Internal Revenue Service 

Program Summary by Appropriations Account and Budget Activity 

(Dollars in thousands) 

Appropriation FY 2010 FY 2011 FY 2012 FY 2010 to FY 2012

Enacted Annualized 

CR Level

Request $ Change % Change

 Taxpayer Services $2,278,830 $2,278,830 $2,345,133 $66,303 2.9%

 Pre-Filing Taxpayer Assistance and Education 679,924 679,924 701,035 21,111 3.1%

 Filing and Account Services 1,598,906 1,598,906 1,644,098 45,192 2.8%

 Enforcement $5,504,000 $5,504,000 $5,966,619 $462,619 8.4%

 Investigations 639,363 639,363 678,849 39,486 6.2%

 Exam and Collections 4,700,345 4,700,345 5,103,420 403,075 8.6%

 Regulatory 164,292 164,292 184,350 20,058 12.2%

 Operations Support $4,083,884 $4,083,884 $4,620,526 $536,642 13.1%

 Infrastructure 895,202 895,202 986,045 90,843 10.1%

 Shared Services and Support 1,311,127 1,311,127 1,313,050 1,923 0.1%

 Information Services 1,877,555 1,877,555 2,321,431 443,876 23.6%

 Business Systems Modernization $263,897 $263,897 $333,600 $69,703 26.4%

 Health Insurance Tax Credit Administration $15,512 $15,512 $18,029 $2,517 16.2%

Subtotal, Internal Revenue Service $12,146,123 $12,146,123 $13,283,907 $1,137,784 9.4%

Offsetting Collections - Reimbursable 137,758 137,279 138,272 993 0.7%

Mandatory Appropriation - User Fees 175,529 204,428 204,428 0 -

Total Program Operating Level $12,459,410 $12,487,830 $13,626,607 $1,138,777 9.1%

Direct FTE 94,766 94,766 99,878 5,112 5.4%

Reimbursable FTE 659 659 659 - -

User Fees FTE 93 - - - -

Total FTE 95,518 95,425 100,537 5,112 5.4%

FY 2010 Enacted represents the approved FY 2010 Operating Plan. 

Summary 

 

The Internal Revenue Service (IRS) collects 

the revenue that funds the government and 

administers the nation’s tax laws. The IRS 

collected $2.345 trillion in taxes (gross 

receipts before tax refunds) in FY 2010, 

93 percent of federal government receipts. To 

protect the flow of revenue to the government, 

the IRS pursues a robust service and 

enforcement agenda. The service agenda 

supports and protects the trillions in revenue 

that come into the Treasury each year 

voluntarily from taxpayers. The enforcement 

agenda vigorously pursues those who evade 

their responsibility to pay the taxes they owe. 

Total resources to support the IRS activities for 

FY 2012 are $13,626,607,000, including 

$13,283,907,000 from direct appropriations, 

an estimated $138,272,000 from reimbursable 

programs, and an estimated $204,428,000 

from user fees. The direct appropriation is 

$1,137,784,000, 9.37 percent, more than the 

FY 2010 enacted level of $12,146,123,000. 

The IRS Strategic Plan 2009-2013 guides 

program and budget decisions and supports the 

Department of the Treasury Strategic Plan and 

High Priority Performance Goals. 

Helping taxpayers understand their obligations 

under the tax law is critical to improving 
compliance and addressing the tax gap, the 

difference between taxes owed and taxes paid 

on time. Therefore, the IRS remains 

committed to a balanced program of assisting 

taxpayers to understand the tax law and remit 

the proper amount of tax. 

The IRS Strategic Plan goals and objectives 

are: 

 

Improve Service to Make Voluntary 

Compliance Easier 

Enforce the Law to Ensure Everyone 

Meets Their Obligation to Pay Taxes 

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 obligations 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 taxexempt 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 appropriately allocate 

resources; and 

• Ensure the privacy and security of data 

and safety and security of employees. 

The IRS Budget Request supports the 

following Department of the Treasury High 

Priority Performance Goals: 

Increase voluntary tax compliance 

Significantly increase the number of 

paperless transactions with the public 

Enforcement Program: The FY 2012 request 

provides funding to implement enacted 

legislation; handle new information reporting 

requirements; increase compliance by 

addressing offshore tax evasion; expand 

enforcement efforts on noncompliance among 

corporate and high-wealth taxpayers; and 

enforce return preparer compliance. 

Increased resources for the IRS compliance 

programs yield direct, measurable results 

through high return on investment activities. 
The new enforcement personnel will generate 

more than $1.3 billion in additional annual 

enforcement revenue once the new hires reach 

full potential in FY 2014. Vigorous 

enforcement also encourages voluntary 

compliance, further increasing revenue. The 

return on investment (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. 

The tax law is complex and even sophisticated 

taxpayers can make honest mistakes on their 

tax returns. Accordingly, helping taxpayers 

understand their obligations under the tax law 

is critical to improving compliance. To this 

end, the IRS remains committed to a balanced 

program of assisting taxpayers to both 

understand the tax law and remit the proper 

amount of tax. 

Taxpayer Service Program: The FY 2012 

request, partially funded in the Operations 

Support account, provides funding to improve 

telephone level of service, increasing the level 

of service performance target to 80 percent 

from the planned target of 71 percent in 

FY 2010. 

