 FTE.

Savings fully realized: -$4,000,000 / 0 FTE. Actual savings: -$4,000,000 / 0 FTE.

Eliminate Lockbox Fees: -$4,000,000 / 0 FTE. Taxpayers now pay lockbox fees as 

part of their installment agreements, saving IRS $4 million.
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Increased savings realized: -$141,423,000 / -107 FTE. Actual savings realized: 

$203,729,155 / -247 FTE. 

Reduce Information Technology (IT) Infrastructure -$75,000,000 / 0 FTE. 

Actual savings realized: -$79,476,337 / -140 FTE. Actual savings realized resulted 

from continuing to adopt common technologies, managing demand, and taking 

advantage of strategic procurement opportunities such as renegotiating contracts for 

more favorable pricing and changing contract vehicles to firm fixed price type 

contracts; mostly in IT hardware, software licensing and maintenance, and 

telecommunication contracts. 

Reduced Contracts: -$20,754,000 / 0 FTE. Actual savings realized: -$26,541,775 / 

0 FTE. The IRS achieved targeted savings through reduced contracting expenses. By 

renegotiating non-IT contracts for more favorable pricing and changing contract 

vehicles the IRS generated savings of $26.5 million. 

Reduced Administrative Expenses: -$14,331,000 / -66 FTE. Actual savings 

realized: -$14,960,155 / -66 FTE. In FY 2012 the IRS eliminated administrative and 

support positions through targeted attrition and hiring freezes generating $15.0 million

in savings. 

Reduced Certain Mailings: -$4,000,000 / 0 FTE. Actual savings 

realized: -$21,900,000 / 0 FTE. In FY 2012, the IRS reduced printing and postage 

costs by eliminating automatic, weekly mailings of Publication 15, Employer’s Tax 

Guide, and decreasing small package carrier expenditures and other mailings, saving 

$21.9 million.

Reduce Training, Travel and Programs: -$27,338,000 / -41 FTE. Actual savings 

realized: -$60,850,888 / -41 FTE. 

Reduced Travel: -$11,937,000 / 0 FTE. Actual savings 

realized: -$22,355,964 / 0 FTE. The IRS reduced agency-wide non-technical 

training and non-case related travel by making greater use of technology and 

increasing the use of hoteling, saving $22.4 million. 

Reduced Training: -$9,000,000 / 0 FTE. Actual savings 

realized: -$32,093,924 / 0 FTE. Reductions in training costs were achieved 

by reducing out-of-town training and the length of training, as well as by 

leveraging technology, saving $32.1 million. 

Reduce Programs: -$6,401,000 / -41 FTE. Actual savings 

realized: -$6,401,000 / -41 FTE. The IRS generated savings of $6.4 million 

by implementing program efficiencies in the taxpayer communication and 

education programs. Despite the proposed saving included in the FY 2012 

budget, Congress increased resources for the Business Systems Modernization 

(BSM) program to ensure successful implementation of CADE 2, Transition 

State 1, and therefore, the $1 million savings was offset by the increased 
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funding. Additionally, the enacted FY 2012 budget included a congressional 

change for the appropriation of funding related to administering the tax credit 

in title II of division A of the Trade Act of 2002 (Public Law 107-210), 

earmarking this spending at the FY 2011 appropriated level. Therefore, the 

IRS did not realize the $1.1 million in contract savings included in the 

FY 2012 budget.

Other FY 2012 Savings to Reach the FY 2012 Enacted Level: Actual savings 

realized: -$208,647,576 / -3,991 FTE. 

In addition to the $189.9 million in savings submitted in the FY 2012 President’s Budget, the 

IRS generated additional savings in FY 2012, primarily through attrition, due to the reduction 

to the FY 2012 enacted level. The IRS absorbed these reductions through:

 Attrition Savings to Reach FY 2012 Enacted Level: Actual savings 

realized: -$205,569,252 and -3,991 FTE. The IRS generated savings to reach the 

FY 2012 enacted level by decreasing full-time equivalents (FTEs) by more than 3.4 

percent from FY 2011 through the use of attrition, hiring freezes that did not replace 

attrition, and targeted buyouts for more than 1,200 support staff for an annualized 

savings of $205.6 million.

