INTERNAL REVENUE SERVICE

FY 2012 BUDGET REQUEST

CONGRESSIONAL BUDGET 

 SUBMISSION 

February 14, 2011
 
 

Internal Revenue Service

Mission Statement

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

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

Program Summary by Appropriations Account 

Dollars in Thousands 

FY 2011

Appropriations FY 2010

Internal Revenue Service Enacted1 Request $ Change % 

Taxpayer Services $2,278,830 $2,278,830 $2,345,133 $66,303 2.91%

Enforcement 5,504,000 5,504,000 5,966,619 462,619 8.41%

Operations Support 4,083,884 4,083,884 4,620,526 536,642 13.14%

Business Systems Modernization 263,897 263,897 333,600 69,703 26.41%

Health Insurance Tax Credit Administration 15,512 15,512 18,029 2,517 16.23%

Total Appropriated Resources $12,146,123 $12,146,123 $13,283,907 $1,137,784 9.37%

Offsetting Collections - Reimbursable $137,758 $137,279 $138,272 993 0.72%

Mandatory Appropriation - User Fees $175,529 $204,428 $204,428

Total Program Operating Level $12,459,410 $12,487,830 $13,626,607 $1,138,777 9.12%

Direct FTE 94,766 94,766 99,878 5,112 5.39%

Reimbursable FTE 659 659 659

User Fees FTE 93

Total FTE 95,518 95,425 100,537 5,112 5.36%

1 FY 2010 Enacted represents the approved FY 2010 Operating Plan.

Annualized 

CR Level

FY 2012

FY 2012 Priorities

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

laws. In FY 2010, the IRS collected $2.345 trillion in taxes (gross receipts before tax 

refunds), 93 percent of federal government receipts. To protect the flow of revenue to the 

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

agenda supports and protects the trillions in revenue that come into the Treasury each 

year voluntarily from taxpayers. The enforcement agenda vigorously pursues those who 

evade their responsibility to pay the taxes they owe. The IRS collected $57.6 billion in 

revenue in FY 2010, $8.7 billion, or 18 percent, more than FY 2009. This increase in 

enforcement revenue demonstrates that the substantial investment in the IRS over the past 

two years is producing a significant return on investment. 

In the FY 2012 request, the IRS seeks additional funding for: 

• Taxpayer Service – Improve taxpayer service and the IRS.gov website; 

• Enforcement – Implement legislative mandates, handle new information 

reporting requirements, increase compliance efforts to address offshore tax 

evasion, focus on corporate and high-wealth returns, increase examination and 

collection coverage, and enforce tax return preparer compliance;
 

• Infrastructure – Enhance employee security, develop disaster recovery systems

capability, and develop the information technology, infrastructure, and systems to 

implement the various ACA provisions; and

• Business Systems Modernization – Continue migration of applications to 

CADE 2 and the expansion of Modernized e-File.
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Table of Contents 

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

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

1B – Program History and Future Outlook ............................................................... 7

Section 2 – Budget Adjustments – Internal Revenue Service ..................................... 15

Program Summary by Appropriations Account and Budget Activity .................. 15

2.1 – Budget Adjustments Table ................................................................................ 16

2A – Budget Increases and Decreases Description .................................................. 17

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

Non-Recur Savings................................................................................................ 18

Increase e-File Savings ......................................................................................... 19

Reduce IT Infrastructure ....................................................................................... 19

Reduce Contracts .................................................................................................. 19

Reduce Administrative Expenses .......................................................................... 19

Eliminate Lockbox Fees ........................................................................................ 19

Reduce Certain Mailings ...................................................................................... 20

Reduce Training, Travel and Programs ............................................................... 20

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

Consolidate Submission Processing Site (Atlanta) ............................................... 20

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

Improve Taxpayer Service .................................................................................... 21

Expand Online Options through IRS.gov Improvements ...................................... 23

Increase International Service and Enforcement ................................................. 26

Increase Collection Coverage ............................................................................... 35

Implement Merchant Card and Basis Reporting .................................................. 38

Increase Coverage to Address Tax Law Changes and Other Compliance Issues 41

Ensure Accurate Delivery of Tax Credits ............................................................. 46

Administer New Statutory Reporting Requirements ............................................. 50

Leverage Return Preparer Program to Reduce Noncompliance .......................... 52

Address Appeals Workload Growth ...................................................................... 54

Implement Uncertain Tax Position Reporting Requirements ............................... 56

Enhance Security and Disaster Recovery Systems Capability ............................. 58

Update Integrated Financial System (IFS) ........................................................... 61

Leveraging Data to Improve Compliance............................................................. 63

Enhance Physical Security for Federal Employees .............................................. 64

Implement Individual Coverage Requirement and Employer Responsibility 

Payments ............................................................................................................... 66

Continue Migration from Aging Tax Administration System ............................... 67

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

2.3 – Appropriation Detail Table ............................................................................... 75

2B – Appropriation Language and Explanation of Changes .................................. 76

2C – Legislative Proposals.......................................................................................... 80
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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

3.2.1 – Budget and Performance Plan ....................................................................... 86

3B – Filing and Account Services ............................................................................ 88

3.2.2 – Budget and Performance Plan ....................................................................... 90

Enforcement ................................................................................................................ 92

2.1 – Budget Adjustments Table ............................................................................... 93

2.2 – Operating Levels Table .................................................................................... 94

2.3 – Appropriation Detail Table .............................................................................. 95

3C – Investigations ................................................................................................... 95

3.2.3 – Budget and Performance Plan ....................................................................... 96

3D – Exam and Collections ...................................................................................... 97

3.2.4 – Budget and Performance Plan ..................................................................... 100

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

3.2.5 – Budget and Performance Plan ..................................................................... 104

Operations Support .................................................................................................. 106

2.1 – Budget Adjustments Table ............................................................................. 107

2.2 – Operating Levels Table .................................................................................. 108

2.3 – Appropriation Detail Table ............................................................................ 109

3F – Infrastructure................................................................................................... 109

3.2.6 – Budget and Performance Plan ..................................................................... 110

3G – Shared Services and Support.......................................................................... 111

3.2.7 – Budget and Performance Plan ..................................................................... 113

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

3.2.8 – Budget and Performance Plan ..................................................................... 118

Business Systems Modernization ............................................................................. 120

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

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

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

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

3.2.9 – Budget and Performance Plan ..................................................................... 128

Health Insurance Tax Credit Administration ........................................................ 130

2.1 – Budget Adjustments Table ............................................................................. 131

2.2 – Operating Levels Table .................................................................................. 132

2.3 – Appropriation Detail Table ............................................................................ 133

3J – Health Insurance Tax Credit Administration .................................................. 133

3.2.10 – Budget and Performance Plan ................................................................... 133
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Section 4 – Supporting Materials ................................................................................ 135

4A – Human Capital Strategy .................................................................................. 135

4B – Information Technology (IT) Strategy ........................................................... 145

4C – Government Wide Initiatives .......................................................................... 150

4D – Summary of FY 2010 Savings Realized ......................................................... 152

4.1 – Summary of IT Resources Table .................................................................... 154

4.3 – IRS Performance Measure Table ................................................................... 156

4.4 – Cost of IRS Operating Activities .................................................................... 158

4.5 – Summary of IRS FY 2012 Budget Request ................................................... 159
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Section 1 – Purpose

1A – Description of Bureau Vision and Priorities

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

Department of the Treasury Strategic Plan and High Priority Performance Goals. The 

IRS Strategic Plan recognizes the increasing complexity of tax laws, changing business 

models, expanding use of electronic data and related security risks, accelerating growth in 

international tax activities, and growing human capital challenges. 

The IRS Strategic Plan goals and objectives are: 

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

• Incorporate taxpayer perspectives to improve all service interactions; 

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

making it easier to navigate the IRS;

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

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

parties to ensure effective tax administration.

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

• Enforce the law proactively in a timely manner while respecting taxpayer rights 

and minimizing taxpayer burden; 

• Expand enforcement approaches and tools; 

• Meet the challenges of international tax administration;

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

emerging high-risk areas;

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

IRS Strategic Goals 

Improve Service to Make Voluntary Compliance Easier 

Enforce the Law to Ensure Everyone Meets Their Obligation to Pay Taxes
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• Ensure that all tax practitioners, tax preparers, and other third parties in the tax 

system adhere to professional standards and follow the law. 

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

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

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

to improve IRS efficiency and productivity; 

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

allocate resources; and 

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

Treasury High Priority Performance Goals

The IRS budget request includes resources to achieve the following Treasury High 

Priority Performance Goals. 

Increase voluntary tax compliance 

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

enforcement of the tax laws:

o Achieve 4.5 million document matching closures in FY 2012 (where IRS 

information does not match taxpayer reported information); and

o Achieve 80 percent of individual taxpayers receiving refunds on a 5-day 

cycle in the new Customer Account Engine database in FY 2012. 

• Assist Americans in voluntarily meeting their tax obligations:

o Achieve individual income tax filers’ American Customer Satisfaction 

Index score of 70 percent; and 

o Improve telephone level of service to 80 percent by the end of FY 2012. 

Significantly increase the number of paperless transactions with the public

• Achieve individual e-File rate of 76 percent and report performance. 
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FY 2012 Budget Request

The IRS FY 2012 President’s Budget request is $13,283.9 million, $1,137.8 million, 

9.37 percent, more than the FY 2010 enacted level. 

Appropriation Account ($ in Millions)

Taxpayer Services $2,345.1

Enforcement 5,966.6

Operations Support 4,620.6

Business Systems Modernization 333.6

Health Insurance Tax Credit Administration 18.0

Total Appropriated Resources $13,283.9

The $1,137.8 million increase consists of:

• +$299.0 million for changes to the base:

o +$401.7 million adjustment to reach the FY 2011 President’s policy level; 

o +$85.7 million to fund the non-pay inflation adjustment and retirement 

contribution; 

o -$189.9 million for efficiency savings and non-recur activities; and

o +$1.5 million for a submission processing consolidation reinvestment. 

• +$838.8 million for program changes: 

o +$114.3 million to improve taxpayer service and the IRS.gov website; 

o +$605.7 million to implement legislative mandates, handle new 

information reporting requirements; increase compliance efforts to address 

offshore tax evasion, focus on corporate and high-wealth returns, increase 

examination and collection coverage, enforce tax return preparer 

compliance, and address workload growth in Appeals and Counsel; and

o +$118.8 million to enhance employee security, develop disaster recovery 

systems capability, and develop the information technology, infrastructure, 

and systems to implement the various Affordable Care Act (ACA)

provisions. 

Reducing the Tax Gap

Recent investments in IRS enforcement programs have yielded significant increases in 

enforcement revenue. Enforcement revenue was $57.6 billion in FY 2010 for a total 

IRS-wide return on investment (ROI) of 4.7 to 1. The return on investment 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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TAX GAP MAP for Tax Year 2001 (in $ Billions)

* IRS will continue to collect late payments 

for TY01 for years to come. This category 

includes tax paid late by taxpayers 

without IRS enforcement action. For 

comparison, $24.3B of tax was collected 

solely through enforcement in FY2001.

† Updated using Census tabulations

# No estimates available

Actual Amounts 

Reasonable Estimates

Weaker Estimates

Certainty of the Estimates

Estimates in Bold Boxes 

Have Been Updated 

Based on Detailed TY01 

NRP Results

Nonfiling †

$27

Individual

Income Tax †

$25

Corporation

Income Tax

#

Employment

Tax

#

Excise

Tax

#

Estate

Tax

$2

Underpayment

$33.3

Individual

Income Tax

$23.4

Corporation

Income Tax

$2.3

Employment

Tax

$5.0

Estate

Tax

$2.1

Excise

Tax

$0.5

Tax Paid Voluntarily & Timely

$1,767

(Voluntary Compliance Rate: VCR = 83.7%)

Gross Tax Gap: $345

(Noncompliance Rate: NCR = 16.3%)

Total Tax

Liability

$2,112

FICA

$14

Unemployment

Tax

$1 

Individual

Income Tax

$197

Non-Business

Income

$30.6

Business

Income

$65.3 

Corporation

Income Tax

$30

Estate

Tax

$4

Excise

Tax

#

Business

Income

$109

Large 

Corporations 

(Over $10M)

$25

Self-Employment

Tax

$39

Non-Business

Income

$56

Small 

Corporations

(Under $10M)

$5

Credits

$17

Adjustments,

Deductions,

Exemptions

$15

Underreporting

$285

Employment

Tax

$54

Enforced

& Other Late 

Payments

$55 *

Net Tax Gap

(Tax Not Collected)

$290

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

* IRS will continue to collect late payments 

for TY01 for years to come. This category 

includes tax paid late by taxpayers 

without IRS enforcement action. For 

comparison, $24.3B of tax was collected 

solely through enforcement in FY2001.

† Updated using Census tabulations

# No estimates available

Actual Amounts 

Reasonable Estimates

Weaker Estimates

Certainty of the Estimates

* IRS will continue to collect late payments 

for TY01 for years to come. This category 

includes tax paid late by taxpayers 

without IRS enforcement action. For 

comparison, $24.3B of tax was collected 

solely through enforcement in FY2001.

† Updated using Census tabulations

# No estimates available

Actual Amounts 

Reasonable Estimates

Weaker Estimates

Certainty of the Estimates

Estimates in Bold Boxes 

Have Been Updated 

Based on Detailed TY01 

NRP Results

Nonfiling †

$27

Individual

Income Tax †

$25

Corporation

Income Tax

#

Employment

Tax

#

Excise

Tax

#

Estate

Tax

$2

Nonfiling †

$27

Individual

Income Tax †

$25

Corporation

Income Tax

#

Employment

Tax

#

Excise

Tax

#

Estate

Tax

$2

Underpayment

$33.3

Individual

Income Tax

$23.4

Corporation

Income Tax

$2.3

Employment

Tax

$5.0

Estate

Tax

$2.1

Excise

Tax

$0.5

Underpayment

$33.3

Individual

Income Tax

$23.4

Corporation

Income Tax

$2.3

Employment

Tax

$5.0

Estate

Tax

$2.1

Excise

Tax

$0.5

Tax Paid Voluntarily & Timely

$1,767

(Voluntary Compliance Rate: VCR = 83.7%)

Gross Tax Gap: $345

(Noncompliance Rate: NCR = 16.3%)

Total Tax

Liability

$2,112

FICA

$14

Unemployment

Tax

$1 

Individual

Income Tax

$197

Non-Business

Income

$30.6

Business

Income

$65.3 

Corporation

Income Tax

$30

Estate

Tax

$4

Excise

Tax

#

Business

Income

$109

Large 

Corporations 

(Over $10M)

$25

Self-Employment

Tax

$39

Non-Business

Income

$56

Small 

Corporations

(Under $10M)

$5

Credits

$17

Adjustments,

Deductions,

Exemptions

$15

Underreporting

$285

Employment

Tax

$54

FICA

$14

Unemployment

Tax

$1 

Individual

Income Tax

$197

Non-Business

Income

$30.6

Business

Income

$65.3 

Corporation

Income Tax

$30

Estate

Tax

$4

Excise

Tax

#

Business

Income

$109

Large 

Corporations 

(Over $10M)

$25

Self-Employment

Tax

$39

Non-Business

Income

$56

Small 

Corporations

(Under $10M)

$5

Credits

$17

Adjustments,

Deductions,

Exemptions

$15

Underreporting

$285

Employment

Tax

$54

Enforced

& Other Late 

Payments

$55 *

Net Tax Gap

(Tax Not Collected)

$290

Enforced

& Other Late 

Payments

$55 *

Net Tax Gap

(Tax Not Collected)

$290

Enforced

& Other Late 

Payments

$55 *

Net Tax Gap

(Tax Not Collected)

$290

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

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

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

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

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

gap of $290 billion. 

As a result of an increase in funding included in the IRS FY 2009 budget, the Department 

of the Treasury and the IRS have initiated intensive efforts to update the estimate of the 

tax gap on an ongoing basis, which will permit more regular and effective assessments. 

Starting in 2011, ongoing updates of the tax gap estimate will form the basis for assessing 

progress towards that goal on a regular basis. 

The three components of the tax gap are:

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

• Nonfiling – Not filing required returns on time; and 

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

return.
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Underreporting tax liability ($285 billion) comprises 

82 percent of the gross tax gap ($345 billion). The 

remainder is almost evenly divided between 

nonfiling ($27 billion, 8 percent) and underpaying 

($33 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, non-profit organizations, and processed more 

than 230 million tax returns in 2010. The system of voluntary tax compliance requires 

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

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

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

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

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

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

differing legal interpretations, unexpected personal emergencies, and temporary 

cash-flow problems. 

Taxpayer Service

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

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

returns prevents inadvertent noncompliance and reduces burdensome post-filing notices 

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

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

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

toll-free call centers, IRS.gov, Taxpayer Assistance Centers (TAC), Volunteer Income 

Tax Assistance (VITA) sites, and Tax Counseling for the Elderly (TCE) sites. Many of 

these sites provide information in Spanish as well as in English. 

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

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

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

amount of tax. The IRS remains committed to improving voluntary compliance and 

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

Enforcement

Vigorous enforcement encourages voluntary compliance for those taxpayers who seek to 

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

resources for IRS compliance programs yield direct, measurable results through high 

return on investment activities. As shown in the table below, the proposed IRS FY 2012 

Underreporting

82%

Underpayment

10%

Nonfiling

8%
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enforcement initiatives will generate $1,332.1 million annually, an ROI of 6.4 to 1, in 

additional annual enforcement revenue once the new hires reach full potential in 

FY 2014. 

Return on Investment for FY 2012 Enforcement Initiatives

Dollars in Millions

FY 2012 Enforcement Investment1 Cost Revenue ROI Cost Revenue ROI

All Enforcement Initiatives $339.3 $646.2 1.9 $296.4 $1,332.1 4.5

Direct Revenue Producing Program Integrity Initiatives $243.8 $646.2 2.7 $207.8 $1,332.1 6.4

Increase International Service and Enforcement 72.6 234.0 3.2 57.1 467.1 8.2

Increase Collection Coverage 52.0 177.3 3.4 45.2 398.3 8.8

Implement Merchant Card and Basis Reporting 35.8 72.4 2.0 30.8 185.7 6.0

Increase Coverage to Address Tax Law Changes and Other Compliance Issues 29.8 42.7 1.4 27.3 80.8 3.0

Ensure Accurate Delivery of Tax Credits 51.0 110.2 2.2 45.0 183.3 4.1

Administer New Statutory Reporting Requirements 2.6 9.6 3.7 2.4 16.9 7.0

Other Enforcement Initiatives $95.5 $0.0 0.0 $88.6 $0.0 0.0

Increase Coverage to Address Tax Law Changes and Other Compliance Issues 24.5 0.0 0.0 23.2 0.0 0.0

Ensure Accurate Delivery of Tax Credits 33.6 0.0 0.0 33.5 0.0 0.0

Administer New Statutory Reporting Requirements 7.6 0.0 0.0 7.5 0.0 0.0

Leverage Return Preparer Program to Reduce Noncompliance 16.6 0.0 0.0 12.6 0.0 0.0

Address Appeals Workload Growth 9.1 0.0 0.0 7.9 0.0 0.0

Implement Uncertain Tax Position Reporting Requirements 4.1 0.0 0.0 3.9 0.0 0.0

First Year (FY 2012) Full Performance (FY 2014)

1

For the purpose of ROI calculation, capital IT expenses related to the IRS implementation of ACA have been excluded.

The Affordable Care Act (ACA): The FY 2012 request includes funding for ACA 

(Public Law 111-148) to administer a premium credit to subsidize the cost of health 

insurance for Americans who do not have access to affordable coverage; a small business 

tax credit to encourage employers to provide health insurance coverage for their 

employees; new information reporting and sharing requirements; an excise tax on tanning 

services; a new aggregate annual fee on businesses engaged in manufacturing and 

importing branded prescription drugs sold to specified government programs; new 

reporting requirements for tax-exempt hospitals; and an individual coverage requirement 

for employees who can afford health insurance, but fail to obtain minimum essential 

coverage. These and other provisions of the ACA will require additional resources to 

build new IT systems; modify existing tax processing systems; provide taxpayer outreach 

and assistance services; make enhancements to notices, collections, and case management 

systems to address and resolve taxpayer issues timely and accurately; and conduct 

focused examinations to encourage compliance. While these activities are spread across 

the three primary IRS appropriations, the vast majority of the funding request is in the 

Operations Support account that funds information technology and infrastructure. 

Further information is provided in Section 2A, Budget Increases and Decreases 

Description. 
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1B – Program History and Future Outlook 

The IRS administers America’s tax laws and collects 93 percent of the revenues that fund 

most government operations and public services. Performance in FY 2010 confirms that 

the IRS is making significant progress in achieving its goals of providing service to 

taxpayers and enforcing the tax laws in a balanced manner while continuing to make 

steady gains in better serving America’s taxpayers.

Taxpayer Service 

The IRS website has become the preferred source of information for millions of 

taxpayers to get answers to their tax questions, to questions about economic recovery 

legislation, and about how to prepare and file a federal tax return accurately and on time. 

IRS.gov/Español offers many of the same services and information in Spanish. 

To improve service to taxpayers during the 2010 filing season, the IRS enhanced IRS.gov 

by providing a rotating spotlight feature on the front page. The spotlight, which changes 

every few seconds, highlights important taxpayer information by identifying how tax law 

changes such as the Making Work Pay and First-Time Homebuyer Credit can benefit 

different types of taxpayers; and how to access on-line applications such as Where’s My 

Refund?, an online tool for taxpayers to check on the status of their refund, and What If?, 

a list of questions and answers to assist taxpayers who are having difficult times

financially handle various scenarios related to payment of taxes and other financial 

problems. In 2010, there were 304.8 million visits to the website and more than 

66.9 million taxpayers accessed the popular application, Where’s My Refund?, to find out 

the status and anticipated receipt of their tax refund. Taxpayers also can use electronic 

tools such as the EITC Assistant to determine if they qualify for the refundable tax credit. 

The IRS also is committed to continuing efforts to redesign IRS correspondence to improve 

clarity, accuracy, and effectiveness. In FY 2010, the IRS: 

• Completed the redesign of 115 notices (25 in Spanish) to provide clear and simple 

explanations of the notice purpose and required taxpayer actions; 

• Redesigned the area of IRS.gov that provides information on locating specific 

notices and an explanation of the redesign process; and

• Released the first group of nine new notices. These notices account for 

approximately two million pieces of correspondence with individuals, businesses 

and exempt organizations.

The IRS completed a successful 2010 filing season, rising to challenges posed by the 

implementation of provisions in the American Reinvestment and Recovery Act of 2009 

(Recovery Act), the Worker, Homeownership, and Business Assistance Act of 2009 

(WHBAA), and increased telephone demand for Economic Recovery Payment inquiries. 

The IRS received more than 141.9 million individual returns, of which 69.3 percent were 

e-filed. The number of taxpayers e-filing their returns from a home computer continued 
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to grow. More than 34.6 million taxpayers prepared their own e-file return, a 7.5 percent 

increase over 2009. 

The IRS issued 109.5 million refunds to individual taxpayers totaling $366 billion. The 

average dollar refund was $3,048 compared to $2,682 in 2009, an increase of almost 

14 percent. IRS also direct-deposited more than 73 million refunds compared to 

72.4 million in 2009. 

Beginning in the 2010 filing season, taxpayers could purchase up to $5,000 of Series I 

U.S. Savings Bonds using their federal tax refund. More than 22,300 taxpayers took 

advantage of this opportunity, requesting more than 98,000 bonds totaling approximately 

$11.1 million. 

In FY 2010, the IRS expanded outreach and educational services to improve information, 

news, and taxpayer interaction through social media networks (Facebook, Twitter, 

YouTube, etc.). For the first time, the IRS produced a number of podcasts that were 

available on IRS.gov and iTunes. In addition, the IRS created more than a dozen 

YouTube videos on a variety of subjects including the Education Tax Credit, Making 

Work Pay, and the New Homebuyer Credit. These videos attracted more than 

963,800 upload views and were available in English, American Sign Language, and 

Spanish. 

As always, providing high-quality, toll-free telephone service is important in helping 

taxpayers navigate the complex tax code. IRS telephone assistors answered 36.7 million 

calls, 6.3 percent fewer than in 2009 while at the same time the IRS received 35.1 million

automated calls, 21 percent more than in 2009, reflecting the growing taxpayer demand 

for self-service options. Telephone level of service (LOS) increased to 74 percent from 

the FY 2009 LOS of 70 percent. This reflects the success rate of taxpayers who call the 

IRS for live telephone assistance on the 1-800 help lines. In 2010, the IRS added an 

estimated wait time feature so taxpayers could make informed choices about whether to 

wait for a live assistor or use another service channel (i.e., self-assisted automated 

telephone services or IRS.gov) to answer their questions. Accuracy rates for both 

customer tax law and account questions remain above 92 percent. 

The IRS also provides in-person service at its Taxpayer Assistance Centers (TACs), for 

taxpayers to resolve tax issues and receive help to prepare their tax returns. Approximately 

6.4 million taxpayers visited a TAC, three percent more than in 2009. Walk-in service 

remains popular among elderly taxpayers, those with limited English and computer 

proficiency, and taxpayers without internet access. 

During the 2010 filing season, the IRS expanded hours of service at 16 geographically 

dispersed TACs, and seven were open every Saturday. In 27 locations, low-income 

taxpayers took advantage of IRS help in the preparation of both their state and federal tax 

returns. The IRS held Open House events at 200 TACs and partner sites nationwide to 

help taxpayers prepare their returns and resolve their tax issues. As a result, more than 

31,400 taxpayers were served and over 7,700 returns were prepared at these events. 
IRS-9 

37.6

43.1

47.3

48.7

59.2

56.4

48.9

 57.6

9.8 10.2 10.2 10.6 10.6 10.9

11.5

12.1

9.6 9.7 9.5 9.5 9.3 9.3 9.6

10.4

0

10

20

30

40

50

60

Revenue (in Billions)

0

5

10

15

20

25

30

Appropriations (in Billions)

TOTAL Enforcement Revenue Appropriated Adjusted for Inflation

FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010

ROI 3.80 4.20 4.60 4.60 5.60 5.20 4.20 4.70

Enforcement 

In FY 2010, revenue from all enforcement sources reached $57.6 billion, 18 percent more 

than in FY 2009. This increase in enforcement revenue demonstrates that the investment 

in the IRS over the past two years is producing a significant return. 

 

In FY 2010 the IRS expanded its enforcement presence in the international field, 

continued to pursue high-wealth/high-income noncompliant taxpayers, and audited more 

charities and other tax-exempt organizations. As a result, the IRS made improvements 

compared with FY 2009 in these key areas: 

• Examined more than 1.58 million individual returns, an increase of 11 percent, 

reaching the highest rate in the past decade;

• Increased high-income/high-wealth audits on taxpayers with income greater 

than $200,000 by 5.5 percent and audits for those with income greater than

$1 million by more than 8 percent;

• Increased automated underreporter contact closures by 19.8 percent, surpassing 

the four million mark for the first time, with more than 4.3 million; 

• Increased collection case closures by 6.3 percent and criminal investigations by 

12.4 percent; 
IRS-10 

• Increased large corporate audits by 8.1 percent, a significant achievement given 

the size (assets greater than $10 million) and complexity of these corporate 

entities and audits of foreign corporations by almost 48 percent; and 

• Increased tax exempt and government entities compliance contacts by roughly 

20 percent.

As part of an overall strategy to improve offshore compliance, in FY 2010 the IRS 

continued to take aggressive steps to track tax evaders that hide their wealth by engaging 

in offshore tax evasion schemes. The IRS realigned and renamed its Large and Mid-Size 

Business Division to Large Business and International as part of its continuing strategy to 

improve international tax administration. The organizational realignment will allow the

IRS to focus its expertise on the most pressing international issues. In addition, the IRS

more than doubled its offshore presence by opening new offices in Asia and Central 

America, placed additional law enforcement personnel at its existing offices throughout 

the world, and expanded its interaction with key international organizations involved in 

tax and financial law compliance. All of these steps are designed to develop new leads in 

ongoing criminal tax and financial crime investigations. 

Other notable accomplishments include: 

• Expanding international presence and coordination with treaty partners and 

international organizations to improve offshore compliance; 

• Establishing a global illicit financial unit to identify and investigate large 

multinational tax and financial crime cases generally perpetrated by organized 

crime syndicates; and 

• Identifying and examining 17,888 foreign resident tax returns with tax 

deficiencies totaling more than $1.64 billion. 

In addition, the IRS Voluntary Disclosure Program (VDP) provided information on banks 

and professionals, including foreign professionals, who facilitate tax evasion. More than 

15,000 Americans with offshore accounts, some holding hundreds of millions of dollars, 

came forward during a voluntary disclosure period that ended in October 2009 to disclose 

information, bringing them back into the U.S. tax system. An additional 3,000 

Americans came forward with accounts at various banks since October 2009, with the 

total disclosures over the period expected to reach 20,000. In FY 2010, the IRS began 

reviewing the information from program participants to identify financial institutions, 

advisors, and others who promoted or otherwise helped Americans hide assets and 

income offshore. 

The IRS continues to ensure that the largest corporate taxpayers are in compliance using 

strategies that are less time and resource intensive. The Compliance Assurance Process 

(CAP) program resolves issues early and ensures the filing of accurate returns. The CAP 

program allows taxpayers who identify their tax issues to get certainty with respect to 

their tax obligations at the time the return is filed, rather than waiting for the IRS to 

examine issues during an audit. In FY 2010, participation increased to 112 corporate 
IRS-11 

taxpayers, with all 102 from 2009 returning. The IRS plans to issue guidance that will 

make CAP permanent and available to a greater number of taxpayers. 

Research improves service to taxpayers and helps in the development of better ways to 

identify noncompliance and reduce the tax gap. The FY 2010 National Research 

Program (NRP) included a study to assess the reporting compliance of employment taxes. 

The study spanned three tax years, from 2008 through 2010, examining approximately 

2,200 randomly-selected taxpayers each year. The new study complements the ongoing 

study of individual reporting compliance. 

Beginning in FY 2010, the IRS launched a number of important changes to its oversight 

of the tax return preparer community to improve tax administration and tax compliance. 

The IRS and external stakeholders agree that setting higher standards for the tax return 

preparer community will significantly enhance protections and services for taxpayers, 

increase confidence in the tax system and result in greater compliance with the tax laws.

Important changes included: 

• Requiring registration and the assignment of a preparer tax identification number 

(PTIN) for all paid tax return preparers (through December 31, 2010, more than

523,000 return preparers received PTINs utilizing the new application system); 

• Establishing mandatory testing and continuing education for paid tax return 

preparers who are not an attorney, certified public accountant, or enrolled agent; 

• Developing a public database so that the public can ensure that their tax return 

preparer is registered with the IRS; and

• Making all return preparers subject to the ethical standards of Treasury 

Circular 230 and subject to discipline by the IRS.

Business System Modernization

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

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

highlights IRS accomplishments: 

• Customer Account Data Engine (CADE) posted more than 41.2 million returns, 

generated more than 35.8 million refunds and, for the first time, accepted more 

than seven million payments submitted with taxpayer returns. In FY 2010, the 

IRS revised its CADE strategy to implement a new taxpayer account database for 

the 2012 filing season. This new database will accelerate the refund processing 

time for most taxpayers.

• Modernized e-File (MeF) deployed an additional release that allowed for the 

acceptance of Form 1040 and 22 supporting forms and schedules. This new 

functionality is designed to reach 61 percent of the e-File population, or 

approximately 55.1 million filers. 
IRS-12 

• Account Management Services (AMS) final release provided IRS employees with 

the ability to view taxpayer correspondence images online and on demand, 

eliminating reliance on a manual process to obtain copies of images. This direct 

access reduced the case cycle time from 10 to 14 days to zero. 

Future Outlook 

In FY 2012, the IRS will continue to seek less costly ways of improving taxpayer service 

and bolstering enforcement. 

The service and enforcement agenda supports the Administration’s goals to reduce the 

federal deficit by increasing tax receipts. Delivering cost-effective and efficient services 

to meet taxpayer demands within a constrained budget environment will continue to be a 

challenge for the IRS. With this in mind, the IRS will focus efforts on the following 

priorities in FY 2012. 

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

where an increasing percentage of taxpayers find the help they need. 

Assisting taxpayers with their tax questions before they file prevents inadvertent 

noncompliance and reduces burdensome post-filing notices and other correspondence 

from the IRS. In FY 2012, the IRS plans to increase level of service by adding resources 

to meet the ever-increasing demand and continuing to make efficiency improvements 

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

less complex issues such as refund inquiries. These improvements will free up staff to 

deal with the more complex tax law issues stemming from the passage of new legislation. 

In addition, the IRS continues to study the effects of services it offers to taxpayers on the 

internet, at walk-in sites, and on its toll-free telephone lines as well as exploring the 

relationships between taxpayer errors and unclear correspondence to aid in the 

development of new approaches to service.

Provisions that become effective in later years, when new options for buying health 

insurance through state-sponsored exchanges go into effect, place significant new 

administrative responsibilities on the IRS that require the design and development of new 

IT systems and business processes along with substantial coordination with other federal 

and state entities.

Enforcement – Implement legislative mandates, handle new information reporting 

requirements, increase compliance efforts to address offshore tax evasion, focus on 

corporate and high-wealth returns, increase examination and collection coverage, develop 

initiatives to improve issue resolution with large business taxpayers, and enforce tax 

return preparer compliance. 

In FY 2012, the IRS will implement changes required by enactment of various legislative 

mandates such as the Foreign Account Tax Compliance Act (FATCA) included in the 

Hiring to Restore Employment (HIRE) Act of 2010 (Public Law 111-147), the merchant 

payment card and third party reimbursements enacted in the Housing and Economic 
IRS-13 

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 

legislative mandates include new information reporting requirements for individuals and 

businesses.

The IRS will continue to invest in strong compliance programs, including robust 

international enforcement initiatives to address offshore tax evasion. Enforcement 

initiatives will address underreporting of income associated with international activities 

and expand enforcement efforts on noncompliance among corporate and high-wealth 

taxpayers and the complex business enterprises they control (including corporations, 

partnerships, and trusts). The IRS will use audit results and intelligence from ongoing 

offshore initiatives to refine case identification and selection methods to identify 

promoters, facilitators, and participants in abusive offshore arrangements.

The IRS also will improve the way compliance risks are identified and addressed in large, 

complex global businesses and high-wealth individuals. 

In addition, the IRS will continue to pursue other important initiatives, such as the CAP 

program, industry issue resolution projects, and fast track settlements, aimed at earlier 

and speedier issue resolution and greater efficiency and certainty. These initiatives are a 

major part of the overall retooling of IRS’s relationships with large corporate taxpayers. 

The IRS will continue to implement the recommendations of the Tax Return Preparer 

Strategy by addressing the challenges associated with the implementation of registration, 

continuing education, and testing requirements for tax return preparers that are scheduled 

to go into effect in FY 2011. The IRS took a major step forward in launching the new 

PTIN online registration process. The process gives the IRS an important and improved 

line of sight into the return preparer community. The IRS will use the information to 

analyze trends, spot anomalies, and potentially detect fraud. In addition, the IRS will 

continue to develop and implement legislation to increase electronic filing among 

the paid preparer community. 

Business Systems Modernization – Continue the development of the new taxpayer 

account database. 

Data and technology are central to the future of tax administration. For the 2012 filing 

season, the IRS will complete the new taxpayer account database and continue to make 

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

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

of individual taxpayers. It is also a prerequisite for other major initiatives, such as 

expansion of online paperless services. The ability of the IRS to support increasingly 

complex taxpayer service and compliance initiatives will be severely limited until the 

new taxpayer account database is completed. 
IRS-14 

Implement the Affordable Care (ACA) Act.

Implementation of the Affordable Care Act (ACA) of 2010 presents a major challenge to 

the IRS. ACA represents the largest set of tax law changes in more than 20 years, with 

more than 40 provisions that amend the tax laws. Although the new law goes into effect 

gradually over many years, many provisions required immediate action, including the 

Small Business Health Care Tax Credit, the Qualifying Therapeutic Discovery Credit, 

and the expanded Adoption Credit. 

To enact the range of provisions that were retroactive to 2009 and immediately effective 

for calendar year 2010, the IRS focused on: developing new systems and business 

processes for near-term provisions; conducting initial planning for longer-term 

provisions; and defining appropriate outreach activities for each affected group. 
IRS-15 

Section 2 – Budget Adjustments – Internal Revenue Service

The IRS Budget Request for FY 2012 is $13,283,907,000 in direct appropriations and 

99,878 FTE. This is an increase of $1,137,784 or 9.37 percent and 5,112 FTE more than 

the FY 2010 enacted level of $12,146,123,000 and 94,766 FTE.

Program Summary by Appropriations Account and Budget Activity 

Dollars in Thousands 

FY 2011

Appropriations / Budget Activity FY 2010

Internal Revenue Service Enacted1 Request $ Change % Change 

Taxpayer Services $2,278,830 $2,278,830 $2,345,133 $66,303 2.91%

 Pre-filing Taxpayer Assistance and Education 679,924 679,924 701,035 21,111 3.10%

 Filing and Account Services 1,598,906 1,598,906 1,644,098 45,192 2.83%

Enforcement $5,504,000 $5,504,000 $5,966,619 $462,619 8.41%

 Investigations 639,363 639,363 678,849 39,486 6.18%

 Exam and Collections 4,700,345 4,700,345 5,103,420 403,075 8.58%

 Regulatory 164,292 164,292 184,350 20,058 12.21%

Operations Support $4,083,884 $4,083,884 $4,620,526 $536,642 13.14%

 Infrastructure 895,202 895,202 986,045 90,843 10.15%

 Shared Services and Support 1,311,127 1,311,127 1,313,050 1,923 0.15%

 Information Services 1,877,555 1,877,555 2,321,431 443,876 23.64%

Business Systems Modernization $263,897 $263,897 $333,600 $69,703 26.41%

Health Insurance Tax Credit Administration $15,512 $15,512 $18,029 $2,517 16.23%

Total Appropriated Resources $12,146,123 $12,146,123 $13,283,907 $1,137,784 9.37%

Offsetting Collections - Reimbursable $137,758 $137,279 $138,272 $993 0.72%

Mandatory Appropriation - User Fees $175,529 $204,428 $204,428

Total Program Operating Level $12,459,410 $12,487,830 $13,626,607 $1,138,777 9.12%

Direct FTE 94,766 94,766 99,878 5,112 5.39%

Reimbursable FTE 659 659 659

User Fees FTE 93

Total FTE 95,518 95,425 100,537 5,112 5.36% 1 FY 2010 Enacted represents the approved FY 2010 Operating Plan.

