INTERNAL REVENUE SERVICE

FY 2013 BUDGET REQUEST

CONGRESSIONAL BUDGET

SUBMISSION

February 13, 2012

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Table of Contents

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

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

1.1 – Appropriation Detail Table by Appropriation.................................................. 1

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

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

1.1 – Appropriation Detail Table by Appropriation and Budget Activity ............ 15

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

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

Maintaining Current Levels (MCLs)........................................................................ 17

Other Adjustments...................................................................................................... 17

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

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

Reduce Travel ....................................................................................................... 18

Targeted Program Reductions.............................................................................. 18

Restoration of FY 2012 Reductions to Enforcement Programs ............................. 19

Restore Audit Coverage to Address Individual Tax Compliance Issues............... 19

Restore Collection Coverage ................................................................................ 23

Program Increases...................................................................................................... 28

Promote Offshore Compliance ............................................................................. 28

Improve International Compliance....................................................................... 34

Implement Tax Legislative Changes..................................................................... 36

Implement Revenue Protection Strategy............................................................... 42

Build Out Tax Return Preparer Program............................................................. 48

Address Appeals Workload................................................................................... 51

Implement Uncertain Tax Position Reporting Requirements............................... 52

Leverage Digital Evidence for Criminal Investigation (CI)................................. 53

Implement Information Technology and Operational Infrastructure to Deliver 

New Tax Credits.................................................................................................... 54

Implement Information Technology Changes Needed for Individual Coverage 

Requirement .......................................................................................................... 56

2.2 – Operating Levels Table ..................................................................................... 57

2B – Appropriation Language and Explanation of Changes.................................. 58

2C – Legislative Proposals.......................................................................................... 62

Section 3 – Budget and Performance Report and Plan............................................... 64

Taxpayer Services....................................................................................................... 64

2.1 – Budget Adjustments Table............................................................................... 65

2.2 – Operating Levels Table.................................................................................... 66

2.3 – Appropriation Detail Table .............................................................................. 67

3A – Pre-Filing Taxpayer Assistance and Education ............................................... 67

3.1.1 – Budget and Performance Report and Plan.................................................... 68

3B – Filing and Account Services ............................................................................ 69

3.1.2 – Budget and Performance Report and Plan.................................................... 71
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Enforcement ................................................................................................................ 74

2.1 – Budget Adjustments Table............................................................................... 75

2.2 – Operating Levels Table.................................................................................... 76

2.3 – Appropriation Detail Table .............................................................................. 77

3C – Investigations ................................................................................................... 77

3.1.3 – Budget and Performance Report and Plan.................................................... 78

3D – Exam and Collections...................................................................................... 79

3.1.4 – Budget and Performance Report and Plan.................................................... 82

3E – Regulatory ........................................................................................................ 86

3.1.5 – Budget and Performance Report and Plan.................................................... 87

Operations Support .................................................................................................... 89

2.1 – Budget Adjustments Table............................................................................... 90

2.2 – Operating Levels Table.................................................................................... 91

2.3 – Appropriation Detail Table .............................................................................. 92

3F – Infrastructure..................................................................................................... 92

3.1.6 – Budget and Performance Report and Plan.................................................... 93

3G – Shared Services and Support............................................................................ 94

3.1.7 – Budget and Performance Report and Plan.................................................... 96

3H – Information Services........................................................................................ 98

3.1.8 – Budget and Performance Report and Plan.................................................. 101

Business Systems Modernization............................................................................. 103

2.1 – Budget Adjustments Table............................................................................. 104

2.2 – Operating Levels Table.................................................................................. 105

2.3 – Appropriation Detail Table ............................................................................ 106

3.1.9 – Budget and Performance Report and Plan.................................................. 116

Section 4 – Supplemental Information........................................................................ 119

4.1 – Summary of Capital Investments................................................................... 119

4.2 – Summary of Cost and Schedule Performance for Major Information 

Technology Systems.................................................................................................. 121

4A – Capital Investment Strategy ........................................................................... 122

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

Proposed Long-term Multiyear Funding Strategy and Timetable .Error! Bookmark 

not defined.

4C – Summary of FY 2011 Savings Realized ......................................................... 131

4.3 – IRS Performance Measure Table ................................................................... 134

4.4 – Cost of IRS Operating Activities.................................................................... 137

4.5 – Summary of IRS FY 2013 Implementation of P.L. 111-148 & 111-152...... 138

4.6 – Summary of IRS FY 2013 Budget Request ................................................... 139
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Internal Revenue Service

Section 1 – Purpose

1A - Mission Statement

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

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

1.1 – Appropriation Detail Table by Appropriation

Dollars in Thousands

1B – Vision, Priorities and Context

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

Department of the Treasury Strategic Plan and Priority Goals including Increase Voluntary 

Tax Compliance. 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. 

Internal Revenue Service

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

New Appropriated Resources:

Taxpayer Services 31,239 $2,293,272 30,535 $2,239,703 30,570 $2,253,133 0.11% 0.60%

Enforcement 50,449 5,492,992 47,586 5,299,367 51,583 5,701,670 8.40% 7.59%

Operations Support 12,505 4,056,716 11,985 3,947,416 12,609 4,476,200 5.21% 13.40%

Business Systems Modernization 333 263,369 605 330,210 495 330,210 -18.18%

Health Insurance Tax Credit Administration 2 15 15,481

Subtotal New Appropriated Resources 94,541 $12,121,830 90,711 $11,816,696 95,257 $12,761,213 5.01% 7.99%

Other Resources:

Recoveries 5,789

Offsetting Collections - Reimbursable 3 782 141,078 743 135,218 743 135,218

Available multi-year/no-year funds 184,629 212,544 238,708 12.31%

50% Carryover 37,461

Transfers In/Out 12

Mandatory Appropriations - User Fees 3 221 285,805 196 210,860 196 218,450 3.60%

Subtotal Other Resources 1,003 $654,774 939 $558,622 939 $592,376 6.04%

Total Resources Available for Obligation 95,544 $12,776,604 91,650 $12,375,318 96,196 $13,353,589 4.96% 7.91%

Other FTE:

Other Direct FTE 4 582 863 7

Total FTE 96,126 92,513 96,203

Enacted1 Resources Available for Obligation Enacted Request to FY 2013

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

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

 FY 2013).

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

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

1 FY 2011 Enacted represents the approved FY 2011 Operating Plan and interappropriation transfer.

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

 reimbursable spend plans.

% Change

FY 2011 FY 2012 FY 2013 FY 2012
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The IRS Strategic Plan goals and objectives are:

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

• Incorporate taxpayer perspectives to improve all service interactions;

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

easier to navigate the IRS;

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

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

ensure effective tax administration.

To enforce the law to ensure everyone meets their 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

• 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 Strategic and Priority Goals

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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The IRS budget request includes resources to achieve the following Treasury Strategic Goals 

and Priority Goals. 

Strategic Goal: Pursue Comprehensive Tax and Fiscal Reform

Priority Goal: Increase Voluntary Tax Compliance

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

enforcement of the tax laws:

o Achieve 4.3 million document matching closures in FY 2013. Where the IRS 

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

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

occurs when the discrepancy is resolved; and

o In FY 2013, process 80 percent of returns for which individual taxpayers are 

due a refund in the new Customer Account Data Engine (CADE 2), which will 

provide faster refunds for millions of individual taxpayers.

• Assist Americans in voluntarily meeting their tax obligations:

o Achieve individual income tax filers’ American Customer Satisfaction Index 

score of 72 percent in FY 2013; and

o Deliver a telephone Level of Service (LOS) of 63 percent in FY 2013. LOS is 

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

service representative assistance. 

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

Priority Goal: Expand the Use of Electronic Transactions

• Achieve individual e-File rate of 80 percent in FY 2013.

FY 2013 Priorities

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

In FY 2011, the IRS collected $2.415 trillion in taxes (gross receipts before tax refunds), 

92 percent of federal government receipts. To protect the flow of revenue to the government, 

the IRS delivers a robust and balanced service and enforcement agenda. The service agenda 

supports and protects the trillions of dollars 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 $55.2 billion in revenue in 

FY 2011. 
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In the FY 2013 request, the IRS seeks additional funding for:

• Enforcement to restore revenue lost from FY 2012 reductions to examination audit 

and collection programs; implement enacted legislation; increase compliance by 

addressing offshore tax evasion; make use of new information reporting to reduce the

underreporting tax gap; improve treatment of complex financial situations including 

transfer pricing and uncertain tax positions; protect revenue by identifying fraud and 

preventing issuance of questionable refunds including tax related identity theft; and 

strengthen return preparer compliance.

• Infrastructure to develop the information technology and operational infrastructure 

to deliver new tax credits and individual coverage requirement; and

• Business Systems Modernization to continue to migrate applications to and progress 

toward Transition State 2 for CADE 2 and invest in state-of-the-art capabilities such as 

on-line services. 

FY 2013 Budget Request

The IRS FY 2013 President’s Budget request is $12,761.2 million, $944.5 million, 

7.99 percent, more than the FY 2012 enacted budget of $11,816.7 million, and $639.4 million, 

5.27 percent more than the FY 2011 enacted budget of $12,121.8 million. 

The $944.5 million increase consists of:

• +$37.5 million net increase to the base:

o +$108.4 million to fund pay raise, inflation, and the increase in Federal 

Employees Retirement System participation; and

o -$70.9 million for efficiency savings.

• +$907.0 million for program changes:

o +200.5 million to restore FY 2012 reductions to enforcement programs;

o +431.4 million to implement new legislative mandates, address offshore tax 

evasion, make use of new information reporting, improve treatment of 

complex financial situations, protect revenue and strengthen return preparer 

compliance; and

o +275.1 million to implement information technology and operational 

infrastructure to deliver new tax credits and individual coverage requirement.

Reducing the Tax Gap

Investments in IRS enforcement programs have yielded significant increases in enforcement 

revenue. Enforcement revenue was $55.2 billion in FY 2011 for a total IRS-wide return on 

investment (ROI) of $4.6-to-$1. The ROI estimate does not include the revenue effect of the 

deterrence value of these investments and other IRS enforcement programs, which is 

conservatively estimated to be at least three times the direct revenue impact.
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In 2012, the IRS released updated estimates 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 $385 billion in 2006, net of late payments and IRS enforcement activities

(see Tax Gap Map for Tax Year 2006 shown below). The voluntary compliance rate—the 

percentage of total tax revenue paid on a timely basis—for tax year 2006 was 83.1 percent. 

This rate is statistically unchanged from tax year 2001. The three components of the tax 

gap are:

• Underreporting – Not reporting the full tax liability on a timely-filed return;

• Nonfiling – Not filing required returns on time; and

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

return.

Tax Gap “Map”

Tax Year 2006 ($ billions)

Actual Amounts 

Updated Estimates

No Estimates Available

Categories of Estimates

Nonfiling

$28

Individual

Income Tax

$25

Corporation

Income Tax

#

Employment

Tax

#

Excise

Tax

#

Estate

Tax

$3

Underpayment

$46

Individual

Income Tax

$36

Corporation

Income Tax

$4

Employment

Tax

$4

Estate

Tax

$2

Excise

Tax

$0.1

FICA

Tax on Wages

$14

Unemployment

Tax

$1 

Individual

Income Tax

$235

Non-Business

Income

$30.6

Business

Income

$65.3 

Corporation

Income Tax

$67

Estate

Tax

$2

Excise

Tax

#

Business

Income

$122

Large 

Corporations 

(assets > $10m)

$48

Self-Employment

Tax

$57

Non-Business

Income

$68

Small 

Corporations

(assets < $10m)

$19

Credits

$28

Adjustments,

Deductions,

Exemptions

$17

Underreporting

$376

Employment

Tax

$72

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

Liability

$2,660 Enforced & Other

Late Payments of Tax

$65 

Net Tax Gap: $385

(Tax Never Collected)

(Net Compliance Rate = 85.5%)

Gross Tax Gap: $450

(Voluntary Compliance Rate = 83.1%)

#
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Underreporting tax liability ($376 billion) comprises 84 

percent of the gross tax gap ($450 billion). The remainder is almost evenly divided between 

nonfiling ($28 billion, 6 percent) and underpaying ($46 billion, 10 percent). The IRS remains

committed to finding ways to increase compliance and reduce the tax gap, while minimizing 

the burden on the vast majority of taxpayers who pay their taxes accurately and on time.

Taxpayer Service and Enforcement Programs Complement Each Other

The IRS serves individuals, businesses, non-profit organizations, and processed more than 

237 million tax returns in 2011. 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.

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

compliance and addressing the tax gap. Therefore, the IRS remains committed to a balanced 

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

and compliance actions. The IRS remains committed to improving voluntary compliance and 

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

Taxpayer Service

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. 

The IRS delivered another successful filing season in 2011, rising to challenges posed by tax 

legislation enacted in late December 2010. The IRS took the necessary steps to minimize 

disruptions for taxpayers and ensure a smooth filing season. The IRS achieved a 70.1 percent 

telephone level of service (LOS). This reflects the success rate of taxpayers who call the IRS 

for live telephone assistance on the 1-800 help lines. IRS telephone assistors answered 

Underreporting

 84%

Underpayment

 10%

 Nonfiling

 6%
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34.2 million calls while at the same time the IRS answered 42.3 million automated calls, 

20.5 percent more than in 2010, reflecting the growing taxpayer demand for self-service 

options.
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Results of the 2011 filing season also include:

• Processed more than 144.7 million individual returns and issued more than 

109.3 million refunds totaling $345 billion compared to 109.5 million refunds totaling 

$366 billion for the same period in 2010;

• Responded accurately to 93.4 percent of tax law questions and 96 percent of account 

questions; 

• Processed more than 2.7 million free file returns; and

• Direct-deposited more than 79 million refunds compared to 74.6 million in 2010, 

almost 6 percent more than 2010.

In FY 2011, the IRS processed more than 111 million individual tax returns electronically, 

setting a new record. Filing season results targeting electronic filing included:

• Individual returns electronically filed increased to 76.9 percent, up 7.6 percentage 

points from 2010;

• Business returns filed electronically at a rate of 31.8 percent, up from 25.5 percent in 

2010;

• Home-computer filing increased to 39.6 million returns, 13.9 percent more than 2010; 

• Tax professional use of e-file increased 15 percent from the previous year, reaching 

71.7 million returns; and

• Registrations to purchase U.S. Savings Bonds through direct deposit reached 

45,499, almost twice as many as FY 2010. Taxpayers, taking advantage of this 

opportunity, requested 136,326 bonds totaling approximately $11.2 million.

During FY 2011, the IRS updated forms to help taxpayers comply with filing requirements, 

converted forms for visually-impaired taxpayers, translated more tax products into multiple 

languages, and reduced telephone wait time. 

The IRS continued to increase the amount of tax information and services available to 

taxpayers through IRS.gov, providing alternative service options. In FY 2011, the IRS 

received a Compuware Gomez “Best of the Web” award, which recognized IRS.gov as one of 

the best websites in government for performance and quality and first in consistency. 

In FY 2011, IRS.gov web pages were viewed more than 1.6 billion times as taxpayers used 

the website to:

• Get forms and publications. More than 229 million tax products were downloaded, an 

increase of 7.5 percent from 2010; 

• Link to EFTPS. The Electronic Federal Tax Payment System (EFTPS) processed 

more than 129.8 million electronic tax payments totaling over $2 trillion; and 

• Get answers. More than 241,962 taxpayers accessed the Interactive Tax Assistant in 

order to receive answers to tax law questions.
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As shown in the chart, 

77.9 million taxpayers used “Where’s My Refund?” to check on refunds in FY 2011, an 

increase of 253 percent from FY 2005.

The IRS is increasing communications with taxpayers who may not get their information from 

traditional sources, such as newspapers and broadcast and cable news. By employing social 

and new media, such as YouTube, Twitter, and iTunes, the IRS can reach these taxpayers and 

provide important service and compliance messages. In January 2011, the IRS also unveiled 

IRS2Go, its first smartphone application that lets taxpayers check on the status of their tax 

refund and obtain helpful tax information. During the 2011 filing season, IRS2Go averaged 4

out of 5 stars in hundreds of reviews and had more than 360,000 downloads. This new 

application reflects the IRS commitment to modernizing the agency and engaging taxpayers 

where and when they want. 

The IRS continues to improve and expand on its outreach and educational services through 

partnerships with state taxing authorities, volunteer groups, and other organizations. 

Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) sites 

provided free tax assistance for the elderly, disabled, and limited English proficient 

individuals and families. In FY 2011, more than $18 million VITA and TCE Grants were 

awarded to 210 organizations, a 23 percent increase in the number of organizations from 

FY 2010. Assistors at more than 9,000 VITA and TCE Grant sites across the nation prepared 

more than one million tax returns.

The IRS conducted “Open House” events, both during and after the filing season. At these 

events, taxpayers could get help preparing current and prior year federal and state tax returns, 

resolving account and balance due issues, and making Installment Agreement arrangements. 

Taxpayers took advantage of:

• Two open house days held during the filing season at 96 Taxpayer Assistance Center 

(TAC) locations. More than 16,300 taxpayers were helped and more than 

4,300 returns were prepared; and

• One open house day was held after the filing season at 74 TAC locations with more 

than 4,000 taxpayers participating.

Through September 30, 2011, 104 redesigned and new notices were in production, 

representing 72 percent of the more than 220 million notices sent each year. The February 

release included collection notices (CP50X series) with new language to help taxpayers better

Where's My Refund? 

Usage Continues to Grow 

22.1 24.7 32.1 39.2

54.3 66.9 77.9

0

20

40

60

80

100

FY

2005

FY

2006

FY

2007

FY

2008

FY

2009

FY

2010

FY

2011

In Millions
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understand the collection process. The revised notices also use plain language about available 

payment options.

Each notice provides a web link to information about the notice, including why the taxpayer 

received the notice, answers to common questions, and tips to help taxpayers meet their tax 

obligations in future years. For high-volume notices, the IRS also included web links to 

translate the notice into five of the most common foreign languages (Spanish, Chinese, 

Korean, Vietnamese, and Russian).

Enforcement

Vigorous enforcement efforts encourage 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 new enforcement initiatives funded 

through a program integrity cap adjustment will generate more than $1.48 billion in additional 

annual enforcement revenue once the new hires reach full potential in FY 2015. These 

resources will achieve a return on investment (ROI) of $4.3-to-$1 but does not include the 

revenue effect of the deterrence value of these investments and other IRS enforcement 

programs, which is conservatively estimated to be at least three times the direct revenue 

impact. 

Return on Investment for FY 2013 Enforcement Initiatives

Enforcement of the tax law is an integral part of the IRS effort to enhance voluntary 

compliance. IRS programs like examination and collection ensure that taxpayers pay what 

Dollars in Millions

FY 2013 Enforcement Investment Cost Revenue ROI Cost Revenue ROI

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

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

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

Restore Collection Coverage 73.3 220.6 3.0 63.9 486.9 7.6

Immediate and Directly Measurable Revenue-Producing Initiatives1 $402.6 $673.4 1.7 $346.0 $1,480.0 4.3

Promote Offshore Compliance 110.7 264.9 2.4 90.9 583.8 6.4

Improve International Compliance 38.9 130.3 3.3 30.0 263.5 8.8

Implement Tax Legislative Changes 128.9 177.3 1.4 120.4 424.0 3.5

Implement Revenue Protection Strategy 88.9 73.7 0.8 78.2 146.5 1.9

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

Strategic Revenue-Producing Initiatives (which do not have immediately

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

Address Appeals Workload 20.3 0.0 0.0 18.2 0.0 0.0

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

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

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

1

The immediate and directly measurable revenue-producing initiatives include $345.1 million in costs needed to generate direct revenue. Also included are 

 $42.1 million in IT support projects and $15.4 million for taxpayer service that directly support the compliance programs but do not independently result 

 in increased revenue.
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they owe and assist those individuals who may have trouble meeting their tax liability because 

of hardship situations. 
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In FY 2011, collections related to all enforcement activities totaled $55.2 billion.

The IRS has shown progress in 

several key enforcement programs compared to FY 2010, including increases in:

• High income audits, 14.5 percent;

• Automated Underreporter contact closures, 8.5 percent;

• Collection case closures, 6.7 percent;

• Tax Exempt/Government Entities compliance contacts, 21 percent; 

• Small business corporate audits (assets less than $10 million), 8.6 percent; and

• Large corporate audits, 3.4 percent.

The IRS made significant strides addressing international tax evasion. In 2009 and continuing 

in 2011, the IRS implemented a voluntary disclosure program (VDP) to encourage taxpayers 

with hidden offshore assets and income to come back into the tax system voluntarily. These 

two programs have resulted in 33,000 disclosures and more than $4.4 billion in revenue 

through mid-December 2011, and have generated so much interest that the Offshore VDP was 

reopened in January 2012. While collecting additional revenue for past offenses is an 

important consideration, more importantly, the success of the VDP is in bringing thousands of 

U.S. taxpayers back into the system so they properly report and pay taxes on their offshore 

accounts for years to come.

The IRS criminal investigation program investigates potential criminal violations of the 

Internal Revenue Code, and related financial crimes such as money laundering, currency 

violations, tax-related identity theft fraud and terrorist financing that adversely affect tax 

administration. Using its unique statutory jurisdiction and financial expertise, the IRS makes 

significant contributions to important national law enforcement priorities. Performance in the 

criminal investigation program remained high in FY 2011. As compared with FY 2010, the 

IRS:

• Completed 4,697 criminal investigations, an increase of 8.6 percent;

• Achieved a conviction rate of 92.7 percent, an increase of 2.5 percentage points; and

• Obtained 2,350 convictions, exceeding the FY 2011 target.

Total Enforcement Revenue Collected

47.3 48.7

59.2 56.4 48.9

57.6 55.2

0

20

40

60

FY

2005

FY

2006

FY

2007

FY

2008

FY

2009

FY

2010

FY

2011

In Billions
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One of the most important initiatives that the IRS has undertaken in recent years is the Return 

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

preparers to obtain a Preparer Tax Identification Number (PTIN). In September 2010, the 

IRS launched the new online PTIN application system. By the end of September 2011, more 

than 735,000 preparers had registered. The PTIN registration process gives the IRS an 

important and improved view of the return preparer community from which IRS can leverage 

information to improve communications, analyze trends, spot anomalies and detect potential 

fraud. In addition, the IRS is in the final stages of developing requirements to establish 

mandatory competency testing for preparers to ensure that taxpayers are hiring preparers who 

are educated in the tax law.

In FY 2011, the IRS made its 

six-year-old Compliance Assurance Process (CAP) pilot program permanent. CAP allows 

large corporate taxpayers to resolve tax issues prior to filing a tax return. Since the IRS 

started CAP, the number of participating corporations has grown each year to the current 140 

participants. Participating corporations cite their primary interest in CAP as the opportunity 

to achieve tax certainty sooner. 

In FY 2011, the IRS took steps to assist individual taxpayers who may be facing financial 

hardship in the struggling economy by implementing a Fresh Start initiative. Fresh Start 

helps taxpayers who owe money by providing greater access to installment agreements and 

easing regulations on lien filing. The changes included: 

• Increasing the dollar threshold at which liens are generally filed;

• Making it easier for taxpayers to obtain lien releases after paying a tax bill;

• Withdrawing liens in most cases where a taxpayer enters into a Direct Debit 

Installment Agreement;

• Creating easier access to Installment Agreements for struggling small businesses; and 

• Expanding a streamlined Offer in Compromise program to cover more taxpayers.

Business System Modernization

IRS modernization efforts focus on building and deploying advanced information technology 

systems, processes, and tools to improve efficiency and productivity. In 2012, the IRS 

delivered the most significant update to its core tax processing system in decades. Since the 

1960s, the IRS has operated on a weekly batch cycle, which starting in 2012, transitioned to a 

CAP Participation

17 34

73

95 101 112

140

0

40

80

120

160

FY

2005

FY

2006

FY

2007

FY

2008

FY

2009

FY

2010

FY

2011
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daily processing cycle. Also, for the first time, IRS processing systems are accepting all 1040 

forms electronically through a modernized e-filing capability, and will feed into a single 

consolidated taxpayer account database, which will allow the next generation of taxpayer 

service and enforcement functions. The 2012 delivery follows up on a number of important 

accomplishments in FY 2011:

• Customer Account Data Engine 2 (CADE 2) logical and physical designs were 

completed on time in December 2010 and April 2011, respectively. The IRS 

successfully deployed CADE 2 daily processing in January 2012, and is in the process 

of moving to a single authoritative database for all individual taxpayer records,

moving the IRS away from its legacy, flat-file data storage model in the 2012 filing 

season. 

• Modernized e-File (MeF) Release 6.2 increased performance for both individual and 

business returns to account for the anticipated increase in volume of returns in 2012. 

It also enhanced the disaster recovery capabilities that were delivered in a previous 

version. MeF accepted more than 18.5 million returns in 2011, a 262 percent increase 

compared to the same period in 2010. The majority of growth was because of an 

increase in Form 1040 tax returns submitted. With the changes implemented for the 

2012 filing season, the IRS is anticipating a substantial increase in the use of the MeF 

platform for 2012.

• Current Customer Account Data Engine (CADE) Release 6.2 successfully deployed in 

January 2011, with technical improvements to the infrastructure and availability of the 

system. CADE also facilitated a mid-season restart in February to implement 

Extender legislative changes affecting individual taxpayers. CADE posted more than 

40 million tax returns and issued more than 35.1 million refunds totaling in excess of 

$65.6 billion. CADE also posted 4.4 million payments submitted with taxpayer 

returns.
IRS-15

Section 2 – Budget Adjustments – Internal Revenue Service

The IRS President’s Budget request for FY 2013 is $12,761,213,000 in direct appropriations 

and 95,257 FTE. This is an increase of $944,517,000 or 7.99 percent and 4,546 FTE more 

than the FY 2012 enacted budget of $11,816,696,000 and 90,711 FTE, and $639,383,000 or 

5.27 percent and 716 FTE more than the FY 2011 enacted budget of $12,121,830,000 and 

94,541 FTE. The goal owner for IRS appropriations and associated budget activities is the 

Commissioner of Internal Revenue.

1.1 – Appropriation Detail Table by Appropriation and Budget Activity

Dollars in Thousands

Internal Revenue Service

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

Taxpayer Services 31,239 $2,293,272 30,535 $2,239,703 30,570 $2,253,133 0.11% 0.60%

Pre-Filing Taxpayer Assistance and Education 6,404 678,204 5,862 632,414 5,716 625,931 -2.49% -1.03%

Filing and Account Services 24,835 1,615,068 24,673 1,607,289 24,854 1,627,202 0.73% 1.24%

Enforcement 50,449 5,492,992 47,586 5,299,367 51,583 5,701,670 8.40% 7.59%

Investigations 4,284 644,479 4,254 636,067 4,725 688,296 11.07% 8.21%

Exam and Collections 44,911 4,689,220 42,133 4,510,245 45,556 4,846,749 8.12% 7.46%

Regulatory 1,254 159,293 1,199 153,055 1,302 166,625 8.59% 8.87%

Operations Support 12,505 4,056,716 11,985 3,947,416 12,609 4,476,200 5.21% 13.40%

Infrastructure 926,190 940,765 987,730 4.99%

Shared Services and Support 6,050 1,291,568 5,806 1,242,470 5,858 1,348,363 0.90% 8.52%

Information Services 6,455 1,838,958 6,179 1,764,181 6,751 2,140,107 9.26% 21.31%

Business Systems Modernization 333 263,369 605 330,210 495 330,210 -18.18%

Health Insurance Tax Credit Administration 2 15 15,481

Subtotal New Appropriated Resources 94,541 $12,121,830 90,711 $11,816,696 95,257 $12,761,213 5.01% 7.99%

Other Resources:

Recoveries 5,789

Offsetting Collections - Reimbursable 3 782 141,078 743 135,218 743 135,218

Available multi-year/no-year funds 184,629 212,544 238,708 12.31%

50% Carryover 37,461

Transfers In/Out 12

Mandatory Appropriations - User Fees 3 221 285,805 196 210,860 196 218,450 3.60%

Subtotal Other Resources 1,003 $654,774 939 $558,622 939 $592,376 0.00% 6.04%

Total Resources Available for Obligation 95,544 $12,776,604 91,650 $12,375,318 96,196 $13,353,589 4.96% 7.91%

Other FTE:

Other Direct FTE 4 582 863 7

Total FTE 96,126 92,513 96,203 1 FY 2011 Enacted represents the approved FY 2011 Operating Plan and interappropriation transfer.

FY 2012

Enacted

% Change

FY 2011 FY 2013 FY 2012

Enacted1 to FY 2013

4

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

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

Resources Available for Obligation

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

 plans.

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

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

Request
IRS-16

2.1 – Budget Adjustments Table

Dollars in Thousands

Internal Revenue Service 

FTE Amount

FY 2012 Enacted 90,711 $11,816,696

Changes to Base

Maintaining Current Levels (MCLs) $108,423

Other Adjustments (110)

Efficiencies/Savings (614) ($70,850)

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

Reduce Travel (2,578)

Targeted Program Reductions (437) (59,706)

Subtotal, FY 2013 Changes to Base (724) $37,573

FY 2013 Current Services (Base) 89,987 $11,854,269

Program Changes 

Restoration of FY 2012 Reductions to Enforcement Programs

Restore Audit Coverage to Address Individual Tax Compliance Issues 912 127,172

Restore Collection Coverage 768 73,309

Subtotal, Restoration of FY 2012 Reductions to Enforcement Programs 1,680 $200,481

Program Increases

Enforcement Initiatives

Promote Offshore Compliance 700 110,739

Improve International Compliance 223 38,884

Implement Tax Legislative Changes 857 128,866

Implement Revenue Protection Strategy 885 88,856

Build Out Tax Return Preparer Program 228 35,166

Address Appeals Workload 132 20,324

Implement Uncertain Tax Position Reporting Requirements 20 4,030

Leverage Digital Evidence for Criminal Investigation (CI) 8 4,504

Subtotal, Enforcement Initiatives 3,053 $431,369

Infrastructure Initiative

537 266,894

8,200

Subtotal, Infrastructure Initiative 537 $275,094

Subtotal, FY 2013 Program Changes 5,270 $906,944

Total, FY 2013 Budget Request 95,257 $12,761,213

Implement Information Technology Changes Needed for Individual Coverage 

Internal Revenue Service

Implement Information Technology and Operational Infrastructure to Deliver New Tax Cred
IRS-17

2A – Budget Increases and Decreases Description

Initiative Costing Methodology

The IRS uses a variety of methods to cost its initiatives. Costs for initiatives that require labor 

funding are calculated by converting the workload to the number and type of staff 

(e.g., Revenue Agents, Revenue Officers, or Special Agents) needed to deliver targeted 

performance goals. Once the number and type of staff are determined, along with the 

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

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

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

each new FTE.

Total Changes to Base

+$37,573,000 / -724 FTE

Maintaining Current Levels (MCLs)

+$108,423,000 / 0 FTE 

Funds are requested for inflation adjustments (1.7 percent) in non-labor expenses such as 

GSA rent adjustments, postage, supplies and equipment and health benefits and the increase 

in Federal Employees Retirement System participation. Funds are also requested for the 

proposed 2013 pay raise (0.5 percent).

Other Adjustments

$0 / -110 FTE 

The technical FTE adjustment reduces the FY 2012 Business Systems Modernization (BSM) 

FTE level to reflect the labor required to support the BSM program in FY 2013. The FTE 

assigned to BSM in FY 2012 will be absorbed in the Operations Support appropriation to 

work on other IRS information technology projects.

Efficiencies and Savings

-$70,850,000 / -614 FTE

Increase e-File Savings 

-$8,566,000 / -177 FTE

These savings are a result of increased electronic filing (e-File). The IRS projects taxpayers 

will file 635,000 fewer paper returns in FY 2013 (466,900 individual and 168,100 business) 

and instead choose to e-file. Savings are based on e-File projected growth, modernization, 

and the completion of the phased implementation of the Worker, Homeowner, and Business 

Assistance Act of 2009 (Public Law 111-92), that requires electronic filing by tax return 

preparers. As a result, the IRS would need 177 fewer FTE in submission processing, 

generating a savings of $8,566,000.
IRS-18

Reduce Travel

-$2,578,000 / 0 FTE

The IRS will reduce non-case related travel by making greater use of technology and 

increasing the use of alternative workspace, including hoteling.

Targeted Program Reductions

-$59,706,000 / -437 FTE

The IRS will achieve reductions in the Taxpayer Service, Enforcement, and Business Systems 

Modernization (BSM) programs by increasing efficiency, reducing costs and streamlining 

operations. The IRS will:

• Reduce staffing in enforcement overhead support and analysis functions to gain 

efficiencies through greater consolidation of activities such as communications, 

human resources, and research, both at the program and enterprise level.

• Transition the focus of stakeholder relationship programs. Following the 

establishment of IRS’s customer facing divisions in FY 2001, the IRS made a 

substantial investment in initiating and building relationships with stakeholder and 

partner organizations. After many years of fruitful collaboration, these relationships 

have matured and the focus has shifted to managing and maintaining the effectiveness 

of existing relationships, reducing resource requirements for these programs.