 Supplies: Actual savings realized: -$3,078,324 and 0 FTE. To generate additional 

savings, the IRS cut supplies costs primarily by negotiating contracts for improved 

pricing and curtailing spending for only critical shortfalls. 
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4.3 – IRS Performance Measure Table

Performance Measures Type of 

Measure

FY2007 

Actual

FY2008 

Actual

FY2009 

Actual

FY2010 

Actual

FY2011 

Actual

FY2012 

Actual

FY2013 

Planned

FY2014 

Planned

Customer Service Representative Level of Service 

(LOS)1 Oe, L 82.1% 52.8% 70.0% 74.0% 70.1% 67.6% 70.0% 79.0%

Customer Contacts Resolved per Staff Year E 7,648 12,634 12,918 10,744 12,419 16,320 16,754 17,198

Customer Accuracy - Tax Law (Phones) Ot 91.2% 91.2% 92.9% 92.7% 93.4% 93.2% 93.0% 93.0%

Customer Accuracy - Accounts (Phones) Ot 93.4% 93.7% 94.9% 95.7% 96.0% 95.6% 95.0% 95.0%

Timeliness of Critical Filing Season Tax Products to the 

Public Ot 83.5% 92.4% 96.8% 95.3% 96.3% 97.2% 95.0% 95.0%

Timeliness of Critical TE/GE & Business Tax Products to 

the Public Ot 84.0% 89.5% 95.2% 97.7% 96.4% 94.5% 95.0% 95.0%

Percent Individual Returns Processed Electronically Oe, L 57.1% 57.6% 65.9% 69.3% 76.9% 80.5% 80.0% 81.0%

Cost per Taxpayer Served ($) (HCTC) E $14.90 $16.94 $13.79 $9.52 $12.36 $14.43 $15.00 N/A

Sign-Up Time (Days) - Customer Engagement (HCTC) Ot 93.3 94.0 91.3 124.0 117.0 116.0 125.0 N/A

Percent of Business Returns Processed Electronically Oe, L 19.1% 19.4% 22.8% 25.5% 31.8% 36.7% 38.0% 40.0%

Refund Timeliness - Individual (Paper) Ot 98.9% 99.1% 99.2% 96.1% 99.4% 99.7% 98.0% 98.0%

Taxpayer Self-Assistance Rate E, L 49.5% 66.8% 69.3% 64.4% 70.1% 78.5% 80.0% 80.5%

Examination Coverage - Individual Oe, L 1.0% 1.0% 1.0% 1.1% 1.1% 1.0% 1.0% 1.0%

Field Exam Nat'l Quality Review Score Oe, L 85.9% 86.0% 85.1% 84.9% 85.8% 87.4% 86.9% 87.3%

Office Exam Nat'l Quality Review Score Oe, L 89.4% 90.0% 92.1% 91.6% 90.4% 91.3% 91.1% 91.1%

Examination Quality - Industry Oe, L 87.0% 88.0% 88.0% 87.0% 90.0% 90.0% N/A1 N/A1

Examination Quality - Coordinated Industry Oe, L 96.0% 97.0% 95.0% 95.0% 96.0% 96.0% N/A1 N/A1

Examination Coverage - Business (Assets > $10 million) Oe, L 6.8% 6.1% 5.6% 5.7% 6.2% 6.2% 4.6% 4.9%

Examination Efficiency - Individual E, L 137 138 138 140 139 142 145 145

Automated Underreporter Efficiency E, L 1,956 1,982 1,905 1,924 2,007 2,041 2,035 2,001

Automated Underreporter Coverage E, L 2.5% 2.6% 2.6% 3.0% 3.3% 3.2% 2.9% 3.1%

Collection Coverage (Units) Ot, L 54.0% 55.2% 54.2% 50.1% 50.0% 48.1% 46.4% 47.1%

Collection Efficiency (Units) E, L 1,828 1,926 1,845 1,822 1,952 1,997 2,049 2,039

Field Collection Nat'l Quality Review Score Ot, L 84.0% 79.0% 80.5% 80.6% 80.3% 80.4% 80.4% 80.4%

Automated Collection System Accuracy Oe 92.9% 95.3% 94.3% 95.9% 94.9% 94.7% 94.5% 94.5%

Criminal Investigations Completed Ot, L 4,269 4,044 3,848 4,325 4,697 4,937 4,350 4,350

Number of Convictions Oe, L 2,155 2,144 2,105 2,184 2,350 2,634 2,400 2,400

Conviction Rate Oe, L 90.2% 92.3% 87.2% 90.2% 92.7% 93.0% 92.0% 92.0%

Conviction Efficiency Rate ($) E, L $301,788 $315,751 $327,328 $324,776 $310,029 $270,511 $285,000 $285,000

TE/GE Determination Case Closures Ot 109,408 100,050 96,246 105,247 91,205 87,000 62,473 67,922

Percent of BSM Projects within +/- 10% Cost Variance E * 92.0% 60.0% 40.0% 71.4% 50.0% 90.0% 90.0%

Percent of BSM Projects within +/- 10% Schedule 

Variance E * 92.0% 90.0% 100.0% 100.0% 90.0% 90.0% 90.0%

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure, L - Long-Term Goal

N/A1 - In FY 2013, these measures were combined and the new measure, Examination Quality - Large Business, will be reported in the FY 2015 Treasury Submission.

