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2024 AGENCY

FINANCIAL REPORT

IRS offers tools and applications to help people

understand and meet their tax responsibilities

YOUR ACCOUNT

Access your individual, business, or tax pro account.

Go to your account (www.irs.gov/youraccount)

WHERE'S MY REFUND

Find the status of your last return and check on your refund.

Check your refund status (www.irs.gov/wheres-my-refund)

PAY DIRECTLY FROM YOUR BANK ACCOUNT

Make a payment

Look up a payment

Use Direct Pay to securely pay your taxes from your

checking or savings account.

Pay your taxes (www.irs.gov/directpay)

TAXPAYER ASSISTANCE CENTER LOCATOR

Find your local office and see what services are available.

Contact your local IRS office (www.irs.gov/tac)

Visit IRS.gov for additional resources

Table of Contents

About This Report

Message from the Commissioner

iii

1 MANAGEMENT'S DISCUSSION AND ANALYSIS

About the IRS

Performance Overview

Enterprise Risk Management

Analysis of Financial Statements

Analysis of Systems, Controls, and Legal Compliance

Forward-Looking Information

51 FINANCIAL INFORMATION

Message from the Chief Financial Officer

Independent Auditor's Report

Enclosure: IRS Response to the Independent Auditor's Report

Financial Statements

Notes to the Financial Statements

Required Supplementary Information

105 OTHER INFORMATION

Section A: Summary of Financial Statement Audit

and Management Assurances

106

Section B: Tax Burden, Tax Gap, and Tax Expenditures

108

Section C: Management and Performance Challenges

113

Section D: Grants Program

141

Section E: Refundable Tax Credits and Other Outlays

and Social Security and Medicare Taxes

142

151 APPENDICES

Appendix A: Glossary of Acronyms

152

Appendix B: Awards and Acknowledgements

153

Appendix C: Contact Information and Accessibility

154

Cover/InsIDe Cover

IRS FY 2024 AGENCY FINANCIAL REPORT

ABOUT THIS REPORT

This Agency Financial Report presents the Internal Revenue Service’s (IRS) financial information in

relation to its mission and entrusted resources for the fiscal year (FY) 2024 reporting period

(October 1, 2023 to September 30, 2024). It highlights select accomplishments and challenges in

implementing programs that promote the IRS’s mission. This financial report is available on www.

irs.gov/about-irs/irs-financial-reports.

The IRS, as a bureau within the Department of the Treasury (Treasury), presents this report in accor

dance with Office of Management and Budget’s Circular A-136, Financial Reporting Requirements.

This report includes Circular A-136 core principles and requirements applicable to a component

entity. This report is titled Agency Financial Report to be consistent with similar reports in the federal

government.

How This Report is Organized

The Agency Financial Report consists of the following sections:

section 1: Management’s Discussion and Analysis (Unaudited)

Provides a high-level overview of the IRS’s history, mission, and organizational structure; strategic

framework; programmatic performance; enterprise risks; analysis of financial statements; analysis

of systems, controls, and legal compliance; management assurances related to the IRS’s internal

controls; and forward-looking information. United States (U.S.) generally accepted accounting

principles issued by the Federal Accounting Standards Advisory Board require the Management’s

Discussion and Analysis be presented as required supplementary information to the financial

statements.

section 2: Financial Information

Includes a message from the Chief Financial Officer (CFO), Independent Auditor’s Report and IRS

response, audited financial statements and accompanying notes, and unaudited required supple

mentary information.

section 3: other Information (Unaudited)

Contains a summary of the Financial Statement Audit and Management Assurances; Tax Burden, Tax

Gap, and Tax Expenditures; Management and Performance Challenges; Grants Programs; and

Refundable Tax Credits and Other Outlays and Social Security and Medicare Taxes. Treasury reports

on Payment Integrity and Climate–Related Financial Risk in its Agency Financial Report (home.

treasury.gov/about/budget-financial-reporting-planning-and-performance/agency-financial-report).

For information on Payment Integrity, see PaymentAccuracy.gov (www.paymentaccuracy.gov).

IntroDUCtIon

IRS FY 2024 AGENCY FINANCIAL REPORT

MESSAGE FROM THE

COMMISSIONER

On behalf of my dedicated colleagues at the IRS, I am pleased to

present the IRS Agency Financial Report for FY 2024. This report

provides an assessment of the IRS’s financial status and demonstrates

how the IRS effectively used entrusted resources in support of our

mission to provide America’s taxpayers top-quality service with

integrity and fairness to all.

The funding provided by the Inflation Reduction Act of 2022 (IRA) has

given us a unique opportunity – a once-in-a-generation chance – to

envision and realize a future of tax administration that meets the

evolving needs of taxpayers and the nation. My commitment to invest

this funding responsibly and drive critically needed agency improve

ments is focused around three central themes:

1. Ensuring taxpayers can easily contact the IRS to get help navigating complex tax laws and

accessing the credits for which they are eligible, whether in person, on the phone, or online.

2. Identifying the growing number of taxpayers with complex returns — including certain high-

income and high-wealth individuals, large corporations, and complex partnerships — who are

shielding income to evade their tax responsibility and collect from them what is owed.

3. Addressing the growing risk of tax scams and schemes, protecting honest taxpayers from them,

and rooting out the nefarious actors that perpetrate them.

This transformation is driven by a detailed Strategic Operating Plan FY 2023-2031 (SOP) that

guides dramatic improvements to our information technology infrastructure to deliver modern

technology platforms that center around data and applications, strengthens compliance, and

delivers improved service to taxpayers and tax professionals. Our 2024 IRA Strategic Operating

Plan Annual Update provides details about our successes in the first year of implementation. In our

2024 IRA Strategic Operating Plan Annual Update Supplement (SOP Annual Update Supplement),

we look to the future and lay out in more detail the vision, plan, and resources required to continue

implementing the SOP. The SOP, Strategic Operating Plan Annual Update, and SOP Annual

Update Supplement can be found at www.irs.gov/strategicplan.

I am proud of the transformation work we have done in FY 2024, and I am committed to

completing the additional work that remains on many fronts: maintaining the outstanding level of

service for our main phone line and closing gaps on other lines, expanding digital options for all

taxpayers, further strengthening data security, and increasing support for vulnerable populations by

such actions as increasing access to the Earned Income Tax Credit and other refundable credits,

as well as protecting and supporting scam victims.

IntroDUCtIon |

IRS FY 2024 AGENCY FINANCIAL REPORT

iii

Key Areas of Focus:

2024 Filing Season: We had several ambitious transformation goals at the start of the filing

season, and because of the hard work of IRS employees, we either met or exceeded our goals. We

exceeded our goal to provide an 85% level of service on our main toll-free phone line during the

filing season, reaching nearly 88%, which means most callers routed to live assistors were able to

connect and receive support without needing to make multiple calls just to get their question

answered. We significantly exceeded our goal of an average call wait time of five minutes or less on

our main taxpayer helpline, with calls being answered in about three minutes. Taxpayers had the

ability to opt for a call back if the projected wait time on the phone was more than 15 minutes,

saving taxpayers over 1.5 million hours of hold time.

We increased self-service support in areas such as the Where’s My Refund? (www.irs.gov/

wheres-my-refund) and Where’s My Amended Return? (www.irs.gov/wmar) to help taxpayers get

quicker answers on the status of their refund or amended return. The improved Where’s My

Refund? tool also allows taxpayers to see more detailed refund status messages and works

seamlessly on mobile devices.

For those who needed in-person assistance, we provided more help at our Taxpayer Assistance

Centers. We exceeded our goal to deliver 8,500 more hours of in-person assistance than we did

during the 2023 filing season by providing 13,000 more hours. We also expanded hours at more

than 240 Taxpayer Assistance Centers around the country during the filing season and provided

special Saturday hours in more than 70 locations. Evening and Saturday hours made it more

convenient for thousands of taxpayers to get help during a time that fits their schedule.

We achieved our goals, but have more work to do in terms of providing service to tax professionals,

such as improving functionality on the Practitioner Priority Line. While our service has improved, we

will continue our focus on providing quality service to the practitioner community.

Direct File: During the 2024 filing season, the IRS conducted a limited-scope pilot of a system that

allowed eligible taxpayers in 12 states to prepare and file a free, online tax return directly with the

IRS. This pilot, called Direct File, served as an important innovation in our ongoing efforts to lead

the agency into a digital, taxpayer-focused future.

Hundreds of thousands of taxpayers successfully signed into the system, and more than 140,000

tax returns were filed through Direct File, which is an impressive number given the limited scope of

the pilot. Users gave the new option positive reviews, citing the ease and convenience of the tool. A

General Services Administration Touchpoints survey of more than 15,000 Direct File users found

90% of respondents ranked their experience with Direct File as Excellent or Above Average. Based

on the operational success and positive feedback, in May 2024, the IRS announced that Direct File

would be expanded and made permanent. We were honored to receive an Innovation of the Year

award from FEDSCOOP for the Direct File pilot. This award celebrates cutting-edge, innovative

applications of technology that have disrupted traditional government operations and processes

leading to an enhanced impact on mission and service delivery.

IntroDUCtIon

IRS FY 2024 AGENCY FINANCIAL REPORT

Digitalization: We’re making critical progress in several areas toward greater digitalization. Digiti

zation of paper-filed tax returns is a cornerstone of the IRS’s modernization efforts. The IRS

replaced outdated scanning equipment and is installing automated mail-sorter machines in the six

highest-volume IRS locations. Once digitized, tax return data is processed throughout the IRS in a

digitally optimized manner. Historical documents are also digitized and made digitally available for

both taxpayers and IRS employees.

Online Services: As a result of expanded capabilities of the IRS Individual Online Account and Tax

Pro Account this past filing season, taxpayers and tax professionals were able to perform more

types of transactions in their accounts. We also launched a Business Tax Account to make inter

acting with the IRS easier for small business owners. We’re continuing to expand the types of

businesses eligible to use this account and the types of transactions they can perform.

Compliance Efforts: The IRS has increased compliance efforts on those posing the greatest risk

to the nation's tax system, whether it's those trying to avoid paying the correct tax amount or

promoters aggressively peddling abusive schemes. In our High Wealth, High Balance Due Taxpayer

Field Initiative, the IRS intensified work on taxpayers with total positive income above $1 million who

have more than $250,000 in recognized tax debt. As a result of an increase in the number of

revenue officers focusing on these high-end collection cases, in FY 2024, we recovered more than

$1 billion in delinquent tax debt. We also opened audits on 76 of the largest partnerships in the

U.S. that included a cross-section of industries, including hedge funds, real estate investment

partnerships, publicly traded partnerships, large law firms, and other industries. As part of our

stepped-up efforts in the partnership area, we recently issued guidance to close tax loopholes that

have led to abusive partnership transactions. We also created a new dedicated team in the Office

of Chief Counsel that will focus on developing more guidance in this area.

Tax Scams and Fraud: When it comes to protecting taxpayers from scams, the IRS is always on

the side of the taxpayer. We continued to issue public warnings about scams that threatened

taxpayers such as one that promises inflated Earned Income Tax Credit amounts and another that

attempts to trick people into tax-related identity theft. We also continued to see a significant

increase in scams and marketing related to the Employee Retention Credit, a credit designed to

support eligible businesses adversely affected by the Coronavirus Disease 19 (COVID-19)

pandemic. Promoters aggressively marketed this program to businesses that may not have been

eligible to claim these credits, putting them at financial risk and requiring the IRS to devote extra

staff to process the large influx of new and often fraudulent claims.

We will continue civil and criminal enforcement efforts of these unscrupulous promoters. We

entered a new phase of our work in this area in FY 2024, completing a detailed review of more than

one million claims. In FY 2024, the IRS denied billions of dollars in improper claims, and that

process will continue into FY 2025. At the same time, we began additional work to issue payments

to help taxpayers without any red flags on their claims, so small businesses with legitimate claims

can receive the assistance to which they are entitled.

IntroDUCtIon |

IRS FY 2024 AGENCY FINANCIAL REPORT

Investing in the IRS Workforce: The IRS’s greatest asset is our workforce, and we continue to

focus on increasing our staffing to better serve America's taxpayers. In addition to new hires for

in-person and telephone support, IRA resources enabled increased staffing in other areas,

including Submission Processing, Information Technology, and Enforcement. In FY 2024, we

began to heavily recruit revenue agents, who are responsible for auditing the most complex filers,

including high-income and high-wealth individuals, large corporations, and complex partnerships.

Exhibiting Financial Stewardship: I am proud to share that the IRS achieved an unmodified

financial statement audit opinion for the 25th consecutive year, marking a significant milestone in

our commitment to financial integrity. Additionally, we successfully addressed a long-standing

significant deficiency in Information System Controls, underscoring our dedication to public

stewardship and excellence in financial management. The IRS continues to strengthen

management controls and is making progress toward addressing the remaining unpaid assess

ments significant deficiency in internal control over financial reporting to meet all U.S. financial

systems compliance and conformance objectives, which is outlined in the Management’s

Discussion and Analysis – Analysis of Systems, Controls, and Legal Compliance.

Looking back on FY 2024, it’s clear that the IRS is in a better place. But there is much more to do,

and I am confident that even more can be accomplished across the IRS in support of taxpayers, our

employees, and the nation. I am committed to ensuring that the IRS will continue to improve the

taxpayer experience and increase the efficiency and effectiveness of its operations, but our progress

depends on adequate discretionary budget support and continued transformation funding.

I am proud to lead this work in collaboration with my colleagues, valued partners in the tax

community, and national, state, and local partners to provide an effective and efficient tax system

that is fair and equitable for all.

Sincerely,

IRS Transformation Vision

Daniel I. Werfel

Commissioner of Internal Revenue

November 1, 2024

Click this Qr code or scan it with

your smart device to watch an

update from Commissioner Werfel

IntroDUCtIon

IRS FY 2024 AGENCY FINANCIAL REPORT

MANAGEMENT'S

DISCUSSION AND ANALYSIS

ABOUT THE IRS

The IRS is a bureau of the Treasury. The IRS carries out the responsibilities of the Secretary of the

Treasury under Internal Revenue Code Section 7801. The Secretary has full authority to administer and

enforce the Internal Revenue Code and has the power to create an agency to enforce these laws.

Internal Revenue Code Section 7803 provides for the appointment of a Commissioner of Internal

Revenue to administer and supervise the execution and application of the Internal Revenue Code.