• Expand use of less expensive service delivery models. The IRS provides service to 

taxpayers via a range of channels from the internet to telephones to face-to-face field 

assistance. The development and delivery of more online tools and other improved 

service channels, such as virtual tax assistance sites, will help the IRS cope with 

increasing service demands in a cost effective manner.

• Reduce supply and contractual service costs in information technology. 
IRS-19

Restoration of FY 2012 Reductions to Enforcement Programs

+$200,481,000 / +1,680 FTE

Restore Audit Coverage to Address Individual Tax Compliance Issues

+$127,172,000 / +912 FTE

Funding to Restore Audit Coverage to Address Individual Tax Compliance Issues will ensure 

individual examination coverage does not decline and that critical non-compliance issues are 

effectively addressed. Apart from detecting non-compliance directly, maintaining 

examination coverage also promotes voluntary compliance both by increasing the likelihood

that intentional non-compliance will be detected and reassuring compliant taxpayers of the 

fairness of the tax administration system. This initiative will restore resources to traditional 

field examination programs to ensure consistent audit coverage; address the compliance risks 

of complex business networks operated by high-wealth individuals; and expand IRS’s 

correspondence examination program to provide focused attention on refundable credits. 

Together, these investments will restore annual enforcement revenue of $661.7 million, an 

ROI of $6.3-to-$1.

Expand Correspondence Examinations of Refundable Credits 

ROI 

$320.1

$483.8

$661.7

$113.6 $104.3 $127.2

$0.0

$100.0

$200.0

$300.0

$400.0

$500.0

$600.0

$700.0

FY 2013 FY 2014 FY 2015

in millions

Cost Enforcement Revenue

2.5 to 1

6.3 to 1

4.3 to 1

Position Type/Other Costs FTE $000

Expand Correspondence Examinations of 

Refundable Credits 314 $29,999

Revenue Agent 4 548

Tax Compliance Officer 33 3,961

Tax Examiner 225 19,792

Support Staff 52 5,698

Field Examination 305 $35,582

Revenue Agent 192 23,389

Tax Compliance Officer 113 12,193

Global High Wealth (GHW) 240 $34,325

Revenue Agent 168 28,274

Tax Examiner 32 2,694

Support Staff 40 3,357

IT Projects 24 $23,362

2D Barcoding 6 8,618

Document Imaging 13 9,948

Examination Technology Enhancements 5 4,796

Other Direct Costs 29 $3,904

Appeal Officer 13 1,922

Attorney 6 1,110

Paralegal 3 296

Customer Service Representative 3 163

Taxpayer Advocacy Specialist 3 326

Support Staff 1 87

Total 912 $127,172

Major Activities Projected

Revenue

$M

Protected

Revenue

$M

Individual

Audits

Business 

Audits

Pre-Refund 

& Post 

Refund 

Closures

Expand Correspondence Examinations of 

Refundable Credits 130.9 130.9 79,500 

Field Examination 141.4 16,587 

Global High Wealth 389.4 82 115 

Total $661.7 $130.9 16,669 115 79,500 
IRS-20

(+$30.0 million / +314 FTE)

This component will provide additional campus examination resources to conduct 

correspondence examinations of refundable credit issues. When certain tax credits exceed the 

total tax liability, the excess is refundable and the government incurs an outlay in the form of 

a refundable tax credit. To maximize the effectiveness of its refund compliance programs, the 

IRS has established a new Return Integrity function to develop a comprehensive and 

integrated compliance strategy to administer refundable credits, improve filters to identify 

questionable credits and rapidly address refund schemes. 

Establishing an office dedicated to refundable credit work will allow the IRS to address 

non-compliance and fraud trends that emerge from existing and future refundable credits. 

Once the new hires reach full performance in 2015, the IRS will complete 39,750 more 

post-refund audits, generating annual enforcement revenue of $130.9 million. The additional 

39,750 pre-refund audits will protect an additional $130.9 million in revenue.

The additional staffing will allow the IRS to maintain broad exam coverage by meeting the 

challenges of administering new credits without reducing coverage of existing returns. 

The IRS will work both individual and small business cases related to refundable credits.

The initiative funding:

• Expedites pre-refund credit review and processing;

• Reduces the time to notify taxpayers of their eligibility for the credit; and

• Increases the number of post-refund audits. 

Field Examination (+$35.6 million / +305 FTE)

Field Examination resources (192 revenue agents and 113 tax compliance officers) will 

preserve the balanced coverage approach of all taxpayer segments with a focus on effectively 

addressing the individual taxpayer portion of the tax gap. Revenue agents will continue to 

concentrate on the priority areas of underreporting compliance for individual taxpayers.

Once the new hires reach full performance in FY 2015, this investment will produce an 

additional 16,587 closures annually.

Global High Wealth (GHW) (+$34.3 million / +240 FTE)

High-wealth individuals frequently operate complex enterprises consisting of multiple, 

interrelated businesses and flow-through entities that have international components. 

The complex interrelationships and ownership patterns within these enterprises often imitate 

those of large corporations and pose significant challenges to effective tax administration. 

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

return-by-return, year-by-year basis, may overlook aspects of complex enterprise structures 

frequently employed by high-wealth individuals. By adopting the GHW approach, the IRS 

will take a unified look at the entire web of business entities controlled by high-wealth 
IRS-21

individuals to better assess the risks and identify alternative treatment and engagement 

options to encourage greater voluntary compliance. 

These funds will allow the IRS to refine a risk assessment process for GHW enterprises and to 

conduct additional examinations of GHW individuals and related entities. They will further 

improve existing methods of capturing data to allow better and quicker identification of 

abusive transactions related to complex enterprise structures and address non-compliance 

stemming from multi-jurisdictional tax evasion schemes.

IT Projects (+$23.4 million / +24 FTE)

• Two Dimensional (2D) Barcode project (+$8.6 million / +6 FTE)

The 2D Barcode, Campus Bulk Remittance Processing and Modernized e-File 

enhancement projects, implemented in conjunction with increased data capture, will 

allow the IRS to:

o Provide the means to convert data from paper tax returns into electronic formats

more efficiently;

o Scan barcodes on computer-generated tax returns for a faster and less 

labor-intensive process than current manual data entry, which will result in fewer 

transcription errors;

o Process paper payments electronically; and

o Allow the IRS to accept and store individual amended returns electronically. 

• Implement Document Imaging (+$10.0 million / +13 FTE)

Document Imaging (DI) will allow the IRS to share a common, modernized 

infrastructure for scanning, imaging, and managing documents. DI also will allow 

IRS employees to collaborate and resolve compliance cases more efficiently. It will 

establish a common document and imaging infrastructure that can simultaneously 

support many projects and improve customer support. Projects that will benefit from 

the common document imaging infrastructure include, but are not limited to: 

o Content Management & Collaboration (CMC) – A Web-based tool used by audit 

teams to facilitate collaboration by integrating document management, forums, 

calendars, and other inter-personal communication and productivity tools; 

o Taxpayer Advocate Service Integrated Systems (TASIS) – A Taxpayer Advocate 

case management system; and

o Correspondence Imaging Compliance (CIC) – An imaging solution that provides 

a central repository for imaged correspondence and stored images used by legacy 

compliance systems.

Further, this resource will improve the efficacy of search queries across applications, 

indices, and database servers by sharing server content. DI significantly reduces the 

time, complexity, and costs of current document management and imaging processes, 

and contributes to improved customer service.
IRS-22

• Examination Technology Enhancements (+$4.8 million / +5 FTE)

The Partnership Control System (PCS) replacement system will increase productivity 

by supporting electronic processing, and the processing of larger Global High Wealth 

and High Income High Wealth cases by providing enhanced functionality to a wider 

range of users. Electronic processing has many advantages including:

o Improving staff efficiency by not having to physically transfer work between sites;

o Providing the capability to create and generate ad hoc reports allowing 

management to monitor inventory;

o Reducing the cost to maintain the new system; and 

o Reducing printing costs by adding the capability of storing electronic copies of 

correspondence instead of generating paper copies. 

Additionally, the IRS will invest in software tools to improve the efficiency of 

examinations and reduce the need for traditional paper records. 

Other Direct Costs (+$3.9 million / +29 FTE)

IRS Activity Cost FTE Explanation

Appeals $1.9 13 Appeals case receipts will increase by new examination closures 

that will require adjudication in the appeals process.

Chief Counsel $1.5 10

Counsel will litigate cases, provide technical guidance, address the 

use of trusts and aggressive estate planning techniques, and 

resolve issues involving employment taxes to partners and 

employees of pass-through entities.

Taxpayer Advocate 

Service $0.3 3 Staffing will handle additional case receipts.

Wage & Investment $0.2 3

Support examination efforts by ensuring staffing is to handle 

downstream affect on collection, accounts management, and 

submission processing operations.

Total $3.9 29

Dollars in Millions
IRS-23

Restore Collection Coverage

+$73,309,000 / +768 FTE

Funding to Restore Collection Coverage will 

ensure that the IRS has sufficient resources to work the collection inventory to bring 

taxpayers who fail to pay their tax debt into compliance. This initiative includes staffing for:

• Automated Collection Systems (ACS) program to address growing collection case 

inventories and incoming call volumes;

• Compliance Services Collection Operation (CSCO) program to address increased 

balance due correspondence and phone work in the Withholding Compliance (WHC) 

Program and to expand the resources dedicated to handling non-streamlined 

installment agreement calls; 

• Offers in Compromise (OIC) program which helps taxpayers, experiencing economic 

hardship, resolve their tax liabilities; and

• Accounts Management (AM) to assist taxpayers 

in resolving enforcement-related notices.

Position Type/Other Costs FTE $000

Automated Collection Systems Operations 257 $20,329

Tax Examiner 29 2,259

Customer Service Representative 225 17,758

Support Staff 3 312

Compliance Services Collection Operations 150 $14,766

Tax Examiner 128 12,800

Support Staff 22 1,966

Centralized Offers in Compromise 154 $12,932

Tax Examiner 116 9,622

Support Staff 38 3,310

Account Management 180 $15,122

Customer Service Representative 180 15,122

IT Projects $7,200

Compliance Data Warehouse 100

Eliminate SSN from Taxpayer Mailings 7,100

Other Direct Costs 27 $2,959

Attorney 2 379

Revenue Officer 9 1,422

Customer Service Representative 13 853

Taypayer Advocacy Specialist 2 218

Support Staff 1 87

Total 768 $73,309

ROI 

$220.6

$389.5

$486.9

$73.3 $65.3 $63.9

$0.0

$100.0

$200.0

$300.0

$400.0

$500.0

$600.0

FY 2013 FY 2014 FY 2015

in millions

Cost Enforcement Revenue

3.0 to 1

7.6 to 1

6.0 to 1
IRS-24

This initiative will restore additional annual enforcement revenue of $486.9 million, an 

ROI of $7.6-to-$1.

Major Activities

Projected

Revenue

$M

TDA 

Closures TDI Closures

Calls 

Answered Closures

Compliance Service Collection Operation 419.7 120,670 19,587 422,500 21,664 

Centralized Offers in Compromise 67.2 15,352 

Total $486.9 120,670 19,587 422,500 37,016 
IRS-25

Automated Collection Systems (ACS) Operations (+$20.3 million / +257 FTE)

These funds will allow the IRS to address growing collection case inventories and call 

volumes by expanding the ACS program to address the underpayment and nonfiling portions 

of the tax gap, estimated at $74 billion.

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

collection. Overall receipt of new delinquent accounts increased 19 percent from FY 2010 to 

FY 2011. These ACS resources will address the growing workload generated by increased 

balance due and delinquent return notices and the expansion of the international examination 

program. Additional resources also will allow ACS to address the increased volume of 

correspondence from taxpayers seeking alternative resolutions to their accounts, reducing 

processing delays that generate additional taxpayer calls and rework.

In FY 2015, this investment is projected to produce an additional 120,670 tax delinquent 

accounts (TDA) and 19,587 tax delinquent investigations (TDI).

Compliance Services Collection Operations (CSCO) (+$14.8 million / +150 FTE)

These funds will allow the IRS to expand CSCO to address non-filing and underpayment of 

taxes in the notice process by addressing the increased balance due work and expanding the 

following programs: 

• Withholding Compliance Program (WHC) – This automated program brings taxpayers 

with serious under-withholding problems into compliance by correcting their federal 

income tax withholding and prevents them from becoming delinquent on the payment 

of future taxes by issuing a letter requiring the employer to withhold a specific, 

appropriate amount from the taxpayer’s pay. During a three-year period, the number 

of filed balance due returns from taxpayers in the current WHC program decreased 

65 percent and the refund or returns with a zero balance increased 189 percent. 

These resources will allow the IRS to add an additional 90,000 taxpayers to the WHC 

program. 

• Non-Streamlined Installment Agreement (NSIA) Phones – By increasing the number 

of balance due calls answered by CSCO, particularly in the case of NSIA calls, the IRS 

will resolve taxpayer tax matters more efficiently. The NSIA phone line, worked by 

CSCO employees, replaces a paperwork handoff from Accounts Management to 

CSCO with a telephone process that grants taxpayer Currently-Not-Collectible and 

NSIA requests sooner. By eliminating the handoff and processing delays, 

time-sensitive collections can begin sooner. With these resources, by FY 2015, the 

IRS will answer an estimated 422,500 NSIA calls.
IRS-26

Centralized Offers in Compromise (OIC) (+$12.9 million / +154 FTE)

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

because of extreme circumstances or hardship. In addition to changes made to the offer 

process in 2009, the IRS continues to focus on assistance to unemployed taxpayers; 

understanding their struggle to pay past and present liabilities and resulting in the continued 

increase of COIC requests. COIC receipts have increased 30 percent since FY 2008 while 

staffing has slightly decreased. As a result, the percentage of cases closed within six months 

has decreased from 92 percent in December 2008, to 62 percent in December 2011. Further 

enhancements to the offer program will encourage more unemployed taxpayers to file a COIC 

in an effort to settle their tax debts. These funds will allow the IRS to help taxpayers 

experiencing hardship resolve their tax liabilities. 

Account Management (AM) (+$15.1 million / +180 FTE)

These funds will allow the IRS to expand the AM staff needed to assist taxpayers in resolving 

enforcement-related issues faster and improve customer service.

In 2011, the IRS:

• Mailed more than 148 million notices to taxpayers;

• Established more than 1.2 million in installment agreements for $5.4 billion in 

FY 2011;

• Answered questions on the taxpayer service phone line for 103 million 

enforcement-related notices;

• Adjusted almost 12.7 million post-filing tax accounts through assisted service 

including processing 4.2 million amended returns; and 

• Answered 34.2 million phone calls, with individual “balance due” calls alone 

exceeding 4.6 million.

Most tax enforcement actions result in downstream AM activities, including account 

adjustments, assisted phone calls, amended returns, and installment agreement preparation. 

Insufficient staffing of these activities results in reduced revenue collected, increased interest 

paid, and delays for taxpayers attempting to resolve enforcement issues. 

IT Projects (+$7.2 million / 0 FTE)

• Compliance Data Warehouse (+$0.1 million / 0 FTE)

These funds will allow the IRS to purchase hardware and storage capability to support 

the IRS Research, Analysis and Statistics compliance data warehouse. The purpose of 

the compliance data warehouse is to provide high-quality data and information 

services, primarily to the research community, in support of projects, analyses, and 

studies related to tax administration, enforcement, and customer service.
IRS-27

• Eliminate Social Security Number (SSN) from Taxpayer Mailings 

(+$7.1 million / 0 FTE)

These funds will provide resources for the third phase of a multi-year effort to 

implement the social security number (SSN) Elimination and Reduction 2D Barcoding 

project (SSNER-2DB). The SSNER-2DB consists of the creation and application of a 

2D barcode on outgoing individual taxpayer notices and the elimination and reduction 

of the SSN. Funding will provide resources for software, infrastructure, and other 

related support.

The SSNER-2DB project is being implemented in three phases. Phases I and II will 

reduce the display of social security numbers (SSNs) on notices. Phase III will reduce 

the display of SSNs on notices requesting a payment from the taxpayer, print barcodes 

on additional outgoing notices, and will create a system that reads 2D barcodes in the 

payment processing systems. In addition, the third phase will reduce the use of SSNs 

on 85 notice types, eliminating the use of SSNs on notices to 74.1 million taxpayers. 

Overall, this project will reduce the use of SSNs on 155 notice types, eliminating the 

use of SSNs on notices mailed to 106.6 million taxpayers. 

The IRS is required to eliminate unnecessary collection, use, and display of SSNs 

within systems, programs, notices, letters, and forms to comply with the Office of 

Management and Budget (OMB) mandate as described in OMB M-07-16, 

Safeguarding Against and Responding to the Breach of Personally Identifiable 

Information. Safeguarding Personally Identifiable Information (PII) in the possession 

of the government is essential to ensure that the government retains the trust and 

confidence of the American public. 

Other Direct Costs (+$3.0 million / + 27 FTE)

IRS Activity Cost FTE Explanation

Appeals $1.4 9

Appeals case receipts will increase because of new 

Collection closures that will require adjudication in the 

appeals process.

Chief Counsel $0.5 3 Counsel will provide legal advice to identify pockets of 

noncompliance and equitable resolutions. 

Taxpayer Advocate Service $0.2 2 Staffing will handle additional case receipts.

Wage & Investment $0.9 13

Support collection efforts by ensuring staffing is available to 

handle the downstream increases in collection, accounts 

management and submission processing workload.

Total $3.0 27

Dollars in Millions
IRS-28

Program Increases

+$906,944,000 / +5,270 FTE

Promote Offshore Compliance

+$110,739,000 / +700 FTE

Funding to Promote Offshore Compliance will 

allow the IRS to strengthen enforcement activities to address offshore tax evasion; expand the 

IRS’s global presence and pursuit of international tax and financial crimes; and implement 

changes required by the enactment of Foreign Account Tax Compliance Act (FATCA)

included in the Hiring Incentives to Restore Employment (HIRE) Act of 2010 (Public 

Law 111-147).

The IRS continues to address tax-avoidance schemes involving offshore activity. 

New reporting, disclosure and withholding requirements coupled with strengthened 

compliance efforts related to offshore activity will produce additional annual enforcement 

revenue of $583.8 million once the new hires reach full potential in FY 2015, an ROI of $6.4-

to-$1. (Note that for reasons that are specific to the measurement of direct IRS enforcement 

revenue, this figure represents a subset of the overall compliance effect of FATCA, estimated 

by the Joint Committee on Taxation (JCT) and included in the JCT report, Estimated Revenue 

Effects of the Revenue Provisions Contained in H.R. 2847, The “Hiring Incentives to Restore 

Employment Act” (JCX-6-10), March 4, 2010.)

Position Type/Other Costs FTE $000

Withholding of Tax on Nonresident Aliens and 

Foreign Corporations, and Reporting 

Requirements of Foreign Financial Institutions 204 $25,739

Revenue Agent 59 11,271

Tax Examiner 123 12,483

Tax Technician 7 697

Support Staff 15 1,288

Strengthen Offshore Enforcement Activities 387 $51,145

Expand Coverage of Offshore Compliance 

Issues 165 $21,023

Revenue Agent 88 14,438

General Attorney, Technical 2 404

Tax Examiner 10 856

Tax Technician 6 759

Support Staff 59 4,566

Expand Offshore Voluntary Disclosure 

Program 192 $27,530

Revenue Agent 102 18,044

Tax Technician 48 5,596

Tax Examiner 20 1,990

Support Staff 22 1,900

Enhance Competent Authority 30 $2,592

Support Staff 30 2,592

Criminal Investigation International Expansion 64 $13,888

Special Agent 48 11,492

Support Staff 16 2,396

Development and Improvement of IT Systems and 

Specialized Tools $11,401

Equipment 9,782

Contractual Services 1,619

Other Direct Costs 45 $8,566

Attorney 45 8,566

Total 700 $110,739
IRS-29

ROI 

$110.7 $95.4 $90.9

$264.9

$381.0

$583.8

$0.0

$100.0

$200.0

$300.0

$400.0

$500.0

$600.0

$700.0

FY 2013 FY 2014 FY 2015

in millions

Cost Enforcement Revenue

2.4 to 1

6.4 to 1

4.0 to 1
IRS-30

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

Requirements of Foreign Financial Institutions (+$25.7 million / +204 FTE)

FATCA seeks to improve offshore compliance by imposing new information reporting 

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

withholding, documentation, and reporting requirements with respect to payments made to 

certain foreign entities. 

FATCA establishes a new set of requirements that seeks to improve offshore compliance by 

imposing a 30 percent withholding tax on U.S. source payments to foreign financial 

institutions unless the institution agrees to disclose information on U.S. account holders or 

certifies that it does not have any U.S. customers. All foreign financial institutions that report 

U.S. source income must enter into an agreement with the Treasury to report to the IRS all 

accounts of U.S. persons or the withholding tax penalty will apply. FFIs and non-financial 

foreign entities (NFFEs) that comply with the disclosure rules for U.S. persons are not subject 

to the 30 percent FATCA tax. Since foreign investment information is difficult to come by as 

investment flows may pass through chains of foreign intermediaries, the U.S. Qualified 

Intermediary program attempts to enforce compliance with U.S. source-based taxation laws. 

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

coverage of international tax return filings. FATCA creates new information reporting 

requirements and imposes tax withholding penalties on FFIs that do not disclose holdings by 

U.S. individuals or firms. To avoid the withholding requirements, the FFIs must enter into an 

agreement with the Department of the Treasury to identify all U.S. accounts held by it or its 

affiliates and report annually to the Treasury on each account. Further, the FFI must comply 

with requests by the Treasury for additional information regarding each U.S. account and 

must attempt to obtain from each holder of a U.S. account a waiver of any bank secrecy law 

that would otherwise prevent such a report. If a waiver is not obtained from each holder of a 

U.S. account, the account will be closed. This initiative funds enforcement of these reporting 

requirements. 

Additional resources also will provide new coverage for discrepancies identified through 

third-party correlations and will enhance and centralize coverage for non-filer taxpayers and 

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

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

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

related audit case files. 

Major Activities

Projected

Revenue

$M

Individual

Audits Cases Completed Business

Audits

Specialty

Program

Audits

Withholding of Tax on Nonresident Aliens and Foreign 

Corporations, and Reporting Requirements of Foreign 

Financial Institutions

265.8 8,015 12 159

Strengthen Offshore Enforcement Activities 318.0 5,407 72 106

Criminal Investigation International Expansion 40

Total $583.8 13,422 40 84 265
IRS-31

Finally, these resources will help the IRS to address potential under-withholding of 

U.S. source income flowing to undisclosed jurisdictions and unknown recipients offshore. 

The initiative will involve a systematic analysis of the process surrounding the Form 1042-S 

to better target compliance and enforcement activities.

Collectively, these efforts will result in more than 8,186 additional audits and more than

$265 million in additional revenues annually. 

Strengthen Offshore Enforcement Activities (+$51.1 million / +387 FTE)

• Expand Coverage of Offshore Compliance Issues (+$21.0 million / +165 FTE)

These resources will be used to expand coverage and address offshore tax compliance 

issues, including foreign investments of U.S. taxpayers and U.S.-source income of 

nonresident aliens. Together, once the new hires reach full potential in FY 2015 these 

efforts will generate more than 2,000 additional audits and result in $83 million in 

additional annual enforcement revenue.

• Expand Offshore Voluntary Disclosure Program (+$27.5 million / +192 FTE)

These resources will allow the IRS to expand its tools for identifying those assets 

hiding offshore through both voluntary disclosure and treaty programs. In 2009 and 

continuing in 2011, the IRS implemented a Voluntary Disclosure Program (VDP) to 

encourage taxpayers with hidden offshore assets and income to voluntarily come back 

into the tax system. These two programs have resulted in 33,000 disclosures and more 

than $4.4 billion in revenue through mid-December 2011. The recent reopening of the 

voluntary disclosure program and treaty cases received through agreements with 

foreign banks will generate additional workload in this area. The additional resources 

will result in more than 3,000 additional audits and $235 million in additional 

revenues annually.

• Enhance Competent Authority (+$2.6 million / +30 FTE)

IRS’s Competent Authority function will increase collaboration with U.S. treaty 

partners to broaden the international tax treaty base and resolve bilateral competent 

authority issues. Funding also allows the IRS to comply with recent recommendations 

from the Treasury Inspector General for Tax Administration (TIGTA) included in the 

report Improvements Are Needed to Reduce Erroneous Foreign Earned Income 

Exclusion Claims (Audit 2010-40-091); and the Government Accountability Office 

(GAO) included in the report IRS May Be Able to Improve Compliance for 

Nonresident Aliens and Updating Requirements Could Reduce Their Compliance 

Burden (GAO-10-429). These efforts will increase income tax collections from small 

international businesses and individuals by increasing voluntary compliance with 

U.S. tax laws through both traditional examination activity and targeting contacts with 

taxpayers through soft letters. 
IRS-32

Criminal Investigation (CI) International Expansion (+$13.9 million / +64 FTE)

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

international tax and financial crimes to include support of: 

• CI’s international investigative case development efforts and development of foreign 

law enforcement partner relationships;

• The Department of Justice (DOJ) Law Enforcement Strategy to combat international 

organized crime; and

• The joint initiative by CI and Financial Crimes Enforcement Network (FinCEN) to 

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

financial institutions located in foreign countries and fail to disclose this to the 

U.S. Government.

CI attaches respond to CI field office requests to facilitate cooperation with foreign law 

enforcement partners to acquire records located overseas, apprehend fugitives, and procure 

witnesses. The attaches also play an integral role in identifying significant compliance issues 

for CI to investigate. Increasing CI’s ability to coordinate with foreign law enforcement 

partners will have a significant affect on voluntary compliance and deterrence of sophisticated 

tax evasion schemes and other financial crimes. 

With this initiative, the IRS will expand its involvement in the DOJ Law Enforcement 

Strategy to Combat International Organized Crime (IOC) and the Global Illicit Finance Team 

(GIFT). GIFT works on and coordinates large financial investigations related to professional 

money launderers. The IOC-2 develops leads and provides support to case agents and the 

GIFT investigates those cases. The GIFT will look at violations around the world and not just 

in one single venue. This will allow the GIFT to investigate international money laundering 

schemes that affect multiple jurisdictions.

These funds will support the Suspicious Activity Report/Report of Foreign Bank and 

Financial Accounts (SAR-FBAR). International cross-border financial transactions are 

increasingly complex to trace and the IRS is taking steps to enhance its ability to address 

these challenges. The SAR-FBAR project is a joint initiative by the IRS and FinCEN that 

seeks to identify and investigate U.S. citizens and residents who hold substantial funds with 

financial institutions located in foreign countries and who fail to disclose such holdings to the 

IRS. This bilateral collaboration will facilitate a quicker exchange of Bank Secrecy Act 

(BSA) information so that both U.S. authorities and other participating foreign financial 

intelligence units can identify and investigate individuals that fail to disclose their financial 

interest, signature authority, or other authority over any foreign financial account with an 

aggregate value exceeding $10,000. 

Once the new hires reach full potential in FY 2015, this investment will complete 

40 additional cases.
IRS-33

Development and Improvement of IT Systems and Specialized Tools

(+$11.4 million / 0 FTE)

These resources will fund 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 linking of international data to tax return 

data. This includes system capabilities to:

• Allow secure Web-based interactivity to implement provisions that require the 

creation of formal working agreements between the IRS and Foreign Financial 

Institutions (FFI); 

• Accept, store and retrieve FFI information, such as FFI agreements, annual account 

reporting, and certifications;

• Automate the interface between the data secured via the Web-based Portal and the IRS 

Master File (MF) stored data;

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

foreign financial institutions that 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;

• Generate reports on FATCA audit and registration certifications; and 

• 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, and 1041-T with Forms 1042-S will provide significant progress toward 

achieving international compliance in an efficient manner.

Other Direct Costs (+$8.6 million / +45 FTE) 

IRS Activity Cost FTE Explanation

Chief Counsel $8.6 45

Support examinations of Forms 1042 and 1042S and 

assist audit teams in addressing complicated withholding 

issues.

Total $8.6 45

Dollars in Millions
IRS-34

Improve International Compliance

+$38,884,000 / +223 FTE

Funding 

to Improve International Compliance strengthens international tax compliance for business

entities by providing additional international technical specialists to increase coverage of 

complex international transactions, including cross-border business arrangements and transfer 

pricing (i.e., transactions between U.S. multinationals and their foreign subsidiaries, and 

foreign-controlled corporations doing business in the U.S. and transactions with their foreign 

parent). This request will address the significant growth in international activities in the 

global tax environment and produce additional annual enforcement revenue of 

$263.5 million once the new hires reach full potential in FY 2015, an ROI of $8.8-to-$1.

Increase Coverage of International Issues, including Cross Border and Transfer Pricing Issues 

(+$33.4 million / +194 FTE)

These resources will be used to expand coverage and address the full range of international 

business tax compliance issues, including cross-border and transfer pricing issues. 

Approximately 15 percent of the new staff would control and close additional Foreign 

Corporation (1120F) returns and the majority (85 percent) will generate enhanced revenue on 

existing cases by identifying and pursuing additional international issues not currently 

addressed. Together, once the new hires reach full potential in FY 2015, these efforts will 

allow the IRS to address an additional 1,800 international issues in large business 

examinations, resulting in more than $263 million in additional annual enforcement revenue.

The IRS will increase issue specialization to address complex international transactions, 

including cross border business arrangements and transfer pricing. These resources combine 

the skills of international examiners, economists, and technical advisors to address the global 

ROI 

$38.9 $32.7 $30.0

$130.3

$175.7

$263.5

$0.0

$50.0

$100.0

$150.0

$200.0

$250.0

$300.0

FY 2013 FY 2014 FY 2015

in millions

Cost Enforcement Revenue

3.3 to 1

8.8 to 1

5.4 to 1

Position Type/Other Costs FTE $000

Increase Coverage of International Issues, 

including Cross Border and Transfer Pricing 

Issues 194 $33,358

Revenue Agent 160 28,304

Economist 24 4,050

General Attorney, Technical 2 312

Support Staff 8 692

Other Direct Costs 29 $5,526

Attorney 29 5,526

Total 223 $38,884

Major Activities

Projected

Revenue

$M

International 

Issues Examined

Address International Issues including Cross Border & 

Transfer Pricing 263.5 1,800

Total $263.5 1,800
IRS-35

nature of tax administration. Increasingly, U.S. entities are engaging in cross-border 

transactions, developing complex multinational structures, and using the tax treaty network to 

lower their effective worldwide tax rate with both appropriate as well as abusive methods. 

International features on U.S. tax returns have now become the norm rather than an exception. 

Some of the key tax issues arising from businesses operating worldwide include:

• Transfer pricing;

• Foreign tax credit generators and splitters;

• Abusive transactions involving hybrid instruments;

• Foreign earnings repatriation;

• Valuation issues;

• Transfers of property (tangible and intangible);

• Potential tax shelters;

• Effectively Connected Income (ECI) and Permanent Establishment;

• Withholding on Foreign Payments;

• Subpart F related issues; and

• IRC 367 Foreign Restructuring.

The IRS will strengthen international tax compliance for businesses entities by identifying 

emerging international compliance issues more quickly; increasing international 

specialization and improving international coordination; increasing the examination coverage 

of small foreign corporations and pass-through entities; and addressing reporting and 

withholding issues to identify U.S.-source income flowing to foreign recipients.

Other Direct Costs (+$5.5 million / +29 FTE)

IRS Activity Cost FTE Explanation

Chief Counsel $5.5 29

Provide legal advice and assistance in addressing 

significant issues arising from the increased coverage of 

complex enterprises and high-risk taxpayers.