N/A - HCTC Program is scheduled to end on December 31, 2013.

1 Beginning in FY 2013, targets include an increase in base user fees.

*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.
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Customer Service Representative (CSR) Level of 

Service

The number of toll free callers that either speak to a Customer Service Representative or receive informational 

messages divided by the total number of attempted calls.

Customer Contacts Resolved per Staff Year The number of Customer Contacts resolved in relation to staff years expended. 

Customer Accuracy – Tax Law Phones The percentage of correct answers given by a live assistor on Toll-free tax law inquiries.

Customer Accuracy – Customer Accounts (Phones) The percentage of correct answers given by a live assistor on Toll-free account inquiries.

Timeliness of Critical Individual Filing Season Tax 

Products to the Public

The percentage of critical individual filing season tax products (tax forms, schedules, instructions, publications, tax 

packages, and certain notices required by a large number of filers to prepare a complete and accurate tax return) 

available to the public in a timely fashion.

Timeliness of Critical TE/GE & Business Tax 

Products to the Public Percentage of critical other tax products, paper and electronic, available to the public in a timely fashion. 

Percent Individual Returns Processed Electronically The percentage of electronically filed individual tax returns divided by the total individual returns filed.

Cost per Taxpayer Served ($) (HCTC) The costs associated with serving the taxpayers including program kit correspondence, registration and program 

participation.

Sign-Up Time (Days) – Customer Engagement 

(HCTC) The length of time between the first Program Kit mailing and first payment received.

Percent Business Returns Processed Electronically The percentage of electronically filed business tax returns divided by the total business returns filed.

Refund Timeliness – Individual (Paper) The percentage of refunds resulting from processing Individual Master File paper returns issued within 40 days or 

less. 

Taxpayer Self Assistance Rate The percentage of taxpayer assistance requests resolved using self-assisted automated services.

Examination Coverage – Individual (1040)

The sum of all individual 1040 returns closed by Small Business/Self Employed (SB/SE), Wage & Investment (W&I), 

Tax Exempt and Government Entities (TE/GE), and Large Business and International (LB&I) (Field Exam and 

Correspondence Exam programs) divided by the total individual return filings for the prior calendar year.

Field Exam Nat'l Quality Review Score The score awarded to a reviewed field examination case by a Quality Reviewer using the National Quality Review 

System (NQRS) quality attributes.

Office Exam Nat'l Quality Review Score The score awarded to a reviewed office examination case by a Quality Reviewer using the NQRS quality attributes.

Examination Quality – Industry Average of the scores of Industry Cases reviewed. Case scores are based on the percentage of elements passed 

within each auditing standard.

Examination Quality – Coordinated Industry Average of the scores of Coordinated Industry Cases reviewed. Case scores are based on the percentage of 

elements passed within each auditing standard. 

Examination Coverage – Business Assets >$10 

Million)

The number of LB&I returns (C and S Corporations with assets over $10 million and all partnerships) examined and 

closed by LB&I during the current fiscal year divided by the number of filings for the preceding calendar year.

Examination Efficiency – Individual (1040) The sum of all individual 1040 returns closed by SB/SE, W&I, TE/GE, and LB&I (Field Exam and Correspondence 

Exam programs) divided by the total Full-Time Equivalent (FTE) expended in relation to those individual returns.

Automated Underreporter (AUR) Efficiency The total number of W&I and SB/SE contact closures (a closure resulting from a case where we made contact) 

divided by the total FTE, including overtime.

Automated Underreporter (AUR) Coverage A percentage representing the total number of W&I and SB/SE contact closures (a closure resulting from a case 

where SBSE and W&I made contact) divided by the total return filings for the prior year.

Collection Coverage – Units The volume of collection work disposed compared to the volume of collection work available.

Collection Efficiency – Units The volume of collection work disposed divided by total collection FTE.

Field Collection Nat'l Quality Review Score The score awarded to a reviewed collection cases by a Quality Reviewer using the NQRS quality attributes.

Automated Collection System (ACS) Accuracy The percent of taxpayers who receive the correct answer to their ACS question.

Criminal Investigations Completed

The total number of subject criminal investigations completed during the fiscal year, including those that resulted in 

prosecution recommendations to the Department of Justice as well as those discontinued due to a lack of 

prosecution potential. 

Number of Convictions The number of criminal convictions.

Conviction Rate The percent of adjudicated criminal cases that result in convictions.

Conviction Efficiency Rate ($) The cost of Criminal Investigation’s (CI) program divided by the number of convictions.