The IRS is one of the world’s largest tax administrators. In FY 2024, the IRS collected about $5.1 trillion

in taxes, which represents nearly all the revenue that supports the federal government’s operations.

Some Key Tax Statistics in FY 2024 Include:

267M

$5.1T

$3,143

$98.7B

FEDERAL TAX

RETURNS AND

FORMS PROCESSED

COLLECTED IN

GROSS TAXES

AVERAGE

INDIVIDUAL

REFUND

ENFORCEMENT

REVENUE

COLLECTED

Note: These statistics are from October 1, 2023, through September 30, 2024. The Average

Individual Refund amount includes refunds issued in FY 2024 for all tax years.

History

The IRS is one of the oldest bureaus in the U.S. Government. Article 1, Section 8 of the Consti

tution gave the federal government the "Power To lay and collect Taxes, Duties, Imposts and

Excises, to pay the Debts and provide for the common Defence and general Welfare of the United

States…” In 1862, President Lincoln and the Congress established the Bureau of Internal Revenue

and the nation’s first income tax. In 1953, the Bureau of Internal Revenue’s name changed to the

Internal Revenue Service. Visit the IRS History Timeline at www.irs.gov/irs-history-timeline.

Internal Revenue Service Building, 1111 Constitution Ave. N.W., Washington D. C.

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IRS FY 2024 AGENCY FINANCIAL REPORT

Mission and Organization

The IRS's mission is to provide America's taxpayers top-quality service by helping them under

stand and meet their tax responsibilities while enforcing the law with integrity and fairness to all.

This mission statement describes the IRS’s role — and the public's expectation — about how the

IRS should perform that role.

• In the U.S., the Congress passes tax laws and requires taxpayers to comply.

• The taxpayer’s role is to understand and meet their tax obligations.

• The IRS’s role is to help willing taxpayers with the tax law, while ensuring that the minority

who are unwilling to comply pay their fair share.

The IRS’s core operations include collecting taxes, processing tax returns, assisting taxpayers,

enforcing tax laws, and investigating tax crimes. The extensive IRS portfolio also includes

tax-exempt organizations, tax-exempt bonds, refundable tax credits, and other specialized

programs.

In FY 2024, the IRS made structural changes at the top of its organization designed to help with

transformation efforts. The IRS’s organizational structure continues to closely resemble the private

sector model of organizing around customers with similar needs. The new organizational structure

features a single Deputy IRS Commissioner and four new IRS chief positions, which are:

Chief Taxpayer Services – has responsibility for oversight and delivery of customer service

(including telephone and face-to-face assistance) and tax return processing for all of America's

taxpayers as well as compliance activities for taxpayers. This organization was formerly the Wage

and Investment division.

Chief Tax Compliance Officer – has responsibility for oversight of the IRS compliance operations

in the following organizations: Large Business and International, Small Business/Self Employed,

Tax Exempt and Government Entities, IRS Criminal Investigation, Office of Professional Responsi

bility, Return Preparer Office, Whistleblower Office, and Enterprise Case Management.

Chief Information Officer – has responsibility for oversight and delivery of information

technology services and solutions that drive effective tax administration to ensure public confi

dence and to meet complex legislative requirements, operate a world-class tax administration

agency, and deliver technology services and solutions to employees and the public.

Chief Operating Officer – has responsibility for oversight of a variety of key operations support

offices, including the: Human Capital Office, CFO, Procurement, Facilities Management and

Security Services, Privacy Governmental Liaison and Disclosure, Office of the Chief Risk Officer,

and Research, Applied Analytics and Statistics.

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IRS FY 2024 AGENCY FINANCIAL REPORT

IRS Organizational Structure

Direct File

office of Chief

Counsel

Commissioner of

Internal Revenue

national taxpayer

Advocate

office of equity,

Diversity & Inclusion

Chief of staff

Independent office

of Appeals

Communications

and liaison

Deputy Commissioner

transformation

strategy office

Chief tax

Compliance officer

taxpayer services

Small Business/

Self-Employed

taxpayer experience

office

Information

technology

office of the Chief

operating officer

Procurement

online services

Criminal Investigation

Human Capital Office

Office of Professional

Responsibility

Privacy, Government

Liaison & Disclosure

Whistleblower Office

Office of the Chief

Financial Officer

Enterprise Case

Management

Research, Applied

Analytics & Statistics

Tax Exempt &

Government Entities

Facilities Management &

Security Services

Large Business &

International

Office of the Chief Risk

Officer

Return Preparer Office

View the most current IRS organization (www.irs.gov/about-irs/irs-organization) and leadership structure.

MAnAgeMent's DIsCUssIon AnD AnAlysIs

IRS FY 2024 AGENCY FINANCIAL REPORT

PERFORMANCE OVERVIEW

IRS Strategic Framework

The IRA creates a unique opportunity for this nation to realize a future of tax administration that

meets the evolving needs of taxpayers. After years of underfunding that deteriorated taxpayer

service and tax enforcement, frustrating taxpayers, the tax community, and IRS employees alike,

the IRA provides the IRS with tens of billions of dollars during the next decade. This funding enables

the IRS to significantly improve taxpayer services, ensure fair enforcement of tax law, and generate

the revenue needed to fund the country’s vital activities.

Published in April 2023, the SOP (www.irs.gov/strategicplan) envisions a modernized IRS that is

focused on the customer experience, prefers digital over manual processes, and prioritizes

compliance efforts that focus on complex tax issues and high-income individuals, complex partner

ships, and large corporations. It outlines how the IRS will transform the American tax administration

system into one that is more modern, capable of adapting to this digital age, and serves the

evolving needs of taxpayers. It also supports the government-wide strategic priorities from the

President’s Management Agenda, including strengthening the federal workforce, delivering an

excellent customer experience, enhancing clean energy efforts, increasing equity, and supporting

underserved communities. Each IRS organization aligns its programs and performance within the

SOP framework, which serves as a guide for decision-making by IRS leadership and project

managers.

The SOP outlines five major objectives to carry forward this transformation:

Strategic Objective 1

Dramatically improve services to help taxpayers meet their

obligations and receive the tax incentives for which they

are eligible.

Strategic Objective 2

Quickly resolve taxpayer issues when they arise.

Strategic Objective 3

Focus expanded enforcement on taxpayers with complex

tax filings and high-dollar noncompliance to address the

tax gap.

Strategic Objective 4

Deliver cutting-edge technology, data, and analytics to

operate more effectively.

Strategic Objective 5

Attract, retain, and empower a highly skilled, diverse work

force, and develop a culture that is better equipped to

deliver results for taxpayers.

MAnAgeMent's DIsCUssIon AnD AnAlysIs

IRS FY 2024 AGENCY FINANCIAL REPORT

The IRS Transformation and Strategy Office was established in January 2023 to act as a catalyst for

the IRS transformation. The Chief Transformation and Strategy Officer provides leadership and

oversees transformation efforts. Change management practices are built into all initiatives and project

plans and incorporates measures of success, as appropriate. Champions are appointed to lead

ongoing projects throughout the IRS to achieve, communicate, and monitor the IRS’s cultural goals.

As mentioned in the IRS's SOP Annual Update Supplement (www.irs.gov/strategicplan), the IRS

incurs costs outside of the purview of the five objectives for ongoing activities performed by its

support organizations, which include actions to fulfill statutory and regulatory requirements, effec

tively administer the tax system, and meet obligations to taxpayers. The IRS has reported select FY

2024 accomplishments performed by these offices in the Performance Overview section under

Shared Services Support.

As Treasury’s largest bureau, the IRS plays a critical role in advancing the Treasury Strategic Plan

2022–2026 (home.treasury.gov/about/budget-financial-reporting-planning-and-performance/

strategic-plan) by co-leading the Tax Policy and Administration strategic objective and supporting

nine other objectives across all five Treasury goals.

Major Programs

The IRS demonstrates responsible stewardship over taxpayer dollars by aligning major programs

and performance measures with budgetary resources as appropriated by Congress. SOP Objec

tives 1 through 4 align to the major programs in the IRS Statement of Net Cost and represent trans

formational activities as described in the SOP and IRS base operations costs. The IRS distributes

the costs associated with Objective 5 and Shared Services Support across all major programs.

DID YOU

KNOW?

IRS OFFERS TAX WITHHOLDING ESTIMATORS

Home

File

Individuals

Tax Withholding Estimator

About You

Tax Withholding Estimator

Use your best estimates for the year ahead to determine how to complete Form W-4 or W-4P so you don't have too much

or too little federal income tax withheld.

About You

Income & Withholding

Adjustments

Deductions

Tax Credits

Results

Information About You

Select the information that best describes how you anticipate filing your 2024 tax return.

All fields marked with an asterisk (*) are required.

What filing status will you use for your tax return? *

Single

Married filing jointly

Married filing separately

Head of Household

Qualifying Widow(er)

The IRS encourages taxpayers to use the

IRS Tax Withholding Estimator to ensure

they are withholding the correct amount of

tax from their pay. Visit IRS.gov/w4app to

learn more.

MAnAgeMent's DIsCUssIon AnD AnAlysIs

IRS FY 2024 AGENCY FINANCIAL REPORT

SOP Objectives, Initiatives, and Near-Term Priority Efforts

Through the course of implementing the SOP (www.irs.gov/strategicplan) in the first year, the IRS

further refined its vision and near-term priority efforts. As published in its SOP Annual Update

Supplement, the IRS presents in more detail the vision, plan, and resources required to continue

implementing the SOP. A key component was the development of plain language outcomes

aligned to the five objectives in the SOP, with priority efforts and key results over the next two years.

The SOP is structured to achieve the following five objectives and their near-term priority efforts,

which will be accomplished through a series of initiatives and projects:

Strategic Objective 1: Dramatically improve services to help taxpayers meet their

obligations and receive the tax incentives for which they are eligible.

Initiatives

Near-Term Priority Efforts

1.1 Improve the availability and accessibility of

customer service.

1.2 Expand digital services and digitalization.

1.3 Ensure employees have the right tools.

• Enhance Live Assistance

• Expand Online Services

• Accelerate Digitalization

• Improve Employee Tools

1.4 Improve self-service options.

1.5 Explore direct file.

1.6 Enable taxpayers to access their data.

1.7 Provide earlier legal certainty.

1.8 Deliver proactive alerts.

1.9 Help taxpayers understand and claim

appropriate credits and deductions.

1.10 Make payments easy.

1.11 Build status-tracking tools for taxpayers.

1.12 Streamline multichannel customer

assistance.

Major Program:

service to the taxpayer

MAnAgeMent's DIsCUssIon AnD AnAlysIs

Total Program Cost:

$6,519 million

IRS FY 2024 AGENCY FINANCIAL REPORT

Strategic Objective 2: Quickly resolve taxpayer issues when they arise.

Initiatives

Near-Term Priority Efforts

2.1 Identify issues during filing.

• Simplify Notices

2.2 Deliver early and appropriate treatments for

issues.

• Disrupt Scams

2.3 Develop taxpayer-centric notices.

2.4 Expand tax certainty and issue resolution

programs.

2.5 Offer proactive debt resolution.

2.6 Expand engagement with nonfilers.

2.7 Use improved data and analytics to tailor

timely collections contacts.

Major Program:

enforcement of tax legislation

Total Program Cost:

Objective 2 is combined with Objective 3

Strategic Objective 3: Focus expanded enforcement on taxpayers with complex tax

filings and high-dollar noncompliance to address the tax gap.

Initiatives

3.1 Employ centralized, analytics-driven, riskbased methods to aid in the selection of

compliance cases.

Near-Term Priority Efforts

• Ensure Fairness in Enforcement

3.2 Expand enforcement for large corporations.

3.3 Expand enforcement for large partnerships.

3.4 Expand enforcement for high-income and

high-wealth individuals.

3.5 Expand enforcement in areas where audit

coverage has declined to levels that erode

voluntary compliance.

3.6 Pursue appropriate enforcement for

complex, high-risk, and emerging issues.

3.7 Promote fairness in enforcement activities.

Major Program:

enforcement of tax legislation

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Total Program Cost:

$12,359 million

IRS FY 2024 AGENCY FINANCIAL REPORT

Strategic Objective 4: Deliver cutting-edge technology, data, and analytics to operate

more effectively.

Initiatives

Near-Term Priority Efforts

4.1 Transform core account data and

processing.

• Modernize Foundational IT

4.2 Accelerate technology delivery.

4.3 Improve technology operations.

4.4 Continue to ensure data security.

4.5 Maximize data utility.

4.6 Apply enhanced analytics capabilities to

improve tax administration.

4.7 Strategically use data to improve tax

administration.

4.8 Partner to expand insights.

Major Program:

transformation of Business systems

Total Program Cost:

$914 million

Strategic Objective 5: Attract, retain, and empower a highly skilled, diverse workforce,

and develop a culture that is better equipped to deliver results for taxpayers.*

Initiatives

Near-Term Priority Efforts

5.1 Redesign hiring and onboarding.

• Enhance Human Capital and Culture

5.2 Attract a talented and diverse workforce.

5.3 Improve the employee experience.

5.4 Help employees grow and develop.

5.5 Develop a data-savvy workforce.

5.6 Elevate workforce planning strategy.

5.7 Improve organizational structures and

governance.

5.8 Build a culture of service and continuous

improvement.

*The IRS distributes costs associated with Objective 5 among Objectives 1, 2, 3 and 4.

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IRS FY 2024 AGENCY FINANCIAL REPORT

IRS Performance Measurement Reporting Process

The IRS Congressional Budget Justification & Annual Performance Report and Plan (www.irs.

gov/about-irs/budget-documents), approved by the IRS Commissioner and Deputy Commissioner,

includes key performance measures, with annual and outyear targets and key performance

indicators. Key performance indicators are created in the absence of historical data or when there

is a lessened degree of control over the measurable value; therefore, targets are not required. The

IRS uses these key metrics to assess progress in achieving the success in major program areas. All

performance results in the FY 2024 Agency Financial Report are considered preliminary. The IRS

will publish the actual results in the FY 2026 IRS Congressional Budget Justification & Annual

Performance Report and Plan, which is generally published after the State of the Union Address.

DID YOU

KNOW?