Total $5.5 29

Dollars in Millions
IRS-36

Implement Tax Legislative Changes

+$128,866,000 / +857 FTE

As the tax law changes, the IRS must 

implement programs to ensure that taxpayers understand the new laws, and that the IRS can

address non-compliance. Funding for Implement Tax Legislative Changes will promote

compliance activities related to a number of tax law changes implemented over the last 

several years, including the:

• Information Reporting Document Matching (IRDM) to implement the reporting 

provisions included on merchant payment card and third party reimbursements enacted in 

the Housing and Economic Recovery Act of 2008 (Public Law 110-289); and basis 

Position Type/Other Costs FTE $000

Implement Information Return Document 

Matching (IRDM) 535 $43,505

Information Reporting on Merchant Card 

Reimbursements - Automated Underreporter 

Program 447 $35,294

Tax Examiner 277 24,082

Data Transcriber 126 6,967

Support Staff 44 3,751

IT Equipment 493

Basis Reporting on Security Sales 20 $1,106

Data Transcriber 20 1,106

Other Costs 68 $7,105

Revenue Officer (Appeals) 13 2,054

Revenue Agent (Appeals) 1 128

Attorney 4 761

Paralegal 3 273

Customer Service Representative 28 1,879

Taxpayer Advocacy Specialist 16 1,722

Support Staff 3 289

Affordable Health Care Tax Law Changes 322 $85,361

Administer New Fees on Drug Manufacturers 

and Health Insurers 9 $1,750

Revenue Agent 5 990

Manager and Analyst 4 760

Strengthen Oversight of Exempt Hospitals 66 $8,111

Revenue Agent 32 3,347

Tax Law Specialist 22 3,384

Manager and Analyst 8 1,058

Support Staff 4 322

Promoting Compliance with Other New 

Provisions 142 $15,051

Revenue Agent 45 5,345

Tax Examiner 65 5,086

Customer Service Representative 3 228

Manager and Analyst 12 3,017

Support Staff 17 1,375

Program Management Office (PMO) 65 $23,569

Manager and Analyst 65 10,575

Contractual Services 12,994

Updating Existing IT Systems for Tax Law 

Changes $30,690

Travel 188

Contractual Services 30,458

Supplies and Materials 44

Other ACA Direct Costs 40 $6,190

Appeals Officer 20 3,228

Attorney 15 2,459

Manager and Analyst 1 115

Support Staff 4 388

Total 857 $128,866
IRS-37

reporting on security sales enacted in the Emergency Economic Stabilization Act of 2008 

(Public Law 110-343); and

• Affordable Care Act (ACA) (Public Law 111-148) to address compliance issues and new 

responsibilities arising from the non-exchange related tax law changes.

Implementing these tax law changes through these initiatives will produce additional annual 

enforcement revenue of $424.0 million, once the new hires reach full potential in FY 2015, 

an ROI of $3.5-to-$1.

ROI 

$177.3

$304.7

$424.0

$128.9 $122.4 $120.4

$0.0

$50.0

$100.0

$150.0

$200.0

$250.0

$300.0

$350.0

$400.0

$450.0

FY 2013 FY 2014 FY 2015

in millions

Cost Enforcement Revenue

1.4 to 1

3.5 to 1

2.5 to 1
IRS-38

Implement Information Return Document Matching (+$36.4 million / +467 FTE)

This funding will allow IRS to increase taxpayers’ voluntary compliance by implementing

two 2008 laws requiring reporting to the IRS and taxpayers of transaction settlement 

information (i.e., merchants’ income from payment cards or third party networks) and of cost 

basis of sales of certain securities. 

• Information Reporting on Merchant Payment Card Reimbursements – Automated 

Underreporter Program 

The IRS is building new IT systems and modifying existing systems to create the 

Business Master File Automated Underreporter Program (BMF AUR) to implement 

document matching for merchant card payment transactions. Although information 

returns will be available for document matching beginning in FY 2012, these 

additional funds are needed to take advantage of the increased information and, 

thereby, generate revenue.

Underreporting of gross receipts significantly contributes to the tax gap. The enacted

legislation allows the IRS to identify businesses with a high likelihood of 

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

party transactions:

o Payment card processors will report total payments made to a business; and 

o Third party settlement organizations will report network transactions settled 

among participating payees. 

The legislation requiring information reporting on merchant card and third party 

reimbursements will help reduce the tax gap in three ways:

o Provide a business with an official year-end statement to reconcile merchant card 

payments and third party network transactions to avoid underreporting of income 

they may have overlooked; 

o Provide IRS information to perform business income validation through document 

matching; and 

o Provide IRS information to more easily identify a business that evades its tax 

obligations by not filing or understating its income. 

This funding will allow the IRS to establish robust document matching compliance 

and enforcement efforts for merchant payment card and third party transactions. The 

amount of the transaction and the name, address, and taxpayer identification number 

Major Activities

Projected

Revenue

$M

Individual 

Audits

Business 

Audits

Calls 

Answered Closures Exams

Document Matching Program 278.0 162,000 16,000 

Strengthen Oversight of Exempt Hospitals 1,700 

Promoting Compliance with Other New 

Provisions 146.0 10,191 566 180,900 210,590 1,000 

Total $424.0 172,191 16,566 180,900 210,590 2,700 
IRS-39

(TIN) of each payee receiving payments from reportable transactions appears on 

Form 1099-K, Merchant Card and Third Party Payments. 

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, 277 FTE for AUR tax examiners, and 44 FTE 

for processing to reconcile approximately 178,000 additional tax returns in FY 2015 

once new hires reach full potential.

• Basis Reporting on Security Sales 

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” audit rate. 

This initiative includes 20 FTE to transcribe basis information from paper 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 achieve improvements in 

document matching.

Affordable Care Act Tax Law Changes (+$79.2 million / +282 FTE)

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

from the recent tax law changes included in the ACA, as well as program management. 

These tax code changes include:

• Administering New Fees on Drug Manufacturers and Health Insurers

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

engaged in manufacturing and importing branded prescription drugs sold to specified 

government programs. The fee, set at $2.8 billion for 2013, represents a significant 

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

manufacturers/importers and specific government programs (Veterans Affairs, 

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

each manufacturer’s fee assessment. Continuing administration includes IRS 

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

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

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

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

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

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

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

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

for 2014.
IRS-40

• Strengthening Oversight of Exempt Hospitals 

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

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

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

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

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

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

of community benefits activities reviews is scheduled to be completed by 

December 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. 

• Promoting Compliance with Other New Provisions 

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

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

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

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

provision establishes a new additional Medicare Tax on wages above the same 

thresholds, for which employers must implement new withholding. Existing 

individual and employer compliance processes must be modified to support 

implementation.

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

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

filing and compliance trends in the initial processing years. Such provisions include 

the excise tax on indoor tanning services and the small employer healthcare tax credit.

• Updating Existing IT Systems for Tax Law Changes

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 will keep 

existing IT systems current with recent tax law changes that require the IRS to 

integrate new information reporting data, administer new revenue provisions 

(e.g., update tax accounts, send notices, provide updates to customer service), and 

assess penalties where appropriate (e.g., for failure to pay).
IRS-41

Other Direct Costs (+$13.3 million / +108 FTE)

IRS Activity Cost FTE Explanation

Appeals $5.5 35

Appeals case receipts will increase because of new 

Collection closures that will require adjudication in the 

appeals process.

Chief Counsel $4.2 29 Counsel will provide legal advice to identify pockets of 

noncompliance and equitable resolutions. 

Taxpayer Advocate Service $1.7 16 Staffing will handle additional case receipts.

Wage & Investment $1.8 27

Support collection efforts by ensuring staffing is available to 

handle the downstream increases in collection, accounts 

management and submission processing workload.

HCO $0.1 1 Handle increased workload to hire and support staff.

Total $13.3 108

Dollars in Millions
IRS-42

Implement Revenue Protection Strategy

+$88,856,000 / +885 FTE

The tax withholding system allows the IRS to 

identify and resolve issues prior to issuing a taxpayer’s refund, thereby protecting revenue at a 

lower cost than downstream enforcement collections. Funding for Implement Revenue 

Protection Strategy will support the implementation of the Return Review Program (RRP), the 

Accounts Management Taxpayer Assurance Program (AMTAP), Identity Theft, and the 

Prisoner Tax Compliance Strategy. It will help prevent erroneous refund payments, including 

non-compliant and fraudulent claims by prisoners and ineligible taxpayers claiming the 

Earned Income Tax Credit (EITC). 

In FY 2011, AMTAP reviewed almost 1.8 million 

questionable refund returns valued at more than $14 billion. The IRS protected almost $3.8 

Position Type/Other Costs FTE $000

Business Support to Optimize Use of the Return 

Review Program 23 $5,673

Manager and Analyst 23 3,064

Contractual Services 2,609

Expand Accounts Management Taxpayer 

Assurance Program 113 $8,908

Tax Examiner 96 7,376

Customer Service Representative 13 1,153

Manager and Support Staff 4 379

Identity Theft 400 $38,100

Tax Examiner 400 38,100

Implement the Prisoner Tax Compliance Strategy 36 $5,034

Tax Examiner 18 1,744

Manager 18 2,365

Contractual Services 800

Travel 125

Increase Earned Income Tax Credit Examinations 250 $23,494 

Tax Examiner 216 20,567

Program Manager and Analyst 34 2,927

Revenue Protection 44 $5,150

Tax Examiner 20 1,938

Analyst 8 1,398

IT Specialist 10 1,241

Manager and Support Staff 6 573

Other Direct Costs 19 $2,497

Appeals Officer 9 1,332

Attorney 5 786

Customer Service Representative 4 262

Support Staff 1 117

Total 885 $88,856

ROI 

$88.9

$117.2

$146.5

$78.2 $79.8 $73.7

$0.0

$20.0

$40.0

$60.0

$80.0

$100.0

$120.0

$140.0

$160.0

FY 2013 FY 2014 FY 2015

in millions

Cost Enforcement Revenue

.8 to 1

1.5 to 1

1.9 to 1
IRS-43

billion in revenue through EITC enforcement efforts (examinations, document matching 

reviews and math error processing). This request will produce additional annual enforcement 

revenue of $146.5 million once the new hires reach full potential in FY 2015, an ROI of $1.9-

to-$1, in addition to billions of dollars of prevented fraudulent refunds.

Major Activities Projected

Revenue

$M

Protected

Revenue

$M

Individual

Post Refund

Audits

Individual

Pre-Refund

Audits

Increase Earned Income Tax Credit (EITC) 

Examinations

Correspondence Examination 146.5 146.5 50,000 50,000 

Total $146.5 $146.5 50,000 50,000 
IRS-44

This initiative will protect revenue by:

• Continued improvement of the business rules identifying questionable refund returns 

in the new Return Review Program (RRP) system;

• Identification and elimination of non-compliant refund claims based upon false wages 

or withholdings;

• Dedication of a specialized staff to handle identity theft cases associated with 

pre-refund, post-refund and on-going resolution support;

• Detection of non-compliant and fraudulent refund claims filed by prisoners and the 

prevention of improper payments; 

• Detection of taxpayers who are manipulating net earnings to qualify for the Earned 

Income Tax Credit (EITC) and the prevention of those improper payments; and 

• Development of streamlined processes to prevent erroneous refund payments.

Business Support to Optimize Use of the Return Review Program

(+$5.7 million / +23 FTE)

The business support component of this initiative will fund the compliance staff and 

contractor support to ensure that the new RRP system meets the needs of both the compliance 

and criminal investigation programs. The new RRP supports a cross-functional approach to 

coordinating and addressing criminal and civil tax noncompliance. The RRP allows analysis 

and support of case processing needs in criminal prosecution, revenue protection, accounts 

management, and taxpayer communications. This support will ensure that RRP’s new 

capabilities to protect revenue can be utilized fully by each affected function. The analysts 

will create and continuously improve the business rules used in models to identify and prevent 

the issuance of improper refunds. The program subject matter experts will work with the 

contractor to modify the RRP system to identify scenarios and schemes.

Expand AMTAP Program (+$8.9 million / +113 FTE)

The IRS AMTAP program focuses on identifying and stopping fraudulent refund claims. 

The AMTAP program identifies potential fraudulent claims and then works with third parties, 

such as employers, to verify the source and amount of income and federal income tax 

withheld claimed on each return. If the IRS establishes that the data reported is false, the 

taxpayer’s account is referred for adjustment or audit (based on current tax law) to prevent the 

issuance of an improper payment. This information also can be used by IRS to identify and 

refer schemes for prosecution. 

These additional resources will allow AMTAP to identify and stop additional non-compliant 

refund claims based on false wages and/or withholding. This component will achieve the 

following objectives:

• Increase the ability to identify potential fraud and refund abuse in a low cost business 

environment;

• Stop additional non-compliant and fraudulent refunds from being issued;
IRS-45

• Allow AMTAP to stop non-compliant refunds of any amount by lowering current 

thresholds that are currently constrained by available resources; and

• Investigate and stop additional non-compliant refunds identified as a result of leads 

provided by banks and prisons.

Identity Theft (+$38.1 million / +400 FTE)

The rapid growth of tax-related identity theft has resulted in a backlog of more than 

228,000 cases. To address this backlog and future cases, the IRS requests resources to 

increase the specialized staff dedicated to handling identity theft cases associated with 

pre-refund, post-refund and on-going resolution support. These teams will ensure that 

taxpayers affected by identity theft have their issues resolved timely and will not be burdened 

with the same issues from year to year. 

The additional staff will address identity theft by: 

• Researching thousands of taxpayer social security numbers received through 

enforcement actions, and resolving situations such as false tax returns and information 

reporting documents where a taxpayer has been compromised by identity theft; 

• Resolving incidents identified through the normal process of filing tax returns; 

• Improving the tracking of case resolution by streamlining the process; and 

• Supporting the Identity Protection PIN program to help past identity theft victims

avoid subsequent filing issues.

Identity theft is costly to the IRS and to taxpayers. These resources will protect revenue and 

reduce burden on taxpayers by allowing the IRS to improve the identification and resolution 

of tax-related identity theft from beginning to end. 

Implement the Prisoner Tax Compliance Strategy (+$5.0 million / +36 FTE) 

In response to increasing attention from Congress, the Treasury Inspector General for Tax 

Administration (TIGTA), and the media, the IRS collaborated with internal and external 

stakeholders to develop the Prisoner Tax Compliance Strategy. This strategy includes five 

areas of focus:

• Data Exchange – Compiles and improves the accuracy of the annual prisoner file and 

implements Memoranda of Understanding to disclose tax return information to federal 

and state prison systems per section 6103(k)(10) of the Internal Revenue Code; trains 

and provides resources to Federal Bureau of Prisons (FBOP) and state and District of 

Columbia Department of Corrections officials on safeguarding and disclosure 

procedures; and conducts required reviews of prison facilities to assess compliance 

with section 6103 requirements assuming Congress extends this provision which 

expired December 31, 2011.

• Compliance – Improves the process for detecting non-compliant prisoner tax returns 

and provides viable solutions for resolving these non-compliant tax returns; and works 
IRS-46

proactively with all state and the District of Columbia Departments of Corrections and 

the FBOP to intercept tax materials, mail, refund checks and other tax information to 

or from the IRS involving inmates who try to obtain false or fraudulent refunds.

• Outreach – Conducts targeted outreach to prisoners and prison officials to help 

prisoners better understand and meet their tax responsibilities; and provides resources 

to prison officials on awareness of prisoner tax filing fraud and sources of reporting to 

the IRS.

• Memoranda of Understanding (MOU) – Establishes and maintains MOUs with the 

Federal Bureau of Prisons, all 50 state prison systems, and the District of Columbia 

prison system that allow for the disclosure of false or fraudulent tax information that 

will lead to administrative reprimand of non-compliant filers within the prison 

population assuming Congress extends this provision which expired 

December 31, 2011.

• Legislation – Ensures compliance with legislative requirements; analyzes annual 

prisoner file data and reports performance in the Annual Report to Congress on Inmate 

Tax Fraud in compliance with the Inmate Tax Fraud Prevention Act of 2008. Also,

partners with prison officials to identify challenges with implementing legislation and 

works together on solutions.

The IRS requests resources to ensure voluntary participation by all states and the District of 

Columbia Department of Corrections and the FBOP to improve the accuracy and reliability of 

the annual prisoner file and detect and stop false and fraudulent refunds to prisoners. 

This funding will allow the IRS to identify and prevent the issuance of improper payments to 

prisoners. The rapid rise in prisoner non-compliance is shown in the following chart:

Calendar 

Year

False Tax 

Returns

Refund 

Claimed

Refund 

Prevented

Refund 

Issued

Percent 

Prevented

2004 18,103 68.1 54.6 13.4 80.18%

2005 21,254 80.4 67.5 12.8 83.96%

 *2006 N/A N/A N/A N/A N/A

2007 37,447 165.9 136.6 29.2 82.34%

2008 47,898 190.4 162.1 28.3 85.14%

2009 44,944 295.1 256.0 39.1 86.75%

Total 169,646 $799.9 $676.8 $122.8 84.61%

Dollars in Millions

* Data were unavailable in Calendar Year 2006

Source: IRS Criminal Investigation Division. TIGTA Report 2011-40-009 
IRS-47

Increase Earned Income Tax Credit (EITC) Examinations (+$23.5 million / +250 FTE)

The IRS plans to increase EITC examinations to identify taxpayers who are avoiding taxes 

and obtaining refunds by manipulating Schedule C, Profit or Loss From Business, net 

earnings to qualify for the earned income credit. These resources will allow additional audits 

to take place before the IRS issues refunds, expedite case processing, and reduce the time it

takes to notify taxpayers of credit eligibility. The additional staff requested will augment 

examination coverage in the EITC program and provide an increased focus without reducing 

coverage for existing programs. 

Revenue Protection (+$5.2 million / +44 FTE)

The IRS continues to face challenges in preventing fraud and abuse of refundable credits such 

as the EITC. The IRS requests resources to develop alternative streamlined processes that 

will prevent the issuance of erroneous refund payments. The new staffing will identify trends,

coordinate and follow leads from banks and other sources, and develop recommendations on 

how to address the findings (i.e., issue taxpayer notices, modify existing systems, etc.). 

They also will conduct case reviews to validate the potential areas of abuse and pilot the new 

recommended procedures. In addition, these resources will allow the IRS to expand and 

expedite access to third party income and withholding information during the filing season.

Other Direct Costs (+$2.5 million / +19 FTE)

IRS Activity Cost FTE Explanation

Appeals $1.3 9 Support examination efforts on key compliance areas 

focused on improving voluntary compliance.

Chief Counsel $0.8 5

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.

Wage and Investment $0.3 4 Downstream Accounts Management support of added 

EITC examinations.

Human Capital Office $0.1 1 Handle increased workload to hire and support staff.

Total $2.5 19

Dollars in Millions
IRS-48

Build Out Tax Return Preparer Program

+$35,166,000 / +228 FTE

Funding 

for Build Out Tax Return Preparer Program will improve taxpayer compliance and the 

accuracy of returns filed by tax professionals; protects taxpayers by establishing a registered 

community of qualified tax professionals; and fosters a stakeholder-driven culture that 

encourages voluntary compliance. This initiative will ensure uniform, high ethical standards 

of conduct for tax return preparers by enforcing preparer compliance with the IRS rules, 

increasing preparer examinations, and monitoring and pursuing preparers engaged in 

fraudulent activities, including noncompliant EITC return preparers. This initiative is core to 

the IRS’s tax gap strategy and will increase government revenue while ensuring high-priority, 

preparer-related enforcement activities are funded to execute the appropriate treatment 

effectively. This request will produce additional annual enforcement revenue of $62.2

million once the new hires reach full potential in FY 2015, an ROI of $2.3-to-$1, in addition 

to the much larger indirect return that will result from higher professional standards among 

the tax return preparer community.

Key activities and deliverables of this initiative include deploying a coordinated return 

compliance strategy by:

• Developing techniques to detect return preparer errors;

• Coordinating return preparer enforcement actions; 

• Prioritizing activities through a return preparer enforcement work plan;

• Updating detection tools and selection logic; and

• Determining effective measurement strategies.

ROI 

$35.2

$28.8 $27.2 $26.5

$39.7

$62.2

$0.0

$10.0

$20.0

$30.0

$40.0

$50.0

$60.0

$70.0

FY 2013 FY 2014 FY 2015

in millions

Cost Enforcement Revenue

.8 to 1

2.3 to 1

1.4 to 1

Position Type/Other Costs FTE $000

Enforce Tax Return Preparer Compliance 158 $22,558

Revenue Officer 4 486

Revenue Agent 120 18,732

General Attorney, Technical 2 404

Tax Technician 8 863

Tax Examiner 12 1,010

Analyst 2 298

Support Staff 10 765

Pursue Tax Return Preparer Fraudulent Activity 50 $10,634

Special Agent 48 10,440

Analyst 2 194

Enforce Ethical Standards of Conduct for 

Practitioners 20 $1,974

Support Staff 20 1,974

Total 228 $35,166

Major Activities

Projected

Revenue

$M

Individual 

Audits Preparer Visits

Enforce Tax Return Preparer Compliance 62.2 750 4,000 

Total $62.2 750 4,000 
IRS-49

Enforce Tax Return Preparer Compliance (+$22.6 million / +158 FTE) 

Given the important role that tax return preparers play in federal tax administration, the IRS 

has a significant interest in identifying tax return preparers and monitoring their tax return 

preparation activities. These funds will allow the IRS to deploy a coordinated return preparer 

compliance strategy by conducting on-site visits and investigating suspicious activity, 

especially of abusive return preparers. 

The IRS revenue agents and CI special agents will conduct visits to return preparers related to 

the following program areas: the Return Preparer Visitation Program, Electronic Return 

Originator (ERO)/e-File visits, Certifying Acceptance Agent (CAA)/Individual Tax 

Identification Number (ITIN), EITC Due Diligence, Knock & Talk monitoring, and the 

Unidentified Preparer Program. Return preparers identified as not complying with Internal 

Revenue Code (IRC) 6695 identification rules (requires disclosure of preparer identification 

numbers) will be identified for audit potential. 

Pursue Tax Return Preparer Fraudulent Activity (+$10.6 million / +50 FTE)

These funds provide resources for CI to form multi-agency taskforces dedicated to tax 

administration by seeking prosecution at the state and federal levels to prevent fraudulently 

obtained refunds (refundable credits are a large percentage) from financing and supporting 

criminal activity in some areas of the country. Special agents will conduct outreach efforts 

that address return preparer concerns while working with state taxing agencies to leverage 

resources and seek prosecution at both the federal and state level where deemed appropriate. 

The task forces will work with local law enforcement agencies to receive information about 

criminal activity involving federal and state tax refunds that can be used to expedite a 

prosecution by the Department of Justice while the criminal activity is still ongoing. 

These teams will target larger-scale crime rings for maximum compliance results and 

publicity. 

Special agents will conduct outreach efforts with practitioners year round and be available to 

address return preparer concerns. CI will participate in joint outreach efforts, Knock and Talk 

Visits with revenue agents and EITC office staff that consists of identifying return preparers 

who are potentially abusing the EITC, and visiting their offices to educate them about the 

EITC statutes. CI participation in the visits increases the perceived significance of EITC 

compliance and the consequences of violating related statutes. In FY 2010, CI completed 

44 Knock and Talk visits, resulting in the protection of an estimated $8 million in revenues. 

CI conducted another 93 Knock and Talk visits in FY 2011, the impact of which is still being 

analyzed. These activities are outside CI's normal investigative duties, and the requested 

resources will ensure that CI can continue to support these educational visits.

Enforce Ethical Standards of Conduct for Practitioners (+$2.0 million / +20 FTE)

This initiative addresses the growth in the population of practitioners who will become subject 

to the ethical standards contained in Circular 230 as a result of expanding the definition of 

practice to include return preparation. This additional staffing will handle conduct cases and 
IRS-50

the associated appeals, conferences, allegations, negotiations, administrative hearing 

preparation, and support the return preparer regulatory recommendations.

The IRS engaged a large and diverse constituent community that included tax return preparers 

licensed by state authorities, unlicensed tax preparers, software vendors, consumer groups, 

IRS employees and taxpayers in a wide-ranging review of issues involving tax preparation. 

With the findings from this review, the IRS developed a comprehensive set of

recommendations to ensure consistent standards for tax preparer qualifications, ethics and 

service. The result has been to provide registration, education, oversight and, when 

necessary, discipline for tax return preparers in the same manner that other tax professionals 

are subject to Circular 230. Some of the important changes to oversight of the tax practitioner 

community include:

• Requiring registration for nearly all paid tax return preparers;

• Establishing mandatory testing and continuing education for identified paid tax return 

preparers who do not already have this kind of requirement (i.e. exempting attorneys, 

certified public accountants and enrolled agents);

• Developing a public database so that the public can determine whether a specific tax 

return preparer is registered with the IRS;

• Making all return preparers subject to the ethical standards of Treasury Circular 230 

and subject to discipline by the IRS in the same manner and to the same degree as 

other tax practitioners; and

• Increasing IRS’s enforcement presence in the tax return preparer community.

Other Direct Costs

There are no other direct costs associated with this initiative.
IRS-51

Address Appeals Workload

+$20,324,000 / +132 FTE

The Appeal’s function at the IRS is a critical 

outlet for taxpayers to get an independent, second review of examination decisions without 

burdening the court system. Appeal’s workload continues to grow at a steady rate, with 

growth averaging 8.9 percent a year over the past five fiscal years. Anticipating that 

workload will continue to grow at this rate, the IRS requests additional staff to manage 

incoming case receipts effectively and additional resources to expand automated data capture.

Appeal’s strives to resolve taxpayer tax disputes 

accurately in a timely manner. Despite increases in case processing efficiency – average 

hours per closed case have improved by approximately 7 percent since FY 2009 – additional 

personnel are needed to handle the rising workload. 

These funds provide resources for 92 Settlement Officers and 40 Appeals Officers to address 

the increasing Appeal’s workload. Settlement Officers are specialized case-working staff

trained to handle collection actions. Appeals Officers are highly trained tax specialists who 

typically adjudicate the examination issues that are received in Appeals, including the largest 

and most technically complex cases that arrive from Large Business and International 

(LB&I). Collection case receipts have skyrocketed during the past several years, increasing 

more than 33 percent between FY 2009 and FY 2011. 

To address rising inventories, Appeals has implemented many process efficiencies such as:

• Beginning in FY 2004, consolidated case-working staff in campuses to more 

efficiently handle scores of less-complex cases;

• Improving training, on-the-job instruction, and technical mentoring programs to help 

staff build a better organizational support structure and a stronger technical 

foundation; and

• Creating Alternative Dispute Resolution to more quickly and effectively adjudicate 

cases before they enter the Appeals pipeline.

Despite a 53 percent increase in case receipts since FY 2006, and 168 percent overall since 

FY 2000, Appeals continues to see improvements in cycle time and average hours per closed

case metrics. Unfortunately, with receipts increasing at almost a double-digit rate annually, 

efficiencies alone will not maintain inventories at acceptable levels and the IRS needs more 

staff to manage the increased workload.

Resources used to hire additional staff in Appeals will result in the closure of an additional 

21,000 cases once the new hires reach full potential in FY 2015.

Position Type/Other Costs FTE $000

Address Appeal's Workload 132 $20,324

Settlement Officer 92 14,536

Appeals Officer 40 5,788

Total 132 $20,324

Major Activities Cases

Completed

Address Appeals Workload 21,000

Total 21,000 
IRS-52

Other Direct Costs

There are no other direct costs associated with this initiative.

Implement Uncertain Tax Position Reporting Requirements

+$4,030,000 / +20 FTE

Funding to Implement Uncertain Tax Position 

Reporting Requirements will allow the IRS to increase its capacity to provide guidance and 

certainty on areas where there are uncertainty in the tax law. This request complements a new 

requirement that certain large business taxpayers report information about their uncertain tax 

positions that could affect their U.S. federal income tax liability. It is a critical part of the 

IRS’s work to foster greater transparency into large corporate tax returns. 

The IRS expects both the volume and complexity of workload including advanced pricing 

agreements, private letter rulings, published guidance and legal advice to increase as 

taxpayers seek certainty on the most complex issues facing their organizations and tax 

administration.

Taxpayers subject to this requirement 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. For each uncertain tax position identified, the taxpayer:

• Uses 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

• Ranks 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.

Position Type/Other Costs FTE $000

Implement Uncertain Tax Position Reporting 

Requirements 20 $4,030

Attorney 20 4,030

Total 20 $4,030
IRS-53

Leverage Digital Evidence for Criminal Investigation (CI)

+$4,504,000 / +8 FTE

Funding for Leverage Digital Evidence for 

Criminal Investigation (CI) will automate current CI processes by implementing a virtual 

digital evidence processing environment. This will allow CI to expedite and enhance the 

analysis of electronic data by special agents, computer investigative specialists, and other 

investigative staff assigned to an investigation. 

These virtual machines will allow agents to analyze and clean contaminated or unknown third 

party data more efficiently before moving it to the CI network. This new secure workspace 

also will allow agents to call in forensic specialists or other agents for support without 

incurring travel costs.

The IRS is currently building a pilot environment at the e-Crimes Lab in Alexandria, 

Virginia. In September 2011, CI began to prototype this environment with one or two large 

investigations. The funding for FY 2013 will allow CI to expand this environment to all 

agents nationwide. 

Other Direct Costs

There are no other direct costs associated with this initiative.

Position Type/Other Costs FTE $000

Leverage Digital Evidence for Criminal 

Investigation 8 $4,504

Contractual Services 3,439

IT and Program Analyst 8 1,065

Total 8 $4,504
IRS-54

Implement Information Technology and Operational Infrastructure to Deliver New Tax 

Credits

+$266,894,000 / +537 FTE

The Affordable Care Act (ACA) provides a 

new premium assistance tax credit to help certain individuals afford health insurance starting 

in 2014. For a number of reasons, administering this credit will require a significant 

investment in new technology as well as changes to our current systems. This initiative 

allows the IRS to continue the development of new information technology systems and 

modification/enhancement of existing systems associated with this new tax credit. 

First, eligibility determination for the premium tax credit is based on household-level income 

information that is not currently maintained. Supporting credit eligibility determination 

requires a new tax data repository (database). 

In addition to the database, new systems and infrastructure components are needed to validate 

household income and provide tools to assist exchanges in determining the amount of advance 

payments of premium tax credit a recipient should get during the coverage year and before tax 

filing. This initiative also funds staff expansion for IRS safeguards and data protection 

reviews.

IRS must make the necessary adjustments to allow individuals to reconcile any advance 

payments received throughout the year with the actual premium tax credit amount determined 

at the time of filing a tax return. IRS must modify systems, forms and instructions to support 

this process, including the processing of information reports filed by exchanges, employers, 

and insurance companies. 

Together, these systems ensure prompt and accurate delivery of the premium tax credit to 

eligible taxpayers.

Finally, where taxpayers who receive a premium tax credit work for a large employer –

defined in the statute as those with 50 or more full-time employees – the IRS must build 

procedures to implement the provisions of the statute that establish shared responsibility 

payments for employers. Under this provision, which takes effect in 2014, large employers 

who have at least one employee receive a premium tax credit may be required to make a 

shared responsibility payment. Although in effect in 2014, IRS has until 2015 (after tax year 

2014 is over) to complete implementation of the necessary IT systems and 

procedures. Accordingly this provision represents a small portion (approximately 3%) of the 

funds requested for this initiative, and is primarily to support planning efforts.

Other Direct Costs

Position Type/Other Costs FTE $000

Implement Information Technology and 

Operational Infrastructure to Deliver New Tax 

Credits 537 $266,894

IT Project Specialist 537 84,456

Contractual Services 180,093

Travel 177

Supplies and Materials 91

Equipment 2,077

Total 537 $266,894
IRS-55

There are no other direct costs associated with this initiative.
IRS-56

Implement Information Technology Changes Needed for Individual Coverage Requirement

+$8,200,000 / 0 FTE

This initiative will fund the development of the 

information technology, infrastructure, and systems to implement the provisions of Subtitle F 

of Title I of the Affordable Care Act (ACA) (Public Law 111-148) that establish an individual 

responsibility health coverage requirement. 

Beginning in 2014, the ACA requires individuals who are able to afford health insurance to 

obtain minimum essential coverage or make a payment. The statute outlines a number of 

exemptions to this requirement that may be available, including if affordable coverage is not 

available.

This initiative will fund the significant revisions to existing tax administration information 

technology systems necessary to provide access to information that allows internal systems to 

determine and separate an individual’s liability for an individual responsibility payment from 

other tax liabilities and to determine whether a taxpayer or a dependent is eligible for an 

exemption. The statute uses a number of similar concepts in both the premium tax credit and 

individual coverage requirement, such as the new concept in the tax code of household

income. Funding to build these new infrastructure capabilities is requested in the initiative 

Implement Information Technology and Operational Infrastructure to Deliver New Tax 

Credits.

Other Direct Costs

There are no other direct costs associated with this initiative.