TE/GE Determination Case Closures The number of cases closed in the Employee Plans or Exempt Organizations Determination programs, regardless of 

type of case or type of closing.

Percent of BSM Projects within +/- 10% Cost 

Variance 

The percentage of BSM projects that are within the +/-10% threshold for cost. The cost variance is measured from 

the initial cost estimate versus current cost estimate.

Percent of BSM Projects within +/- 10% Schedule 

Variance 

The percentage of BSM projects that are within the +/-10% threshold for schedule. The schedule variance is 

measured from the initial schedule estimate to the current schedule estimate.

Budget Level Performance Measure Descriptions
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4.4 – IRS Evaluation Program

National Research Program to evaluate taxpayer compliance

The IRS National Research Program (NRP) is a comprehensive cross-functional effort to 

assess taxpayers’ voluntary compliance with the Federal tax law at a strategic level and to 

produce data that support the development of improved IRS systems for identifying 

noncompliant taxpayers. The program evaluation is built on annual, random “research” audits 

of taxpayers, designed specifically to shed light on the broad range of taxpayer compliance 

behavior. The program evaluates compliance with a range of taxes and for different groups of 

taxpayers. For the purpose of the NRP, compliance is divided into three taxpayer activities: 

filing compliance, payment compliance, and reporting compliance. Data from the NRP 

support strategic and tactical objectives of the IRS, which fall into four categories: IRS 

strategic objectives, workload identification, legislative or administrative changes, and 

internal IRS procedures.

IRS Strategic Objectives

A primary purpose of the NRP reporting compliance data is the estimation of the 

underreporting (of income) component of the tax gap. The tax gap is an estimate of the 

amount of true tax liability that is not paid on time. For tax year 2006, individual 

underreporting accounted for 52 percent of the $450 billion tax gap. Among other things, IRS 

leadership uses these estimates to define the IRS’s strategic direction. 

Workload Identification

NRP data is essential for the estimating and updating of IRS workload identification models, 

including new models for high-income taxpayers. The IRS estimates that the initial set of 

new models generated approximately $185 million in additional adjustments compared to the 

old models. In addition, the IRS tested alternative modeling techniques to identify 

noncompliant high-income taxpayers, with preliminary results that suggest the average 

adjustment is at least three times larger than the traditional workload selection models. 

The move to multiyear studies will allow the IRS to update to these models each year. 

Legislative or Administrative Changes

NRP studies provide data for identifying and addressing specific instances of noncompliance. 

The IRS recommended requirements for brokerage houses to provide documentation on asset 

transactions and for purchase card companies to provide information related to card-based 

sales, based on an analysis of compliance behaviors using NRP study data. The current NRP 

Form 1040 study is gathering data that will assist IRS customer service activities. NRP data 

are supporting a number of issue and market-specific research efforts, including analyses of 

the compliance characteristics of Earned Income Tax Credit (EITC) and high-income 

taxpayers. The results of this research will assist the IRS in its efforts to improve taxpayer 

compliance and service.
IRS-164

Internal IRS Procedures

In addition to providing compliance data, NRP studies provide a platform to test and improve 

IRS operational procedures and guidelines. This includes:

 Support of the small business exam reengineering effort that helped identify specific 

issues for examination;

 Refinement of a number of tools that support the exam process by using the NRP 

studies as a standard for operational programs; and

 Adoption of systems to collect data for compliance research, which led to reductions 

of the burden on NRP examiners and taxpayers. 
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FY 2012 Expenses by Category

(Excluding Imputed Costs)

Taxpayer Service

19.42%

Health Care Tax Credit 

(HCTC)

0.00%

Enforcement**

44.30%

Other Operations 

Support

13.43%

Business Systems Modernization (BSM)

0.76%

IT & 

Telecommunications

9.18%

Other*

5.26%

Rent

7.65%

4.5 – Cost of IRS Operating Activities

FY 2012 Cost of IRS Operating Activities

The following charts provide the FY 2012 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 2012 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).

The first chart shows the FY 2012 actual costs by appropriation.

The second chart shows the FY 2012 actual costs by major expense category.

