Internal Revenue Service

Program Summary by Appropriations Account and Budget Activity

Dollars in Thousands

 FY 2012 FY 2013 FY 2014 FY 2012 TO FY 2014

 Enacted1 Annualized Request $ Change % Change

Budget Activity CR Rate 

Taxpayer Services $2,239,703 $2,253,510 $2,412,576 $172,873 7.72%

Pre-filing Taxpayer Assistance & Education 625,189 632,514 660,197 35,008 5.60%

Filing & Account Services 1,614,514 1,620,996 1,752,379 137,865 8.54%

Enforcement $5,299,367 $5,331,000 $5,666,787 $367,420 6.93%

Investigation 636,386 611,233 661,631 25,245 3.97%

Exam & Collections 4,504,885 4,565,257 4,842,007 337,122 7.48%

Regulatory 158,096 154,510 163,149 5,053 3.20%

Operations Support $3,947,416 $3,971,000 $4,480,843 $533,427 13.51%

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

Shared Services & Support 1,214,514 1,239,929 1,305,701 91,187 7.51%

Information Services 1,803,268 1,814,802 2,235,960 432,692 23.99%

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

Subtotal, Internal Revenue Service $11,816,696 $11,887,741 $12,861,033 $1,044,337 8.84%

Offsetting Collections - Reimbursables 122,451 109,193 110,627 (11,824) -9.66%

User Fees 326,251 511,425 277,582 (48,669) -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/Out2193 (5,000) (4,807)

Total Program Operating Level $12,512,092 $12,792,690 $13,358,007 $845,915 6.76%

Direct FTE 91,646 89,857 96,218 4,572 4.99%

Other Direct FTE 3668 21 21 (647) -96.86%

Reimbursable FTE 723 712 712 (11) -1.52%

User Fees FTE 760 965 360 (400) -52.63%

Total FTE 93,797 91,555 97,311 3,514 3.75%

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 ($193K) and a FY 2014 transfer out to the Alcohol and Tobacco Tax and Trade Bureau (TTB) ($5M).

3Resources 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).

Summary

The Internal Revenue Service (IRS) collects 

the revenue that funds the government and 

administers the nation’s tax laws. During 

FY 2012, the IRS processed more than 

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 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. 

Resources requested for service and 

enforcement are key to supporting the 

Treasury Agency Priority Goal, Increase 

Voluntary Tax Compliance.

Total resources to support IRS activities for

FY 2014 are $13,249,242,000, including 

$12,861,033,000 from direct appropriations, 

an estimated $110,627,000 from reimbursable 

programs, and an estimated $277,582,000

from user fees. The direct appropriation is 

$1,044,337,000 more than the FY 2012

enacted level of $11,816,696,000.

The IRS Strategic Plan guides program and 

budget decisions and supports the Department 

of the Treasury Strategic Plan and Agency 

Priority Goals.

The IRS Strategic Plan goals and objectives 

are:

Improve Service to Make Voluntary 

Compliance Easier

Enforce the Law to Ensure Everyone 

Meets Their Obligation to Pay Taxes

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.

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.

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

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

Enforcement Program: The FY 2014

request provides funding 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.

Increased resources for the IRS compliance 

programs yield direct, measurable results 

through high return on investment (ROI) 

activities. This request includes a 

$412 million program integrity cap adjustment 

that will reduce the deficit through above-base 

funding for high ROI tax enforcement and 

compliance programs, of which $5 million will 

be transferred to the Alcohol and Tobacco Tax 

and Trade Bureau (TTB). The $407 million 

requested for the IRS FY 2014 enforcement 

initiatives funded through this program 

integrity cap adjustment will generate more 

than $1.6 billion in additional annual 

enforcement revenue once the new hires reach 

full potential in FY 2016. These resources 

will achieve a FY 2016 ROI of $6.0-to-$1, not 

including the indirect revenue effect of the 

deterrence value of these enforcement 

investments, which is estimated to be at least 

three times the direct revenue impact.

In addition to the new FY 2014 enforcement 

initiatives, the President’s Budget also 

proposes new tax enforcement and compliance 

initiatives for the 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.

Taxpayer Service Program: The FY 2014

request will allow the IRS to further improve 

customer service to meet taxpayer demand and 

continue delivering services to taxpayers using 

a variety of in-person, telephone, and 

web-based methods to help taxpayers 

understand their tax obligations, correctly file 

their returns, and pay taxes due in a timely 

manner.