Position Type/Other Costs FTE $000

Implement IT Changes Needed for Individual 

Coverage Requirement $8,200

Contractual Services 8,200

Total $8,200
IRS-57

2.2 – Operating Levels Table

Dollars in Thousands

Appropriation Title: Internal Revenue Service

FY 2011 

Actuals1

FY 2012 

President's 

Budget

FY 2012 

Enacted

Proposed 

Reprogrammings

FY 2012 

Proposed 

Operating 

Level

FY 2013

Request

FTE 93,906 99,878 90,711 0 90,711 95,257

Object Classification:

11.1 Full-Time Permanent Positions $6,425,940 $6,893,278 $6,377,124 $0 $6,377,124 6,679,963

11.3 Other than Full-Time Permanent Positions 107,281 126,721 109,458 0 109,458 109,876

11.5 Other Personnel Compensation 288,234 316,749 236,375 0 236,375 255,519

11.8 Special Personal Services Payments 19,857 18,264 18,386 0 18,386 18,458

11.9 Personnel Compensation (Total) $6,841,312 $7,355,012 $6,741,343 $0 $6,741,343 $7,063,816

12.0 Personnel Benefits 1,937,761 2,034,508 1,913,867 0 1,913,867 2,048,654

13.0 Benefits to Former Personnel 54,416 51,392 49,048 0 49,048 49,950

21.0 Travel 174,970 259,269 194,691 0 194,691 242,418

22.0 Transportation of Things 23,939 33,144 25,122 0 25,122 27,047

23.1 Rental Payments to GSA 645,183 685,010 674,900 0 674,900 691,659

23.2 Rent Payments to Others 13,161 15,569 13,494 0 13,494 13,752

23.3 Communications, Utilities, & Misc 396,697 461,617 406,871 0 406,871 440,325

24.0 Printing & Reproduction 42,839 64,063 33,510 0 33,510 37,333

25.1 Advisory & Assistance Services 648,392 119,869 529,409 0 529,409 766,580

25.2 Other Services 184,180 1,028,350 242,004 0 242,004 298,636

25.3 Purchase of Goods & Services from Govt. Accounts 186,993 174,263 175,628 0 175,628 186,318

25.4 Operation & Maintenance of Facilities 144,572 168,478 174,554 0 174,554 183,334

25.5 Research & Development Contracts 3,009 8,482 3,041 0 3,041 3,107

25.6 Medical Care 14,275 13,498 14,415 0 14,415 15,702

25.7 Operation & Maintenance of Equipment 85,475 157,566 162,111 0 162,111 171,254

25.8 Subsistence & Support of Persons 2,381 6,788 3,799 0 3,799 4,629

26.0 Supplies and Materials 72,712 84,092 84,429 0 84,429 91,647

31.0 Equipment 346,254 444,096 319,730 0 319,730 364,738

32.0 Lands and Structures 33,981 88,141 18,072 0 18,072 23,407

33.0 Investments & Loans 0 0 0 0 0 0

41.0 Grants, Subsidies 18,103 22,605 27,893 0 27,893 27,893

42.0 Insurance Claims & Indemn 3,651 2,746 3,822 0 3,822 3,898

43.0 Interest and Dividends 0 0 0 0 0 0

44.0 Refunds 0 0 0 0 0 0

91.0 Unvouchered 7,109 5,349 4,943 0 4,943 5,116

Total Budget Authority $11,881,365 $13,283,907 $11,816,696 $0 $11,816,696 $12,761,213

Appropriations:

Taxpayer Services $2,284,178 $2,363,162 $2,239,703 $0 $2,239,703 $2,253,133

Enforcement 5,484,431 5,966,619 5,299,367 0 5,299,367 5,701,670

Operations Support 3,944,505 4,620,526 3,947,416 0 3,947,416 4,476,200

Business Systems Modernization 168,251 333,600 330,210 0 330,210 330,210

Total Budget Authority $11,881,365 $13,283,907 $11,816,696 $0 $11,816,696 $12,761,213

1 Actuals represent obligations from FY 2011 budget authority. This excludes obligations from user fees ($285,805), 50% carryover ($37,386), 

 multi-year/no year ($152,857) and recoveries ($1,464) accounts.
IRS-58

2B – Appropriation Language and Explanation of Changes

Appropriations Language Explanation of Changes

DEPARTMENT OF THE TREASURY

INTERNAL REVENUE SERVICE

Taxpayer Services

For necessary expenses of the Internal Revenue Service to 

provide taxpayer services, including pre-filing assistance 

and education, filing and account services, taxpayer 

advocacy services, and other services as authorized by 

5 U.S.C. 3109, at such rates as may be determined by the 

Commissioner, [$2,239,703,000] $2,253,133,000, of which 

not less than $5,600,000 shall be for the Tax Counseling 

for the Elderly Program, of which not less than $9,750,000 

shall be available for low-income taxpayer clinic grants, of 

which not less than $12,000,000, to remain available until 

September 30, [2013] 2014, shall be available for a 

Community Volunteer Income Tax Assistance matching 

grants program for tax return preparation assistance[, of 

which not less than $205,000,000 shall be available for 

operating expenses of the Taxpayer Advocate Service, and 

of which $15,481,000]: Provided, That of the amounts 

appropriated under this heading such sums as are 

necessary shall be available for expenses necessary to 

implement the tax credit in title II of division A of the 

Trade Act of 2002 (Public Law 107-210). (Department of 

the Treasury Appropriations Act, 2012.)

Enforcement

For necessary expenses for tax enforcement activities of the 

Internal Revenue Service to determine and collect owed 

taxes, to provide legal and litigation support, to conduct 

criminal investigations, to enforce criminal statutes related 

to violations of internal revenue laws and other financial 

crimes, to purchase (for police-type use, not to exceed 850) 

and hire passenger motor vehicles (31 U.S.C. 1343(b)), and 

to provide other services as authorized by 5 U.S.C. 3109, at 

such rates as may be determined by the Commissioner, 

[$5,299,367,000] $5,701,670,000, of which not less than 

$60,257,000 shall be for the Interagency Crime and Drug 

Enforcement program: Provided, That, of the amounts 

provided under this heading, not less than $276,964,000 

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.

In FY 2012, the resources to 

administer the health insurance 

tax credit program were moved 

to the Taxpayer Services 

appropriation under the 

Consolidated Appropriation 

Act, 2012 (Public Law 112-74). 

To maximize flexibility in 

budget execution the IRS 

proposes to remove the HCTC 

earmark.

The Budget Request for the 

Enforcement account is 

$5,701,670,000 including a 

program integrity cap 

adjustment of $276,964,000 

which, when combined with the 

$414,064,000 cap adjustment in 
IRS-59

Appropriations Language Explanation of Changes

shall be for an additional appropriation for tax activities, 

including tax compliance to address the Federal tax gap, 

as specified for purposes of Section 251(b)(2) of the 

Balanced Budget and Emergency Deficit Control Act of 

1985, as amended. (Department of the Treasury 

Appropriations Act, 2012.)

Operations Support

For necessary expenses of the Internal Revenue Service to 

support taxpayer services and enforcement programs, 

including rent payments; facilities services; printing; 

postage; physical security; headquarters and other 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; [$3,947,416,000] $4,476,200,000, of which 

up to $250,000,000 shall remain available until September 

30, [2013] 2014, 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] 2015, for research; of which not less than 

$2,000,000 shall be for the Internal Revenue Service 

Oversight Board; of which not to exceed $25,000 shall be 

for official reception and representation expenses: 

Provided, That not later than 14 days after the end of each 

quarter of each fiscal year, the Internal Revenue Service 

shall submit a report to the House and Senate Committees 

on Appropriations and the Comptroller General of the 

United States detailing the cost and schedule performance 

for its major information technology investments, including 

the purpose and life-cycle stages of the investments; the 

reasons for any cost and schedule variances; the risks of 

such investments and strategies the Internal Revenue 

Service is using to mitigate such risks; and the expected 

developmental milestones to be achieved and costs to be 

incurred in the next quarter: Provided further, That the 

Internal Revenue Service shall include, in its budget 

justification for fiscal year [2013] 2014, a summary of cost

and schedule performance information for its major 

the Operations Support account, 

totals $691,028,000 in 

additional appropriation for tax 

enforcement and compliance 

activities.
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Appropriations Language Explanation of Changes

information technology systems: Provided, That, of the 

amounts provided under this heading, such sums as are 

necessary shall be available to fully support tax 

enforcement and compliance activities, including not less 

than $414,064,000 for an additional appropriation for tax 

activities, including tax compliance to address the Federal 

tax gap, as specified for purposes of Section 251(b)(2) of 

the Balanced Budget and Emergency Deficit Control Act of 

1985, as amended. (Department of the Treasury 

Appropriations Act, 2012.)

Business Systems Modernization

For necessary expenses of the Internal Revenue Service's 

business systems modernization program, $330,210,000, to 

remain available until September 30, [2014] 2015, for the 

capital asset acquisition of information technology systems, 

including management and related contractual costs of said 

acquisitions, including related Internal Revenue Service 

labor costs, and contractual costs associated with 

operations authorized by 5 U.S.C. 3109: Provided, That not 

later than 14 days after the end of each quarter of each 

fiscal year, the Internal Revenue Service shall submit a 

report to the House and Senate Committees on 

Appropriations and the Comptroller General of the United 

States detailing the cost and schedule performance for 

CADE2 and Modernized e-File information technology 

investments, including the purposes and life-cycle stages of 

the investments; the reasons for any cost and schedule 

variances; the risks of such investments and the strategies 

the Internal Revenue Service is using to mitigate such 

risks; and the expected developmental milestones to be 

achieved and costs to be incurred in the next quarter. 

(Department of the Treasury Appropriations Act, 2012.)

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 

[approval] notification of the Committees on 

Appropriations.

The Budget Request includes 

additional resources for 

increased tax enforcement and 

compliance activities through a 

program integrity cap 

adjustment, of which 

$414,064,000 is in the 

Operations Support account. 
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Appropriations Language Explanation of Changes

Sec. 102. The Internal Revenue Service shall maintain a 

training program to ensure that Internal Revenue Service 

employees are trained in taxpayers' rights, in dealing 

courteously with taxpayers, and in cross-cultural relations.

Sec. 103. The Internal Revenue Service shall institute and 

enforce policies and procedures that will safeguard the 

confidentiality of taxpayer information and protect 

taxpayers against identity theft.

Sec. 104. Funds made available by this or any other Act to 

the Internal Revenue Service shall be available for 

improved facilities and increased staffing to provide 

sufficient and effective 1-800 help line service for 

taxpayers. The Commissioner shall continue to make the 

improvement of the Internal Revenue Service 1-800 help 

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 $9,486,842,000 

shall be specified to pay for the costs of tax activities, 

including tax compliance to address the Federal tax gap, 

as specified for purposes of Section 251(b)(2) of the 

Balanced Budget and Emergency Deficit Control Act of 

1985, as amended. (Department of the Treasury 

Appropriations Act, 2012.)
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2C – Legislative Proposals 

The FY 2013 Budget Request includes a number of legislative proposals intended to improve 

tax compliance with minimal taxpayer burden. These proposals will target the tax gap and 

generate more than $12 billion over the next ten years. The IRS estimates the implementation 

cost for the proposals included in the FY 2012 President’s Budget to be $80.2 million over 

three years, including the initial startup, processing and compliance operational costs. The 

Administration proposes to expand information reporting, improve compliance by businesses, 

strengthen tax administration, and expand penalties. Should Congress enact these provisions, 

Treasury requests that the amounts, below, be included as part of the authorizing legislation. 

The Budget also proposes to amend the Balanced Budget and Emergency Deficit Control Act 

of 1985 (BBEDCA), as amended by the Budget Control Act (BCA) of 2011, to allow 

adjustments to the 9-year (FYs 2013-2021) discretionary caps to permit program integrity cap 

adjustments in support of additional IRS investments. 

Expand information reporting – Compliance with the tax laws is highest when payments are 

subject to information reporting to the IRS. Specific information reporting proposals would:

• Require information reporting for private separate accounts of life insurance 

companies ($0); and

• Require a certified Taxpayer Identification Number (TIN) from contractors and allow 

certain withholding ($11.5 million).

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 ($0);

• Require corporations and partnerships with assets of $10 million or more that are 

required to file Schedule M-3 to file their tax returns electronically ($0.3 million); 

• Provide Treasury with the regulatory authority to reduce the current threshold of filing 

250 or more returns during a calendar year to require electronic filing of certain other 

large taxpayers not required to file Schedule M-3 (such as exempt organizations)

($0.3 million); 

• Provide Treasury with the regulatory authority to require electronic filing of all 

Form 5500, Annual Return/Report of Employee Benefit Plan, information 

($11.2 million); 

• Implement standards that clarify when employee leasing companies can be held liable 

for their clients’ federal employment taxes ($2.9 million); 

• Increase certainty about the rules pertaining to classification of employees as 

independent contractors ($1.9 million);

• Repeal special estimated tax payment provision for certain insurance companies 

($2.2 million);
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• Eliminate special rules modifying the amount of section 6655 estimated tax payments 

by corporations ($0); and 

• Mandate streamlined large partnership audit and adjustment procedures for any 

partnership that has 1,000 or more partners (new in 2013).

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:

• Revise offer-in-compromise application rules ($17.8 million);

• Expand the IRS access to information in the National Directory of New Hires for tax 

administration purposes ($12.0 million);

• Make repeated willful failure to file a tax return a felony ($0);

• Facilitate tax compliance with local jurisdictions ($1.2 million);

• Extend statutes of limitations where state tax adjustments affect federal tax liability

($.015 million); 

• Improve the investigative disclosure statute ($0);

• Require taxpayers who prepare their returns electronically, but file their returns on 

paper, to print their returns with a 2-D bar code ($6.8 million); 

• Allow the IRS to waive credit card processing fees for certain tax payments 

($9.6 million); 

• Improve and make permanent the provision authorizing the IRS to disclose certain 

return information to certain prison officials (new in 2013); and

• Extend IRS math error authority in certain circumstances (new in 2013).

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

($2.5 million).
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Section 3 – Budget and Performance Report and Plan

Taxpayer Services 

Appropriation Description

The Taxpayer Services appropriation provides funding for taxpayer service activities and 

programs. This includes printing forms and publications, processing tax returns and related 

documents, offering filing and account services, ensuring the availability of taxpayer 

assistance, and providing taxpayer advocacy services.

The Taxpayer Services President’s Budget request for FY 2013 is $2,253,133,000 in direct 

appropriations and 30,570 FTE. This is an increase of $13,430,000, or .60 percent, and 

35 FTE more than the FY 2012 enacted budget of $2,239,703,000 and 30,535 FTE.
IRS-65

2.1 – Budget Adjustments Table 

Dollars in Thousands

FTE Amount

FY 2012 Enacted 30,535 $2,239,703

Changes to Base

Maintaining Current Levels (MCLs) $17,282

Efficiencies/Savings (395) ($31,544)

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

Reduce Travel (740)

Targeted Program Reductions (218) (22,680)

Subtotal, FY 2013 Changes to Base (395) ($14,262)

FY 2013 Current Services (Base) 30,140 $2,225,441

Program Changes 

Restoration of FY 2012 Reductions to Enforcement Programs

Restore Audit Coverage to Address Individual Tax Compliance Issues 6 388

Restore Collection Coverage 195 11,869

Subtotal, Restoration of FY 2012 Reductions to Enforcement Programs 201 $12,257

Program Increases

Enforcement Initiatives

Implement Tax Legislative Changes 189 8,366

Implement Revenue Protection Strategy 40 7,069

Subtotal, Enforcement Initiatives 229 $15,435

Subtotal, FY 2013 Program Changes 430 $27,692

Total, FY 2013 Budget Request 30,570 $2,253,133

Taxpayer Services 
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2.2 – Operating Levels Table

Dollars in Thousands

Appropriation Title: Taxpayer Services 1

FY 2011 

Actuals 2

FY 2012 

President's 

Budget

FY 2012 

Enacted

Proposed 

Reprogrammings

FY 2012 

Proposed 

Operating 

Level

FY 2013

Request

FTE 31,574 31,701 30,535 0 30,535 30,570

Object Classification:

11.1 Full-Time Permanent Positions $1,559,309 $1,576,561 $1,565,525 $0 $1,565,525 $1,566,293

11.3 Other than Full-Time Permanent Positions 52,114 56,752 45,637 0 45,637 45,816

11.5 Other Personnel Compensation 83,223 110,875 60,937 0 60,937 61,983

11.8 Special Personal Services Payments 0 0 0 0 0 0

11.9 Personnel Compensation (Total) $1,694,646 $1,744,188 $1,672,099 $0 $1,672,099 $1,674,092

12.0 Personnel Benefits 395,234 399,654 368,689 0 368,689 374,028

13.0 Benefits to Former Personnel 4,982 1,603 150 0 150 153

21.0 Travel 23,861 27,655 24,843 0 24,843 25,376

22.0 Transportation of Things 1,203 1,988 432 0 432 441

23.1 Rental Payments to GSA 0 0 0 0 0 0

23.2 Rent Payments to Others 0 172 24 0 24 24

23.3 Communications, Utilities, & Misc 2,071 7,547 2,472 0 2,472 2,551

24.0 Printing & Reproduction 10,985 12,671 6,159 0 6,159 6,305

25.1 Advisory & Assistance Services 26,688 19,590 13,436 0 13,436 13,702

25.2 Other Services 35,305 38,486 40,623 0 40,623 43,997

25.3 Purchase of Goods & Services from Govt. Accounts 60,432 67,123 63,149 0 63,149 64,402

25.4 Operation & Maintenance of Facilities 2 0 2 0 2 2

25.5 Research & Development Contracts 0 0 0 0 0 0

25.6 Medical Care 0 0 0 0 0 0

25.7 Operation & Maintenance of Equipment 0 10 0 0 0 0

25.8 Subsistence & Support of Persons 61 1,509 1,568 0 1,568 1,602

26.0 Supplies and Materials 8,566 16,620 16,658 0 16,658 17,029

31.0 Equipment 876 290 1,037 0 1,037 1,057

32.0 Lands and Structures 610 1,371 257 0 257 263

33.0 Investments & Loans 0 0 0 0 0 0

41.0 Grants, Subsidies 18,103 22,600 27,893 0 27,893 27,893

42.0 Insurance Claims & Indemn 553 85 212 0 212 216

43.0 Interest and Dividends 0 0 0 0 0 0

44.0 Refunds 0 0 0 0 0 0

91.0 Unvouchered 0 0 0 0 0 0

Total Budget Authority $2,284,178 $2,363,162 $2,239,703 $0 $2,239,703 $2,253,133

Budget Activities:

Pre-filing Taxpayer Assistance & Education $661,256 $701,035 $632,414 0 $632,414 $625,931

Filing & Account Services 1,622,922 1,662,127 1,607,289 0 1,607,289 1,627,202

Total Budget Authority $2,284,178 $2,363,162 $2,239,703 $0 $2,239,703 $2,253,133

1

Health Insurance Tax Credit Administration resources are included in the Taxpayer Services account.

2 Actuals represent obligations from FY 2011 budget authority. This excludes obligations from user fees ($128,966), 50% carryover ($5,900) 

 and multi-year/no year ($11,995) accounts.
IRS-67

2.3 – Appropriation Detail Table

Dollars in Thousands

3A – Pre-Filing Taxpayer Assistance and Education ($625,931,000 in direct 

appropriations and an estimated $1,151,000 from reimbursable programs): This budget 

activity funds services to assist with tax return preparation, including tax law interpretation, 

publication production, and advocate services. The program activities include the following:

• Pre-Filing Services Management supports headquarters management associated with 

Customer Assistance Relationship and Education (CARE). CARE provides pre-filing 

taxpayer assistance and education.

• Taxpayer Communication and Education researches customer needs; 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.

Taxpayer Services

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

New Appropriated Resources:

Pre-Filing Taxpayer Assistance and Education 6,404 $678,204 5,862 $632,414 5,716 $625,931 -2.49% -1.03%

Filing and Account Services 24,850 1,630,549 24,673 1,607,289 24,854 1,627,202 0.73% 1.24%

Subtotal New Appropriated Resources 31,254 $2,308,753 30,535 $2,239,703 30,570 $2,253,133 0.11% 0.60%

Other Resources:

Recoveries 125

Offsetting Collections - Reimbursable 515 28,992 476 24,050 476 24,050

Available multi-year/no-year funds 12,785 10,892 10,892

50% Carryover 5,900

Transfers In/Out

Mandatory Appropriations - User Fees 128,966 66 137,742 66 142,742 3.63%

Subtotal Other Resources 515 $176,768 542 $172,684 542 $177,684 2.90%

Total Resources Available for Obligation 31,769 $2,485,521 31,077 $2,412,387 31,112 $2,430,817 0.11% 0.76%

Enacted1 Resources Available for Obligation Enacted Request to FY 2013

1 FY 2011 Enacted represents the approved FY 2011 Operating Plan and interappropriation transfer.

% Change

FY 2011 FY 2012 FY 2013 FY 2012
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• W&I HQ Management and Administration provides staffing, training, and direct 

support for Wage and Investment management activities of strategic planning, 

communications and liaison, finance, human resources, equity, diversity and inclusion, 

business modernization, and embedded training.

• National Distribution Center processes orders for IRS forms and publications received 

from individual taxpayers, tax practitioners, and IRS tax return preparation partners.

FY 2013 Program Changes by Budget Activity

3.1.1 – Budget and Performance Report and Plan

Description of Performance

The IRS exceeded FY 2010 performance and the FY 2011 targets for the Timeliness of 

Critical Individual Filing Season Tax Products to the Public measure and the Taxpayer Self 

Assistance Rate measure. The IRS exceeded the FY 2011 target for the Timeliness of Critical 

Tax Exempt & Government Entities (TE/GE) & Business Tax Products to the Public measure. 

FTE Amount

Restoration of FY 2012 Reductions to Enforcement Programs 5 $452

Restore Audit Coverage to Address Individual Tax Compliance Issues 3 271

Restore Collection Coverage 2 181

Enforcement Initiatives 21 $3,255

Implement Tax Legislative Changes 16 1,445

Implement Revenue Protection Strategy 5 1,810

Total, FY 2013 Program Changes 26 $3,707

Dollars in Thousands

Taxpayer Services

Pre-filing Taxpayer Assistance and Education

Pre-Filing Taxpayer Assistance & Education Budget Activity

FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013

Resource Level 1 Enacted Enacted Enacted Enacted Enacted Enacted Enacted Request

Appropriated Resources $577,425 $576,537 $645,253 $661,000 $679,924 $678,204 $632,414 $625,931

Reimbursable Resources 1,573 843 774 796 862 1,135 1,151 1,151

Mandatory Appropriations - User Fees 1,201 12,827 18,700 5,514

Total Resources $578,998 $578,581 $658,854 $680,496 $686,300 $679,339 $633,565 $627,082

Budget Activity Total $578,998 $578,581 $658,854 $680,496 $686,300 $679,339 $633,565 $627,082

Pre-Filing Taxpayer Assistance & Education Budget Activity

FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2011 FY 2012 FY 2013

Measure Actual Actual Actual Actual Actual Target Actual Target Proposed

Target

Timeliness of Critical Filing Season Tax Products to the Public (Ot) 83.0% 83.5% 92.4% 96.8% 95.3% 94.0% 96.3% 95.0% 95.0%

Timeliness of Critical TE/GE & Business Tax Products to the Public (Ot) 61.2% 84.0% 89.5% 95.2% 97.7% 91.0% 96.4% 93.0% 95.0%

Taxpayer Self Assistance Rate (E) (L) 46.8% 49.5% 66.8% 69.3% 64.4% 68.7% 70.1% 72.2% 74.4%

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 - Long Term Goal

1

 The FY 2008 - FY 2011 Columns represent realized resources for reimbursable and user fees.
IRS-69

For FY 2011, the IRS timely delivered 96.3 percent of the Critical Individual Filing Season 

Tax Products to the public by the fifth workday of January. This was a significant 

achievement because of late tax law changes that extended expired common tax incentives for 

individuals such as the deduction for real property taxes for individuals who claim the 

standard deduction and deductions for state and local sales taxes. During FY 2011, the IRS 

released early products not affected by legislation to devote more time to analyze, develop, 

and post or print the tax products affected by legislation. The FY 2012 and FY 2013 goals 

were set based on a review of current year data. To achieve future targets the IRS will 

continue to release products not affected by legislation early to devote more time on tax 

products affected by legislation. In FY 2013, the IRS expects to continue to meet the target of 

95 percent for Critical Individual Filing Season Tax Products to the Public. 

The IRS Timeliness of Critical TE/GE and Business Filing Season Tax products to the Public 

reached 96.4 percent, exceeding the FY 2011 target of 91 percent. As a part of the annual 

workload and planning process, Media & Publications prepared a product development

timeline to ensure all products were released early enough for taxpayers to prepare and file 

their returns timely. To achieve future targets the IRS will continue to release products not 

affected by legislation early to have more time to analyze, develop, and post or print the tax 

products affected by legislation. In FY 2013, the IRS expects to continue to meet the target of 

95 percent for Critical TE/GE and Business Tax Products to the Public measure.

Taxpayer Self-Assistance Rate reached 70.1 percent in FY 2011, exceeding the target of 

68.7 percent. This increase is attributed to a 20 percent increase in the use of the Where’s My 

Refund? application. The IRS expects performance to increase as more taxpayers choose to 

use automated applications to resolve issues and questions instead of more traditional 

methods such as contact with the IRS by telephone and written correspondence. To achieve 

future targets, the IRS will continue to increase the self-service applications provided to 

taxpayers through IRS.gov and release new Smartphone applications such as IRS2Go; which 

lets taxpayers interact with the IRS where they want and when they want it. Through 

continued use of automation, the IRS expects to meet the FY 2013 target of 74.4 percent.

3B – Filing and Account Services ($1,627,202,000 in direct appropriations, an estimated

$22,899,000 from reimbursable programs, and an estimated $142,742,000 from user fees): 

This budget activity funds programs that provide filing and account services to taxpayers, 

process paper and electronically-submitted tax returns, issue refunds, and maintain taxpayer 

accounts. The IRS continues to make progress in decreasing paper returns and increasing the 

use of electronic filing and payment methods. This budget activity also provides operating 

resources to administer the advance payment feature of the Trade Act of 2002 (Public Law 

107-210) health insurance tax credit program, which assists dislocated workers with their 

health insurance premiums. 
IRS-70

The program activities include the following:

• Filing and Account Services Management administers filing and account services 

programs.

• Submission Processing processes paper and electronically-submitted tax returns and 

supplemental documents, accounts for tax revenue, processes information documents, 

and issues refunds and tax notices.

• Account Management and Assistance – Electronic/Correspondence Assistance

provides education and assistance to taxpayers and resolves accounts and notice 

inquiries through telephone, paper, and internet correspondence.

• Electronic Products and Services Support provides centralized operations and support 

capabilities for the IRS suite of electronic products, including e-help desk, technology 

support, and operations support.

• Electronic Tax Administration (ETA) markets and administers electronic tax 

administration products and services.

• Pre-Refund provides coordination support for the pre-refund activities to ensure timely 

issuance of refunds and credits that are legally due to taxpayers.

• Joint Operations Center (JOC) provides service, support, and technology for 

telephone, correspondence, and electronic media inquiries; real time monitoring 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.

• Health Insurance Tax Credit Administration (HITCA) provides funds to administer the 

health insurance tax credit portion of the Trade Adjustment Assistance Reform Act of 

2002. 

FY 2013 Program Changes by Budget Activity

FTE Amount

Restoration of FY 2012 Reductions to Enforcement Programs 196 $11,805

Restore Audit Coverage to Address Individual Tax Compliance Issues 3 117

Restore Collection Coverage 193 11,688

Enforcement Initiatives 208 $12,180

Implement Tax Legislative Changes 173 6,921

Implement Revenue Protection Strategy 35 5,259

Total, FY 2013 Program Changes 404 $23,985

Dollars in Thousands

Taxpayer Services

Filing and Account Services
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3.1.2 – Budget and Performance Report and Plan

Description of Performance

The IRS exceeded FY 2010 performance and met or exceeded the FY 2011 targets for 

Customer Contacts Resolved per Staff Year, Customer Accuracy - Tax Law Phones, Percent 

of Individual and Business Returns Processed Electronically, and Refund Timeliness. 

The IRS Customer Contacts Resolved Per Staff Year reached 12,419, exceeding the FY 2011 

target and FY 2010 performance. This measure includes activities such as automated and 

assistor calls answered and web services completed. For FY 2011, performance improved 

15.6 percent compared to FY 2010 because of a significant increase in web usage, up more 

than 21 percent compared to last year. The FY 2012 and FY 2013 targets are set at 

13,300 and 14,400, respectively, and are based on the most recent call and web usage data. 

To achieve these targets, the IRS will continue to provide efficient responses to customer 

contacts with the resources available and provided more self-service applications on IRS.gov.

While rising to challenges posed by tax legislation passed in December 2010, which required 

significant tax form changes, the IRS correctly answered 93.4 percent of tax law questions 

and 96.0 percent of account questions via the telephone, exceeding FY 2010 performance and 

meeting or exceeding the FY 2011 targets. The IRS expects to maintain high performance on 

Filing and Account Services

FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013

Resource Level 1, 2 Enacted Enacted Enacted Enacted Enacted Enacted Enacted Request

Appropriated Resources $1,584,625 $1,576,557 $1,561,067 $1,647,406 $1,614,418 $1,630,549 $1,607,289 $1,627,202

Reimbursable Resources 49,496 20,081 36,037 37,094 21,993 27,857 22,899 22,899

Mandatory Appropriations - User Fees 63,458 139,109 108,300 115,998 128,966 137,742 142,742

Total Resources $1,634,121 $1,660,096 $1,736,213 $1,792,800 $1,752,409 $1,787,372 $1,767,930 $1,792,843

Budget Activity Total $1,634,121 $1,660,096 $1,736,213 $1,792,800 $1,752,409 $1,787,372 $1,767,930 $1,792,843

Filing and Account Services

FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2011 FY 2012 FY 2013

Measures Actual Actual Actual Actual Actual Target Actual Target Proposed

Target

Percent Individual Returns Processed Electronically (Oe) (L) 54.1% 57.1% 57.6% 65.9% 69.3% 74.0% 76.9% 79.0% 80.0%

Percent of Business Returns Processed Electronically (Oe) (L) 16.6% 19.1% 19.4% 22.8% 25.5% 27.0% 31.8% 32.0% 34.0%

Customer Accuracy - Tax Law Phones (Ot) 90.9% 91.2% 91.2% 92.9% 92.7% 92.7% 93.4% 92.7% 92.7%

Customer Accuracy - Accounts (Phones) (Ot) 93.2% 93.4% 93.7% 94.9% 95.7% 95.0% 96.0% 95.0% 95.0%

Customer Contacts Resolved per Staff year (E) 7,414 7,648 12,634 12,918 10,744 12,074 12,419 13,300 14,400

Customer Service Representative Level of Service (Oe) (L) 82.0% 82.1% 52.8% 70.0% 74.0% 71.0% 70.1% 61.0% 63.0%

Refund Timeliness - Individual (paper) (Ot) 99.3% 98.9% 99.1% 99.2% 96.1% 97.0% 99.4% 98.0% 98.0%

Cost per Taxpayer Served ($) (HCTC) (E) (L) $13.71 $14.90 $16.94 $13.79 $9.52 $10.00 $12.36 $13.00 $13.00

Sign-up Time (days) - Customer Engagement (HCTC) (Ot) 98.7 93.3 94.0 91.3 124.0 124.0 117.0 125.0 125.0

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure, and L - Long Term Goal

Dollars in Thousands

1 The FY 2008 - FY 2011 Columns represent realized resources for reimbursable and user fees.

2

In FY 2012, the resources to administer the health insurance tax credit program were moved to the Taxpayer Services appropriation under the P.L. 112-74. For comparison purposes, FY 

2006 through FY 2011 include these resources.
IRS-72

the accuracy goals through several initiatives, including the development of new online tools 

for assistors to research taxpayer questions. For FY 2012 and FY 2013, the IRS will keep the 

tax law accuracy targets at 92.7 percent and the account accuracy targets at 95.0 percent, but 

responding to legislative changes in tax laws will continue to be a major challenge moving 

forward.

Millions of individual and business taxpayers file their returns electronically. The IRS 

achieved a 76.9 percent individual e-file rate and a 31.8 percent business e-file rate in

FY 2011, exceeding the targets for both measures. The increase in individual returns filed 

electronically for FY 2011 can be attributed to a new law requiring paid tax return preparers 

who anticipate filing one hundred or more returns for individuals to electronically file federal 

income tax returns. Continued business e-file growth is the result of states mandating e-filing 

of state submissions and the positive residual affect of the Return Preparer program. 

In addition, the overall benefits of e-file (i.e. faster refunds, greater accuracy, secure and 

confidential submission, quick confirmation, and the ability to file amended, superseded, and 

prior year returns) continue to drive performance. The IRS is promoting the benefits of 

e-filing via social media such as IRS2Go. In January 2011, the IRS unveiled IRS2Go, the 

first Smartphone application that lets taxpayers check on the status of their tax refund and 

obtain helpful tax information. The IRS will increase the individual e-filing target to 

79 percent for FY 2012 and 80 percent for FY 2013 and the business e-filing target to 

32 percent for FY 2012 and 34 percent for FY 2013 by continuing to promote the benefits of 

e-filing.

In FY 2011, Refund Timeliness reached 99.4 percent, exceeding the FY 2011 target of 

97 percent as the number of paper refunds declined. Fewer returns filed in FY 2011 included 

the Making Work Pay Credit (MWPC) or the First-Time Homebuyer Credit (FTHC), which

contributed to improved timeliness because the IRS, in some cases, had to accurately compute 

these credits for taxpayers, which delayed the refund. For FY 2012 and FY 2013, the IRS 

will increase the target to 98.0 percent. To achieve performance, the IRS will continue to 

monitor Individual Master File (IMF) return cycles and inventories through various reports 

and production meetings.