Providing quality taxpayer service is 

especially important to help taxpayers avoid 

making unintentional errors. Assisting 

taxpayers with their questions before they file 

their returns prevents inadvertent noncompliance and reduces burdensome postfiling notices and other correspondence from 

the IRS. To continue the effort to move 

taxpayer service to the internet, and to support 

the Treasury effort to increase paperless 

transactions, an additional $33 million in 

Operations Support will be invested in a multiyear effort to improve the IRS.gov website to 

meet taxpayer needs and the growing demand 

for more electronic services. The technology 

enhancements to IRS.gov and the continued 

investments in electronic filing under the 

Business Systems Modernization (BSM) 

program will allow more taxpayers to reach 

the IRS through the internet. In 2010, there 

were more than 304.8 million visits to 

www.IRS.gov, and more than 66.9 million 

taxpayers checked their refund status by 

accessing Where’s My Refund? in English or in 

Spanish on the IRS website. Taxpayers also 

can use automated features found at 1-800-

829-1040. In FY 2012, the IRS will complete 

the implementation of the electronic filing 

application for Form 1040, U.S. Individual 

Income Tax Return, and supporting forms and 

schedules, and continue adding new forms and 

schedules to the electronic business portfolio 

to further increase web use. 

Business Systems Modernization: The 

FY 2012 request provides funding to continue 

the migration of applications to the core 

taxpayer account database, CADE 2, and the 

expansion of Modernized e-File. The CADE 2 

program is the cornerstone of modernization 

and is a prerequisite to the development of the 

next generation of IRS service and 

enforcement initiatives. It will position the IRS 

to have quicker and better access to data for 

service and compliance. 

The Affordable Care Act (ACA): The 

FY 2012 request includes funding for ACA 

(Public Law 111-148) to administer a premium 

credit to subsidize the cost of health insurance 

for Americans who do not have access to 

affordable coverage; a small business tax 

credit to encourage employers to provide 

health insurance coverage for their employees; 

new information reporting and sharing 

requirements; an excise tax on tanning 

services; a new aggregate annual fee on 

businesses engaged in manufacturing and 

importing branded prescription drugs sold to 

specified government programs; new reporting 

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

employees who can afford health insurance, 

but fail to obtain minimum essential coverage. 

These and other provisions of the ACA will 

require resources to build new IT systems; 

modify existing tax processing systems; 

provide taxpayer outreach and assistance 

services; make enhancements to notices, 

collections, and case management systems to 

address and resolve taxpayer issues timely and 

accurately; and conduct focused examinations 

to encourage compliance. While these 

activities are spread across the three primary 

IRS appropriations, the vast majority of the 

funding request is in the Operations Support 

account that funds information technology and 

infrastructure.

IRS FY 2012 Budget Highlights

(Dollars in thousands)

Appropriation Taxpayer 

Services Enforcement Operations Support

Business 

Systems 

Modernization

Health 

Insurance Tax 

Credit 

Administration

Total

FY 2010 Enacted Budget $2,278,830 $5,504,000 $4,083,884 $263,897 $15,512 $12,146,123

FY 2011 Annualized CR Level $2,278,830 $5,504,000 $4,083,884 $263,897 $15,512 $12,146,123

Changes to Base

Adjustment to Reach FY 2011 President's Policy Level $23,254 $242,275 $10,128 $122,561 $3,447 $401,665

Maintaining Current Levels (MCLs) $12,908 $30,691 $41,755 $168 $232 $85,754

Efficiencies/Savings ($41,333) ($21,996) ($124,440) ($1,026) ($1,162) ($189,957)

Non-Recur Savings (22,090) (22,090)

Increase e-File Savings (21,404) (1,040) (22,444)

Reduce IT Infrastructure (75,000) (75,000)

Reduce Contracts (4,522) (325) (15,907) (20,754)

Reduce Administrative Expenses (5,557) (8,271) (503) (14,331)

Eliminate Lockbox Fees (4,000) (4,000)

Reduce Certain Mailings (4,000) (4,000)

Reduce Training, Travel and Programs (9,850) (9,400) (5,900) (1,026) (1,162) (27,338)

Base Reinvestment 1,486 1,486

Consolidate Submission Processing Site (Atlanta) 1,486 1,486

Subtotal FY 2012 Changes to the Base ($3,685) $250,970 ($72,557) $121,703 $2,517 $298,948

FY 2012 Base $2,275,145 $5,754,970 $4,011,327 $385,600 $18,029 12,445,071

Program Changes

Program Increases:

Taxpayer Service Initiatives $44,078 $70,229 $114,307

Improve Taxpayer Service 44,078 37,229 81,307

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

Enforcement Initiatives $25,910 $209,668 $370,093 $605,671

Increase International Service and Enforcement 48,363 24,233 72,596

Increase Collecton Coverage 2,201 30,275 19,524 52,000

Implement Merchant Card and Basis Reporting 10,475 17,495 7,760 35,730

Increase Coverage to Address Tax Law Changes and Other Compliance Issues 7,229 33,936 55,553 96,718