Annualized 

CR Level

FY 2012

 
IRS-16 

2.1 – Budget Adjustments Table

 Dollars in Thousands 

Internal Revenue Service 

FTE Amount

FY 2010 Enacted Budget1 94,766 $12,146,123

FY 2011 Annualized CR Level 94,766 $12,146,123

Changes to Base:

Adjustment to Reach FY 2011 President's Policy Level 1,653 $401,665

Maintaining Current Levels $85,754

Other Adjustments 501

Technical FTE Adjustments 501

Efficiencies/Savings (523) ($189,957)

Non-Recur Savings (22,090)

Increase e-File Savings (416) (22,444)

Reduce IT Infrastructure (75,000)

Reduce Contracts (20,754)

Reduce Administrative Expenses (66) (14,331)

Eliminate Lockbox Fees (4,000)

Reduce Certain Mailings (4,000)

Reduce Training, Travel and Programs (41) (27,338)

Reinvestment $1,486

Consolidate Submission Processing Site (Atlanta) 1,486

Subtotal Changes to Base 1,631 $298,948

Total FY 2012 Base 96,397 $12,445,071

Program Changes:

Program Increases:

Taxpayer Service Initiatives 534 $114,307

Improve Taxpayer Service 519 81,307

Expand Online Options through IRS.gov Improvements 15 33,000

Enforcement Initiatives 2,917 $605,671

Increase International Service and Enforcement 377 72,596

Increase Collection Coverage 413 52,000

Implement Merchant Card and Basis Reporting 415 35,730

Increase Coverage to Address Tax Law Changes and Other Compliance Issues 497 96,718

Ensure Accurate Delivery of Tax Credits 834 260,293

Administer New Statutory Reporting Requirements 187 58,505

Leverage Return Preparer Program to Reduce Noncompliance 108 16,600

Address Appeals Workload Growth 66 9,100

Implement Uncertain Tax Position Reporting Requirements 20 4,129

Infrastructure Initiatives 90 $118,858

Enhance Security and Disaster Recovery Systems Capability 5 12,000

Update Integrated Financial System (IFS) 5 27,500

Leveraging Data to Improve Compliance 5 1,400

Enhance Physical Security for Federal Employees 10 15,481

Implement Individual Coverage Requirement and Employer Responsibility Payments 65 62,477

Business Systems Modernization (BSM) Initiative (60)

Continue Migration from Aging Tax Administration System (60)

Subtotal Program Changes 3,481 $838,836

Total FY 2012 Request 99,878 $13,283,907

Adjustments to Request

User Fees 204,428

Total FY 2012 Request 99,878 $13,488,335

1

FY 2010 Enacted represents the approved FY 2010 Operating Plan

Internal Revenue Service
IRS-17 

2A – Budget Increases and Decreases Description

Treasury Strategic Goals and Outcome 

The IRS FY 2012 initiatives support the Treasury Strategic Goal: “Effectively Managed 

U.S. Government Finances” and the Treasury Strategic Outcome: “Revenue collected 

when due through a fair and uniform application of the law” and the Treasury Strategic 

Goal: “Prevented Terrorism and Promoted the Nation’s Security Through Strengthened 

International Financial Systems” and Treasury Strategic Outcome: “Removed or reduced 

threats to national security from terrorism, proliferation of weapons of mass destruction, 

drug trafficking, and other criminal activity on the part of rogue regimes, individuals, and 

their support networks.” 

The table that follows lists FY 2012 resources by Strategic Goal, Objective and Outcome 

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

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

intends to accomplish over the five-year period. 

Budget by Strategic Outcome

Dollars in Thousands 

Treasury Strategic Outcome

FY 2010

Enacted1 CR Level Change

Revenue collected when due through a fair and uniform application of the law 11,908,430 11,908,050 13,025,396 9.4%

Removed and reduced threats to national security from terrorism, proliferation of 

weapons of mass destruction, drug trafficking, and other criminal activity on the 

part of rogue regimes, individuals, and their support networks

237,693 238,073 258,511 8.6%

Total Request $12,146,123 $12,146,123 $13,283,907 9.4%

1

The FY 2010 Enacted represents the approved FY 2010 Operating Plan.

Annualized

Request

Percent 

FY 2011

FY 2012

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 of full-time equivalents (FTE) and type of staff are 

determined, the cost of the FTE is estimated using a Unit Cost Rate (UCR) calculator, a 

tool for projecting FTE salary and non-salary support cost and/or savings. The UCR 

calculator fully costs the salary, benefits, and support costs needed for each FTE. 
IRS-18 

Total Changes to Base 

 +$298,948,000 / +1,631 FTE

Adjustment to Reach FY 2011 President’s Policy Level

+$401,665,000 / +1,653 FTE 

Adjustment from the FY 2011 Annualized Continuing Resolution (CR) Rate to reach the 

FY 2011 President’s Policy Level. The President’s Policy Level is equal to the FY 2011 

President’s Budget as adjusted for the proposed pay freeze. 

Maintaining Current Levels (MCLs)

+$85,754,000 / 0 FTE 

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

adjustments, postage, supplies and equipment, and health benefits and the increase in 

Federal Employee Retirement System participation. No inflation adjustment is requested 

for pay in FY 2012. 

Other Adjustments

$0 / +501 FTE

Technical FTE Adjustments 

$0 / 501 FTE

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

in the base budget and to add FTEs where activities are now funded in-house instead of 

through contractor services.

Efficiencies and Savings

-$189,957,000 / -523 FTE

Non-Recur Savings 

-$22,090,000 / 0 FTE 

This is the net reduction of non-recurring, one-time costs associated with the FY 2011 

enforcement initiatives (e.g., IT equipment and training). 
IRS-19 

Increase e-File Savings 

-$22,444,000 / -416 FTE

This decrease is a result of savings from increased electronic filing (e-File). Savings are 

based on e-File projected growth, modernization, and the completion of the phased 

implementation of the Worker, Homeowner, and Business Assistance Act of 2009 

(Public Law 111-92), which requires electronic filing by tax return preparers. As a result, 

the IRS needs 416 fewer FTE in submission processing, generating a savings of 

$22.4 million.

Reduce IT Infrastructure 

-$75,000,000 / 0 FTE 

The IRS will reduce the unit costs of infrastructure through use of the Capability Maturity 

Model (i.e., a process improvement approach that yields efficiencies in software 

engineering); the Information Technology Infrastructure Library (ITIL) that will allow 

the IRS to improve the quality of IT services; and the further consolidation of security 

activities in the Cybersecurity organization to leverage security best practices.

Reduce Contracts 

-$20,754,000 / 0 FTE 

In accordance with the 2009 Presidential guidance on controlling contracting costs, the 

IRS will achieve targeted savings through reduced contracting expenses. The FY 2012 

Budget saves $20.8 million through better acquisition and acquisition-related program 

practices in project support, web learning, equipment, marketing, technical support 

contracts and, as a result of implementing the e-file requirement for tax return preparers, 

lower marketing expenses associated with promoting e-filing.

Reduce Administrative Expenses

-$14,331,000 / -66 FTE 

The IRS will reduce administrative expenses, including targeted attrition through hiring 

freezes. 

Eliminate Lockbox Fees 

-$4,000,000 / 0 FTE 

The IRS will eliminate lockbox fees that now will be paid by taxpayers in installment 

agreements. 
IRS-20 

Reduce Certain Mailings 

-$4,000,000 / 0 FTE 

The IRS will eliminate printing and mailing of certain forms and publications and reduce 

the number of inserts in mailings. 

Reduce Training, Travel and Programs 

-$27,338,000 / -41 FTE

The IRS will reduce agency-wide non-technical training and non-case related travel; and 

will implement various program efficiencies. Reductions in training costs will be 

achieved by reducing out-of-town training and the length of training, as well as by

leveraging technology. The IRS will reduce travel expenses by making greater use of 

technology, increasing the use of hoteling, and eliminating/reducing travel 

reimbursements to field-based employees reporting to duty stations. The IRS will 

achieve program efficiencies in the Business Systems Modernization (BSM) 

($1.0 million), Health Insurance Tax Credit Administration (HITCA) ($1.1 million), and 

the taxpayer communication and education programs ($4.3 million and 41 FTE). 

Program Reinvestment 

+$1,486,000 / 0 FTE

Consolidate Submission Processing Site (Atlanta) 

+$1,486,000 / 0 FTE

Increased use of electronic filing has led to a consolidation of individual return 

processing sites. A portion of the Increase e-File Savings will be reinvested to fund 

one-time separation costs associated with the September 30, 2011, closure of the Atlanta 

submission processing site. As the Atlanta consolidation approaches, the IRS will 

continue to assist employees to find employment either inside or outside of the 

organization. The funding will allow the IRS to provide Voluntary Separation Incentive 

Payments (VSIP) and severance pay to affected Atlanta employees.
IRS-21 

Program Increases

+$838,836,000 / +3,481 FTE

Improve Taxpayer Service

+$81,307,000 / +519 FTE

Funding for Improve Taxpayer Service

and the $25.9 million increase included 

in the FY 2011 President’s Policy level 

will provide staffing to address rising 

demand and increase the Customer 

Service Representative Level of Service 

(LOS) from the planned target of 

71 percent in FY 2010 to 80 percent in 

FY 2012 while maintaining a 93 percent 

customer satisfaction rate for toll-free 

telephone services. This initiative also includes funding to help taxpayers understand the 

new tax law provisions and to make related call center and infrastructure changes to 

handle anticipated inquiries, including ACA-related service questions. 

Increase Customer LOS (+$30.0 million / +369 FTE) 

From FY 2006 to FY 2009, taxpayer demand for IRS toll-free assistor services increased 

by more than 30 percent from 46 million to more than 60 million. In 2009, the National 

Taxpayer Advocate identified access to the IRS toll-free service as the most serious 

problem for taxpayers. The IRS has been aggressively pursuing strategies to mitigate 

telephone demand, including a restructuring of telephone routing systems and creating 

internet applications to divert telephone traffic to IRS.gov. 

Taxpayers need effective service to understand their tax obligations and pay their taxes in 

a timely manner. In addition, increased enforcement activities have caused a significant 

increase in telephone inquiries to address balance-due accounts and establish installment 

agreements. Working with these taxpayers earlier in the process allows the IRS to 

resolve inquiries quickly in a more cost-effective manner and thereby increase taxpayer 

satisfaction.

This initiative also requests $0.1 million for Information Resources Accessibility 

Program equipment to evaluate the needs of new hires with disabilities; evaluate new 

assistive technologies for potential use within the IRS; determine the appropriate assistive 

technology to accommodate functional limitations; purchase assistive technology,

maintenance, and training, if required; and assist customers with assistive technology 

features and functions. 

Position Type/Other Costs FTE $000

Increase LOS 369 $30,000

Customer Service Representative 369 30,000

Implement Affordable Care Act (ACA) 150 $51,307

Assisting Taxpayers in Understanding New 

Provisions 150 $22,170

Customer Service Representative 143 13,158

Media & Pubs Program Analysts 5 8,739

Customer Account Specialists 2 273

Call Center Changes $15,300

Infrastructure $13,837

Total 519 $81,307
IRS-22 

Implement Taxpayer Service Programs for New Tax Law Provisions

(+$51.3 million / +150 FTE)

• Assisting Taxpayers in Understanding New Provisions 

(+$22.2 million / +150 FTE) 

This request further incorporates additional resources to help taxpayers 

understand new ACA provisions. Proactive outreach, education, and educational 

tools will be critical to ensuring that individuals and employers understand the 

changes to the tax law that come into effect starting in 2014. In addition, various 

provisions in the law already are effective (e.g., small employer tax credits and 

the excise tax on tanning services) which require IRS taxpayer service resources. 

IRS requests resources to develop and deliver new publications and informational 

tools to help taxpayers understand their obligations. In addition, to meet 

immediate customer service needs, the IRS requests additional customer service 

staffing for its toll-free service operation to help maintain LOS at 80 percent. 

• Call Center Changes (+$15.3 million) 

The IRS operates one of the largest and most complex phone support operations 

in the world. In order to prepare for a number of ACA provisions coming into 

effect in 2014 for individuals and employers, a number of changes must be made 

to the existing IRS call center systems. The IRS must update its call center 

applications and make enhancements to notices, collections, and case 

management systems to address and resolve taxpayer issues promptly and 

accurately.

• Infrastructure Costs to Support Recently-Enacted Law Service Inquiries

(+$13.8 million) 

Existing call sites are operating at capacity. In order to absorb the requested 

additional staffing needed to deliver an acceptable level of service to taxpayers, 

the IRS needs infrastructure resources to ensure adequate space and technology 

to support ACA-related service inquires.

Other Direct Costs

There are no other direct costs associated with this initiative.
IRS-23 

Expand Online Options through IRS.gov Improvements 

+$33,000,000 / +15 FTE 

Funding for Expand Online Options 

through IRS.gov Improvements will 

continue the multi-year effort to replace

the outdated web portal environment and 

provide additional online services to 

taxpayers. The Taxpayer Assistance 

Blueprint, Phase 2, targeted migration to the electronic channel and services as one of the 

five areas for improvement of IRS service delivery. 

This initiative will allow the IRS to: 

• Continue the replacement of an outdated web portal environment that has reached 

the end of its useful life; and

• Implement e-Notices enhancements.

Completion of these activities will allow the IRS to achieve efficiencies by moving 

high-volume transactions to IRS.gov, thereby improving self-service, reducing taxpayer 

burden, increasing compliance, reducing costs, and improving security. These 

improvements will position IRS.gov as the preferred delivery channel of choice for 

taxpayer service. Taxpayer satisfaction with IRS.gov also will be improved by better

integrating access to information and transaction services, improving IRS.gov navigation, 

enriching content quality, and enhancing IRS.gov search capabilities.

IRS.gov – Registered User Portal (RUP) and Employee User Portal (EUP) Migration

(+$25.0 million / +15 FTE)

This initiative funds the second year of a 

three-year effort to replace the aging 

infrastructure of the portals and complete 

the migration of the RUP/EUP by the end 

of FY 2013. This initiative will 

re-engineer the portal and migrate the 

RUP/EUP applications that interface with

core IRS systems, resulting in an overall 

improvement and in significant enhancements to online capabilities for tax preparers and 

other registered users. This request is driven by the need to complete the transition of the 

RUP/EUP to the new web environment by August 2013 when the existing RUP and EUP 

contracts expire. Failure to complete the portal migration by August 2013 will result in 

increased portal operating costs and increased risk under existing sole source contracts. 

In addition, taxpayer and tax practitioners will continue to use more expensive, labor 

intensive service delivery channels such as calling the 1-800 number or visiting an IRS 

taxpayer assistance center. 

Fiscal Years

2011 2012 2013

Public User Portal (IRS.gov)

Registered User Portal (RUP)

Employee User Portal (EUP)

Completion

IRS Portal Migration Implementation Schedule

Fiscal Years

2011 2012 2013

Public User Portal (IRS.gov)

Registered User Portal (RUP)

Employee User Portal (EUP)

Completion

IRS Portal Migration Implementation Schedule

Position Type/Other Costs FTE $000

 IRS.gov RUP/EUP Portal Migration 15 $25,000

IT Project Specialist 15 2,277

Contractor Service 22,723

Taxpayer and Tax Practitioner Applications 0 $8,000

Contractor Service 8,000

Total 15 $33,000
IRS-24 

The additional FY 2012 resources will allow the IRS to complete the build-out of the 

consolidated web environment and migrate the RUP transactional applications and 

integrate them with the tax information on IRS.gov by the end of FY 2013. Some of the 

RUP applications that the IRS plans to migrate include:

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

reported on their tax returns; 

• Online Employer Identification Number (EIN) – Allows users to apply online for 

a new EIN and, in most cases, receive the new number immediately;

• Preparer Taxpayer Identification Number (PTIN) Application – Allows tax 

professionals to apply online for a PTIN without submitting a paper application 

form and existing users to look up a forgotten PTIN; and 

• Online e-File – Allows tax professionals to apply online to become an authorized 

e-File Electronic Return Originator (ERO).

Activities to migrate the EUP will begin in FY 2012 and be completed in FY 2013. EUP 

migration activities will complete the build-out of the consolidated web environment for 

the secure employee-facing applications and move the applications from the existing 

EUP. Transitioning these applications to the new environment will allow IRS employees 

to process, update and analyze taxpayer returns and information online. Some of the 

applications to be migrated in FY 2012-FY 2013 include: 

• Modernized e-File (MeF) – Provides authorized IRS employees the capability to 

view MeF return data and run reports on taxpayer information; and 

• Integrated Financial System (IFS) - Provides authorized IRS employees with 

timely and detailed financial, cost accounting, property accounting and 

procurement data.

Online Service Applications – e-Notices (Installment Agreement Reminder Notice) 

(+$8.0 million / +0 FTE)

This initiative funds implementation of new online functionality for e-Notices that will 

deliver cost-effective services to the taxpayer while reducing the taxpayer burden. 

E-Notices will securely deliver taxpayer correspondence electronically through an 

integrated, web-based system. Development of the e-Notice concept could result in 

significant cost savings to the IRS if expanded to other higher volume notices. The 

development of the e-Notices Installment Agreement Reminder will provide taxpayers 

who have entered into an installment agreement to opt for monthly electronic payment 

reminders by logging into the IRS Registered User Portal (RUP) to define their 

preference. 
IRS-25 

Implementation of e-Notices will provide specific benefits such as:

• Reduced taxpayer burden in both time and cost; 

• Electronic delivery option to meet taxpayer preferences;

• Reduced risk of taxpayer social security number exposure through mail delivery; 

and

• Expedited communications that may result in quicker receipt of payment. 

There are no other direct costs associated with this initiative.

Other Direct Costs
IRS-26 

Increase International Service and Enforcement 

+$72,596,000 / +377 FTE 

Funding for Increase International 

Service and Enforcement will 

implement changes required by 

enactment of the Foreign Account Tax 

Compliance Act (FATCA) included in 

The Hiring Incentives to Restore 

Employment (HIRE) Act of 2010, 

(Public Law 111-147). The IRS will 

implement the reporting, disclosure and 

withholding requirements and expand 

coverage of international filings, 

conduct more in-depth international 

compliance work, strengthen 

compliance efforts related to offshore 

activity and expand the Global 

High-Wealth compliance group, 

producing additional annual 

enforcement revenue of $467.1 million 

with an ROI of 8.2 to 1 once the new 

hires reach full potential in FY 2014. 

Position Type/Other Costs FTE $000

Implement FATCA Legislation 186 $35,000

Revenue Agent 75 14,349

Tax Examiner 43 3,749

Special Agent 4 923

Customer Service Representative 40 3,260

Attorney 8 1,414

Support Staff 16 1,305

IT Equipment 10,000

Increase International Coverage 107 $15,777

Revenue Agent 58 10,539

Tax Technician 15 2,131

Tax Examiner 8 699

Other Support 26 2,408

Criminal Investigation International Expansion 36 $8,552

Special Agent 29 7,471

Other Support 7 1,063

IT Equipment 18

International Data Analysis 19 $8,784

Revenue Agent 4 705

Other Support 11 1,269

Research Analyst 4 780

Contractor Services and Equipment 6,030

Other Costs 29 $4,483

Appeals Officer 10 1,484

Attorney 15 2,492

Support Staff 4 507

Total 377 $72,596

Major Activities

Projected

Revenue

$M

Individual

Audits

Cases

Completed

Business

Audits

Specialty

Program

Audits

Implement FATCA Legislation

Address Foreign Withholding Compliance $171.6 117 

Expand Coverage of Int'l Tax Return Filings $32.4 21,540 

International Compliance Field Operations $83.0 614 155 

Criminal Investigation 7 

Increase International Coverage and 

Compliance

Expand Global High-Wealth Coverage $180.1 25 274 

Criminal Investigation International

Expansion 21 

Total $467.1 22,179 28 429 117 

ROI 

$72.6 $59.8 $57.1

$234.0

$315.7

$467.1

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

$500

1 2 3

in millions

Costs Enforcement Revenue

3.2 to 1

8.2 to 1

5.3 to 1
IRS-27 

Implement Foreign Account Tax Compliance Act (FATCA) Legislation

(+$35.0 million / +186 FTE)

The number of business and individual returns with international activity continues to 

increase. According to the Department of the Treasury Report on Foreign Portfolio 

Holdings of U.S. Securities dated June 30, 2009, the total long-term and short-term 

foreign holdings of U.S. securities grew from $4.3 billion in June 2002 to $9.6 billion in 

June 2009 (Filings of Form 1042-S, Foreign Person’s U.S. Source Income Subject to 

Withholding). The total U.S. source income, income where the activity for which the 

payment is being made is in the U.S., was $139.6 million in tax year 2000 and 

$646.5 million in tax year 2007, an increase of 363 percent. This growth creates two 

areas of concern for tax administration: (1) U.S. taxpayers avoiding taxation by shielding 

their identity using foreign accounts; and (2) foreign citizens benefiting from withholding 

rates that they are not entitled to use. 

This initiative will allow IRS to:

• Address Foreign Withholding Compliance 

IRS implementation of the reporting, disclosure and withholding requirements 

mandated by FATCA for international investors and financial institutions will 

augment IRS activities to address international noncompliance. 

Every person who earns income subject to U.S. withholding or reporting 

generally must identify himself or herself to both the U.S. government and all 

intermediaries (e.g., banks, brokers, and custodians) through whose hands that 

income passes. The Qualified Intermediary Program (QIP) is responsible for the 

withholding and related documentation requirements for foreign banks, foreign 

branches of U.S. banks, and other non-U.S. financial institutions that must comply 

with withholding tax laws. In general, a Qualified Intermediary (QI) is a foreign 

financial institution or foreign branch of a U.S. financial institution that enters 

into an agreement with the IRS. The QIP will implement the FATCA 

withholding requirements and ultimately the reporting of U.S.-source income sent 

offshore. 

In addition, the Withholding Tax Refund Program will be updated to create new 

electronic forms and reports to support the HIRE Act filing and disclosure 

requirements, handle the thousands of expected claims, provide data storage and 

analysis, and ensure proper and timely processing of returns and cases. The 

number of entities applying to become QIs will increase significantly from the 

current 5,014 QIs to approximately 20,000 to 100,000 entities. As a result, the 

IRS expects a high volume of customer inquiries in response to the influx of new 

QIs. The IRS will not enter into a QI withholding that provides for the use of 

documentary evidence obtained under a country’s know-your-customer (KYC) 

rules if it has not received the KYC practices and procedures for opening accounts 

and responses to specific questions. The additional staffing will approve KYC 

rules of these additional jurisdictions and perform outreach where needed. 
IRS-28 

Automatic matching of payments to annual income tax return data is the most 

efficient and effective tool that the IRS uses to ensure compliance. The Form 

1042-S will be used to determine whether tax is owed on U.S. source income 

flowing to an offshore locality by determining the identity of the recipients. The 

enhancement of systems to reconcile Form 1042, Annual Withholding Tax Return 

for U.S. Source Income of Foreign Persons, 1041-T, Allocation of Estimated Tax 

Payments to Beneficiaries, with Form 1042-S will provide significant steps 

toward achieving international compliance in an efficient manner.

With passage of the HIRE Act, the U.S. Withholding Agent will be responsible 

for establishing the Form 1042 Advanced Review Program (ARP). Additional 

resources will allow IRS to establish this program to work with taxpayers to 

resolve issues before filing their 1042 withholding tax return. 

Withholding taxes on payments to foreign financial institutions and non-financial 

foreign entities that do not agree to make the disclosures are intended to function 

like a back-up withholding tax, so that beneficial owners would be eligible to 

claim a refund or credit for any withholding in excess of their tax liabilities. As a 

result of the enacted legislation and the need for increased withholding of income 

taxes on payments to foreign persons, the IRS will implement revenue protection 

systems that will check for erroneous tax refund claims. As in prior years, 

thousands of claims for a refund of taxes withheld or paid are likely. The 

legislation will add to the number of withholding returns as well as claims, and 

the IRS must increase the capabilities of the Withholding Tax Refund System to 

respond to these additional claims to protect revenue. 

FATCA also imposes significant tax withholding penalties on foreign financial 

institutions that do not disclose holdings by U.S. individuals or firms and creates 

new information reporting requirements. To avoid the withholding requirements, 

the foreign financial institutions 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 Treasury on each account. Further, the foreign financial 

institution must comply with requests by 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 is not obtained from each holder of a U.S. account, the 

account will be closed. This initiative funds enforcement of the reporting 

requirements through new administrative and compliance activities.

This initiative will allow IRS to conduct 117 more specialty program audits.

• Development and Improvement of IT Systems and Specialized Tools 

The funding also will allow for the development and improvement of systems to 

carry out key areas of the FATCA legislation and for the development of 

specialized tools to detect abuses and trends in international taxpayer data and the 
IRS-29 

linking of international data to tax return data. This includes system capabilities 

to: 

o Enable secure Web-based interactivity to implement provisions that 

require the creation of formal working agreements between the IRS and 

Foreign Financial Institutions (FFI); 

o Accept, store and retrieve FFI information such as FFI agreements, annual 

account reporting, and certifications; 

o Automate the interface between the data secured via the Web-based Portal 

and the IRS Master File (MF) stored data; 

o Perform document matching on IRC sections 1471 (imposes a 30 percent 

tax on foreign financial institutions who do not meet certain reporting 

requirements) and 6038D (requires U.S. persons to report foreign 

investments) and Report of Foreign Bank and Financial Accounts (FBAR) 

account data;

o Generate reports on FATCA Audit and Registration certifications; and 

o Provide public access to published FFI information. 

Automatic matching of payments to annual income tax return data is the most 

efficient and effective tool that the IRS uses to ensure compliance. The Form

1042-S will be used to determine whether tax is owed on U.S. source income 

flowing to an offshore locality by determining the identity of the recipients. The 

enhancement of systems to reconcile Forms 1042, 1041-T, with Forms 1042-S will 

provide significant steps toward achieving international compliance in an efficient 

manner.

• Expand Coverage of International Tax Return Filings 

With the increased reporting of withholding requirements required by FATCA 

legislation, this initiative funds withholding compliance activities. It provides 

new coverage for discrepancies identified through third-party correlations based 

on FATCA and will enhance and centralize coverage for non-filer taxpayers and 

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

the calls/communications resulting from notices sent to taxpayers for resolution 

by the Campus Compliance Unit (CCU) that will identify emerging issues with 

FATCA compliance with respect to international tax filings or other international 

tax issues. IRS will compile data and reports that will provide more complete 

background information during the initial set up of related audit case files. The 

building of these case files will create increased efficiencies during the 

examination process by highlighting the FATCA non-compliance areas for 

examiners relative to the unique needs of this compliance initiative. 

These additional resources will increase the number of correspondence 

examinations by 21,540 individual audits. 
IRS-30 

• International Compliance Field Operations 

Offshore financial centers offer strict financial secrecy and low tax rates or no 

taxes to non-residents who maintain bank accounts, investments, and/or other 

financial assets or structures within their jurisdiction. They also allow for the 

formation of non-resident entities such as international business corporations, 

personal investment corporations, and foreign trusts to act as de facto holding 

companies to shield the beneficial ownership of those financial assets. This lack 

of transparency makes offshore financial centers a haven for U.S. taxpayers to 

divert income and shield assets. Further, revenue is lost because of weaknesses 

in compliance involving Chapter 3 withholding issues. FATCA will strengthen 

compliance efforts in this area.

With the increased mobility of people and transactions, the chances for 

non-compliance increase because of the lack of understanding of filing and 

reporting compliance for individuals living or working abroad. In addition, the 

internet has made it easier for more U.S. citizens to have investments in foreign 

countries, resulting in more complex tax situations. An indicator of this growth 

is the 133 percent increase in individual Americans claiming foreign tax credits 

from 2000 to 2007. 

This funding also will ensure proper coverage of the increasing number of small 

businesses with assets of less than $10 million that have expanded into the 

international markets. 

This initiative will allow the IRS to:

o Increase resources needed to identify and audit schemes to avoid FATCA 

compliance involving offshore financial centers;

o Increase audit coverage for U.S. taxpayers living abroad, non-resident 

aliens and small businesses operating overseas; and 

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

earned income exclusion.

Once the new hires reach full potential in FY 2014, the IRS will increase the 

number of examinations by 769 (614 individuals and 155 businesses). 

• Criminal Investigation

This initiative also will fund the expansion of criminal investigation efforts to 

identify and investigate U.S. citizens and residents that hold substantial funds in 

financial institutions in foreign countries and fail to disclose the holdings to the 

IRS or fail to follow FATCA reporting and withholding requirements. The IRS 

and the Financial Crimes Enforcement Network plan to expand the Suspicious 

Activity Report/Report of Foreign Bank and Financial Accounts (SAR/FBAR) 

project to countries beyond Mexico. 
IRS-31 

Once the new hires reach full potential in FY 2014, the IRS will increase the 

number of cases completed by seven cases.

Increase International Coverage (+$15.8 million / +107 FTE)

• Expand Global High-Wealth Coverage 

High-wealth individuals frequently operate complex enterprises consisting of 

multiple, interrelated businesses and flow-through entities that often have 

international components. The complex interrelationships and ownership patterns 

within these enterprises often mimic those of large corporations and pose 

significant challenges to effective tax administration. This initiative continues 

IRS’s efforts to focus on Global High-Wealth (GHW) taxpayers by increasing 

risk identification, case building, and examination capabilities. 

The IRS will take a unified look at the entire web of business entities controlled 

by high-wealth individuals to better assess the risks. Addressing the high-wealth 

population holistically will allow the IRS to better align and coordinate its 

resources toward this higher compliance risk population and develop better 

approaches in accordance with identified risk factors. The goal is to identify 

alternative treatment and engagement options to encourage greater voluntary 

compliance. Additional benefits include addressing a concern that traditional 

methods of assessing high-wealth compliance risk, done largely on a 

return-by-return, year-by-year basis, may have overlooked aspects of complex 

enterprise structures frequently employed by high-wealth individuals. 

This initiative will allow the IRS to:

o Conduct examinations of GHW individuals and related entities; 

o Refine a risk assessment process for GHW enterprises;

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

o Address non-compliance stemming from multi-jurisdictional tax evasion 

schemes; and 

o Improve existing methods of capturing data to allow better and quicker 

identification of abusive transactions related to complex enterprises and 

structures.

Once the new hires reach full potential in FY 2014, the IRS will conduct 25 more 

individual and 274 business examinations. 

• International Central Withholding Agreements 

Non-resident aliens (NRAs) who earn income also can be subject to U.S. 

taxation. Increased coverage will ensure that the filed returns of foreign athletes 

and entertainers, who have entered into Central Withholding Agreements (CWA), 

properly reflect income and deductions. A CWA is an agreement between the 
IRS-32 

IRS and a NRA, usually an athlete or entertainer, and their withholding agent 

and/or promoter based on the net compensation the nonresident alien expects to 

earn in the United States. From 2004 through 2006, visas issued to foreign 

athletes and entertainers rose 9 percent each year. There were 78,000 of this type 

of visa issued in 2006 (most current figure available and does not include 

residents of Canada and Mexico). At a projected coverage of 70 percent, there 

are a possible 54,600 CWA candidates. 

Criminal Investigation International Expansion (+$8.5 million / +36 FTE) 

The additional resources for Criminal Investigation (CI) will add special agents and 

support staff to maximize the deterrent effect of CI activities, increase voluntary 

disclosure, increase the number of potential tax evaders identified, and increase the tax 

revenue collected. This increased revenue applies not only to the years under 

investigation but to subsequent years after the taxpayer re-enters the tax system. 

Similarly, the IRS will expand cooperation with the Department of Homeland Security 

(DHS), Immigration and Customs Enforcement (ICE) and Trade Transparency Unit 

(TTU) to identify import/export businesses involved in trade and transfer pricing 

transactions designed to facilitate tax evasion and money laundering activities. These 

programs will enhance IRS’s ability to identify and develop leads for criminal 

investigations within domestic field offices. 

The IRS has committed to the Attorney General to support the International Organized 

Crime (IOC) strategy and agreed to place staff at the International Organized Crime 

Intelligence and Operations Center (IOC-2) in support of intelligence gathering on 

international organized crime. While the IOC-2 will generate leads and support case 

agents, the Global Illicit Finance Team (GIFT) will address the financial investigations at 

the working agent level. The establishment of a West Coast GIFT and an expansion of 

the East Coast GIFT will enhance IRS efforts to respond effectively to the escalating 

demand for special agents to investigate illicit financial transactions on a national and 

international level. The operations of both IOC-2 and GIFT also will involve substantial 

coordination with IRS foreign attachés, as well as other federal attachés and other foreign 

law enforcement agencies. 

This initiative will allow the IRS to: 

• Further its global presence and its pursuit of offshore tax and financial crimes; 

and

• Support the Department of Justice Law Enforcement Strategy to combat 

international organized crime. 

Once the new hires reach full potential in FY 2014, the IRS will increase the number of 

cases completed by 21 cases.
IRS-33 

International Data Analysis (+$8.8 million / +19 FTE) 

This initiative provides funding to perform international data analysis to detect abuses 

and trends. 

The IRS receives annual submissions from tax treaty partners with income and 

withholding statements for U.S. taxpayers in foreign countries for a variety of income 

types, including interest, dividends, royalties and capital gains. The IRS also forwards to 

treaty partners similar information taken from the submissions of Form 1042-S for 

foreign taxpayers earning income in the U.S. Data are received in various formats by 

multiple recipients throughout the IRS, but not all business users with a need have access 

nor is it available in forms that facilitate full usage for tax purposes. For much of the 

data, effective electronic analysis has not occurred. The initiative would build on the 

prototype already developed that provides the means for electronically analyzing passport 

renewal data, security and exchange commission forms, routine exchange data from 

treaty partners and other data as identified. Currently, the IRS is not incorporating this 

tax information into information matching programs, and only rarely is this information 

incorporated into ongoing compliance efforts. This solution will: 

• Provide inclusion of foreign income into information matching programs reducing

a serious tax gap related to these types of returns; 

• Make the data available for compliance research for modeling taxpayer behavior 

and for the identification of high-risk returns; and 

• Strengthen partnerships with tax treaty partners by providing a more effective 

means of exchanging information in a timely way. 

Similarly, the IRS currently has no way to link individual filers with complex 

international financial transactions to related businesses and other entities to which they 

have significant or controlling interests. This solution provides the overall approach for 

providing technology capabilities to support international risk assessments and tax 

compliance across the IRS and to support several new initiatives, such as the GHW 

Industry and Transfer Pricing Practice. 

To address current limitations of international tax compliance, the IRS seeks additional 

resources to: 

• Increase acquisition, utilization and availability of information on international 

tax issues such as passport renewal data, security and exchange commission 

forms, routine exchange data from treaty partners, and any additional data that 

might be identified; 

• Increase international compliance risk assessment (i.e., link GHW industry 

individual taxpayer behaviors to businesses or tax-exempt organizations); 

• Leverage insights into international compliance risks across all international 

taxpayer segments;
IRS-34 

• Improve international compliance workload identification across IRS 

organizations to assess the total volume of workload exhibiting specific 

compliance risks; and

• Create an enterprise-wide database with tools and technologies that can be used 

throughout IRS to: 

o Promote collaborations for cases that cut across the IRS organization; 

o Centralize disparate datasets into a cohesive data sharing strategy; 

o Analyze complex international and offshore cases; and 

o Identify abusive transactions and emerging trends. 

Other Direct Costs (+$4.5 million / +29 FTE)

IRS Activity Cost FTE Explanation

Appeals $1.5 10 Ensure proper handling of cases, fair enforcement of laws, 

and – when appropriate – equitable application of taxes and penalties.

Chief Counsel $3.0 19 Support examinations of Forms 1042 and 1042S and assist audit teams 

in addressing complicated withholding issues. 

Total $4.5 29

Dollars in Millions
IRS-35 

Increase Collection Coverage 

+$52,000,000 / +413 FTE

Funding for Increase Collection 

Coverage will expand work on the 

collection inventory and improve 

collection processes to bring taxpayers 

who fail to pay their tax debt into 

compliance and produce additional 

annual enforcement revenue of 

$398.3 million with an ROI of 

8.8 to 1 once the new hires reach full 

potential in FY 2014. 

Nonfiling/Underpayment Compliance (+$26.3 million / +282 FTE)

This initiative funds the expansion of the Automated Collection Systems (ACS) program 

to address nonfiling and underpayment compliance more effectively. The increase will 

allow the IRS to address growing collection case inventories and call volumes. This 

effort will help reduce the nonfiling tax gap, estimated at $27 billion (approximately 

8 percent), and the underpayment tax gap, estimated at $33 billion (approximately 

10 percent). 

The ACS is a call-site operation and is the most productive IRS program for revenue 

collection. In FY 2010, ACS call volume was 11 percent more than in 2009. Significant 

increases in phone volume occurred after IRS representatives began leaving messages 

identifying IRS as the caller. ACS support staff will be increased in Atlanta to help place 

Position Type/Other Costs FTE $000

Nonfiling/Underpayment Compliance 282 $26,300

Customer Service Representative 254 22,737

Support Staff 28 3,202

Safeguard Travel 361

Offers-In-Compromise (OIC) 75 $7,920

Revenue Officer 25 4,127

Tax Examiner 17 1,493

Support Staff 33 2,300

Other Costs 56 $5,755

Appeals Officer 5 750

Revenue Agent 1 137

Attorney 10 1,773

Customer Service Representative 35 2,618

Support Staff 5 477

IT Projects 0 $12,025

Electronic Lien (e-Lien) 3,000

Business Masterfile CCNIP 3,025

Integrated Collection System (ICS) 2,000

Consolidated Decision Analytics (CDA) 3,000

Online Offer-in-Compromise (OIC) 1,000

Total 413 $52,000

Major Activities

Projected

Revenue

$M

TDI

Closures

TDA

Closures

Nonfiling/Underpayment Compliance $398.3 25,200 144,300 

ROI 

$52.0 $48.2 $45.2

$177.3

$318.6

$398.3

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

FY 2012 FY 2013 FY 2014

in millions

Cost Enforcement Revenue

3.4 to 1

8.8 to 1

6.6 to 1
IRS-36 

employees who will be effected by the closing of the Atlanta Submission Processing 

Center scheduled for the end of FY 2011. These ACS resources will address the 

workload generated by increased balance due and delinquent return notices and the 

expansion of the international examination program, which resulted in a significant 

increase in workload. 

Offers In Compromise (OIC) (+$7.9 million / +75 FTE)

The OIC program processes taxpayer requests to reduce or eliminate their tax liabilities 

because of extreme circumstances and/or hardship. In FY 2010, the requests for OIC 

services was 8.5 percent more than in 2009. The funding will address the increased 

workload attributable to more taxpayers experiencing economic hardship and the IRS 

focus on assisting unemployed taxpayers. Even with the additional resources requested 

in the FY 2011 budget request, current submission levels will overwhelm the program 

and will result in case processing delays.

Collection IT Requirements (+$12.0 million)

The IRS cannot pursue a large portion of its collection inventory because of resource 

constraints and is developing innovative approaches to inventory selection. The 

following projects will allow the IRS to innovate and improve the collection process: 

• Consolidated Decision Analytics (CDA) – Improve the selection, prioritization, 

and assignment of collection cases. The initiative supports the enhancement of 

workload prediction and selection models, allowing the IRS to allocate collection 

resources more effectively to reduce the tax gap and address the inventory of 

unpaid assessments. 

• Integrated Collection System (ICS) – Continue the modernization of ICS through 

automation of manual processes, improving employee efficiency and productivity, 

and providing a streamlined process for capturing financial data. 

• Business Masterfile Case Creation Non-filer Identification – Identify business 

return non-filers, including unknown non-filers who may be delinquent in filing 

their tax returns. Expand current algorithms and data sets and incorporate 

available state return data to improve the quality of case selection and allow the 

system to become the primary repository where cases are created, prioritized, 

selected and maintained. 

• Electronic Lien (eLien) System – Develop an eLien system to deliver liens 

electronically. More than one million federal tax lien documents are mailed each 

year to more than 4,000 state and local jurisdictions. This system will eliminate 

GAO findings by reducing the time to file lien releases and resolve lost liens. 

Tax liens are a significant tool in the IRS collection program, resulting in the 

filing of over 450,000 liens annually. 
IRS-37 

Other Costs (+$5.8 million / +56 FTE)

IRS Activity Cost FTE Explanation

Appeals $1.0 7 Support examination efforts on key compliance areas focused on 

improving voluntary compliance. 

Chief Counsel $2.0 12

Provide advice related to refundable credits and assist in litigation 

against promoters of schemes to fraudulently claim these credits and any 

cases resulting from denial of refunds. Advise examiners hired to do 

employment tax audits.

Taxpayer Advocate Service $0.3 3 Ensure the IRS follows appropriate procedures and does not create 

unnecessary burdens or compromise taxpayers' rights.

Wage & Investment $2.5 34

Support examination efforts by ensuring staffing available to handle 

downstream impact in collection, accounts management and submission 

processing operations. 