CONGRESSIONAL BUDGET JUSTIFICATION &

ANNUAL PERFORMANCE REPORT AND PLAN

• Ensures taxpayers can

easily interact with the IRS

• Maintains fairness in the tax

system

• Addresses tax scams

• Outlines IT infrastructure

funding and modern

technology platforms

Summary of FY 2024 Results: The IRS has a total of 28 key performance measures and key

performance indicators that support IRS major program areas, of which 20 are measures with

targets and 8 are indicators. The IRS exceeded the FY 2024 target for 12 out of 20 key perfor

mance measures and 2 out of 3 key performance indicators are trending in the desired direction

compared to the prior year result. Results were not available for 5 key performance indicators;

those results will appear in the FY 2026 IRS Congressional Budget Justification & Annual Perfor

mance Report and Plan.

Refer to the Verification and Validation of Performance Data information at the end of this Perfor

mance Overview section for details on the IRS’s approach to verification and validation of perfor

mance data and performance measurement reporting.

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IRS FY 2024 AGENCY FINANCIAL REPORT

Strategic Objective 1: Dramatically improve services to help

taxpayers meet their obligations and receive the tax incentives for

which they are eligible.

Major Program | service to the taxpayer

In FY 2024, the IRS enhanced live assistance. After the passage of the IRA, the IRS hired

thousands of new customer service representatives to ensure that call centers could effectively

handle the millions of calls that the IRS receives annually. The improvement to taxpayer service was

immediate. During the 2024 filing season, the IRS answered more than one million additional phone

calls than the prior year and achieved a nearly 88% level of service (the percentage of callers that

speak to a customer service representative), while maintaining an average call wait time of three

minutes. The IRS introduced new voicebot technology, which helped 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.

Without additional funding, the IRS estimates it can maintain the taxpayer services workforce at the

level required to deliver exceptional service in FY 2025 but will not be able to sustain these efforts

through FY 2026. Consequently, the IRS projects that the 85% level of service targeted for the

2025 filing season may drop to less than 30% in FY 2026, absent additional funding.

In FY 2024, the IRS launched additional efforts to ensure that taxpayers can access additional tax

credits for which they may be eligible, such as:

• In November 2023, the IRS sent over 1.8 million reminder letters to individuals who received

the advanced Child Tax Credit but did not file a 2021 return and could be eligible to claim

the other 50% of the expanded Child Tax Credit.

• In January 2024, while expanding partnerships with tax software companies, paid preparers,

philanthropies, employers, and state and local governments, the IRS launched a new annual

Tax Professional Awareness initiative to educate tax professionals on refundable credit

eligibility requirements and inform them of their due diligence obligations to help eligible

taxpayers receive credits. The IRS also began a data sharing program with states that

enables them to inform potentially eligible taxpayers about the Earned Income Tax Credit.

These efforts will not only support taxpayers with receiving Earned Income Tax Credits and other

refundable tax credits but also support taxpayers' compliance with the complex eligibility rules for

claiming those credits. This will assist taxpayers with claiming only those tax credits for which they

are eligible and could lead to reductions in the IRS improper payment rates. More information on

IRS improper payments can be found in Other Information – Section C: Management and

Performance Challenges.

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IRS FY 2024 AGENCY FINANCIAL REPORT

Using IRA funding, in FY 2024, the IRS also expanded its online services. The IRS enhanced and

created popular and convenient online tools that save taxpayers time and money, while also

reducing phone calls, paper processes, and other burdens. The IRS added new features to the

Online Account for individuals, giving individual taxpayers the ability to perform more interactions

with the IRS without needing to speak to a customer service representative. These additional

features allow taxpayers to view digital copies of most notices and letters, access forms, view

status updates such as changes in refund status, expand secure two-way messaging, and view

their previous year’s tax return forms and information returns. It also allows individuals to process

and monitor payments and apply for an identity protection personal identification number.

In FY 2024, the IRS launched its first-ever Business Tax Account, which focused on small business

owners, sole proprietors, individual partners of partnerships, and individual shareholders of S corpo

rations with an employer identification number. Now, eligible entities can view certain digital notices

and letters, business tax records, business balance due, and request a tax compliance check.

Additionally, tax professionals can perform most of their interactions with the IRS through their

online Tax Pro Account. These enhancements provide the ability to manage active client authoriza

tions and view individual and business clients’ tax information, such as business balance due and

canceled and returned checks for individuals.

The IRS dramatically increased digital services. The 2024 Direct File pilot served as an important

innovation in ongoing efforts to lead the IRS into a digital, taxpayer-focused future. The IRS incorpo

rated a Secure Access Digital Identity authentication feature that enabled eligible taxpayers to sign

and electronically file their federal tax return directly and securely with the IRS. Legacy paper

processes are in the process of being converted to digital formats to further support digital services.

To ensure paper filings are properly retained, the IRS developed a quality control review process with

defined criteria and standards to ensure digitized paper is complete and correct prior to disposal.

The IRA and the Creating Helpful Incentives to Produce Semiconductors Act of 2022 represent the

most significant actions taken on domestic manufacturing, clean energy, and climate change in

U.S. history. Since enactment, the IRS and Treasury have collaboratively worked to implement the

34 clean energy provisions affecting both individual and business taxpayers.

In November 2023, the IRS successfully launched IRS Energy Credits Online, which is used for

multiple clean energy IRA provisions and is part of the larger effort underway to make improve

ments to the taxpayer experience and to transform IRS operations. IRS Energy Credits Online

provides an electronic method for users to register for a Clean Vehicle or Elective Payment/Transfer

Election account. Account holders can register facilities and properties, request advance

payments, and submit Clean Vehicle Time-of-Sale reports. The IRS also conducted numerous IRS

Energy Credits Online registration efforts in partnership with industry organizations and shared

valuable information through nine e-News bulletins focused on eligible clean energy credit commu

nities that collectively have over 2.8 million subscribers.

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IRS FY 2024 AGENCY FINANCIAL REPORT

The IRS established a historic collaboration with the Department of Energy where they assumed

the role of service provider to the IRS for energy projects, including:

• $4 billion in tax credits to advanced energy projects in the first allocation round of the Quali

fying Advanced Energy Project Credit (48C) Program.

• The approval of more than 40,000 Low-Income Communities Bonus Credit program applica

tions for eligible solar and wind projects, allocating more than 1,100 megawatts of capacity.

Another major IRS transformation effort is to accelerate digitalization by moving to a digital

experience and paperless IRS. As part of the Paperless Processing Initiative, the IRS made an

additional 20 forms eligible for electronic filing. The IRS replaced aged scanning equipment and

automated mail sorters in high-volume locations, positioning for a future of digitizing paper returns

at the point of receipt.

The IRS achieved a significant milestone in FY 2024 when the Document Upload Tool accepted its

one-millionth taxpayer submission. Launched in FY 2021 and expanded in FY 2023, the tool offers

taxpayers and tax professionals the option to respond digitally to eligible IRS notices by uploading

documents securely online through IRS.gov. The IRS estimates more than 94% of individual

taxpayers will no longer have to send mail to the IRS, because they can now submit all correspon

dence and responses to notices and letters that do not have a filing or payment action online.

In FY 2024, taxpayers could submit 30 mobile-friendly forms on their mobile devices. This is an

important milestone toward the goal of meeting taxpayers where they are. An estimated 15% of

Americans rely solely on mobile phones for their Internet access, so it is important to make forms

available in mobile-friendly formats.

DID YOU

KNOW?

MOBILE-FRIENDLY FORMS

Mobile-friendly forms are HTML versions of IRS forms

that can be filled out on cell phones and tablet

devices. These forms adapt to all necessary screen

sizes and ensure information is entered into all data

fields. Visit IRS.gov/mobilefriendlyforms to learn more.

MAnAgeMent's DIsCUssIon AnD AnAlysIs

IRS FY 2024 AGENCY FINANCIAL REPORT

objective 1 Performance results

The IRS met or exceeded 7 out of 7 of its Objective 1 key performance measures.

TABLE 1: Summary of key performance measure results for FYs 2020–2024.

2020

Actual

2021

Actual

2022

Actual

2023

Actual

2024

target

2024

Actual

Customer Service Representative Level of

Service1

53.1%

18.5%

17.4%

51.8%

60.0%

65.1%

Level of Service(A)*,2

71.6%

38.2%

39.3%

66.4%

65.0%

76.5%

Customer Accuracy – Tax Law (Phones)

91.0%

92.8%

92.0%

91.4%

89.0%

90.4%

Customer Accuracy – Accounts (Phones)4

93.5%

93.0%

91.8%

89.2%

89.0%

90.2%

Timeliness of Critical Individual Filing Season

Tax Products to the Public5

78.4%

92.0%

96.4%

89.0%

96.6%

Timeliness of Critical Tax Exempt

and Government Entities &

Business Tax Products to the Public6

96.0%

92.9%

96.0%

86.5%

87.0%

94.8%

Enterprise Self-Assistance Participation Rate7

90.6%

92.3%

93.9%

94.2%

94.0%

95.8%

Key Performance Measures

Target met, or indicator trending in the desired direction compared to the prior year result.

Target not met, or indicator not trending in the desired direction compared to the prior year result.

** Historical data provided for comparative purpose.

The number of toll-free callers that either speak to a Customer Service Representative or receive informational messages divided by the total

number of attempted calls. From October 1, 2023, through September 30, 2024, Customer Service Representative Level of Service was 65.1%,

which exceeded the target of 60%, and was an increase of around 26% over the prior year actual level of service of 51.8%. The level of service

for the 2024 filing season was 87.6%. Customer service representatives answered around 19.9 million calls in FY 2024. Customer service

representative phone demand, which includes services offered and disconnects, was around 34.5 million, which was an 11% decrease from last

year’s demand of 38.8 million. In FY 2024, around 17.2 million taxpayers were offered a callback and 66.1% accepted. This resulted in around 5.3

million hours saved for the taxpayer, providing a better experience.

The relative success rate of taxpayers that call seeking assistance and receive a response to their inquiry by an assistor or through automated

responses divided by the total number of attempted calls. This indicator was added to performance reporting in FY 2023.

The percentage of correct answers given by a live assistor on toll-free tax law inquiries.

The percentage of correct answers given by a live assistor on toll-free account inquiries.

The percentage of critical individual filing season tax products available to the public seven calendar days before the official IRS start of the

individual filing season.

The percentage of critical Tax Exempt and Government Entities and business tax products available to the public seven calendar days before the

official IRS start of the individual filing season.

The percentage of taxpayer assistance requests resolved using self-assisted automated services.

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IRS FY 2024 AGENCY FINANCIAL REPORT

1 out of 2 of the Objective 1 key performance indicators are trending in the desired direction

compared to the prior year result.

TABLE 1.1: Summary of key performance indicator results for FYs 2020-2024.

2020

Actual

2021

Actual

2022

Actual

2023

Actual

2024

target

2024

Actual

Taxpayers Satisfied with the IRS1

Indicator

N/A**

Total Ending Inventory (Thousands)*,2

1,100

4,100

2,156

2,923

Indicator

3,242

Percent of Closures to Receipts*,3

99.6%

71.9% 116.4% 93.8%

Indicator

96.5%

Key Performance Indicators

Target met, or indicator trending in the desired direction compared to the prior year result.

Target not met, or indicator not trending in the desired direction compared to the prior year result.

** Historical data provided for comparative purpose.

** Results not available and are not included in the total Key Performance Indicators count above. Results will appear in the IRS FY 2026

Congressional Budget Justification & Annual Performance Report and Plan.

The score of taxpayers satisfied with the IRS according to the American Customer Satisfaction Index survey. The All-Individual Tax Filer score is

calculated from separate American Customer Satisfaction Index Individual Paper Filer and Electronic Filer Customer Satisfaction Index Scores.

Based on a 100-point scale. There was a methodology change made in 2023, which shifted the American Customer Satisfaction Index data

collection from telephone interviews to online panel surveys and made efforts to improve representation. American Customer Satisfaction Index is

conducted by Claes Fornell International Group, founding partner of the American Customer Satisfaction Index and sole licensee in the U.S. to use

the patented American Customer Satisfactions Index methodology.

The total number of accounts management and correspondence work to be processed in inventory. This indicator was added to performance

reporting in FY 2022.

The number of adjustment cases closed compared to the number received. This indicator was added to performance reporting in FY 2022.

DID YOU

KNOW?

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IRS FY 2024 AGENCY FINANCIAL REPORT

Strategic Objective 2: Quickly resolve taxpayer issues when they

arise.

Major Program | enforcement of tax legislation

Correspondence issued via mail or, more recently, via online accounts, remains one of the most

critical methods the IRS has for engaging taxpayers. With IRA funding, the IRS is focused on

improving communications with taxpayers by making IRS notices easier to understand and

providing online access to those who choose to engage with the IRS electronically.

The IRS redesigned 31 notices for the 2024 tax season. These included notices to taxpayers who

may be eligible for tax deferment, including those who served in combat zones, notices reminding

a taxpayer they may have unfiled returns, and notices reminding a taxpayer about their balance due

and where they can go for assistance.

The IRS continues to detect and disrupt tax scams through data analytics and private sector

partnerships. In FY 2024, the IRS offered a withdrawal option to help small business owners and

others who were misled or pressured by the marketers or promoters to file ineligible Employee

Retention Credit claims. Claims that were withdrawn were treated as if they were never filed, and

the IRS did not impose penalties or interest. The IRS also partnered with the Department of

Veterans Affairs to support the disruption of tax scams and schemes that specifically target U.S.

military veterans. These initiatives protected more than $1 billion in improper claims.

DID YOU

KNOW?

TAX SCAMS – WHAT TO KNOW, WHAT TO DO

You can avoid falling victim to a tax scam.

Know what to watch out for and how the

IRS contacts you. Visit IRS.gov/scams to

learn more.

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IRS FY 2024 AGENCY FINANCIAL REPORT

objective 2 Performance results

The IRS did not meet the target of its Objective 2 key performance measure.

TABLE 2: Summary of key performance measure results for FYs 2020–2024.

Key Performance Measures

Collection Coverage1

2020

Actual

2021

Actual

2022

Actual

2023

Actual

2024

target

2024

Actual

34.9%

41.2%

38.3%

34.9%

40.7%

39.1%

Target met, or indicator trending in the desired direction compared to the prior year result.

Target not met, or indicator not trending in the desired direction compared to the prior year result.