The Customer Service Representative Level of Service was 70.1 percent for FY 2011 falling 

short of the FY 2011 target of 71.0 percent. The shortfall is primarily attributed to higher 

demand as the IRS answered 2.5 million more calls than originally planned. Additional, new 

legislation required more training for telephone assistors. The FY 2012 target was lowered to 

61 percent based on a projected higher telephone demand. The FY 2013 target is 63 percent. 

Despite these challenges, the IRS will continue to properly staff toll-free sites to achieve 

future level of service targets.

In FY 2011, the Health Coverage Tax Credit (HCTC) program, enacted by the Trade 

Adjustment Assistance Reform Act of 2002 continued to extend health insurance to a larger 

population of HCTC candidates. The IRS exceeded the FY 2011 target for Sign-up Time, but 

fell short of FY 2011 target for Cost per Taxpayer Served (CPTS), Sign-up Time in FY 2011 

(which involved mailing delays) improved by seven days (117 vs. 124) compared to last year. 

In FY 2011 CPTS was $12.36 compared to $9.52 in FY 2010 largely because of the continued 

decrease in Monthly Taxpayers Served. In FY 2012 and FY 2013, fewer participants are 
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expected than originally anticipated and the FY 2012 and FY 2013 target for CPTS was raised 

to $13.00 and Sign-Up Time was raised to 125.
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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 President’s Budget request for FY 2013 is $5,701,670,000 in direct 

appropriations and 51,583 FTE. This is a $402,303,000, or 7.59 percent, and 3,997 FTE

increase from the FY 2012 enacted budget of $5,299,367,000 and 47,586 FTE. The total 

direct appropriations level includes an additional appropriation for tax enforcement and 

compliance activities funded through a program integrity cap adjustment totaling 

$691,028,000, of which $276,964,000 will be funded from the Enforcement appropriation.
IRS-75

2.1 – Budget Adjustments Table

Dollars in Thousands

FTE Amount

FY 2012 Enacted 47,586 $5,299,367

Changes to Base

Maintaining Current Levels (MCLs) $38,156

Efficiencies/Savings (219) ($31,489)

Targeted Program Reductions (219) (31,489)

Subtotal, FY 2013 Changes to Base (219) $6,667

FY 2013 Current Services (Base) 47,367 $5,306,034

Program Changes 

Restoration of FY 2012 Reductions to Enforcement Programs

Restore Audit Coverage to Address Individual Tax Compliance Issues 882 83,265

Restore Collection Coverage 573 35,407

Subtotal, Restoration of FY 2012 Reductions to Enforcement Programs 1,455 $118,672

Program Increases

Enforcement Initiatives

Promote Offshore Compliance 700 81,738

Improve International Compliance 223 33,033

Implement Tax Legislative Changes 619 51,694

Implement Revenue Protection Strategy 832 60,490

Build Out Tax Return Preparer Program 228 29,190

Address Appeals Workload 132 16,466

Implement Uncertain Tax Position Reporting Requirements 20 3,576

Leverage Digital Evidence for Criminal Investigation (CI) 7 777

Subtotal, Enforcement Initiatives 2,761 $276,964

Subtotal, FY 2013 Program Changes 4,216 $395,636

Total, FY 2013 Budget Request 51,583 $5,701,670

Enforcement
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2.2 – Operating Levels Table

Dollars in Thousands

Appropriation Title: Enforcement

FY 2011 

Actuals 1

FY 2012 

President's 

Budget

FY 2012 

Enacted

Proposed 

Reprogrammings

FY 2012 

Proposed 

Operating 

Level

FY 2013

Request

FTE 49,920 54,582 47,586 0 47,586 51,583

Object Classification:

11.1 Full-Time Permanent Positions $3,735,000 $4,084,707 $3,621,142 $0 $3,621,142 $3,860,487

11.3 Other than Full-Time Permanent Positions 45,140 57,151 49,786 0 49,786 49,979

11.5 Other Personnel Compensation 171,682 170,898 142,407 0 142,407 157,915

11.8 Special Personal Services Payments 19,857 18,264 18,386 0 18,386 18,458

11.9 Personnel Compensation (Total) $3,971,679 $4,331,020 $3,831,721 $0 $3,831,721 $4,086,839

12.0 Personnel Benefits 1,164,084 1,231,973 1,161,821 0 1,161,821 1,251,352

13.0 Benefits to Former Personnel 0 0 0 0 0 0

21.0 Travel 118,572 184,863 131,766 0 131,766 173,052

22.0 Transportation of Things 2,591 8,808 3,105 0 3,105 4,127

23.1 Rental Payments to GSA 23 0 30 0 30 30

23.2 Rent Payments to Others 479 496 358 0 358 375

23.3 Communications, Utilities, & Misc 4,625 4,402 6,154 0 6,154 6,472

24.0 Printing & Reproduction 5,515 6,848 3,664 0 3,664 4,043

25.1 Advisory & Assistance Services 56,992 21,238 15,463 0 15,463 16,612

25.2 Other Services 54,224 72,197 58,337 0 58,337 63,220

25.3 Purchase of Goods & Services from Govt. Accounts 46,653 42,792 48,513 0 48,513 49,691

25.4 Operation & Maintenance of Facilities 155 195 154 0 154 157

25.5 Research & Development Contracts 3,009 3,049 3,007 0 3,007 3,072

25.6 Medical Care 89 79 89 0 89 90

25.7 Operation & Maintenance of Equipment 1,907 2,185 180 0 180 226

25.8 Subsistence & Support of Persons 2,299 4,966 2,008 0 2,008 2,800

26.0 Supplies and Materials 28,424 34,963 22,983 0 22,983 25,945

31.0 Equipment 15,074 8,134 2,582 0 2,582 5,908

32.0 Lands and Structures 127 934 629 0 629 643

33.0 Investments & Loans 0 0 0 0 0 0

41.0 Grants, Subsidies 0 5 0 0 0 0

42.0 Insurance Claims & Indemn 801 2,123 1,860 0 1,860 1,900

43.0 Interest and Dividends 0 0 0 0 0 0

44.0 Refunds 0 0 0 0 0 0

91.0 Unvouchered 7,109 5,349 4,943 0 4,943 5,116

Total Budget Authority $5,484,431 $5,966,619 $5,299,367 $0 $5,299,367 $5,701,670

Budget Activities:

Investigations $652,623 $678,849 $636,067 0 $636,067 $688,296

Exam & Collections 4,672,757 5,103,420 4,510,245 0 4,510,245 4,846,749

Regulatory 159,051 184,350 153,055 0 153,055 166,625

Total Budget Authority $5,484,431 $5,966,619 $5,299,367 $0 $5,299,367 $5,701,670

1 Actuals represent obligations from FY 2011 budget authority. This excludes obligations from user fees ($13,249), 50% carryover ($12,522) 

 and multi-year/no year ($530) accounts.
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2.3 – Appropriation Detail Table

Dollars in Thousands

3C – Investigations ($688,296,000 in direct appropriations and an estimated

$61,633,000 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. The program activities include the following:

• General Management and Administration supports the headquarters management 

activities of strategic planning, communications, finance, and human resources for 

CI activities.

• Criminal Investigations supports the enforcement of criminal statutes relating to 

violations of internal revenue laws and other financial crimes. CI investigates cases of 

suspected intent to defraud that involve both legal and illegal sources of income and 

recommends prosecution as warranted. This activity includes the investigation and 

prosecution of tax and money-laundering violations associated with narcotics 

organizations.

• Criminal Tax Legal Support provides legal advice and support from IRS Counsel to 

CI.

• International Investigations supports international investigations involving U.S. 

citizens residing abroad, non-resident aliens, expatriates, and investigations involving 

other international issues, including legal support (e.g., Foreign Tax Credit and 

Foreign Earned Income Exclusion, Corporations, Non-Profits, Pension Plans, etc.).

• Accounts Management Taxpayer Assurance Program provides support to Accounts 

Management for the review of questionable refunds.

Enforcement

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

New Appropriated Resources:

Investigations 4,284 $644,479 4,254 $636,067 4,725 $688,296 11.07% 8.21%

Exam and Collections 44,911 4,689,220 42,133 4,510,245 45,556 4,846,749 8.12% 7.46%

Regulatory 1,254 159,293 1,199 153,055 1,302 166,625 8.59% 8.87%

Subtotal New Appropriated Resources 50,449 $5,492,992 47,586 $5,299,367 51,583 $5,701,670 8.40% 7.59%

Other Resources:

Recoveries 19

Offsetting Collections - Reimbursable 161 74,963 161 73,604 161 73,604

Available multi-year/no-year funds 3,196 2,538 2,538

50% Carryover 12,597

Transfers In/Out 12

Mandatory Appropriations - User Fees 2 18 13,249 130 17,750 130 17,750

Subtotal Other Resources 179 $104,036 291 $93,892 291 $93,892

Total Resources Available for Obligation 50,628 $5,597,028 47,877 $5,393,259 51,874 $5,795,562 8.35% 7.46%

% Change

FY 2011 FY 2012 FY 2013 FY 2012

Enacted Enacted 1 Resources Available for Obligation Request to FY 2013

1 FY 2011 Enacted represents the approved FY 2011 Operating Plan.

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

reimbursable spend plans.
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FY 2013 Program Changes by Budget Activity

3.1.3 – Budget and Performance Report and Plan

Description of Performance

Criminal investigations (CI) serves the American public by investigating potential criminal 

violations of the Internal Revenue Code and related financial crimes in a manner that foster 

confidence in the tax system and compliance with the law. The following measures are used 

to evaluate the success of achieving its mission. 

In FY 2011, the IRS exceeded its FY 2010 performance and FY 2011 targets for Criminal 

Investigations Completed, Number of Convictions, and Conviction Rate. The IRS also met 

the FY 2011 target for Conviction Efficiency Rate.

The Number of Criminal Investigations Completed in FY 2011 (4,697) increased 9 percent 

compared to FY 2010 and exceeded the FY 2011 target by 20 percent. Approximately 

73 percent of the investigations completed consisted of prosecutions that were recommended 

to the Department of Justice (DOJ). The increase was attributed to a larger number of 

FTE Amount

Enforcement Initiatives 471 $47,129

Promote Offshore Compliance 64 12,144

Implement Revenue Protection Strategy 350 25,090

Build Out Tax Return Preparer Program 50 9,118

Leverage Digital Evidence for Criminal Investigation (CI) 7 777

Total, FY 2013 Program Changes 471 $47,129

Dollars in Thousands

Internal Revenue Service

Investigations

Investigations Budget Activity

FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013

Resource Level 1 Enacted Enacted Enacted Enacted Enacted Enacted Enacted Request

Appropriated Resources $579,555 $576,785 $592,906 $611,601 $639,363 $644,479 $636,067 $688,296

Reimbursable Resources 74,842 32,441 49,404 39,639 67,549 63,146 61,633 61,633

Mandatory Appropriations - User Fees

Total Resources $654,397 $609,226 $642,310 $651,240 $706,912 $707,625 $697,700 $749,929

Budget Activity Total $654,397 $609,226 $642,310 $651,240 $706,912 $707,625 $697,700 $749,929

FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2011 FY 2012 FY 2013

Measure Actual Actual Actual Actual Actual Target Actual Target Proposed

Target

Criminal Investigations Completed (Ot) (L) 4,157 4,269 4,044 3,848 4,325 3,900 4,697 4,000 4,000

Number of Convictions (Ot) (L) 2,019 2,155 2,144 2,105 2,184 2,135 2,350 2,175 2,175

Conviction Rate (Oe) (L) 91.5% 90.2% 92.3% 87.2% 90.2% 92.0% 92.7% 92.0% 92.0%

Conviction Efficiency Rate ($) (E) (L) $328,750 $301,788 $315,751 $327,328 $324,776 $350,000 $310,029 $325,000 $325,000

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure, L - Long Term Goal

Dollars in Thousands

1 The FY 2008 - FY 2011 Columns represent realized resources for reimbursable and user fees.
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investigations initiated in FY 2010 and FY 2011. To achieve future targets, CI will continue 

to leverage interagency partnerships and develop case selection methods using advanced 

technologies. In FY 2013, the IRS expects to meet its target of 4,000 investigations 

completed. 

The Number of Convictions in FY 2011 (2,350) was 8 percent higher compared to FY 2010 

while 10 percent above the FY 2011 target. A higher number of short-term cases, which 

include money laundering and narcotics conviction, caused this measure to exceed the 

year-end target. To achieve future targets, managers will review and monitor performance on 

a monthly basis and make adjustments, as necessary, to keep on plan. In FY 2013, the IRS 

expects to meet its target of 2,175 convictions. The FY 2013 target was set based on the 

quality of the cases and the length of time before prosecution.

The Conviction Rate in FY 2011 was 92.7 percent, an increase up 2.5 percentage points over

FY 2010 performance. During this period, convictions increased 8 percent, acquittals 

increased 38 percent, and dismissals decreased 26 percent when compared to FY 2010. The 

IRS exceeded the FY 2011 target by almost 1 percent. To achieve future targets, CI will 

continue to pursue our core mission of tax enforcement, as well as participate in multi-agency 

investigations of national and international importance. In FY 2013, the IRS expects to meet 

its target of 92 percent using this strategy.

The Conviction Efficiency Rate is the cost of the criminal investigation program divided by 

the Number of Convictions. The FY 2011 target for the Conviction Efficiency Rate was set 

higher than previous years, at $350,000, because of increases in the overall CI financial plan

and reimbursable monies over the prior year. With the additional funding, CI was able to 

complete 4,697 convictions in FY 2011, 166 more compared to last year and decrease the 

Conviction Efficiency Rate by 13 percent to $310,029. To achieve the FY 2012 and FY 2013 

goal of $325,000, CI will continue to monitor its performance and adjust program focus and 

resources as necessary to ensure efforts garner the greatest deterrent effect possible.

3D – Exam and Collections ($4,846,749,000 in direct appropriations and an estimated 

$11,307,000 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. The program activities include the following:

• 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 initiates contact and collects delinquent taxpayer 

liabilities through the centralized Automated Collection System (ACS). 

• Payment Compliance – Field Collection conducts field investigations and collection 

efforts associated with delinquent taxpayer and business entity liabilities, including 
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direct taxpayer contact and outreach programs to protect the interest of the federal 

government in delinquent tax liability situations.

• Tax Reporting Compliance – Document Matching supports the Automated 

Underreporter (AUR), Combined Annual Wage Reporting (CAWR), Federal 

Unemployment Tax Act (FUTA), and other Document Matching Programs.

• Tax Reporting Compliance – Electronic/Correspondence Exam initiates written 

correspondence with taxpayers related to tax issues arising from claims on their tax 

returns.

• Tax Reporting Compliance – Field Exam compares taxpayer income levels and 

corresponding tax liabilities to ensure the accuracy of taxpayer returns.

• Fraud/Bank Secrecy Act 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. 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, Corporations, Non-Profits, Pension Plans, etc).

• Unit General Management and Administration provides staffing, training, and direct 

support for headquarters management activities of strategic planning, communication 

and liaison, finance, human resources, EEO and diversity, business system planning, 

and embedded training.

• EITC Management and Administration supports headquarters management associated 

with administering the EITC program service-wide.
IRS-81

• Whistleblower provides staffing, training, and direct support to process, assess, and 

analyze tips from individuals who identify tax problems in the course of their daily 

personal business, regardless of where encountered (including the workplace).

• Communications and Liaison coordinates local government and liaison relationships; 

manages congressional, state, and national stakeholder relationships and issues; 

coordinates crosscutting issues, including audit management and legislative 

implementation; manages national media contacts and local media relationships; and 

ensures IRS compliance with disclosure and privacy laws.

FY 2013 Program Changes by Budget Activity

FTE Amount

Restoration of FY 2012 Reductions to Enforcement Programs 1,455 $118,672

Restore Audit Coverage to Address Individual Tax Compliance Issues 882 83,265

Restore Collection Coverage 573 35,407

Enforcement Initiatives 2,187 $217,263

Promote Offshore Compliance 636 69,594

Improve International Compliance 223 33,033

Implement Tax Legislative Changes 556 44,326

Implement Revenue Protection Strategy 482 35,400

Build Out Tax Return Preparer Program 158 18,444

Address Appeals Workload 132 16,466

Total, FY 2013 Program Changes 3,642 $335,935

Dollars in Thousands

Internal Revenue Service

Exam and Collections
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3.1.4 – Budget and Performance Report and Plan

Description of Performance

The IRS Strategic goal, Enforce the Law to Ensure Everyone Meets Their Obligation to Pay 

Taxes, drives the IRS effort to enhance voluntary compliance. The IRS enforcement 

activities, such as examination and collection, target elements of the tax gap and remain a 

high priority. These programs make sure taxpayers pay what they owe and assist individuals 

who may have trouble meeting their tax liabilities because of hardship situations.

Exam

The Examination program provides taxpayers top quality service by helping them understand 

and meet their tax responsibilities and by applying the tax law with integrity and fairness. 

The performance goals that the IRS uses to gauge the Examination program performance are 

discussed below.

Exam and Collections

FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013

Resource Level 1 Enacted Enacted Enacted Enacted Enacted Enacted Enacted Request

Appropriated Resources $3,919,275 $3,959,741 $4,037,812 $4,355,186 $4,700,345 $4,689,220 $4,510,245 $4,846,749

Reimbursable Resources 10,948 8,764 8,302 8,970 8,729 11,163 11,307 11,307

Mandatory Appropriations - User Fees 5,452 12,679 3,103 49

Total Resources $3,930,223 $3,973,957 $4,058,793 $4,367,259 $4,709,123 $4,700,383 $4,521,552 $4,858,056

Budget Activity Total $3,930,223 $3,973,957 $4,058,793 $4,367,259 $4,709,123 $4,700,383 $4,521,552 $4,858,056

FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2011 FY 2012 FY 2013

Measure Actual Actual Actual Actual Actual Target Actual Target Proposed

Target

Examination Coverage - Individual (Oe) (L) 1.0% 1.0% 1.0% 1.0% 1.1% 1.1% 1.1% 1.0% 1.0%

Field Exam National Quality Review Score (Oe) (L) 85.9% 85.9% 86.0% 85.1% 84.9% 83.7% 85.8% 85.8% 86.4%

Office Exam National Quality Review Score (Oe) (L) 88.2% 89.4% 90.0% 92.1% 91.6% 90.4% 90.4% 90.4% 90.4%

Examination Quality - Industry (Oe) (L) 85.0% 87.0% 88.0% 88.0% 87.0% 89.0% 90.0% 90.0% 90.0%

Examination Quality - Coordinated Industry (Oe) (L) 96.0% 96.0% 97.0% 95.0% 95.0% 96.0% 96.0% 97.0% 97.0%

Examination Coverage - Business (Assets > $10 million) (Oe) (L) 7.3% 6.8% 6.1% 5.6% 5.7% 5.3% 6.2% 5.6% 5.4%

AUR Efficiency (E) (L) 1,832 1,956 1,982 1,905 1,924 1,980 2,007 2,067 2,067

AUR Coverage (E) (L) 2.4% 2.5% 2.6% 2.6% 3.0% 3.3% 3.3% 3.2% 3.2%

Examination Efficiency - Individual (E) (L) 128 137 138 138 140 134 139 134 134

Collection Coverage - Units (Ot) (L) 54.0% 54.0% 55.2% 54.2% 50.1% 49.1% 50.0% 47.8% 46.8%

Collection Efficiency - Units (E) (L) 1,677 1,828 1,926 1,845 1,822 1,824 1,952 2,073 2,028

Field Collection National Quality Review Score (Ot) (L) 84.2% 84.0% 79.0% 80.5% 80.6% 81.0% 80.3% 78.0% 79.0%

Automated Collection System (ACS) Accuracy (Oe) 91.0% 92.9% 95.3% 94.3% 95.9% 94.0% 94.9% 94.5% 95.0%

Key: Oe - Outcome Measure, E - Efficiency Measure, L - Long Term Goal, Ot - Output/Workload Measure

Dollars in Thousands

1 The FY 2008 - FY 2011 Columns represent realized resources for reimbursable and user fees.
IRS-83

The IRS met the FY 2011 Individual Exam Coverage target of 1.1 percent. Though

individual coverage has been fairly stable from FY 2007 through FY 2011, the IRS audited 

more than 13 percent more individual taxpayers while the calendar year filings decreased by 

1 percent during the same period. Future plans include leveraging National Research 

Program (NRP) data to improve return selection criteria, streamlining automation, an 

emphasizing multi-year non-compliance, and using risk analysis/assessment in all business

processes. New initiatives are included in the FY 2013 budget request to ensure Individual 

Exam Coverage does not drop below 1 percent.

In FY 2011, the Field Exam National Quality Review Score reached 85.8 percent, exceeding 

the 83.7 percent target. The IRS focused on improving the lowest scoring quality attributes, 

including income probes and efficient resolution/time frames met. Actions undertaken to 

improve quality include: 

• Ongoing delivery of Income Toolkit training;

• Establishing a Process Improvement Challenge team to focus on the quality of income 

determinations; and 

• Emphasizing quality casework by area directors (especially income determinations, 

and timeframes) during their operational reviews and staff meetings. 

As a result, there was a 1 percent improvement from FY 2010. In addition, because of the 

new scoring methodology, the number of attributes reviewed decreased from 22 to 18 in 

FY 2011 contributing to the 16 percent decrease in the total number of case reviews. 

(Attributes are concise statements of expectations for quality examinations and are guidelines 

to assist examiners in fulfilling their professional responsibilities. These attributes are utilized 

by the Examination Quality Measurement Staff (EQMS) in determining the quality score.) 

Based on these improvements, the IRS will increase its FY 2012 and FY 2013 targets to 

85.8 percent and 86.4 percent, respectively, and continue its focus on improving quality by 

developing tools and communications to assist examiners with approving the lowest scoring 

attributes. 

The IRS met the FY 2011 Office Exam National Quality Review Score target of 90.4 percent. 

In FY 2011, the quality score was 1 percent lower than the FY 2010 score but still at or above 

90 percent for most industries. The number of attributes reviewed decreased from 22 to 18 in 

FY 2011 contributing to a 17 percent decrease in the total number of cases reviewed. 

Anticipated improvements within the weakest performing quality attributes (i.e. Exam Income 

Determination and Time Span) are currently being implemented. Exam continues efforts to 

improve the weakest performing quality attributes with initiatives including: 

• Establishment of an Exam General Processes Quality Improvement Team to develop 

actions to address weaknesses found within Attribute 510 (Time Span);

• Development of an income website to provide examiners with income probe resources 

compiled in a centralized location; and

• Delivery of Income Toolkit Training for Income Examinations. 
IRS-84

In FY 2013, through these quality improvement efforts, the IRS expects to meet the target of

90.4 percent by continuing to identify and resolve quality weaknesses.

In FY 2011, the Exam Quality Industry Score met the year-end target of 89.0 percent and 

increased by 3 percentage points compared to FY 2010. The biggest increase was in the 

overall quality score for Financial Services which improved 7 percentage points over the 

previous year. This improvement was because of significant increases to three of the five 

Auditing Standards that comprise the Quality Measurement scoring process. Elements within 

each standard showed improvement. In particular, there was improvement in conducting 

taxpayer interviews and in report writing procedures. Feedback is provided to field teams 

through the development and circulation of quality articles, reports, memos, and partnering 

with the industries in quality improvement efforts. Based on FY 2011 quality improvements, 

in FY 2013, the IRS expects to meet the target of 90 percent. 

The IRS met the FY 2011 Exam Quality Coordinated Industry Target of 96 percent. For 

FY 2011, improvement actions implemented in FY 2010, such as ensuring that work papers 

fully documented the audit trail, improving how conclusions were reached, and ensuring that 

Administrative Procedures documents were signed, appear to have been successful, as 

Coordinated Industry Quality increased 1 percentage point compared to FY 2010 (96 percent 

vs. 95 percent). For FY 2012 and FY 2013, the IRS will increase the target to 97 percent by 

focusing on the importance of meeting the quality measures through direct feedback to field 

teams, partnering with the industries in quality improvement efforts, quality articles, quarterly 

reports/memos, and outreach to field teams. The IRS expects to meet its FY 2013 target of 

97 percent using this strategy.

In FY 2011, the IRS achieved a 6.2 percent score for Business Exam Coverage (assets greater 

than $10 million), exceeding FY 2010 performance by 9 percent and the FY 2011 target by 

17 percent. The year-end coverage rate is the result of an increase in the number of closures 

for Corporations (3.5 percent) and Flow-Throughs (5.3 percent). Coverage for FY 2013 is 

projected to be slightly lower than FY 2011 because of an anticipated increase in return filings 

coupled with a decrease in FTE. As coverage is based on closures compared to filings, the 

IRS will continue to monitor its plan in FY 2013 to assure that closures are achieved as 

projected and that plans reflect the large business and international population. New audit 

tools will be used to enhance audit selection so that the plan is achieved and coverage is

maintained. In FY 2013, the IRS expects to meet its target of 5.4 percent using this strategy.

The IRS exceeded the FY 2010 performance and the FY 2011 target for Automated 

Underreporter (AUR) Efficiency. In FY 2011, AUR Efficiency reached 2,007 closures per 

FTE, while exceeding FY 2010 performance (1,924) and the FY 2011 target of 1,980 closures 

per FTE. The high results were primarily because of an 8.5 percent increase in AUR contact 

closures over FY 2010. The increase in total contact closures in FY 2010 and FY 2011 is 

attributed to the new employees hired in late FY 2009 through early 2010 as part of the 

Enforcement initiative. Although FTEs are declined because of funding, AUR efficiency is 

planned to increase to 2,067. To achieve future targets, the IRS plans improve case selection 

and enhance systems to allow for the closures of more cases per FTE. By meeting the AUR 

Efficiency target, the IRS supports the achievement of Treasury’s goal to Pursue 
IRS-85

Comprehensive Tax and Fiscal Reform. In FY 2013, the IRS expects to meet its target of 

2,067 closures per FTE using this strategy.

The IRS exceeded FY 2010 performance and met the FY 2011 AUR Coverage target of 

3.3 percent. As mentioned for AUR Efficiency, the primary reason for the increase is that 

contact closures were up 8.5 percent, which was attributed to the new employees hired in late 

FY 2009 through early 2010 as part of the enforcement initiative. To achieve future targets, 

the IRS plans improve case selection and continued enhance systems to allow the closure of 

more cases per FTE. By meeting the AUR Coverage target, the IRS supports the achievement 

of Treasury’s goal to Pursue Comprehensive Tax and Fiscal Reform. In FY 2013, the IRS 

expects to meet its target of 3.2 percent using this strategy.

The IRS exceeded its FY 2011 target for Individual Exam Efficiency. Individual Exam 

Efficiency reached 139 in FY 2011, exceeding the FY 2011 target of 134 by 4 percent. While 

FY 2011 total closures decreased 1 percent compared to FY 2010, small business closures 

increased 2.3 percent and large business and international individual closures increased more 

than 121 percent. Individual Exam Efficiency is planned to decline in FY 2013 because FTEs 

are anticipated to decline. To meet future targets, the IRS plans to improve the work stream 

through better case identification and classification and by leveraging NRP data to improve 

Exam's ability to select the best workload for examination. The IRS expects to meet the 

FY 2013 target of 134 closures using these strategies as well as through monitoring of cycle 

times, related pickups, and multi-year examinations.

Collection

The Collection program collects delinquent taxes and secures delinquent tax returns through 

the fair and equitable application of the tax laws and provides education to customers to allow

future compliance; thereby protecting and promoting public confidence in the American tax 

system. The performance goals that the IRS uses to gauge collection program performance 

are discussed below.

In FY 2011, Collection Coverage was 50 percent, exceeding the target by almost 1 percent. 

Compared to FY 2010, there was a 3.5 percent decrease in net dispositions and 30 percent 

more collection work was returned to inventory. The notice decrease will negatively affect

Collection Coverage and Efficiency even though the reduction in dispositions has a positive 

affect on potentially collectible inventory. To meet future plans, the IRS will work with the 

campuses throughout the year to identify and assign inventory to mitigate the notice 

deposition shortfall. In FY 2013, the IRS expects to meet its target of 46.8 percent using this 

strategy.

The IRS exceeded FY 2010 performance and FY 2011 Collection Efficiency target (1,854) by 

7 percent. FY 2011 year-end results (1,952) were driven by the over-delivery of 

966,000 module closures coupled with a 3 percent under-delivery in FTE. To meet future 

targets, the IRS plans to gain efficiencies by improving case selection and systemic 

processing. In FY 2013, the IRS expects to meet its target of 2,028 collection closures per 

FTE.
IRS-86

At 80.3 percent, the IRS was within 1 percent of the FY 2011 target of 81 percent for Field 

Collection Quality. One of the major factors that contributed to the shortfall was that in 

previous years, the Case File Folder attribute, which is used to determine the documentation 

necessary to support the method of disposition included with the closed case file, was 

reviewed in roughly 80 percent of cases and scored consistently at 90 percent accuracy. 

In mid-FY 2010, Collection Field function began conducting History Only reviews, which 

resulted in a rating of "N/A" for this attribute. Through the end of FY 2011, the Case File 

Folder attribute was rated in only 23 percent of cases reviewed. Additionally, 13.8 percent of 

the cases reviewed in FY 2011 have been older than the normal Collection Field function case 

closure time of six to eight months. In FY 2013, the target was lowered slightly because of 

the reliance on History Only reviews. By improving sampling and reducing the reliance on 

History Only reviews, the result will be a more complete review process coupled with further 

revisions to the attributes. In FY 2013, the IRS expects to meet its target of 79 percent using 

these strategies.

The IRS met the FY 2011 Automated Collection System Accuracy (ACS) target of 

94 percent. Results for this measure have been consistently above 94 percent for the past four

years and remained above the year-end target for FY 2011 at 94.9 percent. This high rate is 

attributed to an experienced staff who have a smaller margin of error and receives higher 

quality scores. To achieve future targets, the IRS will continue to focus on process and 

performance reviews to maintain the highest accuracy rate possible. Enhanced collaboration 

and information sharing between ACS sites will be key to meeting the FY 2013 target of 

95 percent.

3E – Regulatory ($166,625,000 in direct appropriations, an estimated $664,000 from 

reimbursable programs, and an estimated $17,750,000 from user fees): This budget activity 

funds the development and printing of published IRS guidance materials; interpretation of tax 

laws; internal advice to IRS on general non-tax legal issues; enforcement of regulatory rules, 

laws, and approved business practices; and support for taxpayers in the areas of pre-filing 

agreements, determination letters, and advance pricing agreements. The program activities

include the following:

• Tax Law Interpretation and Published Guidance interprets the tax law through 

published guidance, technical advice, and other technical legal services.

• General Legal Services provides advice to the IRS on non-tax legal issues, including 

procurement, personnel, labor relations, equal employment opportunity, fiscal law, tort 

claims and damages, ethics, and conflict of interest.

• Rulings and Agreements applies the tax law to specific taxpayers in the form of

pre-filing agreements, determination letters, advance pricing agreements, and other 

pre-filing determinations and advice.

• International Regulatory Legal Support supports Counsel’s work in tax law 

interpretation and rulings and agreements related to international issues.

• Return Preparer Strategy provides staffing, training, and direct support associated 

with the Return Preparer Strategy initiative.
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• 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 2013 Program Changes by Budget Activity

3.1.5 – Budget and Performance Report and Plan

Description of Performance

Tax Exempt and Government Entities (TEGE) Determination Closures include both 

applications for tax-exempt status for employee retirement plans and applications from 

various charitable entities seeking tax-exempt status. Applications are reviewed to determine 

their eligibility and closed upon approval or disapproval. The IRS fell short of the FY 2011 

target of 97,151 for determination case closures by 6 percent. Factors contributing to the 

shortfall include: 

• Exempt Organizations (EO) - A shift in processing methods resulted in more time 

applied than anticipated to cases requiring more extensive reviews. EO also shifted 

resources to cases that take longer to process to reduce aging inventory; and 

• Employee Plans (EP) - Agents were shifted to work more complex 

individually-designed plans and pre-approved plan receipts. To address these issues 

and achieve future targets, Tax Exempt & Government Entities (TEGE) plans to shift 

more complex cases from EO to technical groups with the knowledge to dispose of 

these cases much quicker. In EP, TEGE will implement improvements, such as 

FTE Amount

Enforcement Initiatives 103 $12,572

Implement Tax Legislative Changes 63 7,368

Build Out Tax Return Preparer Program 20 1,628

Implement Uncertain Tax Position Reporting Requirements 20 3,576

Total, FY 2013 Program Changes 103 $12,572

Dollars in Thousands

Internal Revenue Service

Regulatory

Regulatory

FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013

Resource Level 1 Enacted Enacted Enacted Enacted Enacted Enacted Enacted Request

Appropriated Resources $209,611 $149,951 $149,282 $150,480 $164,292 $159,293 $153,055 $166,625

Reimbursable Resources 251 255 435 469 574 654 664 664

Mandatory Appropriations - User Fees 168 13,249 17,750 17,750

Total Resources $209,862 $150,206 $149,885 $150,949 $164,866 $173,196 $171,469 $185,039

Budget Activity Total $209,862 $150,206 $149,885 $150,949 $164,866 $173,196 $171,469 $185,039

FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2011 FY 2012 FY 2013

Measure Actual Actual Actual Actual Actual Target Actual Target Proposed

Target

TE/GE Determination Case Closures (Ot) 108,462 109,408 100,050 96,246 105,247 97,151 91,205 65,794 62,600

Dollars in Thousands

Key: Ot - Output/Workload Measure

1 The FY 2008 - FY 2011 Columns represent realized resources for reimbursable and user fees.
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changing submission procedures to better control receipts and inventory levels while 

enhancing business rules to close cases faster.