Total $5.8 56

Dollars in Millions
IRS-38 

Implement Merchant Card and Basis Reporting 

+$35,730,000 / +415 FTE

Funding for Implement Merchant 

Card and Basis Reporting will staff 

programs to implement information 

reporting on merchant payment card 

and third party reimbursements

enacted in the Housing and Economic 

Recovery Act of 2008 (Public Law 

110-289) and basis reporting on 

security sales enacted in the 

Emergency Economic Stabilization 

Act of 2008 (Public Law 110-343), 

producing additional annual 

enforcement revenue of $185.7 million

with an ROI of 6.0 to 1 once the new 

hires reach full potential in FY 2014. 

 

The IRS is building new IT systems and modifying existing systems to create the 

Business Master File Automated Underreporting Program (BMF AUR) to implement 

document matching for merchant card payment transactions. In FY 2011, the IRS 

requested resources to pilot the Business Master File AUR program and test new 

procedures. The FY 2012 initiative will allow the IRS to implement additional document 

matching for merchant payment card and third party entities that transfer payments and 

money between banks and merchants to report the amount of the transaction, and the 

name, address, and taxpayer identification number (TIN) of each payee receiving 

payments from reportable transactions on Form 1099-K, Merchant Card and Third Party 

Payments. 

Position Type/Other Costs FTE $000

Information Reporting on Merchant Card 

Reimbursements AUR 327 $27,456

Tax Examiner 185 17,529

Data Transcriber 126 8,291

Support Staff 16 1,142

IT Equipment 494

Basis Reporting on Security Sales 20 $1,316

Data Transcriber 20 1,316

Other Costs 68 $6,958

Revenue Officer 13 1,763

Revenue Agent 1 137

Customer Service Representative 28 2,099

Attorney 4 725

Paralegal 3 265

Support Staff 19 1,969

Total 415 $35,730

Major Activities

Individual 

and 

Business 

Return 

Audits

Information Reporting on Merchant Card 

Reimbursements 325,000 

ROI 

$35.8 $31.8 $30.8

$72.4

$129.5

$185.7

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

$200

FY 2012 FY 2013 FY 2014

in millions

Cost Enforcement Revenue

2.0 to 1

6.0 to 1

4.1 to 1
IRS-39 

Information Reporting on Merchant Payment Card Reimbursements – Underreporter 

(+$27.5 million / + 327 FTE)

Underreported business income accounts for a significant portion of the individual 

income tax gap. A business receives payments for goods or services through a consumer 

payment card or through third party entities. These receipts can go unreported by 

businesses, thereby significantly contributing to the tax gap.

The enacted legislation allows the IRS to validate income reported by businesses with 

their payment card receipts and third party transactions through additional information 

reporting:

• Payment card processors will report total payments made to a business; and 

• Third party settlement organizations will report network transactions settled 

among participating payees. 

The legislation will help reduce the tax gap in three ways:

• A business could reconcile merchant card payments and third party network 

transactions to an official year-end statement; 

• A business could avoid underreporting knowing the IRS performs income 

validation through document matching; and 

• A business that evades its tax obligations by not filing or understating its income

would be easier for the IRS to identify. 

To implement the document matching of Merchant Payment Card reimbursements, this 

initiative funds 126 FTE for data transcribing to capture payment information and new 

line items from income tax forms and 185 FTE (AUR tax examiners) to reconcile 

approximately 242,000 additional tax returns beginning in FY 2012. Once new hires 

reach full potential in FY 2014, this investment will produce 325,000 more individual 

and business return reconciliations. 

Basis Reporting on Security Sales (+$1.3 million / +20 FTE)

GAO estimated that 36 percent of individual taxpayers misreported their securities capital 

gains or losses in tax year 2001. The estimated capital gains tax gap for Tax Year 2001 is 

$11 billion. The enacted legislation requires investment brokers to report the adjusted 

basis of publicly traded securities owned by customers. The Basis Reporting on Security 

Sales program audit workload levels would remain the same. However, the additional 

information would improve productivity, case selection, and greatly reduce the “no 

change” rate. 

This initiative includes 20 FTE to transcribe basis information from Form 1099-B, 

Proceeds From Broker and Barter Exchange Transactions, and related income tax line 

items on Form 1040 Schedule D, Capital Gains and Losses. This information will 

capture basis reporting on securities sales to improve document matching. 
IRS-40 

Other Direct Costs (+$6.9 million / +68 FTE)

IRS Activity Cost FTE Explanation

Appeals $2.0 15 Support examination efforts on key compliance areas focused on 

improving voluntary compliance. 

Chief Counsel $1.1 9 Litigate those cases that are not resolved at the audit or appeals stages.

Taxpayer Advocate Service $1.7 16 Ensure the IRS follows appropriate procedures and does not create 

unnecessary burdens or compromise taxpayers' rights.

HCO $0.1 1 Handle increased workload to hire and support staff. 

Wage & Investment $2.0 27

Support examination efforts by ensuring staffing available to handle 

downstream impact in collection, accounts management and submission 

processing operations. 

Total $6.9 68

Dollars in Millions
IRS-41 

Increase Coverage to Address Tax Law Changes and Other Compliance Issues 

+$96,718,000 / +497 FTE 

The Increase Coverage to Address Tax 

Law Changes and Other Compliance 

Issues initiative addresses compliance 

issues and new responsibilities arising 

from recent tax law changes included in 

major legislation such as the American 

Recovery and Reinvestment Act of 2009 

(Recovery Act) (Public Law 111-5) and 

the Affordable Care Act (ACA) (Public 

Law 111-148). This initiative will fund 

compliance programs needed for new 

provisions such as direct-pay bonds, new 

requirements on tax-exempt hospitals, a 

new fee on manufacturers and importers 

of branded prescription drugs, the excise 

tax on indoor tanning, and also will 

increase specialty programs (i.e., 

employment tax, excise tax, and estate 

and gift tax) audits. These resources 

would produce additional annual 

enforcement revenue of $80.8 million 

with an ROI of 3.0 to 1 once the new 

hires reach full potential in FY 2014. 

Major Activities

Projected 

Revenue

$M

Specialty 

Program 

Audits Exams

Specialty Programs $43.0 2,210 

IRS Bond Enforcement Activities 675 

Affordable Care Act

Promote Compliance with New Excise Tax $37.8 1,000 

Strengthen Oversight of Exempt Hospitals 1,700 

Total $80.8 3,210 2,375 

ROI 

$29.8 $27.7 $27.3

$42.7

$61.7

$80.8

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

FY 2012 FY 2013 FY 2014

in millions

Cost Enforcement Revenue

1.4 to 1

3.0 to 1

2.2 to 1

Position Type/Other Costs FTE $000

Expand Coverage of Specialty Taxes 45 $6,730

Revenue Agent 32 4,408

Attorney 11 1,642

Support Staff 2 180

Contractor Service 500

Support Expansion of Direct-Pay Bonds 16 $2,550

Revenue Agent 8 1,093

Tax Law Specialist 4 825

Program Manager 2 460

Clerk 2 164

Support Services 8

Taxpayer Service Support for AUR Soft Notices 36 2,742

Customer Service Representative 23 1,707

Tax Examiner 13 855

Additional Postage for Soft Notices 180

Examination IT Requirements $5,975

Correspondence Imaging Compliance (CIC) 5,975

Other Costs 37 $5,106

Revenue Agent 3 410

Appeals Officer 23 3,446

Attorney 2 402

Customer Service Representative 3 287

Taxpayer Advocacy Specialist 2 209

Manager, Analyst, and Support Staff 4 352

Implement Affordable Care Act (ACA) 312 $65,606

Promote Compliance with New Excise Tax 81 $11,506

Revenue Agent 58 9,166

Tax Examiner 8 687

Tax Technician 2 181

Manager, Analyst, and Support Staff 13 1,472

Administer New Fees on Drug Manufacturer 

and Health Insurers 76 $29,278

Revenue Agent 5 1,025

IT Project Specialist 67 10,747

Manager, Analyst, and Support Staff 4 764

Contractor Service 12,092

Software 750

Computer Equipment 3,900

Strengthen Oversight of Exempt Hospitals 84 $9,861

Revenue Agent 35 3,965

Tax Law Specialist 22 3,433

Manager, Analyst, and Support Staff 27 2,463

Update Existing IT Systems for Tax Law 

Changes 71 $14,961

IT Project Specialist 71 11,361

Computer Equipment 3,600

Other ACA Costs 51 $8,009

Appeals Officer 10 1,879

Attorney 8 1,501

Taxpayer Advocacy Specialist 17 1,641

Manager, Analyst, and Support Staff 16 2,988

Total 497 $96,718
IRS-42 

Expand Coverage of Specialty Taxes (+$6.7 million / +45 FTE)

This initiative increases compliance activities in the Employment, Excise, and Estate and 

Gift Tax Programs: 

• The Employment Tax program would focus on misclassification of employees as 

independent contractors through an increase in worker classification audits. It 

also would focus on tip compliance by assessing the employer share of FICA 

taxes on unreported tip income and expanding the Voluntary Compliance 

Agreement process for governmental employers. 

• The Excise Tax program would focus on the increased workload involving 

international issues of foreign entities such as insurance brokers and foreign 

airlines, referrals from large business audits, and non-filers. 

• The Estate and Gift Tax program would focus on changes in the estate tax law 

and on expanding non-filer work in both programs. IRS non-filer work has 

improved using data from state agencies and new research to develop and refine 

both estate and gift non-filer models. The expansion of efforts to address 

non-filers is critical to achieving a higher level of voluntary compliance with 

estate and gift laws.

Once the new hires reach full potential in FY 2014, this investment will produce 

2,210 more specialty program return audits and generate $43 million in revenue. 

Support Expansion of Direct-Pay Bonds (+$2.6 million / +16 FTE)

Build America Bonds (BABs) are tax-credit bonds created by the Recovery Act, which 

were extended and expanded by the Hiring Incentives to Restore Employment Act 

(Public Law 111-147). The requested resources would allow IRS enforcement to keep 

pace with the projected growth in these and similar refundable credit bonds by: 

• Performing critical pre-payment and post-issuance compliance checks on direct 

payment bonds; 

• Regulating the volume cap limitations; 

• Preventing the risk of lost revenue by maintaining a strong examination program 

to address both traditional tax exempt bonds and new tax advantaged issuances 

such as BABs; and

• Meeting the demand for new bond issuances. 

The direct payment feature of BABs and other refundable tax credit bonds introduces 

new risks to the Treasury. Through November 2010, state and local governments issued 

more than 2,000 direct-pay bonds worth $165 billion. Since enactment of the Recovery 

Act, the IRS has completed pre-payment compliance reviews for more than $2.5 billion 

in refundable credit payments. Without the requested resources, the risk of fraudulent 

credit payments made to BABs and other direct-pay bonds (potentially in the millions of 

dollars) would increase, and the ability of the IRS to prevent, detect, and remedy 
IRS-43 

noncompliant bond transactions would decrease. Additionally, many of these new bond 

arrangements are subject to volume cap limitations that restrict the aggregate value of 

bond issuances. 

These staffing resources would be dedicated to monitoring the dollar limitations for 

tax-preferred bonds, would strengthen IRS’s ability to ensure compliance with the 

volume cap rules, would allow the IRS to conduct pre-payment reviews for each related 

bond return, and would ensure that direct-pay bonds meet compliance requirements 

throughout their life cycle. Without this staffing, BAB and direct-pay bond compliance 

activities would strain existing enforcement resources and would decrease the number of 

completed exams in the Tax Exempt Bond examination program. 

Taxpayer Service Support for AUR Soft Notices (+$2.7 million / +36 FTE)

The IRS Strategic Plan includes the expansion of enforcement tools such as soft notices. 

A soft notice asks the taxpayer to self-correct to avoid the traditional compliance 

treatment resulting in additional phone calls and an increase in the number of amended 

returns filed. The AUR program minimizes revenue loss through document matching of 

taxpayer account information. Approximately 12 million taxpayers each year misreport 

income based on matching with third-party information returns. Of these taxpayers, the 

AUR program processes about four million cases. This initiative allows the IRS to issue 

notices to more non-compliant taxpayers. 

Examination Information Technology (IT) Requirements (+$6.0 million)

The IRS requests resources to make the exam process more efficient through the 

following technology initiatives:

• Correspondence Imaging Compliance (CIC) – Campus Compliance annually 

receives about 16 million pieces of correspondence averaging 10 pages each. The 

current manual process causes lengthy delays between receipt and disposition, 

resulting in increased telephone calls and resubmissions. CIC would replace the 

manual process with an electronic imaging system that would use existing 

technology. This investment: 

o Allows real-time access to documents when taxpayers contact the IRS; 

o Provides better management of correspondence inventory; 

o Allows correspondence to be available within one to three days, versus 

weeks;

o Reduces cycle time or days in inventory; and 

o Reduces call volumes and duplicative mail receipts.

Hard copy document storage at the Federal Records Center and transshipments 

cost savings of $12.1 million also would be realized during the project life cycle. 
IRS-44 

Implement Tax Code Changes (+$65.6 million / +312 FTE)

• Promote Compliance with New Excise Tax (+$11.5 million / +81 FTE) 

The ACA imposes a new 10 percent excise tax on indoor tanning services 

provided on or after July 1, 2010. As many as 25,000 businesses provide indoor 

tanning services, including about 10,000 businesses that offer tanning services 

along with other services, such as spas, health clubs, and beauty salons. These 

entities typically do not have experience filing federal excise tax returns. This tax 

is expected to nearly double the number of Form 720, Quarterly Federal Excise 

Tax Return, that the IRS receives each quarter, from about 25,000 to more than 

45,000. 

To promote compliance with this new tax, the IRS has developed a 

comprehensive strategy to identify the affected population and reduce non-filing 

through the use of notices sent before initiating compliance activity. The IRS 

would select entities for examination based on risk, with an emphasis on 

non-filers. The IRS expects to close about 1,000 excise tax cases annually by 

FY 2013. 

• Administer New Fees on Drug Manufacturers and Health Insurers 

(+$29.3 million / +76 FTE) 

The IRS must 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 $2.8 billion for 2012 and 2013, represents a 

significant new source of revenue and requires the development of new systems 

and new processes for interacting with the affected business community. 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. This 

system also would provide a technology platform for administering fees on health 

insurance policies and self-insured health plans, which become effective after 

September 30, 2012. 

• Strengthen Oversight of Exempt Hospitals (+$9.9 million / +84 FTE) 

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 these new reporting requirements. 

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 5,100 entities). This initiative will 

increase the number of compliance reviews of tax-exempt hospitals by 1,700. 
IRS-45 

The first cycle of compliance reviews is scheduled to be completed by 

September 2013. 

Additionally, the IRS (in consultation with the HHS) must develop and deliver a 

new annual report to Congress on levels of charity care in the hospital sector. 

These are substantial new requirements and additional resources are required to 

ensure the legislative intent of these changes is satisfied.

• Update Existing IT Systems for Tax Law Changes (+$14.9 million / +71 FTE) 

In the last few years recent tax law changes have required not only the design of 

new systems, but also have necessitated changes and upgrades to existing IRS 

systems to ensure that they accurately reflect the new requirements and can 

interact with other new systems. These changes allow the IRS to keep pace with 

new tax law, avoid the development of costly manual procedures to counteract 

unanticipated problems, and maintain the efficiency of IRS programs. It is critical 

that IRS systems reflect current law and exchange data and information reliably. 

These additional resources would help the IRS meet its tax administration 

responsibilities by keeping existing IT systems current with recent tax law

changes that require the IRS to integrate new information reporting data, calculate 

and assess new taxes, administer new taxes (e.g., update tax accounts, send 

notices, provide updates to customer service), and assess penalties for incorrect 

reporting, failure to pay, etc. 

Other Direct Costs (+$13.1 million / +88 FTE)

IRS Activity Cost FTE Explanation

Appeals $6.0 39 Support examination efforts on key compliance areas focused on 

improving voluntary compliance. 

Chief Counsel $2.0 12

Provide advice related to refundable credits and assist in litigation 

against promoters of schemes to fraudulently claim these credits and any 

cases resulting from denial or refunds. Advise examiners hired to do 

employment tax audits.

Taxpayer Advocate Service $1.0 19 Ensure the IRS follows appropriate procedures and does not create 

unnecessary burdens or compromise taxpayers' rights.

Wage & Investment $2.0 3

Support examination efforts by ensuring staffing available to handle 

downstream impact in collection, accounts management and submission 

processing operations. 

HCO $0.1 1 Handle increased workload to hire and support staff. 

ACA Program Management

(CFO/NHQM/WAGE) $2.0 14 Overall program management and administration of ACA tax law 

changes.

Total $13.1 88

Dollars in Millions
IRS-46 

Ensure Accurate Delivery of Tax Credits

+$260,293,000 / +834 FTE 

Recognizing IRS’s important role in 

delivering economic incentives through 

tax credits, the Ensure Accurate 

Delivery of Tax Credits initiative will 

improve the delivery of existing credits 

through a combination of improved 

technology tools and increased 

enforcement staffing. The initiative also 

funds the information technology and 

other systems required to implement the 

new ACA premium assistance tax credit, 

which becomes effective in 2014. The 

IRS must build new systems to support 

eligibility determinations based on 

household income, and modify existing 

tax processing systems to support 

reconciliation of advance payments of 

the credit. The initiative also funds the 

appropriate compliance resources for the 

small employer tax credit, which came 

into effect in 2010. The resources 

devoted to improving administration of existing credits would produce additional annual 

enforcement revenue of $183.3 million with an ROI of 4.1 to 1 once the new hires reach 

full potential in FY 2014. 

 

Major Activities

Projected 

Revenue

$M

Protected

Revenue

$M

Individual

Audit

Business

Audits Exams

Refundable Credit Compliance Office $128.9 $128.9 75,700 

Affordable Care Act $54.4 5,000 9,000 1,000 

Total $183.3 $128.9 80,700 9,000 1,000 

ROI 

$51.0 $46.4 $45.0

$110.2

$163.3

$183.3

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

$200

FY 2012 FY 2013 FY 2014

in millions

Cost Enforcement Revenue

2.2 to 1

4.1 to 1

3.5 to 1

Position Type/Other Costs FTE $000

Establish Refundable Credit Compliance Office 314 $30,176

Revenue Agent 5 605

Tax Compliance Officer 35 3,606

Tax Examiner 220 20,097

Manager, Analyst, and Support Staff 54 5,868

Other Costs 16 $2,621

Attorney 13 2,376

Manager, Analyst, and Support Staff 3 245

Implement Affordable Care Act (ACA) 453 $213,459

Provide Coverage for New Health Care Tax 

Credits 234 $23,927

Revenue Agent 193 20,113

Customer Service Representative 2 167

Tax Examiner 8 708

Manager, Analyst, and Support Staff 31 2,939

Provide Facilities and Infrastructure for New 

Compliance Staffing $13,837

Expand IT Infrastructure for New Tax Credits 219 $175,695

IT Project Analyst 219 35,885

Contractor Service 111,960

Software 10,850

Computer Equipment 17,000

Other ACA Costs 51 $14,037

Appeals Officer 10 1,858

Attorney 7 1,322

Taxpayer Advocacy Specialist 16 1,550

Manager, Analyst, and Support Staff 18 9,307

Total 834 $260,293
IRS-47 

Establish Refundable Credit Compliance Office (+$30.2 million / +314 FTE)

The Refundable Credit Compliance Office will develop a comprehensive and integrated 

compliance strategy for administering refundable credits and rapidly addressing refund 

schemes. 

A refundable tax credit is a credit that can reduce tax liability below zero and can result 

in a negative tax liability. If the credit exceeds the total tax liability, the excess is 

refundable and the government incurs an outlay. Examples of refundable credits are the 

Earned Income Tax Credit (EITC) and the Child Tax Credit. 

Establishing an office dedicated to refundable credit work allows the IRS to address 

non-compliance and fraud trends that emerge from existing and future refundable credits. 

Once the new hires reach full performance in 2014, the IRS will complete 37,850 more 

post-refund audits, generating annual enforcement revenue of $128.9 million. The 

additional 37,850 pre-refund audits will protect an additional $128.9 million in revenue.

The additional staffing would allow the IRS to maintain broad exam coverage by meeting

the challenges of new credits without reducing its coverage of existing returns. The IRS 

would work both individual and small business cases produced by the new 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. 

Implement New Legislative Provisions (+213.4 million / +453 FTE)

• Provide Coverage for New Health Care Tax Credits 

 (+$23.9 million / +234 FTE)

The ACA created a significant new credit for small employers to encourage these 

employers to provide health insurance coverage for their employees. This credit 

is equivalent to 35 percent of the employer’s health care premium expenses 

(25 percent refundable credit for tax-exempt employers). The credit percentage 

increases to 50 percent (35 percent for tax-exempt organizations) for tax year 

2014 and beyond. The IRS has identified and communicated with more than four 

million small businesses potentially eligible for this credit. These additional 

resources will allow the IRS to conduct focused examinations to encourage 

compliance with this credit and would allow the IRS to include this issue in 

routine examinations of small employer tax returns without reducing coverage of 

other tax compliance issues. This initiative also provides resources to address the 

expanded adoption tax credit. 
IRS-48 

• Provide Facilities and Infrastructure for New Compliance Staffing 

(+$13.8 million)

Administration of various credits established by the ACA (especially the Premium 

Assistance Tax Credit) requires additional IRS campus staffing. Although the 

premium credit does not become effective until 2014, the IRS must begin the 

process of acquiring and building out new facilities in 2012 so that they will be 

available and functioning when these new employees are hired. This request 

includes funds for acquiring space and equipping facilities with the 

telecommunications and networking infrastructure needed for enforcement staff to 

perform their job duties effectively. 

• Expand IT Infrastructure for New Tax Credits (+$175.7 million / +219 FTE)

The ACA establishes a new premium credit to subsidize the cost of health 

insurance for millions of Americans who do not have access to affordable 

coverage. For a number of reasons, administering this credit will require a 

significant investment in new technology. First, the eligibility for the credit is 

based on household-level income information that is not currently maintained. 

This initiative would create a new tax data repository to support the eligibility 

determination for this new credit. 

In addition, a new accounting and payment system would be needed to administer 

this benefit. The system would aggregate payments to insurers on the 

participants’ behalf and track payments by insurer and participant. 

Furthermore, individuals must reconcile any advance payments received 

throughout the year with the actual income reported on the tax return. IRS must 

modify systems, forms and instructions to support this process. 

Finally, the IRS will build the infrastructure needed to perform document 

matching and other decision analytics to detect fraud and other non-compliance. 

Together, these systems ensure prompt and accurate delivery of the premium 

credit to eligible taxpayers while ensuring that this subsidy is not abused. 
IRS-49 

Other Direct Costs (+$16.7 million / +67 FTE)

IRS Activity Cost FTE Explanation

Appeals $1.9 10 Staffing for increased receipts.

Chief Counsel $4.3 26 Counsel providing legal support for compliance activities.

Taxpayer Advocate Service $1.5 16 Staffing to handle additional case receipts.

ACA Program Management $9.0 15 Overall program management and administration of ACA tax law 

changes.

Total $16.7 67

Dollars in Millions
IRS-50 

Administer New Statutory Reporting Requirements 

+$58,505,000 / +187 FTE

Recent legislation established significant 

new information reporting and sharing 

requirements from third parties (such as 

employers, health insurance providers), 

and the exchanges to administer the 

ACA’s premium assistance tax credit, 

the individual coverage requirement, and 

the employer responsibility payment. 

Effective implementation requires 

significant enhancements to existing 

information returns systems to handle 

the additional volumes and new 

information reporting categories. This 

initiative also includes resources to 

implement provisions that allow IRS to 

share tax data with state and federal entities to determine eligibility for the advance 

premium credit. This request also includes resources to ensure secure exchange of 

information. 

In addition, the ACA, as enacted, also amends Section 6041 of the Internal Revenue 

Code to require businesses to file Form 1099 information returns starting in 2012 for all 

aggregate purchases of services or property greater than $600. The initial campus staff 

included in this initiative to handle the inventory resulting from this provision will 

produce additional annual enforcement revenue of $16.9 million with an ROI of 

7.0 to 1 once the new hires reach full potential in FY 2014. 

 

Major Activities

Projected 

Revenue

$M

TDA/TDI

Closures

Affordable Care Act

Nonfiler Compliance $16.9 70,000 

Total $16.9 0 

ROI 

$2.6 $2.5 $2.4

$9.6

$13.5

$16.9

$0

$2

$4

$6

$8

$10

$12

$14

$16

$18

FY 2012 FY 2013 FY 2014

in millions

Cost Enforcement Revenue

3.7 to 1

7.0 to 1

5.4 to 1

Position Type/Other Costs FTE $000

Implement Affordable Care Act (ACA) 182 $57,676

Implement New 1099 Reporting Requirements 82 $23,286

Tax Examiners 29 2,627

IT Project Specialist 53 9,659

Contractor Services 6,000

Software 2,000

Computer Equipment 3,000

Implement New Health Coverage Information 

Reporting 100 $34,390

Tax Technician 7 1,121

Manager, Analyst, and Support Staff 28 5,676

IT Project Specialist 65 10,480

Contractor Services 13,888

Software 1,225

Computer Equipment 2,000

Other ACA Costs 5 $829

Attorney 4 751

Support Staff 1 78

Total 187 $58,505
IRS-51 

Implement New 1099 Reporting Requirements (+$23.3 million / +82 FTE)

Under ACA, the Form 1099 reporting requirement for a taxpayer making payments to a 

recipient aggregating $600 or more for services or determinable gains in the course of a 

trade or business in a calendar year was expanded to include payments to corporations 

and payments for property. The IRS will need resources to hire additional campus staff 

and upgrade the Filing Information Returns Electronically (FIRE) system. The FIRE 

system provides the capability for businesses and others to file required information 

returns with the IRS in a cost-effective, electronic manner. In order to manage the 

additional workload from this provision, the IRS will need to upgrade the current system 

that is unable to handle the increased volume of submissions. This initiative also will 

provide the initial campus compliance staffing (29 FTE) to establish the program, 

including hiring and training of enforcement resources, to handle the additional inventory 

of non-filer assessments expected because of the expanded Form 1099 information 

reporting requirements from this enacted provision. 

Note: The Administration has proposed to repeal this provision based on the burden it 

places on small businesses. Should this provision be repealed, the IRS would adjust its 

initiative needs accordingly. 

Implement New Health Coverage Information Reporting 

(+$34.4 million / +100 FTE)

The ACA establishes new requirements for employers and health insurance providers to 

report information to the IRS. It also creates new information sharing needs among the 

IRS, the HHS, and state health insurance exchanges. These requirements require the IRS 

to modify existing systems and develop new systems to accept, validate, process, 

aggregate, and store new information. This initiative includes IT resources to develop 

these systems and new staffing (35 FTE) to expand IRS safeguards and data protection. 

Other Direct Costs (+$0.8 million / +5 FTE 

IRS Activity Cost FTE Explanation

Chief Counsel $0.8 5 Develop policy for new reporting requirements and issue appropriate 

guidance to clarify requirements.

Total $0.8 5

Dollars in Millions
IRS-52 

Leverage Return Preparer Program to Reduce Noncompliance 

+$16,600,000 / +108 FTE

Funding for Leverage Return Preparer 

Program to Reduce Noncompliance will 

increase tax return oversight to ensure 

that tax return preparers are competent 

and that the IRS collects the right 

amount of taxes. This initiative will 

ensure uniform and high ethical 

standards of conduct for tax return 

preparers by enforcing preparer 

compliance with IRS rules, increasing 

preparer examinations, and monitoring 

and pursuing preparers engaged in fraudulent activities. This initiative is core to the 

IRS’s tax gap strategy and will increase government revenue. 

Competent tax return preparers who are well educated in the rules and subject matter of 

their field can prevent costly errors, potentially saving a taxpayer from unwanted 

problems later on and relieving the IRS from expending valuable examination and 

collection resources. Given the important role that tax return preparers play in federal tax 

administration, the IRS has a significant interest in being able to identify tax return 

preparers and monitor their tax return preparation activities. This effort also will support 

the Department’s High Priority Performance Goal of increasing voluntary compliance. 

This initiative provides funding to ensure preparers are compliant with IRS rules and to 

design a preparer activity-monitoring program that will allow the IRS to:

• Match preparer information to the filed returns; 

• Ensure return preparers are adhering to professional standards and the law; 

• Ensure return preparers are compliant with their own tax returns; and 

• Provide assurances to the taxpaying public that paid preparers are competent. 

This initiative will deploy a coordinated return preparer compliance strategy by 

conducting visits and investigating suspicious activity, especially of abusive return 

preparers. The IRS plans to use undercover shopping, where appropriate, in the 

investigation of suspicious return preparer activity. The planning and synchronizing of 

shopping activities is a labor-intensive investigative tool. In an effort to enhance 

enforcement activities to identify unscrupulous return preparers, the IRS is requesting 

funding that will support the expansion of investigative efforts to include approximately 

300 undercover shops each year. 

To increase enforcement presence, the IRS will establish multi-agency tax administration 

taskforces to seek prosecution where appropriate with a focus on eliminating fraudulently 

obtained tax refunds. Special Agents will conduct outreach efforts that address return 

Position Type/Other Costs FTE $000

Enforcement Support of the Return

Preparer Program 108 $16,600

Revenue Agent 46 7,430

Revenue Officer 3 346

Tax Technician 22 2,429

Program Analyst 1 195

Special Agent 18 4,225

Appeals Officer 1 146

Attorney 1 162

Support Staff 16 1,667

Total 108 $16,600
IRS-53 

preparer concerns year round while working with the various state taxing agencies to 

leverage resources and collaborate in prosecution efforts. 

This initiative establishes a Scheme Development Center (SDC) that will focus on 

detecting international tax avoidance schemes. The SDC will develop proactive 

approaches to protect the integrity of the U.S. tax system by:

• Developing and implementing procedures for compliance checks of international 

return preparers who specialize in preparing returns for U.S. citizens living abroad 

(expatriates) and foreign persons subject to U.S. tax on U.S. earned income; 

• Developing leads received by attachés involving abusive promoters preparing bad 

returns for citizens abroad; 

• Identifying taxpayers abusing the foreign tax credit; and

• Analyzing data received as a result of the voluntary disclosure process. 

A one-visit comprehensive return preparer compliance check will be used to verify 

compliance of a return preparer. This approach will increase direct compliance time by 

eliminating administrative redundancies of operating individual programs and shifting 

resources to a more holistic review of the preparer. While providing a full treatment 

strategy to the highest risk preparers, this approach also will support any specialized 

emphasis that might occur (e.g., greater weight to monitoring of new tax law provisions, 

in particular refundable credits that provide unique opportunities for abuse). 

Other Direct Costs

There are no other direct costs associated with this initiative.
IRS-54 

Address Appeals Workload Growth 

+$9,100,000 / +66 FTE 

Funding for Address Appeals 

Workload Growth will allow the IRS to 

increase Appeals staffing. Despite 

improvements in cycle time and 

increased efficiency in working cases, 

Appeals continues to experience rising 

inventories, and because of the nature of Appeals work, the cases are processed manually. 

Increased Appeals settlements lead to increased revenue. 

From FY 2000 through 2009, Appeals experienced significant workload growth. Case 

receipts increased by almost 126 percent, from 55,000 cases to more than 125,000 cases. 

However, Appeals staffing levels remained relatively constant. In FY 2000, Appeals had 

977 case-working staff. After years of decline in staffing levels and recent hiring, 

staffing levels reached 1,074 case-working staff in FY 2009. Although Appeals case 

workload grew 126 percent, Appeals case work staffing levels grew by less than 

10 percent. As a result, the average case inventory per Appeals caseworker increased 

from 36 cases in FY 2000 to 70 cases in FY 2010. 

The chart below illustrates the relationship between Appeals workload and staffing over 

the past decade: 

Over the next several years, Appeals workload will continue to grow. Current 

projections indicate that by FY 2012 case receipts will exceed 152,000, an increase of 

nearly 22 percent. Growth will continue beyond FY 2012 as well, reaching a projected 

181,000 case receipts in FY 2015, a 38 percent increase above current levels and a 

227 percent increase since FY 2000. 

Receipts and Technical Staffing by Fiscal Year

0

20,000

40,000

60,000

80,000

100,000

120,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Fiscal Year

Receipts

0

200

400

600

800

1,000

1,200

1,400

Technical Staffing

Receipts Technical Staffing

Position Type/Other Costs FTE $000

Appeals Workload Growth 66 $9,100

Appeals Officer 20 2,902

Revenue Officer 46 6,198

Total 66 $9,100
IRS-55 

To meet the challenges posed by the growing number of receipts, Appeals needs 

additional technical staff to handle the large number of cases it receives:

• Appeals Officers are highly trained tax specialists capable of adjudicating both 

examination and collection cases at all levels of complexity. The additional 

Appeals Officer staff will meet the need for additional teams throughout the 

country. 

• Settlement Officers are specialized case-working staff trained to handle collection 

receipts. Due to the substantial growth in these cases over the past several years, 

Appeals needs additional Settlement Officers throughout the country to help 

resolve this work efficiently and effectively. 

Other Direct Costs

There are no other direct costs associated with this initiative.
IRS-56 

Implement Uncertain Tax Position Reporting Requirements 

+$4,129,000 / +20 FTE

Funding to Implement Uncertain Tax 

Position Reporting Requirements will 

allow the IRS to provide guidance and 

certainty on tax positions and meet 

increasing taxpayer demands for this 

service. This increased workload is expected as a result of changes the IRS has proposed 

(Announcement 2010-9, Uncertain Tax Positions – Policy of Restraint) that require 

certain large business taxpayers to report information about their uncertain tax positions 

that could affect their U.S. federal income tax liability. It is a critical part of IRS’s work 

to gain greater transparency into large corporate tax returns. 

The IRS expects both the volume and complexity of workload to increase in areas listed 

below as taxpayers seek certainty on the most complex issues facing their organizations 

and tax administration.

• Advanced Pricing Agreements (APA); 

• Private Letter Rulings (PLR);

• Non-PLR Closing Agreements (CLAG); 

• Actions on Decisions (AOD); 

• Published guidance of all types; 

• Legal advice (Pre-Filing); and

• Inquiries and general information letters (as part of training).

Taxpayers subject to this requirement will provide a concise description of each uncertain 

tax position for which the taxpayer or a related entity has recorded a reserve for U.S. 

federal income tax in its financial statements. As proposed, a taxpayer also would be 

required to report those positions for which no reserve was established because the 

taxpayer expects to litigate the position and prevail in litigation. 

 

The requirement will apply to business taxpayers with assets of more than $10 million 

and a financial statement prepared under FIN 48 (i.e, a standard for accounting for 

uncertainty in income taxes recognized in an enterprise’s financial statements) or other 

similar accounting standard, such as International Financial Reporting Standards (IFRS), 

that reflects uncertain tax positions. Under this proposal, for each uncertain tax position 

identified, the taxpayer will be required to: 

• Use a new schedule to disclose their uncertain tax positions and file it with the 

taxpayer’s Form 1120, U.S. Corporation Income Tax Return, or other business tax 

returns; and

Position Type/Other Costs FTE $000

Implement New Reporting Requirements 20 $4,129

Attorney 20 4,129

Total 20 $4,129
IRS-57 

• Rank their uncertain positions from highest to lowest based on the size of the 

position (based on U.S. federal income tax reserve amounts). 

The schedule was implemented in 2010 for corporations filing Form 1120, Form 1120F, 

U.S. Income Tax Return of a Foreign Corporation, Form 1120L, U.S. Life Insurance 

Company Income Tax Return, and Form 1120PC, U.S. Property and Casualty Insurance 

Company Income Tax Return. 

Other Direct Costs

There are no other direct costs associated with this initiative.
IRS-58 

 Enhance Security and Disaster Recovery Systems Capability 

+$12,000,000 / +5 FTE 

Funding for Enhance Security and 

Disaster Recovery Systems Capability is 

part of a multi-year improvement 

strategy to support the continued 

deployment of critical disaster recovery 

capabilities. It would improve the 

resiliency of two critical business 

processes: Processing Remittances and

Processing Tax Returns. 

This initiative enhances the resiliency of existing architectures by deploying systemic 

improvements to build a more fault-tolerant infrastructure designed to reduce the 

recovery time dramatically for critical applications supporting remittance and tax return 

processing. The improvements include: 

• Enhancing mainframe and mid-tier system processing; 

• Building test and development environments; 

• Increasing network and data storage capacities;

• Deploying high-availability and geographically-dispersed data replication 

architectures; 

• Leveraging virtualized infrastructures; and

• Evaluating alternative IT architectures, such as cloud-based computing, that can 

facilitate the provisioning and scalability of IT resources for disaster recovery 

requirements.

This initiative also will ensure IRS compliance with government mandates as directed by 

Critical Infrastructure Protection and Homeland Security Presidential directives. 

Enhance Security and Disaster Recovery Systems Capability (+$12.0 million / +5 FTE)

Recent business impact and technical assessments confirmed that the IRS does not have 

adequate redundancy capabilities for critical tax processing systems. In the event of a 

disaster, the IRS would not be able to continue processing revenue, returns, and taxpayer 

refunds efficiently and provide customer service in a timely manner. 

The IRS needs to maintain the capabilities that support its critical business processes. 

The two processes covered in this initiative represent the highest priority critical business 

processes in need of disaster recovery capabilities. In addition, Homeland Security 

Presidential Directive 7 has resulted in designating several IRS core tax processing 

systems that directly support Processing Remittances and Processing Tax Returns as an 

essential part of the national Critical Infrastructure Protection (CIP) Program. 

Position Type/Other Costs FTE $000

Develop Security and Disaster Recovery

System Capability 5 $12,000

IT Project Specialist 5 619

IT Equipment 8,381

Software 1,000

Telecommunication Equipment 1,250

Contractor Services 750

Total 5 $12,000
IRS-59 

The IRS CIP assets are part of the overall federal government continuity program that 

supports the requirements for maintaining national economic stability, national security, 

public morale, and confidence in government. To meet these requirements, these critical 

assets must have sustained systems architectures that ensure availability through 

resiliency and redundancy. 

The IRS needs a recovery time of 12 to 36 hours to allow continued processing of 

revenue and taxpayer refunds. With the current infrastructure, the recovery of the 

supporting systems will likely take several days, and in some cases weeks. Both internal 

and external assessments confirm inadequate disaster recovery capabilities for major 

mainframe-based legacy remittance and tax processing systems. These inadequacies 

range from no disaster recovery infrastructure to insufficient infrastructure operating at 

decreased capacity resulting in an inability to meet acceptable recovery time objectives, 

degraded user capabilities, and extended processing times. Key applications, such as 

e-Services, which support tax return processing are currently unrecoverable. The profile 

also shows that other applications (such as the Master File) that support remittance 

processing and several other critical business processes can be recovered fully only after 

five days.

The IRS estimates that each hour of unavailability of the Electronic Filing (e-File) system

could potentially affect $199 million in refunds. Moreover, 83 percent of the systems 

that support the critical processes, Processing Remittances and Processing Tax Returns, 

are either currently unrecoverable or have recovery times that exceed 36 hours. 

Recent analysis of IRS remittance and tax return processing workloads indicate that 

extended application recovery times would affect the ability of the IRS to deposit federal 

tax receipts. In April, deposits were estimated at $814 million per day representing 

approximately $43.4 million in interest revenue. These figures do not include electronic, 

bank lockboxes or federal tax deposit coupons, which, if added, would significantly 

increase the daily tax receipts. In addition, a major outage would affect an estimated 

$952 million in refund processing for each day of downtime. 

Some of the specific improvements include: 

• Implementing an automated data replication solution ($8.7 million). This would

reduce the recovery window for major legacy mainframe applications. The 

potential reduction of the recovery window for Master File would be from 

five days to nine hours; 

• Upgrading disk storage capacity to recover the application development and 

testing environment ($1.8 million). This upgrade would significantly reduce the 

current 60-day window to recover this environment. This is critical for 

applications such as Master File; and

• Upgrading the network capacity ($1.5 million). The upgrades would expand 

IRS’s bandwidth, which determines the amount of data that can be carried from 

one point to another in a given time period (usually a second). Expanding the 
IRS-60 

bandwidth would provide the capacity necessary to support and fully realize the 

benefits of automated data replication initiatives. 