Ensure Accurate Delivery of Tax Credits 4,946 49,083 206,264 260,293

Administer New Statutory Reporting Requirements 1,059 5,061 52,385 58,505

Leverage Return Preparer Program to Reduce Noncompliance 14,240 2,360 16,600

Address Appeals Workload Growth 7,450 1,650 9,100

Implement Uncertain Tax Position Reporting Requirements 3,765 364 4,129

Infrastructure Initiatives $1,981 $116,877 $118,858

Enhance Security and Disaster Recovery Systems Capability 12,000 12,000

Update Integrated Financial System (IFS) 27,500 27,500

Leveraging Data to Improve Compliance 1,400 1,400

Enhance Physical Security for Federal Employees 1,981 13,500 15,481

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

Business Systems Modernization (BSM) Initiative $52,000 ($52,000)

Continue Migration from Aging Tax Administration System 52,000 (52,000)

Subtotal FY 2012 Program Changes $69,988 $211,649 $609,199 ($52,000) $838,836

Total FY 2012 President's Budget Request $2,345,133 $5,966,619 $4,620,526 $333,600 $18,029 $13,283,907
FY 2012 Budget Adjustments 

 

FY 2011 Annualized CR Level 

The FY 2011 Annualized CR Level for IRS is 

$12, 146,123. 

Adjustment to Reach Policy Level 

Adjustment to Reach Policy Level 

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

Adjustment from the FY 2011 Annualized 

Continuing Resolution (CR) Rate to reach the 

FY 2011 President's Policy Level. The 

President's Policy Level is equal to the FY 

2011 President's Budget as adjusted for the 

proposed pay freeze. 

Base Realignment 

Technical FTE Adjustments +$0 / +501 FTE 

This adjustment reflects permanent changes 

made to ensure FTE levels are fully funded in 

the base budget. 

Base Reinvestment 

Consolidate Submission Processing Site 

(Atlanta) +$1,486,000 / +0 FTE 

Increased use of e-File has led to consolidation 

of the individual return processing sites. A 

portion of the Increased e-File Savings will be 

reinvested to fund the one-time separation 

costs associated with the September 30, 2011 

closure of the Atlanta submission processing 

site. As the Atlanta consolidation approaches, 

the IRS will assist employees to find 

employment either in or outside the 

organization. 

Maintaining Current Levels (MCLs) 

Maintaining Current Levels (MCLs) 

+$85,754,000 / +0 FTE 

Funds are requested for inflation adjustments 

in non-labor expenses such as GSA rent 

adjustments, postage, supplies and equipment 

and health benefits and the increase in Federal 

Employee Retirement System participation. 

No inflation adjustment is requested for pay in 

FY 2012. 

Efficiencies, Savings & Base Reductions 

Non-Recur Savings -$22,090,000 / +0 FTE 

This is the net of reductions of non-recurring, 

one-time costs associated with the IRS 

FY 2011 enforcement initiatives (e.g., IT 

equipment and training). 

Increase e-File Savings -$22,444,000 / -416 

FTE 

This decrease is a result of savings from 

increased electronic filing (e-File). Savings are 

based on e-File projected growth, 

modernization, and the completion of the 

phased implementation of the Worker, 

Homeowner, and Business Assistance Act of 

2009 (Public Law 111-92), which requires 

electronic filing by tax return preparers. 

Reduce IT Infrastructure -$75,000,000 / +0 

FTE 

The IRS will reduce the unit costs of 

infrastructure through use of the Capability 

Maturity Model (i.e., a process improvement 

approach that yields efficiencies in software 

engineering); the Information Technology 

Infrastructure Library (ITIL) that will allow 

the IRS to improve the quality of IT services; 

and the further consolidation of security 

activities in the Cybersecurity organization to 

leverage security best practices. 

Reduce Contracts -$20,754,000 / +0 FTE 

In accordance with Presidential guidance on 

controlling contracting costs, the IRS will 

achieve targeted savings through reduced 

contracting expenses. 

Reduce Administrative Expenses -$14,331,000 

/ -66 FTE 

The IRS will reduce administrative expenses, 

including targeted attrition through hiring 

freezes. 
Eliminate Lockbox Fees -$4,000,000 / +0 FTE 

The IRS will eliminate lockbox fees that now 

will be paid by taxpayers in installment 

agreements. 

Reduce Certain Mailings -$4,000,000 / +0 

FTE 

The IRS will eliminate printing and mailing of 

certain forms and publications and reduce the 

number of inserts in mailings. 

Reduce Training, Travel and Programs – 

$27,338,000 / -41 FTE 

The IRS will reduce agency-wide nontechnical training, non-case related travel, and 

the taxpayer communication and education 

program. 

Program Increases 

Improve Taxpayer Service +$81,307,000 / 

+519 FTE 

Funding for this initiative and the $25.9 

million increase from the FY 2011 President's 

Policy level will provide staffing to address 

rising demand and increase the Customer 

Service Representative Level of Service (LOS) 

from the planned target of 71 percent in 

FY 2010 to 80 percent in FY 2012 while 

maintaining a 93 percent customer satisfaction 

rate for toll-free telephone services. This 

initiative also includes funding to help 

taxpayers understand the new tax law 

provisions and to make related call center and 

infrastructure changes to handle anticipated 

inquiries, including ACA-related service 

questions. 

