# Congressional Budget (2024) > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/agency%3Airs%3Adbba7efc6aa7c34e ## Record - **Collection:** Agency decision - **Document type:** Agency decision ## Text Fiscal Year 2025 Congressional Budget Justification & Annual Performance Report and Plan Publication 4450 (Rev. 2-2024) Catalog Number 39720Z Department of the Treasury Internal Revenue Service www.irs.gov IRS-i Table of Contents Commissioner’s Message .............................................................................................................. 1 Section I – Budget Request ........................................................................................................... 3 A – Mission Statement............................................................................................................... 3 1.1 – Appropriations Detail Table ............................................................................................ 3 1.2 – Inflation Reduction Act Implementation ....................................................................... 7 B – Summary of the Request .................................................................................................... 8 1.3 – Budget Adjustments Table .............................................................................................. 9 C – Base Adjustment and Program Changes Description ..................................................... 9 Maintaining Current Levels ..................................................................................................... 9 Pay Annualization (5.2%) ........................................................................................................ 9 Pay Raise (2.0%) ..................................................................................................................... 9 Non-Pay ................................................................................................................................... 9 Program Decrease...................................................................................................................... 9 Staff Attrition to Offset Unfunded FY 2025 MCLs................................................................... 9 1.4 – Object Classification (Schedule O) Obligations ........................................................... 10 D – Appropriations Language and Explanation of Changes............................................... 11 Section II – Budget and Performance Plan............................................................................... 19 Taxpayer Services .................................................................................................................... 22 2.1 – Budget Adjustments Table ........................................................................................... 26 2.2 – Object Classification Obligations ................................................................................ 27 2.3 – Appropriation Detail Table .......................................................................................... 28 2A – Pre-Filing Taxpayer Assistance and Education ......................................................... 28 2.1.1 – Budget and Performance Report and Plan .............................................................. 31 2B – Filing and Account Services ........................................................................................ 31 2.1.2 - Budget and Performance Report and Plan .............................................................. 35 Enforcement ............................................................................................................................. 36 2.1 – Budget Adjustments Table ........................................................................................... 40 2.2 – Object Classification Obligations ................................................................................ 41 2.3 – Appropriation Detail Table .......................................................................................... 42 2C – Investigations................................................................................................................ 42 2.1.3 – Budget and Performance Report and Plan .............................................................. 45 2D – Exam and Collections .................................................................................................. 45 2.1.4 – Budget and Performance Report and Plan .............................................................. 51 2E – Regulatory .................................................................................................................... 52 2.1.5 – Budget and Performance Report and Plan .............................................................. 53 Technology and Operations Support ..................................................................................... 54 2.1 – Budget Adjustments Table ........................................................................................... 56 2.2 – Object Classification Obligations ................................................................................ 57 2.3 – Appropriation Detail Table .......................................................................................... 58 2F – Infrastructure ............................................................................................................... 58 IRS-i 2.1.6 – Budget and Performance Report and Plan .............................................................. 60 2G – Shared Services and Support ....................................................................................... 60 2.1.7 – Budget and Performance Report and Plan .............................................................. 64 2H – Information Services ................................................................................................... 64 2.1.8 – Budget and Performance Report and Plan .............................................................. 68 Business Systems Modernization ........................................................................................... 69 2.1 – Budget Adjustments Table ........................................................................................... 70 2.2 – Object Classification Obligations ................................................................................ 71 2.3 – Appropriation Detail Table .......................................................................................... 71 2I – Business Systems Modernization .................................................................................. 72 2.1.9 – Budget and Performance Report and Plan .............................................................. 75 B – Business Systems Modernization ..................................................................................... 76 C – Changes in Performance Measures ................................................................................. 83 Section III – Supplemental Information ................................................................................... 84 3.1 – Summary of Capital Investments.................................................................................. 84 3.2 – IRS Performance Measures Table ................................................................................ 92 3.3 – Return on Investment (ROI) for IRS Major Enforcement Programs ....................... 94 3.4 – Policy Proposal to Extend Inflation Reduction Act Funding ..................................... 97 Section IV – Appendix ................................................................................................................ 99 4.1 – Summary of IRS FY 2025 Cybersecurity Budget Request ......................................... 99 4.2 – Summary of IRS FY 2025 Budget Request .................................................................. 99 IRS-ii Commissioner’s Message The IRS is embarking on a once-in-a-generation endeavor to envision and realize the future of tax administration. As the next few years will be crucial for this journey, we are focusing on several major goals, including: o Ensuring taxpayers can easily contact the IRS – whether in person, on the phone or online – and get help navigating complex tax laws and accessing the credits they deserve, o Identifying the growing number of taxpayers with complex returns – including certain wealthy individuals, large corporations, and complex partnerships – who are shielding income to evade their tax responsibility and collecting from them what is owed, and o Addressing the growing risk of tax scams and schemes by protecting honest taxpayers from them and rooting out the nefarious actors that perpetrate them. The IRS has many other goals and objectives supporting this effort as part of our Strategic Operating Plan. This includes making dramatic improvements to our Information Technology (IT) infrastructure and design and delivering modern technology platforms that center around data and applications. These efforts will support all our transformation work. Achieving this ambitious agenda will require that we rebuild areas in the IRS that have suffered from more than a decade of underfunding that preceded the Inflation Reduction Act. A critical change we are making involves providing our workforce with the right tools – including training, technology, and smarter processes – so we are ready now and, in the future, to meet our core mission of supporting taxpayers and the nation. The Strategic Operating Plan outlines dozens of initiatives to achieve these goals – from call center modernization to enterprise digitization to protecting against emerging scams to revamping employee onboarding processes – and we have launched hundreds of associated projects to implement the plan. These efforts are already starting to make transformational changes that will provide significant benefits over the next decade for taxpayers, tax professionals and the tax system. A few examples include: • • • • • We cut phone wait times almost 90 percent (from 28 min to 3 min), answered 3 million more calls, and provided service to 140,000 more taxpayers in-person in Filing Season 2023 than in Filing Season 2022. We achieved a telephone Level of Service (LOS) of 87 percent throughout the 2023 filing season. We processed 750k+ more individual federal tax returns than in Filing Season 2022, scanned 225 times more forms than in 2022, made 51 additional forms and letters available for online response, and enabled a new direct-deposit refund option for taxpayers with amended returns. We opened or reopened 54 Taxpayer Assistance Centers. We cleared the backlog of unprocessed 2022 individual tax returns with no errors. IRS-1 While We Seize this Moment, We Also Have to Look to the Future The Fiscal Responsibility Act of 2023 (FRA) introduced uncertainty around our future funding by immediately rescinding $1.4 billion of IRA appropriations funding and proposing an additional $20.2 billion cut (assumed to be enacted in FY 2024 in this request). The IRS estimates this change will add to the United States’ deficit by more than $100 billion. Additional rescissions of IRA funding would further undermine the nation’s financial strength. I am also concerned with funding levels in Taxpayer Services. At the current pace, without the new investments from the proposed mandatory funding, the IRS will exhaust IRA Taxpayer Services funds by FY 2026, leaving a calamitously large Taxpayer Services funding gap. Additionally, failing to sustain the IRA investment in technology and enforcement would force the IRS to significantly scale back its progress, resulting in a less fair tax system and increasing the deficit by tens of billions of dollars annually. Building on the Successes of IRA is Good for the United States The substantial, multi-year funding provided in the IRA fueled our recent successes. For these improvements to continue and accelerate, however, a consistent, reliable funding stream remains critical for the agency – both for our annual appropriations and maintaining the IRA funding. We are requesting new mandatory appropriations of $104 billion over the 10-year budget window. This funding will allow us to fully realize the vision set forth in the IRA Strategic Operating Plan (SOP), sustain the dramatic improvements in taxpayer service we achieved in FY 2023, modernize our current IT portfolio, and sustain the rebuilding of our enforcement workforce. This investment will pay for itself several times over, yielding an estimated $341 billion in revenue over the 10-year period with enhanced enforcement on high-income, high-wealth taxpayers. In addition to the mandatory funding request, the IRS is also seeking more flexibility with our resources. Most likely, it will require a combination of both to fully ensure we are most effectively serving taxpayers and meeting the objectives of the Administration. The decision about whether to adequately fund the agency comes down to a fundamental choice: Whether or not we will have an IRS that: • taxpayers can easily interact with to meet their tax responsibilities or resolve issues if they arise, • ensures fairness in the tax system through its enforcement activities, • quickly and effectively addresses tax scams that exploit vulnerable populations, and • has updated IT infrastructure and modern technology platforms capable of supporting our transformation work. The IRS is a very different place from a year ago because of IRA. With the stable funding base, mandatory proposal, and additional flexibilities included in this request, much more is on the way. With Congress’s support, I am confident that we can meet our ambitious goals and transform our agency to be the tax administrator the American people deserve. –Danny Werfel Commissioner IRS-2 Section I – Budget Request A – 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 – Appropriations Detail Table Dollars in Thousands FY 2023 Appropriated Resources New Appropriated