Other Direct Costs

There are no other direct costs associated with this initiative.
IRS-61 

Update Integrated Financial System (IFS) 

+$27,500,000 / +5 FTE 

Funding for Update Integrated Financial 

System will complete the first phase of 

an initiative to update IFS. 

Updating to SAP ERP 6.0 software 

provides the following benefits:

• Ensures compliance with future federal accounting requirements, including 

Government-Wide Accounting (GWA) standards and Common Government-wide 

Accounting Classification (CGAC) requirements;

• Moves to an open-services technology platform to allow implementation of 

standardized interfaces and communication with other federal systems with 

minimal configuration; 

• Allows automatic functional updates to implement SAP enhancements without 

costly upgrades;

• Provides standardized federal accounting functionality in compliance with federal 

financial management requirements;

• Eliminates current work-around processes necessary to support adjustments and 

reimbursable receivables activities not provided in the current system; 

• Eliminates the year-end blackout period and multiple budget versions; and

• Eliminates the month-end accrual process because liabilities would post upon 

receipt.

IFS runs on SAP 4.6C, which is more than ten years old, and the IRS is the only federal 

agency using this old software. Since January 2007, SAP no longer provides functional 

updates for Version 4.6C and will not make changes to accommodate new legislative or 

other federal accounting requirements, including CGAC and GWA standards. SAP 

provided support through an extended maintenance contract through December 2010. 

Beginning in 2011, SAP is providing only customer-specific support, charging 

maintenance plus time and materials to keep 4.6C operational. Thus, IRS is paying a 

premium to maintain the current level of maintenance support. Upgrade implementation 

will take approximately 18 months, and therefore, FY 2012 funding would result in 

implementation in FY 2014. 

If the IRS cannot implement subsequent new federal accounting requirements, such as 

CGAC or changes to existing standards, IRS compliance with federal financial 

management standards will be jeopardized. Attempts to change the base code of the 

unsupported software could increase upgrade costs or be so invasive as to prohibit future 

upgrades, as occurred with the IRS legacy accounting system. 

The risks of moving to SAP ERP 6.0 are low because it requires limited data conversion, 

limited configuration management, and minimal changes to business processes, 

Position Type/Other Costs FTE $000

Integrated Financial System (IFS) 5 $27,500

IT Project Specialist 5 770

Contractor Services 26,730

Total 5 $27,500
IRS-62 

interfaces, and reports. Over the past five years, 13 federal agencies successfully moved 

from SAP 4.6C to 6.0, thus demonstrating the low-risk nature of the move. This was 

validated by a contractor study that indicated that updating to SAP ERP 6.0 was the best 

option for IRS. 

There are no other direct costs associated with this initiative.

Other Direct Costs
IRS-63 

Leveraging Data to Improve Compliance 

+$1,400,000 / +5 FTE 

Funding for Leveraging Data to Improve 

Compliance will capitalize on the recent 

significant increase in data reported to 

the IRS, with the goal of increasing 

compliance.

The IRS is focused on using a data-driven approach to continually innovate and improve 

its programs. This investment will capitalize on the recent significant increase in data 

reported to the IRS, with the goal of increasing compliance and evaluating 

IRS-administered programs. The IRS is administering multiple new tax provisions and 

programs in an increasingly complex tax system. Inadequate analysis of the information 

generated by these new activities will hamper improvements in compliance and tax 

administration. 

While the IRS has robust analytical programs and capabilities, they align with existing 

organizational structures and address tactical performance targets. The existing programs 

have difficulty merging and mining the increased amount of data now reported to the 

IRS. 

This initiative will use advances in analytical techniques, such as machine learning, 

neural networks, and data mining, to integrate business and technology aspects to 

improve core business operations and tax programs. The IRS will establish an office 

dedicated to new methods of analysis not tied to annual performance targets with a goal 

of achieving breakthrough insights into compliance. 

To facilitate this effort, the IRS must merge large volumes of disparate data elements into 

a format usable by advanced business analytics. This initiative will:

• Identify emerging areas of non-compliance;

• Promote the use of advanced modeling techniques that, in combination with IRS 

databases, will provide new insights into taxpayer behavior and into how different 

types of tax-related provisions affect compliance rates among taxpayers; and

• Address the changing nature of IRS’s workload and result in improvements in 

current analytical techniques to support existing programs. For example, current 

machine-learning algorithms developed for workload selection for high-income 

audits would be improved through new techniques. 

Other Direct Costs

There are no other direct costs associated with this initiative.

Position Type/Other Costs FTE $000

Office of Research Analysis & Statistics 5 $1,400

Computer Scientist 5 965

Contractor Services 435

Total 5 $1,400
IRS-64 

Enhance Physical Security for Federal Employees

+$15,481,000 / +10 FTE 

The February 2010 attack against the 

IRS in Austin, Texas, killed one IRS 

employee and injured several others. 

Funding for Enhance Physical Security 

for Federal Employees will provide the 

investments needed to update and/or 

upgrade the physical security of IRS 

facilities. The investments enhance the 

overall security of IRS employees in the 

work place, while maintaining open 

access for the taxpayers that they serve.

Enhance Security Guard Services (+$10.0 million)

The additional resources will enhance security by providing guard presence in Taxpayer 

Assistance Centers (TACs) during the filing season. IRS employees are more exposed to 

irate or disgruntled taxpayers in TACs. The presence of a security guard can assist in 

preventing or defusing dangerous situations. 

The IRS currently operates 401 TACs of which 26 sites have a permanent guard presence 

and an additional 36 sites have guards during the January 1 through April 15 filing season 

only. The IRS developed criteria to identify the TAC sites with the greatest risk. These 

criteria considered the following: 

• The number of incidents; 

• Presence of Criminal Investigation (CI) at the site; 

• Potentially dangerous taxpayers among contact taxpayer population; and

• Neighborhood crime statistics. 

The requested resources fund expanded guard services at those sites with the greatest

risk. 

Improve Facility Security (+$1.6 million)

As a result of the Austin attack, the IRS is conducting a security reassessment of all

facilities to identify vulnerabilities to employees, information, equipment, and structures. 

Risk assessments address all layers of security measures, including geography, 

demographics, crime statistics, effectiveness of existing security, and the age and types of 

security equipment in place. The resources will be used to purchase and install 

equipment to address vulnerabilities identified through the reassessment process. 

Position Type/Other Costs FTE $000

Enhance Security Guard Services $10,000

Improve Security Facility $1,569

Address Security Threats 10 $3,912

Special Agent 8 1,852

Attorney 1 196

Support Staff 1 152

IT Equipment 1,712

Total 10 $15,481
IRS-65 

Address Security Threats (+$3.9 million / +10 FTE)

There has been an increase in threats against the U.S. Government in general, and the IRS 

is one of the most public faces of government. The IRS must ensure that its contacts with 

individuals whose intention may be to incite violence are identified, evaluated, and dealt 

with quickly and appropriately. CI works closely with partners at Treasury Inspector 

General for Tax Administration (TIGTA) involved in the domestic terrorism arena to 

address external security risks and protect against external threats to the IRS. This 

initiative not only addresses threats to the IRS, but also encompasses all domestic 

terrorism.

This initiative will provide additional resources to identify and investigate individuals or 

entities whose anti-government or anti-tax rhetoric exhibit behavioral traits associated 

with domestic terrorism. CI will focus on the recognition of potential threats or activities 

that imperil the safety of IRS and other government employees or the physical security of 

their facilities. 

This initiative will allow the IRS to evaluate leads on potential targets and threats; 

develop financial investigations that detect and disrupt domestic terrorist fundraising and 

support networks; work with other law enforcement partners to identify and investigate 

individuals and groups that violate criminal charges within IRS’s jurisdiction; and 

support the following activities: 

• Staff fully the Joint Terrorism Task Forces (JTTFs) and the Attorney General’s 

Advisory Counsels (AGACs) nationwide; 

• Train and develop agents with the skill sets necessary to carry out assignments, 

rapidly follow-up on leads developed by the Garden City Counterterrorism Lead 

Development Center (LDC) in Garden City, New York; and 

• Obtain secure network computers that will allow the IRS to communicate 

securely and efficiently with the intelligence and law enforcement communities, 

as well as allow Special Agents to communicate classified information within the 

IRS.

Funding for 29 Treasury Secure Data Network (TSDN) computers will allow the secure 

and efficient communication of classified information within the IRS and between IRS 

and other intelligence and law enforcement communities. The new computer and 

network infrastructure system will provide access to Secret Internet Protocol Router 

Network (SIPRNet) and the Department of Defense classified communications network. 

Other Direct Costs

There are no other direct costs associated with this initiative.
IRS-66 

Implement Individual Coverage Requirement and Employer Responsibility Payments 

+$62,477,000 / +65 FTE 

This initiative will fund the development 

of the information technology, 

infrastructure, and systems to implement 

the provisions of Subtitle F of Title I of 

the Affordable Care Act (ACA) (Public 

Law 111-148) that establish shared 

responsibility payments for both 

individuals and employers. 

Beginning in 2014, the ACA requires individuals who are able to afford health insurance 

to obtain minimum essential coverage or pay a penalty. If affordable coverage is not 

available, they will be eligible for an exemption. Other exemptions also may apply. 

Also beginning in 2014, the ACA requires large employers – those with 50 or more 

full-time employees – to make a shared responsibility payment if they do not provide 

affordable coverage to their employees, and at least one of their employees has enrolled 

in an qualified health plan on an exchange with respect to which a premium assistance 

tax credit is allowed or paid. 

This initiative will fund the significant revisions to existing tax administration 

information technology systems, as well as development of new systems to administer 

these provisions. For example, the IRS must make modifications to existing tax systems 

as well as forms and publications to administer these provisions. Additionally, both 

provisions involve new information reporting that will streamline IRS verification and 

compliance efforts. Finally, the IRS must implement appropriate business rules for 

document matching, conduct penalty calculations and send notices to individuals and 

employers, and integrate ACA requirements into current collection, case management, 

and fraud detection systems. 

Other Direct Costs

There are no other direct costs associated with this initiative.

Position Type/Other Costs FTE $000

Implement Affordable Care Act (ACA) 65 $62,477

Administer Individual Coverage Requirement 

and Employer Responsibility Payments

IT Project Specialist 62 10,823

Program Management 3 600

Contractor Services 42,980

Computer Equipment 7,033

Software 1,041

Total 65 $62,477
IRS-67 

Continue Migration from Aging Tax Administration System 

The FY 2012 BSM request of $333.6 million and 453 FTE will fund the activities of the 

BSM projects as described in the table below. 

This funding will improve taxpayer service and enforcement, and reduce the costs and 

risks of operating parallel tax processing systems. The IRS will update and settle 

individual taxpayer accounts in 24 to 48 hours with current, complete and authoritative 

data, and will facilitate expanded opportunities for compliance, increase analytical 

capabilities and accelerate the identification of fraudulent trends.

BSM FY 2012 funding allocation is as follows: 

Business Systems Modernization Projects/Initiatives FY 2010 

Enacted 

FY 2011

Annualized

CR Level

FY 2011 

President's 

Budget 

Request 

FY 2012 

Request1,2 

$ Change

FY 2011 

President's

Budget to

FY 2012 

Request 

$ Change

FY 2011 

Annualized

CR Level to

FY 2012 

Request 

Application Migration to CADE 2 (Taxpayer Account Database)

 • Address Federal Financial Management System Requirements

 (FFMSR) compliance for most individual taxpayer accounts.

• Implement a modular application platform for Penalty and Interest (P&I)

 calculation with documented standard posting rules to be used by all

 systems.

• Replace portions of current CADE 2 applications with state-of-the-art

 modular applications using a modern programming language 

 (e.g., Java) and tools.

Current CADE

Implement tax law changes and enhance the overall security posture.

Modernized e-File

Continue the development of Form 94X family of forms, Employment/ 

Unemployment Tax and begin the logical design of Form 1041, U.S. 

Income Tax Return for Estates and Trusts . 50,000 39,100 39,100 20,500 (18,600) ($18,600)

Core Infrastructure

Provide services in architecture, engineering and deployment of 

standardized, consolidated, virtual and secure modernized development 

environments (DITE) and shared infrastructure components (Employee 

User Portal, Registered User Portal, and Security) of the production 

environments.

Architecture, Integration and Management

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 11,712 10,000 10,000 2,622 (7,378) (7,378)

Subtotal Capital Investments $217,897 $217,193 $316,719 $264,267 ($52,452) $47,074

BSM Labor3 46,000 46,704 70,189 69,333 (856) 22,629

Total BSM $263,897 $263,897 $386,908 $333,600 ($53,308) $69,703

2

The BSM appropriation includes a $1,026,000 program efficiency reduction. 

3

The BSM appropriation includes a $450,000 decrease to reflect the FY 2011 pay freeze and a $168,000 increase for the FY 2012 inflation adjustment for health benefits and FERS.

32,000 38,500 37,700 (800)

40,000 19,000 (21,000) (19,000)

FY 2012 BSM Project Activities

Dollars in Thousands

38,000 38,000

$58,100 $70,008 $152,119 $156,800 $4,681 $86,792

1

The BSM appropriation excludes $52,000,000 for the operations and maintenance of deployed modernization project releases. These costs are included in the Operations Support appropriation.

5,700

28,085 28,085 37,000 27,645 (9,355) ($440)

32,000
IRS-68 

Customer Account Data Engine 2 (CADE 2) ($156.8 million)

The IRS request will continue the development of the CADE 2 Program. The CADE 2 

Program will provide an authoritative database with daily processing capabilities for all 

individual taxpayers and build the foundation for a more efficient and effective tax 

administration program. An analytical data store will provide business users with tools to 

use the CADE 2 authoritative database more effectively for improved compliance and 

customer service. 

CADE 2 establishes a set of capabilities that will allow the IRS to achieve business 

benefits across the tax processing lifecycle:

• Daily processing/posting of individual taxpayer returns filed and other 

transactions to provide faster processing of taxpayer refunds and payments and 

prompt adjustments to taxpayer accounts reducing the credit interest paid by 

government; 

• Exception processing/posting of individual taxpayer returns filed to prevent or 

reduce erroneous refunds; 

• Operational database that supports enterprise-wide data access strategy to provide 

efficiencies, multiple account analysis, and more current and timely account 

balance information;

• Analytical data store, Integrated Production Model (IPM), to support the 

enterprise-wide data access strategy; fraud detection through data analytics and 

filtering (i.e., expanding capabilities to analyze data and establish patterns against 

which all individual taxpayer data can be compared); enhanced compliance 

workload selection and resource allocation; and advanced data analytics and data 

mining (i.e., expanding capabilities to more timely and effectively analyze 

taxpayer data from different perspectives and summarize it into useful 

information); and

• Integrated, state-of-the-art processing and data infrastructure to improve service 

and reduce risk, providing: 

o A single set of authoritative, modular applications that will facilitate 

system maintenance and allow for greater flexibility and faster response to 

legislative changes; 

o A common module for a single, authoritative penalty and interest 

computation resulting in consistent and accurate calculations that allow 

daily updates to the Integrated Data Retrieval System (IDRS) for early 

viewing of posted information; 

o Enhanced security capabilities to guard from threats and violations of 

system data; and

o Comprehensive disaster recovery capabilities.
IRS-69 

The CADE 2 Program will be implemented in two stages:

• Transition State 1 (TS 1) – In January 2012, the IRS will deliver a database that 

will house all individual taxpayer accounts and update daily from the individual 

taxpayer account core-processing applications, resulting in faster refunds for 

millions of individual taxpayers. The key IRS customer service operational 

database, IDRS, will have the benefit of more timely posted data. 

The solution will populate the IPM analytical data store and provide business 

users with enhanced tools to more effectively use the data from compliance and 

customer service. 

The TS1 solution will: 

o Implement required security controls; 

o Leverage security capabilities that are available in the Security and 

Communications System (SACS) for account viewing; 

o Improve information security; and 

o Provide analytical access to the CADE 2 data residing in the analytical 

data store and enhanced tools to access the data and provide opportunities 

for enhanced compliance and improved service. 

• Transition State 2 (TS 2) – In FY 2012, the IRS will build upon the foundation 

established in TS 1 and begin the development of TS 2. TS 2 will focus on 

resolving financial material weaknesses and building or modifying existing 

applications for direct interaction with the target database. This solution will 

leverage elements of the current Individual Master File and current CADE for 

some functions. A combination of current state and transitional components will 

be used to fill the function needs of individual taxpayer account processing. 

Key elements of Transition State 2 will:

o Incorporate Federal Financial Management Systems Requirements 

(FFMSR) compliance for most individual taxpayer accounts; 

o Implement a modular application platform for Penalty and Interest (P&I) 

calculation with documented standard posting rules to be used by all 

systems, to ensure integrity of financial data and more consistent treatment 

of taxpayers; 

o Replace portions of current CADE 2 applications with state-of-the-art, 

modular applications using a modern programming language (e.g., Java) 

and tools; 

o Establish a standardized, integrated platform and environments for 

development, integration, testing, and production; and 

o Implement essential changes to downstream systems required to support 

TS 2, with limited capabilities for enhanced data analytics leveraging 

individual taxpayer account database for improved compliance. 
IRS-70 

The IRS request will implement the necessary tax law changes for deployment during the 

2012 Filing Season and begin the shutdown process for the eventual retirement of this 

system. 

Current Customer Account Data Engine ($19.0 million)

The IRS request will complete the final phase (Release 7) of a three-phased 

implementation of the 1040 family of forms. This includes the 125 remaining 

1040-related forms and schedules, including Forms 1040A and 1040EZ. 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 technologies, and service 

benefits to external stakeholders. With MeF, the IRS stores all tax return data in an XML 

format in a modernized Tax Return Database (MTRDB) so authorized viewers see an 

entire tax return online. 

Modernized e-File (MeF) ($20.5 million)

The $20.5 million request for MeF will:

• Complete Release 8 physical design and development of Forms 94X, Employment 

/ Unemployment Tax, to the MeF platform ($10.5 million). Forms that would be 

implemented 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, and Form 945, Annual Return of 

Withheld Federal Income Tax. 

• Complete Release 9, logical design implementation of Form 1041, U.S. Income 

Tax Return for Estates and Trusts, ($10 million).

By adding Form 94X and Form 1041 to the MeF platform, the trading partners and 

taxpayers realize the following benefits:

• Extensive business rule validation and error checking to help ensure the accuracy 

of the tax return; 

• Sophisticated math error validation to increase the likelihood that the tax return 

will be successfully processed; 

• Ability to attach all documents supporting the data on the tax returns; and 

• Ability to provide a justification to the taxpayer/trading partner when the IRS 

rejects the tax return. 

Productivity and efficiency gains include: 

• Improving Taxpayer Service – IRS customer service representatives will provide 

responses to taxpayers more quickly by viewing the original Forms 94X and 

1041 online and in real-time, eliminating back-end rekeying and data entry. 
IRS-71 

Without MeF, only a limited subset of these documents would be available and 

would result in a time-consuming process of source document retrieval. 

• Enhancing Compliance and Enforcement Operations – Online capabilities and 

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

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

accurate manner. 

• Increasing the Production Volumes – A return submitted through the MeF 

encounters fewer processing errors than do paper returns.

• Eliminating the need for the legacy 94X e-File system – The IRS will be able to 

disable the capability for the legacy Electronic Management System to accept this 

family of returns. 

The request will continue to support Core Infrastructure in providing mission critical 

services in designing, engineering, testing and deploying standardized, consolidated, 

virtual and secure modernized development and production environments for use by 

BSM projects. 

Core Infrastructure ($37.7 million) 

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 

telecommunication services, security, and operations management. 

This approach facilitates IRS’s ability to develop 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, and configuration 

management. 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.

In FY 2012, ISS will place increased emphasis on effectively engineered common 

IT infrastructure services, security, and infrastructure enhancement initiatives that 

affect the BSM projects, while continuing to support efforts begun in FY 2010 

related to enhanced availability and portal improvements. ISS will continue to 
IRS-72 

provide capacity planning and performance engineering services for BSM 

projects to address their effect on the modernized infrastructure environments 

because of an increase in the number of electronic documents, on-line 

transactions, and on-line tax filers. 

• 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, 

CADE, and CADE2 that allows geographically distributed developers access to 

standardized tools, information, and services. EITE provides a more structured, 

production-like, comprehensive integration and testing environment necessary to 

rigorously test end-to-end system capabilities and performance before release into 

the BSM production environment. 

In FY 2012, DITE will continue to support the BSM projects through deployment 

and acceptance in the production environment; improve the efficiency of server 

administration; and engineer, install, maintain and support core DITE 

infrastructure to include web portals and common IT infrastructure services. It 

also will provide a mechanism for remote access to core DITE data by authorized 

users; and provide maintenance of a suite of standard software development and 

testing tools for use on BSM projects. 

Architecture, Integration and Management ($27.7 million)

The IRS request will provide continued support to the AI&M program. This program 

provides the engineering management capabilities essential to delivering a program of the 

magnitude, nature, and complexity of BSM and delivers essential IRS systems strategy, 

architecture, and engineering capabilities to the major modernization projects across all 

technology platforms: IT Infrastructure, Business Applications, Data Management, and 

IT Security. AI&M translates enterprise and project objectives into targeted, actionable 

investments to provide the necessary enterprise technical framework and direction for 

cohesive and successful modernization. 

Management Reserve ($2.6 million)

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

adjustments and fluctuates from year to year to accommodate changes in funding levels. 

The IRS requests a total of $69.3 million ($69.2 million for BSM labor and $0.1 million 

for inflation costs) to provide the government labor costs associated with the 

development of projects within the BSM portfolio. 

Labor ($69.3 million / 453 FTE)
IRS-73 

O&M of Deployed Modernization Systems (+$52.0 million / +5 FTE)

This increase provides funding in the Operations Support appropriation for the operations 

and maintenance (O&M) costs of deployed modernization systems. BSM systems are 

developed and deployed incrementally. The IRS will use these funds to pay for the O&M 

costs of the deployed BSM systems. 
IRS-74 

2.2 – Operating Levels Table

Dollars in Thousands 

Appropriation Title: Internal Revenue Service FY 2010

Enacted 

Level 1,2

FY 2011

President's 

Budget

Congressional 

Action 

including 

Rescission

FY 2011

Annualized 

CR Level 2 

Proposed 

Reprogram.

FY 2011 

Proposed 

Operating 

Level

FY 2012

Request 

Level 2

% 

Change 

FY 2011 

to 

FY 2012

FTE 94,766 96,419 0 94,766 0 94,766 99,878 5.4%

Object Classification:

11.1 Full-Time Permanent Positions $6,402,855 $6,394,057 $0 $6,402,855 $0 $6,402,855 6,893,278 7.7%

11.3 Other than Full-Time Permanent Positions 103,681 423,013 0 103,681 0 103,681 126,721 22.2%

11.5 Other Personnel Compensation 286,434 308,396 0 286,434 0 286,434 316,749 10.6%

11.8 Special Personal Services Payments 18,173 18,445 0 18,173 0 18,173 18,264 0.5%

11.9 Personnel Compensation (Total) $6,811,143 $7,143,911 $0 $6,811,143 $0 $6,811,143 $7,355,012 8.0%

12.0 Personnel Benefits 1,814,796 1,937,543 0 1,814,796 0 1,814,796 2,034,508 12.1%

13.0 Benefits to Former Personnel 55,579 57,106 0 55,579 0 55,579 51,392 -7.5%

21.0 Travel 284,016 255,980 0 284,016 0 284,016 259,269 -8.7%

22.0 Transportation of Things 31,517 33,170 0 31,517 0 31,517 33,144 5.2%

23.1 Rental Payments to GSA 646,393 676,738 0 646,393 0 646,393 685,010 6.0%

23.2 Rent Payments to Others 16,039 592 0 16,039 0 16,039 15,569 -2.9%

23.3 Communications, Utilities, & Misc 482,440 434,883 0 482,440 0 482,440 461,617 -4.3%

24.0 Printing & Reproduction 72,030 67,503 0 72,030 0 72,030 64,063 -11.1%

25.1 Advisory & Assistance Services 175,611 126,385 0 175,611 0 175,611 119,869 -31.7%

25.2 Other Services 649,390 718,802 0 649,390 0 649,390 1,028,350 58.4%

25.3 Purchase of Goods & Services from Govt. Accounts 190,552 204,826 0 190,552 0 190,552 174,263 -8.5%

25.4 Operation & Maintenance of Facilities 157,258 217,899 0 157,258 0 157,258 168,478 7.1%

25.5 Research & Development Contracts 8,506 8,478 0 8,506 0 8,506 8,482 -0.3%

25.6 Medical Care 18,716 12,616 0 18,716 0 18,716 13,498 -27.9%

25.7 Operation & Maintenance of Equipment 89,245 129,660 0 89,245 0 89,245 157,566 76.6%

25.8 Subsistence & Support of Persons 6,644 6,500 0 6,644 0 6,644 6,788 2.2%

26.0 Supplies and Materials 96,145 70,555 0 96,145 0 96,145 84,092 -12.5%

31.0 Equipment 456,779 476,244 0 456,779 0 456,779 444,096 -2.8%

32.0 Lands and Structures 47,569 17,857 0 47,569 0 47,569 88,141 85.3%

33.0 Investments & Loans 0 0 0 0 0 0 0 0.0%

41.0 Grants, Subsidies 28,100 28,105 0 28,100 0 28,100 22,605 -19.6%

42.0 Insurance Claims & Indemn 2,737 2,712 0 2,737 0 2,737 2,746 0.3%

43.0 Interest and Dividends 0 0 0 0 0 0 0 0.0%

44.0 Refunds 0 0 0 0 0 0 0 0.0%

91.0 Unvouchered 4,918 5,205 0 4,918 0 4,918 5,349 8.8%

Total Budget Authority $12,146,123 $12,633,270 $0 $12,146,123 $0 $12,146,123 $13,283,907 9.4%

Appropriations:

Taxpayer Services $2,278,830 $2,321,975 $0 $2,278,830 $0 $2,278,830 $2,345,133 2.9%

Enforcement 5,504,000 5,797,400 0 5,504,000 0 5,504,000 5,966,619 8.4%

Operations Support 4,083,884 4,108,000 0 4,083,884 0 4,083,884 4,620,526 13.1%

Business Systems Modernization 263,897 386,908 0 263,897 0 263,897 333,600 26.4%

Health Insurance Tax Credit Administration 15,512 18,987 0 15,512 0 15,512 18,029 16.2%

Total Budget Authority $12,146,123 $12,633,270 $0 $12,146,123 $0 $12,146,123 $13,283,907 9.4%

1 FY 2010 Enacted represents the approved FY 2010 Operating Plan.

2 Reflects implementation of the IRS Material Group Code project. This project realigned costs to more closely conform to general ledger account and OMB object class definitions. 
IRS-75 

2.3 – Appropriation Detail Table 

 Dollars in Thousands 

Internal Revenue Service

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

New Appropriated Resources:

Taxpayer Services 31,607 $2,258,882 31,063 $2,278,830 31,063 $2,278,830 31,686 $2,345,133 2.01% 2.91%

Enforcement 50,400 5,492,985 50,983 5,504,000 50,983 5,504,000 54,582 5,966,619 7.06% 8.41%

Operations Support 12,262 4,008,115 12,372 4,083,884 12,372 4,083,884 13,142 4,620,526 6.22% 13.14%

Business Systems Modernization 337 177,208 333 263,897 333 263,897 453 333,600 36.04% 26.41%

Health Insurance Tax Credit Administration 12 15,478 15 15,512 15 15,512 15 18,029 0.00% 16.23%

Subtotal New Appropriated Resources 94,618 $11,952,668 94,766 $12,146,123 94,766 $12,146,123 99,878 $13,283,907 5.39% 9.37%

Other Resources:

Recoveries 6,338

Offsetting Collections - Reimbursable 659 135,505 659 137,758 659 137,279 659 138,272 0.72%

Available multi-year/no-year funds 164,836 196,181 184,630 41,248 -77.66%

50% Carryover 33,767 35,947

Transfers In/Out (12,371)

Mandatory Appropriations - User Fees 93 175,529 93 175,529 204,428 204,428

Subtotal Other Resources 752 $509,637 752 $539,382 659 $526,337 659 $383,948 0.00% -27.05%

Total Resources Available for Obligation 95,370 $12,462,305 95,518 $12,685,505 95,425 $12,672,460 100,537 $13,667,855 5.36% 7.85%

% Change

Enacted1 to FY 2012

1 The FY 2010 Enacted column represents the approved FY 2010 Operating Plan.

FY 2011

Resources Available for Obligation

FY 2010 FY 2012

Request

FY 2010 FY 2011

Obligations Annualized CR Level
IRS-76 

2B – Appropriation Language and Explanation of Changes

Appropriations Language Explanation of Changes

DEPARTMENT OF THE TREASURY

INTERNAL REVENUE SERVICE

TAXPAYER SERVICES

(including transfer of funds) 

For necessary expenses of the Internal Revenue Service 

to provide taxpayer services, including pre-filing 

assistance and education, filing and account services, 

taxpayer advocacy services, and other services as 

authorized by 5 U.S.C. 3109, at such rates as may be 

determined by the Commissioner, $2,345,133,000, of 

which not less than $5,100,000 shall be for the Tax 

Counseling for the Elderly Program, of which not less 

than $9,500,000 shall be available for low-income 

taxpayer clinic grants, of which not less than 

$8,000,000, to remain available until September 30, 

2013, shall be available for a Community Volunteer 

Income Tax Assistance matching grants program for tax 

return preparation assistance, and of which up to 

$6,000,000 may be transferred as necessary from this 

account to “Health Insurance Tax Credit 

Administration” upon advance notification of the 

Committees on Appropriations: Provided, That this 

transfer of authority shall be in addition to any other 

transfer authority provided in this Act. 

ENFORCEMENT

(including transfer of funds) 

For necessary expenses for tax enforcement activities of 

the Internal Revenue Service to determine and collect 

owed taxes, to provide legal and litigation support, to 

conduct criminal investigations, to enforce criminal 

statutes related to violations of internal revenue laws 

and other financial crimes, to purchase (for police-type 

use, not to exceed 850) and hire passenger motor 

vehicles (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, 

$5,966,619,000, of which not less than $60,257,000 

The IRS supports adequate 

funding for the Taxpayer 

Advocate Service. Specifying 

the TAS funding level in law 

prevents the IRS from 

proposing an operating plan 

that allocates resources in the 

best interest of taxpayers.

Several subsequent laws have 

extended this program, 

provided additional funding to 

implement and administer the 

program, and increased the 

amount of the subsidy to 80 

percent of premium costs, the 

most recent being the 

Omnibus Trade Act of 2010 

(Public Law 111-344). 

This change represents a 

contingency in case the 

increased workload continues 

in FY 2012. 
IRS-77 

shall be for the Interagency Crime and Drug 

Enforcement program: Provided, That of the amount 

provided under this heading, not less than $936,000,000 

shall be for the additional appropriation for Internal 

Revenue Service tax compliance activities included as 

an adjustment to the discretionary spending limits 

pursuant to the Concurrent Resolution on the Budget. 

OPERATIONS SUPPORT

(including transfer of funds) 

For necessary expenses of the Internal Revenue Service 

to support taxpayer services and enforcement programs, 

including rent payments; facilities services; printing; 

postage; physical security; headquarters and other IRSwide administration activities; research and statistics of 

income; telecommunications; information technology 

development, enhancement, operations, maintenance, 

and security; the hire of passenger motor vehicles 

(31 U.S.C. 1343(b)); and other services as authorized by 

5 U.S.C. 3109, at such rates as may be determined by 

the Commissioner; $4,620,526,000, of which up to 

$250,000,000 shall remain available until September 

30, 2013, 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, 

2014, for research; of which not to exceed $2,000,000 

shall be for the Internal Revenue Service Oversight 

Board; of which not to exceed $25,000 shall be for 

official reception and representation: Provided, That of 

the amounts provided under this heading, such sums as 

are necessary shall be available to fully support tax 

enforcement activities, including not less than 

$321,000,000 for the additional appropriation for 

Internal Revenue Service tax compliance activities 

included as an adjustment to the discretionary spending 

limits pursuant to the Concurrent Resolution on the 

Budget. 

BUSINESS SYSTEMS MODERNIZATION

(including transfer of funds) 

For necessary expenses of the Internal Revenue 

Service's business systems modernization program, 

This FY 2012 two-year 

authority increase for 

information technology will 

ensure IRS’s ability to 

obligate funds for the IT 

projects needed to implement 

the Affordable Care Act of 

2010. 
IRS-78 

$333,600,000, to remain available until September 30, 

2014, for the capital asset acquisition of information 

technology systems, including management and related 

contractual costs of said acquisitions, including related 

Internal Revenue Service labor costs, and contractual 

costs associated with operations authorized by 5 U.S.C. 

3109: Provided, That, with the exception of labor costs, 

none of these funds may be obligated until the Internal 

Revenue Service submits to the Committees on 

Appropriations a plan for expenditure that: (1) meets 

the capital planning and investment control review 

requirements established by the Office of Management 

and Budget, including Circular A-11; (2) complies with 

the Internal Revenue Service's enterprise architecture, 

including the modernization blueprint; (3) conforms 

with the Internal Revenue Service's enterprise life cycle 

methodology; (4) is approved by the Internal Revenue 

Service, the Department of the Treasury, and the Office 

of Management and Budget; (5) has been received by 

the Government Accountability Office; and (6) complies 

with the acquisition rules, requirements, guidelines, and 

systems acquisition management practices of the 

Federal Government. 

HEALTH INSURANCE TAX CREDIT 

ADMINISTRATION

(including transfer of funds) 

For expenses necessary to implement the health 

insurance tax credit included in the Trade Act of 2002 

(Public Law 107-210), $18,029,000. 

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 
IRS-79 

dealing courteously with taxpayers, and in crosscultural relations. 

Sec. 103. The Internal Revenue Service shall institute 

and enforce policies and procedures that will safeguard 

the confidentiality of taxpayer information. 

Sec. 104. Funds made available by this or any other Act 

to the Internal Revenue Service shall be available for 

improved facilities and increased staffing to provide 

sufficient and effective 1-800 help line service for 

taxpayers. The Commissioner shall continue to make the 

improvement of the Internal Revenue Service 1-800 help 

line service a priority and allocate resources necessary 

to increase phone lines and staff to improve the Internal 

Revenue Service 1-800 help line service.

Sec. 105. Of the funds made available by this Act to the 

Internal Revenue Service, not less than $8,490,000,000 

shall be available only for tax compliance, of which not 

less than $1,257,000,000 shall be available for the 

additional appropriation for Internal Revenue Service 

tax compliance activities included as an adjustment to 

the discretionary spending limits in the Concurrent 

Resolution on the Budget. 
IRS-80 

2C – Legislative Proposals 

The FY 2012 Budget Request includes a number of legislative proposals intended to 

improve tax compliance with minimum taxpayer burden. These proposals will 

specifically target the tax gap and generate more than $10 billion over the next ten years. 

The implementation cost for the proposals included in the FY 2011 President’s Budget is 

estimated to be $50.4 million over three years and includes the initial startup, processing 

and compliance operational costs. Among other proposals, the Administration proposes 

to expand information reporting, improve compliance by businesses, strengthen tax 

administration, and expand penalties. 

Expand information reporting – Compliance with the tax laws is highest when payments 

are subject to information reporting to the IRS. Specific information reporting proposals 

would: 

• Require information reporting for private separate accounts of life insurance 

companies; and

• Require a certified Taxpayer Identification Number (TIN) from contractors and 

allow certain withholding.

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 information returns 

be filed electronically;

• Require corporations and partnerships with assets of $10 million or more that are 

required to file Schedule M-3 to file their tax returns electronically; 

• Provide Treasury 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); 

• Provide Treasury with the regulatory authority to require electronic filing of all 

Form 5500 Annual Report information (new in FY 2012); 

• Implement standards that clarify when employee leasing companies can be held 

liable for their clients’ federal employment taxes; 

• Increase certainty about the rules pertaining to classification of employees as 

independent contractors; 

• Repeal special estimated tax payment provision for certain insurance companies

(new in FY 2012); and 

• Eliminate special rules modifying the amount of estimated tax payments by 

corporations (new in FY 2012). 
IRS-81 

Strengthen tax administration – The IRS has taken a number of steps under existing law 

to improve compliance. These efforts would be enhanced by specific tax administration 

proposals that would: 

• Expand IRS access to information in the National Directory of New Hires for tax 

administration purposes; 

• Make repeated willful failure to file a tax return a felony;

• Facilitate tax compliance with local jurisdictions;

• Extend statutes of limitations where state tax adjustments affect federal tax 

liability; 

• Improve the investigative disclosure statute; 

• Require taxpayers who prepare their returns electronically but file their returns on 

paper to print their returns with a 2-D bar code (new in FY 2012); 

• Allow the IRS to collect information from the U.S. Bureau of Prisons to reduce 

fraudulent claims (new in FY 2012); 

• Allow the IRS to absorb credit and debit card processing fees for certain tax 

payments (new in FY 2012); and 

• Repeal the requirement of a partial payment with an application for an 

offer-in-compromise. 

Expand penalties – Penalties play an important role in discouraging intentional 

noncompliance. A specific proposal to expand penalties would: 

• Impose a penalty on failure to comply with electronic filing requirements; and 

• Increase the penalty imposed on paid preparers who fail to comply with EITC due 

diligence requirements. (new in FY 2012) 
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 Budget Request for FY 2012 is $2,345,133,000 in direct 

appropriations and 31,686 FTE. This is an increase of $66,303,000, or 2.91 percent, and 

623 FTE more than the FY 2010 enacted level of $2,278,830,000 and 31,063 FTE. 
IRS-83 

2.1 – Budget Adjustments Table 

Dollars in Thousands 

FTE Amount

FY 2010 Enacted Budget1 31,063 $2,278,830

FY 2011 Annualized CR Level 31,063 $2,278,830

Changes to Base:

Adjustment to Reach FY 2011 President's Policy Level (395) $23,254

Maintaining Current Levels $12,908

Other Adjustments 614

Technical FTE Adjustments 614

Efficiencies/Savings (483) ($41,333)

Increase e-File Savings (416) (21,404)

Reduce Contracts (4,522)

Reduce Administrative Expenses (26) (5,557)

Reduce Training, Travel and Programs (41) (9,850)

Reinvestment $1,486

Consolidate Submission Processing Site (Atlanta) 1,486

Subtotal Changes to Base (264) ($3,685)

Total FY 2012 Base 30,799 $2,275,145

Program Changes:

Program Increases:

Taxpayer Service Initiatives 518 $44,078

Improve Taxpayer Service 518 44,078

Enforcement Initiatives 369 $25,910

Increase Collection Coverage 37 2,201

Implement Merchant Card and Basis Reporting 189 10,475

Increase Coverage to Address Tax Law Changes and Other Compliance Issues 87 7,229

Ensure Accurate Delivery of Tax Credits 49 4,946

Administer New Statutory Reporting Requirements 7 1,059

Subtotal Program Changes 887 $69,988

Total FY 2012 Request 31,686 $2,345,133

Adjustments to Request

User Fees 130,962

Total FY 2012 Request 31,686 $2,476,095

1

FY 2010 Enacted represents the approved FY 2010 Operating Plan

Taxpayer Services 
IRS-84 

2.2 – Operating Levels Table 

Dollars in Thousands 

Appropriation Title: Taxpayer Services FY 2010

Enacted 

Level 1,2

FY 2011

President's 

Budget

Congressional 

Action 

including 

Rescission

FY 2011

Annualized 

CR Level 2 

Proposed 

Reprogram.