Expand Online Options through IRS.gov 

Improvements +$33,000,000 / +15 FTE 

This initiative will continue the multi-year 

effort to replace the outdated web portal 

environment and provide additional online 

services to taxpayers. The Taxpayer 

Assistance Blueprint, Phase 2, targeted 

migration to the electronic channel and services as one of the five areas for improvement 

of IRS service delivery. IRS will achieve 

efficiencies by moving high-volume 

transactions to IRS.gov, improving taxpayer 

self-service, reducing taxpayer burden, 

increasing compliance, reducing costs, 

improving security, and these improvements 

will position IRS.gov as the preferred delivery 

channel of choice for taxpayer service. 

Increase International Service and 

Enforcement +$72,596,000 / +377 FTE 

This initiative will implement changes 

required by enactment of the Foreign Account 

Tax Compliance Act (FATCA) included in 

The Hiring Incentives to Restore Employment 

(HIRE) Act of 2010 ( Public Law 111-147). 

The IRS will implement the reporting, 

disclosure and withholding requirements and 

expand coverage of international filings, 

conduct more in-depth international 

compliance work, strengthen compliance 

efforts related to offshore activity and grow 

the Global High-Wealth compliance group. 

This initiative will increase examinations of 

employment tax specialty program audits; 

individual audits; business audits; and criminal 

investigation case closures. 

Increase Collection Coverage +$52,000,000 / 

+413 FTE 

This initiative will expand work on the 

collection inventory and improve collection 

processes to bring taxpayers who fail to pay 

their tax debt into compliance. This funding 

will expand the Automated Collection Systems 

(ACS) program, address the increased 

workload for the Offers in Compromise (OIC) 

program due to program improvements and to 

more taxpayers experiencing economic 

hardship, and improve efficiency through 

innovative approaches to inventory selection. 

The additional staff will resolve an additional 

144,300 tax delinquency accounts (TDA) (i.e., 

balance due accounts where returns were filed, 

but the taxes have not been paid) and 25,200 

tax delinquency investigations (TDI) (i.e., 
investigations of taxpayers with unfiled returns 

who have not responded to a notice). 

Implement Merchant Card and Basis 

Reporting +$35,730,000 / +415 FTE 

This initiative will staff programs to 

implement information reporting on merchant 

payment card and third party reimbursements 

enacted in the Housing and Economic 

Recovery Act of 2008 (Public Law 110-289) 

and basis reporting on security sales enacted in 

the Emergency Economic Stabilization Act of 

2008 (Public Law 110-343). 

Increase Coverage to Address Tax Law 

Changes and Other Compliance Issues 

+$96,718,000 / +497 FTE 

This initiative addresses compliance issues and 

new responsibilities arising from recent tax 

law changes included in major legislation such 

as the American Recovery and Reinvestment 

Act (Recovery Act) and the ACA. This 

initiative will fund compliance programs 

needed for new provisions such as direct-pay 

bonds, new requirements on tax-exempt 

hospitals, a new fee on manufacturers and 

importers of branded prescription drugs, the 

excise tax on indoor tanning, and will also 

increase the number of specialty program (i.e., 

employment tax, excise tax, and estate and gift 

tax) audits. 

Ensure Accurate Delivery of Tax Credits 

+$260,293,000 / +834 FTE 

This initiative recognizes the important role 

IRS plays in delivering economic incentives 

through tax credits by improving the delivery 

of existing credits through a combination of 

improved technology tools and increased 

enforcement staffing. The initiative also funds 

the information technology and other systems 

required to implement the new ACA premium 

assistance tax credit, which becomes effective 

in 2014. IRS must build new systems to 

support eligibility determination based on 

household income, and modify existing tax 

processing systems to support reconciliation of 

advance payments of the credit. The initiative 

also funds the appropriate compliance 

resources for the small employer tax credit, 

which came into effect in 2010. 

Administer New Statutory Reporting 

Requirements +$58,505,000 / +187 FTE 

Recent legislation established significant new 

information reporting and sharing 

requirements from third parties (such as 

employers, health insurance providers), and 

the exchanges to administer the ACA’s 

premium assistance tax credit, the individual 

coverage requirement, and the employer 

responsibility payment. Effective 

implementation will require significant 

enhancements to existing information returns 

systems to handle the additional volumes and 

new information reporting categories. This 

initiative also includes resources to implement 

provisions that allow the IRS to share tax data 

with state and federal entities for the purpose 

of determining eligibility for the advance 

premium credit. The ACA also amends 

Section 6041 of the Internal Revenue Code 

expanding in 2012 the 1099 information 

reporting requirement for businesses to report 

all aggregate purchases of services or property 

greater than $600. A portion of this initiative 

($23.3 million) is allocated to implement this 

provision, although it should be noted that the 

Administration has proposed to repeal this 

provision based on the burden it places on 

small businesses. Should this provision be 

repealed, the IRS would adjust its initiative 

needs accordingly. 

Leverage Return Preparer Program to Reduce 

Noncompliance +$16,600,000 / +108 FTE 

The IRS is increasing tax return preparer 

oversight to ensure that tax return preparers 

are competent and to help ensure that the IRS 

collects the right amount of taxes. This 

initiative will ensure uniform and high ethical 

standards of conduct for tax return preparers 
by enforcing preparer compliance with IRS 

rules, increasing preparer examinations, and 

pursuing preparers engaged in fraudulent 

activities. This initiative is core to the IRS’s 

tax gap strategy and will increase government 

revenue. 