Resources Taxpayer Services Pre-filling Taxpayer Assistance and Education Filing and Account Services Enforcement Investigations Exam and Collections Regulatory Technology and Operations Support3 Infrastructure Shared Services and Support Information Services Business System Modernization Subtotal New Appropriated Resources Other Resources 4 Reimbursables Offsetting Collections (Non-reimbursable) User fees Recoveries from Prior Years Unobligated Balances from Prior Years 567 IRA Funding Usage Transfers In/Out Resources from Other Accounts8 Subtotal Other Resources Total Budgetary Resources Operating Plan1 2 FTE AMOUNT 27,880 $2,880,606 4,447 763,472 23,433 2,117,134 31,963 $5,165,741 3,076 730,488 27,988 4,263,263 899 171,990 11,175 $4,122,707 894,403 5,173 1,157,249 6,002 2,071,055 116 $150,000 71,134 $12,319,054 699 86 1,843 13,661 717 17,006 88,140 168,000 33,836 31,827 53,633 884,175 3,396,142 119 161,471 $4,729,203 $17,048,257 FY 2024 Annualized CR FTE AMOUNT 24,737 $2,780,606 4,200 749,814 20,538 2,030,792 30,576 $5,437,622 2,822 757,402 26,926 4,489,141 828 191,079 10,443 $4,100,826 919,454 4,327 1,111,964 6,115 2,069,408 FY 2025 Request FTE AMOUNT 23,961 $2,780,606 4,076 749,814 19,885 2,030,792 29,765 $5,437,622 2,773 757,402 26,212 4,489,141 780 191,079 10,282 $4,100,826 919,454 4,166 1,111,964 6,115 2,069,408 FY 2024 to FY 2025 Change % Change FTE AMOUNT FTE AMOUNT (777) -3% (124) -3% (653) -3% (811) -3% (49) -2% (714) -3% (48) -6% (161) -2% (161) -4% 65,756 $12,319,054 64,008 $12,319,054 (1,749) -3% 652 176,400 35,625 603,100 53,635 259,000 7,244,826 119 270,538 $8,643,243 $20,962,297 685 211,050 50,556 303,100 61,589 263,880 9,313,255 104 270,538 $10,474,072 $22,793,126 33 71 16,314 918 17,955 83,711 1 56 25,719 469 26,929 90,937 (15) 34,650 14,931 (300,000) 7,954 4,880 9,405 2,068,429 (15) 9,423 7,674 $1,830,829 $1,830,829 5% -21% 58% -49% 50% 9% 20% 42% -50% 15% 2% 29% -13% 21% 9% The FY 2023 Operating Plan does not include COVID supplemental funding, and includes an Inter-Appropriations Transfer (IAT) from Enforcement ($272 million) to Taxpayer Services ($100 million), Operations Support ($22 million), and Business Systems Modernization ($150 million). 2 FY 2023 Enacted may differ slightly from the amounts reported in the IRS FY 2023 Operating Plan due to timing of legislative actions and agency decisions. 3 The IRS is requesting to rename the Operations Support appropriation to Technology and Operations Support, as this title more accurately reflects its critical role of funding IRS technology, which now represents the single largest component of the appropriation. 4 FY 2023 Other Resources represent actuals. 5 96 percent of the IRA funded estimated FY 2023 FTE levels support non-Enforcement activities. FY 2023 IRA Funding Usage includes amounts for Taxpayer Services ($889 million and 10,518 FTE), Enforcement ($299 million and 495 FTE), Technology and Operations Support ($1,474 million and 2,317 FTE), Business Systems Modernization ($723 million and 327 FTE), and Direct eFile ($12 million and 4 FTE). 6 84 percent of the IRA funded estimated FY 2024 FTE levels support non-Enforcement activities. FY 2024 IRA Funding Usage includes amounts for Taxpayer Services ($969 million and 7,279 FTE), Enforcement ($1,047 million and 4,088 FTE), Technology and Operations Support ($3,258 million and 2,944 FTE), Business Systems Modernization ($1,789 million and 193 FTE), and Energy Security tax credits ($180 million and 1,810 FTE). 7 72 percent of the IRA funded estimated FY 2025 FTE levels support non-Enforcement activities. FY 2025 IRA Funding Usage includes amounts for Taxpayer Services ($1,323 million and 12,562 FTE), Enforcement ($2.317 million and 7,239 FTE), Technology and Operations Support ($3,565 million and 3,808 FTE), Business Systems Modernization ($1,929 million and 300 FTE), and Energy Security tax credits ($180 million and 1,810 FTE). 8 Resources from Other Accounts reflect planned spending from Private Collection Agency retained earnings. IRS-3 Introduction The IRS Fiscal Year (FY) 2025 Budget Request (Budget) is $12.3 billion, in annual appropriations, equal to a potential FY 2024 Annualized Continuing Resolution (CR) and the FY 2023 Enacted level. The IRS is implementing its plans for transformative change with the significant resources provided by IRA. To support ongoing transformative efforts funded through the IRA, annual discretionary appropriations need to provide sufficient recurring “base” resources. Without additional funding, telephone level of service (LOS) is expected to see a drastic decline in FY 2026, when only about one in every ten taxpayers will be able to have their calls answered. The budget includes proposals to expand the IRS’s transfer authority and extend IRA resources through FY 2034 to sustain completed improvements. The IRA is already yielding tangible benefits for taxpayers. During filing season 2023, the IRS was able to achieve an 87 percent level of service on its main customer phone line, a dramatic reversal from 15.5 percent the year before. Wait times to speak with a customer service agent fell to 3 minutes on average, compared to 28 minutes in filing season 2022. Since the beginning of 2023 the IRS opened or reopened 54 Taxpayer Assistance Centers (TACs) to provide more inperson help to taxpayers, with more service improvements being implemented in filing season 2024. In addition, the IRS launched the Paperless Processing Initiative (PPI), which has allowed taxpayers to digitally submit all correspondence and responses to notices, and the Simple Notice Initiative, which will ensure the 170 million notices it sends to taxpayers each year are easier to understand. In addition, the IRS has collected more than $500 million from high-income individuals who were delinquent on their tax debt and launched new enforcement initiatives to ensure large corporations and complex partnerships pay taxes owed. These are just a few of the significant improvements made possible by the combination of IRA funding and IRS base funding. However, with no anticipated discretionary increases for inflationary requirements in FY 2024 and FY 2025, the IRS will be required to further extend its reliance on IRA resources to fund base needs. IRA resources are limited, and the IRS will likely use them entirely before the funding expires in FY 2031. In addition, the authorizing language does not provide the flexibility to realign the IRA funds across appropriations. This will have the most immediate impact on the Taxpayer Services (TS) appropriation, with IRA TS resources expected to run out completely by FY 2026. As the figure illustrates, the IRS is spending much more on Taxpayer Services than is provided in annual appropriations, with IRA funding heavily supplementing telephone and in person service. Without additional funding or additional flexibility to realign between appropriations, LOS is expected to see a drastic decline in FY 2026 and fall even further in FY 2027. In this scenario, the vast IRS-4 majority of taxpayers would be unable to reach an IRS representative for assistance and millions of pieces of correspondence would not be answered timely. To address this issue, the Budget also includes a mandatory proposal that will avert the IRA funding “cliffs,” after which IRA funds are exhausted for a given appropriation and will extend IRA funding through FY 2034. This proposal would provide $104 billion over the 10-year budget window and is estimated to generate an additional $341 billion in revenue. It will ensure that the IRS’s transformation efforts to improve service, modernize technology, and ensure high-income taxpayers, large corporations, and complex partnerships pay the taxes they owe, as described in the Strategic Operating Plan, can continue. Technology and Operations Support With this Budget, the IRS requests Congress change the name of the “Operations Support” appropriation to “Technology and Operations Support.” In part this is an acknowledgement of the current reality – that IT is the largest component of “Operations Support.” It is also an adjustment to reflect the fact that technology work which may previously have been funded through discretionary appropriations for Business Systems Modernization (BSM) will now be funded in the new Technology and Operations Support (TOS) appropriation. Due to Business Systems Modernization discretionary funding constraints in FY 2023, the IRA became the primary source of BSM funding. Though the IRA BSM resources were substantial, they alone are not sufficient to fulfill the planned requirements for IRS technology transformation through FY 2031. When the IRA BSM funding is exhausted, the TOS resources will be the sole funding source for both operations and maintenance (O&M) and IT transformation. If BSM funding is not approved, as requested in the Mandatory Proposal, TOS appropriations would have to provide an additional $3 billion for modernization through FY 2031. IRA is already supplementing TOS discretionary resources by roughly $1 billion per year for O&M (greater than $7 billion through FY 2031). Absent the mandatory proposal, these pressures on TOS funding will only allow the IRS to partially modernize, leaving a sizeable legacy technology footprint that will prevent the IRS from enabling a real-time tax processing system that provides taxpayers with instant account updates, faster refund processing and payment posting, and near real-time status updates. Outdated legacy technology will operate inefficiently and with greater risks of outages affecting taxpayers and IRS employees, while the cost of operating and maintaining IRS technology will continue to rise as the IRS continues to manage both modern and legacy systems. This Budget Addresses IRS’s Operational Risks In addition to steady discretionary resources, this budget requests Congress expand transfer authority to allow IRS to mitigate many of these issues. The flexibility provided by a transfer authority change will allow the IRS to allocate its existing resources to fill funding gaps, as well as make the IRS more nimble in responding as issues arise in the future. Addressing the potential exhaustion of IRA resources requires a combination of supportive discretionary funding and enhanced flexibility for transfers. Without implementing these approaches, including the mandatory funding proposal, the IRS will experience a series of avoidable crises over the next several years as discretionary funding once again becomes the primary source for the IRS’s expanding requirements. The consequences of IRS-5 not solving these problems cannot be overstated: taxpayers would ultimately find it next to impossible to contact the IRS for live assistance, millions of taxpayer calls would go unanswered, refund processing would be slowed, and fewer taxpayers would be able to get in-person help. In addition, IRA resources have allowed the IRS to increase its Enforcement staffing, for example, from 33,183 FTE in FY 2023 (actuals) to a targeted 37,004 FTE in FY 2025. This additional staff will allow the IRS to ensure large corporations, complex partnerships, and high-income individuals pay the taxes they owe. An abrupt and severe decline in the IRS’s Enforcement budget beginning in fiscal year 2030, however, would force the IRS to significantly scale back these efforts. Returning to low audit rates for high-end taxpayers would mean a less fair tax system, while increasing the deficit by tens of billions annually. Tax scams and cheating would become more widespread, and crucial technology improvements to improve data security, create efficiencies, and deliver new tools for taxpayers would be stalled. The Administration’s mandatory proposal, especially, addresses these issues. IRS-6 1.2 – Inflation Reduction Act Implementation The IRS Inflation Reduction Act (IRA) SOP, published in April 2023, guides the IRS’s resources, programs, and operational decisions. The table below outlines IRS actual and planned spending of IRA funding. These funds are being used to strategically add staff, especially for service and compliance priorities, fund IT transformation, cover base shortfalls due to limited discretionary levels. and allow the IRS to undertake a wide variety of projects to transform how the IRS performs its mission. Dollars in Thousands *Reflects the $1.4 billion recission per the Fiscal Responsibility Act, P.L. 118-5. Note: While Taxpayer Services and BSM funding are expected to run out in FY 2025 or shortly thereafter, Enforcement and Operations Support IRA spending is expected to continue into the future. More information on the SOP can be found on page 20. More information on IRA Taxpayer Services can be found on page 22. More information on IRA Enforcement can be found on page 36. More information on IRA Operations Support can be found on page 54. More information on IRA Business Systems Modernization can be found on page 69. IRS-7 B – Summary of the Request The IRS is responsible for administering the Nation’s tax system and meeting the needs of U.S. taxpayers by helping them understand their tax responsibilities and enforcing the law with integrity and fairness. The IRS’s core operations include collection of individual and corporate taxes, examination of returns, taxpayer assistance, oversight of tax-exempt organizations, administering multiple refundable tax credits, and other specialized programs. In FY 2023, the IRS collected more than $4.7 trillion in taxes (gross receipts before tax refunds), nearly all the revenue that supports the Federal government’s operations. With the U.S. tax base becoming more complex, one key responsibility of the IRS is to make it easier for taxpayers to understand and meet their tax obligations. FY 2025 Budget Request and Priorities The FY 2025 discretionary budget request is $12.3 billion, equal to the FY 2023 Enacted Budget level. It contains various proposals that will increase financial flexibility for the IRS and support hiring efforts as the IRS continues to implement its transformation