** Historical data provided for comparative purpose.

The volume of collection work disposed compared to the volume of collection work available. FY 2024 performance was 39.1%, which was an

increase from 34.9% in FY 2023. Collection Coverage finished below the target of 40.7%. While total closures have increased compared to FY

2023, total ending inventory has also increased by around 13%.

The Objective 2 key performance indicator data is not yet available.

TABLE 2.1: Summary of key performance indicator results for FYs 2020–2024.

2020

Actual

2021

Actual

2022

Actual

2023

Actual

2024

target

2024

Actual

Time to Start Compliance Resolution*,1

66.3%

66.0%

68.0%

72.0%

Indicator

N/A**

Time to Resolve Compliance Issue after

Filing*,2

491

484

404

372

Indicator

N/A**

Repeat Noncompliance Rate*,3

35.6%

30.7%

28.1%

18.9%

Indicator

N/A**

Cost to Collect $100

$0.35

$0.33

$0.29

$0.34

Indicator

N/A**

Key Performance Indicators

Target met, or indicator trending in the desired direction compared to the prior year result.

Target not met, or indicator not trending in the desired direction compared to the prior year result.

** Historical data provided for comparative purpose.

** Results not available and are not included in the total Key Performance Indicators count above. Results will appear in the IRS FY 2026

Congressional Budget Justification & Annual Performance Report and Plan.

The percentage of all individual income tax enforcement cases started within six months of the return posting date. This indicator was added to

performance reporting in FY 2020.

The median time it takes to close all individual income tax enforcement cases in days (excluding disaster, bankruptcy and Tax Equity and Fiscal

Responsibility Act cases for exam and collection cases that are not closed as full paid) starting from filing date. This indicator was added to

performance reporting in FY 2020.

The percentage of individual taxpayers in a fiscal year with noncompliance two years after the initial tax year that contains a filing, payment or

reporting compliance issue, compared to total taxpayers. This indicator was added to performance reporting in FY 2020.

The cost of collecting $100 is computed as total operating costs divided by gross collection multiplied by 100.

MAnAgeMent's DIsCUssIon AnD AnAlysIs |

IRS FY 2024 AGENCY FINANCIAL REPORT

Strategic Objective 3: Focus expanded enforcement on taxpayers

with complex tax filings and high-dollar noncompliance to address

the tax gap.

Major Program | enforcement of tax legislation

Prior to funding provided by the IRA, more than a decade of budget cuts prevented the IRS from

keeping pace with the sophisticated ways that some taxpayers attempt to evade taxes. The IRS is

moving more swiftly to improve tax compliance in areas where the IRS did not have adequate

resources; however, small businesses and households earning $400,000 or less will not see audit

rates increase relative to historical levels.

In continuing efforts to improve tax compliance and ensure fairness, the IRS used IRA funding to

reduce the number of high-income nonfilers. The IRS is working to ensure priority taxpayer

segments, which include large corporations, complex partnerships, high-income and high-wealth

individual filers pay the taxes they owe. New compliance efforts are focused on 125,000 highincome taxpayer cases where federal income tax returns have not been filed since 2017. This work

is directly in line with the IRS’s vision to minimize attempts at tax evasion by complex filers. The IRS

estimates that approximately $63 billion, or 9% of the gross tax gap, is due to nonfilers. More

information on the tax gap can be found in Other Information – Section B: Tax Burden, Tax Gap,

and Tax Expenditures. In FY 2024, the IRS sent more than 25,000 compliance letters to the

priority nonfiler population with more than $1 million in income, and over 100,000 letters to nonfilers

who had incomes between $400,000 and $1 million for tax years 2017 through 2021.

The IRS expanded enforcement for priority taxpayer segments in FY 2024 by increasing total

trained staff and making compliance work more efficient with new tools and processes. This

included identifying and implementing strategic options for rapidly increasing enforcement activities

to supplement hiring and training. The IRS introduced a pilot to utilize refined approaches and

treatments for priority taxpayer segments. High-income nonfilers received tailored, proactive

outreach before receiving automated assessments or penalties.

In FY 2024, the IRS ramped up efforts to pursue high-income and high-wealth individuals who have

either not filed their taxes or failed to pay recognized tax debt, concentrating on taxpayers with

more than $1 million in income and more than $250,000 in recognized tax debt. The IRS opened

examinations on 76 of the largest partnerships in the U.S., representing a cross section of indus

tries including hedge funds, real estate investment partnerships, publicly traded partnerships, large

law firms, and other industries. The selection of these returns is the result of groundbreaking collab

oration among experts in data science and tax enforcement. In addition, the IRS expanded the

large corporate compliance program, focusing on noncompliance by using data analytics to

identify large corporate taxpayers for audit. The large corporate compliance program includes 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.

With the funding provided by the IRA, the IRS has already begun to rebuild capacity and deliver results

to improve tax fairness, including collecting over $1 billion from millionaires with delinquent tax debt

and examining the returns of large partnerships with questionable balance sheets. This has been

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IRS FY 2024 AGENCY FINANCIAL REPORT

made possible by an increase in enforcement staff of more than 8,000 since the passage of the IRA,

bringing total enforcement staffing to nearly 43,000. This resulted in boosting enforcement capacity to

ensure high-income individuals, large corporations, and complex partnerships pay what they legally

owe, and to disrupt tax scams that prey on families, small businesses, and other taxpayers.

The IRS continues to rebuild trust and fairness in enforcement. When researchers from Treasury

and several academic institutions published a study (https://siepr.stanford.edu/publications/

working-paper/measuring-and-mitigating-racial-disparities-tax-audits) that found Black taxpayers

were three to five times more likely to be audited than other taxpayers, the IRS dedicated resources

to evaluate the extent to which exam priorities, automated processes, and the data it relies on,

contributed to this disparity. The IRS’s findings supported the conclusion that Black taxpayers are

audited at higher rates than other taxpayers. The IRS is revamping compliance efforts to advance

its commitment to fair, equitable, and effective tax administration and hold itself accountable to

taxpayers. The IRS is investing IRA resources in research that can help identify disparities across

dimensions of race, ethnicity, age, gender, and geography, and is using that research to continu

ously refine approaches to compliance and enforcement.

Concerns about the IRS’s Whistleblower

Program have been raised by Congress, the

whistleblower practitioner community, and

the news media regarding the decline in the

total dollar amount of whistleblower awards,

THE IRS WHISTLEBLOWER OFFICE

the total proceeds collected attributed to

The IRS Whistleblower Office processes

whistleblower awards paid, the number of

tips received from individuals who spot

awards paid, and the length of time it takes

tax problems in their workplace, while

to pay out an award. To address these

conducting day-to-day personal

concerns, the IRS introduced several steps

business or anywhere else they may be

during FY 2024 to improve the Whistleencountered. Monetary awards are paid

blower Program by increasing the capacity

to eligible individuals whose information

to use high-value whistleblower information

is used by the IRS. Visit IRS.gov/

effectively, awarding whistleblowers fairly

whistleblower to learn more.

and as soon as possible, and keeping

whistleblowers informed of the status of

their claims and the basis for IRS decisions.

The IRS is strengthening collaboration with all whistleblower program stakeholders. In FY 2024, the

IRS updated Form 211, Application for Award for Original Information, based on feedback from

whistleblower program stakeholders. Form 211 revisions included updated alleged violation issue

options to improve data capture of key compliance work areas and the option for multiple whistleblowers to file jointly. The IRS is working to make it easier for whistleblowers to file a claim by devel

oping a digital intake solution. The IRS took steps to help improve awareness of the program and is

developing a multi-year IRS Whistleblower Office Strategic Plan that is also based on feedback

from internal and external stakeholders. In FY 2024, the IRS paid awards totaling $123.5 million

based on whistleblower information attributable to tax and other amounts collected of $474.7

million. Since issuing its first award in 2007 through September 2024, the IRS has paid over $1.3

billion in awards based on the successful collection of $7.4 billion from noncompliant taxpayers.

DID YOU

KNOW?

MAnAgeMent's DIsCUssIon AnD AnAlysIs

IRS FY 2024 AGENCY FINANCIAL REPORT

objective 3 Performance results

The IRS met or exceeded 1 out of 6 of its Objective 3 key performance measures.

TABLE 3: Summary of key performance measure results for FYs 2020–2024.

2020

Actual

2021

Actual

2022

Actual

2023

Actual

2024

target

2024

Actual

Examination Efficiency – Individual1

108

101

103

106

Exam Starts – High-Income Individuals*,2

2,693

2,227

3,625

4,326

4,398

4,052

Exam Starts – Partnerships*

4,106

4,327

3,155

6,709

4,074

2,285

Exam Starts – Large Corporations

(Assets >= $250M)*,4

1,700

1,490

1,365

1,400

1,250

1,263

Criminal Investigations Completed5

2,624

2,766

2,552

2,584

2,500

2,481

Conviction Rate

90.4%

89.4%

90.6%

88.4%

92.0%

90.0%

Key Performance Measures

Target met, or indicator trending in the desired direction compared to the prior year result.

Target not met, or indicator not trending in the desired direction compared to the prior year result.

** Historical data provided for comparative purpose.

The sum of all individual 1040 returns closed by Small Business/Self-Employed, Taxpayer Services, and Large Business and International (Field

Exam and Correspondence Exam programs) divided by the total full-time equivalent expended in relation to those individual returns. FY 2024

performance was 82. Examination Efficiency – Individual finished below the target of 106. This was due to training new hires and working

complex cases, which take more time to complete.

The number of examinations of individual returns started during the fiscal year with a total positive income of $10 million and above. This

indicator was added to performance reporting in FY 2021. FY 2024 performance was 4,052, which was a 6.3% decrease from FY 2023. Exam

Starts – High-Income Individuals finished below the target of 4,398. This was due to hiring and experienced examiners being taken offline to

serve as on-the-job instructors, reducing overall direct exam time. Exam starts are expected to increase in FY 2025 and subsequent years as new

hires complete training and trainers resume their normal work.

The number of examinations of partnership returns started during the fiscal year. This indicator was added to performance reporting in FY 2021.

FY 2024 performance was 2,285, which was a 65.9% decrease from FY 2023. Exam Starts – Partnerships finished below the target of 4,074. This

was due to a delay in partnership training. Per directive, IRA funding was not to be used to increase exams on small businesses. Thus, partnership

examinations will move towards more complex organizations requiring long cycle times and resulting in fewer starts.

The number of examinations of large corporate returns started during the fiscal year reporting assets of $250 million and above. This indicator

was added to performance reporting in FY 2021. There was significant hiring in FY 2024, which required new hire training. Exam starts are

expected to increase in FY 2025 and subsequent years as new hires complete training and trainers resume their normal work.

The total number of subject criminal investigations completed during the fiscal year, including those that resulted in prosecution recommendations

to the Department of Justice as well as those discontinued due to a lack of prosecution potential. FY 2024 performance was 2,481, which was a

4% decrease from FY 2023. Criminal Investigations Completed finished below the target of 2,500 because there was a bigger shift toward training

as a result of much needed hiring. Experienced agents served as on-the-job instructors and academy instructors, thereby impacting productivity.

The percent of adjudicated criminal cases that result in convictions.

DID YOU

KNOW?

IDENTITY THEFT CONTROL

Tax-related identity theft happens when someone

steals your personal information to commit tax

fraud. Visit IRS.gov/idtheft to learn more.

MAnAgeMent's DIsCUssIon AnD AnAlysIs

IRS FY 2024 AGENCY FINANCIAL REPORT

Strategic Objective 4: Deliver cutting-edge technology, data, and

analytics to operate more effectively.

Major Program | transformation of Business systems

The IRS is a technology shop in that every aspect of delivering tax administration is enabled by

technology and data. The foundational technology infrastructure, data, systems, and network are

critical to enabling services and enforcement efforts, while ensuring core IRS operations remain

resilient and secure. None of the improvements previously described would be possible without

investing in the IRS’s underlying technology infrastructure and data analytics. Thanks to IRA invest

ments, the IRS is deploying new technology to benefit taxpayers and is making significant progress

on modernizing its foundational legacy information technology systems. In addition to replacing

decades-old sorting machines, in FY 2024, the IRS enabled bulk filings of Forms 1099 and

scanned millions of paper forms.

Business systems modernization activities were zeroed out in the FY 2023 and FY 2024 appropria

tions; therefore, the IRS is reliant on IRA funding for digitalization and other technological innova

tions. With the absence of discretionary business systems modernization funding, the IRS

estimates it is currently underfunded by nearly $3 billion through FY 2031 for funds dedicated to

information technology modernization. The IRS estimates business systems modernization funds

provided by the IRA will be exhausted by FY 2026, at which point:

• Automation solutions will be scaled back leaving taxpayers unable to have up-to-date

account information when they want it.

• Cyber and cloud work will be truncated, increasing the risk for failure of IRS systems and

cyber-attacks.

• Work on digital solutions including Taxpayer 360 (a new platform designed to provide a more

seamless and efficient experience for both taxpayers and customer service representatives),

expanded payment functionality, and other important modernization efforts will be stopped.

In FY 2024, the IRS implemented enhanced security audit trails and advanced logging, advanced

cybersecurity monitoring, cyber fraud analytics, and incident response capabilities to reduce risk

and ensure high availability of IRS systems and applications, and protected information without

major disruption to nearly 10,000 data users. Enhanced security audit trails were completely

modernized by consolidating all audit trail data repositories into a centralized monitoring tool. As a

result, the IRS is now receiving audit trails from 100% of IRS applications, an increase from 36

applications to 320.

MAnAgeMent's DIsCUssIon AnD AnAlysIs

IRS FY 2024 AGENCY FINANCIAL REPORT

objective 4 Performance results

The IRS met or exceeded 2 out of 4 of its Objective 4 key performance measures.

TABLE 4: Summary of key performance measure results for FYs 2020–2024.

2020

Actual

2021

Actual

2022

Actual

2023

Actual

2024

target

2024

Actual

Rentable Square Feet per Person1

278

264

248

238

224

Percent of Aged Hardware2

16.0%

9.3%

7.1%

19.9%

20.0%

17.6%

Percent of Major Information Technology

Investments Within +/- 10% Cost Variance at

the Investment Level3

84.2%

94.1%

81.3%

85.7%

90.0%

85.7%

Percent of Major Information Technology

Investments Within +/- 10% Schedule

Variance at the Investment Level4

94.7% 100.0% 87.5%

92.8%

90.0%

71.4%

Key Performance Measures

Target met, or indicator trending in the desired direction compared to the prior year result.