Providing quality taxpayer service is 

especially important to help taxpayers avoid 

making unintentional errors. Assisting 

taxpayers with their questions before they file 

their returns prevents inadvertent 

noncompliance and reduces burdensome 

post-filing notices and other correspondence

from the IRS. Taxpayer demand for 

self-service and electronic service options at 

the IRS has dramatically increased in recent 

years. To support this demand, and transition 

taxpayers to less expensive, more efficient 

options, the IRS requests resources to support 

the Treasury Department’s efforts to expand 

the use of electronic transactions including 

new service options such as eTranscripts and 

Online Payment Agreements/Installment 
Agreements that will allow more taxpayers to 

interact with the IRS through the internet. 

Technology enhancements to IRS.gov and 

continued investments in electronic filing 

under the Business Systems Modernization 

(BSM) program have dramatically expanded 

the ways in which taxpayers can reach the 

IRS. In 2012, there were more than 372 

million visits to www.IRS.gov, and more than 

132 million taxpayers checked their refund 

status by accessing the Where’s My Refund?

web application in English or in Spanish on 

the IRS website. Taxpayers also used the

automated features found at 1-800-829-1040.

Business Systems Modernization: IRS 

modernization efforts focus on building and 

deploying advanced information technology 

systems, processes, and tools to improve 

efficiency and productivity. The FY 2014 

request will 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 

taxpayer account data by investing in state-ofthe-art capabilities, such as online taxpayer 

services, that leverage the database 

infrastructure that is now in place. IRS 

processing systems are now accepting virtually 

all 1040 forms electronically, and for the first 

time, feeding those returns through a single, 

consolidated taxpayer account database. The 

next phase, known as Transition State 2, will 

eliminate the risks associated with antiquated 

technologies and programming languages that 

are still used in the current IRS environment.
IRS FY 2014 Budget Highlights

Dollars in Thousands

Appropriation Taxpayer Services Enforcement Operations Support Business Systems

Modernization Total

$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 91,646

FY 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 89,857

FY 2014 Changes to Base:

Non-Recur CR Increase: ($13,807) ($31,633) ($23,584) ($2,021) ($71,045)

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 79,673

Non-Pay Inflation Adjustment 3,114 4,749 38,138 46,001

Efficiency/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 (251) ($37,687) (460) ($84,020) (146) ($31,404) ($162,735) ($9,624) (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 89,000

Program Changes:

Taxpayer Services Initiative: $130,306 1,863 $3,250 32 $43,501 40 $177,057 1,935

 Improve Taxpayer Service and Meet Increased Demand 130,306 1,863 3,250 32 43,501 40 177,057 1,935

Enforcement Initiatives: $38,384 561 $365,224 3,713 $201,675 248 $605,283 4,522

 Implement Foreign Account Tax Compliance Act (FATCA) 19,600 204 15,590 29 35,190 233

 Address International and Offshore Compliance Issues

 

43,311 329 6,043 49,354 329

 Implement Merchant Card and Basis Matching 7,643 153 30,275 370 12,361 13 50,279 536

 Address Impact of Affordable Care Act (ACA) Statutory 

 Requirements 1,124 8 26,084 223 17,212 52 44,420 283

 Improve Identification and Prevention of Refund Fraud 

 and Identity Theft 19,269 236 48,361 538 33,468 76 101,098 850

 Increase Audit Coverage to Address Tax Compliance

 Issues 71,453 773 39,482 24 110,935 797

 Increase Collection Coverage 36,261 573 24,213 60,474 573

 Expand Coverage of High-Wealth Individuals and 

 Enterprises 29,456 242 4,509 33,965 242

 Improve Coverage of Partnerships and Flow-Through

 Entities 39,136 320 5,877 45,013 320

 Build Out Tax Return Preparer Compliance Activities 15,982 124 2,333 18,315 124

 Leverage Data to Improve Case Selection 10,348 164 4,474 10 36,879 53 51,701 227

 Leverage Digital Evidence for Criminal Investigation (CI) 831 7 3,708 1 4,539 8

Infrastructure Initiatives: $348,687 761 $348,687 761

 Implement IT Changes to Deliver Tax Credits and 

 Other Requirements 305,645 722 305,645 722

 Develop New Online Services 24,059 37 24,059 37

 Develop Converged Telecommunication Networks 15,000 15,000

 Expand Virtual Services Delivery (VSD) 3,983 2 3,983 2

Alcohol Tax and Trade Bureau (TTB) Program 

Integrity Transfer: $5,000 $5,000

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

 Tax Enforcement Activities 5,000 5,000

Subtotal FY 2014 Program Changes $168,690 2,424 $373,474 3,745 $593,863 1,049 $1,136,027 7,218

Total 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.
FY 2014 Budget Adjustments

Non-Recurring Costs

Non-Recur CR Increase

-$71,045,000 / 0 FTE

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

CR through March 27, 2013 is non-recurred.