The FY 2012 and FY 2013 targets were lowered because of the anticipated complexity of the 

work and reduced staffing. In FY 2013, the IRS expects to close 62,600 determination cases. 

To address these issues and achieve future targets, TEGE plans to shift more complex cases 

from EO to technical groups with the knowledge to dispose of these cases more quickly. 

EP will implement improvements, such as changing submission procedures to better control 

receipts and inventory levels while enhancing business rules to close case faster. 
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Operations Support 

Appropriation Description

The Operations Support appropriation provides funding for overall planning, direction, and 

support for the IRS, including shared service support related to facilities services, rent 

payments, printing, postage, and security. This appropriation funds headquarters policy and 

management activities such as corporate support for strategic planning; communications and 

liaison; finance; human resources; equity, diversity and inclusion; research and statistics of 

income; and necessary expenses for information systems and telecommunication support, 

including development, security, and maintenance of IRS’s information systems.

The Operations Support President’s Budget request for FY 2013 is $4,476,200,000 in direct 

appropriations and 12,609 FTE. This is an increase of $528,784,000, or 13.40 percent, and 

624 FTE more than the FY 2012 enacted budget of $3,947,416,000 and 11,985 FTE. The 

direct appropriations level includes an additional appropriation for tax enforcement and 

compliance activities funded through a program integrity cap adjustment totaling 

$691,028,000, of which $414,064,000 will be funded from the Operations Support 

appropriation. 
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2.1 – Budget Adjustments Table

Dollars in Thousands

FTE Amount

FY 2012 Enacted 11,985 $3,947,416

Changes to Base

Maintaining Current Levels (MCLs) $52,698

Efficiencies/Savings ($7,530)

Increase e-File Savings (442)

Reduce Travel (1,708)

Targeted Program Reductions (5,380)

Subtotal, FY 2013 Changes to Base $45,168

FY 2013 Current Services (Base) 11,985 $3,992,584

Program Changes 

Restoration of FY 2012 Reductions to Enforcement Programs

Restore Audit Coverage to Address Individual Tax Compliance Issues 24 43,519

Restore Collection Coverage 26,033

Subtotal, Restoration of FY 2012 Reductions to Enforcement Programs 24 $69,552

Program Increases

Enforcement Initiatives

Promote Offshore Compliance 29,001

Improve International Compliance 5,851

Implement Tax Legislative Changes 49 68,806

Implement Revenue Protection Strategy 13 21,297

Build Out Tax Return Preparer Program 5,976

Address Appeals Workload 3,858

Implement Uncertain Tax Position Reporting Requirements 454

Leverage Digital Evidence for Criminal Investigation (CI) 1 3,727

Subtotal, Enforcement Initiatives 63 $138,970

Infrastructure Initiative

537 266,894

8,200

Subtotal, Infrastructure Initiative 537 $275,094

Subtotal, FY 2013 Program Changes 624 $483,616

Total, FY 2013 Budget Request 12,609 $4,476,200

Implement Information Technology Changes Needed for Individual Coverage Requiremen

Operations Support

Implement Information Technology and Operational Infrastructure to Deliver New Tax Cred
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2.2 – Operating Levels Table

Dollars in Thousands

Appropriation Title: Operations Support

FY 2011 

Actuals 1

FY 2012 

President's 

Budget

FY 2012 

Enacted

Proposed 

Reprogrammings

FY 2012 

Proposed 

Operating 

Level

FY 2013

Request

FTE 12,103 13,142 11,985 0 11,985 12,609

Object Classification:

11.1 Full-Time Permanent Positions $1,098,904 $1,182,167 $1,122,032 $0 $1,122,032 $1,198,751

11.3 Other than Full-Time Permanent Positions 9,653 11,693 11,612 0 11,612 11,654

11.5 Other Personnel Compensation 32,456 33,586 30,110 0 30,110 32,795

11.8 Special Personal Services Payments 0 0 0 0 0 0

11.9 Personnel Compensation (Total) $1,141,013 $1,227,446 $1,163,754 $0 $1,163,754 $1,243,200

12.0 Personnel Benefits 370,043 387,046 366,121 0 366,121 407,452

13.0 Benefits to Former Personnel 49,434 49,789 48,898 0 48,898 49,797

21.0 Travel 31,600 46,282 36,679 0 36,679 42,717

22.0 Transportation of Things 20,145 22,348 21,585 0 21,585 22,479

23.1 Rental Payments to GSA 645,160 685,010 674,870 0 674,870 691,629

23.2 Rent Payments to Others 12,673 14,901 13,103 0 13,103 13,344

23.3 Communications, Utilities, & Misc 389,806 449,668 395,835 0 395,835 428,892

24.0 Printing & Reproduction 26,313 44,544 23,677 0 23,677 26,975

25.1 Advisory & Assistance Services 460,649 79,041 312,980 0 312,980 534,320

25.2 Other Services 93,718 740,967 141,864 0 141,864 190,239

25.3 Purchase of Goods & Services from Govt. Accounts 79,898 64,348 63,822 0 63,822 72,081

25.4 Operation & Maintenance of Facilities 144,412 168,283 174,398 0 174,398 183,175

25.5 Research & Development Contracts 0 5,433 34 0 34 35

25.6 Medical Care 14,186 13,419 14,326 0 14,326 15,612

25.7 Operation & Maintenance of Equipment 82,728 94,389 159,581 0 159,581 168,678

25.8 Subsistence & Support of Persons 21 313 223 0 223 227

26.0 Supplies and Materials 35,716 32,453 44,610 0 44,610 48,652

31.0 Equipment 311,449 408,472 272,120 0 272,120 312,413

32.0 Lands and Structures 33,244 85,836 17,186 0 17,186 22,501

33.0 Investments & Loans 0 0 0 0 0 0

41.0 Grants, Subsidies 0 0 0 0 0 0

42.0 Insurance Claims & Indemn 2,297 538 1,750 0 1,750 1,782

43.0 Interest and Dividends 0 0 0 0 0 0

44.0 Refunds 0 0 0 0 0 0

91.0 Unvouchered 0 0 0 0 0 0

Total Budget Authority $3,944,505 $4,620,526 $3,947,416 $0 $3,947,416 $4,476,200

Budget Activities:

Infrastructure $925,094 $986,045 $940,765 $0 $940,765 987,730

Shared Services & Support 1,255,062 1,313,050 1,242,470 $0 1,242,470 1,348,363

Information Services 1,764,349 2,321,431 1,764,181 $0 1,764,181 2,140,107

Total Budget Authority $3,944,505 $4,620,526 $3,947,416 $0 $3,947,416 $4,476,200

1 Actuals represent obligations from FY 2011 budget authority. This excludes obligations from user fees ($54,642), 50% carryover ($18,964), 

 multi-year/no year ($62,241) and recoveries ($1,464) accounts.
IRS-92

2.3 – Appropriation Detail Table

Dollars in Thousands

3F – Infrastructure ($987,730,000 in direct appropriations, an estimated $889,000 from

reimbursable programs, and an estimated $21,867,000 from user fees): This budget activity 

funds administrative services related to space and housing, rent and space alterations, building 

services, maintenance, guard services, and non-IT equipment. The program activities include 

the following:

• 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.

Operations Support

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

New Appropriated Resources:

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

Shared Services and Support 6,050 1,291,568 5,806 1,242,470 5,858 1,348,363 0.90% 8.52%

Information Services 6,455 1,838,958 6,179 1,764,181 6,751 2,140,107 9.26% 21.31%

Subtotal New Appropriated Resources 12,505 $4,056,716 11,985 $3,947,416 12,609 $4,476,200 5.21% 13.40%

Other Resources:

Recoveries 2,034

Offsetting Collections - Reimbursable 106 37,123 106 37,564 106 37,564

Available multi-year/no-year funds 70,629 80,915 80,915

50% Carryover 18,964

Transfers In/Out

Mandatory Appropriations - User Fees 54,642 55,368 57,958 4.68%

Subtotal Other Resources 106 $183,392 106 $173,847 106 $176,437 1.49%

Total Resources Available for Obligation 12,611 $4,240,108 12,091 $4,121,263 12,715 $4,652,637 5.16% 12.89%

Enacted1 to FY 2013

FY 2012

Resources Available for Obligation

FY 2011 FY 2013

Request

FY 2012

% Change

Enacted 

1 FY 2011 Enacted represents the approved FY 2011 Operating Plan and interappropriation transfer.
IRS-93

FY 2013 Program Changes by Budget Activity

3.1.6 – Budget and Performance Report and Plan

Description of Performance

Through September 30, 2011, the IRS achieved cost savings by completing or partially 

completing 18 space reduction projects, releasing a cumulative total of 128,893 rentable 

square feet for an annualized savings of $2.8 million. These FY 2011 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. 

For FY 2012, the IRS plans for 35 space reduction projects with a projected release of 

421,928 rentable square feet and associated annualized expenses, mainly rent of $8.4 million. 

For FY 2013, the IRS is evaluating 10 space reduction projects that, if implemented, would 

total approximately 42,800 square feet with $956,000 in annual rent savings. The IRS also 

intends, where possible, to place new hires in existing space and renew leases at existing sites 

FTE Amount

Restoration of FY 2012 Reductions to Enforcement Programs $10,585

Restore Audit Coverage to Address Individual Tax Compliance Issues 5,745

Restore Collection Coverage 4,840

Enforcement Initiatives $18,294

Promote Offshore Compliance 4,410

Improve International Compliance 1,406

Implement Tax Legislative Changes 4,460

Implement Revenue Protection Strategy 5,574

Build Out Tax Return Preparer Program 1,436

Address Appeals Workload 832

Implement Uncertain Tax Position Reporting Requirements 126

Leverage Digital Evidence for Criminal Investigation (CI) 50

Infrastructure Initiatives $1,576

Implement Information Technology and Operational Infrastructure to Deliver New Tax Credits 1,576

Total, FY 2013 Program Changes $30,455

Dollars in Thousands

Internal Revenue Service

Infrastructure

Infrastructure

FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013

Resource Level 1 Enacted Enacted Enacted Enacted Enacted Enacted Enacted Request

Appropriated Resources $864,403 $845,203 $826,313 $875,538 $895,202 $926,190 $940,765 $987,730

Reimbursable Resources 385 121 149 14,120 505 880 889 889

Mandatory Appropriations - User Fees 13,049 23,290 21,277 21,867

Total Resources $864,788 $845,324 $839,511 $889,658 $895,707 $950,360 $962,931 $1,010,486

Budget Activity Total $864,788 $845,324 $839,511 $889,658 $895,707 $950,360 $962,931 $1,010,486

Dollars in Thousands

1 The FY 2008 - FY 2011 Columns represent realized resources for reimbursable and user fees.
IRS-94

rather than move to new locations. These and other actions will help offset the projected rent 

costs in FY 2012 and beyond, as well the cost of future campus consolidation projects. 

3G – Shared Services and Support ($1,348,363,000 in direct appropriations, an estimated 

$20,207,000 from reimbursable programs, and an estimated $11,700,000 from user fees): 

This budget activity funds policy and management, IRS-wide support for research, strategic 

planning, communications and liaison, finance, human resources, and equity, diversity and 

inclusion program. It also funds printing and postage, business systems planning, security, 

corporate training, legal services, procurement, and employee benefits programs. The 

program activities include the following:

• National Headquarters Management and Administration directs the management 

activities of strategic planning, communications and liaison, finance, human resources, 

equity, diversity and inclusion, and business systems planning and embedded training. 

This activity sets policies and goals, provides leadership and direction for the IRS and 

builds partner relationships with key stakeholders (Congress, GAO, OMB, and the 

Oversight Board). It provides policy guidance for conducting planning and budgeting 

strategies, conducting analysis of programs and investments to support strategic 

decision-making, and developing and managing human resources. It also includes 

official reception and representation expenses.

• Real Estate and Facilities Management provides services and supplies required to 

manage IRS facilities.

• Procurement supports the procurement function of the IRS.

• Equity, Diversity and Inclusion Field Services: This activity provides staffing, 

training, and direct support to plan and manage the IRS’s Equity, Diversity and 

Inclusion program.

• Communications and Liaison coordinates local government and liaison relationships; 

handles congressional, state, and national stakeholder relationships and issues; 

coordinates 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, 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.

• Statistics of Income provides resources for researching annual income, financial, and 

tax data from tax returns filed by individuals, corporations, and tax-exempt 

organizations.
IRS-95

• 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 2 (CADE 2), and Account Management 

Services (AMS) technology solutions, and re-engineered business processes.

• Benefit Payments provides resources to fund Workers’ Compensation benefits and 

Unemployment Compensation for federal employee payments.

• Shared Services provides additional services, such as Public Transit Subsidy.

FY 2013 Program Changes by Budget Activity

FTE Amount

Restoration of FY 2012 Reductions to Enforcement Programs $30,080

Restore Audit Coverage to Address Individual Tax Compliance Issues 12,732

Restore Collection Coverage 17,348

Enforcement Initiatives 52 $61,466

Promote Offshore Compliance 10,105

Improve International Compliance 3,442

Implement Tax Legislative Changes 49 30,578

Implement Revenue Protection Strategy 3 11,319

Build Out Tax Return Preparer Program 3,584

Address Appeals Workload 2,138

Implement Uncertain Tax Position Reporting Requirements 238

Leverage Digital Evidence for Criminal Investigation (CI) 62

Infrastructure Initiatives $1,431

Implement Information Technology and Operational Infrastructure to Deliver New Tax Credits 1,431

Total, FY 2013 Program Changes 52 $92,977

Dollars in Thousands

Internal Revenue Service

Shared Services and Support
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3.1.7 – Budget and Performance Report and Plan

Description of Performance

Through support activities that include management and administration of human resources, 

security, and research, the IRS continues to provide shared services to all IRS programs.

Human Capital

One of the foundations to become the Best Place to Work in Government was the 2011 

Workforce of Tomorrow (WoT) Summit, held in June, with 43 emerging IRS leaders and 

NTEU partners in attendance. Summit participants leveraged information provided from field 

events, during which more than 600 employee-participants provided more than 2,400 ideas 

and feedback on six focus areas. The focus of the Summit was on communications and the 

theme “A better informed workforce of today leads to a more dynamic workforce of 

tomorrow.” Recommendations from the Summit will improve communications to keep the

IRS workforce well informed, resulting in consistent messages that reach diverse audiences 

within the IRS, and driving the organization’s processes, culture, and workforce toward 

making the IRS the Best Place to Work. For FY 2011, the Best Places to Work ranked the

IRS 65 out of 240 agency subcomponents. The rankings improved because of the IRS’s 

significantly higher scores in three core areas: job satisfaction, satisfaction with the overall 

organization and willingness of employees to recommend the IRS as a good place to work. 

The IRS will continue to ensure the success of every business unit by providing human capital 

strategies and tools for recruiting, hiring, developing, retaining, and transitioning a 

highly-skilled and high-performing workforce to support the mission.

Security

The IRS collects a tremendous amount of sensitive information and protecting this 

information is vital to maintaining the public trust. The IRS continues to face challenges as it 

strives to protect sensitive information from being obtained by identity thieves and to address 

online threats. As the prevalence of identity theft has increased across the United States and 

the world, so have the counter measures put in place by the IRS. The IRS has implemented 

several identity theft indicators that allow taxpayer accounts to be flagged for potential 

identity theft and fraud. 

Shared Services and Support 

FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013

Resource Level 1 Enacted Enacted Enacted Enacted Enacted Enacted Enacted Request

Appropriated Resources $1,176,202 $1,179,216 $1,291,296 $1,269,642 $1,311,127 $1,291,568 $1,242,470 $1,348,363

Reimbursable Resources 13,844 13,649 30,796 20,763 20,315 19,957 20,207 20,207

Mandatory Appropriations - User Fees 19,114 2 17,887 4,588 11,700 11,700

Total Resources $1,190,046 $1,192,865 $1,341,206 $1,290,407 $1,349,329 $1,316,113 $1,274,377 $1,380,270

Budget Activity Total $1,190,046 $1,192,865 $1,341,206 $1,290,407 $1,349,329 $1,316,113 $1,274,377 $1,380,270

Dollars in Thousands

1 The FY 2008 - FY 2011 Columns represent realized resources for reimbursable and user fees.
IRS-97

The IRS takes the issue of identity theft seriously. In CY 2011, to preserve and enhance 

public confidence, the IRS advocated the protection and proper use of identity information by: 

• Ensuring identity theft indicators and business rules isolated returns for additional 

screening to validate whether the true taxpayer filed the return;

• Removing more than 324,725 returns from processing and preventing more than 

$1.3 billion in fraudulent refunds through October 13, 2011; 

• Issuing Identity Protection Personal Identification Numbers (PIN) to approximately 

56,000 taxpayers who self-reported they were victims of identity theft. The PIN 

allows identity theft victims to avoid delays in processing their returns; and

• Establishing the Identity Theft Assessment and Action Group (ITAAG) to implement, 

promote, and refine identity theft procedures to ensure that the IRS resolves taxpayer 

account issues timely and completely.

Attempts to obtain taxpayer personally identifiable information continue to occur as phishing 

and vishing (voice + phishing) remain a challenge. As the threats from both identity theft and 

online sources evolve, so does the IRS response. By working proactively with the Internet 

Service Providers (ISPs) and the Domain Name Registrars to identify and quickly shut down 

fake e-filing sites, the IRS eliminated e-File scams that would have resulted in paying out 

refunds to tax cheats and identify thieves. The IRS has shut down 17,024 sites since the 

beginning of FY 2009. There was an unprecedented spike between June 20 and July 6, 2011, 

during which 7,449 phishing/malware attacks using the IRS name were identified and shut 

down. However, as the IRS shuts down fraudulent sites and addresses schemes, new and 

innovative tactics continue to evolve. The IRS works to identify and quickly shut down these 

new schemes to protect tax information and maintain public confidence. 

Research 

During FY 2011, the IRS continued its research studies of filing, payment, and reporting 

compliance, including the National Research Program (NRP), to provide a comprehensive 

picture of overall taxpayer compliance levels. Research allows the IRS to target specific areas 

to improve voluntary compliance and to allocate resources more effectively to reduce the tax 

gap. The NRP efforts included analyzing individual income tax returns for tax years 

(TY) 2006 - 2010 as part of an on-going reporting compliance study. In addition, the IRS

began an employment tax compliance study for TY 2008 - 2010, and is preparing to begin a 

reporting compliance study of corporate income tax. The IRS also devised a new method for 

measuring the filing compliance rate.

In FY 2011, the IRS continued to develop tools and models to detect non-compliance, to 

identify emerging issues related to compliance activities (with a focus on international issues), 

to analyze results of implemented compliance efforts, and to support the Return Preparer 

initiative. Research efforts in FY 2011 also concentrated on providing taxpayer-based 

information and analyses necessary to implement new tax laws; in particular, health 

care-related legislation and provisions of the American Recovery and Reinvestment Act 

of 2009. 
IRS-98

The IRS will continue to:

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

improve the IRS efficiency and productivity; and 

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

resources.

3H – Information Services ($2,140,107,000 in direct appropriations, an estimated

$16,468,000 from reimbursable programs, and an estimated $24,391,000 from user fees): 

This budget activity funds staffing, equipment, and related costs to manage, maintain, and 

operate the information systems critical to the support of tax administration programs. This 

includes the design and operation of security controls and disaster recovery planning. 

This budget activity funds the development and maintenance of the millions of lines of 

programming code that support all aspects and phases of tax processing and the operation and 

administration of 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. The program activities include the 

following:

• Security Services ensures effective security policies and programs to safeguard 

taxpayer records, IRS employees, facilities, business processes, systems and other 

resources. The program is responsible for corrective action efforts to establish 

adequate service-wide security, including Security Policy Support and Oversight, 

Mission Assurance, and Modernization Security. Policies are set using a governance 

process including executive steering committees. Compliance review teams perform 

vulnerability assessments. Mission assurance activities include operation of the 

Computer Systems Incident Response and Situation Awareness and Management 

Centers, as well as coordination of service-wide disaster recovery and business 

continuity planning. Operational programs include security training and awareness, 

sensitive system certification and accreditation with Treasury on the federal Critical 

Infrastructure Protection Program.

• Tier B provides support to one single-owner business unit for small to medium new 

investment projects (not Operations & Maintenance (O&M)), using core data, 

Business Master File (BMF) and Individual Master File (IMF), to support specialized 

functions (Submission Processing, Enforcement, and Taxpayer Service).

• Management Services provides for the design, development, delivery, and evaluation 

of a wide range of human resource programs for the 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 
IRS-99

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.

• Affordable Care Act – Program Management Office (PMO) manages the strategic 

planning, development, and implementation of new information systems in support of 

business requirements with regard to the healthcare reform initiative.

• MITS Executive Oversight provides support to the immediate Office of the Chief 

Technology Officer, as well as the direct reports for Equity, Diversity and Inclusion, 

and the Director, Stakeholder Management (including Communications Services and 

Program Oversight). The program provides executive direction for the MITS 

organization, enabling MITS to be a customer-focused supplier of IT solutions that are 

responsive to customer business priorities and meet functional and operational needs

effectively.

• Application Development performs the analysis, design, development, testing, and 

implementation of approximately 85,000 application programs supporting critical tax 

processing, management information reporting and financial management support 

systems for the IRS. This program also supports external trading partner data 

exchanges with federal government agencies, state and local governments, and other 

third-party entities. The program controls application source code and deploys 

applications to the production environment.

• Enterprise Operations designs, develops, and maintains IT that supports critical tax 

processing, management information reporting and financial management support 

systems for the IRS. The program supports data exchanges with external 

organizations, such as other federal agencies, state and local governments, and 

external entities (e.g., employers and banks), and includes a comprehensive disaster 

recovery capability to ensure continued operations in the event of a major interruption 

of service.

• Enterprise Network provides telecommunications service delivery to all customer 

segments, including management of day-to-day operations of the telecommunications 

environment. This includes the operation of equipment and services to meet business 

user needs and the execution of routine changes for scheduled and unscheduled 

modifications to the telecommunications infrastructure and applications. It addresses 

all phases of engineering, acquisition, implementation, and operation of 

telecommunications systems and services, including voice, video, and data 

communications.

• Enterprise Services plans and manages service and delivery methods used across the 

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, 
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email and domain user account maintenance. This activity monitors IRS network and 

systems administration by utilizing automated management tools. It performs asset 

management activities, and maintenance of the voice and data infrastructure at the 

territory offices. 

• 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 

contractors, and responding to information requests. 

• Disaster Recovery supports activities related to Enterprise Disaster Recovery 

planning, including testing, evaluations, plan development, and technical and business 

impact assessments.

• IT Security Training provides training for Federal Information Security Management 

Act (FISMA) reporting purposes.

• IT Homeland Security Presidential Directive-12 oversees the use of Personal Identity 

Verification (PIV) technology for physical access to federally-controlled facilities and 

logical access to information systems for all federal employees and contractors who 

require long-term access.

• IT Infrastructure funds the replacement of IRS IT infrastructure that has reached or 

surpassed its useful life cycle. The IRS centralizes the resources achieved through 

efficiencies in various parts of MITS to ensure that replacement of the aging 

infrastructure is addressed corporately. 

• Treasury Working Capital Fund is a centralized functional area for separating from 

the Information Services base budget the resources required to pay Treasury billings 

for services provided through the Working Capital Fund.

• Integrated Document Solutions Enterprise (IDSE) Campus Operations Most Efficient 

Organization (MEO) captures savings resulting from IDSE MEO activities

(i.e., activities that reduce FTE, re-engineer processes, and enhances use of 

technology).
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FY 2013 Program Changes by Budget Activity

3.1.8 – Budget and Performance Report and Plan

Description of Performance

The IRS taxpayer service and enforcement programs rely heavily on information systems that 

fall into the non-business systems modernization (BSM) major products categories to process 

tax and information returns, account for tax revenues collected, send bills for taxes owed, 

issue refunds, assist in the selection of tax returns for audit, and provide telecommunication 

services for all business activities, including the public’s toll-free access to tax information. 

In addition, in FY 2011, the IRS provided new applications to make it easier for taxpayers to 

secure tax information.

• Starting in January 2011, taxpayers could request account and return transcripts 

through IRS.gov and have transcripts mailed directly to them, eliminating the need to 

contact a customer service representative. During FY 2011, the application processed 

more than 755,000 transcripts.

• The Federal Student Aid Datashare was deployed successfully on December 12, 2010. 

As a result, taxpayers completing the Department of Education’s web-based Free 

Application for Student Aid have access to a Spanish and English language on-line 

FTE Amount

Restoration of FY 2012 Reductions to Enforcement Programs 24 $28,887

Restore Audit Coverage to Address Individual Tax Compliance Issues 24 25,042

Restore Collection Coverage 3,845

Enforcement Initiatives 11 $59,210

Promote Offshore Compliance 14,486

Improve International Compliance 1,003

Implement Tax Legislative Changes 33,768

Implement Revenue Protection Strategy 10 4,404

Build Out Tax Return Preparer Program 956

Address Appeals Workload 888

Implement Uncertain Tax Position Reporting Requirements 90

Leverage Digital Evidence for Criminal Investigation (CI) 1 3,615

Infrastructure Initiatives 537 $272,087

Implement Information Technology and Operational Infrastructure to Deliver New Tax Credits 537 263,887

Implement IT Changes Needed for Individual Coverage Requirement 8,200

Total, FY 2013 Program Changes 572 $360,184

Dollars in Thousands

Internal Revenue Service

Information Services

Information Services

FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013

Resource Level 1 Enacted Enacted Enacted Enacted Enacted Enacted Enacted Request

Appropriated Resources $1,420,600 $1,520,416 $1,723,500 $1,721,831 $1,877,555 $1,838,958 $1,764,181 $2,140,107

Reimbursable Resources 7,481 14,006 14,310 5,481 17,231 16,286 16,468 16,468

Mandatory Appropriations - User Fees 19,000 66,678 50,000 9,543 36,081 26,764 22,391 24,391

Total Resources $1,447,081 $1,601,100 $1,787,810 $1,736,855 $1,930,867 $1,882,008 $1,803,040 $2,180,966

Budget Activity Total $1,447,081 $1,601,100 $1,787,810 $1,736,855 $1,930,867 $1,882,008 $1,803,040 $2,180,966

Dollars in Thousands

1 The FY 2008 - FY 2011 Columns represent realized resources for reimbursable and user fees.
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application to obtain relevant tax return data from their filed 1040 series individual 

federal tax return.

In FY 2011, the IRS had a consistent record-managing cost and schedule variance for the 

52 non-BSM, information service related projects that are part of major programs as 

illustrated in the chart below. These projects comprise a significant component of the overall 

MITS funding total and receive the same management approach and scrutiny as the more 

public BSM activity.

In addition, in FY 2011, the IRS continued to strengthen management of its IT Infrastructure

by implementing an Enterprise Infrastructure Strategy. This strategy incorporates a 

risk-based approach to the replacement and upgrade of hardware and software in the 

infrastructure and includes assessments of aging components together with consideration of 

new technology and customer demand. 

For FY 2012 and beyond, the IRS will use the newly implemented Enterprise Infrastructure 

Strategy to assess the need to replace/upgrade hardware and software in the most effective 

manner.

Fiscal Year

Percent Within +/- 10%

Cost Variance

Percent Within +/- 10%

Schedule Variance

2009 85% 98%

2010 89% 100%

2011 90% 99%

Non-BSM Major Projects
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Business Systems Modernization

Appropriation Description

The Business Systems Modernization (BSM) appropriation provides resources for the 

planning and capital asset acquisition of IT to modernize the IRS business systems.

The BSM President’s Budget request for FY 2013 is $330,210,000 in direct appropriations

and 495 FTE. This is a decrease of 110 FTE less than the FY 2012 enacted budget of 

$330,210,000 and 605 FTE.
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2.1 – Budget Adjustments Table 

Dollars in Thousands

FTE Amount

FY 2012 Enacted 605 $330,210

Changes to Base

Maintaining Current Levels (MCLs) $287

Other Adjustments (110)

Efficiencies/Savings ($287)

Reduce Travel (130)

Targeted Program Reductions (157)

Subtotal, FY 2013 Changes to Base (110)

FY 2013 Current Services (Base) 495 $330,210

Subtotal, FY 2013 Program Changes

Total, FY 2013 Budget Request 495 $330,210

Business Systems Modernization
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2.2 – Operating Levels Table 

Dollars in Thousands

Appropriation Title: Business Systems Modernization FY 2011 

Actuals 1

FY 2012 

President's 

Budget

FY 2012 

Enacted

Proposed 

Reprogrammings

FY 2012 

Proposed 

Operating 

Level

FY 2013

Request

FTE 309 453 605 0 605 495

Object Classification:

11.1 Full-Time Permanent Positions $32,727 $49,843 $68,425 $0 $68,425 54,432

11.3 Other than Full-Time Permanent Positions 374 1,125 2,423 0 2,423 2,427

11.5 Other Personnel Compensation 873 1,390 2,921 0 2,921 2,826

11.8 Special Personal Services Payments 0 0 0 0 0 0

11.9 Personnel Compensation (Total) $33,974 $52,358 $73,769 $0 $73,769 $59,685

12.0 Personnel Benefits 8,400 15,835 17,236 0 17,236 15,822

13.0 Benefits to Former Personnel 0 0 0 0 0 0

21.0 Travel 937 469 1,403 0 1,403 1,273

22.0 Transportation of Things 0 0 0 0 0 0

23.1 Rental Payments to GSA 0 0 0 0 0 0

23.2 Rent Payments to Others 9 0 9 0 9 9

23.3 Communications, Utilities, & Misc 195 0 2,410 0 2,410 2,410

24.0 Printing & Reproduction 26 0 10 0 10 10

25.1 Advisory & Assistance Services 104,063 0 187,530 0 187,530 201,946

25.2 Other Services 933 176,700 1,180 0 1,180 1,180

25.3 Purchase of Goods & Services from Govt. Accounts 10 0 144 0 144 144

25.4 Operation & Maintenance of Facilities 3 0 0 0 0 0

25.5 Research & Development Contracts 0 0 0 0 0 0

25.6 Medical Care 0 0 0 0 0 0

25.7 Operation & Maintenance of Equipment 840 60,982 2,350 0 2,350 2,350

25.8 Subsistence & Support of Persons 0 0 0 0 0 0

26.0 Supplies and Materials 6 56 178 0 178 21

31.0 Equipment 18,855 27,200 43,991 0 43,991 45,360

32.0 Lands and Structures 0 0 0 0 0 0

33.0 Investments & Loans 0 0 0 0 0 0

41.0 Grants, Subsidies 0 0 0 0 0 0

42.0 Insurance Claims & Indemn 0 0 0 0 0 0

43.0 Interest and Dividends 0 0 0 0 0 0

44.0 Refunds 0 0 0 0 0 0

91.0 Unvouchered 0 0 0 0 0 0

Total Budget Authority $168,251 $333,600 $330,210 $0 $330,210 $330,210

Budget Activities:

IT Investments $168,251 $333,600 $330,210 $0 $330,210 $330,210

Total Budget Authority $168,251 $333,600 $330,210 $0 $330,210 $330,210

1

 Actuals represent obligations from FY 2011 budget authority. This excludes obligations from user fees ($88,948) and multi-year/no year ($78,093) a
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2.3 – Appropriation Detail Table 

Dollars in Thousands

3I – Business Systems Modernization ($330,210,000 in direct appropriations): This budget 

activity funds the planning and capital asset acquisition of information technology (IT) to 

modernize IRS business systems, including labor and related contractural costs. 

In 2012, the IRS delivered the most significant update to its core tax processing system in 

decades. Since the 1960s, the IRS has operated on a weekly batch cycle, which starting in 

2012 transitioned to a daily processing cycle. Also, for the first time, IRS processing systems 

are accepting all 1040 forms electronically through a modernized e-filing capability, and will 

feed into a single consolidated taxpayer account database which will allow the next generation 

of taxpayer service and enforcement functions. In 2013, the IRS will build on this momentum 

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

can utilize the database infrastructure put in place in 2012. The IRS also will focus effort on 

the second phase of the CADE 2 initiative, which addresses risks associated with the 

continued legacy of antiquated systems and programming languages in the current IRS 

environment. This next phase, known as Transition State 2, will ensure the long-term 

viability of the IRS tax processing systems.