plans with IRA resources. These proposals include: • • • Increase IRS transfer authority so all available resources can be used most effectively, and Expand Direct Hire Authority, which streamlines the hiring process, so that it can be used to accelerate hiring for new staff brought on to the IRS with IRA resources, and Extend the IRA investment into the future with a mandatory funding policy proposal Collectively, these proposals will ensure that the IRS is making the best use of both its discretionary and IRA funding so that the IRS’s transformation efforts can have the greatest impact. In FY 2025, the IRS will utilize IRA resources to build on recent successes and deliver key results for taxpayers. IRS-8 1.3 – Budget Adjustments Table Dollars in Thousands FY 2024 Annualized CR Changes to Base: Maintaining Current Levels (MCLs): Pay Annualization (5.2% average pay raise) Pay Raise (2.0% average pay raise) Non-Pay (2.2% non-pay inflation) Program Decrease Staff Attrition to Offset Unfunded FY 2025 MCLs Subtotal Changes to Base FY 2025 Current Services Total FY 2025 Request FTE 65,756 Amount $12,319,054 $329,551 $118,950 $139,036 $71,565 ($329,551) ($329,551) (1,748) (1,748) (1,748) 64,008 $12,319,054 64,008 $12,319,054 See footnotes in 1.1 - Appropriations Detail Table. C – Base Adjustment and Program Changes Description Maintaining Current Levels………………………………………. +$329,551,000 / 0 FTE Pay Annualization (5.2%) +$118,950,000 / 0 FTE Funds are requested for annualization of the January 2024 5.2 percent average pay raise. Pay Raise (2.0%) +$139,036,000 / 0 FTE Funds are requested for a 2.0 percent average pay raise in January 2025. Non-Pay (2.2%) +$71,565,000 / 0 FTE Funds are requested for 2.2 percent increase in non-labor expenses such as travel, contracts, rent, supplies, and equipment due to inflation. Program Decrease…………………………………………… -$329,551,000 / -1,748 FTE Staff Attrition to Offset Unfunded FY 2025 MCLs -$329,551,000 / -1,748 FTE The IRS will be forced to use IRA supplemental funds to offset the cost of increased MCLs in the base discretionary budget. Using supplemental funds to pay for activities that should be funded from the base creates operational risk for the IRS. IRS-9 1.4 – Object Classification (Schedule O) Obligations Dollars in Thousands Object Classification 11.1 - Full-time permanent 11.3 - Other than full-time permanent 11.5 - Other personnel compensation 11.8 - Spec. personal serv. paym'ts 11.9 - Personnel Compensation (Total) 12.1 - Personnel benefits 13.0 - Benefits for former personnel Total Personnel and Compensation Benefits 21.0 - Travel and transportation of persons 22.0 - Transportation of things 23.1 - Rental payments to GSA 23.2 - Rental payments to others 23.3 - Communications, utilities, and miscellaneous 24.0 - Printing and reproduction 25.1 - Advisory and assistance services 25.2 - Other services from non-Federal sources 25.3 - Other goods and services from Federal sources 25.4 - Operation and maintenance of facilities 25.6 - Medical care 25.7 - Operation and maintenance of equipment 26.0 - Supplies and materials 31.0 - Equipment 32.0 - Land and structures 41.0 - Grants, Subsidies 42.0 - Insurance Claims & Indemn 91.0 - Unvouchered Expenses Total Non-Personnel New Budgetary Resources FTE FY 2023 Operating Plan 6,225,129 65,702 443,566 56,072 6,790,468 2,524,535 12,522 $9,327,525 128,166 25,137 578,392 1,146 241,153 39,924 983,205 120,722 203,616 191,358 22,782 54,655 26,978 237,351 47,573 79,000 2,371 8,000 $2,991,529 $12,319,054 71,134 Amounts reflect obligations of annually appropriated discretionary resources. See footnotes in 1.1 - Appropriations Detail Table. IRS-10 FY 2024 FY 2025 Annualized CR Request 6,074,740 6,074,740 92,754 92,754 384,296 384,296 99,204 99,204 6,650,994 6,650,994 2,491,426 2,491,426 12,483 12,483 $9,154,903 $9,154,903 124,511 124,511 25,548 25,548 606,708 606,708 1,019 1,019 253,389 253,389 39,206 39,206 988,882 988,882 182,576 182,576 230,160 230,160 192,086 192,086 16,567 16,567 47,540 47,540 37,100 37,100 267,587 267,587 59,999 59,999 79,000 79,000 4,273 4,273 8,000 8,000 $3,164,151 $3,164,151 $12,319,054 $12,319,054 65,756 64,008 D – Appropriations Language and Explanation of Changes Appropriations Language Explanation of Changes 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, $2,780,606,000, of which not to exceed $100,000,000 shall remain available until September 30, 2026, of which not less than $11,000,000 shall be for the Tax Counseling for the Elderly Program, of which not less than $26,000,000 shall be available for lowincome taxpayer clinic grants, including grants to individual clinics of up to $200,000, of which not less than $55,000,000, to remain available until September 30, 2026, shall be available for the Community Volunteer Income Tax Assistance Matching Grants Program for tax return preparation assistance, and of which not less than $236,000,000 shall be available for operating expenses of the Taxpayer Advocate Service: Provided, That of the amounts made available for the Taxpayer Advocate Service, not less than $7,000,000 shall be for identity theft and refund fraud casework. 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 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 IRS-11 such rates as may be determined by the Commissioner, $5,437,622,000; of which not to exceed $250,000,000 shall remain available until September 30, 2026; of which not less than $60,257,000 shall be for the Interagency Crime and Drug Enforcement program; and of which not to exceed $35,000,000 shall be for investigative technology for the Criminal Investigation Division: Provided, That the amount made available for investigative technology for the Criminal Investigation Division shall be in addition to amounts made available for the Criminal Investigation Division under the "Technology and Operations Support" heading. TECHNOLOGY AND OPERATIONS SUPPORT For necessary expenses to operate the Internal Revenue Service to support taxpayer services and enforcement programs, including rent payments; facilities services; printing; postage; physical security; headquarters and other IRS-wide administration activities; research and statistics of income; telecommunications; information technology development, enhancement, operations, maintenance and security; the hire of passenger motor vehicles (31 U.S.C. 1343(b)); the operations of the Internal Revenue Service Oversight Board; and other services as authorized by 5 U.S.C. 3109, at such rates as may be determined by the Commissioner; $4,100,826,000, of which not to exceed $275,000,000 shall remain available until September 30, 2026; of which not to exceed $10,000,000 shall remain available until expended for acquisition of equipment and construction, repair and renovation of facilities; of which not to exceed $1,000,000 shall remain available until September 30, 2027, for research; and of which not to exceed $20,000 shall be for With the FY 2023 Enacted Budget not providing any BSM resources, the IRS remains committed to delivering the required technological portfolio that will foster modernization mandates. IRS-12 official reception and representation expenses: Provided, That not later than 30 days after the end of each quarter, the Internal Revenue Service shall submit a report to the Committees on Appropriations of the House of Representatives and the Senate and the Comptroller General of the United States detailing major information technology investments in the Internal Revenue Service portfolio, including detailed, plain language summaries on the status of plans, costs, and results; prior results and actual expenditures of the prior quarter; upcoming deliverables and costs for the fiscal year; risks and mitigation strategies associated with ongoing work; reasons for any cost or schedule variances; and total expenditures by fiscal year: Provided further, That the Internal Revenue Service shall include, in its budget justification for fiscal year 2026, a summary of cost and schedule performance information for its major information technology systems. ADMINISTRATIVE PROVISIONSINTERNAL REVENUE SERVICE (INCLUDING TRANSFER OF FUNDS) SEC. 101. Not to exceed 8 percent of any funds available in this act or any other provision of law to the Internal Revenue Service may be transferred to any other Internal Revenue Service appropriation upon the advance notification to the Committees on Appropriations of the House of Representatives and the Senate. SEC. 102. The Internal Revenue Service shall maintain an employee training program, which shall include the following topics: taxpayers' rights, dealing courteously with taxpayers, cross-cultural relations, ethics, and the impartial application of tax law. IRS-13 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 improvements to the Internal Revenue Service 1–800 help line service a priority and allocate resources necessary to enhance the response time to taxpayer communications, particularly with regard to victims of tax-related crimes. SEC. 105. The Internal Revenue Service shall issue a notice of confirmation of any address change relating to an employer making employment tax payments, and such notice shall be sent to both the employer's former and new address and an officer or employee of the Internal Revenue Service shall give special consideration to an offer-incompromise from a taxpayer who has been the victim of fraud by a third-party payroll tax preparer. SEC. 106. None of the funds made available under this Act may be used by the Internal Revenue Service to target citizens of the United States for exercising any right guaranteed under the First Amendment to the Constitution of the United States. SEC. 107. None of the funds made available in this Act may be used by the Internal Revenue Service to target groups for regulatory scrutiny based on their ideological beliefs. SEC. 108. None of funds made available by this Act to the Internal Revenue Service shall IRS-14 be obligated or expended on conferences that do not adhere to the procedures, verification processes, documentation requirements, and policies issued by the Chief Financial Officer, Human Capital Office, and Agency-Wide Shared Services as a result of the recommendations in the report published on May 31, 2013, by the Treasury Inspector General for Tax Administration entitled "Review of the August 2010 Small Business/Self-Employed Division's Conference in Anaheim, California" (Reference Number 2013–10–037). SEC. 109. None of the funds made available in this Act to the Internal Revenue Service may be obligated or expended— (1) to make a payment to any employee under a bonus, award, or recognition program; or (2) under any hiring or personnel selection process with respect to re-hiring a former employee; unless such program or process takes into account the conduct and Federal tax compliance of such employee or former employee. SEC. 110. None of the funds made available by this Act may be used in contravention of section 6103 of the Internal Revenue Code of 1986 (relating to confidentiality and disclosure of returns and return information). SEC. 111. The Secretary of the Treasury (or the Secretary's delegate) may use funds made available to the Internal Revenue Service in this Act or any other provision of law to appoint, without regard to sections 3304 and 3309 through 3319 of Title 5, United States Code, qualified candidates to positions in the competitive service in occupations for which the Secretary of the Treasury (or the Secretary's delegate)(“the Secretary”) has determined in writing that there is a critical hiring need or severe shortage of highly qualified candidates: Provided, That the These changes will allow the IRS to utilize Direct Hire Authority (DHA) with IRA resources. IRS-15 Secretary shall consult with the Office of Personnel Management (OPM) on the positions to recruit (including quantity), as well as candidate recruitment, assessment, and selection policies; issue guidance to human resources practitioners in the Internal Revenue Service on use of this authority; use OPM qualification standards in all appointments made; and exercise this authority consistent with the requirements in any collective bargaining agreement between the Internal Revenue Service and a labor organization which has been granted exclusive recognition under Chapter 71 of Title 5, United States Code: Provided further, That no later than 180 days after expiration of this authority, the Secretary shall, in consultation with the Director of OPM, provide a report to Congress that includes demographic data of individuals hired pursuant to this authority; salary information of individuals hired pursuant to this authority; and how IRS exercised this authority consistent with merit systems principles: Provided further, That the appointment authority under this section shall expire September 30, 2027. SEC. 112. Notwithstanding section 1344 of title 31, United States Code, funds appropriated to the Internal Revenue Service in this Act may be used to provide passenger carrier transportation and protection between the Commissioner of Internal Revenue's residence and place of employment. SEC. 113 The Secretary of the Treasury (or the Secretary's delegate) may use funds made available to the Internal Revenue Service in this Act or any other provision of law, subject to such policies as the Secretary (or the Secretary's delegate) may establish, to take such personnel actions as the Secretary (or the Secretary's delegate) determines necessary to administer the Internal Revenue Code of 1986, including (1) in addition to the Streamlined Critical Pay authority gives the IRS a management tool to quickly recruit and retain employees with high levels of expertise in technical or professional fields that are crucial to the success of the IRS’s transformative efforts by allowing for higher base salaries for these hires than would otherwise be possible. The current authority will expire in 2025. IRS-16 authority under section 7812(1) of the Internal Revenue Code