FY 2011 

Proposed 

Operating 

Level

FY 2012

Request 

Level 2

% 

Change 

FY 2011 

to 

FY 2012

FTE 31,063 30,668 31,063 31,063 31,686 2.0%

Object Classification:

11.1 Full-Time Permanent Positions $1,549,331 $1,309,132 $0 $1,549,331 $0 $1,549,331 $1,574,187 1.6%

11.3 Other than Full-Time Permanent Positions 37,423 304,283 0 37,423 0 37,423 56,752 51.7%

11.5 Other Personnel Compensation 87,129 98,503 0 87,129 0 87,129 110,851 27.2%

11.8 Special Personal Services Payments 0 0 0 0 0 0 0 0.0%

11.9 Personnel Compensation (Total) $1,673,883 $1,711,918 $0 $1,673,883 $0 $1,673,883 $1,741,790 4.1%

12.0 Personnel Benefits 372,622 391,504 0 372,622 0 372,622 399,278 7.2%

13.0 Benefits to Former Personnel 7,362 8,199 0 7,362 0 7,362 1,603 -78.2%

21.0 Travel 39,267 31,269 0 39,267 0 39,267 27,452 -30.1%

22.0 Transportation of Things 1,871 5,564 0 1,871 0 1,871 1,988 6.3%

23.1 Rental Payments to GSA 0 0 0 0 0 0 0 0.0%

23.2 Rent Payments to Others 37 46 0 37 0 37 172 364.9%

23.3 Communications, Utilities, & Misc 2,457 3,607 0 2,457 0 2,457 7,526 206.3%

24.0 Printing & Reproduction 9,117 9,091 0 9,117 0 9,117 12,468 36.8%

25.1 Advisory & Assistance Services 20,275 3,923 0 20,275 0 20,275 19,590 -3.4%

25.2 Other Services 27,428 46,993 0 27,428 0 27,428 23,703 -13.6%

25.3 Purchase of Goods & Services from Govt. Accounts 68,337 67,939 0 68,337 0 68,337 67,123 -1.8%

25.4 Operation & Maintenance of Facilities 29 95 0 29 0 29 0 -100.0%

25.5 Research & Development Contracts 0 0 0 0 0 0 0 0.0%

25.6 Medical Care 2 0 0 2 0 2 0 0.0%

25.7 Operation & Maintenance of Equipment 0 673 0 0 0 0 10 0.0%

25.8 Subsistence & Support of Persons 1,628 1,487 0 1,628 0 1,628 1,509 -7.3%

26.0 Supplies and Materials 25,227 10,899 0 25,227 0 25,227 16,605 -34.2%

31.0 Equipment 525 587 0 525 0 525 290 -44.8%

32.0 Lands and Structures 183 0 0 183 0 183 1,341 632.8%

33.0 Investments & Loans 0 0 0 0 0 0 0 0.0%

41.0 Grants, Subsidies 28,100 28,100 0 28,100 0 28,100 22,600 -19.6%

42.0 Insurance Claims & Indemn 480 81 0 480 0 480 85 -82.3%

43.0 Interest and Dividends 0 0 0 0 0 0 0 0.0%

44.0 Refunds 0 0 0 0 0 0 0 0.0%

91.0 Unvouchered 0 0 0 0 0 0 0 0.0%

Total Budget Authority $2,278,830 $2,321,975 $0 $2,278,830 $0 $2,278,830 $2,345,133 2.9%

Budget Activities:

Pre-filing Taxpayer Assistance & Education $679,924 $693,753 $0 $679,924 $0 $679,924 $701,035 3.1%

Filing & Account Services 1,598,906 1,628,222 0 1,598,906 0 1,598,906 1,644,098 2.8%

Total Budget Authority $2,278,830 $2,321,975 $0 $2,278,830 $0 $2,278,830 $2,345,133 2.9%

1 FY 2010 Enacted represents the approved FY 2010 Operating Plan.

2 Reflects implementation of the IRS Material Group Code project. This project realigned costs to more closely conform to general ledger account and OMB object class 

definitions. 
IRS-85 

2.3 – Appropriation Detail Table 

Dollars in Thousands 

Taxpayer Services

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

New Appropriated Resources:

Pre-Filing Taxpayer Assistance and Education 25,592 $667,840 6,189 $679,924 6,189 $679,924 6,375 $701,035 3.01% 3.10%

Filing and Account Services 6,015 1,591,042 24,874 1,598,906 24,874 1,598,906 25,311 1,644,098 1.76% 2.83%

Subtotal New Appropriated Resources 31,607 $2,258,882 31,063 $2,278,830 31,063 $2,278,830 31,686 $2,345,133 2.01% 2.91%

Other Resources:

Recoveries 781

Offsetting Collections - Reimbursable 444 22,855 444 22,855 444 22,889 444 22,924 0.00% 0.15%

Available multi-year/no-year funds 8,000 8,011 12,786 8,792 -31.24%

50% Carryover 19,993 20,000

Transfers In/Out

Mandatory Appropriations - User Fees 61 121,512 61 121,512 128,966 130,962 1.55%

Subtotal Other Resources 505 $172,360 505 $173,159 444 $164,641 444 $162,678 0.00% -1.19%

Total Resources Available for Obligation 32,112 $2,431,242 31,568 $2,451,989 31,507 $2,443,471 32,130 $2,507,811 1.98% 2.63%

FY 2010

% Change

FY 2010 FY 2011 FY 2012 FY 2011

Enacted1 to FY 2012

1 The FY 2010 Enacted column represents the approved FY 2010 Operating Plan.

Resources Available for Obligation Obligations Annualized CR Level Request

3A – Pre-Filing Taxpayer Assistance and Education ($701,035,000 in direct 

appropriations and an estimated $863,000 from reimbursable programs): This budget 

activity funds services to assist with tax return preparation, including tax law 

interpretation, publication production, and advocate services. This includes the following 

program activities:

• Pre-Filing Services Management supports headquarters management associated 

with Customer Assistance Relationship and Education (CARE). CARE provides 

pre-filing taxpayer assistance and education.

• Taxpayer Communication and Education researches customer needs; prepares tax 

forms and publications; develops and manages educational programs; establishes 

partnerships with stakeholder groups; and disseminates tax information to 

taxpayers and the general public through a variety of media, including 

publications and mailings, websites, broadcasting, and advertising. 

• Media and Publications develops and produces notices, forms, and publications 

for printed and electronic tax materials, and provides media production services to 

taxpayers.

• Taxpayer Advocacy provides advocate services to taxpayers by identifying the 

underlying causes of taxpayer problems and participating in the development of 

systematic and/or procedural remedies.

• 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, 
IRS-86 

communications and liaison, finance, human resources, EEO and diversity, 

business modernization, and embedded training. 

• National Distribution Center processes orders for IRS forms and publications 

received from individual taxpayers, tax practitioners, and IRS tax return 

preparation partners. 

FY 2012 Program Changes by Budget Activity

FTE Amount

Taxpayer Service Initiatives 15 $10,552

Improve Taxpayer Service 15 10,552

Enforcement Initiatives 87 $10,607

Increase Collection Coverage 3 270

Implement Merchant Card and Basis Reporting 16 1,437

Increase Coverage to Address Tax Law Changes and Other Compliance Issues 33 4,172

Ensure Accurate Delivery of Tax Credits 28 3,669

Administer New Statutory Reporting Requirements 7 1,059

Total FY 2012 Request 102 $21,159

Dollars in Thousands

Taxpayer Services

Pre-filing Taxpayer Assistance and Education

3.2.1 – Budget and Performance Plan

Pre-Filing Taxpayer Assistance & Education Budget Activity FY 2011

FY 2008 FY 2009 FY 2010 FY 2010 Annualized FY 2012

Resource Level Obligated Obligated Obligated Enacted1 CR Level Request

Appropriated Resources $628,286 $648,685 $667,840 $679,924 $679,924 $701,035

Reimbursable Resources 774 876 862 862 862 863

Mandatory Appropriations - User Fees 12,827 18,703 5,514 5,514

Total Resources $641,887 $668,264 $674,216 $686,300 $680,786 $701,898

Budget Activity Total $641,887 $668,264 $674,216 $686,300 $680,786 $701,898 1

The FY 2010 Enacted represents the approved FY 2010 Operating Plan.

Pre-Filing Taxpayer Assistance & Education Budget Activity FY 2008 FY 2009 FY 2010 FY 2010 FY 2011 FY 2012

Measure Actual Actual Actual Target Target Target

Timeliness of Critical Filing Season Tax Products to the Public (Ot) 92.4% 96.8% 95.3% 94.0% 94.0% 95.0%

Timeliness of Critical TE/GE & Business Tax Products to the Public (Ot) 89.5% 95.2% 97.7% 90.0% 91.0% 93.0%

Taxpayer Self Assistance Rate (E) (L) 66.8% 69.3% 64.4% 61.3% 68.7% 68.7%

Percent of Eligible Taxpayers Who File for EITC (Oe) * * * 75-80% 75-80% 75-80%

Dollars in Thousands

*The methodology for estimating the eligibility rate is being revised. Data not available.

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure, and L - 
IRS-87 

Description of Performance

The IRS partners with state taxing authorities, volunteer groups, and other organizations 

to enhance taxpayer outreach and education. The IRS and its partners provide free tax 

assistance to the elderly, disabled, and limited English proficient individuals and families 

at Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) 

sites. The IRS also provides grants to support low-income taxpayer clinics to help 

individuals who need assistance on tax-related issues. In FY 2010, the IRS awarded 

more than $13.5 million in VITA and TCE Grants to 171 organizations, 17 percent more 

than the number of organizations in 2009. Consequently, assistors at the more than 

12,000 VITA and TCE sites throughout the nation prepared more than 3.1 million 

returns, including 360,500 returns for individuals with disabilities and/or families with 

disabled dependents. 

The IRS and its partners hosted five Open House events at more than 200 IRS Tax 

Assistance Centers (TACs) and partner sites nationwide to help taxpayers prepare returns 

and resolve tax issues. The IRS assisted more than 31,400 taxpayers and prepared more 

than 7,700 returns. The IRS also: 

• Held two special Saturday events assisting more than 9,500 taxpayers and 

preparing more than 4,000 returns; 

• Created a system that allows taxpayers to self-screen and make on-line 

appointments for return preparation in the TACs; 

• Provided a dedicated toll-free telephone line and hosted a Gulf Coast Assistance 

Day at seven TACs in the Gulf region to provide guidance to taxpayers affected 

by the oil spill in the Gulf of Mexico; and

• Expanded the state income tax return preparation service for low-income 

taxpayers from 20 to 27 states, contributing to more than 57,000 returns being 

prepared. 

During the FY 2010 filing season, taxpayers used IRS.gov to get current filing 

information: 

• More than 1.7 billion web pages were viewed; 

• More than 66.9 million taxpayers used Where’s My Refund?, a 23.8 percent

increase from 2009; 

• More than 213.3 million downloads of various tax products by taxpayers, an 

increase of almost 12 percent; and

• More than 108.8 million electronic payments totaling over $1.9 trillion were 

processed through the Electronic Federal Tax Payment System.
IRS-88 

The IRS also expanded outreach and educational services to improve information, news 

and taxpayer interaction through social media networks (Facebook, Twitter, and 

YouTube, etc.). The IRS produced and posted 258 YouTube videos on a variety of 

subjects including the Education Tax Credit, Making Work Pay, Health Care, Return 

Preparer, and the Homebuyer Credit. These videos attracted more than 963,800 upload 

views and were available in English, Spanish, and American Sign Language. 

The Earned Income Tax Credit (EITC) is one of the federal government’s largest benefit 

programs for working families and individuals. In FY 2010, the IRS conducted itsfourth 

annual EITC Awareness Day to educate the public on the availability and benefits of this 

important tax credit. As part of a national outreach strategy, the IRS reached out to 

qualifying taxpayers by communicating the benefits of EITC through: 

• Interviews in prominent newspapers with nationwide audience bases; 

• More than 50 satellite television media tours in English and Spanish; 

• Interviews with radio networks reaching more than 1,000 radio stations; and 

• 72 news conferences held around the country. 

3B – Filing and Account Services ($1,644,098,000 in direct appropriations, an 

estimated $22,061,000 from reimbursable programs, and an estimated 

$130,962,000 from user fees): This budget activity funds programs that provide filing 

and account services to taxpayers, processes paper and electronically-submitted tax 

returns, issues refunds, and maintains taxpayer accounts. This includes the following 

program activities:

• Filing and Account Services Management administers filing and account services 

programs. 

• Submission Processing processes paper and electronically-submitted tax returns 

and supplemental documents, accounts for tax revenue, processes information 

documents, and issues refunds and tax notices. 

• Account Management and Assistance – Electronic/Correspondence Assistance

provides education and assistance to taxpayers through telephone, paper, and 

internet correspondence to resolve account and notice inquiries. 

• Electronic Products and Services Support 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.

• Joint Operations Center (JOC) provides service, support, and technology for 

telephone, correspondence, and electronic media inquiries; real time monitoring 
IRS-89 

and routing of inbound calls; monitoring of Customer Service Representative 

accuracy; and management of the enterprise telephone database.

• Files Most Efficient Organization (MEO) provides staffing, training, and direct 

support for the management associated with the MEO for files in Submission 

Processing. This organization stores the administrative files and the most recent 

tax returns in process, which are the returns most often requested for research by 

various IRS organizations before forwarding to federal records centers.

FY 2012 Program Changes by Budget Activity

FTE Amount

Taxpayer Service Initiatives 503 $33,526

Improve Taxpayer Service 503 33,526

Enforcement Initiatives 282 $15,303

Increase Collection Coverage 34 1,931

Implement Merchant Card and Basis Reporting 173 9,038

Increase Coverage to Address Tax Law Changes and Other Compliance Issues 54 3,057

Ensure Accurate Delivery of Tax Credits 21 1,277

Total FY 2012 Request 785 $48,829

Dollars in Thousands

Internal Revenue Service

Filing and Account Services
IRS-90 

3.2.2 – Budget and Performance Plan

Filing and Account Services FY 2011

FY 2008 FY 2009 FY 2010 FY 2010 Annualized FY 2012

Resource Level Obligated Obligated Obligated Enacted1 CR Level Request

Appropriated Resources $1,545,478 $1,631,121 $1,591,042 $1,598,906 $1,598,906 $1,644,098

Reimbursable Resources 36,037 23,578 21,993 21,993 22,027 22,061

Mandatory Appropriations - User Fees 139,109 104,297 115,998 115,998 128,966 130,962

Total Resources $1,720,624 $1,758,996 $1,729,033 $1,736,897 $1,749,899 $1,797,121

Budget Activity Total $1,720,624 $1,758,996 $1,729,033 $1,736,897 $1,749,899 $1,797,121 1

The FY 2010 Enacted represents the approved FY 2010 Operating Plan.

Filing and Account Services FY 2008 FY 2009 FY 2010 FY 2010 FY 2011 FY 2012

Measures Actual Actual Actual Target Target Target

Percent Individual Returns Processed Electronically (Oe) (L) 57.6% 65.9% 69.3% 70.2% 74.0% 76.0%

Percent of Business Returns Processed Electronically (Oe) (L) 19.4% 22.8% 25.5% 24.3% 27.0% 28.0%

Customer Accuracy - Tax Law Phones (Ot) 91.2% 92.9% 92.7% 91.2% 92.7% 92.7%

Customer Accuracy - Accounts (Phones) (Ot) 93.7% 94.9% 95.7% 93.7% 95.0% 95.0%

Customer Contacts Resolved per Staff year (E) 12,634 12,918 10,744 9,398 12,074 12,061

Customer Service Representative Level of Service (Oe) (L) 52.8% 70.0% 74.0% 71.0% 71.0% 80.0%

Refund Timeliness - Individual (paper) (Ot) 99.1% 99.2% 96.1% 98.4% 97.0% 97.5%

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure, and L - Long Term Goal

Dollars in Thousands

Description of Performance

The IRS delivered a successful 2010 filing season, rising to challenges posed by the 

implementation of provisions in the American Reinvestment and Recovery Act of 2009 

(Recovery Act), the Worker, Homeownership, and Business Assistance Act of 2009 

(WHBAA), and increased telephone demand for Economic Recovery Payment inquiries. 

Results of the 2010 filing season include: 

• Processed 141.9 million individual returns and issued more than 109.5 million 

refunds totaling $366 billion compared to 144.4 million returns resulting in 

111.4 million refunds totaling over $339.6 billion in 2009; 

• Achieved a 74.0 percent telephone level of service, an increase from 70.0 percent

in 2009, while answering 36.7 million assistor calls;

• Answered 35.1 million automated calls, a 21 percent increase from 2009, 

reflecting a growing public appetite for quality self-service options; 
IRS-91 

• Responded correctly to 92.7 percent of tax law questions and 95.7 percent of 

account questions; and 

• Processed more than 2.9 million Free File returns.

Millions of taxpayers continue to file their returns electronically using both paid 

preparers and home computers. As a result: 

• Home computer filing increased to 34.6 million returns, 2.4 million more than in 

2009; 

• Individual returns filed electronically increased to 69.3 percent, 3.4 percent more 

than in 2009, with the total number of individual returns filed electronically 

reaching 98.4 million;

• Business returns filed electronically reached 25.5 percent, 11.9 percent more than 

in 2009; and 

• Tax professionals filed 62.3 million returns electronically. 
IRS-92 

Enforcement 

Appropriation Description

The Enforcement appropriation provides funding for the examination of tax returns, both 

domestic and international; administrative and judicial settlement of taxpayer appeals of 

examination findings; technical rulings; monitoring of employee pension plans; 

determination of qualifications of organizations seeking tax-exempt status; examination 

of tax returns of exempt organizations; enforcement of statutes relating to detection and 

investigation of criminal violations of the internal revenue laws; identification of 

underreporting of tax obligations; securing of unfiled tax returns; and collecting unpaid 

accounts.

The Enforcement Budget Request for FY 2012 is $5,966,619,000 in direct appropriations 

and 54,582 FTE. This is an increase of $462,619,000, or 8.41 percent, and 3,599 FTE

more than the FY 2010 enacted level of $5,504,000,000 and 50,983 FTE.
IRS-93 

2.1 – Budget Adjustments Table

Dollars in Thousands 

FTE Amount

FY 2010 Enacted Budget1 50,983 $5,504,000

FY 2011 Annualized CR Level 50,983 $5,504,000

Changes to Base:

Adjustment to Reach FY 2011 President's Policy Level 1,880 $242,275

Maintaining Current Levels $30,691

Other Adjustments (296)

Technical FTE Adjustments (296)

Efficiencies/Savings (35) ($21,996)

Reduce Contracts (325)

Reduce Administrative Expenses (35) (8,271)

Eliminate Lockbox Fees (4,000)

Reduce Training, Travel and Programs (9,400)

Subtotal Changes to Base 1,549 $250,970

Total FY 2012 Base 52,532 $5,754,970

Program Changes:

Program Increases:

Enforcement Initiatives 2,040 $209,668

Increase International Service andEnforcement 373 48,363

Increase Collection Coverage 372 30,275

Implement Merchant Card and Basis Reporting 225 17,495

Increase Coverage to Address Tax Law Changes and Other Compliance Issues 266 33,936

Ensure Accurate Delivery of Tax Credits 563 49,083

Administer New Statutory Reporting Requirements 48 5,061

Leverage Return Preparer Program to Reduce Noncompliance 107 14,240

Address Appeals Workload Growth 66 7,450

Implement Uncertain Tax Position Reporting Requirements 20 3,765

Infrastructure Initiatives 10 $1,981

Enhance Physical Security for Federal Employees 10 1,981

Subtotal Program Changes 2,050 $211,649

Total FY 2012 Request 54,582 $5,966,619

Adjustments to Request

User Fees

Total FY 2012 Request 54,582 $5,966,619

1

FY 2010 Enacted represents the approved FY 2010 Operating Plan

Enforcement 
IRS-94 

2.2 – Operating Levels Table 

Dollars in Thousands 

Appropriation Title: Enforcement FY 2010

Enacted 

Level 1,2

FY 2011

President's 

Budget

Congressional 

Action 

including 

Rescission

FY 2011

Annualized 

CR Level 2 

Proposed 

Reprogram.

FY 2011 

Proposed 

Operating 

Level

FY 2012

Request 

Level 2

% 

Change 

FY 2011 

to 

FY 2012

FTE 50,983 52,863 50,983 50,983 54,582 7.1%

Object Classification:

11.1 Full-Time Permanent Positions $3,744,545 $3,938,661 $0 $3,744,545 $0 $3,744,545 $4,084,707 9.1%

11.3 Other than Full-Time Permanent Positions 52,993 91,365 0 52,993 0 52,993 57,151 7.8%

11.5 Other Personnel Compensation 164,191 173,549 0 164,191 0 164,191 170,898 4.1%

11.8 Special Personal Services Payments 18,173 18,445 0 18,173 0 18,173 18,264 0.5%

11.9 Personnel Compensation (Total) $3,979,902 $4,222,020 $0 $3,979,902 $0 $3,979,902 $4,331,020 8.8%

12.0 Personnel Benefits 1,084,382 1,173,634 0 1,084,382 0 1,084,382 1,231,973 13.6%

13.0 Benefits to Former Personnel 0 0 0 0 0 0 0 0.0%

21.0 Travel 197,877 181,570 0 197,877 0 197,877 184,863 -6.6%

22.0 Transportation of Things 5,824 6,607 0 5,824 0 5,824 8,808 51.2%

23.1 Rental Payments to GSA 30 0 0 30 0 30 0 -100.0%

23.2 Rent Payments to Others 1,003 502 0 1,003 0 1,003 496 -50.5%

23.3 Communications, Utilities, & Misc 5,818 4,131 0 5,818 0 5,818 4,402 -24.3%

24.0 Printing & Reproduction 6,530 6,546 0 6,530 0 6,530 6,848 4.9%

25.1 Advisory & Assistance Services 56,970 25,464 0 56,970 0 56,970 21,238 -62.7%

25.2 Other Services 62,489 72,609 0 62,489 0 62,489 72,197 15.5%

25.3 Purchase of Goods & Services from Govt. Accounts 49,243 49,902 0 49,243 0 49,243 42,792 -13.1%

25.4 Operation & Maintenance of Facilities 193 196 0 193 0 193 195 1.0%

25.5 Research & Development Contracts 3,124 3,007 0 3,124 0 3,124 3,049 -2.4%

25.6 Medical Care 123 78 0 123 0 123 79 -35.8%

25.7 Operation & Maintenance of Equipment 1,421 2,110 0 1,421 0 1,421 2,185 53.8%

25.8 Subsistence & Support of Persons 4,716 4,692 0 4,716 0 4,716 4,966 5.3%

26.0 Supplies and Materials 32,862 29,733 0 32,862 0 32,862 34,963 6.4%

31.0 Equipment 4,414 7,301 0 4,414 0 4,414 8,134 84.3%

32.0 Lands and Structures 425 0 0 425 0 425 934 119.8%

33.0 Investments & Loans 0 0 0 0 0 0 0 0.0%

41.0 Grants, Subsidies 0 5 0 0 0 0 5 100.0%

42.0 Insurance Claims & Indemn 1,736 2,088 0 1,736 0 1,736 2,123 22.3%

43.0 Interest and Dividends 0 0 0 0 0 0 0 0.0%

44.0 Refunds 0 0 0 0 0 0 0 0.0%

91.0 Unvouchered 4,918 5,205 0 4,918 0 4,918 5,349 8.8%

Total Budget Authority $5,504,000 $5,797,400 $0 $5,504,000 $0 $5,504,000 $5,966,619 8.4%

Budget Activities:

Investigations $639,363 $651,966 0 $639,363 $0 $639,363 $678,849 6.2%

Exam & Collections 4,700,345 4,974,618 0 4,700,345 0 4,700,345 5,103,420 8.6%

Regulatory 164,292 170,816 0 164,292 0 164,292 184,350 12.2%

Total Budget Authority $5,504,000 $5,797,400 $0 $5,504,000 $0 $5,504,000 $5,966,619 8.4%

1 FY 2010 Enacted represents the approved FY 2010 Operating Plan.

2 Reflects implementation of the IRS Material Group Code project. This project realigned costs to more closely conform to general ledger account and OMB object class 

definitions. 
IRS-95 

2.3 – Appropriation Detail Table 

Dollars in Thousands 

Enforcement

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

New Appropriated Resources:

Investigations 4,364 $644,061 4,170 $639,363 4,170 $639,363 4,442 $678,849 6.52% 6.18%

Exam and Collections 44,802 4,683,200 45,424 4,700,345 45,424 4,700,345 48,772 5,103,420 7.37% 8.58%

Regulatory 1,234 165,724 1,389 164,292 1,389 164,292 1,368 184,350 -1.51% 12.21%

Subtotal New Appropriated Resources 50,400 $5,492,985 50,983 $5,504,000 50,983 $5,504,000 54,582 $5,966,619 7.06% 8.41%

Other Resources:

Recoveries 537

Offsetting Collections - Reimbursable 124 74,599 124 76,852 124 75,247 124 75,902 0.87%

Available multi-year/no-year funds 944 3,462 3,196 3,054 -4.44%

50% Carryover 3,498 5,600

Transfers In/Out 172

Mandatory Appropriations - User Fees 49 49

Subtotal Other Resources 124 $79,090 124 $86,672 124 $78,443 124 $78,956 0.65%

Total Resources Available for Obligation 50,524 $5,572,075 51,107 $5,590,672 51,107 $5,582,443 54,706 $6,045,575 7.04% 8.30%

FY 2010

Obligations Enacted Annualized CR Level 1 Resources Available for Obligation Request to FY 2012

1 The FY 2010 Enacted column represents the approved FY 2010 Operating Plan.

% Change

FY 2010 FY 2011 FY 2012 FY 2011

3C – Investigations ($678,849,000 in direct appropriations and an estimated 

$66,567,000 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 and campus support of the 

Questionable Refund program. This includes the following program activities:

• General Management and Administration supports the headquarters management 

activities of strategic planning, communications, finance, and human resources for 

CI activities.

• Criminal Investigations supports the enforcement of criminal statutes relating to 

violations of internal revenue laws and other financial crimes. CI investigates 

cases of suspected intent to defraud that involve both legal and illegal sources of 

income and recommends prosecution as warranted. This activity includes the 

investigation and prosecution of tax and money laundering violations associated 

with narcotics organizations. 

• Criminal Tax Legal Support provides staffing, training, and direct support to 

Counsel and CI. 

• International Investigations supports international investigations involving U.S. 

citizens residing abroad, non-resident aliens, expatriates, and investigations 

involving other international issues including legal support (e.g., Foreign Tax 

Credit and Foreign Earned Income Exclusion). 

• Accounts Management Taxpayer Assurance Program provides support to 

Accounts Management for the review of questionable refunds. 
IRS-96 

FY 2012 Program Changes by Budget Activity 

FTE Amount

Enforcement Initiatives 66 $13,423

Increase International Service and Enforcement 43 8,999

Leverage Return Preparer Program to Reduce Noncompliance 23 4,424

Infrastructure Initiatives 10 $1,981

Enhance Physical Security for Federal Employees 10 1,981

Total FY 2012 Request 76 $15,404

Dollars in Thousands

Internal Revenue Service

Investigations

3.2.3 – Budget and Performance Plan

Investigations Budget Activity FY 2011

FY 2008 FY 2009 FY 2010 FY 2010 Annualized FY 2012

Resource Level Obligated Obligated Obligated Enacted1 CR Level Request

Appropriated Resources $601,436 $615,544 $644,061 $639,363 $639,363 $678,849

Reimbursable Resources 49,404 39,639 65,296 67,549 65,928 66,567

Mandatory Appropriations - User Fees

Total Resources $650,840 $655,183 $709,357 $706,912 $705,291 $745,416 1

The FY 2010 Enacted represents the approved FY 2010 Operating Plan.

Investigations Budget Activity FY 2008 FY 2009 FY 2010 FY 2010 FY 2011 FY 2012

Measure Actual Actual Actual Target Target Target

Criminal Investigations Completed (Ot) (L) 4,044 3,848 4,325 3,900 3,900 3,880

Number of Convictions (Oe) (L) 2,144 2,105 2,184 2,135 2,135 2,135

Conviction Rate (Oe) (L) 92.3% 87.2% 90.2% 92.0% 92.0% 92.0%

Conviction Efficiency Rate ($) (E) (L) $315,751 $327,328 $324,776 $331,000 $350,000 $360,000

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure, L - Long Term Goal

Dollars in Thousands

Description of Performance

The IRS continues to investigate tax, money laundering, and other financial crimes that

adversely affect tax administration. Improved case development and selection methods, 

coupled with heightened fraud awareness resulted in the successful prosecution of 

taxpayers involved in significant abusive tax schemes, high-income non-filers, 

employment tax evasion cases, and other flagrant forms of tax evasion. Using its unique 

statutory jurisdiction and financial expertise, the IRS made significant contributions to 

important national law enforcement priorities. Performance levels for the CI program 

remained high in FY 2010:

• Completed more than 4,300 criminal investigations, 12 percent more than in

2009; 
IRS-97 

• Maintained a Department of Justice acceptance rate of 93.9 percent, with a U.S. 

Attorney acceptance rate of 91.8 percent, which compares favorably with other 

Federal law enforcement agencies;

• Achieved a conviction rate of more than 90 percent; and 

• Obtained 2,184 convictions. 

In an effort to deter financial crime and enhance voluntary tax compliance, the IRS uses 

media and other outreach opportunities to maximize publicity of investigations. Publicity 

focuses on informing the American public about enforcement efforts and educating the 

public about fraud schemes and scams that they should avoid. 

In FY 2010, IRS representatives participated in more than 500 outreach events. 

Audiences included tax and accounting professionals, representatives from financial 

institutions, business and industry managers, government representatives, educational 

institutions, and the public. Topics included general fraud awareness, tax and accounting 

fraud, money laundering, Bank Secrecy Act, and other financial fraud. These outreach 

events were attended by more than 27,800 individuals and businesses. 

3D – Exam and Collections ($5,103,420,000 in direct appropriations and an estimated 

$8,761,000 from reimbursable programs): This budget activity funds programs that 

enforce tax laws through examination and collection programs that ensure proper 

payment and tax reporting. This budget activity also supports appeals and litigation 

activities associated with exam and collection. This includes the following program 

activities:

• Compliance Services Management supports management associated with 

compliance program activities.

• Payment Compliance – Correspondence Collection supports IRS collection 

activities by initiating contact and collecting delinquent taxpayer liabilities 

through written notices and other means. 

• Automated Collections and Support provides support to the centralized 

Automated Collection System (ACS) by initiating contact and collecting 

delinquent taxpayer liabilities through automated means. 

• Payment Compliance – Field Collection conducts field investigations and 

collection efforts associated with delinquent taxpayer and business entity 

liabilities, including direct taxpayer contact and outreach programs to protect the 

interest of the federal government in delinquent tax liability situations.

• Tax Reporting Compliance – Document Matching supports the Automated 

Underreporter (AUR), Combined Annual Wage Reporting (CAWR), Federal 

Unemployment Tax Act (FUTA), and other Document Matching Programs. 

• Tax Reporting Compliance – Electronic/Correspondence Exam initiates written 

correspondence with taxpayers related to tax issues arising from claims on their 

tax returns. 
IRS-98 

• Tax Reporting Compliance – Field Exam compares taxpayer income levels and 

corresponding tax liabilities to ensure the accuracy of taxpayer returns.

• Fraud/Bank Secrecy Act enforces the anti-money laundering provisions of the 

Bank Secrecy Act of 1970 (BSA) and the USA Patriot Act of 2001. It examines 

non bank financial institutions for compliance with these laws, receives and 

processes more than 15 million financial reports annually, and manages a 

centralized database of that information for the Financial Crimes Enforcement 

Network (FinCEN). The Fraud program follows the “money trail” to support the 

criminal investigation of tax evasion operations. Fraud Technical Advisors and 

Revenue Agents provide investigative leads and referrals to federal, state, and 

local law enforcement agencies.

• Appeals provides an administrative review process that provides a channel for 

impartial case settlement before a case is docketed in a court of law.

• Litigation provides legal support for the IRS in litigation of cases, including 

interpretation of the tax law.

• Specialty Programs – Exams examines federal tax returns of businesses and 

individuals responsible for the filing and payment of employment, excise, estate 

and gift taxes. 

• International Collection supports international field collection efforts associated 

with delinquent taxpayer and business entity liabilities from U.S. citizens residing 

abroad, non-resident aliens, expatriates, and those involving other international 

issues (e.g., Foreign Tax Credit and Foreign Earned Income Exclusion). 

• International Exams supports the international exam program involving U.S. 

citizens residing abroad, non-resident aliens, expatriates and other examinations 

involving other international issues including legal support (e.g., Foreign Tax 

Credit and Foreign Earned Income Exclusion). 

• Unit General Management and Administration provides staffing, training, and 

direct support for headquarters management activities of strategic planning, 

communication and liaison, finance, human resources, EEO and diversity, 

business system planning, and embedded training. 

• EITC Management and Administration supports headquarters management 

associated with administering the EITC program service-wide. 

• Whistleblower provides staffing, training, and direct support to process, assess, 

and analyze tips from individuals who identify tax problems in the course of their 

daily personal business, regardless of where encountered (including the 

workplace). 

• Communications and Liaison coordinates local government and liaison 

relationships; manages congressional, state, and national stakeholder relationships 

and issues; coordinates crosscutting issues, including audit management and 

legislative implementation; manages national media contacts and local media 

relationships; and ensures IRS compliance with disclosure and privacy laws. 
IRS-99 

FY 2012 Program Changes by Budget Activity

FTE Amount

Enforcement Initiatives 1,878 $182,682

Increase International Service and Enforcement 322 37,980

Increase Collection Coverage 372 30,275

Implement Merchant Card and Basis Reporting 225 17,495

Increase Coverage to Address Tax Law Changes and Other Compliance Issues 213 27,809

Ensure Accurate Delivery of Tax Credits 553 47,566

Administer New Statutory Reporting Requirements 43 4,291

Leverage Return Preparer Program to Reduce Noncompliance 84 9,816

Address Appeals Workload Growth 66 7,450

Total FY 2012 Request 1,878 $182,682

Dollars in Thousands

Internal Revenue Service

Exam and Collections
IRS-100 

3.2.4 – Budget and Performance Plan

Exam and Collections FY 2011

FY 2008 FY 2009 FY 2010 FY 2010 Annualized FY 2012

Resource Level Obligated Obligated Obligated Enacted1 CR Level Request

Appropriated Resources $4,030,648 $4,342,021 $4,683,200 $4,700,345 $4,700,345 $5,103,420

Reimbursable Resources 8,302 8,970 8,729 8,729 8,745 8,761

Mandatory Appropriations - User Fees 12,679 3,103 49 49

Total Resources $4,051,629 $4,354,094 $4,691,978 $4,709,123 $4,709,090 $5,112,181 1

The FY 2010 Enacted represents the approved FY 2010 Operating Plan.

Exam and Collections Budget Activity FY 2008 FY 2009 FY 2010 FY 2010 FY 2011 FY 2012

Measure Actual Actual Actual Target Target Target

Examination Coverage - Individual (Oe) (L) 1.01% 1.0% 1.1% 1.1% 1.1% 1.1%

Field Exam National Quality Review Score (Oe) (L) 86.0% 85.1% 84.9% 86.3% 83.7% 84.9%

Office Exam National Quality Review Score (Oe) (L) 90.0% 92.1% 91.6% 90.9% 90.4% 90.9%

Examination Quality - Industry (Oe) (L) 88.0% 88.0% 87.0% 89.0% 89.0% 89.0%

Examination Quality - Coordinated Industry (Oe) (L) 97.0% 95.0% 95.0% 96.0% 96.0% 96.0%

Examination Coverage - Business (Oe) (L) 6.1% 5.6% 5.7% 5.1% 5.3% 5.2%

AUR Efficiency (E) (L) 1,982 1,905 1,924 1,868 1,980 2,017

AUR Coverage (E) (L) 2.55% 2.6% 3.0% 3.0% 3.3% 4.0%

Examination Efficiency - Individual (E) (L) 138 138 140 132 134 126

Collection Coverage - Units (Ot) (L) 55.2% 54.2% 50.1% 50.5% 49.1% 47.9%

Collection Efficiency - Units (E) (L) 1,926 1,845 1,822 1,898 1,824 1,752

Field Collection National Quality Review Score (Ot) (L) 79.0% 80.5% 80.6% 81.0% 81.0% 81.0%

Automated Collection System (ACS) Accuracy (Oe) 95.3% 94.3% 95.9% 92.5% 94.0% 94.0%

Key: Oe - Outcome Measure, E - Efficiency Measure, L - Long Term Goal, Ot - 

Dollars in Thousands
IRS-101 

Description of Performance

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

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

target elements of the tax gap and will always remain a high priority. In FY 2010, the 

IRS placed extraordinary focus on detecting and bringing to justice those who hide assets 

overseas to avoid paying tax. The IRS also continued its pursuit of high-wealth 

noncompliant taxpayers and initiated actions to implement the return preparer strategy.

The IRS collected $57.6 billion in revenue in FY 2010, $8.7 billion, or 18 percent, more 

than in FY 2009. The IRS showed steady progress, building on its FY 2009 successes in 

key enforcement programs: 

• Total individual audits increased 11 percent to 1.58 million; 

• Automated underreporter contact closures increased 19.8 percent to 4.3 million; 

• Collection case closures increased 6 percent to 3 million; 

• High income audits increased to more than 5 percent to 153,000; and 

• Large corporate audits increased 8.1 percent to almost 15,000, a significant 

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

corporate entities.

As part of an overall strategy to improve offshore compliance, the IRS continued to take 

aggressive steps to track tax evaders who hide their wealth by engaging in tax evasion 

schemes using offshore accounts. 

The IRS voluntary disclosure program (VDP), offered in 2009, combined with powerful 

whistle-blower initiatives, yielded information on banks and professionals, including 

foreign professionals, who facilitate tax evasion. Thousands of taxpayers with offshore 

accounts voluntarily came forward during the VDP partial amnesty period to disclose 

information as the result of the initiative. 

The pressure on offshore financial institutions known to facilitate concealment of income 

by U.S. citizens resulted in:

• A large Swiss bank entering into a deferred prosecution agreement on charges of 

conspiring to defraud the United States. Investigations resulted in indictments or 

guilty pleas of clients and bankers on federal income tax related charges, 

including filing false income tax returns, failing to report foreign bank accounts, 

and concealing millions in income subject to taxation. 

• A bank in Scotland agreeing to forfeit $500 million as part of a deferred 

prosecution agreement. The bank violated the Bank Secrecy Act (BSA) and 

conspired to defraud the U.S. Certain offices, branches, affiliates, and 

subsidiaries altered or removed names and references from payment messages to 
IRS-102 

sanctioned countries thereby allowing these entities to move hundreds of millions 

of dollars through the U.S. financial system without identification. 

• A Swiss corporation agreeing to forfeit $536 million to the United States. The 

violations relate to transactions illegally conducted on behalf of customers and 

other countries sanctioned in programs administered by the Department of the 

Treasury. The corporation deliberately removed material information from 

payment messages so that wire transfers would pass undetected through filters at 

U.S. financial institutions. 

Through the offshore voluntary disclosure program, the IRS identified previously 

unreported foreign bank accounts from every continent except Antarctica.

Additionally, the Accounts Management Taxpayer Assurance Program (AMTAP) and 

Questionable Refund Program (QRP) identify fraudulent returns and stop payment of 

fraudulent refunds. In FY 2010, the IRS: 

• Identified 807,898 potentially fraudulent returns claiming more than $5.2 billion 

in fraudulent refunds through the AMTAP; and

• Identified 1,576 schemes in potentially fraudulent refund claims through the QRP. 

o Initiated 504 investigations, achieved a 92.4 percent conviction rate, an 

83.8 percent incarceration rate, and an 84.6 percent publicity rate on 

adjudicated cases.

Setting higher standards for the tax return preparer community will significantly enhance 

protections and services for taxpayers, increase confidence in the tax system and result in 

greater compliance with tax laws. In FY 2010, as part of a Tax Return Preparer Strategy 

developed in FY 2009, the IRS began implementing a number of the recommendations to 

ensure that more than one million tax return preparers are competent. Key elements of 

the strategy include: 

• Requiring registration for all paid tax return preparers (through 

December 31, 2010, more than 523,000 return preparers received PTINs utilizing 

the new application system); 

• Establishing mandatory testing and continuing education; 

• Developing a public database for tax return preparer registration with the IRS; 

• Making all tax return preparers subject to ethical standards; and

• Increasing the IRS enforcement presence in the tax return preparer community. 