Maintaining Current Level (MCLs)

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.

Efficiency Savings

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 returns) and 

instead choose to e-file. As a result, the IRS 

will need 101 fewer FTE in submission 

processing, generating a savings of 

$5,040,000.

Business Systems Modernization (BSM) 

Savings -$30,000,000 / 0 FTE

This reduction provides an FY 2014 funding 

level of $300,827,000 that is required for the 

IRS to continue modernization of critical 

information technology systems that support 

the nation’s revenue base, including the 

Customer Account Data Engine 2 (CADE 2) 

and Modernized e-File (MeF) programs.

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.

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 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

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, considering such factors as the next 

closest post-of-duty, number of employees 

affected, timing of lease, alteration costs, 

number of vacant workstations, and number of 

field-based employees. As part of this effort, 

the IRS will develop implementation strategies 

to minimize the effect on employees.

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 onetime reinvestment of $37.5 million to 

implement rent reduction and mid-size postof-duty closure projects in FY 2014 and 

reduce future annual rent costs by

$76.7 million from the FY 2012 actual rent 

expenditures. 

Program Increases

Improve Taxpayer Service and Meet Increased 

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

This initiative will provide resources 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.

Implement Foreign Account Tax Compliance 

Act (FATCA) +$35,190,000 / +233 FTE

This initiative 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 will 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.

Address International and Offshore 

Compliance Issues +$49,354,000 / +329 FTE

This initiative 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.

Implement Merchant Card and Basis 

Matching +$50,279,000 / +536 FTE

This initiative will allow the IRS to take 

advantage of the reporting provisions for

merchant payment card and third party 

reimbursements enacted in the Housing and 

Economic Recovery Act of 2008 (Public Law 

110-289); and basis reporting on security sales 

enacted in the Emergency Economic 

Stabilization Act of 2008 (Public Law 110-343). 
These efforts will ensure business and 

individual taxpayers meet their tax obligations;

investigate discrepancies related to payment 

card and securities basis reporting issues; 

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 will 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.

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. 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 new compliance responsibilities 

from the non-exchange related tax law 

changes. 

This initiative will 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.

Improve Identification and Prevention of 

Refund Fraud and Identity Theft 

+$101,098,000 / +850 FTE

This 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 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.

Increase Audit Coverage to Address Tax 

Compliance Issues

+$110,935,000 / +797 FTE

This initiative 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, once 

the new hires reach full potential in FY 2016, 

an ROI of $3.2 to $1.

Increase Collection Coverage

+$60,474,000 / +573 FTE

This initiative will ensure that the IRS has 

sufficient resources to work the collection 

inventory to bring taxpayers who fail to pay 
their tax debt into compliance 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 System (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.

Expand Coverage of High-Wealth Individuals 

and Enterprises +$33,965,000 / +242 FTE

This initiative will continue 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 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.

Improve Coverage of Partnerships and FlowThrough Entities +$45,013,000 / +320 FTE

Partnership businesses continue to be the 

fastest growing segment of all tax returns filed. 

This initiative will increase the identification 

and audit coverage of partnerships and flowthrough entities; increase the number of 

auditors with specialized knowledge in 

partnership law; 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.

Build Out Tax Return Preparer Compliance 

Activities +$18,315,000 / +124 FTE

This initiative 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.

Leverage Data to Improve Case Selection 

+$51,701,000 / +227 FTE

This initiative 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. The IRS will then 

leverage this data through an analytical 

computing and data testing environment 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, 

achieving an ROI of $1.5 to $1.

Leverage Digital Evidence for Criminal 

Investigation (CI) +$4,539,000 / +8 FTE

This initiative will automate current CI 

processes by implementing a virtual digital 

evidence processing environment. This will 

allow CI to expedite and enhance the analysis 

of electronic data by special agents, computer 

investigative specialists, and other 

investigative staff assigned to an investigation.