of 1986, appointing not more than 200 individuals to positions in the Internal Revenue Service under streamlined critical pay authority subject to the requirements and conditions under section 9503 of title 5, United States Code, except that subsection 9503(a)(3) of such title shall not apply; and (2) appointing not more than 300 individuals to positions in the Internal Revenue Service at any one time for which (A) the rate of basic pay may be established by the Secretary of the Treasury (or the Secretary's delegate) at a rate that does not exceed the salary set in accordance with section 104 of title 3, United States Code; and (B) the total annual compensation paid to an employee in such a position, including allowances, differentials, bonuses, awards, and similar cash payments, may not exceed the maximum amount of total annual compensation payable at the salary set in accordance with section 104 of title 3, United States Code: Provided, That the authority provided under this paragraph shall expire on September 30, 2031. IRS-17 E – Legislative Proposals For information on a complete list of the Administration’s FY 2025 legislative proposals for improving tax administration and compliance and for sustaining the IRA funding through FY 2034, please follow this link: https://home.treasury.gov/policy-issues/tax-policy/revenueproposals IRS-18 Section II – Budget and Performance Plan A – Strategic Alignment Alignment to Treasury Strategic Plan and President’s Management Agenda (PMA) The IRS IRA Strategic Operating Plan aligns to the Treasury Strategic Plan FY 2022-2026 and the President’s Management Agenda. The following shows IRS’s alignment to the Treasury Strategic Plan: IRS co-leads one objective with the Office of Tax Policy. Goal 1: Promote Equitable Economic Growth and Recovery • Objective 1.1 Tax Administration and Policy (IRS co-leads this objective) IRS supports four goals and eight objectives with other Treasury Department Offices and Bureaus: Goal 2: Enhance National Security • Objective 2.1 Cyber Resiliency of Financial Systems and Institutions • Objective 2.4 Transparency in the Financial System Goal 3: Protect Financial Stability and Resiliency • Objective 3.3 Financial Innovation Goal 4: Combat Climate Change • Objective 4.2 Climate Incentives and Investment • Objective 4.4 Sustainable Treasury Operations Goal 5: Modernize Treasury Operations • Objective 5.1 Recruit and Retain Diverse and Inclusive Workforce • Objective 5.2 Future Work Routines • Objective 5.3 Better Use of Data • Objective 5.4 Customer Experience Practices The IRS aligns to the three PMA priorities: • PMA Priority 1: Strengthening and Empowering the Federal Workforce. • PMA Priority 2: Delivering Excellent, Equitable, and Secure Federal Services and Customer Experience. • PMA Priority 3: Managing the Business of Government. IRS-19 IRA Strategic Operating Plan The IRS IRA SOP, published in April 2023, guides the IRS’s resources, programs and operational decisions. The SOP’s transformation objectives are: 1. Better Taxpayer Experience: Dramatically improve services to help taxpayers meet their obligations and receive the tax incentives for which they are eligible. 2. Faster Issue Resolution: Quickly resolve taxpayer issues when they arise. 3. Smarter Enforcement: Focus expanded enforcement on taxpayers with complex tax filings and high-dollar noncompliance to address the tax gap. 4. Advanced Technology and Analytics: Deliver cutting-edge technology, data, and analytics to operate more effectively. 5. Empowered Employees: Attract, retain, and empower a highly skilled, diverse workforce and develop a culture that is better equipped to deliver results for taxpayers. The SOP provides a vision for the future of Federal tax administration, which can be summarized as follows: • • • A world class customer service operation where taxpayers can engage with the IRS in a fully digital manner if they choose, where helpful tools for taxpayers to navigate the complexity of our tax laws are deployed and then refreshed and updated regularly based on taxpayer feedback, and where our customer service workforce is maintained at the right size and with the right resources and training to always be ready to meet taxpayer demand for assistance. New capacities, including specialized skills, in place to decompose the complex filings of high-income taxpayers and large corporations and partnerships so Americans have confidence that all taxpayers, regardless of means, are doing their part to meet their responsibilities under the tax laws. An organization and infrastructure rooted in modern technology that provides taxpayers increased confidence that data is secure and that the IRS is prepared to more rapidly meet new requirements and responsibilities that may emerge in the future. While the SOP provided the vision the IRS needs to achieve its transformation over a 10-year period, the IRS worked to create a framework to help it determine how best to prioritize the transformative initiatives identified in the SOP in the context of practical limitations related to procurement, IT, and human resources. Doing so will help the IRS better track, manage, and execute progress against those priorities. The resulting work identified the highest priority areas of focus through filing season 2025, with a second sprint to cover efforts through filing season 2026. IRS-20 The following represent the areas of focus from this work: • • • • • • • • Digitalization: Digitize paper upon receipt by the IRS and enable IRS employees to perform their work digitally. Fairness in Enforcement: Expand enforcement efforts for complex taxpayer segments while simultaneously ensuring taxpayers at all levels receive appropriate fairness to include the outreach and support necessary to ensure taxpayers receive the benefits for which they are eligible. Live Assistance: Ensure when taxpayers need answers from the IRS, we are available. Notifications & Scams: o The IRS provides taxpayers with clear and concise notices. o The IRS is stepping in to disrupt and dismantle scams while providing support to victims. Self Service & Online Accounts: Taxpayers will have the option to address all of their tax-related needs with the IRS online if they choose. Employee Tools and Experience: Enable a fully equipped, empowered, and engaged IRS workforce ready to serve taxpayers. Foundational Technology: Modernize the IRS foundational technology to meet the needs of taxpayers and IRS employees. Human Capital: Attract, retain, and empower a highly skilled, diverse workforce that is better equipped to deliver results for taxpayers. These priority items track to initiatives in the SOP and ensure progress can be made towards the SOP’s vision. Agency Priority Goal (APG) In FY 2023, the IRS supported the Bureau of Fiscal Service’s (BFS) Improving the Payment Experience APG. The IRS continued to partner with BFS and collaborated with tax industry to promote direct deposit for tax refunds. The tax refund electronic payment rate was 79.7 percent, just below the target of 81 percent. While 79.7 percent is under the FY 2023 target, it is above the pre-pandemic fiscal year-end rates. With reduced taxpayer filings from lower income taxpayers who needed urgent financial assistance during the pandemic, the IRS individual tax refund EFT rate was lower than during pandemic years, despite new programming allowing taxpayers to choose direct deposit for e-filed amended returns. IRS-21 Taxpayer Services Appropriation Description The Taxpayer Services appropriation provides funding for taxpayer service activities and programs. This includes producing forms and publications, processing tax returns and related documents, offering filing and account services, phone and in-person taxpayer assistance, and providing taxpayer advocacy services. Hiring and equity, diversity, and inclusion costs for Taxpayer Services employees will now be paid from this appropriation. Notification of this change was included in the FY 2024 Budget. The Taxpayer Services budget request for FY 2025 is $2,780,606,000 in direct appropriations funding 23,961 FTE. This amount is the same as the FY 2024 Annualized CR level, and funds 777 fewer FTE, 3.14 percent lower than the FY 2024 Annualized CR level, due to absorbing unfunded pay increases and inflation. For FY 2025, the IRS expects to use an estimated $1,322,584,000 to fund 12,562 FTE in Taxpayer Services with IRA resources. The IRS uses base resources to fund its Taxpayer Services operations, as described above. Much of the expected funding from IRA is needed to supplement those base operations to provide adequate telephone, online, and in-person service to taxpayers. Base funding alone in FY 2025 will not fund an adequate level of service. By FY 2026, the IRS projects that IRA Taxpayer Services resources will be entirely consumed. Additional discretionary or mandatory (as shown in the policy proposal on page 97) resources will be needed to maintain the level of service that taxpayers deserve. Reducing the IRS’s discretionary appropriations would further deplete IRA resources and hasten the onset of significant level of service reductions. FY 2023 IRA Achievements The IRS was only able to achieve significant improvements in FY 2023 for taxpayers with a substantial increase in funding due to the IRA—increasing the amount available for Taxpayer Services by over 30 percent. Some notable achievements include: • • • • • Expanded the customer callback option to cover 95 percent of all taxpayers seeking live assistance. Cut phone wait times almost 90 percent, answered 3 million more calls, and serviced 140,000 more taxpayers in person during the 2023 filing season. Achieved a telephone level of service of 87 percent through the 2023 filing season. Expanded the Document Upload Tool to allow taxpayers to response to nearly all notices and letters that require a response, providing an alternative to responding by mail or fax. The IRS opened or reopened 54 Taxpayer Assistance Centers and began a series of Community Assistance Visits in underserved and rural communities. The IRS is accelerating and expanding its work through the FY 2024 and FY 2025 priorities identified below. Please note that these activities are focused on Taxpayer Service related outcomes, but may involve funding from several appropriations, for example Information Technology work funded from both TOS and/or BSM. IRS-22 FY 2024 IRA Priorities Live Assistance: Ensure when taxpayers need answers from the IRS, we are available. The IRS is committed to maintaining the significantly improved phone service achieved in filing season 2023 and will again reach 85 percent Level of Service on the agency's main taxpayer helpline during filing season 2024. The IRS will also achieve an average call wait time of 5 minutes or less on the agency's main taxpayer helpline during filing season. As part of expanded taxpayer service efforts, nearly 250 IRS Taxpayer Assistance Centers around the country will extend their weekly office hours to give taxpayers additional time to get the help they need during the filing season, increasing the hours available at Taxpayer Assistance Centers by more than 8,500 hours. Digitalization: Digitize paper as soon as it is received by the IRS and stand-up the tools and processes that allow IRS employees to perform their work in a fully digital manner. In FY 2024, the IRS will continue realizing goals outlined in the Paper Processing Initiative by enabling taxpayers to go paperless through expanded e-filing, digital submission of non-tax forms and digitally processing paper submissions. The IRS will also provide the option for taxpayers to e-file additional tax forms, enabling approximately 4 million additional tax documents to be digitally filed every year. In addition, certain IRS forms will have modern, mobile-friendly formats that make them easier for taxpayers to complete and submit electronically. For Filing Season 2024, the IRS will have replaced scanning equipment that is older than 5 years as well as the automated mail sorter machines in the six highest-volume locations, streamlining the process of mail sorting, opening, and scanning, which will help lay the groundwork for turning the IRS into a digital agency. Self Service & Online Accounts: Taxpayers will have the option to address all of their taxrelated needs with the IRS online if they choose. In filing season 2024, the IRS will deliver these key Individual Online Account capabilities: • Enable Individuals to Schedule and Cancel Payments: Allows individual taxpayers to identify a future date when their payment will be processed and credited against their outstanding balance or for estimated payments. Individual taxpayers can also cancel the scheduled payment in advance of the transaction date. • Enable Individuals to View Cancelled and Returned Payments: Allows individual taxpayers to see their scheduled payments that have been cancelled and payments that have been returned. In filing season 2024, the IRS will deliver these key Business Tax Account capabilities: • Expand Sole Proprietorships and, Single Member LLCs Online Account Functionality: Expands Business Tax Account functionality to allow a sole proprietor to take additional IRS-23 • actions such as viewing business balance due, business tax records, viewing select digital notices, requesting a tax compliance check, registering for clean energy credits (if eligible), and giving account access to their employees. Expand Partnerships and S-Corps (Access to Online Accounts): Expands Business Tax Account to allow an authorized individual partner or shareholder to view business balance due, business transcripts and business name on file. In filing season 2024, the IRS will deliver these key Tax Pro Online Account capabilities: • Enable Individual tax professionals to: o Initiate Power of Attorney (POA) / Tax Information Authorization (TIA) for business clients (already possible to do this for individual clients) o View balance due of authorized clients o View payment