In FY 2010, the IRS made a number of due diligence visits to tax return preparers 

and conducted more than 5,000 field visits to ensure compliance with the tax 

laws. The IRS also conducted 265 undercover visits to tax return preparers. 

During these visits, IRS agents posed as taxpayers to seek out and stop 

unscrupulous preparers from filing inaccurate returns. 
IRS-103 

3E – Regulatory ($184,350,000 in direct appropriations and an estimated 

$574,000 from reimbursable programs): This budget activity funds the development and 

printing of published IRS guidance materials; interpretation of tax laws; advice on 

general legal servicing, ruling and agreements; enforcement of regulatory rules, laws, and 

approved business practices; and support for taxpayers in the areas of pre-filing 

agreements, determination letters, and advance pricing agreements. This includes the 

following program activities:

• Tax Law Interpretation and Published Guidance interprets the tax law through 

published guidance, technical advice, and other technical legal services.

• General Legal Services provides advice to the IRS on non-tax legal issues, 

including procurement, personnel, labor relations, equal employment opportunity, 

fiscal law, tort claims and damages, ethics, and conflict of interest.

• Rulings and Agreements applies the tax law to specific taxpayers in the form of

pre-filing agreements, determination letters, advance pricing agreements, and 

other pre-filing determinations and advice.

• International Regulatory Legal Support supports Counsel’s work in tax law 

interpretation and rulings and agreements related to international issues. 

• Return Preparer Strategy provides staffing, training, and direct support associated 

with the Return Preparer Strategy initiative.

• 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.

FY 2012 Program Changes by Budget Activity

FTE Amount

Enforcement Initiatives 96 $13,563

Increase International Service and Enforcement 8 1,384

Increase Coverage to Address Tax Law Changes and Other Compliance Issues 53 6,127

Ensure Accurate Delivery of Tax Credits 10 1,517

Administer New Statutory Reporting Requirements 5 770

Implement Uncertain Tax Position Reporting Requirements 20 3,765

Total FY 2012 Request 96 $13,563

Dollars in Thousands

Internal Revenue Service

Regulatory
IRS-104 

3.2.5 – Budget and Performance Plan

Regulatory FY 2011

FY 2008 FY 2009 FY 2010 FY 2010 Annualized FY 2012

Resource Level Obligated Obligated Obligated Enacted1 CR Level Request

Appropriated Resources $145,036 $152,115 $165,724 $164,292 $164,292 $184,350

Reimbursable Resources 435 469 574 574 574 574

Mandatory Appropriations - User Fees 168

Total Resources $145,639 $152,584 $166,298 $164,866 $164,866 $184,924 1

The FY 2010 Enacted represents the approved FY 2010 Operating Plan.

Regulatory Budget Activity FY 2008 FY 2009 FY 2010 FY 2010 FY 2011 FY 2012

Measure Actual Actual Actual Target Target Target

TE/GE Determination Case Closures (Ot) 100,050 96,246 105,247 140,465 97,151 85,471

Dollars in Thousands

Key: Ot - Output/Workload Measure

Description of Performance

In 2010, the IRS continued to help pension plans, exempt organizations, and government 

entities comply with the tax law by:

• Developing an Indian Tribal consultation policy with the Department of the 

Treasury, pursuant to a November 2009 Presidential Memorandum. The IRS held 

consultation meetings with stakeholder groups to allow tribes an opportunity to 

discuss the consultation policy and a new section on Tribal Policy was developed 

and added to the Treasury website. In addition, the IRS piloted a specialty course 

designed to ensure that IRS employees will have the necessary skills to interact 

effectively with Tribal governments on a government-to-government basis. 

• Releasing an interim report on compliance of college and universities for 

unrelated business taxable income and compensation. Based on responses from 

the surveys received from the colleges/universities, IRS opened examinations 

focusing on unrelated business income and executive compensation. 

• Implementing Section 301 of the Small Business and Infrastructure Jobs Tax Act 

of 2010 that expanded the Build America Bond (BAB) direct payment regime to 

include four types of specified tax credit bonds. This initiative included: 

o Expeditious issuance of formal guidance and educational materials related 

to the new bond provisions; 

o Issuance of a new return, Form 8038-TC, Information Return for Tax 

Credit Bonds and Specified Tax Credit Bonds, and instructions, and 

revision and reissuance of the Form 8038-CP, Return for Credit Payments 

to Issuers of Qualified Bonds, and instructions; 

o Implementation of new programming to ensure direct payments are made 

contemporaneously with the bonds’ interest payment dates; and

o Conducting several HIRE Act related outreach presentations. 
IRS-105 

In FY 2010, IRS closed more than 41,400 tax-exempt compliance contacts, 19 percent 

more than in 2009. 

General Legal Services (GLS) worked on promulgation of guidance in connection with 

the administration of the whistleblower program and was responsible for litigating cases 

before the Tax Court filed by whistleblowers challenging the IRS award determination. 

In FY 2010, GLS handled 20 cases before the Tax Court and expects this number will 

increase substantially as the IRS completes the investigation of whistleblower claims and 

the Whistleblower Office begins to make award determinations. GLS has litigated and 

provided advice with respect to protection of taxpayers regarding tax practitioners, tax 

preparers and various novel personnel issues implicating both individuals and groups of 

employees. GLS provided advice on the implementation of the Affordable Care Act 

(ACA) legislation regarding such matters as funding and authority; and advice on 

numerous matters arising from the Austin tragedy and the IRS efforts to provide the best 

relief appropriate for affected IRS employees and taxpayers.
IRS-106 

Operations Support 

Appropriation Description

The Operations Support appropriation provides funding for overall planning, direction, 

and support for the IRS, including shared service support related to facilities services, 

rent payments, printing, postage, and security. This appropriation funds headquarters 

policy and management activities such as corporate support for strategic planning, 

communications and liaison, finance, human resources, Equal Employment Opportunity 

(EEO) and diversity; research and statistics of income; and necessary expenses for 

information systems and telecommunication support, including development, security, 

and maintenance of IRS’s information systems.

The Operations Support Budget Request for FY 2012 is $4,620,526,000 in direct 

appropriations and 13,142 FTE. This is an increase of $536,642,000, or 13.14 percent, 

and 770 FTE more than the FY 2010 enacted level of $4,083,884,000 and 12,372 FTE.
IRS-107 

2.1 – Budget Adjustments Table

Dollars in Thousands 

FTE Amount

FY 2010 Enacted Budget1 12,372 $4,083,884

FY 2011 Annualized CR Level 12,372 $4,083,884

Changes to Base:

Adjustment to Reach FY 2011 President's Policy Level 12 $10,128

Maintaining Current Levels $41,755

Other Adjustments 154

Technical FTE Adjustments 154

Efficiencies/Savings (5) ($124,440)

Non-Recur Savings (22,090)

Increase e-File Savings (1,040)

Reduce IT Infrastructure (75,000)

Reduce Contracts (15,907)

Reduce Administrative Expenses (5) (503)

Reduce Certain Mailings (4,000)

Reduce Training, Travel and Programs (5,900)

Subtotal Changes to Base 161 ($72,557)

Total FY 2012 Base 12,533 $4,011,327

Program Changes:

Program Increases:

Taxpayer Service Initiatives 16 $70,229

Improve Taxpayer Service 1 37,229

Expand Online Options through IRS.gov Improvements 15 33,000

Enforcement Initiatives 508 $370,093

Increase International Service and Enforcement 4 24,233

Increase Collection Coverage 4 19,524

Implement Merchant Card and Basis Reporting 1 7,760

Increase Coverage to Address Tax Law Changes and Other Compliance Issues 144 55,553

Ensure Accurate Delivery of Tax Credits 222 206,264

Administer New Statutory Reporting Requirements 132 52,385

Leverage Return Preparer Program to Reduce Noncompliance 1 2,360

Address Appeals Workload Growth 1,650

Implement Uncertain Tax Position Reporting Requirements 364

Infrastructure Initiatives 80 $116,877

Enhance Security and Disaster Recovery Systems Capability 5 12,000

Update Integrated Financial System (IFS) 5 27,500

Leveraging Data to Improve Compliance 5 1,400

Enhance Physical Security for Federal Employees 13,500

Implement Individual Coverage Requirement and Employer Responsibility Payments 65 62,477

Business Systems Modernization (BSM) Initiative 5 $52,000

Continue Migration from Aging Tax Administration System 5 52,000

Subtotal Program Changes 609 $609,199

Total FY 2012 Request 13,142 $4,620,526

Adjustments to Request

User Fees 73,466

Total FY 2012 Request 13,142 $4,693,992

1

FY 2010 Enacted represents the approved FY 2010 Operating Plan

Operations Support
IRS-108 

2.2 – Operating Levels Table 

Dollars in Thousands 

Appropriation Title: Operations Support FY 2010

Enacted 

Level 1,2

FY 2011

President's 

Budget

Congressional 

Action 

including 

Rescission

FY 2011

Annualized 

CR Level 2 

Proposed 

Reprogram.

FY 2011 

Proposed 

Operating 

Level

FY 2012

Request 

Level 2

% Change 

FY 2011 to 

FY 2012

FTE 12,372 12,384 12,372 12,372 13,142 6.2%

Object Classification:

11.1 Full-Time Permanent Positions $1,072,547 $1,089,960 $0 $1,072,547 $0 $1,072,547 $1,182,167 10.2%

11.3 Other than Full-Time Permanent Positions 12,480 26,496 0 12,480 0 12,480 11,693 -6.3%

11.5 Other Personnel Compensation 34,437 35,147 0 34,437 0 34,437 33,586 -2.5%

11.8 Special Personal Services Payments 0 0 0 0 0 0 0 0.0%

11.9 Personnel Compensation (Total) $1,119,464 $1,151,603 $0 $1,119,464 $0 $1,119,464 $1,227,446 9.6%

12.0 Personnel Benefits 346,939 357,973 0 346,939 0 346,939 387,046 11.6%

13.0 Benefits to Former Personnel 48,217 48,907 0 48,217 0 48,217 49,789 3.3%

21.0 Travel 46,639 42,852 0 46,639 0 46,639 46,282 -0.8%

22.0 Transportation of Things 23,822 20,999 0 23,822 0 23,822 22,348 -6.2%

23.1 Rental Payments to GSA 646,363 676,738 0 646,363 0 646,363 685,010 6.0%

23.2 Rent Payments to Others 14,999 44 0 14,999 0 14,999 14,901 -0.7%

23.3 Communications, Utilities, & Misc 474,165 426,745 0 474,165 0 474,165 449,668 -5.2%

24.0 Printing & Reproduction 56,383 51,666 0 56,383 0 56,383 44,544 -21.0%

25.1 Advisory & Assistance Services 98,366 96,998 0 98,366 0 98,366 79,041 -19.6%

25.2 Other Services 411,244 390,480 0 411,244 0 411,244 740,967 80.2%

25.3 Purchase of Goods & Services from Govt. Accounts 72,972 86,985 0 72,972 0 72,972 64,348 -11.8%

25.4 Operation & Maintenance of Facilities 157,036 217,608 0 157,036 0 157,036 168,283 7.2%

25.5 Research & Development Contracts 5,382 5,471 0 5,382 0 5,382 5,433 0.9%

25.6 Medical Care 18,591 12,538 0 18,591 0 18,591 13,419 -27.8%

25.7 Operation & Maintenance of Equipment 77,246 110,905 0 77,246 0 77,246 94,389 22.2%

25.8 Subsistence & Support of Persons 300 321 0 300 0 300 313 4.3%

26.0 Supplies and Materials 38,048 29,916 0 38,048 0 38,048 32,453 -14.7%

31.0 Equipment 380,226 360,851 0 380,226 0 380,226 408,472 7.4%

32.0 Lands and Structures 46,961 17,857 0 46,961 0 46,961 85,836 82.8%

33.0 Investments & Loans 0 0 0 0 0 0 0 0.0%

41.0 Grants, Subsidies 0 0 0 0 0 0 0 0.0%

42.0 Insurance Claims & Indemn 521 543 0 521 0 521 538 3.3%

43.0 Interest and Dividends 0 0 0 0 0 0 0 0.0%

44.0 Refunds 0 0 0 0 0 0 0 0.0%

91.0 Unvouchered 0 0 0 0 0 0 0 0.0%

Total Budget Authority $4,083,884 $4,108,000 $0 $4,083,884 $0 $4,083,884 $4,620,526 13.1%

Budget Activities:

Infrastructure $895,202 $889,929 0 $895,202 $0 $895,202 $986,045 10.1%

Shared Services & Support 1,311,127 1,337,776 0 1,311,127 0 1,311,127 1,313,050 0.1%

Information Services 1,877,555 1,880,295 0 1,877,555 0 1,877,555 2,321,431 23.6%

Total Budget Authority $4,083,884 $4,108,000 $0 $4,083,884 $0 $4,083,884 $4,620,526 13.1%

1 FY 2010 Enacted represents the approved FY 2010 Operating Plan.

2 Reflects implementation of the IRS Material Group Code project. This project realigned costs to more closely conform to general ledger account and OMB object class 

definitions. 
IRS-109 

2.3 – Appropriation Detail Table 

Dollars in Thousands 

Operations Support

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

New Appropriated Resources:

Infrastructure $894,288 $895,202 $895,202 $986,045 10.15%

Shared Services and Support 5,830 $1,299,008 5,992 1,311,127 5,992 1,311,127 6,082 1,313,050 1.50% 0.15%

Information Services 6,432 $1,814,819 6,380 1,877,555 6,380 1,877,555 7,060 2,321,431 10.66% 23.64%

Subtotal New Appropriated Resources 12,262 $4,008,115 12,372 $4,083,884 12,372 $4,083,884 13,142 $4,620,526 6.22% 13.14%

Other Resources:

Recoveries 863

Offsetting Collections - Reimbursable 91 38,051 91 38,051 91 39,143 91 39,446 0.77%

Available multi-year/no-year funds 48,697 68,454 70,629 7,738 -89.04%

50% Carryover 10,276 10,347

Transfers In/Out (12,543)

Mandatory Appropriations - User Fees 32 53,968 32 53,968 75,462 73,466 -2.65%

Subtotal Other Resources 123 $150,992 123 $159,140 91 $185,234 91 $120,650 -34.87%

Total Resources Available for Obligation 12,385 $4,159,107 12,495 $4,243,024 12,463 $4,269,118 13,233 $4,741,176 6.18% 11.06% 1 The FY 2010 Enacted column represents the approved FY 2010 Operating Plan.

% Change

Obligations Enacted Annualized CR Level 1 to FY 2012

FY 2011

Resources Available for Obligation

FY 2010 FY 2012

Request

FY 2010 FY 2011

3F – Infrastructure ($986,045,000 in direct appropriations, an estimated $516,000 from 

reimbursable programs and an estimated $22,095,000 from user fees): This budget 

activity funds administrative services related to space and housing, rent and space 

alterations, building services, maintenance, guard services, and non-IT equipment. This 

includes the following program activities:

• Building Delegation oversees and manages the IRS GSA-delegated buildings, 

including cleaning, maintenance, utilities, protection, administrative, and 

recurring and one-time repair costs.

• Rent provides resources for all IRS rent needs. 

• Space and Housing/Non-IT Equipment provides management of all IRS building 

services, maintenance, space alterations, guard services, custodial overtime, utility 

services needs, and non-IT equipment. 

• Security covers building security costs related to contract guard services. 
IRS-110 

FY 2012 Program Changes by Budget Activity

FTE Amount

Taxpayer Service Initiatives $11,775

Improve Taxpayer Service 11,682

Expand Online Options through IRS.gov Improvements 93

Enforcement Initiatives $23,062

Increase International Service and Enforcement 2,337

Increase Collection Coverage 2,560

Implement Merchant Card and Basis Reporting 2,241

Increase Coverage to Address Tax Law Changes and Other Compliance Issues 1,855

Ensure Accurate Delivery of Tax Credits 12,404

Administer New Statutory Reporting Requirements 618

Leverage Return Preparer Program to Reduce Noncompliance 583

Address Appeals Workload Growth 356

Implement Uncertain Tax Position Reporting Requirements 108

Infrastructure Initiatives $10,426

Enhance Security and Disaster Recovery Systems Capability 31

Update Integrated Financial System (IFS) 31

Leveraging Data to Improve Compliance 27

Enhance Physical Security for Federal Employees 10,070

Implement Individual Coverage Requirement and Employer Responsibility Payments 267

Business Systems Modernization (BSM) Initiative $56

Continue Migration from Aging Tax Administration System 56

Total FY 2012 Request $45,319

Dollars in Thousands

Internal Revenue Service

Infrastructure

3.2.6 – Budget and Performance Plan

Infrastructure FY 2011

FY 2008 FY 2009 FY 2010 FY 2010 Annualized FY 2012

Resource Level Obligated Obligated Obligated Enacted1 CR Level Request

Appropriated Resources $809,039 $859,093 $894,288 $895,202 $895,202 $986,045

Reimbursable Resources 149 14,120 505 505 511 516

Mandatory Appropriations - User Fees 13,049 24,277 22,095

Total Resources $822,237 $873,213 $894,793 $895,707 $919,990 $1,008,656 1

The FY 2010 Enacted represents the approved FY 2010 Operating Plan.

Dollars in Thousands

Description of Performance

The IRS achieved cost savings in FY 2010 by completing nine space reduction projects, 

releasing a total of 22,370 square feet with an annualized savings of $429,910. 

The FY 2010 savings, coupled with those from previous years, have helped to offset the 

increased costs associated with GSA rate increases, as well as infrastructure improvement 

initiatives such as the consolidation of the Philadelphia campus operations. Workstation 

utilization continued to increase in 2010 as the IRS placed most new employees into 

existing space.
IRS-111 

For FY 2011, 26 space reduction projects are planned with a projected release of an 

additional 111,338 square feet. The IRS plans to place any new hires in existing space 

and renew leases at existing sites rather than moving to new locations. These and other 

actions will help IRS absorb projected FY 2011 rent increases.

3G – Shared Services and Support ($1,313,050,000 in direct appropriations and an 

estimated $20,577,000 from reimbursable programs): This budget activity funds policy 

and management, IRS-wide support for research, strategic planning, communications and 

liaison, finance, human resources, and equal employment opportunity and diversity 

services and programs. It also funds printing and postage, business systems planning, 

security, corporate training, legal services, procurement, and employee benefits 

programs. This includes the following program activities: 

• National Headquarters Management and Administration directs the management 

activities of strategic planning, communications and liaison, finance, human 

resources, EEO and diversity, and business systems planning and embedded 

training. This activity sets policies and goals, provides leadership and direction 

for the IRS and builds partner relationships with key stakeholders (Congress, 

GAO, OMB). It provides policy guidance for conducting IRS planning and 

budgeting strategies, conducting analysis of programs and investments to support 

strategic decision-making, and developing and managing human resources. It 

also includes official reception and representation expenses.

• Real Estate and Facilities Management provides services and supplies required to 

manage IRS facilities.

• Procurement supports the procurement function of the IRS. 

• EEO and Diversity Field Services plans and manages the IRS EEO and Diversity 

Program.

• Communications and Liaison coordinates local government and liaison 

relationships; handles congressional, state, and national stakeholder relationships 

and issues; coordinates cross-cutting issues, including managing audits and 

legislative implementation; handles national media contacts and local media 

relationships; and ensures IRS-wide compliance with disclosure and privacy laws. 

• Employee Support Services plans and manages financial services, including 

relocation, travel, imprest fund, purchase cards, corporate express, and employee 

clearances.

• Treasury Complaint 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. 
IRS-112 

• Statistics of Income provides resources for researching annual income, financial, 

and tax data from tax returns filed by individuals, corporations, and tax-exempt 

organizations. 

• Research provides resources for market-based research to identify compliance 

issues, for conducting tests of treatments to address noncompliance, and for the 

implementation of successful treatments of taxpayer non-compliant behavior.

• Security Administration and Management manages and oversees the staffing, 

training, equipment, and direct support for the protection of IRS employees, 

facilities, assets, and the availability of taxpayer services. 

• 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 (CADE), 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 Public Transit Subsidy and 

Career Counselor Contract. 

FY 2012 Program Changes by Budget Activity

FTE Amount

Taxpayer Service Initiatives 1 $3,339

Improve Taxpayer Service 1 3,252

Expand Online Options through IRS.gov Improvements 87

Enforcement Initiatives 29 $40,652

Increase International Service and Enforcement 4 6,824

Increase Collection Coverage 4,185

Implement Merchant Card and Basis Reporting 1 3,664

Increase Coverage to Address Tax Law Changes and Other Compliance Issues 6 5,297

Ensure Accurate Delivery of Tax Credits 3 13,910

Administer New Statutory Reporting Requirements 14 4,318

Leverage Return Preparer Program to Reduce Noncompliance 1 1,400

Address Appeals Workload Growth 878

Implement Uncertain Tax Position Reporting Requirements 176

Infrastructure Initiatives 8 $4,136

Enhance Security and Disaster Recovery Systems Capability 29

Update Integrated Financial System (IFS) 29

Leveraging Data to Improve Compliance 5 1,359

Enhance Physical Security for Federal Employees 1,695

Implement Individual Coverage Requirement and Employer Responsibility Payments 3 1,024

Business Systems Modernization (BSM) Initiative $50

Continue Migration from Aging Tax Administration System 50

Total FY 2012 Request 38 $48,177

Dollars in Thousands

Internal Revenue Service

Shared Services and Support
IRS-113 

3.2.7 – Budget and Performance Plan

Shared Services and Support FY 2011

FY 2008 FY 2009 FY 2010 FY 2010 Annualized FY 2012

Resource Level Obligated Obligated Obligated Enacted1 CR Level Request

Appropriated Resources $1,279,800 $1,257,040 $1,299,008 $1,311,127 $1,311,127 $1,313,050

Reimbursable Resources 30,796 20,763 20,315 20,315 20,445 20,577

Mandatory Appropriations - User Fees 19,114 2 17,887 17,887

Total Resources $1,329,710 $1,277,805 $1,337,210 $1,349,329 $1,331,572 $1,333,627 1

The FY 2010 Enacted represents the approved FY 2010 Operating Plan.

Dollars in Thousands

Description of Performance

Through support activities that include management and administration of human 

resources, security, and research, the IRS provides shared services to all IRS tax 

administration programs. 

Human Capital 

In FY 2010, the IRS continued its focus on attracting, retaining, and developing a quality 

workforce to support workforce management activities that contribute to making the IRS 

one of the best places to work in government. To attract the best and increase the number 

of qualified and diverse applicants, the IRS enhanced its recruitment programs and 

introduced a new recruitment brand, “Count on Me!” on print materials, USAjobs.gov, 

IRS Careers website, Internet advertisements, and social media. 

One of the key initiatives that contribute to making the IRS the best place to work was 

the establishment of the Workforce of Tomorrow (WOT) group. In FY 2010, the IRS 

completed 41 of 58 recommendations outlined in the 2009 WOT report. The 

recommendations address the most significant challenges facing current employees and 

managers. Implementation included the recognition of employee successes through the 

web, issuing anniversary congratulations messages, enhancing the Career Management 

Resource Center website, and developing a comprehensive on-boarding strategy for new 

IRS employees, which includes providing forms and benefit information, as well as 

orientation information. 

Results of the annual IRS employee engagement survey are used to improve the 

workplace. The level of employee engagement affects the overall ability of the 

organization to meet goals, minimize attrition, and increase productivity. In FY 2010, a 

record 79 percent of employees participated in the annual survey, with overall employee 

satisfaction increasing from 73.7 percent in FY 2009 to 74.4 percent in FY 2010. In 

addition, the IRS also improved its Federal Employee Viewpoint scores ranking from 

79 out of 224 government agencies compared to 127 out of 216 agencies in 2008. 

Leadership competencies are the foundation for hiring, promoting, developing, and 

evaluating IRS leaders. The IRS uses leadership competencies to assess employee skills, 

abilities, and knowledge to determine their readiness for leadership in the IRS. For 2010, 
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the IRS phased in a new and improved leadership competency model that comprises four 

leadership competencies, each of which has three or more supporting behaviors. The 

new model replaces the old model that had 21 competencies, reducing managerial burden 

associated with employee assessment, and making the overall process easier to use. 

Security

The IRS collects a tremendous amount of sensitive information, and protecting this 

information is vital to maintaining the public trust. The IRS takes the issue of identity 

theft very seriously. In FY 2010, to preserve and enhance public confidence, the IRS 

advocated the protection and proper use of identity information by: 

• Placing markers on more than 284,000 taxpayer accounts to alert employees that

the account belongs to a substantiated identity theft victim; and

• Ensuring identity theft indicators and business rules isolate returns for additional 

screening to validate whether the true taxpayer filed the return. More than 

82,000 returns were selected for additional screening and closed, and 

$245 million was protected from being refunded to perpetrators on more than 

48,000 fraudulent returns.

The IRS also protects its systems and taxpayers from increasing and evolving online 

threats. By monitoring, identifying, and mitigating fraudulent sites and phishing scams, 

the IRS helps to reduce the number of taxpayers who fall victim to online fraud schemes. 

During FY 2010, the IRS shut down 4,109 phishing sites (899 domestic and 

3,210 international) compared to 3,444 sites shut down through all of 2009. 

Research

The IRS remains committed to finding ways to increase compliance and reduce the tax 

gap. In FY 2010, the IRS began developing new methodologies for estimating the 

corporate income tax gap, updating the estate and gift tax nonfiling and underreporting 

tax gap estimates, and developing a new basis for estimating the individual income tax 

non-filer gap. Updated tax gap estimates will be released in 2011 based on new National 

Research Program (NRP) data, including reporting compliance estimates using tax year 

(TY) 2006 and TY 2007 NRP data. Tax gap estimates will also incorporate updated 

filing and payment estimates. Updated methodologies to detect non-compliance will be 

used. 

The IRS NRP allows the IRS to target specific areas of noncompliance to improve 

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

FY 2010, NRP efforts included a study to assess the reporting compliance of employment 

taxes. The study will span three tax years, from 2008 through 2010, examining 

approximately 2,200 randomly selected taxpayers each year. This new study 

complements the ongoing study of individual reporting compliance. 
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The IRS continues to study the effects of services it offers to taxpayers on the internet, at 

walk-in sites, and on its toll-free telephone lines as well as exploring the relationships 

between taxpayer errors and unclear correspondence. As part of this effort, the IRS is 

testing the effect of on-line assistance and instruction and service quality to aid in the 

development of new approaches to service.

3H – Information Services ($2,321,431,000 in direct appropriations, an 

estimated $18,353,000 from reimbursable programs and an estimated $51,371,000 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. 

Modernization and Information Technology Services (MITS) is responsible for 

information systems and technology, ranging from cyber security and networks to 

applications development and end user equipment and services. This includes the 

following program activities:

• 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 to single-owner, small to medium investment projects 

using core data to support specialized functions. 

• Management Services provides for the design, development, delivery, and 

evaluation of a wide range of human resource programs for the MITS 

organization. These programs include workforce planning, recruitment and 

retention, career management, performance management, labor/employee 

relations, position management, workplace improvement, succession management 

and service-wide IT training and education. 

• National Headquarters (NHQ) IT Management provides for the management and 

oversight of investments in IT for the Chief of Staff and Research, Analysis and 

Statistics (RAS). The program allows NHQ to manage and leverage IT solutions 

that are responsive to IRS-wide management, tax compliance, enforcement, and 

strategic and tactical research projects.
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• Affordable Care Act Project Management Office will manage the strategic 

planning, development, and implementation of new information systems in 

support of business requirements with regard to the healthcare reform initiative. 

• MITS Executive Oversight provides support to the immediate office of the Chief 

Technology Officer, as well as the direct reports for EEO and Diversity, and the 

Director, Stakeholder Management (including Communications Services and 

Program Oversight). The program provides executive direction for the MITS 

organization, enabling MITS to be a customer-focused supplier of IT solutions 

that are responsive to customer business priorities and effectively meet functional 

and operational needs. 

• Application Development performs the analysis, design, development, testing, and 

implementation of approximately 85,000 application programs supporting critical 

tax processing, management information reporting and financial 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 MITS organization, including demand analysis, enterprise architecture, 

configuration management, project reporting, enterprise life cycle management, 

release management, systems engineering, dashboard reporting, and internal 

management.

• End User Equipment and Services maintains the IRS automated business 

processes at headquarters and field sites, 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 
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management tools. It performs asset management activities, and maintenance of 

the voice and data infrastructure at the territory offices. 

• Strategy and Planning provides the management and oversight of investments in 

IT, demand analysis, project reporting, portfolio management and other MITS 

operational priorities. 

• IT Security Certification and Accreditation provides design and operations of 

security controls and the technical mechanisms used by the IRS systems and 

applications as part of the 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 with 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 FISMA reporting purposes. 

• IT Homeland Security Presidential Directive-12 oversees the use of Personal 

Identity Verification (PIV) technology for physical access to federally-controlled 

facilities and logical access to information systems for all federal employees and 

contractors who require long-term access.

• IT Infrastructure funds the replacement of IRS IT infrastructure that has reached 

or surpassed its useful life cycle. The resources achieved through efficiencies in 

various parts of MITS are centralized to ensure that replacement of the aging 

infrastructure is addressed corporately. 

• Treasury Working Capital Fund is a centralized functional area for separating 

from the Information Services base budget the resources required to pay Treasury 

billings for services provided through the working capital fund. 

• Integrated Document Solutions Enterprise (IDSE) Campus Operations Most 

Efficient Organization (MEO) captures savings resulting from IDSE MEO 

activities.
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FY 2012 Program Changes by Budget Activity

FTE Amount

Taxpayer Service Initiatives 15 $55,115

Improve Taxpayer Service 22,295

Expand Online Options through IRS.gov Improvements 15 32,820

Enforcement Initiatives 479 $306,379

Increase International Service and Enforcement 15,072

Increase Collection Coverage 4 12,779

Implement Merchant Card and Basis Reporting 1,855

Increase Coverage to Address Tax Law Changes and Other Compliance Issues 138 48,401

Ensure Accurate Delivery of Tax Credits 219 179,950

Administer New Statutory Reporting Requirements 118 47,449

Leverage Return Preparer Program to Reduce Noncompliance 377

Address Appeals Workload Growth 416

Implement Uncertain Tax Position Reporting Requirements 80

Infrastructure Initiatives 72 $102,315

Enhance Security and Disaster Recovery Systems Capability 5 11,940

Update Integrated Financial System (IFS) 5 27,440

Leveraging Data to Improve Compliance 14

Enhance Physical Security for Federal Employees 1,735

Implement Individual Coverage Requirement and Employer Responsibility Payments 62 61,186

Business Systems Modernization (BSM) Initiative 5 $51,894

Continue Migration from Aging Tax Administration System 5 51,894

Total FY 2012 Request 571 $515,703

Dollars in Thousands

Internal Revenue Service

Information Services

3.2.8 – Budget and Performance Plan

Information Services FY 2011

FY 2008 FY 2009 FY 2010 FY 2010 Annualized FY 2012

Resource Level Obligated Obligated Obligated Enacted1 CR Level Request

Appropriated Resources $1,678,744 $1,680,279 $1,814,819 $1,877,555 $1,877,555 $2,321,431

Reimbursable Resources 14,310 5,481 17,231 17,231 18,187 18,353

Mandatory Appropriations - User Fees 50,000 9,543 36,081 36,081 51,185 51,371

Total Resources $1,743,054 $1,695,303 $1,868,131 $1,930,867 $1,946,927 $2,391,155 1

The FY 2010 Enacted represents the approved FY 2010 Operating Plan.

Dollars in Thousands

Description of Performance

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

prioritizes funding of business unit needs using a risk assessment framework. In 

FY 2010, IRS reduced the quantity of aged IT hardware assets by 17 percent, from 

42 percent on October 1, 2009 to 25 percent on September 30, 2010. During FY 2010, 

the IRS spent more than $117 million to replace 38,346 of these aged assets, which 

include network equipment, end-user equipment, and servers and storage equipment. 

Future funding will be used to replace aging IT and telecommunication equipment in line 

with current business standards. Without investment in an ongoing replacement program 
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for the backlog of aged and outdated IT and telecommunication equipment, the IRS runs 

the risk of increased maintenance costs, an inability to meet increased demand for 

interaction and information exchange with taxpayers and tax preparers, and failure to 

comply with government-wide standards and industry best practices. 
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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 Budget Request for FY 2012 is $333,600,000 in direct appropriations and 

453 FTE. This is an increase of $69,703,000, or 26.4 percent, and 120 FTE more than

the FY 2010 enacted level of $263,897,000 and 333 FTE.
IRS-121 

2.1 – Budget Adjustments Table 

Dollars in Thousands 

FTE Amount

FY 2010 Enacted Budget1 333 $263,897

FY 2011 Annualized CR Level 333 $263,897

Changes to Base:

Adjustment to Reach FY 2011 President's Policy Level 156 $122,561

Maintaining Current Levels $168

Other Adjustments 29

Technical FTE Adjustments 29

Efficiencies/Savings ($1,026)

Reduce Training, Travel and Programs (1,026)

Subtotal Changes to Base 185 $121,703

Total FY 2012 Base 518 $385,600

Program Changes:

Program Increases:

Business Systems Modernization (BSM) Initiative (65) ($52,000)

Continue Migration from Aging Tax Administration System (65) (52,000)

Subtotal Program Changes (65) ($52,000)

Total FY 2012 Request 453 $333,600

Adjustments to Request

User Fees

Total FY 2012 Request 453 $333,600

Business Systems Modernization 

1

FY 2010 Enacted represents the approved FY 2010 Operating Plan
IRS-122 

2.2 – Operating Levels Table 

Dollars in Thousands 

Appropriation Title: Business Systems Modernization FY 2010

Enacted 

Level 1,2

FY 2011

President's 

Budget

Congressional 

Action 

including 

Rescission

FY 2011

Annualized 

CR Level 2 

Proposed 

Reprogram.

FY 2011 

Proposed 

Operating 

Level

FY 2012

Request 

Level 2

% 

Change 

FY 2011 

to 

FY 2012

FTE 333 489 333 333 453 36.0%

Object Classification:

11.1 Full-Time Permanent Positions $34,079 $53,905 $0 $34,079 $0 $34,079 $49,843 46.3%

11.3 Other than Full-Time Permanent Positions 785 869 0 785 0 785 1,125 43.3%

11.5 Other Personnel Compensation 643 1,173 0 643 0 643 1,390 116.2%

11.8 Special Personal Services Payments 0 0 0 0 0 0 0 0.0%

11.9 Personnel Compensation (Total) $35,507 $55,947 $0 $35,507 $0 $35,507 $52,358 47.5%

12.0 Personnel Benefits 10,493 14,058 0 10,493 0 10,493 15,835 50.9%

13.0 Benefits to Former Personnel 0 0 0 0 0 0 0 0.0%

21.0 Travel 100 78 0 100 0 100 469 369.0%

22.0 Transportation of Things 0 0 0 0 0 0 0 0.0%

23.1 Rental Payments to GSA 0 0 0 0 0 0 0 0.0%

23.2 Rent Payments to Others 0 0 0 0 0 0 0 0.0%

23.3 Communications, Utilities, & Misc 0 0 0 0 0 0 0 0.0%

24.0 Printing & Reproduction 0 0 0 0 0 0 0 0.0%

25.1 Advisory & Assistance Services 0 0 0 0 0 0 0 0.0%

25.2 Other Services 135,605 193,348 0 135,605 0 135,605 176,700 30.3%

25.3 Purchase of Goods & Services from Govt. Accounts 0 0 0 0 0 0 0 0.0%

25.4 Operation & Maintenance of Facilities 0 0 0 0 0 0 0 0.0%

25.5 Research & Development Contracts 0 0 0 0 0 0 0 0.0%

25.6 Medical Care 0 0 0 0 0 0 0 0.0%

25.7 Operation & Maintenance of Equipment 10,578 15,972 0 10,578 0 10,578 60,982 476.5%

25.8 Subsistence & Support of Persons 0 0 0 0 0 0 0 0.0%

26.0 Supplies and Materials 0 0 0 0 0 0 56 0.0%

31.0 Equipment 71,614 107,505 0 71,614 0 71,614 27,200 -62.0%

32.0 Lands and Structures 0 0 0 0 0 0 0 0.0%

33.0 Investments & Loans 0 0 0 0 0 0 0 0.0%

41.0 Grants, Subsidies 0 0 0 0 0 0 0 0.0%

42.0 Insurance Claims & Indemn 0 0 0 0 0 0 0 0.0%

43.0 Interest and Dividends 0 0 0 0 0 0 0 0.0%

44.0 Refunds 0 0 0 0 0 0 0 0.0%

91.0 Unvouchered 0 0 0 0 0 0 0 0.0%

Total Budget Authority $263,897 $386,908 $0 $263,897 $0 $263,897 $333,600 26.4%

Budget Activities:

IT Investments $263,897 $386,908 $0 $263,897 $0 $263,897 $333,600 26.4%

Total Budget Authority $263,897 $386,908 $0 $263,897 $0 $263,897 $333,600 26.4%

1 FY 2010 Enacted represents the approved FY 2010 Operating Plan.

2 Reflects implementation of the IRS Material Group Code project. This project realigned costs to more closely conform to general ledger account and OMB object class 

definitions. 
IRS-123 

2.3 – Appropriation Detail Table 

Dollars in Thousands 

Business Systems Modernization

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

New Appropriated Resources:

Business Systems Modernization 337 $177,208 333 $263,897 333 $263,897 453 $333,600 36.04% 26.41%

Subtotal New Appropriated Resources 337 $177,208 333 $263,897 333 $263,897 453 $333,600 36.04% 26.41%

Other Resources:

Recoveries 2,980

Offsetting Collections - Reimbursable

Available multi-year/no-year funds 107,195 116,254 98,019 21,664 -77.90%

50% Carryover

Transfers In/Out

Mandatory Appropriations - User Fees

Subtotal Other Resources $107,195 $119,234 $98,019 $21,664 -77.90%

Total Resources Available for Obligation 337 $284,403 333 $383,131 333 $361,916 453 $355,264 36.04% -1.84%

% Change

Enacted1 to FY 2012

1 The FY 2010 Enacted column represents the approved FY 2010 Operating Plan.

FY 2011

Resources Available for Obligation

FY 2010 FY 2012

Request

FY 2010 FY 2011

Obligations Annualized CR Level

3I – Business Systems Modernization ($333,600,000 in direct appropriations): This 

budget activity funds the planning and capital asset acquisition of IT to modernize IRS 

business systems, including labor and related contractural costs. The IRS is required to 

submit an annual BSM expenditure plan that justifies the projects for which resources are 

requested. 

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 FY 2012 BSM request of $333.6 million funds the projects listed in the table below: 

Project

FY 2012 

Budget 

Request

Customer Account Data Engine 2 $156.8

Current Customer Account Data Engine 19.0

Modernized e-File 20.5

Core Infrastructure 37.7

Architecture, Integration and Management 27.6

Management Reserve 2.6

Labor 69.3

Total $333.6
IRS-124 

Customer Account Data Engine 2 (CADE 2) (Taxpayer Account Database): The CADE 

2 Program will implement an authoritative database for all individual taxpayers and 

provides the foundation for more efficient and effective tax administration. An analytical 

data store will provide business users with tools to use taxpayer data more effectively for 

enhanced compliance and taxpayer service. 

The primary purpose of the CADE 2 Program is to implement a data-centric solution that

provides daily processing of taxpayer accounts. The CADE 2 Program will move from 

the current-state solution to the target-state solution through multiple major transition 

states. The transition states allow the IRS to make marked progress towards the target 

state in an incremental manner.

The target state of CADE 2 will focus on completing the transition of all applications and 

eliminating transitional components that were required during the transition states and 

achieving the business benefits allowed by the target solution. This final step will 

enhance the long-term viability of the CADE 2 platform.