Target not met, or indicator not trending in the desired direction compared to the prior year result.

** Historical data provided for comparative purpose.

The amount of rentable square feet the IRS maintains per person requiring space.

This measure shows the percentage of all information technology hardware in operation that is past its useful life.

The number of major information technology investments within +/-10% variance between planned total cost and projected/actual cost within

a fiscal year divided by the total number of major information technology investments in the fiscal year. Six of seven major investments were

within the cost variance threshold at the close of the 4th quarter. Filing and Intake underspent due to the Digitalization program which achieved

efficiencies in spend.

The number of major information technology investments within +/-10% variance between planned days and projected/actual days within a fiscal

year divided by the total number of major information technology investments in the fiscal year. Five of seven major investments were within the

schedule variance threshold at the close of the 4th quarter. Digital Services was late and Filing and Intake was early.

Treasury Secretary Janet Yellen and Submission

Processing Field Director Michelle Momsen view a new

IBML Fusion HDL scanner at the IRS campus in Austin,

TX. This will allow employees to convert and store more

paper documents in a digital format and is one of many

IRA investments.

Commissioner Werfel discussed the new sorting

machines with Secretary Yellen and (l-r) Submission

Processing Deputy Director Scott Wallace and Texas

Congressman Greg Casar.

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IRS FY 2024 AGENCY FINANCIAL REPORT

Strategic Objective 5: Attract, retain, and empower a highly

skilled, diverse workforce and develop a culture that is better

equipped to deliver results for taxpayers.

Employees are the foundation of everything the IRS does – without a high-quality workforce, none of

the improvements made thus far would be possible. The IRS continues to invest in its employees to

ensure it recruits and retains top talent. In FY 2024, the IRS assessed and reshaped its workforce to

meet future requirements by modernizing how the IRS attracts, retains, develops, and empowers its

employees. The IRS also focused on efforts to ensure IRS employees have the tools, training, and

culture they need to perform at their best, collaborate effectively, and build meaningful connections

within and across teams. Through these efforts, the IRS fostered a positive and enhanced employee

experience and created a workplace that reflects the diversity of the taxpayers it serves.

In FY 2024, the IRS matured its workforce planning capabilities by enhancing hiring plans to include

additional position requirements to perform critical work. The IRS updated onboarding and orien

tation programs to ensure a positive first employee experience for new hires. In-person orientation

events were established in 12 key campus and IRS locations. The IRS launched a Health of the

Workforce dashboard to monitor workforce trends at different levels and teams. The IRS also

expanded training for managers to increase their ability to support their employees and the IRS

mission and expanded its workforce using streamlined, efficient methods for workforce planning,

recruiting, hiring, and onboarding quality applicants that represent the American taxpayers.

The IRS continuously encourages its employees to pursue educational opportunities that enhance

performance and help the IRS fulfill its mission of providing effective tax administration. In May

2024, the IRS implemented a new, voluntary Certified Internal Controls Advocate course to provide

employees with an understanding of internal controls concepts. The course covers basic skills on

how to analyze operations, determine and rate risks, design and implement effective controls, and

monitor the controls to ensure they are operating as intended. Since implementation, IRS

employees from 14 different organizations became Certified Internal Controls Advocates.

The IRS also created the Risk Management Advocate Program, which provides opportunities for all

IRS employees to gain an understanding of enterprise risk management concepts and tools for

practical application in their normal duties, develop and improve leadership competencies, and

obtain a greater awareness of enterprise risk management initiatives. Successful completion of this

course allows employees to become Certified Risk Management Advocates. In FY 2024, 90 new

Certified Risk Management Advocates were added, bringing the total to over 600 certified

employees since the program’s inception in 2019.

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IRS FY 2024 AGENCY FINANCIAL REPORT

objective 5 Performance results

The IRS met or exceeded 2 out of 2 of its Objective 5 key performance measures.

TABLE 5: Summary of key performance measure results for FYs 2020-2024.

2020

Actual

2021

Actual

2022

Actual

2023

Actual

2024

target

2024

Actual

Attrition Rate1

6.15%

7.52%

9.72%

8.43%

7.90%

7.12%

Hiring Cycle Time2

119.5

98.6

80.63

77.14

Key Performance Measures

Target met, or indicator trending in the desired direction compared to the prior year result.

Target not met, or indicator not trending in the desired direction compared to the prior year result.

** Historical data provided for comparative purpose.

Attrition Rate is the total number of full-time permanent employees that left the IRS during the fiscal year divided by the number of full-time

permanent employees on board at the beginning of the fiscal year plus the number of full-time permanent new hires.

Hiring Cycle Time is the number of days between the date a hiring request is approved (or a certificate is issued) to the enter on duty date. This

measure was added to performance reporting in FY 2019.

The Objective 5 key performance indicator is trending in the desired direction compared to the prior

year result.

TABLE 5.1: Summary of key performance indicator results for FYs 2020-2024.

Key Performance Indicators

Employee Engagement Index1

2020

Actual

2021

Actual

2022

Actual

2023

Actual

2024

target

2024

Actual

74.2%

73.5%

73.1%

72.9%

Indicator

73.7%

Target met, or indicator trending in the desired direction compared to the prior year result.

Target not met, or indicator not trending in the desired direction compared to the prior year result.

** Historical data provided for comparative purpose.

** Results not available and are not included in the total Key Performance Indicators count above. Results will appear in the IRS FY 2026

Congressional Budget Justification & Annual Performance Report and Plan.

The Office of Personnel Management Employee Engagement Index is a measure of the conditions conducive to engagement. The index consists of

15 items grouped into three subindices: Leaders Lead, Supervisors, and Intrinsic Work Experience. The Office of Personnel Management measures

this government wide.

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IRS FY 2024 AGENCY FINANCIAL REPORT

Shared Services Support

The IRS incurs costs for shared tasks that occur outside the purview of the SOP (www.irs.gov/

strategicplan). These tasks support employees, taxpayers, and the overall mission of the IRS.

Below are select FY 2024 accomplishments performed by these offices.

security and Facilities

Safety, security, and the well-being of IRS employees, taxpayers, contractors, and facilities is of

utmost importance to the IRS. The IRS overcame many funding challenges to enhance physical

facility security and provide permanent and interim space solutions by strategically allocating IRA

and discretionary funds across more than 500 facilities. The IRS applied critical upgrades and

expansions to its security infrastructure, which included procuring state-of-the-art video surveil

lance systems and automating data collection and processes. The IRS also collaborated with the

Department of Homeland Security’s Federal Protective Service to enhance its threat response

capabilities and develop a certified training course.

To enhance taxpayer service, the IRS modernized 25 Taxpayer Assistance Centers by replacing

walk-up counter windows, upgrading security, making alterations, and in some locations, creating

private taxpayer workspace for virtual communication with individual taxpayer assistance

specialists. Since the IRA funding was approved, the IRS reopened 35 previously closed Taxpayer

Assistance Centers across the country, ensuring equipment was up-to-date and functional. In

addition, the IRS continued its expansion effort in Puerto Rico to enhance in-person and over-the

phone taxpayer service levels, which generated over 3,000 new jobs, having an economic impact

of over $200 million in salaries annually. The IRS delivered a permanent training center, expanded

the Automated Collection System Call Site in San Juan, adding one call site in Guaynabo (Caparra),

two Taxpayer Services call sites in Caguas and Ponce, and four Taxpayer Assistance Centers

across the island.

Human Capital

To bolster the overall employee experience, the IRS delivered several new and enhanced programs

and services. The Student Loan Repayment Program was updated to expand eligibility to all

employees and streamline the payment process. The Student Loan Repayment Program provides

student loan repayments to support employee retention. The Childcare Subsidy Program was

enhanced making it accessible to more IRS families. Additionally, the IRS established supply

stations at all campuses to ensure employees had the necessary supplies to carry out their day-to

day duties. The IRS implemented a new series of events called IRS Cares Day. The events were

designed to provide a wide variety of services and real-time support to address employees’

workplace needs.

The IRS implemented an electronic Official Personnel Folder hybrid digitization and robotics

automation solution to meet the National Archives and Records Administration and Office of

Management and Budget Mandate M-19-21 directive. The capabilities of the hybrid solution

digitize and utilize robotic process automation to upload forms to an employee’s electronic profile in

the Office of Personnel Management’s electronic Official Personnel Folder system.

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IRS FY 2024 AGENCY FINANCIAL REPORT

Privacy and Disclosure

In FY 2024, the IRS continued its efforts to preserve and enhance protection, authentication,

minimization, retention, and disclosure of taxpayer information. The IRS developed a Privacy

Advocate Certification Program to increase IRS employees’ ability to identify and address privacy

threats to federal tax information and promote awareness of criminal activities aimed at compro

mising taxpayers’ private information.

The IRS began implementing a new artificial intelligence governance process to ensure enterpriselevel oversight and compliance with federal requirements. The process was approved by the Data

and Analytics Strategic Integration Board and issued interim guidance for new Internal Revenue

Manual 10.24.1, Artificial Intelligence (AI) Governance and Principles (www.irs.gov/pub/foia/ig/

spder/interim-guidance-raas-10-0524-0001-artificial-intelligence-governance-and-principles

redacted.pdf), in May 2024. The governance body included an artificial intelligence assurance team

consisting of subject matter experts from 10 different business units.

Using IRA funding, the IRS enhanced and

created popular convenient online tools that

save taxpayers time and money, while

reducing phone calls, paper processes, and

other burdens on IRS employees. The IRS

FREEDOM OF INFORMATION ACT

improved timely access to records and

PUBLIC ACCESS PORTAL

transparency to operations by deploying a

This portal (foiapublicaccessportal.for.irs.gov)

Freedom of Information Act Portal. The

provides members of the public with basic

portal provides members of the public the

information on how to obtain access to

ability to request and receive records

records maintained by the IRS.

electronically, including tax records

protected by Internal Revenue Code

Section 6103. This has enhanced customer

satisfaction while protecting sensitive information in a digital environment. The Freedom of Infor

mation Act Portal also provides requesters access to a dashboard of requests submitted, the ability

to obtain the status of those requests and submit questions, and the functionality to download

responsive records securely.

DID YOU

KNOW?

Procurement

In FY 2024, the IRS created the Acquisition Program Management Office, to provide a centralized

point of contact for direct customer support with acquisition package development, including

requirements writing, during the pre-award phase of the acquisition process. The IRS also

designed an IRS-specific training, ensuring that all contracting officer representatives possess the

necessary knowledge and tools to effectively oversee contracting activities and enhance

compliance and operational efficiency within the organization. Over 95% of the IRS contracting

office representatives completed the Contractor Onboarding and Offboarding training.

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IRS FY 2024 AGENCY FINANCIAL REPORT

The IRS continued to work towards meeting statutory and regulatory requirements for contracts

throughout the agency. The IRS's priority objective is timely execution of procurement packages.

However, the IRS faced challenges with increased workloads, continuous customer education for

ideal contract management, continuing resolution constraints, and swift adaptability to changing

procurement landscapes that influence how the agency acquires goods and services. The IRS

continued to work through competing priorities, attrition, contract management, and growing

demands for contract requirements.

Finance

The IRS was the first agency to meet Treasury’s Government Invoicing mandate. Previously a

manual process, this new solution uses the IRS's financial system to integrate with Treasury

Government Invoicing for intragovernmental agreements and transaction processing. This enables

the IRS to transparently manage its intra-governmental buy/sell transactions, and with its trading

partners, negotiate and accept general terms and conditions agreements, broker orders, exchange

performance information, and validate settlement requests through intra-governmental payment

and collection.

The IRS continued to streamline processes — such as accounts payable — to save time, improve

reporting, ensure adherence to prompt payment legislation, and to ensure the IRS makes timely

and accurate payments. The streamlined accounts payable process saves labor hours annually

while continuing to exceed the 98% prompt payment target.

enterprise risk Management

The IRS continued to strengthen its Enterprise Risk Management Program and risk management

practices. The IRS Commissioner kicked off the Risk Awareness Campaign in October 2023 with

the theme of Nurturing a Robust Risk-Aware Culture, whereby he emphasized the significance of

having a strong risk-aware culture that encourages employees to consider risks while doing their

daily work. Throughout the fiscal year, the IRS hosted a series of risk management events with

internal and external partners to promote awareness on risks, enhance incident response and

program management strategies; and educate employees on how they can recognize and report

potential threatening activities to enable early detection and intervention.

On November 29, 2023, the Association for Federal Enterprise Risk Management, an organization

that promotes Enterprise Risk Management practices within the federal government, awarded the

IRS with the prestigious Enterprise Risk Management Luminary Award for significant progress and

notable achievements in the implementation and management of an Enterprise Risk Management

program.

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IRS FY 2024 AGENCY FINANCIAL REPORT

Verification and Validation of Performance Data

The IRS requires complete, accurate, and reliable performance data to assess progress toward its

strategic objectives and program outcomes to make good management decisions. The IRS's

approach to verification and validation of performance data to improve accuracy and reliability is

based upon the following:

1. The IRS reviews performance measures through its annual performance assessment process

with Treasury. This assessment includes reviewing the extent to which currently reported perfor

mance measures support the strategic plan and priorities and identifying or developing new

performance measures to fill any gaps.

2. IRS business units use a standard template to document detailed information for each perfor

mance measure. The IRS includes these measure templates in its comprehensive data

dictionary, which it maintains corporately and updates annually. For each measure, the data

dictionary includes information including, but not limited to:

• Definition

• Source of the data

• Business unit

• Data limitations

• Responsible Official

• Management controls

• Formula/methodology for computation

3. The Responsible Official for the measure assesses the completeness, consistency, timeliness,

and quality of the data, following the documented procedures for gathering the data and

ensuring management controls are in place. The heads of office are accountable for their perfor

mance results. These positions vary by business unit.

4. The CFO's Strategic Planning office reviews quarterly and year-end performance measure results

before sharing the results with the senior executive team and/or publishing them in Treasury and

IRS documents. The Strategic Planning office also independently reviews the performance

measure targets and accompanying documentation. If anomalies occur, the Strategic Planning

office informs the business unit, which makes any necessary adjustments. Leadership reviews all

target adjustments as part of the budget development and review process.