activity (pending and scheduled) o Make payments on behalf of individual clients Taxpayers will also benefit from important new updates to the Where's My Refund? tool, to allow taxpayers to see more detailed refund status messages in plain language, and they will also ensure Where's My Refund? works seamlessly on mobile devices. Finally, the IRS launched a Direct File pilot in filing season 2024, providing certain taxpayers with the choice to e-file their federal tax return for free, directly with the IRS. FY 2025 IRA Priorities Digitalization: Digitize paper as soon as it is received by the IRS and stand-up the tools and processes that allow IRS employees to perform their work in a fully digital manner. In FY 2025, the IRS will scan at point of entry virtually all paper-filed tax and information returns. It will also digitally extract data from scanned tax return forms and route it through IRS systems for quicker processing. In addition, the IRS will scan for digital processing approximately half (~125 million) of all paper-submitted correspondence, forms, and notice responses. Taken together, filing season 2025 will be a key turning point in creating a fully digital IRS, creating positive effects in how the IRS manages taxpayer service and compliance efforts across the enterprise. Towards that end, the IRS will digitally transform major IRS process workflows to support filing season 2025 operations and expand the use of robotic process automation (RPA) to streamline time intensive, manual processes. The IRS will also continue efforts begun in FY 2024 to scan historic paper documents, making scanned documents available for future search. Live Assistance: Ensure when taxpayers need answers from the IRS, we are available. When taxpayers call the IRS, they should reach an agent in a timely manner and have high levels of satisfaction with the interaction. In filing season 2025, the IRS remains committed to IRS-24 maintaining the significantly improved phone service achieved in filing season 2023 and planned for filing season 2024 by reaching 85 percent Level of Service and achieving an average call wait time of 5 minutes or less on the agency's main taxpayer helpline. The IRS will also complete the transition into a future state that can improve efficiency through improved forecasting, scheduling, and “just in time” ability to effectively manage taxpayer service through telephone, written, online, and in-person services. This more agile service model will provide taxpayers the ability to communicate their needs through multiple service channels and to receive rapid acknowledgement of actions taking place to resolve their account issues. Simultaneous to these call center improvements, the IRS will improve over the prior year in overage volume for individual amended returns. Overage volume refers to the count of cases that have been open in inventory over an established aging criteria (e.g., 45 days for amended Form 1040X returns). In addition to these changes, IRS agents and officers will be able to take payments over the phone or in-person using modern channels (e.g., credit/debit cards) and use taxpayer identity authentication via a chatbot to pre-authenticate a live phone callback without having to reauthenticate. Self Service & Online Accounts: Taxpayers will have the option to address all of their taxrelated needs with the IRS online if they choose. In filing season 2025, the IRS will deliver these key Individual Online Account capabilities: • In support of the Simple Notice Initiative, view digital copies of most notices and letters online. • Allow individual taxpayers to access digital, mobile, and adaptive forms. • Provide status updates within Online Account, such as changes in refund status. • Expand secure 2-way messaging within Online Account. In filing season 2025, the IRS will deliver these key Business Tax Account capabilities: • Provide additional Business Tax Account functionality for Partnerships and S-Corps, such as the ability to take actions through their account. • In support of the Simple Notice Initiative, view digital copies of most notices and letters online. • Make balance due payments. • View payments history, scheduled/cancelled payments. In filing season 2025, the IRS will deliver these key Tax Pro Online Account capabilities: • Link a business Centralized Authorization File (CAF) enables tax professionals that work for businesses, such as large accounting firms, to access their authorized clients’ account with the different permission types based on their level of authority within the company. • Initiate Power of Attorney (POA) / Tax Information Authorization (TIA) for individual clients. IRS-25 • • Enable authorized tax professionals to make payments on behalf of sole proprietor. Enable authorized tax professionals to make and modify payments on behalf of individual clients. Stacked on top of the changes made in filing season 2024, these key changes enabled by the IRA funding will create an IRS that meets taxpayer expectations for interacting with other financial institutions – namely, the ability to see your financial status and resolve issues online. 2.1 – Budget Adjustments Table Dollars in Thousands See footnotes in 1.1 - Appropriations Detail Table. IRS-26 2.2 – Object Classification Obligations Dollars in Thousands 1 The FY 2023 Operating Plan does not include COVID supplemental funding, and includes an Inter-Appropriations Transfer (IAT) from Enforcement ($27 million) to Taxpayer Services ($100 million), Operations Support ($22 million), and Business Systems Modernization ($150 million). Amounts reflect obligations of annually appropriated discretionary resources. See footnotes in 1.1 - Appropriations Detail Table. IRS-27 2.3 – Appropriation Detail Table Dollars in Thousands 1 The FY 2023 Operating Plan does not include COVID supplemental funding, and includes an Inter-Appropriations Transfer (IAT) from Enforcement ($27 million) to Taxpayer Services ($100 million), Operations Support ($22 million), and Business Systems Modernization ($150 million). See footnotes in 1.1 - Appropriations Detail Table. 2A – Pre-Filing Taxpayer Assistance and Education ($749,814,000 in direct appropriations, an estimated $105,000 in reimbursable programs, and an estimated $166,932,000 in IRA funding): This budget activity funds services to assist with tax return preparation, including tax law interpretation, publication, production, and advocate services. The program activities include: • • • • • • • Pre-Filing Services Management supports headquarters staffing and support for Taxpayer Advocate Service and Customer Assistance Relationship and Education (CARE) program activities. CARE provides pre-filing taxpayer assistance and education. Taxpayer Communication and Education researches customers’ needs; develops and manages educational programs; establishes partnerships with stakeholder groups; and disseminates tax information to taxpayers and the general public through a variety of media, including publications and mailings, websites, broadcasting, and advertising. Media and Publications develops and produces notices, forms, and publications for printed and electronic tax materials, and provides media production services to taxpayers. Taxpayer Advocacy provides advocate services to taxpayers by identifying the underlying causes of taxpayer problems and participating in the development of systematic and/or procedural remedies. Account Management and Assistance – Field Assistance provides face-to-face assistance, education, and compliance services to taxpayers. It includes return preparation, answering tax questions, resolving account and notice inquiries, and supplying forms and publications to taxpayers. Taxpayer Advocate Case Processing provides advocate services to taxpayers to resolve taxpayer problems through prompt identification, referral, and settlement. Wage and Investment (W&I) HQ Management and Administration provides staffing, training, and direct support for W&I management activities of strategic planning, IRS-28 • communications and liaison, finance, human resources, equity, diversity and inclusion, business modernization, and embedded training. Taxpayer Services Research provides resources to support taxpayer services by conducting taxpayer behavioral studies, data analysis, and uses advanced analytics to deliver results and conclusions to inform business decisions to improve IRS products and services. Description of FY 2023 Performance – Pre-Filing and Taxpayer Assistance In FY 2023, the Timeliness of Critical Individual Filing Season (CIFS) Tax Products to the Public (i.e., tax forms, schedules, instructions, and publications) was 96.4 percent, which exceeded the target of 83 percent and was the same compared to FY 2022 performance. In FY 2023, 80 of 83 CIFS tax products were made available to the public timely. Critical tax product timeliness is regarded as tax products that are made available to the public seven calendar days before the official IRS start of the (individual) filing season. IRS prioritized work on the release of critical products, especially forms and instructions, over other products and granted overtime, credit, and compensatory time during workdays, weekends, and holidays. The IRS expects to achieve a target of 89 percent for FY 2024 and FY 2025. In FY 2023, the Timeliness of Critical Tax Exempt/Government Entities (TE/GE) and Business (CTB) Filing Season Tax products to the Public was 86.5 percent, above the target of 85 percent and a 9.9 percent decrease compared to FY 2022. In FY 2023, 64 of 74 tax products were available to the public timely. IRS prioritized work on the release of critical products, especially forms and instructions, over other products and granted overtime, credit, and compensatory time during workdays, weekends, and holidays. The IRS expects to achieve a target of 87 percent for FY 2024 and FY 2025. The Enterprise Self-Assistance Participation Rate (ESAPR) represents the percentage of taxpayer assistance requests resolved using self-assisted automated services. The ESAPR of 94.2 percent exceeded the target of 94 percent. In FY 2023, the total self-assisted services of 1.6 billion was 7.6 percent higher than FY 2022 of 1.5 billion, total assisted services of 99.4 million was 2 percent above the FY 2022 of 97.5 million, and total services were 1.7 billion which was 7.3 percent higher than prior year of 1.6 billion. Using self-assisted services, taxpayers made over 212 million electronic payments, received completed information from the Where’s My Refund? tool over 303 million times, and accessed their Online Accounts during nearly 64.4 million sessions. The IRS expects to achieve a target ESAPR of 94 percent for FY 2024 and FY 2025. IRS-29 IRS-30 FY 2025 Changes by Budget Activity Dollars in Thousands Pre-Filing Taxpayer Assistance and Education Summary of Proposed FY 2025 Request FY 2024 Annualized CR Changes to Base: Maintaining Current Levels (MCLs): Pay Annualization (5.2% average pay raise) Pay Raise (2.0% average pay raise) Non-Pay (2.2% average pay raise) Program Decrease Staff Attrition to Offset Unfunded FY 2025 MCLs Subtotal Changes to Base FY 2025 Current Services FY 2025 President's Budget Request Amount $749,814 $19,276 8,078 9,441 1,757 ($19,276) (19,276) $749,814 $749,814 FTE 4,200 (124) (124) (124) 4,076 4,076 See footnotes in 1.1 - Appropriations Detail Table. 2.1.1 – Budget and Performance Report and Plan Dollars in Thousands Pre-Filing Taxpayer Assistance & Education Resource Level FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 Actual Actual Actual Actual Actual FY 2024 FY 2025 Annualized Request CR 1 $640,379 $621,907 $632,893 $658,344 $763,472 $749,814 $749,814 Appropriated Resources 260 118 578 142 75 100 105 Reimbursable Resources2 Inflation Reduction Act Resources 16,774 122,342 166,932 Budget Activity Total $640,639 $622,025 $633,471 $658,486 $780,321 $872,256 $916,851 1 The FY 2019 - FY 2023 appropriated resources represent the approved operating plan including any inter-BAC transfers and InterAppropriation Transfers. 2 The FY 2019 - FY 2023 columns represent realized resources for reimbursables. *FY 2024 and FY 2025 targets assume all sources of available funding. 2B – Filing and Account Services ($2,030,792,000 in direct appropriations, $46,095,000 from reimbursable programs, $303,100,000 from user fees, and an estimated $1,155,652,000 in IRA funding): 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 public continues to file more returns electronically, with 91.7 percent of individual returns filed electronically during the 2023 filing season—an increase of 2.2 percent over 2022. The program activities include: • Filing and Account Services Management administers filing and account services programs. IRS-31 • • • • • 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 (EPSS) provides centralized operations and support capabilities for the IRS suite of electronic products, including e-help desk, technology support, and Technology and Operations Support. Electronic Tax Administration (ETA) markets and administers electronic tax administration products and services. 