Notes:

1Other includes Contractual Services, Supplies, Printing, Postage, Travel and Training

2Enforcement includes Non-Labor Enforcement Expenses of $132M (1.1%)

Labor Costs represent 76.77% of total expenses and are included in Taxpayer Service, Enforcement, Operations 

Support, and HCTC 

FY 2012 Expenses by Appropriation

(Excluding Imputed Costs)

Operations Support, 

35.25%

Health Insurance Tax 

Credit Administraton, 

0.04%

Taxpayer Services, 

20.24%

Business System Modernization, 1.77%

Enforcement, 42.69%
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4.6 – Return on Investment (ROI) for IRS Major Enforcement Programs

The GAO recommended in its report, Internal Revenue Service, Assessment of the Fiscal 

Year 2009 Budget Request, GAO-08-620T, that the IRS extend the use of return on 

investment (ROI) analysis to cover the major enforcement programs. The IRS has developed 

a methodology to compare actual cost and actual revenue collected for the three major 

enforcement programs: Examination, Collection and Automated Underreporter (AUR). The

activities included in these programs include:

Examination Program conducts examinations of individual taxpayers, businesses and other 

types of organizations. This includes individuals, small business, self-employed, large 

corporate business, international, estate and gift, excise tax and employment tax, and tax 

exempt, qualified pension benefit plans, and Government entities. The examination costs 

include the Field Exam, Correspondence Exam, IRS Chief Counsel and Appeals functions.

Collection Program collects delinquent taxes and secures delinquent tax returns, including 

the use of enforcement tools such as lien, levy, seizure of assets, installment agreement, offer 

in compromise, substitute for return, summons, and IRC 6020(b) (i.e., allows the IRS to 

prepare returns if a taxpayer neglects or refuses to file), when appropriate; and provides

education to customers to enable future compliance. The cost of the Collection program 

includes Automated Collection System (ACS), Field Collection, and Payment 

Compliance/Correspondence Collection.

Automated Underreporter (AUR) Program matches payer information returns (Forms 1099, 

W-2, etc.) against data reported on individual tax returns. The information is verified to 

identify any discrepancies. If a discrepancy is identified, the case is given to a tax examiner 

for research and analysis. If the tax examiner is unable to resolve the discrepancy, a proposed 

notice is issued and a proposed assessment is generated. 

ROI is calculated by dividing revenue by cost. The Cost, Revenue, and ROI for FY 2009, 

2010, 2011 and 2012 for the three major programs, Examination, Collection, and AUR, are 

provided below. This information provides an indication of the ROI for the three major 

enforcement program over time, but it is important to note that enforcement revenue collected 

in a fiscal year includes tax, interest, and penalties from multiple tax years. Some 

enforcement activities can take more than a year to close and may generate revenue over 

several years, so it is generally inappropriate to compare revenue collected in a given fiscal 

year to the staffing available for that same year. 

In addition, it also is important to note that these data reflect the average ROI for these 

programs and do not include the indirect effects of IRS enforcement activities on voluntary 

compliance. As such, they are not intended to be used to allocate resources or maximize 

revenue. Net revenue is maximized only when resources are allocated according to marginal 

direct and indirect ROI, but those ratios are much more challenging to estimate than the 

average ROI shown here. As a result, the IRS will continue to allocate enforcement resources 

across a range of enforcement activities to ensure taxpayers pay the taxes they owe with 

integrity and fairness to all. 
IRS-167

Dollars in Millions

Enforcement Program Cost1 Revenue ROI Cost1 Revenue ROI Cost1 Revenue ROI Cost1 Revenue ROI

IRS Total $6,068.3 $48,886 8.1 $6,581.1 $57,592 8.8 $6,542.7 $55,229 8.4 $6,241.5 $50,187 8.0

Examination 3,965.2 17,446 4.4 4,371.0 23,563 5.4 4,333.0 18,924 4.4 4,232.4 14,476 3.4

Collection 1,880.3 26,871 14.3 1,948.4 29,105 14.9 1,939.4 31,060 16.0 1,741.7 30,442 17.5

Automated Underreporter (AUR) 222.8 4,569 20.5 261.7 4,924 18.8 270.3 5,245 19.4 267.4 5,269 19.7

FY 2012

Return on Investment for IRS Major Enforcement Programs

1The cost of the enforcement programs was calculated using budget data from the IRS Integrated Financial System (IFS) and includes direct dollars and FTE from the Enforcement appropriation, Exam and 

Collections budget activity, and dollars from the Operations Support appropriation prorated using actual FTE realized for each major enforcement program.

FY 2009 FY 2010 FY 2011
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4.7 – Alignment of the FY 2014 Initiatives to the IRS Strategic Goals

Goal #3 Goal #4

FY 2014 Initiatives Increase voluntary tax 

compliance

Increase Electronic 

Transactions with the 

public to improve service, 

prevent fraud, and reduce 

costs.