5. As part of managing the portfolio of enterprise performance measures, the Strategic Planning

office conducts ad-hoc meetings with business units to discuss topics such as: oversight, respon

sibilities of ownership, guidance on measurement and reporting, and organizational change.

6. At the end of each fiscal year, the business units who are involved in the collection and reporting

of these measures receive a notification from the Strategic Planning office, reminding them of

their responsibility for:

• Ensuring the quality and accuracy of the performance data.

• Reviewing and following Internal Revenue Manual guidelines when proposing new and

modifying existing measures.

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IRS FY 2024 AGENCY FINANCIAL REPORT

• Ensuring there are sufficient controls in place for proper and accurate reporting of their

performance results.

These procedures help to provide assurances that the performance data and internal controls

reported by the IRS are sufficiently complete, accurate, and reliable.

Detailed guidance on the appropriate use and application of performance information appears in

Internal Revenue Manual 1.5.1: The IRS Balanced Performance Measurement System

(www.irs.gov/irm/part1/irm_01-005-001).

Members of Puerto Rico Accounts Management at the Bayamon

location during in-person program reviews.

The Accounts Management function answers more than 55 million

account and tax law inquiries and form requests via telephone and

19.8 million paper inquiries each year across ten campus and fifteen

remote locations.

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IRS FY 2024 AGENCY FINANCIAL REPORT

ENTERPRISE RISK MANAGEMENT

In compliance with the Office of Management and Budget Circular A-123, Management’s Respon

sibility for Enterprise Risk Management and Internal Control, the IRS conducts an annual Enterprise

Risk Assessment and develops an Enterprise Risk Profile, which articulates the IRS’s top risks to

achieving its strategic objectives.

As part of the annual Enterprise Risk Assessment process, the Chief Risk Officer brings together

representatives from across the IRS to assess risk environments, looking at external and internal

factors, including business unit level risks, that could impact the IRS within the next 12 to 18

months. The Commissioner and Executive Risk Committee deliberate on the Enterprise Risk

Assessment outputs, which update the IRS Enterprise Risk Profile and determine priorities and

focus for the upcoming year.

For the 2024 reporting, the IRS is organizing its portfolio of enterprise risks by Risk Type, which

brings visibility to certain enterprise risks individually and those that may fall at the bottom of the

traditional numerical ranked profile. The table below includes Risk Types, a Risk Type Summary,

and the top ranked Enterprise Risk within each Risk Type.

IRS 2024/2025 Enterprise Risk Profile

Risk Type

Strategic/

Reputational

The strategic/

reputational risks are

related to the IRS’s

strategic posture and

reputation. Internally,

risks are related to

taxpayer experience,

compliance and

the management of

contracts and vendors.

Externally, risks are

related to the impact

of legislation and third

parties.

Technology

Operational

Organizational

The technology risks

are related to the IRS

information technology

infrastructure’s

resiliency, accessibility,

reliability, security, and

evolving risks such as

Artificial Intelligence

and the modernization

of Information

Technology at the IRS.

The operational

risks are related to

managing efficient and

effective operations

at the IRS, including

physical threats to

operations, data and

record protection,

acquisition processes,

procedure and policy

and overall alignment

with the SOP.

The organizational

risks are related to IRS

employee experience,

such as challenges

with recruitment,

hiring, retention;

embracing change

stemming from the IRA

transformation efforts;

and monitoring the

IRS’s cultural goals.

Financial/

Reporting

The financial/reporting

risks are related to

the reliability of the

overall financial wellbeing of the IRS and

the U.S. tax system.

This includes threats

associated with fraud,

communication,

reliable reporting and

funding for taxpayer

services.

Top Enterprise Risk by Risk Type

Taxpayer

Experience

Data Security

Contract Planning

and Acquisition

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Employee

Experience

Retention of IRA

Resources

IRS FY 2024 AGENCY FINANCIAL REPORT

ANALYSIS OF FINANCIAL

STATEMENTS

Financial Management Highlights

The financial statements are prepared to report the financial position and results of operations,

pursuant to the requirements of 31 U.S. Code Section 3515(b). The statements are prepared from

records of the IRS in accordance with U.S. generally accepted accounting principles and the

formats prescribed by the Office of Management and Budget. Reports used to monitor and control

budgetary resources are prepared from the same records. Users of the statements are advised that

the statements are for a component of the U.S. government.

The IRS is responsible for the administration of tax laws and the custodial collections of taxes for

the U.S. government. The IRS responsibilities are divided into two distinct financial management

activity categories: administrative and custodial. Administrative accounts are included as appropri

ations and offsetting collections in the Statements of Budgetary Resources. These resources are

also reflected as assets, liabilities, revenues, expenses, and the net position of the IRS. Custodial

accounts include activity in support of tax collections. The IRS collects nearly all the receipts that

support the federal government’s operations. Tax receipts are accounted for in designated

custodial accounts as presented on the Statements of Custodial Activity. Custodial accounts are

also included in the Balance Sheets for Fund Balance with Treasury; Federal Taxes Receivable, Net;

and Federal Tax Refunds Payable.

Financial Statement Overview

The IRS received $79,411 million in multi-year (FYs 2022 through 2031) supplemental funding

through the IRA. However, the Fiscal Responsibility Act of 2023 rescinded $1,389 million in IRA

funding and the appropriations bill for FY 2024 rescinded $20,200 million in IRA funding from

Enforcement. Since inception, IRA net obligations incurred total $9,009 million with $48,813 million

remaining unobligated to carry forward into FY 2025. IRA unobligated balances by budget account

at the end of FY 2024 are broken out as follows:

• Taxpayer Services – $1,891 million

• Enforcement – $22,415 million

• Business Systems Modernization – $2,707 million

• Operations Support – $21,356 million

• Energy Security – $441 million

• Direct E-File Taskforce – $3 million

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IRS FY 2024 AGENCY FINANCIAL REPORT

The following financial statements analysis provides an overview of the IRS’s financial position and

results of operations with an emphasis on significant variations in financial statement line items.

Audited financial statements with accompanying notes, including the independent auditor’s report,

are presented in the Financial Information section of this report. In addition, Note 20. IRA provides

cumulative financial data specific to the IRA appropriations.

Financial Statement Analysis

Analysis of the Balance sheets

The Balance Sheets display amounts of future economic benefits owned or available for use

(assets), amounts owed (liabilities), and the residual amounts (net position) at the end of the fiscal

year. The following chart displays changes in Balance Sheet line items as of the fiscal year ended

September 30, 2024, compared to September 30, 2023.

2024

2023

$ 139,220

$ 182,000

Fund Balance with Treasury

66,019

Due from the General Fund of the U.S. Government

4,427

Other

($ in Millions)

$ Change

%Change

ASSETS

Federal Taxes Receivable, Net

Total Assets

(42,780)

-23.5%

86,347

(20,328)

-23.5%

6,647

(2,220)

-33.4%

2,525

1,798

727

40.4%

$ 212,191

$ 276,792

$ (64,601)

-23.3%

LIABILITIES

Intragovernmental

$ 148,335

$ 185,633

(37,298)

-20.1%

Federal Tax Refunds Payable

4,427

6,648

(2,221)

-33.4%

Other

3,601

3,870

(269)

-7.0%

Federal Employee Benefits Payable

1,310

1,507

(197)

-13.1%

$ 157,673

$ 197,658

$ (39,985)

-20.2%

(25,136)

-32.4%

Total Liabilities

NET POSITION

Unexpended Appropriations

Cumulative Results of Operations

Total Net Position

52,433

77,569

2,085

1,565

520

33.2%

$ 54,518

$ 79,134

$ (24,616)

-31.1%

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IRS FY 2024 AGENCY FINANCIAL REPORT

Assets of the IRS primarily comprise: Federal Taxes Receivable, Net; Fund Balance with Treasury;

Due from the General Fund of the U.S. Government; and Other, which primarily consists of

Property and Equipment, Net. The composition of FY 2024 assets is presented as follows:

2.1%

1.2%

65.6%

31.1%

FY 2024

$212,191

Assets

($ in Millions)

Federal Taxes Receivable, Net

Fund Balance with Treasury

Due from the General Fund of the U.S. Government

Other

Asset fluctuations primarily include decreased Fund Balance with Treasury; Federal Taxes

Receivable, Net; and Due from the General Fund of the U.S. Government—which are partially

offset by an increase in Property and Equipment, Net.

Federal Taxes Receivable, Net decreased by $42,780 million in FY 2024 as compared to FY 2023.

This decrease is primarily due to payments that reduced amounts of nondelinquent 965(h) unpaid

assessments, partially offset by an increase in delinquent unpaid assessments, both of which are

described further in the section for Unpaid Assessments. Additional information on Federal Taxes

Receivable, Net can be found in Note 4. Federal Taxes Receivable, Net in the Financial Infor

mation section of this report.

Fund Balance with Treasury decreases of $20,328 million are primarily due to the rescission of

$20,200 million in IRA funding. Other Assets increased by $727 million as purchases of property

and equipment have risen from $382 million in FY 2023 to $1,005 million in FY 2024, the majority

being attributable to capitalized internal-use software. Due from General Fund of the U.S.

Government decreased by $2,220 million which correlates to the liability for Federal Tax Refunds

Payable. Amounts due from the General Fund of the U.S. Government represents funds that will be

used as resources to disburse federal tax refunds.

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IRS FY 2024 AGENCY FINANCIAL REPORT

Liabilities include Intragovernmental (Due to the General Fund of the U.S. Government and Other

Intragovernmental Liabilities), Federal Tax Refunds Payable, Federal Employee Benefits Payable,

and Other Liabilities with the Public. Additional information for Federal Employee Benefits Payable

and Other Liabilities (Intragovernmental and With the Public) can be found in Note 8. Federal

Employee Benefits Payable and Note 9. Other Liabilities. The percentage composition of IRS

liabilities is depicted in the following chart:

2.8%

2.3%

0.8%

94.1%

FY 2024

$157,673

Liabilities

($ in Millions)

Intragovernmental

Federal Tax Refunds Payable

Other

Federal Employee Benefits Payable

Liability fluctuations primarily include decreased Intragovernmental liabilities, Federal Tax Refunds

Payable, and Other Liabilities with the Public.

Intragovernmental liabilities decreased from the previous fiscal year because of a $37,218 million

decline in the amount for the Due to the General Fund liability, which is representative of funds that

will be distributed to the General Fund upon collection. This amount is directly correlated with the

amount of Federal Taxes Receivable, Net but also includes State Innovation Waiver Payments (refer

to Note 1.K. Due to the General Fund of the U.S. Government).

Federal Tax Refunds Payable decreased by $2,221 million in comparison to FY 2023. Refunds of

Federal Taxes and Outlays decreased by 16.1% from the prior year as discussed in the Analysis of

the Statements of Custodial Activity. Other Liabilities with the Public decreased by $311 million due

to a lower amount of federal tax deposits not yet identified.

Net Position consists of Unexpended Appropriations and Cumulative Results of Operations.

Funds made available by Congress are recorded in Unexpended Appropriations. Cumulative

Results of Operations is the net difference between 1) expenses, losses, and transfers from the

inception of an agency or activity and 2) financing sources such as expended appropriations,

revenues, gains, and transfers in from the inception of an agency or activity, as of the reporting date

of the financial statements. The net book value of capitalized assets and future funding require

ments of unfunded liabilities both affect net position but do not factor into the unobligated balance

as reported on the Statement of Budgetary Resources. Net Position decreased by 31.1% due to

higher payroll expenditures and the rescission of $20,200 million of IRA funding.

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IRS FY 2024 AGENCY FINANCIAL REPORT

Analysis of the statements of net Cost

The Statements of Net Cost present the annual cost of operating the IRS’s three major programs:

Service to the Taxpayer, Enforcement of Tax Legislation, and Transformation of Business Systems.

Net Cost of Operations includes Gross Cost less Earned Revenue from user fees and reimbursable

agreements.

Net Cost of Operations increased by $1,998 million, or 11.6% over the prior fiscal year. The

Statement of Net Cost reflects a total of $19,226 million for the period ending September 30, 2024,

as compared to $17,228 million for the period ending September 30, 2023.

Statement of Net Cost

2024

($ in Millions)

2023

$ Change

% Change

570

9.6%

GROSS COSTS

Service to the Taxpayer

Enforcement of Tax Legislation

Transformation of Business Systems

Total Gross Costs

6,519

5,949

12,359

10,916

1,443

13.2%

914

943

(29)

-3.1%

1,984

11.1%

19,792

17,808

REVENUES

Service to the Taxpayer

Enforcement of Tax Legislation

Transformation of Business Systems

Total Revenues

1.7%

500

514

(14)

-2.7%

(1)

-16.7%

566

580

(14)

-2.4%

6,458

5,889

569

9.7%

1,457

14.0%

NET COSTS

Service to the Taxpayer

Enforcement of Tax Legislation

11,859

Transformation of Business Systems

10,402

909

Total Net Costs

19,226

937

17,228

(28)

-3.0%

1,998

11.6%

Gross Cost increased by $1,984 million due primarily to higher costs for personnel salaries and

benefits as staffing levels are 10.7% higher and a cost-of-living adjustment of 4.7% was imple

mented for calendar year 2024. Total payroll expenses have risen by $1,434 million and imputed

costs associated with employee pension benefits have increased by $262 million. In addition,

agency modernization efforts have resulted in higher expenses for contractual services, which

includes management consulting services for large-scale information technology projects.

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IRS FY 2024 AGENCY FINANCIAL REPORT

Net Cost of Operations by major programs are presented in the table below for the periods ending

September 30, 2024 and 2023, respectively.

4.7%

33.6%

61.7%

FY 2024

$19,226

Net Cost

($ in Millions)

Enforcement of Tax Legislation

Service to the Taxpayer

Transformation of Business Systems

Analysis of the statements of Budgetary resources

IRS operations are financed through appropriations, spending authority from offsetting collections,

and unobligated balances carried forward. Custodial appropriations for taxpayer refunds, refundable

tax credits, and other outlays are not available to the IRS for operational expenditures and are

therefore not included in the presentation of the Statements of Budgetary Resources (refer to Note

15. Statement of Budgetary Resources for a reconciliation to the Budget of the U.S. Government).

As displayed in the following chart, Total Budgetary Resources decreased by $23,537 million from

the previous fiscal year, which is primarily attributable to the $20,200 million rescission in the IRA

appropriation for Enforcement.