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 (CSR) accuracy; and management of the enterprise telephone database. Description of FY 2023 Performance – Filing and Account Services In FY 2023, Customer Accuracy—Tax Law, which is the percent of correct answers given by a live assistor on toll-free tax law inquiries, was 91.4 percent, which was above the target of 87 percent. The IRS will continue to monitor results through data-driven analysis of reports to achieve future goals. Ongoing efforts have and will continue to focus on meeting with field sites, promoting coding consistency of product reviews, and providing training to managers and employees to ensure quality service to customers. The IRS set the Tax Law Accuracy target at 89 percent for FY 2024 and FY 2025. In FY 2023, Customer Accuracy – Accounts, which is the percent of correct answers given by a live assistor on toll-free account inquiries, was 89.2 percent, which was above the target of 87 percent. The IRS will continue to monitor results through data-driven analysis of reports to achieve future goals. Ongoing efforts have and will continue to focus on meeting with field sites, promoting coding consistency of product reviews, and providing training to managers and employees to ensure quality service to customers. The IRS set the Accounts Accuracy target at 89 percent for FY 2024 and FY 2025. The Customer Service Representative (CSR) Level of Service (LOS) measures the relative success rate of taxpayers wanting to speak with an assistor. In FY 2023, from October 1, 2022, to September 30, 2023, CSR LOS was 51.8 percent, which was 13.6 percent below the target of 60 percent and an increase of 197.8 percent over the prior year actual level of service of 17.4 percent. During the filing season, which ran from January 23, 2023, through April 21, 2023, the telephone level of service on individual toll-free lines was 87 percent, meeting the Treasury Secretary’s directive for IRS to achieve at least an 85 percent LOS during the filing season. Customer service representatives answered around 17.9 million calls in FY 2023, and the average wait time was 10.1 minutes, which was less than half the average of 26.0 minutes in FY 2022. IRS-32 During the filing season, wait time was 3 minutes, compared to 28 minutes during filing season 2022. Accounts Management Customer service representatives answer the phones and reply to written correspondence from taxpayers. Accounts management telephone demand fell 52.3 percent, from 81.3 million calls in FY 2022 to 38.8 million calls in FY 2023. Around 8.5 million taxpayers were offered a callback and 64 percent accepted. This resulted in around 2.4 million hours saved for the taxpayer, providing a better experience during FY 2023. In addition to live assistors, the IRS also provides phone service to taxpayers using automation. During FY 2023, over 18 million taxpayers received the answer to their questions through automation. IRS implemented a new measure in FY 2023 called LOS(A), which is defined as the relative success rate of taxpayers that call seeking assistance and receive a response to their inquiry by a live assistor or through automated responses. In FY 2023, LOS(A) was 66.4 percent. The following table displays the LOS on multiple phone service lines. The two major phone service lines are the Accounts Management line and the Automated Collection System (ACS) line. Enterprise includes calls answered across the Service, including telephone lines serving individuals, small business/self-employed, large business and international, and tax-exempt and government entities. The IRS is committed to continuing to deliver an improved experience for taxpayers. For FY 2024, the IRS is again striving to achieve an 85 percent LOS during the 2024 individual filing season and a 60 percent LOS for all of FY 2024 and FY 2025 as CSRs continue to balance answering phones with processing the elevated paper inventory. Additionally, IRS has two inventory indicators, which provide a broader picture of the CSRs whose daily priorities include both answering phones and processing paper inventory. Total Ending IRS-33 Inventory (thousands) in Accounts Management increased from 2,156 in FY 2022 to 2,923 in FY 2023, mainly due to an increase in amended business returns received. Percent of Closures to Receipts was 93.8 percent. The Taxpayers Satisfied with the IRS indicator – the former All Individual Tax Filers Score, is based on the annual American Customer Satisfaction Index (ACSI) Survey, which is the only uniform, cross-industry/government measure of customer satisfaction with the quality of goods and services available to U.S. residents. The measure is calculated as a weighted combination of the ACSI Individual Electronic Tax Filer and Individual Paper Tax Filer Customer Satisfaction Index scores based on a 100-point scale. The 2023 result for Taxpayers Satisfied with the IRS is not yet available and will be reported later this year. FY 2025 Changes by Budget Activity Dollars in Thousands Filing and Account Services Summary of Proposed FY 2025 Request FY 2024 Annualized CR Changes to Base: Maintaining Current Levels (MCLs): Pay Annualization (5.2% average pay raise) Pay Raise (2.0% average pay raise) Non-Pay (2.2% average pay raise) Program Decrease Staff Attrition to Offset Unfunded FY 2025 MCLs Subtotal Changes to Base FY 2025 Current Services FY 2025 President's Budget Request See footnotes in 1.1 - Appropriations Detail Table. IRS-34 Amount $2,030,792 $58,605 23,107 27,008 8,490 ($58,605) (58,605) $2,030,792 $2,030,792 FTE 20,538 (653) (653) (653) 19,885 19,885 2.1.2 - Budget and Performance Report and Plan Dollars in Thousands 1 2 The FY 2019 - FY 2023 appropriated resources represent the approved operating plan including any inter-BAC transfers and Inter-Appropriation Transfers. The FY 2019 - FY 2023 columns represent realized resources for reimbursables and user fees. *FY 2024 and FY 2025 targets assume all sources of available funding. 1 The CSR LOS includes toll-free telephone lines answered by Accounts Management assistors only. 2 Historical data provided for comparative purposes. 3 Based on the American Customer Satisfaction Index (ACSI) survey; the All-Individual Tax Filer score is calculated from separate ACSI Individual Paper Filer and Electronic Filer. For 2023, there will be updates to the methodology. The final results are undergoing review and are not yet available. IRS-35 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 collection of unpaid accounts. Hiring and equity, diversity, and inclusion costs for Enforcement employees will now be paid from this appropriation. Notification of this change was included in the FY 2024 Budget; see page 5 for more information. With these funds, the IRS is committed to not increasing audit coverage for small businesses and households below the $400,000 threshold a year compared to historic levels. The Enforcement budget request for FY 2025 is $5,437,622,000 in direct appropriations funding 29,765 FTE. This amount is the same as the FY 2024 Annualized CR level, and funds 811 fewer FTE, 2.65 percent lower than the FY 2024 Annualized CR level of 30,576 FTE. For FY 2025, the IRS expects to use an estimated $2,316,841,000 and fund 7,239 FTE in Enforcement with IRA resources. The IRS will continue ongoing efforts to protect against Employee Retention Credit (ERC) abuse. To protect taxpayers from scams following concerns about aggressive ERC marketing from tax professionals and others, the IRS announced a moratorium on processing new ERC claims in September and has shifted focus to review ERC claims for compliance concerns, including intensifying audit work and criminal investigations on promoters and businesses filing dubious claims. These efforts include utilizing new technology to capture data from over 1 million paperfiled claims received in the months leading up to and after the moratorium for improved data analysis on preventing erroneous claims from being paid. Thousands of audits are currently in the pipeline with thousands more about to be started, nine open promoter investigations with another 123 under review, and 352 criminal investigations initiated involving more than $2.9 billion in potentially fraudulent ERCs in tax years 2020 – 2023. Additionally, IRS Criminal Investigation will host a series of educational sessions to ensure that tax professionals have the latest information about ERC claims and understand ERC eligibility. The IRS will also continue to administer the ERC Voluntary Disclosure Program and withdrawal program for pending ERC claims for businesses that filed a claim and received a payment in error. The IRS uses base resources to fund its compliance operations, as described above. IRA resources fund an expanded compliance workforce, which allows the IRS to target the growing number of wealthy taxpayers who are evading their tax responsibility and address the growing risk of tax scams and schemes. Base funding alone in FY 2025 will not fund this expanded workforce, as evidenced by recent historically low audit coverage rates. Reducing the IRS’s discretionary appropriations would deplete IRA resources and result in uncollected Enforcement revenue. IRS-36 FY 2024 IRA Priorities Fairness in Enforcement: Expand enforcement efforts for complex taxpayer segments while simultaneously ensuring taxpayers at all levels receive appropriate fairness to include the outreach and support necessary to ensure taxpayers receive the benefits for which they are eligible. During FY 2024, the IRS will expand its enforcement presence through hiring in critical staffing areas such as revenue agents, revenue officers, and tax specialists to expand compliance for large corporations, complex partnerships, and high-wealth individual taxpayers to ensure they pay the taxes they owe. The IRS recently expanded its large partnership compliance program, opening examinations of 76 of the largest partnerships in the U.S. that represent a cross section of industries including hedge funds, real estate investment partnerships, publicly traded partnerships, large law firms, and other industries. On average, these partnerships each have more than $10 billion in assets. The IRS will continue greater focus on partnership issues through compliance letters and recently began mailing around 500 partnerships with over $10 million in assets that had discrepancies on balance sheets which is an indicator of potential non-compliance. Depending on the response, the IRS will add these to the audit stream for additional work. The IRS will continue to expand efforts involving digital assets, including work through the John Doe summons effort and the release of proposed regulations on broker reporting. The IRS projects more digital asset cases will be developed for further compliance work during this fiscal year. A John Doe summons is an investigative tool used to determine the identity of unknown individuals who the IRS has reason to believe have been violating tax law. The summons requires a third party—such as a crypto exchange, bank, or credit card company—to provide certain information to the IRS. The IRS will place more scrutiny on Report of Foreign Bank and Financial Accounts (FBAR) violations. High-income taxpayers from all segments continue to utilize Foreign Bank accounts to avoid disclosure and related taxes. IRS analysis of multi-year filing patterns has identified hundreds of possible FBAR non-filers with account balances that average over $1.4 million. The IRS plans to audit the most egregious potential non-filer FBAR cases during this fiscal year. The IRS is increasing compliance efforts on the U.S. subsidiaries of foreign companies that distribute goods in the U.S. and do not pay their fair share of tax on the profit they earn of their U.S. activity. These foreign companies report losses or exceedingly low margins year after year through the improper use of transfer pricing to avoid reporting an appropriate amount of U.S. profits. To crack down on this strategy, in FY 2024 the IRS is sending compliance alerts to more than 180 subsidiaries of large foreign corporations to reiterate their U.S. tax obligations and incentivize selfcorrection. The IRS is expanding its Large Corporate Compliance (LCC) program, which focuses on noncompliance by using data analytics to identify large corporate taxpayers for audit. LCC includes IRS-37 the largest and most complex corporate taxpayers with average assets of more than $24 billion and average taxable income of approximately $526 million per year. As new accountants come on board in 2024, the IRS is expanding the program by starting an additional 60 audits of the largest corporate taxpayers selected using a combination of artificial intelligence and subject matter expertise in areas such as cross-border issues and corporate planning and transactions. As part of the agency’s increased focus on the tax issues applicable to partnerships and partners, the IRS has been increasing compliance to ensure that Self-Employment Contributions Act (SECA) taxes are being properly reported and paid by wealthy individual partners who provide services and have inappropriately claimed to qualify as “limited partners” in state law limited partnerships (such as investment partnerships) not subject to SECA tax. The IRS efforts to date include more than 80 audits of wealthy individuals. Additionally, in November 2023, the Tax Court issued an opinion in Soroban Capital Partners LP v. Commissioner that agreed with the IRS’s position that the limited partner exception to SECA tax does not apply to a partner who is “limited” in name only. As a result, partners who actively participated in the state law limited partnership must report their partnership share as net earnings from self-employment subject to SECA tax. The IRS has ramped up efforts to pursue high income, high wealth individuals who have either not filed their taxes or failed to pay recognized tax debt, with dozens of Revenue Officers focused on these high-end collection cases. These efforts are concentrated among taxpayers with more than $1 million in income and more than $250,000 in recognized tax debt. In an initial success, the IRS collected $38 million from more than 175 high-income earners. The IRS last fall began contacting about 1,600 new taxpayers in this category that owe hundreds of millions of dollars in taxes. The IRS has assigned over 900 of these 1,600 cases to revenue officers, with over $482 million collected so far. This brings the total recovered from millionaires through these new initiatives to $520 million. The IRS is committed to ensuring that IRS functions execute their work fairly and equitably. The IRS will substantially reduce the number of correspondence audits focused on refundable credits, including the Earned Income Tax Credit (EITC), and implementing an initial round of changes to the EITC audit