Implement IT Changes to Deliver Tax Credits 

and Other Requirements

+$305,645,000 / +722 FTE

To implement the new tax law provisions 

contained in the Affordable Care Act (ACA), 

the IRS must invest in new technology 

(infrastructure and applications) and 

significantly modify existing IRS tax 

administration systems. This effort requires 

implementing complex changes to support 

processing of the new premium assistance tax 

credit to help certain individuals afford health 

insurance starting in 2014; the small business 

health care tax credit for employers; the 

individual and employer responsibility

provisions; and the new information reporting 

requirements for federal and state exchanges, 

certain large employers, and insurance issuers. 

The IRS will implement these changes across 

all submission processing, fraud, and 

compliance tax administration systems to 

receive, validate and process individual 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. 

Develop New Online Services

+$24,059,000 / +37 FTE

The funding requested in this initiative will 

allow the IRS to 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 selfservice 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 taxpayer 

services. This includes prevention of improper 

access to taxpayer information and 

development of taxpayer and practitioner selfservice applications that do not exist today 

such as viewable eTranscripts, Power of 

Attorney (POA), and Online Payment 

Agreements/Installment Agreements. 

Develop Converged Telecommunication 

Networks +$15,000,000 / 0 FTE

This initiative 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.

Expand Virtual Services Delivery (VSD) 

+$3,983,000 / +2 FTE

The resources requested in this initiative will 

facilitate the deployment of 100 new VSD 

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 Taxpayer Assistance Centers 

(TACs), Taxpayer Advocate Service (TAS) 

sites, 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.

Transfer to TTB for High-Return on 

Investment (ROI) Tax Enforcement Activities 

+$5,000,000 / 0 FTE

The IRS will transfer $5 million to TTB for 

those high-ROI tax enforcement activities that 

produce additional revenue through program 

activities designated to narrow the Federal 

excise tax gap on alcohol and tobacco 

commodities. More detailed information can 

be found in the TTB FY 2014 Budget in Brief.

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

Legislation

Return on Investment for IRS FY 2014 Cap Adjustment Enforcement Initiatives

Dollars in Millions

Cost Revenue ROI Cost Revenue ROI

Revenue-Producing Enforcement Initiatives Before the Cap Adjustment $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)

Dollars in Millions

Cost Revenue ROI Cost Revenue ROI

Cap Adjustment Revenue-Producing Enforcement Initiatives $322.5 $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 Initiative (which does not have immediately 

measurable ROI, but clear long-term revenue effects)

$22.8 $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) 4.5 0.0 0.0 4.5 0.0 0.0

First Year (FY 2014) Full Performance (FY 2016)
Explanation of Budget Activities

Taxpayer Services

The FY 2014 President’s Budget request is 

$2,412,576,000 in direct appropriations, an 

estimated $21,360,000 from reimbursable

programs, and an estimated $151,242,000

from user fees, for a total operating level of 

$2,585,178,000. This appropriation funds the 

following budget activities.

Pre-filing Taxpayer Assistance & Education

($660,197,000 from direct appropriations, an 

estimated $98,000 from reimbursable 

resources, 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. In addition, funding for 

these programs continues to emphasize 

taxpayer education, outreach, increased 

volunteer support time and locations, and 

enhancing pre-filing taxpayer support through 

electronic media.

Filing & Account Services ($1,752,379,000 

from direct appropriations, an estimated 

$21,262,000 from reimbursable resources, 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. This 

budget activity also provides operating 

resources to administer the advance payment 

feature of the Trade Act of 2002 (Public 

Law 107-210) health insurance tax credit 

program, which assists dislocated workers 

with their health insurance premiums. 

Enforcement

The FY 2014 President’s Budget request is 

$5,666,787,000 in direct appropriations and an 

estimated $65,619,000 from reimbursable 

programs, and an estimated $18,205,000 from 

user fees, for a total operating level of 

$5,750,611,000. 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, 

including a $5,000,000 transfer to TTB for 

high return on investment 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 returns on investment in the form of 

increased tax revenues. This appropriation 

funds the following budget activities.

Investigations ($661,631,000 from direct 

appropriations, and an estimated $58,402,000 

from reimbursable resources)

This budget activity funds the Criminal 

Investigation (CI) programs that explore 

potential criminal and civil violations of tax 

laws; enforce criminal statutes relating to 

violations of tax laws and other financial 

crimes; and recommend prosecution as 

warranted. These programs identify and 

document the movement of both legal and 

illegal sources of income to identify and 

document cases of suspected intent to defraud. 

This budget activity also provides resources 

for international investigations involving U.S. 

citizens residing abroad, non-resident aliens,

and expatriates, and includes investigation and 

prosecution of tax and money-laundering 

violations associated with narcotics 

organizations.