Business Systems Modernization

FTE AMOUNT FTE AMOUNT FTE AMOUNT FTE AMOUNT

New Appropriated Resources:

Business Systems Modernization 333 $263,369 605 $330,210 495 $330,210 -18.18%

Subtotal New Appropriated Resources 333 $263,369 605 $330,210 495 $330,210 -18.18%

Other Resources:

Recoveries 3,611

Offsetting Collections - Reimbursable

Available multi-year/no-year funds 98,019 118,199 144,363 22.14%

50% Carryover

Transfers In/Out

Mandatory Appropriations - User Fees 2 203 88,948

Subtotal Other Resources 203 $190,578 $118,199 $144,363 22.14%

Total Resources Available for Obligation 536 $453,947 605 $448,409 495 $474,573 -18.18% 5.83%

Enacted1 Resources Available for Obligation Enacted Request to FY 2013

1 FY 2011 Enacted represents the approved FY 2011 Operating Plan.

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

% Change

FY 2011 FY 2012 FY 2013 FY 2012
IRS-107

The FY 2013 BSM request of $330.2 million funds the projects listed in the table below:

Customer Account Data Engine 2 (CADE 2) (Taxpayer Account Database): The CADE 2 

program will build and deploy an authoritative database and complete data model for all 

individual taxpayers, providing the foundation for more efficient and effective tax 

administration. The CADE 2 authoritative database will provide a feed to the Integrated 

Production Model (IPM), which is as an analytical data store with a single point of access for 

end users. The IPM analytic data store will centralize individual taxpayer account 

information along with other data to provide more meaningful business intelligence and 

expanded opportunities for analytic capabilities to increase compliance and accelerate the 

identification of fraudulent trends.

In FY 2013, the IRS will continue the development of the CADE 2 Program. The CADE 2 

program implements a single data-centric solution that provides daily processing of taxpayer 

accounts. The CADE 2 program will accomplish the following:

• Establish a solid data foundation for the future by leveraging relational database 

processing capability (Completed);

• Make substantial progress toward addressing financial material weaknesses for 

individual taxpayer account processing, demonstrate compliance with Federal 

Dollars in Thousands

Business Systems Modernization FY 2011

Enacted1

FY 2012 

Enacted

FY 2013 

Budget 

Request2

Change

FY 2012 to

FY 2013 

Application Migration to CADE 2 (Taxpayer Account Database )

Build on the foundation set in Transition State 1 (TS1) and continue the development of Transition State 2 (TS2). 

Employ a single system for managing individual taxpayer accounts. Core applications are structured to directly 

access and update the authoritative relational database established in TS1. TS2 addresses critical financial 

management applications and the IRS’s financial material weaknesses, such as capturing line item data attributes, 

which was not possible in the legacy master file. TS2 eliminates security weaknesses associated with individual 

taxpayer account processing, which provides more exact compliance with privacy and disclosure policy and better 

protection of personally identifiable information. Using agile development methods, FY 2013 funds will

be used for early deployment of some incremental components of the solution, such as: 

 • Facilitate the utilization of Foreign Address 

 • Single Penalty & Interest calculation engine for IMF, BMF and IDRS

 • Data Distribution engine for CADE2 and IPM databases and feed downstream systems 

 • Replace select 701 extracts with direct data pull from CADE2 and IPM databases

 • On-line viewing: Updated Individual Account access services and/or components

$136,100 $139,500 $148,000 $8,500

Current CADE

Implement tax law changes and enhance the overall security posture (description applicable to FY 2011). 28,000 0 0 0

Modernized e-File

Final deployment of Form 94X family of forms for Employment/ Unemployment Tax; development and deployment 

of Form 1041 (U.S. Income Tax Return for Estates and Trusts); and begin requirements development for a release 

designed to add additional forms to the MeF platform. Forms being considered include: 706, 709, 720-X, 8038, 

8038-B, 8038-CP, and 1040X Amended returns).

39,100 23,900 24,800 900

Core Infrastructure

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

modernized Development, Integration, and Testing Environments (DITE) and shared infrastructure components 

(Employee User Portal, Registered User Portal, and Security) of the production environments. 32,000 37,700 37,750 50

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.

27,555 27,645 32,445 4,800

Management Reserve 8,925 7,780 9,315 1,535

Subtotal Capital Investments $271,680 $236,525 $252,310 $15,785

 BSM Labor 80,689 93,685 77,900 (15,785)

Total BSM $352,369 $330,210 $330,210 $0

2 BSM labor includes $287,000 of inflation costs.

1 Includes $89,000,000 in user fees.
IRS-108

Financial Management System Requirements (FFMSR), and maintain a clean audit 

opinion;

• Maintain best practices and industry standards around security and privacy posture;

• Continue the focus on moving away from 1960s technology (i.e., aging infrastructure, 

applications, and sequential flat file processing) with redesign and rewrite of core 

individual taxpayer account processing applications in a modern programming 

language; and

• Demonstrate substantive progress toward achieving long-term viability and 

maintainability of the individual taxpayer account processing system.

The CADE 2 program will deliver its program scope incrementally through a series of 

transition states:

• In Transition State 1 (TS 1), the IRS established a single database to house all 

individual taxpayer accounts. Processing is enhanced to include daily batch 

processing. The key IRS customer service operational database, Integrated Data 

Retrieval System (IDRS), will benefit from more timely posted data. The CADE 2 

database will populate the Integrated Production Model (IPM) analytical data store 

and provide business users with tools to use the data for compliance and customer 

service more effectively. Enhanced data security will be in place. 

o Downstream systems that must be modified to support daily processing are 

included in the scope of Transition State 1. Downstream systems that do not 

need to be modified, but want to take advantage of daily processing, are not 

included.

• In Transition State 2 (TS 2), the IRS will build upon the foundation started in 

Transition State 1 to establish a modern tax processing system for managing 

individual taxpayer accounts with an integrated, state-of-the-art tax-processing 

platform that allows deployment of modular applications using modern programming 

language. After its completion, core applications will have access to a single source of 

individual taxpayer account data. The CADE 2 program will make substantial 

progress toward addressing financial material weaknesses associated with individual 

taxpayer account processing. Improvements include standardized data distribution for 

downstream systems combined with an integrated view of the standardized data 

through our data store. In TS 2, the IRS will use a combination of current-state 

components and transitional components and this will improve the IRS’s ability to 

maintain and improve security and privacy associated with individual taxpayer 

account processing. 

• The Target State completes the transition to the target-state applications and 

database; provides a data-centric solution that enables faster and more effective use of 

taxpayer account data; retires all transitional components; and addresses financial 

statement audit and security material weaknesses identified at the inception of the 

program.
IRS-109

In FY 2013, the IRS will continue development of the CADE 2 TS 2 solution under its 

program framework for the Enterprise Life Cycle, developing functionality on an incremental 

basis using agile and iterative practices. Building on earlier milestone work in FY 2012, the 

IRS will use the FY 2013 funds to address financial material weaknesses associated with 

individual taxpayer processing by designing a tax processing platform based on modern 

architecture, modern programming language, and a modular applications framework. This 

new tax processing platform will provide all of the existing tax processing capabilities plus 

the capability to do the following:

• Provide a single penalty and interest calculation engine for Individual Master File 

(IMF), Business Master File (BMF) and IDRS to ensure consistent calculation of 

penalty and interest, eliminate manual calculations, and ensure financial integrity;

• Track Taxpayer Identification Numbers across multiple accounts and master files in 

order to identify duplicate tax assessments (e.g., innocent spouse, Trust Fund 

Recovery Program) and to identify and prevent the issuance of fraudulent returns;

• Provide greater visibility into tax assessments allowing line-by-line capture of 

obligations for taxpayers to support more detailed analysis of obligation data and 

better financial reporting;

• Provide the ability to store and retrieve financial transaction data, account collection 

data, business rules and case data for individual taxpayer accounts;

• Perform validity checks on Return line items (including Schedules) before processing;

• Support enhanced financial reporting by allowing the IRS to maintain more extensive 

historical records of taxpayer account activity, providing traceability from general 

ledger to multiple levels of taxpayer debit and credit history;

• Address all applicable Federal Financial Management System Requirements 

(FFMSRs); and

• Provide data from authoritative data source to downstream systems.

In addition, the IRS will use the FY 2013 funds for early deployment of some incremental 

components of the solution, such as:

• Downstream system changes to allow candidate downstream systems to leverage the 

CADE 2 database access information sooner because of daily processing;

• Accurate capture of foreign addresses from upstream systems, store them in the 

database, and provide them to downstream systems;

• Improved business analytics to identify and select tax cases for examination based on 

both historical and current filing season data;

• Data distribution engine for CADE 2 and IPM databases to distribute data to 

downstream systems securely; and

• Replace current data extracts process in select areas with a more direct data pull from 

IPM.
IRS-110

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 Form 990N,

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 implemented the second 

phase by providing enhanced Disaster Recovery capabilities to ensure appropriate 

management of operational risk and the optimization code necessary to support the 

anticipated volume of returns in 2012. The third and final phase 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 will expand the reach of MeF to all 

of the e-File population, or approximately 98.3 million filers by January 2012.

In FY 2013, the IRS will complete the implementation of Form 94X (Release 8), 

Employment/Unemployment Tax, and Form 1041 (Release 9), U.S Income Tax Return for 

Estates and Trusts, to the MeF platform. Also, MeF will develop the requirements and 

logical design for Release 10, an assorted bundle of forms. 

The request for MeF will:

• Complete Milestone 5 (Deployment) of Release 8, the migration of Forms 94X, 

Employment/Unemployment Tax, to the Modernized e-File platform.

o Forms to 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 Milestones 4a (Physical Design), 4b (Development), and 5 (Deployment) of 

Release 9: implementation of Form 1041, U.S. Income Tax Return for Estates and 

Trusts.

• Complete Milestones 2 (Domain Architecture Design) and 3 (Requirements and 

Logical Design) of Release 10 (Assorted Bundle of Forms, which may include Form 

706, United States Estate (and Generation-Skipping Transfer) Tax Return, Form 709, 
IRS-111

United States Gift (and Generation-Skipping Transfer) Tax Return, Form 720X, 

Amended Quarterly Federal Excise Tax Return, Form 8038, Information Return for 

Tax-Exempt Private Activity Bond Issues, Form 8038-B, Information Return for Build 

America Bonds and Recovery Zone Economic Development Bonds, and Form 

8038-CP, Return for Credit Payments to Issuers of Qualified Bonds), and 1040X,

Amended Returns.

By adding Form 94X, Form 1041, and the assorted bundle of forms to the MeF platform,

trading partners (i.e., one of the two or more participants in an ongoing business relationship) 

and taxpayers realize the following benefits:

• Extensive business rule validation and error checking, which improves the accuracy of 

the tax return;

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

tax return will be successfully processed; 

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

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

rejects the tax return.

Productivity and IRS efficiency gains include: 

• Improving Customer Service – IRS customer service representatives will provide 

faster responses to taxpayers by viewing the original 94X and 1041 documents online 

and in real-time, and eliminating back-end re-keying and data entry. 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 will enhance compliance and 

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

manner.

• Enhancing the Production Volumes – Returns submitted through the MeF encounter 

fewer processing errors than do paper returns.

• Retiring retire the Legacy 94X e-File system – Allow the IRS to disable the capability 

for the legacy Electronic Management System (EMS) to accept this family of returns.

Core Infrastructure: The Core Infrastructure provides mission-critical services to BSM 

projects. In FY 2013 the Core Infrastructure will continue to provide mission critical services 

in designing, engineering, testing, and deploying standardized, consolidated, virtual and 

secure modernized development and production environments for use by BSM projects. 
IRS-112

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

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

infrastructure consists of two primary program elements – Infrastructure Shared Services 

(ISS), and the Development, Integration and Testing Environment (DITE):

• ISS provides integrated architectural and engineering services required to deploy and 

deliver the BSM projects, including infrastructure requirements identification and 

management, security engineering, systems engineering, performance engineering, 

capacity planning, transition management support, configuration management, and 

expanded e-services and online filing. The continued development and management 

of this infrastructure incorporates the identification and development of common 

infrastructure, security, and application integration services for use and reuse by the 

BSM projects and reduces delivery time, application development, and operations and 

maintenance costs.

• The increased use of shared infrastructure will reduce future costs associated with 

infrastructure implementation and maintenance. In FY 2013, ISS will emphasize 

effectively engineered common information technology (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. The ISS also must address the effect on the modernized 

infrastructure environments caused by an increase in the number of electronic 

documents, online transactions, and online tax filers. During FY 2013, ISS will 

continue to provide capacity planning and performance engineering services for BSM 

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

IRS’s confidence in deployed systems. ISS will provide subject matter experts and 

institute security measures approved by IRS executive management to protect the 

modernized infrastructure from intrusion and unauthorized access. In addition, the 

ISS will plan and implement processes to move the IRS toward the Capability 

Maturity Model (CMM) Level III, a process improvement approach that yields 

efficiencies in software engineering. The ISS will implement the Library of 

Infrastructure Engineering Design Patterns and repeatable processes for the design of 

infrastructure engineering solutions.

• DITE is comprised of a Virtual Development Environment (VDE) and an Enterprise 

Integration and Test Environment (EITE). The VDE provides a software development 

environment for modernization projects such as MeF and CADE 2 that allows 

geographically distributed developers access to standardized tools, information, and 

services. EITE provides the more structured, production-like, comprehensive 
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integration and testing environment necessary to test end-to-end system capabilities 

and performance before release into the BSM production environment.

• In FY 2013, DITE will continue to engineer, install, maintain, and support the 

development and test environments needed for each BSM project through deployment 

and acceptance in the production environment. It will:

o Improve the efficiency of server administration; 

o Engineer, install, maintain, and support core DITE infrastructure, to include 

web portals and common IT infrastructure services; 

o Provide a mechanism for remote access to core DITE data by authorized users; 

and 

o Provide maintenance of a suite of standard software development and testing 

tools for use on BSM projects. 

Funding also provides for enhancements enabling the DITE to provide a more 

integrated test environment for CADE 2 and other BSM projects. The enhanced 

environment will enable the execution of extensive performance and capacity tests in a 

more “production like” environment, increasing the probability of success when the 

product is moved into the production environment. This approach provides for 

significant cost savings when compared to replicating the production environment on a 

project-by-project basis.

Architecture, Integration and Management (AI&M): AI&M activities ensure that systems 

solutions meet IRS business needs and effectively integrate modernization projects/programs; 

examples include CADE 2, MeF, expanded e-services, and online filing programs. 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. 

In FY 2013 AI&M will continue to support BSM projects. This program provides the 

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

nature, and complexity of BSM. It also delivers essential IRS systems strategy, architecture, 

and engineering capabilities to the major modernization projects across all technology 

platforms: IT Infrastructure, Business Applications, Data Management, and IT Security. 

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. 

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 

integrating each project effectively 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.
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• 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, web-services strategy and architecture, 

enterprise transition strategy, release architecture, and security architecture. 

• 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. The program 

accomplishes this through the development of Enterprise Data Models and the 

Enterprise Data Architecture. In addition, 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 Systems Integration Services Contractor (PRIME) in 

planning, developing, and integrating reasonable, manageable, and attainable release 

schedules and release packages on IRS modernization projects; 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, and transition management. 

PG&C will provide an integrated IT portfolio assessment of organizational capacity 

for delivering BSM capabilities. This IT portfolio assessment is critical to ensure the

technical effect of BSM program decisions on the current production environment are 

considered fully and understood. Engineering analyses and resource estimates are

integral to ensuring organizational capacity needs are incorporated into both plans and 
IRS-115

budgets. This assessment results in an integrated portfolio which includes maintaining 

current 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 industry best practices for requirements 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 assess its operation and implement continuous 

improvements. Additionally, the IRS has initiated an effort to establish corporate IT 

Strategic Planning, technical analyses, and program integration processes that identify 

and map key activities across IT and enhance cross-program decision making.

• 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. 

• 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 Architecture; Data Strategy; System 

Architecture and Engineering; and IRS Enterprise Architecture, consisting of the 
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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 some flexibility to cover unanticipated cost adjustments.

Labor: This activity provides the labor costs associated with the development of projects 

within the BSM portfolio.

3.1.9 – Budget and Performance Report and Plan

Description of Performance

The IRS’s modernization efforts focus on building and deploying advanced information 

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

following highlights BSM accomplishments in FY 2011: 

• Customer Account Data Engine 2 (CADE 2) logical and physical designs were 

completed on time in December 2010 and April 2011, respectively. The IRS 

successfully deployed CADE 2 daily processing January 2012, and is in the process 

of moving to a single authoritative database for all individual taxpayer records, 

moving the IRS away from its legacy flat-file data storage model in the 2012 filing 

season. 

• Modernized e-File (MeF) Release 6.2 increased performance in MeF for both 

individual and business returns to account for the anticipated increase in volume of 

returns in 2012. It also enhanced the disaster recovery capabilities that were 

delivered in a previous version. MeF accepted more than 18.5 million returns in 

2011, a 262 percent increase compared to the same period in 2010. The majority of 

the growth was because of an increase in 1040 tax returns submitted with the changes 

implemented for the 2012 filing season, the IRS is anticipating a substantial increase 

in the use of the MeF platform for 2012.

Business Systems Modernization

FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013

Resource Level 1 Enacted Enacted Enacted Enacted Enacted Enacted Enacted Request

Appropriated Resources $242,010 $212,569 $267,090 $229,914 $263,897 $263,369 $330,210 $330,210

Reimbursable Resources

Mandatory Appropriations - User Fees 88,948

Total Resources $242,010 $212,569 $267,090 $229,914 $263,897 $352,317 $330,210 $330,210

Budget Activity Total $242,010 $212,569 $267,090 $229,914 $263,897 $352,317 $330,210 $330,210

Business Systems Modernization Budget Activity

FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2011 FY 2012 FY 2013

Measure Actual Actual Actual Actual Actual Target Actual Target Proposed

Target

Percent of BSM Projects within +/- 10% Cost Variance (E) * * 92.0% 60.0% 40.0% 90.0% 71.4% 90.0% 90.0%

Percent of BSM Projects within +/- 10% Schedule Variance (E) * * 92.0% 90.0% 100.0% 90.0% 100.0% 90.0% 90.0%

Key: E - Efficiency Measure

Dollars in Thousands

*

 Prior to FY 2008, Cost and Schedule Variance was reported separately for each project. In FY 2008, these measures were changed to reflect an overall percentage of all 

major BSM projects that were within the +/- 10% threshold.

1 The FY 2008 - FY 2011 Columns represent realized resources for reimbursable and user fees.
IRS-117

• Customer Account Data Engine (CADE) Release 6.2 deployed in January 2011, with 

technical improvements to the infrastructure and availability of the system. CADE 

also facilitated a mid-season restart in February to implement Extender legislative 

changes affecting individual taxpayers. CADE posted more than 40 million tax 

returns and issued more than 35.1 million refunds totaling in excess of $65.6 billion. 

CADE also posted 4.4 million payments submitted with taxpayer returns.

For the Business Systems Modernization program (BSM), the IRS met 50 percent (1 of 2) of 

its BSM targets for FY 2011. These targets pertain to the two budget level measures, which 

track the percentage of major BSM projects that are within the +/-10 percent Cost and 

Schedule variance threshold. The IRS met its Schedule variance target while falling short of 

the Cost variance target. As listed in the tables below, there were seven project segments 

completed in FY 2011.

In FY 2011, five out of seven (71.4 percent) project segments met the cost variance threshold. 

Two of the project segments exceeded the cost variance threshold. As shown in the table 

below, MeF Release 7 Milestone 3 was 24 percent below expected costs because of lower 

than expected hardware and software costs in addition to lower than expected contract 

expenditures. Improved pricing opportunities provided a positive affect on the project 

costing. CADE Release 6.2 Milestone 4b was also 15 percent below expected costs because 

of changes related to filing season and tax legislation being less complex and extensive than 

originally projected. Legislative changes are an unknown quantity until passed and each year 

projections are based on the best information available. 

In FY 2011, the IRS completed 100 percent of all project segments within the schedule 

variance threshold, exceeding the goal of 90 percent, as improved planning and project 

management continues to have a positive effect on the projects. 

Project Release Milestone

Planned 

Cost 

($000)

Current Cost

 ($000)

Variance

 ($000)

Variance 

(%)

Within 

Acceptable 

Tolerance

MeF R6 2 4b 7,800 7,800 0 0% Yes

MeF R6 2 5 5,200 5,200 0 0% Yes

MeF R7 3 15,875 12,121 -3,754 -24% No

MeF R7 4a 11,830 11,830 0 0% Yes

CADE R6 2 4b 22,000 18,670 -3,330 -15% No

CADE 2 Trans. State 1 3 14,200 13,834 -366 -3% Yes

CADE 2 Trans. State 1 4a 7,200 7,200 0 0% Yes

Cost Variance for Project Segments Completed in FY 2011
IRS-118

To meet future targets, the IRS will continue to improve on its modernization efforts by 

implementing new practices, such as the Capability Maturity Model Integration (CMMI) and 

the Information Technology Infrastructure Library (ITIL), which help to improve in areas 

such as development, services, and acquisitions. In FY 2013, the IRS expects to meet a target 

of 90 percent for cost and schedule variance through better project management and 

oversight.

Project Release Milestone

Planned 

Finished 

Date

Current 

Finished 

Date

Variance 

($000)

Variance 

(%)

Within 

Acceptable 

Tolerance

MeF R6 2 4b 12/29/10 12/29/10 0 0% Yes

MeF R6 2 5 05/17/11 05/18/11 1 1% Yes

MeF R7 3 12/21/10 10/21/10 0 0% Yes

MeF R7 4a 04/26/11 04/26/11 0 0% Yes

CADE R6 2 4b 01/31/11 01/14/11 -10 -6% Yes

CADE 2 Trans. State 1 3 12/15/10 12/13/10 -2 -1% Yes

CADE 2 Trans. State 1 4a 04/30/11 04/18/11 -9 -6% Yes

Schedule Variance for Project Segments Completed in FY 2011
IRS-119

Section 4 – Supplemental Information

4.1 – Summary of Capital Investments

Investments / Funding Source FY 2010 Actuals FY 2011 Actual*

% Change 

from FY10 

to FY11 FY 2012 Enacted

% Change 

from FY11 

to FY12

FY 2013 

Congressional 

Justification

% Change 

from FY12 to 

FY13

Major IT Investments

Account Management Services (AMS) $27,988 $18,162 -35.1% $20,860 14.9% $21,019 0.8%

IRS BSM 015-45-0921 6,688 59 0 0

IRS Operations Support 015-45-0919 21,300 18,103 20,860 21,019

Affordable Care Act (ACA) $0 $0 $0 $303,535

IRS Operations Support 015-45-0919 One-year 0 0 0 128,535

IRS Operations Support 015-45-0919 Multi-year 0 0 0 175,000

Current CADE $68,569 $50,102 -26.9% $694 -98.6% $0 -100.0%

IRS BSM 015-45-0921 67,810 49,843 674 0

IRS Operations Support 015-45-0919 758 257 20 0

IRS EITC 015-45-0919-0 0 1 0 0

CADE 2 $77,687 $214,409 176.0% $210,261 -1.9% $203,392 -3.3%

IRS BSM 015-45-0921 77,524 214,406 210,252 203,383

IRS Operations Support 015-45-0919 163 3 9 10

e-Services $16,518 $17,033 3.1% $13,884 -18.5% $13,970 0.6%

IRS BSM 015-45-0921 5 1 0 0

IRS Operations Support 015-45-0919 16,513 17,031 13,884 13,970

Electronic Fraud Detection System (EFDS) $13,737 $13,212 -3.8% $15,558 17.8% $15,809 1.6%

IRS BSM 015-45-0921 10 0 0 0

IRS Operations Support 015-45-0919 10,021 9,554 11,928 12,112

IRS EITC 015-45-0919-0 3,657 3,657 3,630 3,697

IRS Txpyr. Scvs., Enfor.(0912, 0913) Multi-yr, Health 

Care/ACA(09A9), Rcvry., Asset Forfeiture 50 0 0 0

Return Review Program (RRP) $18,383 $24,015 30.6% $18,417 -23.3% $18,337 -0.4%

IRS Operations Support 015-45-0919 18,383 24,015 18,417 18,337

Individual Master File (IMF) $8,995 $8,143 -9.5% $10,281 26.3% $10,363 0.8%

IRS BSM 015-45-0921 0 0 0

IRS Operations Support 015-45-0919 8,923 8,143 10,281 10,363

IRS Txpyr. Scvs., Enfor.(0912, 0913) Multi-yr, Health 

Care/ACA(09A9), Rcvry., Asset Forfeiture 72 0 0 0

Information Reporting and Document Matching 

(IRDM) $18,824 $24,354 29.4% $19,955 -18.1% $20,448 2.5%

IRS Operations Support 015-45-0919 15,905 24,354 19,955 20,448

IRS Txpyr. Scvs., Enfor.(0912, 0913) Multi-yr, Health 

Care/ACA(09A9), Rcvry., Asset Forfeiture 2,920 0 0 0

IRS End User Systems and Services (EUSS) $215,781 $274,004 27.0% $201,964 -26.3% $194,760 -3.6%

IRS Operations Support 015-45-0919 194,035 274,004 201,964 194,760

IRS EITC 015-45-0919-0 0 0 0 0

IRS Txpyr. Scvs., Enfor.(0912, 0913) Multi-yr, Health 

Care/ACA(09A9), Rcvry., Asset Forfeiture 21,746 0 0 0

IRS Main Frames and Servers Services and Support 

(MSSS) $563,945 $443,418 -21.4% $449,250 1.3% $453,668 1.0%

IRS BSM 015-45-0921 69,738 59,561 41,580 41,642

IRS Operations Support 015-45-0919 477,266 383,668 407,670 412,026

IRS Private Collection Agent Program 015-45-5510 0 188 0 0

IRS EITC 015-45-0919-0 0 0 0 0

IRS Txpyr. Scvs., Enfor.(0912, 0913) Multi-yr, Health 

Care/ACA(09A9), Rcvry., Asset Forfeiture 16,941 0 0 0

Internal Revenue Service

FY 2013 CJ Submission

Capital Investments
IRS-120

Investments / Funding Source FY 2010 Actuals FY 2011 Actual*

% Change 

from FY10 

to FY11 FY 2012 Enacted

% Change 

from FY11 

to FY12

FY 2013 

Congressional 

Justification

% Change 

from FY12 to 

FY13

IRS Telecommunications Systems and Support $299,838 $329,442 9.9% $218,563 -33.7% $221,024 1.1%

IRS Operations Support 015-45-0919 293,451 327,262 217,490 219,931

IRS Private Collection Agent Program 015-45-5510 0 1,053 0 0

IRS EITC 015-45-0919-0 1,065 1,081 1,073 1,092

IRS Txpyr. Scvs., Enfor.(0912, 0913) Multi-yr, Health 

Care/ACA(09A9), Rcvry., Asset Forfeiture 5,322 46 0 0

Integrated Customer Communications Environment 

(ICCE) $16,752 $16,321 -2.6% $16,005 -1.9% $16,149 0.9%

IRS Operations Support 015-45-0919 16,680 16,320 16,005 16,149

IRS BSM 015-45-0921 0 1 0 0

IRS Txpyr. Scvs., Enfor.(0912, 0913) Multi-yr, Health 

Care/ACA(09A9), Rcvry., Asset Forfeiture 72 0 0 0

Integrated Data Retrieval Systems (IDRS) $20,351 $18,627 -8.5% $18,257 -2.0% $18,382 0.7%

IRS Operations Support 015-45-0919 20,351 18,627 18,257 18,382

Integrated Financial System/CORE Financial System 

(IFS) $18,357 $26,579 44.8% $16,643 -37.4% $16,922 1.7%

IRS Operations Support 015-45-0919 18,051 26,579 16,643 16,922

IRS Txpyr. Scvs., Enfor.(0912, 0913) Multi-yr, Health 

Care/ACA(09A9), Rcvry., Asset Forfeiture 306 0 0 0

Integrated Submission and Remittance Processing 

System (ISRP) $17,311 $17,458 0.8% $20,900 19.7% $13,699 -34.5%

IRS Operations Support 015-45-0919 17,311 17,458 20,900 13,699

Internal Revenue Service.gov (IRS.gov) $51,825 $52,470 1.2% $31,156 -40.6% $31,700 1.7%

IRS Operations Support 015-45-0919 39,779 52,470 31,156 31,700

IRS Txpyr. Scvs., Enfor.(0912, 0913) Multi-yr, Health 

Care/ACA(09A9), Rcvry., Asset Forfeiture 12,046 0 0 0

Foreign Account Tax Compliance Act (FATCA) $0 $897 $0 -100.0% $11,401

IRS Operations Support 015-45-0919 897 0 11,401

Modernized e-File (MeF) $89,127 $89,347 0.2% $49,122 -45.0% $50,414 2.6%

IRS BSM 015-45-0921 70,585 68,067 30,713 31,639

IRS Operations Support 015-45-0919 18,178 21,280 18,409 18,775

IRS Txpyr. Scvs., Enfor.(0912, 0913) Multi-yr, Health 

Care/ACA(09A9), Rcvry., Asset Forfeiture 364 0 0 0

Service Center Recognition/Image Processing System 

(SCRIPS) $19,693 $16,047 -18.5% $19,670 22.6% $10,653 -45.8%

IRS Operations Support 015-45-0919 19,693 16,047 19,670 10,653

IRS EITC 015-45-0919-0 0 0 0 0

Subtotal, Major IT Investments $1,563,681 $1,654,038 5.8% $1,351,440 -18.3% $1,645,644 21.8%

Non-Major IT Investments $688,016 $729,042 6.0% $752,668 3.2% $834,566 10.9%

TOTAL IT Investments $2,251,697 $2,383,081 5.8% $2,104,108 -11.7% $2,480,210 17.9%

* FY2011 Actuals includes funding from all sources, all other years are Appropriated Funds only.

Major Non-IT Investments

Criminal Investigations Capital Assets $2,548 $7,089 178.2% $9,900 39.7% $10,280 3.8%

IRS Enforcement (Reimbursable) 2,548 7,089 9,900 10,280

Security Equipment $2,990 $3,701 23.8% $3,300 -10.8% $3,300 0.0%

IRS Operations Support (One Year) 2,990 3,701 3,300 3,300

Leasehold Improvements $38,586 $27,277 -29.3% $11,688 -57.2% $16,031 37.2%

IRS Operations Support (One Year) 38,586 27,277 11,688 16,031

Total Major Non-IT Investments $44,124 $38,067 -13.7% $24,888 -34.6% $29,611 19.0%

Total Capital Investments $2,295,821 $2,421,147 5.5% $2,128,996 -12.1% $2,509,821 17.9%

Internal Revenue Service

FY 2013 CJ Submission

Capital Investments
IRS-121

4.2 – Summary of Cost and Schedule Performance for Major Information Technology 

Systems

A summary of capital investment resources, including major information technology and non 

technology investments, can be viewed/downloaded here:

Investment Cost 

Variance % 

Schedule 

Variance %

Overall 

Red/Yellow/Green 

Rating

Account Management Services (AMS) 2.97% 0.00% GREEN

Current CADE1 0.00% 0.00% GREEN

Customer Account Data Engine 2 (CADE 2)1 0.00% 0.00% GREEN

e-Services (e-SVS)) -0.40% -9.24% GREEN

Electronic Fraud Detection System (EFDS) -2.36% -6.14% GREEN

Implement RRP (Replaces EFDS) 0.00% 0.00% GREEN

Individual Master File (IMF) 0.00% 0.00% GREEN

Information Reporting and Document Matching (IRDM) 0.00% 0.00% GREEN

Integrated Customer Communication Environment (ICCE) 26.16% 0.00% GREEN

Integrated Data Retrieval System (IDRS) 0.00% 0.00% GREEN

Integrated Financial System/CORE Financial System (IFS) 0.00% 0.00% GREEN

Integrated Submission and Remittance Processing System (ISRP) 0.00% 0.00% GREEN

IRS End User Systems and Services (EUSS) 0.00% 0.00% GREEN

IRS Main Frames and Servers Services and Support (MSSS)2 0.00% -112.05% GREEN

IRS Telecommunications Systems and Support (TSS) 0.00% -9.84% GREEN

IRS.GOV - Portal Environment 0.00% 0.00% GREEN

Modernized e-File (MeF)1 -9.35% 0.00% GREEN

Service Center Recognition/Image Processing System (SCRIPS) 0.00% 0.00% GREEN

Data reported as of December 20, 2011.

1 The cost variance for BSM projects includes labor and differs from the variance calculated in section 3.1.9.

2 Bureau CIO Comments: The schedule variance for the Modernized Infrastructure Solaris 10 & Supporting Technologies

 Upgrade project was caused by delays in funding approval which did not occur until 06/21/11. Additional scheduling 

 variances were created by scheduling adjustments towards filing season readiness testing and the late delivery of ordered 

 equipment. However, the project is on track to be completed by December 30, 2011.
IRS-122

4A – Capital Investment Strategy

Information Technology (IT)

Moving to World Class Information Technology (IT): Focus on People, Process and

Technology

The IRS, widely regarded as the one of the world’s most efficient tax administration 

organizations, processes hundreds of millions of tax returns and collects trillions of dollars in 

revenue each year. 