selection processes that should improve the accuracy of exam outcomes and further reduce disparities. Notifications & Scams: The IRS provides taxpayers with clear and concise notices and steps to disrupt and dismantle scams while providing support to victims. The IRS will coordinate with a variety of partners to help prevent taxpayers, including seniors and veterans, from falling victim to scams and working to assist those who do. Throughout FY 2024 the IRS will work to increase the number of notices viewable for individual taxpayers in their online account. This effort will allow taxpayers to validate that the paper notice they received was legitimately sent from the IRS and not a scammer. IRS-38 FY 2025 IRA Priorities Fairness in Enforcement: Expand enforcement efforts for complex taxpayer segments while simultaneously ensuring taxpayers at all levels receive appropriate fairness to include the outreach and support necessary to ensure taxpayers receive the benefits for which they are eligible. In filing season 2025, the IRS will continue building upon the FY 2024 expanded enforcement efforts to ensure that high-income individuals, large corporations, and complex partnerships are accountable to pay the full amount of taxes they owe. The IRS will establish a new organization to focus on large and complex pass-through entities. The new Pass-Through organization will reside in the IRS Large Business and International (LB&I) division. It will include employees currently in LB&I as well as the Small Business/Self Employed division and newly hired employees. In filing season 2025, the IRS will also identify and implement other strategic options for rapidly increasing enforcement activities, including non-audit activities, to supplement hiring and training activities. By applying improved data and analytics practices, the IRS will also design and implement initial reforms to enforcement practices to improve fairness. In addition, the IRS will move even more towards a centralized, data-backed case selection and compliance planning function to more effectively identify and act upon high-priority compliance cases, with a focus on large corporations, complex partnerships, and high-wealth individual taxpayers to ensure they pay the taxes they owe. Notifications & Scams: The IRS provides taxpayers with clear and concise notices and steps in to disrupt and dismantle scams while providing support to victims. In filing season 2025, the IRS will work with tax software providers to protect and identify taxpayers potentially falling victim to common scams, looking for ways to enable providers to potentially further disrupt scams. It will also begin implementing new analytics and processes using IRS sourced information to identify tax return scams prior to issuing refunds. In filing season 2025, as part of the Simple Notice Initiative, the IRS will redesign up to 200 notices, accounting for 70 percent of total volume (e.g., updated language, shortened notices, updated visual format). The IRS will also initiate technology and/or business process changes required to flexibly generate notices. IRS-39 2.1 – Budget Adjustments Table Dollars in Thousands See footnotes in 1.1 - Appropriations Detail Table. IRS-40 2.2 – Object Classification Obligations Dollars in Thousands 1 The FY 2023 Operating Plan does not include COVID supplemental funding, and includes an Inter-Appropriations Transfer (IAT) from Enforcement ($27 million) to Taxpayer Services ($100 million), Operations Support ($22 million), and Business Systems Modernization ($150 million). Amounts reflect obligations of annually appropriated discretionary resources. See footnotes in 1.1 - Appropriations Detail Table. IRS-41 2.3 – Appropriation Detail Table Dollars in Thousands 1 The FY 2023 Operating Plan does not include COVID supplemental funding, and includes an Inter-Appropriations Transfer (IAT) from Enforcement ($27 million) to Taxpayer Services ($100 million), Operations Support ($22 million), and Business Systems Modernization ($150 million). 2 Because this table is limited to Enforcement, the FY 2024 and FY 2025 IRA Funding Usage FTE percentage change reflects only the Enforcement increase. The FY 2025 IRA Funding Usage FTE in Enforcement represents 24 percent of the total discretionary request FTE. See footnotes in 1.1 - Appropriations Detail Table. 2C – Investigations ($757,402,000 in direct appropriations, an estimated $89,526,000 from reimbursable programs, and an estimated $443,881,000 in IRA funding): This budget activity funds the Criminal Investigation (CI) programs that explore potential criminal and civil violations of tax laws; enforce criminal statutes relating to violations of tax laws and other financial crimes; and recommend prosecution as warranted. The program activities include: • • • • General Management and Administration supports the headquarters management activities of strategic planning, communications, finance, and human resources for CI activities. Identity Theft supports the Stolen Identity Refund Fraud (SIRF) inherent risks while focusing on high impact tax investigations, prosecutions to maximize deterrence and stopping fraudulent refunds from being issued through CI's collaboration with internal and external business partners. CI 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 involving 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. IRS-42 • • International Investigations provides policy, guidance, strategic planning, and investigative support impacting international investigations, travelers and personnel stationed abroad. International investigations involve U.S. citizens residing abroad, non-resident aliens, expatriates, and other international issues. This activity includes support for international programs/investigations such as Foreign Account Tax Compliance Act (FATCA), Organization for Economic and Cooperation Development (OECD), Joint Chiefs of Global Tax Enforcement (J5), International Fraud Referrals/Schemes, transnational organized crime, narcotics, and counterterrorism. Cybersecurity supports CI’s cyber-efforts around inherent risks to CI’s networks and systems while focusing enforcement and investigative actions on the criminals that pose those threats. This additional activity also supports security program management that protects the safeguarding of all data and systems within CI and adhering to all federal regulatory security compliance mandates and local security policies. Description of FY 2023 Performance – Investigations IRS Criminal Investigation (CI) is the law enforcement arm of the IRS. CI special agents are sworn federal law enforcement officers and the only federal law enforcement agency with jurisdiction to investigate federal income tax crimes. CI special agents investigate tax crimes and other financial crimes like money laundering, sanction violations, terrorist financing, identity theft, narcotics, national security, human trafficking, child exploitation, and cybercrime. CI special agents conduct interviews, execute search warrants and criminal arrests as part of their official duties. CI serves the American public by investigating potential criminal violations of the Internal Revenue Code and related financial crimes in a manner that fosters confidence in the tax system and compliance with the law. CI uses the following measures to evaluate its success in achieving its mission. Criminal Investigations Completed by CI in FY 2023 were 2,584, exceeding the year-end target of 2,500 by 3.4 percent. Year-end results reflect an increase of 1.3 percent compared to FY 2022. Prosecution recommendations for cases related to legal activities and cases related to narcotics activities decreased 13.1 percent and 3.0 percent, respectively, while cases related to illegal activities increased 11.3 percent when compared to the same period in FY 2022. IRS-43 Legal source cases include people that earn their income legally, but willfully violate the tax laws (tax evasion). Illegal source cases include embezzlement, mortgage fraud, telemarketing fraud, and money laundering. Narcotics cases are like illegal cases; however, these cases are specific to profits and financial gains of organized drug groups involved in narcotics, narcotics trafficking, and money laundering. CI continues to utilize proven case development strategies, expand case development efforts, and leverage interagency partnerships to identify, initiate and complete significant criminal investigations in all program areas. IRS set a target of 2,500 for FY 2024 and FY 2025. The Conviction Rate, for FY 2023 of 88.4 percent was 3.9 percent below the year‐end target of 92.0 percent. Additionally, the FY 2023 number of convictions was 1,508, a 3.6 percent decrease compared to FY 2022. The IRS set the Conviction Rate targets for FY 2024 and FY 2025 at 92.0 percent. IRS-44 FY 2025 Changes by Budget Activity Dollars in Thousands Investigations Summary of Proposed FY 2025 Request FY 2024 Annualized CR Changes to Base: Maintaining Current Levels (MCLs): Pay Annualization (5.2% average pay raise) Pay Raise (2.0% average pay raise) Non-Pay (2.2% average pay raise) Program Decrease Staff Attrition to Offset Unfunded FY 2025 MCLs Subtotal Changes to Base FY 2025 Current Services FY 2025 President's Budget Request Amount $757,402 $20,560 8,178 9,559 2,823 ($20,560) (20,560) $757,402 $757,402 FTE 2,822 (49) (49) (49) 2,773 2,773 See footnotes in 1.1 - Appropriations Detail Table 2.1.3 – Budget and Performance Report and Plan Dollars in Thousands Investigations Resource Level FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 Annualized Actual Actual Actual Actual Actual CR $595,686 $619,227 $630,093 $700,876 $730,488 $757,402 FY 2025 Request 1 $757,402 Appropriated Resources 2 27,749 41,233 1,950 37,092 45,542 85,263 89,526 Reimbursable Resources Inflation Reduction Act Resources 35,548 200,716 443,881 $623,435 $660,460 $632,043 $737,968 $811,578 $1,043,381 $1,290,809 Budget Activity Total 1 The FY 2019- FY 2023 appropriated resources represent the approved operating plan including any inter-BAC transfers and InterAppropriation Transfers. 2 The FY 2019 - FY 2023 columns represent realized resources for reimbursables. *FY 2024 and FY 2025 targets assume all sources of available funding. 1 The impact of hiring on performance is not immediate due to required academy and on-the-job training (6+ months) as well as the average cycle time it takes to complete an investigation (400-500 days). 2D – Exam and Collections ($4,489,141,000 in direct appropriations, an estimated $3,960,000 in reimbursable programs, and an estimated $1,796,363,000 in IRA funding): This budget activity funds programs that enforce the tax laws through examination and collection programs that ensure proper payment and tax reporting. This budget activity also includes campus support of the Questionable Refund program and appeals, and litigation activities associated with exam and collection. The program activities include: IRS-45 • • • • • • • • • • • • • • • Compliance Services Management supports management associated with exam and 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 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 Under Reporter (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 CI 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, nonresident 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.). Enforcement 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. Unit General Management and Administration provides staffing, training, and direct support for the unit headquarters management activities of strategic planning, communications and IRS-46 • • • • • • liaison, finance, human resources, Equal Employment Opportunity (EEO) and diversity, and business systems planning and embedded training. Earned Income Tax Credit (EITC) Management and Administration supports headquarters management associated with administering EITC program service wide. Integrity and Verification Operations supports IRS civil fraud detection and prevention efforts in a pre-refund environment including monitoring program performance and developing policy, procedures, and guidance for processing civil revenue protection program(s). ID Theft Victim's Assistant sole responsibility will have end-to-end responsibility and accountability for IDT victim assistance policy and operations which will include paper inventories from tax-related ID Theft, the Identity Theft Protection Specialized Unit (IPSU) and Return Preparer Misconduct. Whistleblower Office 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 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 compliance with disclosure and privacy laws. Return Integrity, Verification and Program Management provides policy and program oversight of revenue protection efforts such as detection, prevention, and treatment of improper refunds (identity theft and non-compliance) to include managing systemic solutions regarding payment of valid refund claims and the development of innovative technology solutions supporting IRS-wide revenue protection strategies. Description of FY 2023 Performance – 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. Even with improved taxpayer service, some taxpayers will not comply. IRS will focus expanded enforcement on taxpayers with complex tax filings and high-dollar noncompliance to address the tax gap. The IRS is committed to not increasing audit coverage for small businesses and households below the $400,000 threshold a year compared to historic levels. The performance metrics IRS uses to gauge the Examination program’s performance are discussed below. Exam Starts – High Income Individual was established in FY 2021 to monitor resources associated with examinations of individual return filers reporting over $10M of Total Positive Income (TPI). In FY 2023, targets were set for the first time for this measure, and historical data is provided for comparative purposes. The IRS started 4,326 new high-income individual tax return examinations in FY 2023, surpassing