2024

($ in Millions)

2023

$ Change

80,934

% Change

BUDGETARY RESOURCES

Unobligated Balance from Prior Year Authority

76,112

(4,822)

-6.0%

Appropriations (Discretionary and Mandatory)

Taxpayer Services

Enforcement

Operations Support

Business Systems Modernization

Other

Total Appropriations

Spending Authority from Offsetting Collections

Total Budgetary Resources

3,390

2,880

510

17.7%

(15,034)

3,776

(18,810)

-498.1%

3,890

4,181

(291)

-7.0%

–

(10)

-100.0%

436

575

(139)

-24.2%

(7,318)

11,422

(18,740)

-164.1%

174

149

16.8%

$ 68,968

$ 92,505

$ (23,537)

-25.4%

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IRS FY 2024 AGENCY FINANCIAL REPORT

In FY 2024, the IRS incurred obligations of $18,580 million, which is an increase of $2,054 million,

or 12.4%, from the previous fiscal year. Higher obligations are due to expenditures from the IRA

supplemental appropriations for information technology projects and to cover additional payroll

costs associated with expanding the size of the IRS workforce. Of the $1,434 million in additional

personnel-related obligations, $840 million was funded through the IRA accounts. The following

chart displays the FY 2024 obligations incurred by category. Miscellaneous includes travel and

transportation, grants, printing, and supplies and materials.

7.6%

21.9%

5.7%

64.9%

FY 2024

$18,580

Obligations

($ in Millions)

Personnel Salaries & Benefits

Contractual Services

Rent, Communications, Utilities, and Miscellaneous

Property and Equipment

Major Budget Account Descriptions

Taxpayer Services funds the necessary expenses of the IRS to provide taxpayer services,

including pre-filing assistance and education, filing and account services, taxpayer advocacy

services, and Low-Income Taxpayer Clinic and Volunteer Income Tax Assistance grants for tax

return preparation assistance.

Enforcement funds the necessary expenses for tax enforcement activities of the IRS to determine

and collect owed taxes, provide legal and litigation support, conduct criminal investigations, and

enforce criminal statutes related to violations of internal revenue laws and other financial crimes.

Operations Support funds the necessary expenses of the IRS to support taxpayer services and

enforcement programs, including rent payments; facilities services; printing; postage; physical

security; headquarters and other administration activities spanning the entire bureau; research and

statistics of income; telecommunications; information technology development; enhancement;

operations; maintenance; and security.

Business Systems Modernization funds the necessary expenses of the IRS's business systems

modernization program to include resources for planning and capital asset acquisition of infor

mation technology systems. In FY 2023 and FY 2024, Congress did not appropriate funds to the

discretionary Business Systems Modernization account, however, funding from the IRA remains

available through FY 2031.

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IRS FY 2024 AGENCY FINANCIAL REPORT

Analysis of the statements of Custodial Activity

The Statements of Custodial Activity present custodial revenues (federal tax collections), and

dispositions of custodial revenues for the current and prior fiscal years. As custodial activity is

performed on behalf of another entity, the IRS collects federal tax revenues on behalf of the U.S.

government.

Federal tax revenues are reported in six major tax categories:

• Individual Income, which includes Federal Insurance Contributions Act and Self-Employment

Contributions Act

• Corporate Income

• Excise

• Estate and Gift

• Railroad Retirement

• Federal Unemployment

FY 2024 revenue receipts collected by the IRS totaled $5,100,490 million, a $406,155 million

increase from $4,694,335 million in FY 2023.

Statement of Custodial Activity

2024

2023

Individual Income

$ 4,409,528

$ 4,112,546

Corporate Income

565,086

456,941

($ in Millions)

$ Change

% Change

296,982

7.2%

108,145

23.7%

CUSTODIAL REVENUES

Excise

77,948

74,249

3,699

5.0%

Other

47,928

50,599

(2,671)

-5.3%

$ 5,100,490

$ 4,694,335

406,155

8.7%

Total Custodial Revenues

The Statements of Custodial Activity also present refunds and outlays disbursed by the IRS on

behalf of the federal government. Total Refunds of Federal Taxes and Outlays include such items as

refunds of tax overpayments, interest payments, and disbursements for refundable tax credits. For

additional information on refundable tax credits and outlays, refer to Other Information – Section

E: Refundable Tax Credits and Other Outlays and Social Security and Medicare Taxes. Total

Refunds of Federal Taxes and Outlays decreased 16.1%, to $552,661 million from $659,052 million

for the periods ending September 30, 2024 and 2023, respectively.

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IRS FY 2024 AGENCY FINANCIAL REPORT

Unpaid Assessments

Under federal accounting standards, federal taxes receivable are unpaid tax assessments in which

the taxpayer or court has agreed to the amount. Those unpaid assessments not agreed to by

taxpayers or the courts are categorized as compliance assessments; those that have no future

collection potential are categorized as write-offs. Compliance assessments and write-offs are not

included on the Balance Sheets as Federal Taxes Receivable, Net.

2024

($ in Millions)

2023

UNPAID ASSESSMENTS

Federal Taxes Receivable

389,856

404,000

Compliance Assessments (Amounts not agreed to by taxpayer or courts)

90,131

94,000

Write-Offs (No future collection potential)

86,033

76,000

Total Unpaid Assessments

566,020

574,000

The decrease in total unpaid assessments is $7,980 million when compared to September 30,

2023. This change is primarily due to a decrease in Gross Federal Taxes Receivable associated

with Internal Revenue Code Section 965(h) payments partially offset by an increase in Write-Offs

(No future collection potential). For additional information, refer to the Required Supplementary

Information section, Federal Taxes Receivable, Net.

The total unpaid assessment balance consists of delinquent and nondelinquent balances. These

balances are owed by taxpayers who file returns without sufficient payment and/or assessed

amounts through the IRS’s enforcement programs (refer to Note 1.G. Federal Taxes Receivable,

Net and Note 4. Federal Taxes Receivable, Net). Delinquent balances are past due while nonde

linquent balances are Internal Revenue Code 965(h) amounts, for repatriated foreign earnings, due

at a future point in time. Unpaid Assessments Other consists of uncollected branded prescription

drugs fees and delinquent miscellaneous accounts not separately tabulated for financial reporting.

2024

($ in Millions)

2023

FEDERAL TAXES RECEIVABLE, GROSS

Nondeliquent Internal Revenue Code Section 965(h) Unpaid Assessments

76,868

Delinquent Unpaid Assessments

Delinquent Restitution Based Unpaid Assessments

Unpaid Assessments Other

Federal Taxes Receivable, Gross

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123,000

276,000

3,528

3,000

137

2,000

389,856

IRS FY 2024 AGENCY FINANCIAL REPORT

309,323

404,000

Collectability Modeling and economic Conditions

Delinquent unpaid assessments collectability reflects existing economic conditions of the

taxpayers’ ability to pay. Indicators of financial health were manually reviewed for publicly traded

businesses with large dollar Internal Revenue Code Section 965(h) amounts due. The analysis

determined that large dollar Internal Revenue Code Section 965(h) taxpayers are primarily in a

favorable long-term economic position to make their future payments.

Federal Taxes Receivable, Net, excludes the estimated uncollectible amounts of $250,636 million

and $222,000 million as of September 30, 2024 and 2023, respectively. Examples of uncollectible

taxes include taxpayers who agree they owe the tax but are unlikely to pay and businesses with

extreme financial hardships. Overall collectibility combines separate collectibility calculations for

Internal Revenue Code Section 965(h) amounts and components of delinquent taxes receivable.

estimated Collectability: Federal taxes receivable gross and net

As of September 30, 2024

($ in Millions)

Collectability

Nondelinquent Unpaid Assessments

94.4%

Delinquent Unpaid Assessments

21.3%

Gross

76,868

Net

312,988

66,619

Federal Taxes Receivable, Gross and Net

($ in Millions)

As of September 30, 2023

Collectability

Nondelinquent Unpaid Assessments

94.3%

Delinquent Unpaid Assessments

23.1%

Federal Taxes Receivable, Gross and Net

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Gross

125,000

404,000

139,220

Net

279,000

389,856

72,601

118,000

64,000

182,000

IRS FY 2024 AGENCY FINANCIAL REPORT

ANALYSIS OF SYSTEMS, CONTROLS,

AND LEGAL COMPLIANCE

Federal Managers' Financial Integrity Act of 1982

Background

The Federal Managers' Financial Integrity Act of 1982 requires executive branch agencies to

establish and maintain internal control and financial systems to provide reasonable assurance that:

• Obligations and costs comply with applicable laws.

• Funds, property, and other assets are safeguarded against waste, loss, unauthorized use, or

misappropriation.

• Revenues and expenditures applicable to agency operations are properly recorded and

accounted for to permit the preparation of accounts and reliable financial and statistical

reports, and to maintain accountability over the assets.

The Office of Management and Budget Circular A-123, Management’s Responsibility for Enterprise

Risk Management and Internal Control provides implementing guidance for the Federal Managers'

Financial Integrity Act of 1982, and defines management’s responsibility for establishing and

assessing internal controls. The Circular also requires federal agencies to adhere to the

Government Accountability Office’s Standards for Internal Control in the Federal Government, and

to evaluate and report on the effectiveness of the organization’s internal controls based on the 17

GAO Green Book principles. The purpose of this guidance is to improve accountability and effec

tiveness of programs and operations through implementation of enterprise risk management

practices and by establishing, maintaining, and assessing internal control effectiveness.

The Management Controls Executive Steering Committee is the IRS's internal control oversight

body and exercises its governance authority over significant annual internal control processes. The

Management Controls Executive Steering Committee briefs the Chief Operating Officer regarding

any significant deficiencies. Executives from different divisions provide periodic updates on the

status of any deficiencies and any current or pending audits regarding these.

Analysis of Controls

The Commissioner’s Assurance Statement is supported by a comprehensive risk-based internal

control evaluation plan that adheres to Treasury guidance. This plan includes a methodology that

identifies and documents key controls and provides for the assessment and testing of those

controls to provide reasonable assurance that the controls are designed, implemented, and

operating effectively.

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IRS FY 2024 AGENCY FINANCIAL REPORT

As part of the evaluation process the business units do the following:

• Submit an Internal Control Managerial Assessment certified by their head of office.

• Submit the GAO Evaluation Tool: consisting of an evaluation of the 17 Green Book Principles

(biennial).

• Conduct A-123 internal control testing of key financial and non-financial transactions.

• Update the Quality Assurance Review Listing.

• Conduct quality assurance reviews (managerial, operational, quality, security, and program

evaluation).

• Conduct Internal Control Review program assessments of IRS activities.

Internal Control over Financial and non-Financial reporting

In accordance with Office of Management and Budget Circular A-123, Appendix A, Management

of Reporting, and Data Integrity Risk, the IRS also assessed internal controls over financial

reporting. The IRS applied Treasury’s Appendix A guide to assess the effectiveness of its internal

controls by testing the design, implementation, and operating effectiveness of key internal controls

for material transactions to support reliable financial reporting. Based on the results of this

assessment the IRS can provide reasonable assurance regarding the effectiveness of its internal

control over financial reporting as of September 30, 2024. Furthermore, the IRS completed a pilot

project to test internal controls over non-financial reporting to ensure the overall data quality and

reliability of the information used to make decisions.

The pilot project review covers internal controls and processes that support overall data quality and

reliability. Reporting requirements include the following:

• Reports IRS Executives need to support critical decision-making and evaluation of perfor

mance.

• Reports considered high-level and might garner significant attention from media and/or

oversight groups.

• Reports driven by statutory requirements or the need for integrity, accountability, or trans

parent government data.

• Reports responsive to agency plans at strategic, operational, or other various levels.

• Reports used and relied upon by other government agencies that might reduce the public's

trust and confidence in the IRS if they were to include inaccuracies.

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IRS FY 2024 AGENCY FINANCIAL REPORT

Federal Financial Management Improvement Act of 1996

The Federal Financial Management Improvement Act of 1996 requires federal agencies to

implement and maintain financial management systems that comply substantially with federal

financial management systems requirements, applicable federal accounting standards, and the

U.S. Standard General Ledger at the transaction level.

The Act’s Section 803(c)(1) requires an annual determination of substantial compliance with Section

803(a) of the Act based on review of relevant factors. To support this determination, the IRS uses

the implementation guidance established by the Office of Management and Budget Circular A-123,

Appendix D, Management of Financial Management Systems – Risk and Compliance, to determine

whether our financial management systems comply substantially with federal financial management

system requirements, applicable federal accounting standards and the U.S. Standard General

Ledger at the transaction level. The assessment process includes the use of the Federal Financial

Management Improvement Act Compliance Determination Framework in Office of Management

and Budget Circular A-123, Appendix D, which is a risk and evidence-based assessment model

that leverages existing audits, evaluations, and reviews that auditors and agency management

already perform.

In applying the Federal Financial Management Improvement Act Compliance Determination

Framework, the IRS assesses available information from audit reports and other relevant and

appropriate sources, such as the IRS Federal Information Security Modernization Act of 2014

compliance activities, to determine whether the financial management systems comply substan

tially with the Federal Financial Management Improvement Act of 1996. The IRS also assesses

improvements and ongoing efforts to strengthen financial management systems and the impact of

instances of noncompliance on overall financial management system performance. Based on the

results of the overall assessment, the IRS concluded that its financial management systems did not

comply with federal financial management system requirements as of September 30, 2024, due to

a significant deficiency.

The IRS has a significant deficiency in internal control over financial reporting related to unpaid

assessments. Specifically, this deficiency relates to limitations in the ability of IRS’s financial

management systems to classify unpaid assessments and report taxes receivable in accordance

with federal accounting standards. The IRS worked diligently during FY 2024 to enhance its infor

mation technology security posture and resolved the long-standing Information System Controls

significant deficiency condition. The IRS continues to implement a strategy to downgrade the

unpaid assessments significant deficiency.

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IRS FY 2024 AGENCY FINANCIAL REPORT

Financial Management systems

The IRS developed its financial management systems to generate timely and accurate data and to

comply with applicable laws and regulations, while protecting data and systems through the

design, implementation, and monitoring of strong internal controls. The IRS objectives are to

continuously improve financial management systems by implementing enhancements that expand

and streamline financial transaction processing, analysis, and reporting, while operating in a robust

security environment.