Address Appeals Workload Growth 

+$9,100,000 / +66 FTE 

This initiative will allow the IRS to increase 

Appeals staffing. Despite improvements in 

cycle time and increased efficiency in working 

cases, Appeals continues to experience rising 

inventories, and because of the nature of 

Appeals work, the cases must be processed 

manually. The funding in this initiative will 

reduce the stress put on the appeals process 

because of increased caseload. In addition, 

Appeals settlements lead to revenue to the 

government, so this initiative will increase 

revenues. 

Implement Uncertain Tax Position Reporting 

Requirements +$4,129,000 / +20 FTE 

This initiative will allow the IRS to provide 

guidance and certainty on tax positions and 

meet increasing taxpayer demands for this 

service This increased workload is expected 

as a result of changes IRS has proposed for 

certain large business taxpayers to report 

information about their uncertain tax positions. 

It is a critical part of IRS’s work to gain 

greater transparency into large corporate tax 

returns. 

Enhance Security and Disaster Recovery 

Systems Capability +$12,000,000 / +5 FTE 

This initiative is part of a multi-year 

improvement strategy to support the continued 

deployment of critical disaster recovery 

capabilities. It supports two critical business 

processes: Processing Remittances and 

Processing Tax Returns by reducing the 

recovery time dramatically for the critical 

applications supporting these processes. 

Update Integrated Financial System (IFS) 

+$27,500,000 / +5 FTE 

This initiative provides funds to complete the 

first phase of an initiative to update IFS. This 

request will ensure IRS compliance with future 

federal accounting requirements and allow 

implementation of standard interfaces and 

communication with other federal systems. 

The IRS current financial system is more than 

ten years old and SAP no longer provides 

updates or changes to accommodate new 

legislative or other federal accounting 

requirements. Without a system that will 

allow implementation of new federal 

accounting requirements, the IRS compliance 

with federal financial management standards 

will be jeopardized. 

Leveraging Data to Improve Compliance 

+$1,400,000 / +5 FTE 

The IRS is focused on using a data-driven 

approach to continually innovate and improve 

its programs. This investment will capitalize 

on the significant increase in data reported to 

the IRS, with the goal of increasing 

compliance. Funding will increase compliance 

through leveraging such data and/or evaluating 

the effectiveness of tax-related programs. 

Enhance Physical Security for Federal 

Employees +$15,481,000 / +10 FTE 

The February 2010 attack against the IRS in 

Austin, Texas, killed one IRS employee and 

injured several others. This initiative will 

provide investments needed to update and/or 

upgrade the physical security of IRS facilities. 

The investments will enhance the overall 

security of IRS employees in the work place, 

while maintaining open access for the 

taxpayers that they serve. 

Implement Individual Coverage Requirement 

and Employer Responsibility Payments 

+$62,477,000 / +65 FTE 

This initiative will fund the development of 

the information technology, infrastructure, and 
systems to implement the provisions of 

Subtitle F of Title I of the ACA that establish 

shared responsibility payments for both 

individuals and employers. Beginning in 

2014, the ACA requires individuals who are 

able to afford health insurance to obtain 

minimum essential coverage or pay a penalty, 

and large employers - those with 50 or more 

full-time employees - to make a shared 

responsibility payment if they do not provide 

affordable coverage to their employees, and at 

least one of their employees benefits from the 

premium assistance tax credit. 

Return on Investment for Enforcement Initiatives

Dollars in Millions

FY 2012 Enforcement Investment Cost Revenue ROI Cost Revenue ROI

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

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

Increase International Service and Enforcement 72.6 234.0 3.2 57.1 467.1 8.2

Increase Collection Coverage 52.0 177.3 3.4 45.2 398.3 8.8

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

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

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

Administer New Statutory Reporting Requirements 2.6 9.6 3.7 2.4 16.9 7.0

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

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

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

Administer New Statutory Reporting Requirements 7.6 0.0 0.0 7.5 0.0 0.0

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

Address Appeals Workload Growth 9.1 0.0 0.0 7.9 0.0 0.0

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

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

Explanation of Budget Activities 

 

Taxpayer Services 

The FY 2012 President’s Budget request is 

$2,345,133,000 in direct appropriations, an 

estimated $22,924,000 from reimbursable 

programs, and an estimated $130,962,000 

from user fees, for a total operating level of 

$2,499,019,000. This appropriation funds the 

following budget activities. 

Pre-Filing Taxpayer Assistance and Education 

($701,035,000 from direct appropriations, and 

an estimated $863,000 from reimbursable 

programs) This budget activity funds services 

to assist with tax return preparation, including 

tax law interpretation, publication, production, 

and advocate services. In addition, funding for 

these programs continues to emphasize 

taxpayer education, outreach, increased 

volunteer support time and locations, and 

enhancing pre-filing taxpayer support through 

electronic media. 

Filing and Account Services ($1,644,098,000 

from direct appropriations, an estimated 

$22,061,000 from reimbursable programs, and 

an estimated $130,962,000 from user fees) 

This budget activity funds programs that 

provide filing and account services to 

taxpayers, process paper and electronicallysubmitted tax returns, issue refunds, and 

maintain taxpayer accounts. The IRS 

continues to make progress in decreasing 

paper returns and increasing the use of 

electronic filing and payment methods. 
Enforcement 

The FY 2012 President’s Budget request is 

$5,966,619,000 in direct appropriations and an 

estimated $75,902,000 from reimbursable 

programs for a total operating level of 

$6,042,521,000. The total direct appropriations level includes an additional 

appropriation for tax enforcement and 

compliance activities funded through a 

program integrity allocation adjustment 

totaling $1,257,000,000, of which 

$936,000,000 will be funded from the 

Enforcement account. This appropriation 

funds the following budget activities. 