Current Customer Account Data Engine(CADE): Current CADE allows for the 

replacement of the IRS’s current master files and serves as the repository of all taxpayer 

information. 

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 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.

The first release of MeF went into production in February 2004, when Form 1120, U.S. 

Corporation Income Tax Return, Form 1120-S, U.S. Income Tax Return for an S 

corporation, and Form 990, Return of Organization Exempt from Income Tax were 

accepted on the modernized platform. Subsequent releases added Form 1065, U.S. 

Return of Partnership Income, Form 1120-F, U.S. Income Tax Return of a Foreign 

Corporation, and Federal Form 990 N, Electronic Notice (e-Postcard) for Tax-Exempt 

Organizations Not Required to File Form 990 or 990-EZ. 

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 will implement 

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 will take 

place in FY 2012 by migrating the 125 remaining 1040 family forms and schedules, 

including Forms 1040A, Making Work Pay and Government Retiree Credits, and 

1040EZ, Income Tax Return for Single and Joint Filers With No Dependents. This phase 
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will expand the reach of MeF to all of the e-File population, or approximately 

98.3 million filers by January 2012. 

Core Infrastructure: The Core Infrastructure will provide mission-critical services to 

BSM projects and consists of two primary program elements – Infrastructure Shared 

Services (ISS), and the Development, Integration and Testing Environment (DITE). 

• ISS provides mission-critical services in designing, engineering, developing, and 

deploying a standardized, consolidated, virtual, and secure modernized production 

environment for use by BSM projects. The continued development and 

management of this infrastructure incorporates (1) the identification and 

development of common architecture, infrastructure, and security; 

(2) virtualization; and (3) application integration services for use and reuse by 

BSM projects—thus reducing delivery time as well as application development 

and operations and maintenance costs. 

• DITE is a standardized environment composed of all modernized infrastructure 

components and applications needed by projects that plan to use and integrate into 

the modernized production environment. DITE uses streamlined processes and 

standard tools that allow thorough development and testing in a controlled 

environment, ensuring projects work effectively and seamlessly within the 

modernized production environment. DITE provides ongoing infrastructure 

support to all BSM projects on Level of Effort (LOE) basis and supports the 

development, test, integration, and deployment of each project on a 

release-by-release basis. 

DITE is an integral part of the approved IRS Enterprise Architecture (EA). Use 

of this modernized, enterprise-level component allows modernized systems to 

comply with IRS standards. 

Architecture, Integration and Management (AI&M): AI&M activities ensure that systems 

solutions meet IRS business needs and effectively integrate modernization 

projects/programs (current CADE, Customer Account Data Engine (CADE 2), and MeF). 

To ensure the success of the planned business change, AI&M provides a single 

authoritative source of guidance for integrating each project as it moves from the 

development environment to the business environment. Major AI&M components are: 

• Architecture and Integration (A&I) – The A&I activities ensure systems solutions 

meet business needs and provide a single authoritative source of guidance for 

effectively integrating each project as it moves from the development to the 

business environment. This program produces the principles, strategies, and 

standards to guide the construction and delivery of coherent and integrated 

enterprise systems.

• Enterprise Architecture (EA) – EA ensures that the IRS follows mandated 

requirements in developing its EA. This includes business and technical 

architecture, enterprise data management/architecture, enterprise transition 

strategy, release architecture and security architecture. 
IRS-126 

• Systems Architecture and Engineering (SAE) – SAE supports the BSM projects 

in the conceptual design of the architectures to ensure that they comply with 

EA-mandated Guidelines. SAE also is responsible for providing systems 

architecture and engineering support, which includes outlining the design and 

ensuring performance metrics are established.

• Enterprise Data Management (EDM) – The EDM manages the XML vocabulary 

along with the naming and design rules used on all BSM projects. This is 

accomplished through the development of Enterprise Data Models and the 

Enterprise Data Architecture. In addition, the EDM defines the data strategy and 

supports the data components and activities that in part define the IRS Enterprise 

Architecture. EDM documents this process through the publication and 

enforcement of data management policies, standards (including XML standards) 

and procedures at both the enterprise and project levels. 

• Integrated Process Management (IPM) – IPM supports the continued 

implementation of an end-to-end process management framework, through 

refinement of the Process Asset Library (PAL) and Integrated Process Framework 

(IPF) to support implementation of the Capability Maturity Model Integration 

(CMMI) and Information Technology Information Library (ITIL) disciplines. 

The IRS plans to implement a three-phased migration (process centralization, 

process integration, and process analysis) to an IPM framework. It is responsible 

for leveraging the research and development expertise of industry experts to 

implement the plan to transition from the current fragmented state to the 

integrated framework.

• Change and Configuration Management (CCM) – CCM provides program 

support and oversight to key information technology projects and is responsible 

for developing and implementing IT Service Management in accordance with 

MITS direction and ITIL best practices. In addition, CCM develops and conducts 

configuration management (CM) training for program management, project 

managers, and CM representatives MITS-wide; conducts CM compliance 

assessments and oversight on all CM practitioners; assists PRIME modernization 

projects in planning, developing and integrating reasonable, manageable, and 

attainable release schedules and release packages; and tracks and facilitates 

resolution of risks, issues, schedule, and resource conflicts.

• Portfolio Governance and Control (PG&C) – PG&C processes and standards 

allow the IRS to define, manage, and deliver its IT portfolio successfully. 

Activities include IT portfolio investment management, cost estimation, transition 

management and risk management. The IRS will develop an IT risk management 

strategy to establish a consistent enterprise approach for identification and 

mitigation of risks for BSM projects and releases. PG&C also will provide an 

integrated IT portfolio assessment of organizational capacity for delivering BSM 

capabilities. This IT portfolio assessment is critical to ensure the technical impact 

of BSM program decisions on the current production environment are understood 

and considered fully. Engineering analyses and resource estimates are integral to 

ensuring organizational capacity needs are incorporated into both plans and 

budgets to deliver an integrated portfolio, including maintaining current 
IRS-127 

operations, delivering filing season readiness, addressing significant legislative 

proposals, and supporting BSM initiatives. 

• Requirements Management (RM) – RM improves the conduct of business 

analysis, process redesign, business rules harvesting and management, and 

business requirements elicitation, definition and management. RM standards and 

expertise allow the IRS to incorporate requirements engineering industry best 

practices into the Enterprise Life Cycle for consistent systems development 

processes; apply business rules methods, tools and processes to BSM projects; 

and develop enterprise policy and standards for requirements and business rules 

management. 

RM provides requirements planning and management support, business process 

redesign, rules and requirements development, business modeling, requirements 

training and outreach, requirements baseline management, and solution 

development support. In addition, RM allows for integrating the technical 

requirements engineering process into requirements management methodology. 

• Management Processes (MP) – MP provides management disciplines leading to 

consistent quality, managed risk, increased stakeholder satisfaction, and delivery 

of modernized business systems within established cost and schedule parameters. 

The IRS is continually working to strengthen its management processes through 

the development and deployment of processes and procedures such as Earned 

Value Management (EVM) and Enterprise Life Cycle (ELC). The dynamic 

nature of modernization drives BSM to continually assess its operation and 

implement continuous improvements. 

• Program Management (PM) – PM provides centralized services for the PRIME 

task orders to ensure consistency and quality of the products delivered to the IRS 

and to assist PRIME staff in providing timely and efficient services to the IRS. 

The PRIME contractor will continue to provide overall executive and contractual 

support for the task orders, with the IRS integrating the task orders’ results and 

measuring program-critical success factors. The PRIME task order provides the 

management data and IT infrastructure that supports risk management activities, 

high-level project cost and schedule estimates, contracts and procurement 

management, and security services for the PRIME contract and associated task 

orders. This funding will provide the IRS with the high quality, timely data 

necessary to evaluate and report overall contract performance from a perspective 

that balances cost, schedule, technical requirements, and customer satisfaction. 

• Federally Funded Research and Development (FFRDC) – The IRS has undertaken 

a complete redesign and modernization of its computer-based information 

processing system through its modernization program. The IRS must improve its 

procedures and practices through the injection of public and private sector 

expertise. The FFRDC provides national experts in systems engineering, 

architectural design and development, information technology, security, and other 

technical disciplines that are critical to the modernization success. The FFRDC 

also provides support services to promote consistency with enterprise goals and 

objectives to ensure efficient operations. Areas of support include Security 
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Architecture; Data Strategy; System Architecture and Engineering; IRS Enterprise 

Architecture, consisting of the Enterprise Architecture, Enterprise Requirements, 

and Enterprise Transition components. 

Management Reserve: The management reserve funds are not designated for specific 

projects or programs and allow the IRS flexibility to cover unanticipated cost 

adjustments.

Labor: This activity provides the labor costs associated with the development of projects 

within the BSM portfolio.

FY 2012 Program Changes by Budget Activity

FTE Amount

Business Systems Modernization (BSM) Initiative (65) ($52,000)

Continue Migration from Aging Tax Administration System (65) (52,000)

Total FY 2012 Request (65) ($52,000)

Dollars in Thousands

Internal Revenue Service

Information Technology Investments

3.2.9 – Budget and Performance Plan

Business Systems Modernization FY 2011

FY 2008 FY 2009 FY 2010 FY 2010 Annualized FY 2012

Resource Level Obligated Obligated Obligated Enacted1 CR Level Request

Appropriated Resources $170,576 $131,138 $177,208 $263,897 $263,897 $333,600

Reimbursable Resources

Mandatory Appropriations - User Fees

Total Resources $170,576 $131,138 $177,208 $263,897 $263,897 $333,600

Budget Activity Total $170,576 $131,138 $177,208 $263,897 $263,897 $333,600 1

The FY 2010 Enacted represents the approved FY 2010 Operating Plan.

Business Systems Modernization Budget Activity FY 2008 FY 2009 FY 2010 FY 2010 FY 2011 FY 2012

Measure Actual Actual Actual Target Target Target

Percent of BSM Projects within +/- 10% Cost Variance (E) 92.0% 60.0% 40.0% 90.0% 90.0% 90.0%

Percent of BSM Projects within +/- 10% Schedule Variance (E) 92.0% 90.0% 100.0% 90.0% 90.0% 90.0%

Key: E - Efficiency Measure

Dollars in Thousands

Description of Performance

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

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

highlights IRS accomplishments in FY 2010: 

• Customer Account Data Engine (CADE) – CADE posted more than 41.2 million 

tax returns and processed more than 35.8 million refunds. For the first time, 
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CADE posted more than 7.2 million payments submitted with taxpayer returns 

and, at the taxpayers’ request, issued 8,128 U.S. Savings Bonds using their federal 

tax refund. 

• Modernized e-File (MeF) – The IRS deployed an additional release that allowed 

for filing of individual Forms 1040 (federal and state returns), Form 4868, 

Application for Automatic Extensions of Time to File U.S. Individual Income Tax 

Return, extensions, and 21 other supporting 1040 forms and schedules. In 

FY 2010, MeF accepted more than 6.9 million returns. 

• Accounts Management Services (AMS) – The final AMS Release provided all 

users with the ability to view correspondence images online in real-time,

eliminating reliance on the manual processes to obtain copies. Direct access to 

images reduced the case cycle time from 10 to 14 days to zero. In 2010, over 

1.3 million images were viewed. 

CADE to CADE2

The IRS launched the Customer Account Data Engine (CADE) in 2000 as one of the 

cornerstones of the Business Systems Modernization (BSM) programs. Since its 

inception, CADE has made significant progress towards replacing the IRS aged master 

file processing system. It has delivered increased value to taxpayers as well as 

operational efficiencies for the IRS.

An assessment conducted by IRS senior technologists and respected external advisors 

resulted in a revised path forward for CADE, leveraging existing systems as well as new 

development and focusing on the end state – “getting to done.” 

As a result, CADE 2 was commissioned to execute a revised plan to modernize IRS’s

core taxpayer account processing systems that would build on the substantial progress 

that the current CADE processing platform had created. The CADE 2 solution will 

provide daily processing capability, timely access to authoritative individual taxpayer 

account information, an enhanced ability to address technology security and IRS financial 

material weaknesses, and long-term architecture planning and viability. 

Completion of a taxpayer account database under CADE 2 is the prerequisite for other 

major initiatives, including significant expansion of online services and transactions and 

the next generation of enforcement technologies.
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Health Insurance Tax Credit Administration 

Appropriation Description

The Health Insurance Tax Credit Administration (HITCA) appropriation provides 

funding for contractor support to develop and administer the advance payment option for 

the Health Coverage Tax Credit (HCTC) included in the Trade Adjustment Assistance 

Act (Trade Act of 2002) (Public Law 107-210). 

The IRS administers the enrollment, payment, and compliance components of this credit. 

The Department of Labor, state workforce agencies, and the Pension Benefit Guaranty 

Corporation determine who might be eligible for HCTC. This credit was expanded by 

the Recovery Act and is proposed for extension in the FY 2012 Budget.

The HITCA Budget Request for FY 2012 is $18,029,000 in direct appropriations and 

15 FTE. This is an increase of $2,517,000, or 16.23 percent, more than the FY 2010 

enacted level of $15,512,000 and 15 FTE. 
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2.1 – Budget Adjustments Table 

Dollars in Thousands 

FTE Amount

FY 2010 Enacted Budget1 15 $15,512

FY 2011 Annualized CR Level 15 $15,512

Changes to Base:

Adjustment to Reach FY 2011 President's Policy Level $3,447

Maintaining Current Levels $232

Other Adjustments

Technical FTE Adjustments

Efficiencies/Savings ($1,162)

Reduce Training, Travel and Programs (1,162)

Subtotal Changes to Base $2,517

Total FY 2012 Base 15 $18,029

Program Changes:

Subtotal Program Changes

Total FY 2012 Request 15 $18,029

Adjustments to Request

User Fees

Total FY 2012 Request 15 $18,029

Health Insurance Tax Credit Administration

1

FY 2010 Enacted represents the approved FY 2010 Operating Plan
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2.2 – Operating Levels Table 

Dollars in Thousands 

Appropriation Title: Health Insurance Tax Credit 

Administration

FY 2010

Enacted 

Level 1,2

FY 2011

President's 

Budget

Congressional 

Action 

including 

Rescission

FY 2011

Annualized 

CR Level 2 

Proposed 

Reprogram.

FY 2011 

Proposed 

Operating 

Level

FY 2012

Request 

Level 2

% 

Change 

FY 2011 

to 

FY 2012

FTE 15 15 15 15 15 0.0%

Object Classification:

11.1 Full-Time Permanent Positions $2,353 $2,399 $0 $2,353 $0 $2,353 $2,374 0.9%

11.3 Other than Full-Time Permanent Positions 0 0 0 0 0 0 0 0.0%

11.5 Other Personnel Compensation 34 24 0 34 0 34 24 -29.4%

11.8 Special Personal Services Payments 0 0 0 0 0 0 0 0.0%

11.9 Personnel Compensation (Total) $2,387 $2,423 $0 $2,387 $0 $2,387 $2,398 0.5%

12.0 Personnel Benefits 360 374 0 360 0 360 376 4.4%

13.0 Benefits to Former Personnel 0 0 0 0 0 0 0 0.0%

21.0 Travel 133 211 0 133 0 133 203 52.6%

22.0 Transportation of Things 0 0 0 0 0 0 0 0.0%

23.1 Rental Payments to GSA 0 0 0 0 0 0 0 0.0%

23.2 Rent Payments to Others 0 0 0 0 0 0 0 0.0%

23.3 Communications, Utilities, & Misc 0 400 0 0 0 0 21 100.0%

24.0 Printing & Reproduction 0 200 0 0 0 0 203 100.0%

25.1 Advisory & Assistance Services 0 0 0 0 0 0 0 0.0%

25.2 Other Services 12,624 15,372 0 12,624 0 12,624 14,783 17.1%

25.3 Purchase of Goods & Services from Govt. Accounts 0 0 0 0 0 0 0 0.0%

25.4 Operation & Maintenance of Facilities 0 0 0 0 0 0 0 0.0%

25.5 Research & Development Contracts 0 0 0 0 0 0 0 0.0%

25.6 Medical Care 0 0 0 0 0 0 0 0.0%

25.7 Operation & Maintenance of Equipment 0 0 0 0 0 0 0 0.0%

25.8 Subsistence & Support of Persons 0 0 0 0 0 0 0 0.0%

26.0 Supplies and Materials 8 7 0 8 0 8 15 87.5%

31.0 Equipment 0 0 0 0 0 0 0 0.0%

32.0 Lands and Structures 0 0 0 0 0 0 30 100.0%

33.0 Investments & Loans 0 0 0 0 0 0 0 0.0%

41.0 Grants, Subsidies 0 0 0 0 0 0 0 0.0%

42.0 Insurance Claims & Indemn 0 0 0 0 0 0 0 0.0%

43.0 Interest and Dividends 0 0 0 0 0 0 0 0.0%

44.0 Refunds 0 0 0 0 0 0 0 0.0%

91.0 Unvouchered 0 0 0 0 0 0 0 0.0%

Total Budget Authority $15,512 $18,987 $0 $15,512 $0 $15,512 $18,029 16.2%

Budget Activities:

Health Insurance Tax Credit Administration $15,512 $18,987 $0 $15,512 $0 $15,512 $18,029 16.2%

Total Budget Authority $15,512 $18,987 $0 $15,512 $0 $15,512 $18,029 16.2%

1 FY 2010 Enacted represents the approved FY 2010 Operating Plan.

2 Reflects implementation of the IRS Material Group Code project. This project realigned costs to more closely conform to general ledger account and OMB object class 

definitions. 
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2.3 – Appropriation Detail Table 

Dollars in Thousands 

Health Insurance Tax Credit Administration

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

New Appropriated Resources:

Health Insurance Tax Credit Administration 12 $15,478 15 $15,512 15 $15,512 15 $18,029 16.23%

Subtotal New Appropriated Resources 12 $15,478 15 $15,512 15 $15,512 15 $18,029 16.23%

Other Resources:

Recoveries 1,177

Offsetting Collections - Reimbursable

Available multi-year/no-year funds

50% Carryover

Transfers In/Out

Mandatory Appropriations - User Fees

Subtotal Other Resources $1,177

Total Resources Available for Obligation 12 $15,478 15 $16,689 15 $15,512 15 $18,029 16.23%

FY 2010

Obligations Enacted Annualized CR Level 1 to FY 2012

1 The FY 2010 Enacted column represents the approved FY 2010 Operating Plan.

Resources Available for Obligation Request

% Change

FY 2010 FY 2011 FY 2012 FY 2011

3J – Health Insurance Tax Credit Administration ($18,029,000 in direct 

appropriations): The HITCA budget activity funds costs to administer a refundable tax 

credit created by the Trade Act of 2002 to purchase health insurance for eligible 

taxpayers. This activity maintains the administrative and direct support for the HITCA 

program office and the staff charged with managing the program for the IRS.

3.2.10 – Budget and Performance Plan

Health Insurance Tax Credit Administration FY 2011

FY 2008 FY 2009 FY 2010 FY 2010 Annualized FY 2012

Resource Level Obligated Obligated Obligated Enacted1 CR Level Request

Appropriated Resources $15,223 $15,374 $15,478 $15,512 $15,512 $18,029

Reimbursable Resources

Mandatory Appropriations - User Fees

Total Resources $15,223 $15,374 $15,478 $15,512 $15,512 $18,029 1

The FY 2010 Enacted represents the approved FY 2010 Operating Plan.

Health Insurance Tax Credit Administration Budget Activity FY 2008 FY 2009 FY 2010 FY 2010 FY 2011 FY 2012

Measure Actual Actual Actual Target Target Target

Cost per Taxpayer Served ($) (E) $16.94 $13.79 $9.52 Baseline1 $10.00 $11.00

Sign-up Time (days) - Customer Engagement (Ot) 94.0 91.3 124.0 Baseline1 124.0 137.0

Key: E - Efficiency Measure, Ot - Output/Workload Measure

1

An increase in participation occurred due to the Recovery Act. IRS established a new baseline in FY 2010.

Dollars in Thousands

Description of Performance

The IRS administers the HCTC by working with health plan administrators to arrange for 

direct payment of health plan premiums on behalf of taxpayers and is dependent upon the 

Department of Labor, state workforce agencies, and the Pension Benefit Guaranty 

Corporation who determine HCTC candidates. 
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Over the past two years, the HCTC program has undergone several changes. The 

economic downturn led to an increased number of candidates and increased operational 

volumes while the ARRA provisions improved the accessibility and affordability of the 

HCTC program. 

In FY 2010, the IRS promoted communication of program changes, expanding outreach 

with special mailings and targeted presentations to educate participants and to encourage 

them to enroll. The IRS also worked closely with other agencies to ensure eligible 

candidates receive the HCTC. 

In FY 2010, the IRS processed almost 11 million HCTC eligibility records, made more 

than 279,000 HCTC payments (60 percent more than in 2009) on behalf of taxpayers, 

handled approximately 233,000 (77 percent more than in 2009) HCTC telephone calls, 

and mailed more than 1.1 million (72 percent more than in 2009) pieces of 

correspondence. While volumes were significantly higher than in FY 2009, the IRS 

maintained a customer satisfaction level of 90 percent. 

In addition, the Cost per Taxpayer Served (CPTS) decreased from $13.79 in 2009 to 

$9.52 in 2010 because of the significant increase in the number of new candidates, 

enrollees and people contacting the program. While the CPTS decreased, sign-up time (the 

median number of days between the first program kit mailing and the first payment 

received from the participant) increased 36 percent from 91 days to 124 days as a result of 

the additional time needed to process more registrations because of the increased numbers 

of eligible taxpayers. 
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Section 4 – Supporting Materials

4A – Human Capital Strategy 

In FY 2010 the IRS completed the IRS Human Capital Business Plan (HCBP) for 

2010-2014. This plan expands upon the IRS Strategic Plan and outlines IRS’s dedication 

to make effective investments in the IRS workforce. The HCBP highlights the strategic 

vision and direction to achieve IRS’s FY 2012 goals and objectives with collaboration, 

leadership, connectivity, and delivery of a cutting-edge workforce with measured results 

to showcase IRS as the “best place to work in government.” 

To achieve the strategic goals and objectives, the IRS is faced with the following 

business challenges: 

• Increasing complexity of tax administration that requires new and enhanced 

employee competencies;

• Growing numbers of employees eligible for retirement; and

• Managing an increasingly diverse and mobile workforce. 

To address the challenges, the IRS must: 

• Recruit, Hire, and Onboard – Supports the IRS priority to achieve both the 

optimum mix of employee skill sets and diversity by continuing efforts to improve 

recruiting, hiring transition, and other processes to ensure the right person is in the 

right job. 

• Engage, Develop, and Retain – Supports the IRS commitment to improve 

employee skills, address retention efforts, and increase employee engagement. It 

also reflects a commitment to support top quality managers with effective 

resources, recognition, and tools to lead an engaged workforce. 

• Develop and Promote Leaders – Addresses the crucial support needed to 

provide leadership with effective resources, recognition, and tools to lead the IRS 

workforce. Without a stable, knowledgeable managerial infrastructure, IRS’s

ability to carry out its mission is compromised.

• Facilitate Collaborative Environment – Fosters an open exchange of innovative 

ideas and leveraging relationships to ensure that human capital plans and 

implementation efforts are fully integrated with the IRS mission, strategies and 

program goals. 

The FY 2012 IRS key objectives are: 

• Enhance productivity through expanded use of technology; 

• Continue process improvements to simplify hiring; 

• Close skill and competency gaps in critical occupations; 

• Implement recommendations from annual workforce summits;
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• Focus recruitment on the most critical hiring needs by using a more targeted 

approach to college recruiting and leveraging partnerships with external 

organizations and internal affinity groups; and 

• Create new ways for candidates to learn about and apply for IRS jobs through the 

use of an employee referral program and electronic media. 

Mission Critical Occupations Facing Critical Deficiencies

Leadership continuity continues to be one of the IRS key areas of focus because of the 

growing numbers of employees in leadership positions who are eligible to retire. 

Retirement eligibility among experienced employees who would otherwise be candidates 

for leadership positions also is growing. 

Management 

Level

Number of 

Employees

FY 2010 FY 2011 FY 2012 FY 2013

Executive 297 19 109 130 149 170 57.2%

Senior 1,677 94 522 626 748 857 51.1%

Department 363 13 54 74 88 113 31.1%

Front Line 6,639 241 1,542 1,863 2,185 2,558 38.5%

Non-Management 99,200 2,577 15,982 19,286 22,803 26,634 26.8%

Total 108,176 2,944 18,209 21,979 25,973 30,332 28.0%

1

Based on retirement eligibility statistics as of November 30, 2010

Retirement Eligibility1

FY 2014

To address this challenge, the IRS identifies potential leaders through competency 

assessments, leadership succession review, and leadership development programs such as 

Frontline, Senior, and Executive Readiness Programs. 

The IRS has no major hiring gaps with non-management positions. To ensure this trend 

continues, the Recruitment Office will:

• Continue to ensure that mission critical occupation, geography, and diversity 

needs are met;

• Maintain candidate relationships from the beginning to the end of the recruiting 

process using a data tracking system;

• Continue to standardize materials and messages, tailored to candidate segments; 

• Use diverse hiring sources to increase employment of disabled, veteran, and 

student applicants; and 

• Develop a strong online presence at relevant social media sites.
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Closing Competency Gaps in Mission Critical Positions

The IRS completed its pilot of a skills assessment process called Assess 4 Success (A4S). 

A draft report was completed and will be presented to leadership for review.

Human Capital Occupations/Functions Contracted 

The IRS uses contractor employees to fill short-term needs and obtain technical and 

expert information technology skills that are not available within the current workforce. 

To support surges in hiring workload, the IRS plans to continue to leverage temporary 

contractor support and re-employed annuitants. 

Organizational Changes 

The Large and Mid-Size Business Division completed an organizational change initiative 

to consolidate international expertise and staffing into one organization to enhance 

efficiencies and effectiveness by creating direct line authority, and facilitating 

consistency of treatment of issues and employee training. The organizational changes 

were accomplished within available resources and resulted in the new Large Business and 

International (LB&I) Division. 

The End User Equipment & Services organization is reorganizing to meet Federal 

Information Technology Infrastructure Line-of-Business target levels. Full transition is 

expected to continue through September 30, 2012. The new organization structure will: 

• Reduce cost and increase service delivery performance by changing the support 

model to a leaner model focused on a centralized service desk;

• Consolidate onsite support in high-density customer locations; and 

• Allow for contracted support for low-density customer locations. 

Best Place to Work in Government 

Several key initiatives helped IRS make significant progress toward becoming the “best 

place to work in government.” For example, a strategic business relationship was 

developed with the Partnership for Public Service to advise the IRS on strategies to 

increase its stature as the “best place to work in government.” In addition, an Action 

Planning Team (HCO, Business Unit, and NTEU representatives) was formed to focus on 

three key areas for organizational improvement: 

• Effective Leadership; 

• Family-Friendly Culture and Benefits; and 

• Employee Skills/Mission Match. 
IRS-138 

The results from the Federal Employee Viewpoint Survey, used to rank agencies across 

the federal government and encourage “the best and brightest” to work in government, 

ranked the Department of the Treasury, with the IRS as the key driver, as one of the top 

10 most improved agencies in government in all four of the survey indices. The IRS was 

ranked 79th among the 224 federal agencies. 

Employee Engagement 

Based on key initiatives recommended by the Workforce of Tomorrow, the IRS annual 

employee satisfaction survey (ESS) results, and the Federal Human Capital Survey 

(FHCS) results, IRS is taking the following steps to increase employee satisfaction:

• Reduction of Managerial Burden – IRS has taken the following steps to allow 

managers to spend more time developing their employees: 

o Established a Managers Resource Center to answer manager questions 

and provide information. IRS is piloting an iManage website with over 

2,800 managers that provides information, advice, and interactive features. 

Implementation of the iManage website is scheduled for early 2011. IRS 

also is pursuing technology such as instant messaging and online help to 

reduce wait times for issue resolution. An online Hotline service, “Direct 

Connect” will be a pilot project in FY 2011. 

o Completed a Recognition Toolkit in April 2010 to provide the options 

and instructions for monetary and non-monetary recognition and 

recognition ceremonies. 

o Developing Managerial Training Enhancements, including the 

following improvements in training for readiness program participants, 

new managers, existing managers, and administrative professionals: 

 Redesigned the Front Line Readiness Program;

 Developed the New Managers Orientation course;

 Developed Fundamental Management Skills course; and 

 Redesigned Front Line Managers course. 

The next phase will focus on training for managers after they have been in 

their positions with completion planned in FY 2011. 

o Established a Service-wide Managerial Burden Council in April 2010, 

which is currently working on developing solutions to managerial burdens. 

o Designed and conducted a Managerial Burden Survey (July 2010) to 

identify ways to reduce burden to ensure measurable progress in reducing 

burden so managers can instruct and coach employees on job performance 

and career goals. Reducing burden also will affect how employees view 

the prospect of becoming a manager. Approximately 20 percent of 

managers completed the survey and an analysis of the results is underway. 
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• Increase Communications to Employees – IRS is taking steps to better inform 

employees of IRS and division level initiatives. Senior leaders use town halls, 

blogs, streaming videos and all-employee messages to reach staff. Leaders also 

share best practices and success stories on their internal websites and recognize 

those who are achieving IRS goals and objectives. 

• Improve Employee Recognition – The IRS is revising the awards and 

recognition program to reach more employees and to create a standard protocol 

for employee recognition. Recognition activities such as using the web to 

recognize employee successes were implemented throughout FY 2010. 

• Improve Training for New Employees – The IRS is improving its new 

employee training. The IRS is updating its on-boarding program for new 

employees from a one-day orientation to a 12-month corporate on-boarding 

strategy. In addition, IRS is initiating an ambassador program to help familiarize 

new employees with their job. Many of these programs were created with input 

from the National Treasury Employees Union (NTEU). In May 2010, the IRS 

completed a redesign of the Career Management Resource Center to support and 

enhance employees’ career development process. 

• Address Results of the IRS Annual Employee Survey – The IRS received its 

2010 survey results with a record 79 percent employee participation and overall 

employee satisfaction increased from 73.7 percent in FY 2009 to 74.4 percent in 

FY 2010. Each division within the agency conducted meetings with their 

workgroups to discuss results and devise specific plans for addressing any issues. 

The IRS also is working with the Partnership for Public Service to further 

enhance its service-wide action planning process. 

Wellness Program 

The IRS wellness initiative links to and supports the goals of the President’s Federal 

Employee Worksite Wellness Initiative and Office of Personnel Management (OPM) and 

Office of Management and Budget directives requiring agencies to inventory current 

wellness activities, initiate plans to enhance wellness programs, and establish health and 

wellness performance targets.

The wellness initiative supports employee health and wellness through education and 

awareness programs, encourages healthy lifestyle choices, and raises awareness and 

commitment to health and wellness as part of work-life balance. Benefits to employees

include fewer work-related injuries, improved attendance, reduced turnover, and 

increased morale. 

To meet the FY 2011 performance target, the IRS completed an inventory of current 

wellness and health services/activities; researched external health resources and tools to 

supplement internal wellness activities; and developed a detailed communication strategy 

and wellness website that highlights the availability and benefits of wellness services. 
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In FY 2012, the IRS will continue to build upon its education and awareness efforts. 

New wellness activities include: 

• Continuing and expanding efforts to increase employee awareness of internal and 

external services and resources;

• Maximizing use of services and resources available under the Federal 

Occupational Health and Employee Assistance Program contracts;

• Participating in OPM-sponsored government-wide wellness activities 

(e.g., FedsGetFit challenges and events);

• Developing a more robust and interactive wellness website for use by managers 

and employees upon implementation of IConnect, the new IRS employee portal; 

• Partnering with specific demographic groups and employee organizations to 

promote wellness programs and services; and 

• Promoting extended (4 to 6 weeks) physical activity campaigns (link to events 

such as President's Physical Challenge and National Employee Health and Fitness 

Day) and campaigns that focus on healthy eating and weight management (link to 

events such as Healthy Weight Week and National Nutrition Month). 

To evaluate the progress of the IRS Wellness Initiative, the IRS will measure and track 

use of Federal Occupational Health and Employee Assistance Program services. The 

OPM Employee Viewpoint Survey results, Best Place to Work in Government and, if 

feasible, the IRS Employee Engagement Survey also will be used to collect data and 

assess the effectiveness of the IRS Wellness. 

Hiring Reform 

The IRS Hiring Reform initiative is directly linked to and fully supports the goals of the 

Presidential Budget and Performance Plans (June 2009) and Presidential Improving the 

Federal Recruitment and Hiring Process (May 2010) directives. This initiative will 

include: 

• Development/enhancement of assessment tools 

Key activities for developing and enhancing assessment tools include: 

o Development of automated ranking templates for 75 percent of the hiring 

volume in FY 2011. 

o Implementation of more than 200 CareerConnector templates to improve the 

hiring process using the Treasury CareerConnector recruitment system. 

o Implementation of the Presidential Improving the Federal Recruitment and 

Hiring Process directives by November 1, 2010, as mandated. 

 Deployment of CareerConnector templates to eliminate KSA/Essay 

questions and revision of instructions so applicants can apply using 

resumes and cover letters. 
IRS-141 

 Expanding use of category ratings on CareerConnector 

announcements. Category ratings increases the number of qualified 

applicants while preserving veterans’ preference rights. 

o Development of a process to convert manual external announcements to 

category ratings. 

o Implementation of an experience calculator to assist applicants in determining 

basic and specialized experience qualifications. 

o Continued use of the OPM hiring survey for internal and external 

announcements to measure the quality of the recruitment actions. 

• Education/Training of HR Specialists and Hiring Managers

The IRS began training human resources specialists and assistants on hiring 

reform and key aspects of the hiring process to improve technical knowledge and 

skills. The IRS completed the development of manager training on the hiring 

process in October 2010. The “just in time” online training can be taken at the 

time managers begin the recruitment process. Early involvement ensures 

accountability and participation in every facet of the hiring process. 

• Outreach/Communications to Applicants

IRS is developing a Hiring Reform Alert document share within and outside of 

the IRS Human Capital Office and a communications plan that includes web 

notices and alerts to educate and communicate with employees. 

• Workforce Planning

IRS also is analyzing its collective workforce needs by developing a corporate 

approach with appropriate measures to integrate the planning function with other 

core workforce management functions, including recruitment, hiring, retention, 

development, and succession planning. The IRS is developing common 

guidelines and processes for collecting and analyzing workforce data, identifying 

and prioritizing workforce gaps and developing strategies to address gaps and 

prepare for future workforce needs. 

Veterans’ Employment 

The IRS Veterans Employment and Recruitment Operational Plan supports key aspects 

of the Veterans Employment Initiative. Current and planned initiatives in support of 

promoting employment opportunities for veterans include:

• Recruitment and increased hiring of veterans 

o Continue outreach efforts by organizing and coordinating recruitment 

opportunities throughout the U.S. for wounded service members, veterans, 

and their spouses; 
IRS-142 

o Provide one-on-one resume writing assistance, interviewing skills and 

other career search services through corporate immersion workshops and 

various information sessions; 

o Design a professional development/career-building intern program for 

veterans to meet mission critical needs; 

o Contribute to the development of an interactive program to translate 

military skills to civilian occupations; 

o Develop a transitioning service member and veteran resume 

database/skills inventory with appropriate business partners; 

o Develop an IRS marketing campaign highlighting veteran and 

transitioning service member skills, leadership, dedication and how these 

attributes support the IRS in meeting mission objectives; and

o Integrate IRS marketing efforts with transition assistance program offices 

on military installations and other targeted marketing efforts underway at 

Treasury and Veterans Affairs.

• Retention to include veteran training, mentoring and job counseling 

o Maximize career counseling opportunities and career search activities for 

veterans and transitioning service members through social network 

platforms; 

o Train and educate veterans and transitioning service members to meet the 

staffing needs of IRS’s high-demand occupations; 

o Validate programs and policies that ensure veterans and transitioning 

service members are trained, educated and informed on hiring authorities, 

veterans preferences and employment opportunities; 

o Design an IRS Veterans website to better provide information on 

employment opportunities, veterans’ preference, Q&As, hiring authorities 

as well as a calendar of recruitment events for veterans, transitioning 

service members and hiring managers; and 

o Provide interaction via email to transitioning service members/veterans for 

job search assistance.

• Fulfillment of mandatory annual training of hiring managers and human 

resource specialists 

o Conduct training incorporating Treasury training module (under 

development) for HR professionals and hiring officials on veterans' 

employment, including the strategic use of special hiring authorities, 

employment of military spouses, and reasonable accommodations for 

disabled veterans. 
IRS-143 

Hiring Individuals with Disabilities

The IRS uses specific recruitment efforts to reach individuals with disabilities, including 

targeted disabilities through partnerships with the National Federation for the Blind, 

American Council for the Blind; National Federation for the Blind; Association for 

Higher Education and Disabilities; Jobs Accommodations Network and Employee 

Assistance Resource Network. IRS Affinity Groups also are a way to increase 

opportunities to recruit and hire a diverse applicant pool. Some specific activities 

include: 

• Job counseling to facilitate successful matching of applicants to jobs in the IRS; 

• Working with the Workforce Recruitment Program that connects federal and 

private sector employers nationwide with postsecondary students and recent 

graduates with disabilities;

• Partnering with a university to develop a new “feeder program” for hiring 

employees with disabilities, emulating some of the aspects of the Lions World 

Services for the Blind Model; and 

• Incorporating a mentoring program component for employees with disabilities 

and establishing a cadre of formally trained mentors. The mentors will help 

develop employee skills and experience levels to promote career growth and 

improve networking and communications for employees with disabilities. 

The IRS continues to take steps to educate managers and employees on the hiring and 

retention of individuals with disabilities. The IRS is using different communications 

channels such as town halls, the internal website, streaming videos, and all employee 

emails to reach the IRS workforce. 

Labor-Management Forums 

IRS and NTEU senior leadership continue discussions regarding formulation of a 

collaborative forum with senior leadership participation. Associated with the 

development of this forum is identifying a more progressive approach to obtain 

pre-decisional input from IRS employees through their elected representatives on all 

workplace issues. Once these determinations have been made, the IRS will provide 

appropriate training to managers and other participants in the processes. Evaluative 

metrics will be developed to allow for review of processes and modifications as 

appropriate. 

Long-standing labor relations management committees continue to operate within the 

provisions of the IRS National Agreement II, Article 46. These forums provide a venue 

for addressing matters of concern or interest regarding personnel policies, practices and 

working conditions as well as building and strengthening relationships between the union 

and the IRS. Issues identified at the local level that may have IRS-wide impact are 

reviewed at the national level.
IRS-144 

Finally, the IRS and NTEU have sponsored two on-going national collaborative 

initiatives for the purpose of program review and have identified opportunities for 

process improvement. 
IRS-145 

4B – Information Technology (IT) Strategy 

The IRS information systems support all aspects of tax administration and are essential 

tools for taxpayer communications and transactions within the IRS. Major IT activities 

address both internal and external priorities, through a balanced investment portfolio that 

is fully aligned with the IRS Strategic Plan 2009-2013. IRS strategic priorities are 

determined by the IRS Senior Executive Team (SET) and are expected to provide the 

foundation for making sound decisions to meet both IRS and business IT needs. 

 

Information Technology Process Improvement

The IRS plans to direct resources to the enrichment of specific business processes. This 

will enable the standardization of program management and service delivery methods 

according to industry best practices and move the IRS closer to its goal of managing its 

IT processes and infrastructure more efficiently.

A few of these processes include:

• Capability Maturity Model Integration (CMMI) – An approach that provides 

organizations with the essential elements of effective software engineering 

processes. CMMI is being used to guide process improvement across projects to: 

o Produce quality products or services; 

o Create value for the business stakeholders;

o Enhance customer satisfaction; and

o Gain an industry-wide recognition for excellence.