the target of 3,817 by 509 starts. The agency is expanding enforcement for high-income and high-wealth individuals by pursing non-compliance through a variety of mechanisms, including audits and non-audit contacts since income alone is not the only indicator of risk or complexity. Future estimates reflect that it takes several years of specializing in enterprise exams using a holistic approach to conduct the most complex audits and it typically takes 3-5 years of experience before examiners can identify and address the more difficult transactions. IRS-47 Compared to the same period in FY 2022, Exam Starts - High Income Individuals increased 19.3 percent. IRS expects to start 4,398 cases in FY 2024 and 3,848 in FY 2025. Exam Starts – Partnerships was established in FY 2021 to monitor resources associated with the examination of partnership returns. In FY 2023, targets were set for the first time for this measure, and historical data is provided for comparative purposes. In FY 2023, IRS started exams on 6,709 partnerships, which was a 112 percent increase from FY 2022 but below the target of 8,852 due to new hires starting a lower-than-expected number of returns. This was a result of delayed phases of training and additional time given to trainees to start partnership returns. During FY 2023 SBSE Field Exam had a backlog of new hires from prior years go through training which increased the number of partnerships starts for the fiscal year. The number of trainees needing this specific training is expected to level off in FY 2024 and the Starts targets in FY 2024 and FY 2025 reflect correspondingly lower estimates. Additionally, because it takes between 3 and 5 years, before an examiner can address the more difficult cases and start contributing to this measure, new hires that have recently come on board in the past year will not have a significant immediate impact on exam starts. Finally, when staff shift from case work to serve as trainers for newly onboarded staff, there is a resulting reduction in near term productivity. In FY 2024 IRS expects to start 4,074 cases and 5,215 in FY 2025. Exam Starts – Large Corporations was established in FY 2021 to monitor resources associated with examinations of large corporate returns reporting assets of $250 million and above. In FY 2023 targets were set for the first time for this measure, and historical data is provided for comparative purposes. In FY 2023, the IRS started 1,400 new large corporation tax return examinations, exceeding its target of 1,121 and reflecting a 2.6 percent increase compared to FY 2022. The increase in FY 2023 was driven in part by specific Net Operating Loss cases that were tied to a temporary provision in the CARES Act and are expected to decrease in the coming years. In FY 2024 and FY 2025, the anticipated hiring efforts for both revenue agents and specialists will require shifting seasoned agents offline to support new hire training as on the job instructors, resulting in near term decreases in exam starts for large corporations. The FY 2024 target is 1,250 and the FY 2025 target is 1,375. IRS-48 Exam Efficiency – Individual is the sum of all individual 1040 returns closed divided by the total Full-Time Equivalent (FTE) expended in relation to those individual returns. Total exam closures decreased 17.2 percent compared to FY 2022 and FTEs decreased 18.8 percent. Exam Efficiency – Individual was 103, exceeding the target of 92. The FY 2024 target is set at 106 and the FY 2025 target is 107. Time to Start Compliance Resolution is the percentage of all individual income tax enforcement cases started within six months of the return posting date. This indicator was added for FY 2020 and historical data is provided for comparative purposes. This indicator reflects the effect of expedited issue detection and more integrated enforcement approaches. For FY 2023, the percent of individual enforcement cases started within 6 months was 72 percent, a 5.9 percent increase from FY 2022. Time to Resolve Compliance Issue After Filing is the median time it takes to close all individual income tax enforcement cases in days. This indicator was added for FY 2020 and historical data is provided for comparative purposes. This indicator reflects the complete life cycle from return filing to resolution. For FY 2023, the overall Time to Resolve Compliance Issue After Filing was 372 days, a 7.9 percent decrease compared to FY 2022. IRS-49 Repeat Non-Compliance Rate is the percentage of individual taxpayers with repeat noncompliance two years after the initial tax year for filing, payment or reporting compliance. This indicator was added for FY 2020 and historical data is provided for comparative purposes. Instances of payment repeat non-compliance were lower in FY 2023 in part due to lower penalty issuances during COVID for Tax Years 2019 and 2020. For FY 2023, the Repeat Non-Compliance Rate was 18.9 percent compared to 28.1 percent for FY 2022. Description of FY 2023 Performance ‒ Collection The Collection program collects delinquent taxes, secures delinquent tax returns through the fair and equitable application of tax laws, and provides education to customers to promote future compliance. The performance goals that the IRS uses to gauge collection program performance are discussed below. The Collection Coverage measure is calculated by taking the total volume of collection work completed divided by total collection work available. Collection Coverage was 34.9 percent, exceeding the FY 2023 target of 33.4 percent. Based on projected case closures, the target will be set at 40.7 percent in FY 2024 and 39.1 percent in FY 2025. The Cost to Collect $100 is computed as total operating costs divided by gross collection and then multiplied by 100. Total operating costs include dollars obligated, expended, and disbursed against appropriated funds; excluded are costs reimbursed by other federal agencies and private entities for services performed for these external parties. Gross collections are before refunds are issued and include penalties and interest in addition to taxes collected. The FY 2023 Cost to Collect $100 was 34 cents, compared to 29 cents for FY 2022. Total operating costs in FY 2023 were approximately $16.1 billion while gross collections were approximately $4.7 trillion. Gross collections decreased approximately 4 percent in FY 2023. IRS-50 FY 2025 Changes by Budget Activity Dollars in Thousands Exam and Collections Summary of Proposed FY 2025 Request FY 2024 Annualized CR Changes to Base: Maintaining Current Levels (MCLs): Pay Annualization (5.2% average pay raise) Pay Raise (2.0% average pay raise) Non-Pay (2.2% average pay raise) Program Decrease Staff Attrition to Offset Unfunded FY 2025 MCLs Subtotal Changes to Base FY 2025 Current Services FY 2025 President's Budget Request Amount $4,489,141 $124,244 53,476 62,505 8,263 ($124,244) (124,244) $4,489,141 $4,489,141 FTE 26,926 (714) (714) (714) 26,212 26,212 See footnotes in 1.1 - Appropriations Detail Table. 2.1.4 – Budget and Performance Report and Plan Dollars in Thousands 1 The FY 2019 - FY 2023 appropriated resources represent the approved operating plan including any inter-BAC transfers and Inter-Appropriation Transfers. 2 The FY 2019 - FY 2023 columns represent realized resources for reimbursables and user fees. *FY 2024 and FY 2025 targets assume all sources of available funding. 1 Historical data provided for comparison. 2 This measure was an indicator in FY 2022 and transitioned to a measure with a target starting in FY 2023. 3 Audits of high-income individuals may take a revenue agent upwards of 250 hours to complete. 4 Due to the timing of hiring and the start date of the lengthy training cycle, the impact of hiring on performance is not immediate. 5 The impact of hiring on performance is not immediate due to required training for new Revenue Agents and the average case cycle time of about 36 months for these large corporations. IRS-51 2E – Regulatory ($191,079,000 in direct appropriations, an estimated $120,000 in reimbursable programs, and an estimated $76,597,000 in IRA funding): This budget activity funds the development 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 activities include: Tax Law Interpretation and Published Guidance interprets 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 activity provides staffing, training, and direct support associated with the Return Preparer Strategy initiative. • Office of Professional Responsibility identifies, communicates, and enforces Treasury Circular 230 standards of competence, integrity, and conduct of those who represent taxpayers before the IRS, including attorneys, Certified Public Accountants (CPAs), enrolled agents, enrolled actuaries and appraisers, and other professionals. Description of FY 2023 Performance – Regulatory • In FY 2023, the IRS published 115 Priority Guidance Plan (PGP) projects and 56 ministerial rulings. Ministerial projects are publications that only involve matters such as applicable Federal interest rates and monthly bond factor amounts. Many items published in FY 2023 involved complex and novel issues. Forty-two of the published items pertain to implementing the Inflation Reduction Act of 2022, including guidance on the application criteria and process for the increase in the energy credit for solar and wind facilities in low-income communities and the pre-election registration requirements for certain tax credit elections. Six of the published items pertain to implementing the Consolidated Appropriations Act of 2023 and the SECURE 2.0 Act of 2022, including guidance regarding supervisory approval of penalties. The 2023-2024 PGP was published on September 29, 2023, and covers July 2023 through June 2024, listing 237 projects. In FY 2023, the IRS made 119,491 Exempt Organizations (EO) Determinations, of which 117,595 were for new organizations applying for exempt status. In FY 2022, IRS made 136,708 total determinations of which 134,621 were for new organizations. In FY 2023, IRS closed 2,464 EO examinations, which is less than the 3,270 closures in FY 2022. IRS completed 1,367 Employee Plan (EP) Determinations on pension plans in FY 2023, which was a 7 percent increase from the 1,276 closures in FY 2022. In FY 2023, IRS closed 3,992 EP examinations, which was a 1 percent increase from the 3,944 closed in FY 2022. IRS-52 FY 2025 Changes by Budget Activity Dollars in Thousands Regulatory Summary of Proposed FY 2025 Request FY 2024 Annualized CR Changes to Base: Maintaining Current Levels (MCLs): Pay Annualization (5.2% average pay raise) Pay Raise (2.0% average pay raise) Non-Pay (2.2% average pay raise) Program Decrease Staff Attrition to Offset Unfunded FY 2025 MCLs Subtotal Changes to Base FY 2025 Current Services FY 2025 President's Budget Request Amount FTE $191,079 828 $5,279 2,256 2,637 386 ($5,279) (48) (5,279) (48) (48) $191,079 780 $191,079 780 See footnotes in 1.1 - Appropriations Detail Table. 2.1.5 – Budget and Performance Report and Plan Dollars in Thousands 1 The FY 2019 - FY 2023 appropriated resources represent the approved operating plan including any inter-BAC transfers and Inter-Appropriation Transfers. 2 The FY 2019 - FY 2023 columns represent realized resources for reimbursables. IRS-53 Technology and Operations Support Appropriation Description The Technology and Operations Support appropriation funds rent payments; facilities services; printing; postage; physical security; headquarters policy and management activities; research and statistics of income; and necessary expenses for information systems and telecommunication support, including development, security, and maintenance of the IRS’s information systems. The Technology and Operations Support budget request for FY 2025 is $4,100,826,000 in direct appropriations funding 10,282 FTE. This is the same amount as the FY 2024 Annualized CR level, and funds 161 fewer FTE, 1.54 percent lower than the FY 2024 Annualized CR FTE of 10,443. For FY 2025, the IRS expects to use an estimated $3,564,800,000 to fund 3,808 FTE in Technology and Operations Support with IRA resources. The IRS uses base resources to fund its technology and support operations, as described above. A significant portion of the expected funding from IRA is needed to supplement those base operations, especially in technology. Base funding alone in FY 2025 will not fully fund IT operations and maintenance. The IRS is funding IT development for transformation in both the Technology and Operations Support and Business Systems Modernization discretionary and IRA appropriations. However, when IRA Business Systems Modernization resources are entirely consumed by FY 2026, this appropriation will be the primary source of technology modernization funds. All maintenance for completed IT development is funded from the Technology and Operations Support appropriation. Reducing the IRS’s discretionary appropriations would deplete IRA resources and diminish the IRS’s ability to transform its technology and maintain its modernized systems. FY 2023 IRA Achievements • • • • • The IRS launched the first phase of business tax account that, over time, will allow businesses to check payment history, make payments, view notices, authorize powers of attorney and conduct other business with the IRS. The IRS offered new voice and chatbots to help taxpayers with a wide range of issues, including securing account transcripts, getting answers to questions about balances due and getting help from the Taxpayer Advocate Service. Whether people call the IRS or visit online, there are new self-service options available around-the clock. During business hours, many of the IRS voice and chatbots provide an option to connect with a live assistor if needed. In all, the IRS has nine taxpayer-facing voicebots in operation today, in addition to 10 chatbots. To date, taxpayers with balances due have messaged online with Collection [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Airs%3Adbba7efc6aa7c34e. Public record. Not legal advice.