Investigations ($678,849,000 from direct 

appropriations, and an estimated $66,567,000 

from reimbursable programs) This budget 

activity funds the criminal investigations 

programs that uncover criminal violations of 

the internal revenue tax laws and other 

financial crimes, enforce criminal statutes 

relating to these violations, and recommend 

prosecution as warranted. These programs 

identify and document the movement of both 

legal and illegal sources of income to identify 

and document cases of suspected intent to 

defraud. It provides resources for international 

investigations involving U.S. citizens residing 

abroad, non-resident aliens and expatriates and 

includes investigation and prosecution of tax 

and money-laundering violations associated 

with narcotics organizations. 

Exam and Collections ($5,103,420,000 from 

direct appropriations, and an estimated 

$8,761,000 from reimbursable programs) This 

budget activity funds programs that enforce 

the tax laws and increase compliance through 

examination and collection programs that 

ensure proper payment and tax reporting. It 

also includes programs such as specialty 

program examinations (employment tax, 

excise tax and estate and gift exams), 

international collections and international 

examinations. The budget activity also 

supports appeals and litigation activities 

associated with exam and collection. 

Regulatory ($184,350,000 from direct 

appropriations, and an estimated $574,000 

from reimbursable programs) This budget 

activity funds the development and printing of 

published IRS guidance materials; 

interpretation of tax laws; advice on general 

legal servicing, ruling and agreements; 

enforcement of regulatory rules, laws, and 

approved business practices; and supporting 

taxpayers in the areas of pre-filing agreements, 

determination letters, and advance pricing 

agreements. The Return Preparer Strategy 

initiative is funded within this activity in 

addition to the Office of Professional 

Responsibility who is responsible for 

identifying, communicating, and enforcing the 

Treasury Circular 230 standards of 

competence, integrity, and conduct of 

professionals representing taxpayers before the 

IRS. 

Operations Support 

The FY 2012 President’s Budget request is 

$4,620,526,000 in direct appropriations, an 

estimated $39,446,000 from reimbursable 

programs, and an estimated $73,466,000 from 

user fees, for a total operating level of 

$4,733,438,000. The direct appropriations 

level includes an additional appropriation for 

tax enforcement and compliance activities 

funded through a program integrity allocation 

adjustment totaling $1,257,000,000, of which 

$312,000,000 will be funded from the 

Operations Support account. This 

appropriation funds the following budget 

activities. 

Infrastructure ($986,045,000 from direct 

appropriations, an estimated $516,000 from 

reimbursable programs, and an estimated 

$22,095,000 from user fees) This budget 

activity funds administrative services related 

to space and housing, rent and space 
alterations, building services, maintenance, 

guard services, and non-IT equipment. 

Shared Services and Support ($1,313,050,000 

from direct appropriations, and an estimated 

$20,577,000 from reimbursable programs) 

This budget activity funds policy management, 

IRS-wide support for research, strategic 

planning, communications and liaison, 

finance, human resources, and equal 

employment opportunity and diversity services 

and programs. It also funds printing and 

postage, business systems planning, security, 

corporate training, legal services, procurement, 

and specific employee benefits programs. 

Information Services ($2,321,431,000 from 

direct appropriations, an estimated 

$18,353,000 from reimbursable programs, and 

an estimated $51,371,000 from user fees) This 

budget activity funds staffing, equipment, and 

related costs to manage, maintain and operate 

the information systems critical to the support 

of tax administration programs. This includes 

the design and operation of security controls 

and disaster recovery planning. This budget 

activity funds the development and 

maintenance of the millions of lines of 

programming code that support all aspects and 

phases of tax processing and the operation and 

administration of the mainframes, servers, 

personal computers, networks, and a variety of 

management information systems. 

Business Systems Modernization 

The FY 2012 President’s Budget request is 

$333,600,000 in direct appropriations. This 

appropriation funds the following budget 

activity. 

Business Systems Modernization 

($333,600,000 from direct appropriations) 

This budget activity funds the planning and 

capital asset acquisition of information 

technology (IT) to continue the modernization 

of IT systems, including labor and related 

contractual costs. The completion of the core 

taxpayer account database, CADE 2, is the 

cornerstone of modernization and is a 

prerequisite to the development of the next 

generation of IRS service and enforcement 

initiatives. The integration strategy includes a 

particular focus on enhanced information 

technology security practices and robust 

accounting and financial management 

controls. This activity also funds the ongoing 

development of the Modernized e-File 

platform for filing tax returns electronically. 

Health Insurance Tax Credit 

Administration 

The FY 2011 President’s Budget request is 

$18,029,000 in direct appropriations. This 

appropriation funds the following budget 

activity. 

Health Insurance Tax Credit Administration 

($18,029,000 from direct appropriations)This 

budget activity funds costs to administer a 

refundable tax credit for health insurance to 

qualified individuals, which was enacted as 

part of the Trade Adjustment Assistance 

Reform Act of 2002. 