Protect our National 

Security through 

Targeted Financial 

Actions

Pursue Comprehensive 

Tax and Fiscal Reform - 

Increase voluntary tax 

compliance

Improve Service to Make 

Voluntary Compliance 

Easier

Enforce the Law to 

Ensure Everyone Meets 

Their Obligation to Pay 

Taxes

Electronic 

Interaction 

Enablement

Telephone 

Service 

Enhancements

Partner Services Outreach and 

Education

Marketing and 

Promotion

Improve Taxpayer Service and Meet Increased Demand       Implement FATCA  Address International and Offshore Compliance Issues  Implement Merchant Card and Basis Matching    Address Impact of ACA Statutory Requirements  Improve Identification and Prevention of Refund Fraud and Identity Theft    Increase Audit Coverage to Address Tax Compliance Issues  Increase Collection Coverage  Expand Coverage of High-Wealth Individuals and Enterprises  Improve Coverage of Partnerships and Flow-Through Entities  Build Out Tax Return Preparer Compliance Activities  Leverage Data to Improve Case Selection  Leverage Digital Evidence for Criminal Investigation (CI)  Implement IT Changes to Deliver Tax Credits and Other Requirements  Develop New Online Services     Develop Converged Telecommunication Networks    Expand Virtual Services Delivery (VSD)    

1 Strategic Plan 2012-2015

Goals Service Improvement Categories

Taxpayer Assistance Blueprint (TAB) IRS

Strategic Plan

Treasury 

Strategic Plan1

Priority Goals
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4.8 – Summary of IRS FY 2010 – FY 2012 Affordable Care Act (ACA) Funding

In FY 2010 through FY 2012, the IRS received funding to implement the Affordable Care Act 

(ACA) from the Health Insurance Reform Implementation Fund (HIRIF) appropriated to the 

Secretary of Health and Human Services (HHS) to fund the Federal administrative expenses 

to implement ACA.

4.9 – Summary of IRS FY 2014 Implementation of Affordable Care Act (ACA)

Dollars in Thousands $000 FTE $000 FTE $000 FTE $000 FTE

Administer New Fees on Drug Manufacturers and Health Insurers 345 1 667 4 1,136 8 2,148 13

Strengthen Oversight of Exempt Hospitals 414 2 4,525 39 4,029 34 8,968 75

Promoting Compliance with Other New Provisions 825 5 11,643 90 8,293 66 20,761 161

Program Management 123 0 8,366 42 17,909 49 26,398 91

Support of Implementation & Taxpayer Issues (e.g. Counsel, Appeals) 2,360 14 5,008 31 5,174 37 12,542 82

Customer Service Support (Outreach, Phones & Other Support) 1,299 9 6,020 77 4,712 64 12,031 150

15,340 0 131,928 294 257,961 406 405,229 700

Total $20,706 31 $168,157 577 $299,214 664 $488,077 1272

Information Technology, Operations & Support & Infrastructure / 

Deliver New Tax Credits & Individual Coverage Requirement

FY 2010 FY 2011 FY 2012 Total

Dollars in Thousands

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

Program Increases:

Improve Taxpayer Service and Meet Increased Demand 70,322 908 3,250 32 15,947 9 89,519 949

Address Impact of Affordable Care Act (ACA) Statutory Requirements 1,124 8 26,084 223 17,212 52 44,420 283

Implement IT Changes to Deliver Tax Credits and Other Requirements 305,645 722 305,645 722

Total FY 2014 ACA Budget Request $71,446 916 $29,334 255 $338,804 783 $439,584 1,954

FY 2014

 Affordable Care Act (ACA)

TOTAL OPERATIONS 

SUPPORT TAXPAYER SERVICES ENFORCEMENT
IRS-170

Summary of Program Integrity Cap Adjustment $000 FTE $000 FTE $000 FTE $000 FTE $000 FTE

FY 2012 Enacted1 $2,239,703 30,290 $5,299,367 48,297 $3,947,416 12,454 $330,210 605 $11,816,696 91,646FY 2013 Annualized CR Rate $2,253,510 30,402 $5,331,000 46,702 $3,971,000 12,240 $332,231 513 $11,887,741 89,857FY 2014 Changes to Base:

Non-Recur CR Increase: ($13,807) ($31,633) ($23,584) ($2,021) ($71,045)Maintaining Current Levels (MCLs): $22,391 $50,551 $52,115 $617 $125,674

Pay Inflation Adjustment 19,277 45,802 13,977 617 $79,673Non-Pay Inflation Adjustment 3,114 4,749 38,138 $46,001

Efficiencies/Savings: ($18,208) (251) ($56,605) (460) ($150,051) (146) ($30,000) ($254,864) (857)

Increase e-File Savings (4,969) (101) (71) (5,040) (101)Business Systems Modernization (BSM) Savings (30,000) (30,000)Reduce Information Technology (IT) Infrastructure (57,500) (57,500)Implement Human Capital Administrative Efficiencies (7,858) (73) (7,858) (73)Targeted Personnel Savings (13,239) (150) (56,605) (460) (7,922) (73) (77,766) (683)Savings from Space Optimization (76,700) (76,700)