The IRS IT organization plays an important role in helping the IRS meet its tax administration 

responsibilities. The IT organization provides efficient and secure processing, transfer of 

taxpayer data, and ensures equipment and system availability to support the needs of 

100,000 IRS employees.

The IRS IT organization’s vision is to become a world-class provider of IT services, and to 

achieve this goal, it will focus on three key components – people, process, and technology. 

People: The IRS needs a high-quality, dedicated IT workforce to tackle the challenges posed 

by an increasingly complex external environment. To develop current employees and hire 

qualified candidates, the IRS will examine and improve employee recruitment, recognition, 

training, and evaluations for all tenures and positions.

Process: One of the two strategic foundations needed to achieve the IRS service and 

enforcement goals is technology. The IRS’s objective is to build and deploy advanced IT

systems, processes and tools to improve IRS efficiency and productivity. To meet this 

objective, the IRS implemented a Capability Maturity Model Integration (CMMI) process 

improvement approach that integrates traditionally separate organizational processes. CMMI 

is adopted worldwide by top companies to improve areas, such as development, services, and 

acquisitions. The IRS is using CMMI to guide process improvements across projects to:

• Produce quality products and services;

• Create value for the business stakeholders;

• Enhance customer satisfaction; and

• Gain industry-wide recognition for excellence.

The IRS also uses Information Technology Infrastructure Library (ITIL), one of the most 

widely accepted approaches to IT service management in the world. ITIL is being integrated 

throughout the IRS, and it is a proven method based on industry standards for best practices 

regarding planning common processes, roles, and activities. The benefits to ITIL best 

practices are:

• Improved IT services;

• Reduced costs;
IRS-123

• Improved productivity;

• Improved use of skills and experience; and

• Improved delivery of third party services.

Technology: The IT organization balances the right technology solutions with optimal 

service levels to meet the IT needs of the IRS. By doing so, the IRS is able to increase 

operational efficiencies and decrease costs. The IRS continues to identify and implement 

appropriate technology solutions such as Customer Account Data Engine (CADE) 2. The IRS 

will continue to test and evaluate new and innovative technologies as part of a commitment to 

provide customers with the tools they need to get the job done as efficiently and effectively as 

possible.

CyberSecurity – Safeguarding Taxpayer Data 

The IRS has a portfolio of IT initiatives to ensure the integrity and confidentiality of taxpayer 

data, while maintaining secure electronic interaction within the IRS. These initiatives

comprise solutions that resolve long-standing Computer Security Material Weakness 

(CSMW) goals and offer increased security for taxpayer transactions. The IRS is

implementing stronger authentication measures that provide enhanced data security and a 

continuous monitoring capability to identify and deter cyber attacks that could compromise 

IRS systems and data. Collectively, these IT initiatives will increase taxpayer trust and 

confidence in the federal tax administration process.

The following IRS CyberSecurity initiatives will protect taxpayer data:

• Social Security Numbers (SSN) Elimination and Reduction 2-D 

Barcoding – Leverages barcoding to eliminate use of SSNs on taxpayer notices;

• Enterprise Security Audit Trails – Facilitates the capability for continuous monitoring 

of user, system, and application activity to identify and prevent unauthorized access 

and targeted cyber attacks or security compromises;

• Security Compliance Posture Monitoring and Reporting – Manages risk proactively 

through automated security compliance and risk posture monitoring;

• Safeguarding Personally Identifiable Information (PII) Data Extracts – Detects and 

prevents the loss of PII and sensitive agency information through a phased 

implementation for data-in-motion (i.e., data that is moving through a network, 

including wireless transmissions); data-at-rest (i.e., that resides in databases, file 

systems, or other structured storage methods); and data-in-use (i.e., endpoints of a 

network where the data is being used such as desktop hard drives, and other mobile 

media);

• Enterprise Vulnerability Assessment Management – Proactively assesses, manages,

and prevents the exploitation of vulnerabilities across IRS networks and applications 

through a comprehensive suite of scanning tools;
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• Internal Identity and Access Management – Consolidates disparate data sources for 

identity management, providing a trusted repository for administration of access and 

rights management;

• Secure Registration Based Email – Allows email communication using encryption 

security to mitigate the risk of compromising Sensitive but Unclassified (SBU) data or 

PII exchanged in email communications with external agencies and constituents;

• E-Authentication – Provides a common service framework to authenticate taxpayers 

for access to IRS systems, applications and data;

• Federal Information Security Management Act (FISMA)

Enhancements – Continues diligence in assessing and resolving the security and 

certification of systems to properly safeguard systems, services, and taxpayer data; and

• Disaster Recovery – Ensures the continued reliability and resilience of enterprise 

capabilities of services offered to taxpayers.

IT Infrastructure

The Sustaining Infrastructure Program (SIP) centrally funds IRS IT infrastructure investments 

primarily to replace hardware and system software that have reached or surpassed their useful 

life. The infrastructure strategy (further described in Section 4B, IRS Aging Legacy 

Information Technology (IT) Infrastructure (non-BSM) Proposed Long-term Multiyear 

Funding Strategy and Timetable), provides a strategic sequencing plan to a mature portfolio 

of infrastructure services and establishes the technology for effective integration with the IT 

operations and management processes. 

The centrally managed infrastructure portfolio and shared scalable infrastructure services 

offer world-class security, control, consistency, flexibility, and standardization. Server 

virtualization and consolidation, desktop and laptop refreshment, Microsoft platform 

upgrades, Enterprise Internet Protocol (IP) telephony rollout and Public Branch Exchange 

(PBX) retirement are examples of major infrastructure projects scheduled for implementation.

IT Project Management 

The IRS MITS Strategy and Capital Planning Office are responsible for prioritizing the IT 

investment portfolio according to the Senior Executive Team (SET) strategic priorities. MITS 

accomplishes this 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.

• 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
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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 determine 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 Assessment Process 

The IRS implemented a standardized health assessment process as a key component 

of the governance framework. The health assessment process uses:

o Enterprise Key Performance Indicators (EKPIs) to rate project performance 

and to 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 EKPI 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 issues. Metrics regarding 

cost and schedule variances are reported both internally and externally to oversight 

organizations. 

As of April 2011, 100 percent of the non-BSM IT Portfolio had risk and contingency 

management plans; and, approximately 96 percent of non-BSM projects were 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.
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Criminal Investigations (CI) Capital Assets

These capital assets are used to protect CI special agents from threats and bodily injury when 

performing their law enforcement duties including conducting investigations concerning 

alleged criminal tax fraud violations, financial crimes, and other related offenses. CI special 

agents use law enforcement vehicles to conduct or participate in surveillance, armed escorts, 

undercover operations, execution of search and arrest warrants, seizures, etc. 

Security Equipment

The IRS purchases security equipment such as cameras, digital video recorder system 

(DVRs), access control panels, and card readers. The IRS uses facility-specific security 

assessments to prioritize asset needs and develop criteria for replacing equipment in a given 

facility. Additionally, emergency needs arise over the course of the year. These needs are 

ranked and funded according to the affect the equipment has on the overall security posture. 

Performance is measured through security reviews, testing, and the assessment of individual 

facilities for their overall security posture using a number of criteria including location, size, 

number of employees, and type of work done in the facility. These criteria are used to 

develop an overall security posture. This posture is then compared to existing equipment in 

the facility to determine additional needs. If a facility has a large divergence from the 

posture, equipment is ordered. Reviews are done on a regular basis to measure and evaluate 

performance. 

The useful life of security equipment is usually five years. The need for equipment can arise 

at any time, such as when employees are moved into a new building, during internal moves, 

or intermittently when equipment needs to be replaced. The benefit of this capital asset 

investment is that it supports the IRS priority to provide a safe and secure environment for its 

employees, equipment, and facilities.

Leasehold Improvements 

Many projects undertaken by IRS entail the design, alteration, and furnishing of space either 

upon acquisition, at lease renewal, or for other purposes, such as supporting space 

consolidation or reduction. The portion of the project that is captured as a capital asset is 

reflected in OMB Object Class 3200, Land and Structures, and includes alterations to 

buildings; fixtures such as elevators, plumbing, power-plant boilers, fire-alarm systems, 

lighting, heating systems, air-conditioning systems, flooring, and carpeting. The total figure 

is a sum of the expenditures in that object class for all IRS projects in that particular year. 

The IRS employs a scheme to rank projects in priority order and keeps a comprehensive list 

of projects across the territories. Projects are considered based on the critical need for the 

project. Projects approved but not funded in the current year are deferred to the following 

year. Proposed projects are identified throughout the year and are prioritized and added to list 

as appropriate.
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Performance is measured utilizing the following measures: 

• Project Spend per total rentable square feet (RSF) in Portfolio;

• Project Spend per usable square feet (USF) on Closed Projects; 

• Total USF Touched by Projects; and

• Percent of Total USF Under Management; Percent Customers Satisfied With

Completed Space Projects.

The useful life of these alterations is usually five years or the remaining fixed term of the 

lease. The fixed term of most leases is five years, with options to renew or to extend for some 

additional period. The need for alterations can arise at any time, including, but not limited to: 

• Adding personnel workspaces;

• Consolidating functions; and

• Addressing other space issues. 

The benefit of these alterations is that they provide the means for the business unit occupants 

to perform their mission efficiently and in user-friendly space. In some cases, a portion of the 

investment may provide a savings such as in the area of energy consumption.
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The IRS Sustaining Infrastructure (SI) Prioritization Process is the IRS long-term multi-year 

funding strategy within the Operations Support account to upgrade and modernize the aging 

legacy information technology infrastructure. The process is built on leading business 

practices that support the IRS mission and strategic objectives while ensuring compliance 

with Federal laws and agency oversight guidance. To provide for infrastructure viability over 

the long-term, with the flexibility to meet dynamically changing business requirements, the 

Sustaining Infrastructure program established a prioritization process to replenish aged assets 

that first support the most critical IRS business processes. Overlaying the annual budget onto 

this prioritization, the program establishes its infrastructure investment timetable. Extending 

beyond legacy systems, investments in innovation such as network convergence and desktop 

virtualization will allow the IRS to gain efficiencies such that foreseeable budgets will meet 

IRS requirements to replace aged assets. This innovation element, as part of the SI program, 

is a key component to IRS’ long-term infrastructure viability. Projects are assessed and 

funded annually across three Portfolios to include:

Portfolio Name Description

Average 

Percentage of 

Portfolio

Sustaining Infrastructure Aged inventory beyond useful life 70%

Sustaining Architecture & 

Engineering

Aged inventory not past its useful 

life, but tied to production 

applications or critical business need

19%

Sustaining Other Operational Demand 11%

The SI strategy objectives are:

• Achieve an acceptable level of aged assets (20 – 25%);

• Reduce the aged inventory of IRS infrastructure;

• Describe an IRS future infrastructure replacement decision model; 

• Focus replacement investment decisions on the future infrastructure vision; 

• Assist in preparing annual asset retirement goals; and 

• Make the most efficient infrastructure investments. 

The benefits of the SI Prioritization Process include reducing the overall operational 

infrastructure cost of Modernization & Information Technology Services (MITS) wherever 

possible; reducing equipment diversity and quantity; improving infrastructure capacity; 

improving governance; increasing IT security; improving disaster recovery operations; and 

driving infrastructure to a more efficient world-class environment.
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The SI Prioritization Process is defined by four lifecycle phases: 1) Pre-Select (Screen and 

Rank), 2) Select (Choose), 3) Control, and 4) Evaluate. IRS governance bodies make 

decisions using defined processes and data regarding the investments during each of these 

phases. Approved investments become part of the larger sustaining infrastructure investment 

portfolio. The process is dynamic. Proposed and ongoing investments are continually 

monitored throughout their lifecycle and compared to other investments in the overall 

portfolio. Post-investment assessments review successful investments as well as those that 

have been terminated or delayed.

Sustaining Infrastructure Prioritization Process Lifecycle:

The Pre-Select Phase provides a process to assess proposed IT solutions for unmet business 

requirements. The pre-selection phase creates a portfolio of IT project investments designed 

to improve overall organizational performance. The three-step selection process is: 

• Step 1 – IT proposals are screened for the level of review as well as relevance and 

feasibility. A mature investment screening process prescribe the amount of 

documentation and level of analytical rigor depending on the project’s type 

(i.e., mission critical infrastructure, etc.) and phase (i.e., initial concept, new, ongoing, 

and operational).

• Step 2 – Proposals are reduced to those with the highest potential to support the IRS 

critical mission and/or operations. If viable, it moves into the Investment 

Management Plan (IMP) development stage where it undergoes the development of a 

full IMP.

• Step 3 – IT projects are rigorously compared against one another to create a 

prioritized list of all investments under consideration. After completing analysis, the 

IRS develops a ranked listing of information technology projects. A prioritized list of 

IT projects and proposals with supporting documentation and analysis is completed.

During the Select (fund) phase, an executive level decision-making body determines which 

projects are funded based on the analyses completed in the previous steps. The process is 

used to prioritize IT investments to align with priorities and strategy. Projects are funded 

based on budget constraints with consideration for technical soundness of projects, 

contribution to mission needs, performance improvement priorities, and overall available 

funding levels.

The Control Phase begins once investments have been selected, budgeted, and have received 

funding. The Control Phase monitors on-going IT projects during the planning, acquisition, 

deployment and maintenance/operational phases of the IT investment life cycle. The primary

objective is to assess the performance and enable the effective management of all major IT 

investments within the IRS. If a project is late, over cost, or not being developed according to 

approved IMPS, projects may be modified or cancelled. 
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The Evaluate Phase includes two components, a Post Implementation Review (PIR) on 

implemented or cancelled investments, and an annual analysis of the performance of the 

IRS’s portfolio management process. During post implementation reviews, data is collected, 

recorded, and analyzed to compare expected results against actual benefits and returns. Once 

investments are fully implemented or cancelled, actual versus expected results are evaluated 

to (1) assess the investment’s impact on strategic performance, (2) identify modifications that 

may be needed, and (3) revise the investment management process based on lessons learned.
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4C – Summary of FY 2011 Savings Realized

In FY 2011, the IRS President’s Budget identified $190,638,000 million and 472 FTE in 

reductions to the IRS base budget. Total actual savings realized in FY 2011 were 

$277,178,100 and 960 FTE, $86,540,300 and 488 FTE more in total savings. FY 2011 

savings were realized as follows: 

Savings not fully realized: -$5,150,000 / 0 FTE. Actual savings: -$2,653,700 / 0 FTE

Reduce Tuition Assistance Program (TAP) - $5,150,000 / 0 FTE - Actual savings 

realized in the TAP program from FY 2010 to FY 2011 were $2,653,700. 

Savings fully realized: -$42,680,000 / 0 FTE

Non-Recur Savings: -$32,680,000 / 0 FTE - These savings resulted from 

non-recurring, one-time (e.g., ADP equipment and training) costs associated with the 

hiring of more than 2,000 enforcement employees funded by the FY 2010 enforcement 

initiatives. 

Reduce Printing, Travel and Training: -$10,000,000 / 0 FTE – These saving 

resulted from reduced agency-wide printing of selected internal manuals, selected 

training materials; and reduced non-case related travel and non-technical training.

Increased savings realized: -$142,808,000 / -472 FTE. 

Actual Savings: -$231,844,400/ -960 FTE

Increase e-File Savings -$22,808,000 / -472 FTE. Actual savings realized: 

-$42,374, 400 / -960 FTE. - The IRS projected FY 2011 e-File savings based on 

anticipated fewer paper filed returns as well as increased electronically-filed returns 

with the enactment of the Worker, Homeownership, and Business Assistance Act of 

2009 (Public Law 111-92). In FY 2011, the IRS received 13.4 million fewer 

(10.1 million individual and 3.3 million business) paper returns compared to FY 2010

and an increase of 15.7 million returns filed electronically resulting in total actual 

savings of $42,374,400 and 960 FTE.

Information Technology (IT) Infrastructure and Process Improvements and 

Reduced Procurement/Contracting: -$100,000,000 / 0 FTE. Actual savings: 

$164,600,000 / 0 FTE - Actual savings realized in these two areas was 

$164.6 million, resulting from renegotiating contracts for more favorable pricing and 

changing contract vehicles to firm fixed price type contracts; mostly in IT hardware, 

software licensing and maintenance, and telecommunication contracts. 
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Eliminated Selective Mailings of Forms and Publications: -$20,000,000 / 0 FTE. 

Actual savings: $24,870,000 / 0 FTE - The IRS saved $24,870,000 by eliminating 

selective mailings of forms and publications. These included:

Non-Mandated Notice Inserts - In FY 2011, the IRS eliminated 

non-mandatory inserts in taxpayer notices. By eliminating the non-mandatory 

inserts, the lower-weighted notices saved $518,000 in postage costs. 

Automated Mailing of Form 1040, U.S. Individual Tax Return, Tax 

Packages and Business Tax Products - In FY 2011, the IRS eliminated 

mailing tax packages to individual taxpayers and eliminated and/or reduced the 

direct mailing of a number of tax packages and publications to 

businesses. The eliminated products included individual income tax packages 

(Forms 1040, 1040A, 1040EZ), business tax packages (Forms 1120, 1120S, 

1065), federal employment tax forms (Publication 393), Split-Interest Trust 

Information Return (Form 5227), Annual Return/Report of Employee Benefit 

Plan (Form 5500), and additional quarterly and other business tax 

products. The savings for these eliminations and other mailing and 

procurement efficiencies totaled $24,352,000.

Reinvestment of FY 2011 Savings

The budget passed by Congress for FY 2011 was a full-year continuing appropriation at 

FY 2010 levels with a 0.2 percent rescission of $24,293,000 for an enacted level for the IRS 

of $12,121,830,000. 

The $24.3 million rescission resulted in net savings to the IRS of $253,986,000 which were 

reinvested as follows:

Unfunded Mandatory Increases: $99,986,000 - The FY 2011 budget included 

increases to maintain current levels, including pay annualization of the FY 2010 pay 

raise, non-pay inflation adjustments and additional costs from the increase of FERS 

agency contributions.

Unfunded IRS Priorities: $93,000,000 - The FY 2011 budget requested program 

increases to address some of the IRS’s most critical priorities. IRS reinvested savings 

of $83 million to the most critical of these priorities:

Maintain telephone level of service - $20,000,000 - IRS requested 

$20.9 million to increase telephone level of service. At the FY 2011 enacted 

level, IRS would not have been able to maintain the current level of service, so 

savings of $20 million were reinvested to maintain this level. 

Improve IRS.gov/on-line services - $21,000,000 - IRS requested $25 million 

to begin the migration of IRS web content and applications to a new 

consolidated IRS web environment. Savings of $21 million were reinvested to 

initiate this effort and improve on-line taxpayer service options. 
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Fund Operations and Maintenance of modernized systems: $43,000,000

IRS requested $45,463,000 to fund the Operations and Maintenance (O&M) 

costs of deployed modernization systems. Savings of $43 million were 

reinvested to fund this on-going cost of operations.

Upgrade the Integrated Financial System (IFS): $9,000,000 - The IRS 

FY 2012 budget request included $27.5 million to update IFS to ensure IRS 

compliance with future federal accounting requirements and allow 

implementation of standard interfaces with other federal systems. 

In anticipation of not receiving this funding in FY 2012, $9 million of savings 

were reinvested to upgrade this critical financial system.

Unobligated Balances: $61,000,000 - The IRS ended FY 2011 with $61 million of 

unobligated balances. 
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4.3 – IRS Performance Measure Table
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Customer Service Representative (CSR) Level of Service The number of toll free callers that either speak to a Customer Service Representative or 

receive informational messages divided by the total number of attempted calls.

Customer Contacts Resolved per Staff Year The number of Customer Contacts resolved in relation to staff years expended. 

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), Tax Exempt and Government Entities (TE/GE), and Large 

Business and International (LB&I) (Field Exam and Correspondence Exam programs) divided 

by the total individual return filings for the prior calendar year.

Field Exam Nat'l Quality Review Score The score awarded to a reviewed field examination case by a Quality Reviewer using the 

National Quality Review System (NQRS) quality attributes.

Office Exam Nat'l Quality Review Score The score awarded to a reviewed office examination case by a Quality Reviewer using the 

NQRS quality attributes.

Examination Quality – Industry Average of the scores of Industry Cases reviewed. Case scores are based on the percentage 

of elements passed within each auditing standard.

Examination Quality – Coordinated Industry Average of the scores of Coordinated Industry Cases reviewed. Case scores are based on 

the percentage of elements passed within each auditing standard. 

Examination Coverage – Business (Corps. >$10M)

The number of LB&I returns (C and S Corporations with assets over $10 million and all 

partnerships) examined and closed by LB&I during the current fiscal year divided by the 

number of filings for the preceding calendar year.

Examination Efficiency – Individual (1040)

The sum of all individual 1040 returns closed by SB/SE, W&I, TE/GE, and LB&I (Field Exam 

and Correspondence Exam programs) divided by the total Full-Time Equivalent (FTE) 

expended in relation to those individual returns.

Automated Underreporter (AUR) Efficiency The total number of W&I and SB/SE contact closures (a closure resulting from a case where 

we made contact) divided by the total FTE, including overtime.

Automated Underreporter (AUR) Coverage

A percentage representing the total number of W&I and SB/SE contact closures (a closure 

resulting from a case where SBSE and W&I made contact) divided by the total return filings 

for the prior year.

Collection Coverage – Units The volume of collection work disposed compared to the volume of collection work available.

Collection Efficiency – Units The volume of collection work disposed divided by total collection FTE.

Field Collection Nat'l Quality Review Score The score awarded to a reviewed collection cases by a Quality Reviewer using the NQRS 

quality attributes.

Automated Collection System (ACS) Accuracy The percent of taxpayers who receive the correct answer to their ACS question.

Criminal Investigations Completed

The total number of subject criminal investigations completed during the fiscal year, including 

those that resulted in prosecution recommendations to the Department of Justice as well as 

those discontinued due to a lack of prosecution potential. 

Number of Convictions The number of criminal convictions.

Conviction Rate The percent of adjudicated criminal cases that result in convictions.

Conviction Efficiency Rate ($) The cost of Criminal Investigation’s (CI's) program divided by the number of convictions. 

TE/GE Determination Case Closures The number of cases closed in the Employee Plans or Exempt Organizations Determination 

programs, regardless of type of case or type of closing.

Percent of BSM Projects within +/- 10% Cost Variance The percentage of BSM projects that are within the +/-10% threshold for cost. The cost 

variance is measured from the initial cost estimate versus current cost estimate.

Percent of BSM Projects within +/- 10% Schedule 

Variance 

The percentage of BSM projects that are within the +/-10% threshold for schedule. The 

schedule variance is measured from the initial schedule estimate to the current schedule 

estimate.

Budget Level Performance Measurement Descriptions
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Performance Measures Type of 

Measure

FY 2006 

Actual

FY 2007 

Actual

FY 2008 

Actual

FY 2009 

Actual

FY 2010 

Actual

FY 2011 

Actual

FY 2012 

Planned

FY 2013 

Planned

Customer Service Representative Level of Service Oe, L 82.0% 82.1% 52.8% 70.0% 74.0% 70.1% 61.0% 63.0%

Customer Contacts Resolved per Staff Year E 7,414 7,648 12,634 12,918 10,744 12,419 13,300 14,400

Percent of Eligible Taxpayers Who File for EITC Oe * * * * * * 75% - 80% 75% - 80%

Customer Accuracy - Tax Law (Phones) Ot 90.9% 91.2% 91.2% 92.9% 92.7% 93.4% 92.7% 92.7%

Customer Accuracy - Accounts (Phones) Ot 93.2% 93.4% 93.7% 94.9% 95.7% 96.0% 95.0% 95.0%

Timeliness of Critical Filing Season Tax Products to the Public Ot 83.0% 83.5% 92.4% 96.8% 95.3% 96.3% 95.0% 95.0%

Timeliness of Critical TE/GE & Business Tax Products to the 

Public Ot 61.2% 84.0% 89.5% 95.2% 97.7% 96.4% 93.0% 95.0%

Percent Individual Returns Processed Electronically Oe, L 54.1% 57.1% 57.6% 65.9% 69.3% 76.9% 79.0% 80.0%

Cost per Taxpayer Served ($) (HCTC) E $13.71 $14.90 $16.94 $13.79 $9.52 $12.36 $13.00 $13.00 

Sign-Up Time (Days) - Customer Engagement (HCTC) Ot 98.7 93.3 94.0 91.3 124.0 117.0 125.0 125.0

Percent of Business Returns Processed Electronically Oe, L 16.6% 19.1% 19.4% 22.8% 25.5% 31.8% 32.0% 34.0%

Refund Timeliness - Individual (Paper) Ot 99.3% 98.9% 99.1% 99.2% 96.1% 99.4% 98.0% 98.0%

Taxpayer Self-Assistance Rate E, L 46.8% 49.5% 66.8% 69.3% 64.4% 70.1% 72.2% 74.4%

Examination Coverage - Individual Oe, L 1.0% 1.0% 1.0% 1.0% 1.1% 1.1% 1.0% 1.0%

Field Exam Nat'l Quality Review Score Oe, L 85.9% 85.9% 86.0% 85.1% 84.9% 85.8% 85.8% 86.4%

Office Exam Nat'l Quality Review Score Oe, L 88.2% 89.4% 90.0% 92.1% 91.6% 90.4% 90.4% 90.4%

Examination Quality - Industry Oe, L 85.0% 87.0% 88.0% 88.0% 87.0% 90.0% 90.0% 90.0%

Examination Quality - Coordinated Industry Oe, L 96.0% 96.0% 97.0% 95.0% 95.0% 96.0% 97.0% 97.0%

Examination Coverage - Business (Assets > $10 million) Oe, L 7.3% 6.8% 6.1% 5.6% 5.7% 6.2% 5.6% 5.4%

Examination Efficiency - Individual E, L 128 137 138 138 140 139 134 134

Automated Underreporter Efficiency E, L 1,832 1,956 1,982 1,905 1,924 2,007 2,067 2,067

Automated Underreporter Coverage E, L 2.4% 2.5% 2.6% 2.6% 3.0% 3.3% 3.2% 3.2%

Collection Coverage (Units) Ot, L 54.0% 54.0% 55.2% 54.2% 50.1% 50.0% 47.8% 46.8%

Collection Efficiency (Units) E, L 1,677 1,828 1,926 1,845 1,822 1,952 2,073 2,028

Field Collection Nat'l Quality Review Score Ot, L 84.2% 84.0% 79.0% 80.5% 80.6% 80.3% 78.0% 79.0%

Automated Collection System Accuracy Oe 91.0% 92.9% 95.3% 94.3% 95.9% 94.9% 94.5% 95.0%

Criminal Investigations Completed Ot, L 4,157 4,269 4,044 3,848 4,325 4,697 4,000 4,000

Number of Convictions Oe, L 2,019 2,155 2,144 2,105 2,184 2,350 2,175 2,175

Conviction Rate Oe, L 91.5% 90.2% 92.3% 87.2% 90.2% 92.7% 92.0% 92.0%

Conviction Efficiency Rate ($) E, L $328,750 $301,788 $315,751 $327,328 $324,776 $310,029 $325,000 $325,000

TE/GE Determination Case Closures Ot 108,462 109,408 100,050 96,246 105,247 91,205 65,794 62,600

Percent of BSM Projects within +/- 10% Cost Variance E ** ** 92.0% 60.0% 40.0% 71.4% 90.0% 90.0%

Percent of BSM Projects within +/- 10% Schedule Variance E ** ** 92.0% 90.0% 100.0% 100.0% 90.0% 90.0%

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure, L - Long-Term Goal

* The methodology for estimating the eligibility rate is being revised.

** In FY 2006 and 2007, Cost and Schedule Variance was reported separately for each project release/subrelease. In FY 2008, these measures were changed to reflect an overall percentage of all major BSM projects.
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4.4 – Cost of IRS Operating Activities

FY 2011 Cost of IRS Operating Activities

The following charts provide the FY 2011 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 2011 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 2011 actual costs by major expense category.

Notes:

1

Other includes Contractual Services, Supplies, Printing, Postage, Travel and Training 2

Enforcement includes Non-Labor Enforcement Expenses of $234M (2.0%)

Labor Costs represent 76.59% of total expenses and are included in Taxpayer Service, Enforcement, Operations 

Support, and HCTC 

FY 2011 Expenses by Appropriation

(Excluding Imputed Costs)

Operations 

Support, 35.27%

Health Insurance 

Tax Credit 

Administraton, 

0.27%

Taxpayer 

Services, 19.95%

Business System 

Modernization, 

0.96%

Enforcement, 

43.55%

FY 2011 Expenses by Category

(Excluding Imputed Costs)

Taxpayer Service

19.13%

Health Care Tax Credit 

(HCTC)

0.01%

Enforcement2

45.48%

Other Operations 

Support

13.31%

Business Systems 

Modernization (BSM)

0.64%

IT & 

Telecommunications

5.36%

Other1

8.63%

Rent

7.44%
IRS-138

4.5 – Summary of IRS FY 2013 Implementation of P.L. 111-148 & 111-152

Dollars In Thousands

FY 2013 Implementation of 

Public Laws 111-148 & 111-152 $000 FTE $000 FTE $000 FTE $000 FTE

Program Increases

Implement Tax Legislative Changes 28,634 274 56,727 48 85,361 322

Implement Information Technology and Operational Infrastructure

to Deliver New Tax Credits

266,894 537 266,894 537

Implement Information Technology Changes Needed for Individual 

Coverage Requirement 

8,200 8,200

Total, FY 2013 Initiatives $28,634 274 $331,821 585 $360,455 859

TAXPAYER SERVICES ENFORCEMENT OPERATIONS SUPPORT TOTAL
IRS-139

4.6 – Summary of IRS FY 2013 Budget Request Bureau: Internal Revenue Service Summary of Proposed FY 2013 Budget Request $000 FTE $000 FTE $000 FTE $000 FTE $000 FTE FY 2012 Enacted $2,239,703 30,535 $5,299,367 47,586 $3,947,416 11,985 $330,210 605 $11,816,696 90,711 Changes to Base Maintaining Current Levels (MCLs) $17,282 $38,156 $52,698 $287 $108,423 Other Adjustments1 (110) (110) Efficiencies/Savings ($31,544) (395) ($31,489) (219) ($7,530) ($287) ($70,850) (614) Increase e-File Savings (8,124) (177) (442) (8,566) (177) Reduce Travel (740) (1,708) (130) (2,578) Targeted Program Reductions (22,680) (218) (31,489) (219) (5,380) (157) (59,706) (437) Subtotal, FY 2013 Changes to Base ($14,262) (395) $6,667 (219) $45,168 (110) $37,573 (724) FY 2013 Current Services (Base) $2,225,441 30,140 $5,306,034 47,367 $3,992,584 11,985 $330,210 495 $11,854,269 89,987 Program Changes Restoration of FY 2012 Reductions to Enforcement Programs Restore Audit Coverage to Address Individual Tax Compliance Issues 388 6 83,265 882 43,519 24 127,172 912 Restore Collection Coverage 11,869 195 35,407 573 26,033 73,309 768 Subtotal, Restoration of FY 2012 Reductions to Enforcement Programs $12,257 201 $118,672 1,455 $69,552 24 $200,481 1,680 Program Increases Enforcement Initiatives Promote Offshore Compliance 81,738 700 29,001 110,739 700 Improve International Compliance 33,033 223 5,851 38,884 223 Implement Tax Legislative Changes 8,366 189 51,694 619 68,806 49 128,866 857 Implement Revenue Protection Strategy 7,069 40 60,490 832 21,297 13 88,856 885

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

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

Implement Uncertain Tax Position Reporting Requirements 3,576 20 454 4,030 20

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

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

Infrastructure Initiative

Implement Information Technology and Operational Infrastructure to Deliver New Tax Credits 266,894 537 266,894 537

Implement Information Technology Changes Needed for Individual Coverage Requirement 8,200 8,200

Subtotal, Infrastructure Initiative $275,094 537 $275,094 537

Subtotal, FY 2013 Program Changes $27,692 430 $395,636 4,216 $483,616 624 $906,944 5,270Total, FY 2013 Budget Request $2,253,133 30,570 $5,701,670 51,583 $4,476,200 12,609 $330,210 495 $12,761,213 95,257 1 The FTE adjustment reflects the labor required to support the BSM program in FY 2013.

Dollar/FTE Change $13,430 35 $402,303 3,997 $528,784 624 (110) $944,517 4,546

Percent Change 0.60% 0.11% 7.59% 8.40% 13.40% 5.21% -18.18% 7.99% 5.01%

Final OMB Passback Levels $2,239,703 $5,715,100 $4,476,200 $330,210 $12,761,213

($13,430) $13,430

TOTAL OPERATIONS SUPPORT TAXPAYER SERVICES ENFORCEMENT BSM