Legislative Proposals 

 

The FY 2012 President’s Budget includes a 

number of legislative proposals intended to 

improve tax compliance with minimum 

taxpayer burden. These proposals will 

specifically target the tax gap and generate 

more than $10 billion over the next ten years. 

The implementation cost for the proposals 

included in the FY 2011 President’s Budget, is 

estimated to be $50.4 million over three years 

and includes the initial startup, processing and 

compliance operational costs. Among other 

proposals, the Administration proposes to 

expand information reporting, improve 

compliance by businesses, strengthen tax 

administration, and expand penalties. 
IRS Performance by Program

Program Performance Measure FY 2008 FY 2009 FY 2010 FY 2011 FY 2012

Actual Actual Actual Target Target

Taxpayer Services Customer Contacts Resolved Per 

Staff Year (E)

12,634 12,918 10,744 12,074 12,061

Taxpayer Services Customer Service Representative 

(CSR) Level of Service (%) (Oe)

52.8 70.0 74.0 71.0 80.0

Taxpayer Services Percent of Individual Returns 

Processed Electronically (%) (Oe)

57.6 65.9 69.3 74.0 76.0

Enforcement Automated Collection System 

(ACS) Accuracy (%) (Oe)

95.3 94.3 95.9 94.0 94.0

Enforcement Automated Underreporter 

Coverage (%) (E)

2.6 2.6 3.0 3.3 4.0

Enforcement Examination Efficiency - Individual 

(1040 form) (E)

138 138 140 134 126

Key: Oe - Outcome Measure, E - Efficiency Measure, Ot - Output/Workload Measure, M - Management/Cust. Satisfaction, DISC - 

Discontinued, and B - Baseline

Description of Performance 

 

In FY 2010, IRS continued to provide 

excellent service to taxpayers and enforced the 

laws in a balanced manner. The following is a 

summary of significant program performance 

improvements. 

Enforcement 

In FY 2010, revenue from all enforcement 

sources reached $57.6 billion, 18 percent more 

than in FY 2009. 

This increase in enforcement revenue 

demonstrates that the investment in the IRS 

over the past two years is producing 

significant return. The IRS expanded its 

enforcement presence in the international field, 

continued to pursue high-wealth/high-income, 

noncompliant taxpayers, and audited more 

charities and other tax-exempt organizations. 

As a result, the IRS made improvements over 

FY 2009 in these key areas: 

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

11 percent, reaching the highest rate in 

the past decade; 

• Increased high-income/high-wealth 

audits on taxpayers with income 

greater than $200,000 by 5.5 percent 

and audits for those with income 

greater than $1 million by more than 8 

percent; 

• Increased automated underreporter 

contact closures by 19.8 percent, 

surpassing the four million mark for 

the first time, with more than 4.3 

million; 

• Increased collection case closures by 

6.3 percent and criminal investigations 

by 12.4 percent; 

Total Enforcement Revenue Collected

37.6 43.1 47.3 48.7

59.2 56.4

48.9

57.6

0

20

40

60

FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10

In Billions
• Increased large corporate audits by 

8.1 percent, a significant achievement 

given the size (assets greater than $10 

million) and complexity of these 

corporate entities and audits of foreign 

corporations by almost 48 percent; and 

• Increased tax exempt and government 

entity compliance contacts by 

approximately 20 percent. 

As part of an overall strategy to improve 

offshore compliance, in FY 2010, the IRS 

continued to take aggressive steps to track tax 

evaders that hide their wealth by engaging in 

offshore tax evasion schemes. The IRS more 

than doubled its offshore presence by opening 

new offices in Asia and Central America, 

placed additional law enforcement personnel 

at its existing offices throughout the world, 

and expanded its interaction with key 

international organizations involved in tax and 

financial law compliance. All of these steps 

are designed to develop new leads in ongoing 

criminal tax and financial crime investigations. 

The IRS voluntary disclosure program (VDP) 

provides information on banks and 

professionals, including foreign professionals, 

who facilitate tax evasion. More than 15,000 

Americans with offshore accounts, some 

holding hundreds of millions of dollars, came 

forward during a voluntary disclosure period 

that ended in October 2009 to disclose 

information bringing them back into the U.S. 

tax system. An additional 3,000 Americans 

came forward with accounts at various banks 

since October 2009, with the total disclosures 

over the period expected to reach 20,000. In 

FY 2010, the IRS began reviewing the 

information from program participants to 

identify financial institutions, advisors, and 

others who promoted or otherwise helped 

Americans hide assets and income offshore. 

The IRS continues to ensure the largest 

corporate taxpayers are in compliance using 

strategies that are less time and resource 

intensive. The Compliance Assurance Process 

(CAP) program resolves issues early and 

ensures the filing of accurate returns. The IRS 

plans to make the CAP program permanent 

and is incorporating a number of program 

improvements. 

Taxpayer Service 

The IRS website has become the preferred 

source of information for millions of taxpayers 

to get answers to their tax questions, to 

questions about economic recovery legislation, 

and to prepare and file a federal tax return 

accurately and on time. IRS.gov/Español 

offers many of the same services and 

information in Spanish. 