Reinvestment: $37,500 $37,500

Implement Space Optimization to Achieve Savings 37,500 37,500

Subtotal FY 2014 Changes to Base ($9,624) (251) ($37,687) (460) ($84,020) (146) ($31,404) ($162,735) (857)FY 2014 Current Services (Base) $2,243,886 30,151 $5,293,313 46,242 $3,886,980 12,094 $300,827 513 $11,725,006 89,000Program Changes:

Program Increases Before Cap Adjustment::

Promote Voluntary Compliance, Implement Legislative Changes, and Protect Revenue:

Improve Taxpayer Service and Meet Increased Demand 130,306 1,863 3,250 32 43,501 40 177,057 1,935Implement Foreign Account Tax Compliance Act (FATCA) 19,600 204 15,590 29 35,190 233Implement Merchant Card and Basis Matching 7,643 153 30,275 370 12,361 13 50,279 536Address Impact of Affordable Care Act (ACA) Statutory Requirements 1,124 8 26,084 223 17,212 52 44,420 283Implement IT Changes to Deliver Tax Credits and Other Requirements 305,645 722 305,645 722Improve Identification and Prevention of Refund Fraud and Identity Theft 19,269 236 48,361 538 33,468 76 101,098 850Leverage Data to Improve Case Selection (Taxpayer Service portion) 10,348 164 10,348 164

Subtotal Promote Voluntary Compliance, Implement Legislative Changes, and Protect Revenue $168,690 2,424 $127,570 1,367 $427,777 932 $724,037 4,723Subtotal Program Increases Before Cap Adjustment $168,690 2,424 $127,570 1,367 $427,777 932 $724,037 4,723Total Request Before Cap Adjustment $2,412,576 32,575 $5,420,883 47,609 $4,314,757 13,026 $300,827 513 $12,449,043 93,723

Cap Adjustment Program Increases:

Enforcement Initiatives:

Address International and Offshore Compliance Issues 43,311 329 6,043 49,354 329Increase Audit Coverage to Address Tax Compliance Issues 71,453 773 39,482 24 110,935 797Increase Collection Coverage 36,261 573 24,213 60,474 573Expand Coverage of High-Wealth Individuals and Enterprises 29,456 242 4,509 33,965 242Improve Coverage of Partnerships and Flow-Through Entities 39,136 320 5,877 45,013 320Build Out Tax Return Preparer Compliance Activities 15,982 124 2,333 18,315 124Leverage Data to Improve Case Selection 4,474 10 36,879 53 41,353 63Leverage Digital Evidence for Criminal Investigation (CI) 831 7 3,708 1 4,539 8

Subtotal Enforcement Initiatives $240,904 2,378 $123,044 78 $363,948 2,456

Infrastructure Initiatives:

Develop New Online Services 24,059 37 24,059 37Develop Converged Telecommunication Networks 15,000 15,000Expand Virtual Services Delivery (VSD) 3,983 2 3,983 2

Subtotal Infrastructure Initiative $43,042 39 $43,042 39

Alcohol and Tobacco Tax and Trade Bureau Program Integrity Transfer:

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

Subtotal Alcohol and Tobacco Tax and Trade Bureau Program Integrity Transfer $5,000 $5,000Subtotal FY 2014 Cap Adjustment $245,904 2,378 $166,086 117 $411,990 2,495Total FY 2014 Budget Request $2,412,576 32,575 $5,666,787 49,987 $4,480,843 13,143 $300,827 513 $12,861,033 96,218

1 FY 2012 Enacted represents the approved FY 2012 Operating Plan.

Dollar/FTE Change FY 2014 Budget Request over FY 2012 Enacted $172,873 2,285 $367,420 1,690 $533,427 689 ($29,383) (92) $1,044,337 4,572Percent Change FY 2014 Budget Request over FY 2012 Enacted 7.72% 7.54% 6.93% 3.50% 13.51% 5.53% -8.90% -15.21% 8.84% 4.99%

TOTAL OPERATIONS SUPPORT TAXPAYER SERVICES ENFORCEMENT BSM

4.10 – Summary of Program Integrity Cap Adjustment
IRS-171

Bureau: Internal Revenue Service Summary of Proposed FY 2014 Request $000 FTE $000 FTE $000 FTE $000 FTE $000 FTE

FY 2012 Enacted1 $2,239,703 30,290 $5,299,367 48,297 $3,947,416 12,454 $330,210 605 $11,816,696 91,646FY 2013 Annualized CR Rate $2,253,510 30,402 $5,331,000 46,702 $3,971,000 12,240 $332,231 513 $11,887,741 89,857FY 2014 Changes to Base:

Non-Recur CR Increase: ($13,807) ($31,633) ($23,584) ($2,021) ($71,045)Maintaining Current Levels (MCLs): $22,391 $50,551 $52,115 $617 $125,674

Pay Inflation Adjustment 19,277 45,802 13,977 617 79,673Non-Pay Inflation Adjustment 3,114 4,749 38,138 46,001

Efficiencies/Savings: ($18,208) (251) ($56,605) (460) ($150,051) (146) ($30,000) ($254,864) (857)

Increase e-File Savings (4,969) (101) (71) (5,040) (101)Business Systems Modernization (BSM) Savings (30,000) (30,000)Reduce Information Technology (IT) Infrastructure (57,500) (57,500)Implement Human Capital Administrative Efficiencies (7,858) (73) (7,858) (73)Targeted Personnel Savings (13,239) (150) (56,605) (460) (7,922) (73) (77,766) (683)Savings from Space Optimization (76,700) (76,700)

Reinvestment: $37,500 $37,500

Implement Space Optimization to Achieve Savings 37,500 37,500

Subtotal FY 2014 Changes to Base ($9,624) (251) ($37,687) (460) ($84,020) (146) ($31,404) ($162,735) (857)FY 2014 Current Services (Base) $2,243,886 30,151 $5,293,313 46,242 $3,886,980 12,094 $300,827 513 $11,725,006 89,000Program Changes:

Program Increases:

Taxpayer Service Initiatives:Improve Taxpayer Service and Meet Increased Demand 130,306 1,863 3,250 32 43,501 40 177,057 1,935

Subtotal Taxpayer Service Initiatives $130,306 1,863 $3,250 32 $43,501 40 $177,057 1,935

Enforcement Initiatives:

Implement Foreign Account Tax Compliance Act (FATCA) 19,600 204 15,590 29 35,190 233Address International and Offshore Compliance Issues 43,311 329 6,043 49,354 329Implement Merchant Card and Basis Matching 7,643 153 30,275 370 12,361 13 50,279 536Address Impact of Affordable Care Act (ACA) Statutory Requirements 1,124 8 26,084 223 17,212 52 44,420 283Improve Identification and Prevention of Refund Fraud and Identity Theft 19,269 236 48,361 538 33,468 76 101,098 850Increase Audit Coverage to Address Tax Compliance Issues 71,453 773 39,482 24 110,935 797Increase Collection Coverage 36,261 573 24,213 60,474 573Expand Coverage of High-Wealth Individuals and Enterprises 29,456 242 4,509 33,965 242Improve Coverage of Partnerships and Flow-Through Entities 39,136 320 5,877 45,013 320Build Out Tax Return Preparer Compliance Activities 15,982 124 2,333 18,315 124Leverage Data to Improve Case Selection 10,348 164 4,474 10 36,879 53 51,701 227Leverage Digital Evidence for Criminal Investigation (CI) 831 7 3,708 1 4,539 8

Subtotal Enforcement Initiatives $38,384 561 $365,224 3,713 $201,675 248 $605,283 4,522

Infrastructure Initiatives:

Implement IT Changes to Deliver Tax Credits and Other Requirements 305,645 722 305,645 722Develop New Online Services 24,059 37 24,059 37Develop Converged Telecommunication Networks 15,000 15,000Expand Virtual Services Delivery (VSD) 3,983 2 3,983 2

Subtotal Infrastructure Initiatives $348,687 761 $348,687 761

Alcohol and Tobacco Tax and Trade Bureau Program Integrity Transfer:

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

$5,000 $5,000

Subtotal FY 2014 Program Changes $168,690 2,424 $373,474 3,745 $593,863 1,049 $1,136,027 7,218Total FY 2014 Budget Request $2,412,576 32,575 $5,666,787 49,987 $4,480,843 13,143 $300,827 513 $12,861,033 96,218

1 FY 2012 Enacted represents the approved FY 2012 Operating Plan.

Dollar/FTE Change FY 2014 Budget Request over FY 2012 Enacted $172,873 2,285 $367,420 1,690 $533,427 689 ($29,383) (92) $1,044,337 4,572Percent Change FY 2014 Budget Request over FY 2012 Enacted 7.72% 7.54% 6.93% 3.50% 13.51% 5.53% -8.90% -15.21% 8.84% 4.99%Subtotal Alcohol and Tobacco Tax and Trade Bureau Program Integrity Transfer

TOTAL OPERATIONS SUPPORT TAXPAYER SERVICES ENFORCEMENT BSM

4.11 – Summary of IRS FY 2014 Budget Request