• Information Technology Infrastructure Library (ITIL) – A proven method based 

on industry standards for planning common processes, roles and activities with 

appropriate references to each other defining how communication lines should 

exist between processes. Benefits include:

o Improved quality service provisioning; 

o Cost-justified service quality;

o Integrated centralized processes; and

o Demonstrated performance indicators.

• Project Management Institute (PMI) – PMI sets the project management standard 

for how projects are planned and executed. The PMI organization certifies 

individuals who understand and practice these standards. The benefits of 

PMI-certified project management include:

o Common method to manage risk across projects; 

o Better decision making by evaluating a project’s triple constraints – cost, 

time, and scope; and

o Enhanced and more comprehensive project planning. 
IRS-146 

CyberSecurity 

The IRS, through the CyberSecurity organization, offers a robust organizational structure 

with associated tools and processes to ensure annual compliance with FISMA 

requirements. Specific tracking of required deliverables and year-to-date progress is 

communicated to management decision-makers on a monthly basis via the FISMA 

Dashboard product. This dashboard tracks FISMA progress in the following program 

areas: 

• Security Assessment & Authorization

• Information Technology Contingency Plans (ITCP) Testing 

• Security Controls Testing (Continuous Monitoring/SCAs) 

• Plan of Action and Milestones (POA&M) Mitigation 

• Privacy Impact Assessments (PIA)

• System of Record Notices (SORN)

• FISMA Contractor System Reviews

• Employee Awareness Training

• Contractor Awareness Training

• Specialized IT Security Training

• Security Configuration Management 

Executive review of the dashboard and management of follow-up actions ensures that 

sufficient year-to-date progress is made and to implement mitigation strategies to address 

documented areas of shortcoming. 

IT Infrastructure 

The IRS Data Center Consolidation Plan was prepared in response to the Office of 

OMB’s Federal Data Center Consolidation Initiative (FDCCI). Additionally, the FDCCI 

is a key component to achieve Goal 9 - Electronic Stewardship - of the IRS Sustainability 

plan. The IRS is committed to ensuring policies and practices reduce the environmental 

impact of IRS operations and are critical for long-term economic fiscal responsibility to 

reduce operating costs. Adopting Green IT and migrating to more efficient infrastructure 

operations are key focus areas for the IRS in the coming years. 

The IRS Data Center Consolidation Initiative (DCCI) approach is to centralize, virtualize, 

and decommission server resources to meet the following goals: 

• Consolidate the governance of all servers; 

• Reduce the IRS Data Center footprint; 

• Enhance the IRS Disaster Recovery capabilities; and 

• Streamline IRS processes to reach a more mature level of ITIL. 
IRS-147 

The IRS will perform a business case study to determine the most cost effective approach 

to meet the goal of doubling the effective use of the available Data Center raised floor 

over the next five years. Essentially, the IRS will reduce the Data Center square footage 

by 50 percent over a five-year period and make that capacity available for other uses. As 

a long-term approach, after reviewing the business case, the IRS will be able to better 

identify the 10 year goals for efficient use of available raised floor resources. 

The IRS will, through a business case study, determine a cost effective approach to 

reducing Data Center square footage and allow Treasury to consolidate its Bureaus Data 

Center needs inside of IRS Data Centers. The business study will focus on two major 

approaches – a reduction in the number of data centers and/or a reduction in the current 

data center footprints. Both methods will allow the IRS to reach its goal of operating 

more efficiently through better utilization of resources. 

The FDCCI serves as a foundation for expanding the use of shared services. The IRS is 

building a foundation to Centralize Information, Improve Platform Portability, and 

Improve User Mobility. The IRS goal to have “All applications run on all systems and 

all systems see all the data with integrity” will be achieved by implementing a scalable 

Service-Oriented Infrastructure with information portability and manual workload 

distribution across services. The IRS is evaluating Cloud Computing technology, 

including Infrastructure as a Service, Platform as a Service, and Software as a Service. 

IRS is continuously evaluating utilization of this technology for various tax 

administration and employee productivity tools. 

Another initiative is the Enterprise Storage Strategy with a goal to move from a project 

based allocation to a "storage-as-a-service" model. The Enterprise Storage Strategy is a 

utility-on-premise storage model where storage will be procured based on a usage model 

meeting IRS performance and operational service level agreements. The goal is to save 

20 to 30 percent of the annual IT budget for storage acquisition and maintenance, reduce 

reliance on vendors and manage data as a valued asset. The objective is to consolidate a 

majority of storage to the three IRS data centers, Martinsburg/Memphis/Detroit, and 

reduce the necessary footprint through consolidation and virtualization of IRS storage 

pools. In FY 2011, the contract will be awarded and implementation will begin with 

completion scheduled in FY 2012. 

IT Project Management 

The IRS MITS Strategy and Capital Planning Office is responsible for prioritizing the IT 

investment portfolio according to the Senior Executive Team strategic priorities. This is 

accomplished by utilizing a Pre-Select/Select process that considers available resources. 

This process provides a level playing field when evaluating investment proposals by 

using a business case approach and driving IT investment decisions from the top down to 

ensure that investments deliver strategic benefits for the organization. 
IRS-148 

• The Pre-Select/Select process requires that each IT investment proposal:

o Maintain executive sponsorship; 

o Include an executive synopsis (business case) that states the business 

problem to be solved, identifies alternative solutions to solving the 

problem, reflects a cost analysis with a documented basis of estimate for 

the lifecycle, identifies known risks, applicable benefits and return on 

investment; and

o Align to the SET investment priorities.

• Governance Process 

The IRS uses an integrated governance model that reflects industry best practices. 

IT projects are assigned to an appropriate governance body for oversight. The 

enterprise governance model:

o Considers IT projects or systems, from selection through retirement, 

regardless of dollar value or life cycle phase;

o Empowers governance bodies to make project cost, schedule, and scope 

decisions for “at risk” projects that require escalation within the tiered 

governance model to boards with greater authority to intervene for 

corrective actions; and

o Promotes accountability and decision-making at the enterprise and project 

level, specifying the appropriate thresholds and governance bodies for 

elevating issues.

• Health Assessments 

The IRS has implemented a standardized health assessment process as a key 

component of the governance framework. The health assessment process uses: 

o Common criteria or Enterprise Key Performance Indicators (KPIs) to rate 

project performance and identify potential risks; 

o A color-coded rating for EKPIs to rate projects in the areas of cost, 

schedule, risk, scope, technical, organizational readiness, and overall 

performance; and

o Control and governance organizations to review the EKPPI rating and take 

corrective actions as appropriate. 

Potential issues are identified for remediation through the analysis of project specific 

data. IRS governance and control organizations guide project managers in remediation 

activities to assess the issues at hand and determine the appropriate actions to be taken. 

Project assistance teams are formed, as needed, to identify and remediate those project 
IRS-149 

issues. Metrics regarding cost and schedule variances are reported both internally and 

externally to oversight organizations. As of the October 2010 Oversight Reporting cycle, 

100 percent of the non-BSM IT Portfolio had risk and contingency management plans; 

and, approximately 98 percent of non-BSM projects are within established thresholds for 

cost variance and schedule slippage. For those projects exceeding established thresholds, 

mitigation strategies are underway as appropriate. In addition, IRS IT organizations 

conduct quality assurance reviews of project data to monitor compliance with 

methodologies and assist project managers in implementing components of the 

IRS Enterprise Lifecycle methodology. 
IRS-150 

4C – Government Wide Initiatives 

Improper Payments Reductions

The IRS has made a number of improvements to the Earned Income Tax Credit (EITC) 

program. The IRS strategy with respect to EITC improper payments is to intervene early 

to ensure compliance with the rules. Thus, the IRS has expanded outreach and education 

to taxpayers and preparers so that they are aware of the legal requirements for EITC 

eligibility. Efforts also include improved examination selection processes and data 

matching using third-party data, reducing taxpayer burden while increasing revenue 

protected. Most recently, the IRS has begun to concentrate more on regulating the 

preparer community. 

In January 2010, the IRS announced a plan that will register, license and create 

enforcement tools that affect the paid return preparer community more broadly. The IRS 

believes new regulation of tax return preparers will drive increased EITC compliance, 

decrease fraud and affect the improper payment rate. Currently, tax preparers complete 

66 percent of EITC returns and by focusing on this area, compliance and payment 

accuracy is expected to improve. As part of the EITC focused paid return preparer effort, 

the IRS developed a risked-based scoring and selection system to identify preparers for 

several types of enforcement treatment based on a preparer’s level of egregiousness such 

as Due Diligence Visits, Knock and Talk Visits, Streamline Injunctions, Notices, 

Undercover Shopping, and Expanded Contact Approach. These activities will continue 

and expand in FY 2012. 

In addition, the Department of the Treasury is conducting a pilot project using funds from 

the Partnership Fund for Program Integrity Innovation to test how fraud and error in 

EITC might be significantly improved by sharing information with state-based programs 

to better determine eligibility up front. This pilot, which will conclude in the second 

quarter of FY 2012, simulates the benefits of data sharing in order to inform whether 

additional authority to implement such data sharing may be warranted. 

Efficient Use of Energy

The IRS is promoting the sustainable use of energy resources by increasing the efficiency 

of facilities to reduce greenhouse gas emissions. The IRS is conducting energy and water 

audits of delegated facilities, as directed by the Energy Independence and Security Act of 

2007 (Public Law 110-140). These audits identify energy efficiency improvements 

called actionable Energy Conservation Measures (ECMs). At multiple IRS campuses, 

IRS implemented ECM improvements such as data center support equipment upgrades. 

These energy program improvements reduced energy use by 12.3 percent from the 

2003 baseline. 
IRS-151 

The IRS also improved building water efficiency by implementing water management 

best practices to reduce potable water consumption that decreased water consumption by 

17 percent from FY 2007 to FY 2009. The IRS continues to meet renewable energy 

utilization goals by purchasing Renewable Energy Credits on an annual basis. 

Furthermore, the IRS is working to reduce emissions through fleet initiatives. In 

FY 2009, the IRS decreased the general fleet by 6 percent. 

IRS strives to improve agency facilities and foster high-performing buildings. To meet 

the Guiding Principles for Federal Leadership in High Performance and Sustainable 

Buildings as required by Executive Order 13514 (“Federal Leadership in Environmental, 

Energy, and Economic Performance”), the IRS is developing a sustainable buildings 

implementation strategy and has achieved Leadership in Energy and Environmental 

Design (LEED) certification at three facilities. IRS is exploring pursuing the LEED 

certification at additional facilities. To use space more efficiently and realize associated 

gains, the IRS is developing a Data Center Consolidation Plan and examining 

opportunities in underused space. 

Through acquisition policies, IRS also is improving the sustainability of procured goods 

and services. IRS is using the Green Procurement Plan and Buying Green Program and

environmental workshops and training to ensure that 95 percent of new contracts for 

products and services are energy and water efficient, environmentally preferable, and 

generally more sustainable. Finally, three IRS facilities comply with Environmental 

Management Systems (EMS), which meet or exceed the International Organization for 

Standardization’s “ISO 14001” requirements for environmental management. IRS is 

pursuing the EMS or Compliance Management Program designation at facilities 

nationwide to promote environmentally favorable, sustainable buildings and practices. 
IRS-152 

4D – Summary of FY 2010 Savings Realized 

In FY 2010 the IRS President’s Budget identified $118.1 million and 1,504 FTE in 

reductions to the IRS base budget as a result of increased electronic filing (e-File) and 

non-recurring and one-time costs associated with the FY 2009 enforcement initiatives 

and the Economic Stimulus Act of 2008 (Public Law 110-185). In addition, the IRS 

identified in the FY 2011 President’s Budget $58.3 million in savings to be realized in 

FY 2010 (generated from the Reduce Procurement/Contracting and a portion of 

Information Technology (IT) Infrastructure and Process Improvements savings 

initiatives). 

During the preparation of the budget request, the IRS reduced the requested level by the 

amount of the presented savings, and if the enacted budget level includes those 

reductions, the IRS operates at the reduced level. Thus, projected savings become actual 

savings upon enactment. 

FY 2010 Savings 

Increase e-File Savings -$8,360,000 / -182 FTE

The IRS projected to generate this savings by receiving 4.6 million fewer returns filed on 

paper (2.9 million individual and 1.7 million business) in FY 2010. For FY 2010, the 

IRS received 6.3 million (4.9 million individual and 1.4 million business) fewer returns in 

FY 2010 compared to FY 2009. The actual savings was $10,078,050 and 223 FTE. 

Non-Recur Savings -$27,074,000 / 0 FTE 

The IRS base budget was reduced by the $27 million in non-recurring, one-time

(e.g., ADP equipment and training) costs associated with the hiring of over 

3,000 enforcement employees funded by the FY 2009 enforcement initiatives. 

Non-Recur Stimulus Savings -$67,900,000 / -1,322 FTE 

The non-recur Stimulus funds received in FY 2009 were removed from the FY 2010 

budget. The dedicated toll free line added to handle Stimulus-related calls is now being 

used for the new Recovery Act legislation issues. The line added to the 2008 tax year tax 

return to facilitate reconciliation of the payment was removed from the 2009 tax year 

return. 

Non-Recur FY 2009 Reduction Adjustment/Correspondence Inventory

-13,439,000 / 0 FTE 

The non-recur funds received in FY 2009 to handle the increased adjustment/ 

correspondence workload that resulted from diverting staff from paper correspondence to 

telephone service to meet the requirements of the Stimulus Act was removed from the 

FY 2010 budget. The IRS correspondence inventory, comparing August 2009 to 
IRS-153 

August 2010 dropped 1,254,796 to 775,960, a decrease of 478,836. Note: these 

adjustment/ correspondence inventory levels do not include First Time Homebuyer 

Credit, Worker Homeownership and Business Assistance Act, and Recovery Act 

inventory. 

Non-Recur Pension Plan -$1,352,000 / 0 FTE 

The non-recur funds received in FY 2009 to fund one-time, non-recurring costs 

associated with testing the IRS ERISA (Employee Retirement Income Security Act of 

1974) Residual Solution (IERS) system were removed from the FY 2010 budget. The 

IRS ERISA Residual Solution (IERS) allows the IRS to receive and audit pension benefit 

data (Form 5500 series) for compliance purposes. Testing was successful, and the system 

became operational to receive and process returns on December 30, 2009. 

Reduce Procurement/Contracting (Reduction was taken in the FY 2011 President’s 

Budget)

Information Technology (IT) Infrastructure and Process Improvements 

FY 2010 Projected Savings -$58,300,000 / 0 FTE 

In accordance with Presidential guidance on controlling contract costs, the IRS planned 

to generate $58.3 million in savings in FY 2010. In FY 2010, the IRS realized savings of 

$61.6 million by renegotiating contracts for more favorable pricing and changing contract 

vehicles to firm fixed price type contracts. Most of this savings was generated from IT 

hardware, software licensing and maintenance, and telecommunication contracts. 
IRS-154 

 4.1 – Summary of IT Resources Table

Dollars in Millions

Major IT Investments /

Funding Source Budget Activity

FY 2009 

Actuals

FY 2010 

Actuals 

% Change 

from FY09 

to FY10

FY 2011 CR 

Rate

(FY 2010 

Enacted)

% Change 

from FY10 

to FY11

FY 2012 

Request

FY 2012 

Innovation 

Investments

% Change 

from FY11 

to FY12

Account Management Services (AMS) IT Investments $22,807 $27,988 22.7% $17,037 -39.1% $15,107 $15,107 -11.3%

IRS BSM 20-0921-0-1-803 IT Investments 10,650 6,688 -37.2% 000 -100.0% 000 000 0.0%

IRS Operations Support 20-0919-0-1-803 Information Services 12,157 21,300 75.2% 17,037 -20.0% 15,107 15,107 -11.3%

Automated Collection System (ACS) - Major Information Services $6,892 $7,872 14.2% $10,145 28.9% $7,885 $7,885 -22.3%

Business Master File (BMF) Information Services $12,259 $7,287 -40.6% $8,410 15.4% $8,267 $8,267 -1.7%

IRS Operations Support 20-0919-0-1-803 Information Services 12,259 7,189 -41.4% 8,410 17.0% 8,267 8,267 -1.7%

External Funding (incl. Reimbursable Agreements) * Information Services 000 097 100.0% 000 -100.0% 000 000 0.0%

Counsel Automated Systems Environment (CASE) Information Services $26,513 $22,742 -14.2% $27,951 22.9% $27,951 $27,951 0.0%

Criminal Investigation Management Information 

System (CIMIS) - Major Information Services $3,776 $1,159 -69.3% $4,273 268.8% $1,169 $1,169 -72.7%

IRS Txpyr. Scvs., Enfor.(0912, 0913) Multi-yr, Health 

Care/ACA(09A9), Rcvry., Asset Forfieture Information Services 1,009 1,000 -0.9% 1,626 62.6% 1,000 1,000 -38.5%

IRS Operations Support 20-0919-0-1-803 Information Services 2,767 159 -94.3% 2,647 1569.6% 169 169 -93.6%

Current CADE (previously known as Customer 

Account Data Engine (CADE)) IT Investments $61,430 $68,569 11.6% $46,356 -32.4% $24,223 $24,223 -47.7%

IRS BSM 20-0921-0-1-803 IT Investments 58,100 67,810 16.7% 45,937 -32.3% 23,460 23,460 -48.9%

IRS Txpyr. Scvs., Enfor.(0912, 0913) Multi-yr, Health 

Care/ACA(09A9), Rcvry., Asset Forfieture Information Services 000 000 0.0% 000 0.0% 000 000 0.0%

IRS Operations Support 20-0919-0-1-803 Information Services 3,330 758 -77.2% 419 -44.7% 763 763 82.1%

Customer Account Data Engine (MTA) / CADE 2 IT Investments $33,150 $77,687 134.3% $85,733 10.4% $198,832 $198,832 131.9%

IRS BSM 20-0921-0-1-803 IT Investments 33,150 77,524 133.9% 85,733 10.6% 198,451 198,451 131.5%

IRS Txpyr. Scvs., Enfor.(0912, 0913) Multi-yr, Health 

Care/ACA(09A9), Rcvry., Asset Forfieture Information Services 000 000 0.0% 000 0.0% 000 000 0.0%

IRS Operations Support 20-0919-0-1-803 Information Services 000 163 0.0% 000 -100.0% 381 381 0.0%

e-Services Information Services $14,648 $16,518 12.8% $14,007 -15.2% $8,666 $8,666 -38.1%

IRS BSM 20-0921-0-1-803 IT Investments 000 005 100.0% 000 -100.0% 000 000 0.0%

IRS Operations Support 20-0919-0-1-803 Information Services 14,648 16,513 12.7% 14,007 -15.2% 8,666 8,666 -38.1%

Electronic Fraud Detection System (EFDS) Information Services $12,392 $13,737 10.9% $12,251 -10.8% $14,341 $14,341 17.1%

IRS Operations Support 20-0919-0-1-803 Information Services 8,754 10,021 14.5% 8,594 -14.2% 10,632 10,632 23.7%

IRS Operations Support (EITC) 20-09E9 Information Services 3,639 3,657 0.5% 3,657 0.0% 3,709 3,709 1.4%

IRS BSM 20-0921-0-1-803 IT Investments 000 010 100.0% 000 -100.0% 000 000 0.0%

IRS Txpyr. Scvs., Enfor.(0912, 0913) Multi-yr, Health 

Care/ACA(09A9), Rcvry., Asset Forfieture Information Services 000 050 100.0% 000 -100.0% 000 000 0.0%

Electronic Management System (EMS) Information Services $4,742 $4,282 -9.7% $5,761 34.5% $4,318 $4,318 -25.0%

Enterprise Data Access Strategy (EDAS)

(Formerly:Enterprise Data Warehouse) Information Services $8,369 $8,086 -3.4% $6,995 -13.5% $7,367 $7,367 5.3%

IRS BSM 20-0921-0-1-803 IT Investments 000 014 100.0% 000 -100.0% 000 000 0.0%

IRS Operations Support 20-0919-0-1-803 Information Services 8,369 8,072 -3.5% 6,995 -13.3% 7,367 7,367 5.3%

Excise Files Information Retrieval System (ExFIRS) - 

Major / Externally Funded Information Services $13,022 $1,145 -91.2% $6,632 479.0% $097 $097 -98.5%

External Funding (incl. Reimbursable Agreements) * Information Services 13,018 000 -100.0% 6,139 100.0% 000 000 -100.0%

IRS Operations Support 20-0919-0-1-803 Information Services 004 1,145 28075.7% 493 -57.0% 097 097 -80.3%

Financial Management Information System (FMIS) Information Services $6,801 $5,825 -14.3% $5,186 -11.0% $6,069 $6,069 17.0%

Implement RRP (incorporates EFDS replacement) Information Services $0,000 $18,383 100.0% $17,947 -2.4% $20,905 $20,905 16.5%

Individual Master File (IMF) Information Services $13,357 $8,995 -32.7% $10,982 22.1% $11,393 $11,393 3.7%

IRS Operations Support (EITC) 20-09E9 Information Services 142 000 -100.0% 000 0.0% 000 000 0.0%

IRS Operations Support 20-0919-0-1-803 Information Services 13,215 8,923 -32.5% 10,982 23.1% 11,393 11,393 3.7%

IRS Txpyr. Scvs., Enfor.(0912, 0913) Multi-yr, Health 

Care/ACA(09A9), Rcvry., Asset Forfieture Information Services 000 072 100.0% 000 -100.0% 000 000 0.0%

Information Reporting and Document Matching (IRDM) Information Services $5,119 $18,824 267.7% $23,000 22.2% $23,255 $23,255 1.1%

IRS Operations Support 20-0919-0-1-803 Information Services 5,119 15,905 210.7% 23,000 44.6% 23,255 23,255 1.1%

IRS Txpyr. Scvs., Enfor.(0912, 0913) Multi-yr, Health 

Care/ACA(09A9), Rcvry., Asset Forfieture Information Services 000 2,920 100.0% 000 -100.0% 000 000 0.0%

Information Returns Processing (IRP) Information Services $7,654 $6,402 -16.4% $6,775 5.8% $5,976 $5,976 -11.8%

IRS Operations Support 20-0919-0-1-803 Information Services 7,654 6,388 -16.5% 6,775 6.1% 5,976 5,976 -11.8%

External Funding (incl. Reimbursable Agreements) * Information Services 000 014 100.0% 000 -100.0% 000 000 0.0%
IRS-155 

Major IT Investments /

Funding Source Budget Activity

FY 2009 

Actuals

FY 2010 

Actuals 

% Change 

from FY09 

to FY10

FY 2011 CR 

Rate

(FY 2010 

Enacted)

% Change 

from FY10 

to FY11

FY 2012 

Request

FY 2012 

Innovation 

Investments

% Change 

from FY11 

to FY12

Integrated Collection System (ICS) Information Services $7,484 $9,823 31.3% $9,854 0.3% $10,173 $10,173 3.2%

IRS Operations Support 20-0919-0-1-803 Information Services 7,484 9,823 31.3% 9,104 -7.3% 10,173 10,173 11.7%

IRS Txpyr. Scvs., Enfor.(0912, 0913) Multi-yr, Health 

Care/ACA(09A9), Rcvry., Asset Forfieture Information Services 000 000 0.0% 750 100.0% 000 000 -100.0%

Integrated Customer Communications Environment 

(ICCE) Information Services $12,082 $16,752 38.6% $16,618 -0.8% $14,892 $14,892 -10.4%

IRS Operations Support 20-0919-0-1-803 Information Services 12,082 16,680 38.1% 16,618 -0.4% 14,892 14,892 -10.4%

IRS Txpyr. Scvs., Enfor.(0912, 0913) Multi-yr, Health 

Care/ACA(09A9), Rcvry., Asset Forfieture Information Services 000 072 100.0% 000 -100.0% 000 000 0.0%

Integrated Data Retrieval Systems (IDRS) Information Services $20,231 $20,351 0.6% $19,550 -3.9% $20,795 $20,795 6.4%

Integrated Financial System/CORE Financial System 

(IFS)

IRS Business Systems 

Modernization $18,167 $18,357 1.0% $17,449 -4.9% $44,798 $44,798 156.7%

IRS BSM 20-0921-0-1-803 IT Investments 000 000 0.0% 000 -100.0% 000 000 0.0%

IRS Operations Support 20-0919-0-1-803 Information Services 18,167 18,051 -0.6% 17,449 -3.3% 44,798 44,798 156.7%

IRS Txpyr. Scvs., Enfor.(0912, 0913) Multi-yr, Health 

Care/ACA(09A9), Rcvry., Asset Forfieture Information Services 000 306 100.0% 000 -100.0% 000 000 0.0%

Integrated Submission and Remittance Processing 

System (ISRP) Information Services $18,981 $17,311 -8.8% $17,939 3.6% $17,098 $17,098 -4.7%

Internal Revenue Service.gov (IRS.gov) Information Services $56,479 $51,825 -8.2% $55,380 6.9% $113,380 $113,380 104.7%

IRS Operations Support 20-0919-0-1-803 Information Services 56,479 39,779 -29.6% 55,380 39.2% 113,380 113,380 104.7%

IRS Txpyr. Scvs., Enfor.(0912, 0913) Multi-yr, Health 

Care/ACA(09A9), Rcvry., Asset Forfieture Information Services 000 12,046 100.0% 000 -100.0% 000 000 0.0%

Redesign Revenue Accounting Control System 

(RRACS) - formerly Interim Revenue Accounting Cost 

System (IRACS) (Includes "Redesign IRACS" Tier B 

initiative) Information Services $5,137 $4,198 -18.3% $1,495 -64.4% $2,618 $2,618 75.1%

Modernized e-File (MeF) IT Investments $47,117 $89,127 89.2% $61,143 -31.4% $33,851 $33,851 -44.6%

IRS BSM 20-0921-0-1-803 IT Investments 29,500 70,585 139.3% 46,489 -34.1% 27,939 27,939 -39.9%

IRS Txpyr. Scvs., Enfor.(0912, 0913) Multi-yr, Health 

Care/ACA(09A9), Rcvry., Asset Forfieture Information Services 000 364 100.0% 000 -100.0% 000 000 0.0%

IRS Operations Support 20-0919-0-1-803 Information Services 17,617 18,178 3.2% 14,654 -19.4% 5,912 5,912 -59.7%

Report Generation Software (RGS) Information Services $7,961 $8,260 3.8% $7,709 -6.7% $7,780 $7,780 0.9%

IRS Operations Support (EITC) 20-09E9 Information Services 3,384 2,798 -17.3% 2,785 -0.5% 2,825 2,825 1.5%

IRS Operations Support 20-0919-0-1-803 Information Services 4,578 5,462 19.3% 4,924 -9.9% 4,955 4,955 0.6%

Reporting Compliance Case Management System 

(RCCMS) (Formerly TE/GE Reporting and Electronic 

Exmaination System (TREES) Information Services $2,140 $4,175 95.1% $4,030 -3.5% $4,340 $4,340 7.7%

Service Center Recognition/Image Processing System 

(SCRIPS) Information Services $16,632 $19,693 18.4% $16,818 -14.6% $15,385 $15,385 -8.5%

Tax Return Database (TRDB) - BAC 99 Information Services $4,250 $4,759 12.0% $5,212 9.5% $2,565 $2,565 -50.8%

IRS Operations Support 20-0919-0-1-803 Information Services 4,250 4,383 3.1% 5,212 18.9% 2,565 2,565 -50.8%

External Funding (incl. Reimbursable Agreements) * Information Services 000 376 100.0% 000 -100.0% 000 000 0.0%

Travel Reimbursement and Accounting System 

(TRAS) - BAC 99 Information Services $000 $000 0.0% $000 0.0% $000 $000 0.0%

Web Currency and Banking Retrieval System 

(WebCBRS) Information Services $7,550 $6,372 -15.6% $7,756 21.7% $6,853 $6,853 -11.7%

IRS Operations Support 20-0919-0-1-803 Information Services 1,029 1,365 32.6% 2,009 47.2% 1,685 1,685 -16.1%

IRS Txpyr. Scvs., Enfor.(0912, 0913) Multi-yr, Health 

Care/ACA(09A9), Rcvry., Asset Forfieture Information Services 6,521 5,007 -23.2% 5,747 14.8% 5,167 5,167 -10.1%

Web Requisition Tracking System /Integrated 

Procurement System (WebRTS/IPS) Information Services $5,246 $6,074 15.8% $5,770 -5.0% $1,895 $1,895 -67.2%

Subtotal, Major IT Investments $482,390 $592,578 22.8% $556,165 -6.1% $682,245 $682,245 22.7%

Non-Major IT Investments $500,340 $580,145 16.0% $569,598 -1.8% $994,198 $994,198 74.5%

- Total (FY 10 includes $3.553 of external funding) $986,392 $1,079,565 9.4% $1,053,699 -2.4% $997,187 $997,187 -5.4%

Enterprise Architecture $2,443 $000 -100.0% $2,491 100.0% $000 $000 -100.0%

Sub-Total IT Investments $1,971,564 $2,252,288 14.2% $2,181,954 -3.1% $2,673,629 $2,673,629 22.5%

* MINUS Externally Funded Major Investments $13,018 $4,041 -69.0% $6,139 51.9% $000 $000 0.0%

TOTAL IT Investments $1,958,546 $2,248,247 14.8% $2,175,815 -3.2% $2,673,629 $2,673,629 22.9%
IRS-156 

4.3 – IRS Performance Measure Table 

The following table shows IRS performance measures achieved and projected from 

FY 2010 through FY 2012. 

Performance Measures Type of 

Measure

FY 2010 

Target

FY 2010 

Actual

FY 2011 

Planned

FY 2012 

Planned

Customer Service Representative Level of Service Oe, L 71.0% 74.0% 71.0% 80.0%

Customer Contacts Resolved per Staff Year E 9,398 10,744 12,074 12,061

Percent of Eligible Taxpayers Who File for EITC Oe 75% - 80% NA 75% - 80% 75% - 80%

Customer Accuracy - Tax Law (Phones) Ot 91.2% 92.7% 92.7% 92.7%

Customer Accuracy - Accounts (Phones) Ot 93.7% 95.7% 95.0% 95.0%

Timeliness of Critical Filing Season Tax Products to the Public Ot 94.0% 95.3% 94.0% 95.0%

Timeliness of Critical TE/GE & Business Tax Products to the 

Public Ot 90.0% 97.7% 91.0% 93.0%

Percent Individual Returns Processed Electronically Oe, L 70.2% 69.3% 74.0% 76.0%

Cost per Taxpayer Served ($) (HCTC) E Baseline1 $9.52 $10.00 $11.00

Sign-Up Time (Days) - Customer Engagement (HCTC) Ot Baseline1 124.0 124.0 137.0

Percent of Business Returns Processed Electronically Oe, L 24.3% 25.5% 27.0% 28.0%

Refund Timeliness - Individual (Paper) Ot 98.4% 96.1% 97.0% 97.5%

Taxpayer Self-Assistance Rate E, L 61.3% 64.4% 68.7% 68.7%

Examination Coverage - Individual Oe, L 1.1% 1.1% 1.1% 1.1%

Field Exam Nat'l Quality Review Score Oe, L 86.3% 84.9% 83.7% 84.9%

Office Exam Nat'l Quality Review Score Oe, L 90.9% 91.6% 90.4% 90.9%

Examination Quality - Industry Oe, L 89.0% 87.0% 89.0% 89.0%

Examination Quality - Coordinated Industry Oe, L 96.0% 95.0% 96.0% 96.0%

Examination Coverage - Business Oe, L 5.1% 5.7% 5.3% 5.2%

Examination Efficiency - Individual E, L 132 140 134 126

Automated Underreporter Efficiency E, L 1,868 1,924 1,980 2,017

Automated Underreporter Coverage E, L 3.0% 3.0% 3.3% 4.0%

Collection Coverage (Units) Ot, L 50.5% 50.1% 49.1% 47.9%

Collection Efficiency (Units) E, L 1,898 1,822 1,824 1,752

Field Collection Nat'l Quality Review Score Ot, L 81.0% 80.6% 81.0% 81.0%

Automated Collection System Accuracy Oe 92.5% 95.9% 94.0% 94.0%

Criminal Investigations Completed Ot, L 3,900 4,325 3,900 3,880

Number of Convictions Oe, L 2,135 2,184 2,135 2,135

Conviction Rate Oe, L 92.0% 90.2% 92.0% 92.0%

Conviction Efficiency Rate ($) E, L $331,000 $324,776 $350,000 $360,000

TE/GE Determination Case Closures Ot 140,465 105,247 97,151 85,471

Percent of BSM Projects within +/- 10% Cost Variance E 90.0% 40.0% 90.0% 90.0%

Percent of BSM Projects within +/- 10% Schedule Variance E 90.0% 100.0% 90.0% 90.0%

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure, L - Long-Term Goal

1 An increase in participation occurred due to the Recovery Act. IRS established a new baseline in FY 2010.
IRS-157 

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. 

Percent of Eligible Taxpayers Who File for EITC The number of taxpayers who claim the Earned Income Tax Credit (EITC) compared to the 

number of taxpayers who appear to be eligible for the EITC.

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), and Large and Mid-Sized Business (LMSB) (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 (Corps. >$10M)

The number of LMSB “customer base” returns (C and S Corporations with assets over $10 

million and all partnerships) examined and closed by LMSB 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, and LMSB (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 sum of all modules disposed by Automated Collection System (ACS) (SB/SE & W&I) and 

by SB/SE Field Collection divided by the 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's) program divided by the number of convictions. The 

number of convictions is the total number of cases with the following statuses: guilty plea, nolo 

contendere, judge guilty or jury guilty. The CI financial plan includes direct and reimbursable 

costs, including employees’ salaries, benefits, and investigative expenses, as well as facility 

costs (office space, heating, cleaning, computers, security, etc.), and other overhead costs.

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 Measurement Descriptions
IRS-158 

4.4 – Cost of IRS Operating Activities 

FY 2010 Cost of IRS Operating Activities 

The following charts provide the FY 2010 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 2010 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 second chart shows the FY 2010 actual costs by major expense category.

Notes:

1

Other includes Contractual Services, Supplies, Printing, Postage, Travel, and Training

2

Enforcement includes Non-Labor Enforcement Expense of $306M (2.5%) 3

Labor Costs represent 74.13 % of total expenses and include Taxpayer Service, Operations Support, Enforcement, BSM, and HCTC

FY 2010 Expenses by Appropriation

(Excluding Imputed Costs)

Operations Support, 

35.21% Health Insurance Tax 

Credit Administraton, 

0.57%

Taxpayer Services, 

20.00%

Business System 

Modernization, 1.24%

Enforcement, 42.97%

FY 2010 Expenses by Category

(Excluding Imputed Costs)

Taxpayer Service

18.93%

Health Care Tax Credit 

(HCTC)

0.01%

Enforcement**

44.42%

Other Operations 

Support

12.91%

Business Systems 

Modernization (BSM)

0.40%

IT & Telecommunications

7.70%

Other*

9.00%

Rent

6.63%
IRS-159 

4.5 – Summary of IRS FY 2012 Budget Request Bureau: Internal Revenue Service Summary of Proposed FY 2012 Budget Request $000 FTE $000 FTE $000 FTE $000 FTE $000 FTE $000 FTE FY 2010 Enacted1 $2,278,830 31,063 $5,504,000 50,983 $4,083,884 12,372 $263,897 333 $15,512 15 $12,146,123 94,766 Total FY 2011 Annualized CR Level $2,278,830 31,063 $5,504,000 50,983 $4,083,884 12,372 $263,897 333 $15,512 15 $12,146,123 94,766 Changes to Base Adjustment to Reach FY 2011 President's Policy Level $23,254 (395) $242,275 1,880 $10,128 12 $122,561 156 $3,447 $401,665 1,653 Maintaining Current Levels (MCLs) $12,908 $30,691 $41,755 $168 $232 $85,754 Workers Compensation/Health Benefits/FERS 10,242 25,067 5,482 168 5 40,964 Non-Pay Inflation Adjustment (1.4%) 2,666 5,624 36,273 227 44,790 Other Adjustments 614 (296) 154 29 501 Technical FTE Adjustments2 614 (296) 154 29 501 Efficiencies/Savings ($41,333) (483) ($21,996) (35) ($124,440) (5) ($1,026) ($1,162) ($189,957) (523) Non-Recur Savings (22,090) (22,090) Increase e-File Savings (21,404) (416) (1,040) (22,444) (416) Reduce IT Infrastructure (75,000) (75,000) Reduce Contracts (4,522) (325) (15,907) (20,754) Reduce Administrative Expenses (5,557) (26) (8,271) (35) (503) (5) (14,331) (66) Eliminate Lockbox Fees (4,000) (4,000) Reduce Certain Mailings (4,000) (4,000) Reduce Training, Travel and Programs (9,850) (41) (9,400) (5,900) (1,026) (1,162) (27,338) (41) Reinvestment 1,486 $1,486 Consolidate Submission Processing Site (Atlanta) 1,486 1,486 Subtotal, FY 2012 Changes to the Base ($3,685) (264) $250,970 1,549 ($72,557) 161 $121,703 185 $2,517 $298,948 1,631 FY 2012 Current Services (Base) $2,275,145 30,799 $5,754,970 52,532 $4,011,327 12,533 $385,600 518 $18,029 15 $12,445,071 96,397 Program Changes Program Increases Taxpayer Service Initiatives Improve Taxpayer Service 44,078 518 37,229 1 81,307 519 Expand Online Options through IRS.gov Improvements 33,000 15 33,000 15 Subtotal, Taxpayer Service Initiatives $44,078 518 $70,229 16 $114,307 534 Enforcement Initiatives Increase International Service and Enforcement 48,363 373 24,233 4 72,596 377

Increase Collection Coverage 2,201 37 30,275 372 19,524 4 52,000 413

Implement Merchant Card and Basis Reporting 10,475 189 17,495 225 7,760 1 35,730 415Increase Coverage to Address Tax Law Changes and Other Compliance Issues 7,229 87 33,936 266 55,553 144 96,718 497

Ensure Accurate Delivery of Tax Credits 4,946 49 49,083 563 206,264 222 260,293 834Administer New Statutory Reporting Requirements 1,059 7 5,061 48 52,385 132 58,505 187

Leverage Return Preparer Program to Reduce Noncompliance 14,240 107 2,360 1 16,600 108

Address Appeals Workload Growth 7,450 66 1,650 9,100 66

Implement Uncertain Tax Position Reporting Requirements 3,765 20 364 4,129 20

Subtotal, Enforcement Initiatives $25,910 369 $209,668 2,040 $370,093 508 $605,671 2,917

Infrastructure Initiatives

Enhance Security and Disaster Recovery Systems Capability 12,000 5 12,000 5

Update Integrated Financial System (IFS) 27,500 5 27,500 5

Leveraging Data to Improve Compliance 1,400 5 1,400 5

Enhance Physical Security for Federal Employees 1,981 10 13,500 15,481 10Implement Individual Coverage Requirement and Employer Responsibility Payments 62,477 65 62,477 65

Subtotal, Infrastructure Initiatives $1,981 10 $116,877 80 $118,858 90

Business Systems Modernization (BSM) Initiative

Continue Migration from Aging Tax Administration System 52,000 5 (52,000) (65) (60)

Subtotal, BSM $52,000 5 ($52,000) (65) (60)

Subtotal, FY 2012 Program Changes $69,988 887 $211,649 2,050 $609,199 609 ($52,000) (65) $838,836 3,481

Total FY 2012 Budget Request $2,345,133 31,686 $5,966,619 54,582 $4,620,526 13,142 $333,600 453 $18,029 15 $13,283,907 99,878

1 FY 2010 Enacted represents the approved FY 2010 Operating Plan.2 Technical FTE adjustments to ensure FTE levels are fully funded in the base budget. 

Dollar/FTE Change $66,303 623 $462,619 3,599 $536,642 770 $69,703 120 $2,517 $1,137,784 5,112

Percent Change 2.91% 2.0% 8.41% 7.1% 13.14% 6.2% 26.41% 36.0% 16.23% 9.37% 5.39%

HITCA TOTAL OPERATIONS SUPPORT TAXPAYER SERVICES ENFORCEMENT BSM