Exam & Collections ($4,842,007,000 from 

direct appropriations, an estimated 

$6,541,000 from reimbursable resources, 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. 

It also includes programs such as specialty tax 

examinations (employment tax, excise tax, and 
estate and gift tax exams), international 

collections, and international examinations. 

The budget activity also provides for campus 

support of the Questionable Refund program 

and appeals and litigation activities associated 

with exam and collection. 

Regulatory ($163,149,000 from direct 

appropriations, an estimated $676,000 from 

reimbursable resources, 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 the IRS on general non-tax legal 

issues such as procurement, personnel, and 

labor relations; enforcement of regulatory 

rules, laws, and approved business practices; 

and support of taxpayers in the areas of 

pre-filing agreements, determination letters, 

and advance pricing agreements. The Return 

Preparer Program is funded within this activity 

in addition to the Office of Professional 

Responsibility, which is responsible for 

identifying, communicating, and enforcing the 

Treasury Circular 230 standards of 

competence, integrity, and conduct of 

professionals representing taxpayers before the 

IRS.

Operations Support

The FY 2014 President’s Budget request is 

$4,480,843,000 in direct appropriations, an 

estimated $23,648,000 from reimbursable 

programs, and an estimated $108,135,000

from user fees, for a total operating level of 

$4,612,626,000. 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 provides 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.

Infrastructure ($939,182,000 from direct 

appropriations, an estimated $1,044,000 from 

reimbursable resources, 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.

Shared Services & Support ($1,305,701,000 

from direct appropriations, an estimated 

$15,806,000 from reimbursable resources, and 

an estimated $31,520,000 from user fees)

This budget activity funds policy management, 

IRS-wide support for research, strategic 

planning, communications and liaison, 

finance, human resources, and equity, 

diversity, and inclusion programs. It also 

funds printing and postage, business systems 

planning, security, corporate training, legal 

services, procurement, and specific employee 

benefits programs.

Information Services ($2,235,960,000 from 

direct appropriations, an estimated 

$6,798,000 from reimbursable resources, 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 tax administration programs. This 

includes the design and operation of security 

controls and disaster recovery planning. This 

budget activity funds the development and 

maintenance of the millions of lines of 

programming code that support all aspects and 

phases of tax processing and the operation and 

administration of the mainframes, servers, 

personal computers, networks, and a variety of 

management information systems.
Business Systems Modernization

The FY 2014 President’s Budget request is 

$300,827,000 in direct appropriations. This 

appropriation funds the following budget 

activity.

Business Systems Modernization

($300,827,000 from direct appropriations)

This budget activity funds the planning and 

capital asset acquisition of information 

technology (IT) to continue the modernization 

of IT systems, including labor and related 

contractual costs. 

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 ten 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 

Administration proposes to expand 

information reporting, improve compliance by 

businesses, strengthen tax administration, and 

expand penalties. The Budget also proposes to 

amend the Balanced Budget and Emergency 

Deficit Control Act of 1985 (BBEDCA), as 

amended, 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 10-year budget window.

IRS Performance by Program

Program Performance Measure FY 2010 FY 2011 FY 2012 FY 2013 FY 2014

Actual Actual Actual Target Target

Taxpayer Services Customer Contacts Resolved Per 

Staff Year 

10,744 12,419 16,320 16,754 17,198

Taxpayer Services Customer Service Representative 

(CSR) Level of Service (%) 

74.0 70.1 67.6 70.0 79.0

Taxpayer Services Percent Individual Returns 

Processed Electronically (%) 

69.3 76.9 80.5 80.0 81.0

Enforcement Automated Collection System 

(ACS) Accuracy (%) 

95.9 94.9 94.7 94.5 94.5

Enforcement Automated Underreporter (AUR) 

Coverage (%) 

3.0 3.3 3.2 2.9 3.1

Enforcement Examination Efficiency - Individual 

(1040) 

140 139 142 145 145

Key: DISC - Discontinued and B - Baseline

Description of Performance

In FY 2012, the IRS continued to provide 

quality service to taxpayers and enforced the 

laws in a balanced manner. The following is a 

summary of significant program performance 

improvements.