To improve service to taxpayers during the 

2010 filing season, the IRS enhanced IRS.gov 

by providing a rotating spotlight feature on the 

front page. The spotlight, which changes 

every few seconds, highlights important 

taxpayer information by identifying how tax 

law changes such as Making Work Pay Credit

and First-Time Homebuyer Credit can benefit 

different types of taxpayers; and how to access 

online applications such as Where’s My 

Refund, an online tool for taxpayers to check 

on the status of their refund, and What If?, a 

list of questions and answers to assist 

taxpayers who are having difficult times 

financially handle various scenarios related to 

payment of taxes and other financial problems. 

Demand Increasing for Electronic Tools

2.2 2.4 2.2

4.0 4.5 0.8 0.9 1.2

3.7 2.2 1.0 4.6

9.3

5.7 5.6

4.7

0

2

4

6

8

10

12

14

16

FY 2006 FY 2007 FY 2008 FY 2009 FY 2010

In Millions

Withholding Calculator EITC Assistant

T/P Assistance Center Locator Request Electronic Filing PIN (new)

6.8

12.7

7.9

12.0

15.8
As shown in the chart, taxpayer demand for 

electronic tools has significantly increased and 

the IRS will continue to improve the speed, 

accessibility, and accuracy of on-line 

information as well as develop new 

applications to reach even more taxpayers. 

The IRS also is committed to continuing 

efforts to redesign IRS correspondence to 

improve clarity, accuracy, and effectiveness. 

In FY 2010, the IRS: 

• Completed the redesign of 115 notices 

(25 in Spanish) to provide clear and 

simple explanations of the notice 

purpose and required taxpayer actions; 

• Redesigned the area of IRS.gov that 

provides information on locating 

specific notices and an explanation of 

the redesign process; and 

• Released the first group of nine new 

notices. These notices account for 

approximately two million pieces of 

correspondence with individuals, 

businesses and exempt organizations. 

The IRS completed a successful 2010 filing 

season, rising to challenges posed by the 

implementation of provisions in the American 

Reinvestment and Recovery Act of 2009 

(Recovery Act), the Worker, Homeownership, 

and Business Assistance Act of 2009 

(WHBAA), and increased telephone demand 

for Economic Recovery Payment inquiries. 

The IRS received more than 141.9 million 

individual returns, of which 69.3 percent were 

e-filed. More than 34.6 million taxpayers 

prepared their own e-file return, 32.2 percent 

more than in 2009. 

The IRS issued 109.5 million refunds to 

individual taxpayers totaling $366 billion. The 

average dollar refund was $3,048 compared to 

$2,682 in 2009, an increase of almost 14 

percent. IRS also direct-deposited more than 

73 million refunds compared to 72.4 million in 

2009. Beginning in the 2010 filing season, 

taxpayers could purchase up to $5,000 of 

Series I U.S. Savings Bonds using their federal 

tax refund. More than 22,300 taxpayers took 

advantage of this opportunity, requesting more 

than 98,000 bonds totaling approximately 

$11.1 million. 

In FY 2010, the IRS expanded outreach and 

educational services to improve information, 

news, and taxpayer interactions through social 

media networks (Facebook, Twitter, YouTube, 

etc). For the first time, the IRS produced a 

number of podcasts that were available on 

IRS.gov and iTunes. In addition, the IRS 

created more than a dozen YouTube Videos on 

a variety of subjects including the Education 

Tax Credit, Making Work Pay, and the New 

Homebuyer Credit. These videos attracted 

more than 963,800 upload views and were 

available in English, American Sign 

Language, and Spanish. 

As always, providing high-quality, toll-free 

telephone service is important in helping 

taxpayers navigate the complex tax code. The 

IRS telephone assistors answered 36.7 million 

calls, 6.3 percent fewer than in 2009 while at 

the same time the IRS received 35.1 million 

automated calls, 21 percent more than in 2009, 

reflecting the growing taxpayer demand for 

self-service options. Telephone level of 

service (LOS) increased to 74 percent from the 

FY 2009 LOS of 70 percent. This reflects the 

success rate of taxpayers who call the IRS for 

live telephone assistance on the 1-800 help 

lines. In 2010, the IRS added an estimated 

wait time feature so taxpayers could make 

informed choices on whether to wait for a live 

assistor or use another service channel (i.e., 

self-assisted automated telephone services or 

IRS.gov) to answer their questions. Accuracy 

rates for both customer tax law and account 

questions remain above 92 percent. 

The IRS also provides in-person service at its 

Taxpayer Assistance Centers (TACs), for 
taxpayers resolving tax issues and needing help to 

prepare their tax returns. Approximately 6.4 

million taxpayers visited a TAC, three percent 

more than in 2009. Walk-in service remains 

popular among elderly taxpayers, those with 

limited English and computer proficiency, and 

taxpayers without internet access. 

Business System Modernization 

IRS modernization efforts continue to focus on 

core tax administration systems designed to 

provide more sophisticated tools to taxpayers 

and to IRS employees. The following 

highlights IRS accomplishments: 

• Customer Account Data Engine 

(CADE) posted more than 41.2 million 

returns, generated more than 35.8 

million refunds and, for the first time, 

accepted more than seven million 

payments submitted with taxpayer 

returns. In FY 2010, the IRS revised 

its CADE strategy to implement a new 

taxpayer account database for the 2012 

filing season. This new database will 

accelerate the refund processing time 

for most taxpayers. 

• Modernized e-File (MeF) deployed an 

additional release that allowed for the 

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

functionality is designed to reach 61 

percent of the e-File population, or 

approximately 55.1 million filers.