Enforcement

Enforcement of the tax laws is an integral part 

of the IRS’s effort to enhance voluntary 

compliance. IRS enforcement activities, such 

as examination and collection, remained a high 

priority. In FY 2012, the IRS maintained its 

international enforcement presence, continued 

efforts to engage with the tax return preparer 
IRS Enforcement Revenue ($ Billions)

48.7

59.2 56.4 48.9

57.6 55.2 50.2

0

20

40

60

FY

2006

FY

2007

FY

2008

FY

2009

FY

2010

FY

2011

FY

2012

In Billions

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 for a total IRS-wide 

ROI of $4.2 to $1. Although enforcement 

collections declined in FY 2012, it should be 

noted that IRS funding was reduced by 

roughly $300 million in that year compared to 

FY 2011.

The IRS has shown progress in FY 2012 in 

several key enforcement programs and, as 

compared with FY 2011, the IRS increased:

 High income audits 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 a total of 

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. 

The IRS continued to implement its Return 

Preparer Program initiative 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 Earned Income Tax Credit 

(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.

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 (TACs), Volunteer Income Tax 

Assistance (VITA) sites, and Tax Counseling 

for the Elderly (TCE) sites. 

IRS delivered a successful 2012 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, a 4.9 percent 

increase; and

 Receiving 80.5 percent of individual 

returns electronically, an increase of 

4.7 percent.

The IRS received more than 118.9 million 

individual tax returns electronically. Filing 

season electronic filing results increased as 

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. 

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.

Business Systems Modernization

IRS modernization efforts focus on building 

and deploying advanced information 

technology systems, processes, and tools to 

improve efficiency and productivity.

FY 2012 successes included:

 Removal from GAO’s High-Risk List. 

After 18 years, in February 2013, GAO 

removed the IRS Business Systems 

Modernization program from its HighRisk List. GAO concluded that the 

IRS had made substantial progress in 

addressing weaknesses over the past 

several years and had demonstrated a 

commitment to sustained progress. 

 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 accounts 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 threeyear 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 

121.3 million in FY 2012.
Dollars in Thousands

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

Program Increases:

Enhance Taxpayer Service to 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

Summary of Proposed FY 2014 Affordable Care Act (ACA) Budget Request

IRS FY 2014 Summary of Proposed Program Integrity Cap Adjustment

1

FY 2012 Enacted represents the approved FY 2012 Operating Plan

.

Dollars in Thousands

Appropriation

$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 91,646

FY 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 89,857

FY 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 79,673

Non-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 the 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 89,000

Program Changes:

Program Increases Before Cap Adjustment: Promote Voluntary Compliance, Implement Legislative Changes, and 

Protect Revenue: $168,690 2,424 $127,570 1,367 $427,777 932 $724,037 4,723

Improve Taxpayer Service and Meet Increased Demand 130,306 1,863 3,250 32 43,501 40 177,057 1,935

Implement Foreign Account Tax Compliance Act (FATCA) 19,600 204 15,590 29 35,190 233

Implement Merchant Card and Basis Matching 7,643 153 30,275 370 12,361 13 50,279 536

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

Improve Identification and Prevention of Refund Fraud and Identity Theft 19,269 236 48,361 538 33,468 76 101,098 850

Leverage Data to Improve Case Selection (Taxpayer Services portion) 10,348 164 10,348 164

Total 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: $240,904 2,378 $123,044 78 $363,948 2,456

Address International and Offshore Compliance Issues 43,311 329 6,043 49,354 329

Increase Audit Coverage to Address Tax Compliance Issues 71,453 773 39,482 24 110,935 797

Increase Collection Coverage 36,261 573 24,213 60,474 573

Expand Coverage of High-Wealth Individuals and Enterprises 29,456 242 4,509 33,965 242

Improve Coverage of Partnerships and Flow-Through Entities 39,136 320 5,877 45,013 320

Build Out Tax Return Preparer Compliance Activities 15,982 124 2,333 18,315 124

Leverage Data to Improve Case Selection 4,474 10 36,879 53 41,353 63

Leverage Digital Evidence for Criminal Investigation (CI) 831 7 3,708 1 4,539 8

Infrastructure Initiatives: $43,042 39 $43,042 39

Develop New Online Services 24,059 37 24,059 37

Develop Converged Telecommunications Networks 15,000 15,000

Expand Virtual Services Delivery (VSD) 3,983 2 3,983 2

Alcohol Tax and Trade Bureau (TTB) Program Integrity Transfer: $5,000 $5,000

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

Activities

5,000 5,000

Subtotal FY 2014 Cap Adjustment $245,904 2,378 $166,086 117 $411,990 2,495

Total 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

Taxpayer Services Enforcement Operations Support Total Business Systems Modernization