The IRS’s financial management systems provide timely, accurate, and complete financial infor

mation to generate the IRS’s financial statements and provide IRS business units data to execute

their missions. The IRS's financial management systems comprise two major components.

The Redesigned Revenue Accounting Control System is a custom-built software database used to

account for and summarize all IRS revenue tax transactions and activities. The IRS uses the

Redesigned Revenue Accounting Control System to record, control, account for, reconcile, and

balance all revenue accounting activity, including tax payment collections and refunds, receivables,

appropriation warrants, refundable tax credits, and other transactional revenue activities on behalf

of the federal government. The Redesigned Revenue Accounting Control System specifically

supports the IRS revenue responsibilities to ensure the accuracy and completeness of tax collec

tions, disbursements and related activities in its financial reports and records.

The Integrated Financial System is comprised of three SAP® software components: the Enterprise

Resource Planning Central Component, Procurement for Public Sector, and Business Warehouse.

The Integrated Financial System interfaces with multiple systems, including, but not limited to,

Invoice Processing Platform, ConcurGov (travel), MoveLINQ® (relocation), and National Finance

Center (payroll) systems. The Integrated Financial System provides the IRS with comprehensive

automated functionality that supports financial and administrative program management. The

software provides automated functionality for significant administrative business processes,

including core financials, procurement, intragovernmental transactions, purchase card activities

and budget formulation and execution. The Integrated Financial System also provides robust

cumulative reporting capabilities by merging data from all sub-systems in Business Warehouse.

During FY 2024, IRS implemented several system improvements including:

• Migrated to the SAP National Security Services, Inc.® S/4HANA® Cloud, which upgraded the

Integrated Financial System functional capability platform.

• Government Invoicing functionalities in the Integrated Financial System.

• SAP® and Business Warehouse software upgrades.

• System-wide legislative, technical and cybersecurity upgrades.

The IRS will build upon successes of FY 2024 with the vision that fully articulates the goals and

objectives of the SOP (www.irs.gov/strategicplan). The IRS is committed to developing its

employees by providing resources, tools and training that will help meet the needs of today and

tomorrow and continuing to build its workforce using data-driven planning to strategically under

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IRS FY 2024 AGENCY FINANCIAL REPORT

stand future workforce needs. It is important for the IRS to foster continued partnerships and build

new ones with those who are essential contributors in improving the taxpayer experience. The IRS

will continue to expand its network for better information sharing and improved service delivery.

Within the next five years, the IRS plans to continue to enhance financial management systems

including:

• Enhancing the Integrated Financial System functional capability by continuing to plan and

implement the multi-year initiative to upgrade the Integrated Financial System functional

software to SAP® S/4HANA®.

• Implementing the remaining segments of the Government Invoicing functionality.

• Building core systemic functionality to support financial accounting program changes related

to the IRA and the Creating Helpful Incentives to Produce Semiconductors Act of 2022.

• Expanding data analytics across financial systems.

other laws

The IRS is required to comply with several legal and regulatory requirements, including the Antidefi

ciency Act. The Management Controls Executive Steering Committee, which includes top IRS

administrative and programmatic leadership, provides oversight and governance for the design,

implementation, and monitoring of controls to comply with these legal and regulatory requirements.

The IRS is not aware of any violations of the Antideficency Act.

The Digital Accountability and Transparency Act of 2014 expands upon the Federal Financial

Accountability and Transparency Act of 2006 by adding account-level reporting and requiring the

federal government to collectively standardize the reportable financial data elements.

In FY 2024 we provided consistent reviews of the Digital Accountability and Transparency Act of

2014 compliance for the following processes:

• Completeness of financial and award data (daily),

• Management accountability on reliability and validity of financial and award data (quarterly).

• Quality Assurance Review (monthly),

• Monthly Verification and Validation (monthly), and

• System Interface and Certification (monthly).

The Federal Information Security Modernization Act of 2014 requires federal agencies to develop,

document, and implement an agency-wide program to protect government information and infor

mation systems that support the operations and assets of the agency. The IRS continues to work

diligently to adopt the best cybersecurity practices and strategies to improve information

technology security.

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IRS FY 2024 AGENCY FINANCIAL REPORT

Management Assurances

Commissioner's statement of Assurance

The IRS’s management is responsible for managing risks and maintaining effective internal control

and financial management systems to meet the objectives of the Federal Managers’ Financial

Integrity Act of 1982. We conducted our assessment of risk and internal controls in accordance

with the Office of Management and Budget Circular A-123, Management’s Responsibility for Enter

prise Risk Management and Internal Control.

Based on our assessment, we can provide reasonable assurance that, in accordance with Section

2 of the Federal Managers’ Financial Integrity Act of 1982, the IRS’s internal control over opera

tions, reporting and compliance with laws and regulations were operating effectively as of

September 30, 2024. This includes the effective operation of internal control over financial reporting

which was considered as part of our assessment. We can also provide reasonable assurance that,

as of September 30, 2024, the IRS’s financial management systems conform with the requirements

of Section 4 of the Federal Managers’ Financial Integrity Act of 1982, with the exception of the

federal financial management systems requirement discussed below.

The Federal Financial Management Improvement Act of 1996 Section 803(a) requires agencies to

implement and maintain financial management systems that comply substantially with federal

financial management systems requirements, applicable federal accounting standards, and the

U.S. Standard General Ledger at the transaction level. We conducted our evaluation of financial

management systems for compliance with the Federal Financial Management Improvement Act of

1996 in accordance with Office of Management and Budget Circular A-123, Appendix D.

Based on our assessment, we can provide reasonable assurance that, as of September 30, 2024,

the IRS complied substantially with applicable federal accounting standards and the U.S. Standard

General Ledger at the transaction level. However, the IRS did not comply substantially with federal

financial management systems requirements because of a significant deficiency related to unpaid

assessments. As a result of this significant deficiency, we determined that the IRS’s financial

management systems did not comply substantially with the Federal Financial Management

Improvement Act of 1996.

We continue to make progress in remediating this deficiency and remain committed to focusing manage

ment’s attention and resources on appropriate corrective actions. Overall, we continue our efforts to

ensure high standards, minimize internal control weaknesses and meet federal financial management

systems requirements. Additional information on the deficiency can be found in Other Information –

Section A: Summary of Financial Statement Audit and Management Assurances, of this report.

Daniel I. Werfel

Commissioner of Internal Revenue

November 1, 2024

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Irs Management’s report on Internal Control over Financial reporting

The IRS’s internal control over financial reporting is a process effected by those charged with

governance, management, and other personnel. The objectives of this process are to provide

reasonable assurance that: (1) transactions are properly recorded, processed and summarized to

permit the preparation of financial statements in accordance with U.S. generally accepted

accounting principles, and assets are safeguarded against loss from unauthorized acquisition, use

or disposition, and (2) transactions are executed in accordance with provisions of applicable laws,

including those governing the use of budget authority, regulations, contracts, and grant agree

ments, noncompliance with which could have a material effect on the financial statements.

IRS management is responsible for designing, implementing, and maintaining effective internal

control over financial reporting relevant to the preparation and fair presentation of financial state

ments that are free from material misstatement, whether due to fraud or error. IRS management

evaluated the effectiveness of the IRS's internal control over financial reporting as of September 30,

2024, based on the criteria established under 31 U.S. Code 3512(c) and (d) (commonly known as

the Federal Managers' Financial Integrity Act of 1982).

Based on that evaluation, we conclude that as of September 30, 2024, the IRS’s internal control

over financial reporting was effective. The IRS has a significant deficiency in its internal control over

financial reporting for unpaid assessments, which we are actively addressing.

Daniel I. Werfel

Commissioner of Internal Revenue

November 1, 2024

Melanie R. Krause

Chief Operating Officer

November 1, 2024

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IRS FY 2024 AGENCY FINANCIAL REPORT

Teresa R. Hunter

Chief Financial Officer

November 1, 2024

FORWARD-LOOKING INFORMATION

After a year of implementation, the IRS has refined the objectives of the SOP (www.irs.gov/strate

gicplan) into a clear and concise articulation of the future of taxpayer service which is that all

taxpayers can meet their responsibilities, including all interactions with the IRS, in a completely

digital manner if they prefer. It has become abundantly clear that to bring the IRS into the modern

era, the IRS needs to become a digital-first agency. Digital-first processes and technologies will

enable the IRS to be nimbler in the administration of complex tax laws and will enable the IRS to

change along with taxpayer needs and expectations. While the IRS will maintain non-digital options

to ensure accessibility to all, the IRS must meet taxpayers where most of them want to be—online.

Many taxpayers want to interact with the IRS entirely digitally as they can with commercial financial

institutions. By simultaneously digitalizing internal processes, the IRS will also reduce timeconsuming, manual processes and free up employees to focus on more complex issues, such as

helping victims of scams. Digitalizing also reduces errors, which is beneficial for both taxpayers and

the IRS. The IRS estimates it can maintain the taxpayer services workforce at the level required to

deliver exceptional service in FY 2025 but will not be able to sustain these efforts through FY 2026

once IRA funding is depleted.

In addition, the IRS is working to ensure fairness in enforcement, making sure large corporate, large

partnership, and high-income individual filers pay the taxes they owe. Supported by IRA funding,

the IRS will ensure that noncompliant taxpayers and the largest and most complex filers, pay what

they owe because the IRS has the workforce and advanced technology needed to ensure fairness

in the tax system and narrow the tax gap. Even with improved taxpayer service, some taxpayers do

not pay what they owe. The rising breadth and complexity of tax administration, coupled with the

sophisticated ways some taxpayers attempt to evade their obligations, have outpaced IRS

resources and the ability to monitor compliance and narrow the gap between taxes owed and

taxes collected. Achieving this means the IRS will have the workforce and advanced analytics

needed to select the right cases for enforcement action, ensure the proper amount of tax is paid,

and promote future compliance. In line with Treasury’s directive, small businesses and households

earning $400,000 or less will not see audit rates increase relative to historical levels.

To achieve gains in taxpayer service and enforcement, the IRS will need to continue investing in

foundational capabilities and modernize its core information technology components, in addition to

transforming IRS human capital processes and technology as part of ongoing investment in the

IRS workforce.

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IRS FY 2024 AGENCY FINANCIAL REPORT

Key areas of focus through 2025 include:

• Enhancing live assistance through improved efficiency in call centers, reduced backlog of

paper returns and continued expanded staffing levels at Taxpayer Assistance Centers and

Pop-up Live Assistance Centers in rural and other areas, while working to ensure taxpayers

are aware of all available credits and benefits.

• Expanding online services by expanding the features available in online accounts,

including digital copies of notices, status updates, secure two-way messaging and

expanded payment options.

• Accelerating digitalization by providing up to 150 non-tax forms in digital mobile-friendly

formats in addition to the 20 delivered in FY 2024 as well as scanning at the point of entry

virtually all paper-filed tax and information returns.

• Simplifying notices by redesigning up to 200 notices, capturing 90% of all notice volume

for individual taxpayers and initiating business process changes necessary to flexibly

generate notices and reduce taxpayer burden.

• Disrupting tax scams and schemes by coordinating with partners to identify scams and

victims and improving victim assistance.

• Modernizing foundational technology and aged programming from the point of intake of

tax returns and information systems. Data security will be integrated throughout to protect

the integrity of the tax system and taxpayers.

• Modernizing how the IRS attracts, retains, develops, and empowers employees,

focusing on efforts to ensure they have the tools, training, and culture they need to perform

at their best.

• Improving IRS employee tools by developing and integrating high priority software tools

into operations to help taxpayers and improve service.

• Ensuring fairness in enforcement through hiring and increased training in critical staffing

areas such as those dedicated to high-income earners and large and complex partnerships.

• Increasing compliance efforts on the wealthiest taxpayers, large corporations, and

complex partnerships by expanding audits on these entities.

• Expanding Direct File to 12 additional states to provide eligibility to 30 million taxpayers

with increased types of permitted taxpayer deductions and tax credits.

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IRS FY 2024 AGENCY FINANCIAL REPORT

While the IRS has accomplished a lot so far with IRA funding and under the SOP (www.irs.gov/

strategicplan), there is so much more work to be done to make improvements and transform the

IRS for the benefit of taxpayers, tax professionals and the nation. Although the IRA funding

provides tens of billions of dollars, years of under-funding created unique challenges for the IRS.

Given current funding structures, Business System Modernization funding provided under the IRA

is critical for technology improvements but will run out by FY 2026. In addition, the IRS will be

unable to support current levels of taxpayer service through FY 2026. This means that the nearly

88% level of service delivered for taxpayers this filing season on the IRS individual customer service

phone line could drop to less than 30% in FY 2026, meaning 7 out of 10 taxpayers would not get

through to an assistor when calling.

The IRS will continue focusing on making improvements and efficient use of funding. It is critical

that the IRS has stable, secure funding to allow technology modernization and taxpayer service

improvements to continue and ensure those with complex returns, including certain high-income

individuals, large corporations, and complex partnerships pay the taxes they owe.

The President’s FY 2025 budget proposal would restore and maintain the full IRA investment in the

IRS through 2034 and avoid funding cliffs that would dramatically degrade IRS work abilities in

many different areas, including taxpayer services and technology modernization. This funding will

ensure the IRS can continue its transformation efforts as outlined in the SOP Annual Update

Supplement (www.irs.gov/strategicplan).

Participating States

IRS Direct File will be open for filing in early 2025 expanding to 24 participating states with additional

features making this option available to more taxpayers. Visit Irs.gov/directfile to learn more.

MAnAgeMent's DIsCUssIon AnD AnAlysIs

IRS FY 2024 AGENCY FINANCIAL REPORT

FINANCIAL INFORMATION

MESSAGE FROM THE

CHIEF FINANCIAL OFFICER

I am honored to share the IRS’s FY 2024 Agency Financial Report. This

report reflects our commitment to transparency, accountability, and

responsible stewardship of public funds to fulfill the IRS’s mission and

provide taxpayers with top quality service with integrity and fairness to all.

The CFO organization is the principal advisor to the IRS Commissioner

and Deputy Commissioner on all financial management programs, and

a critical driver of the IRS's strategic plan, budget formulation and the

execution of a multi-billion-dollar budget, financial reporting of the

multi-trillion-dollar revenue collected annually, and ensuring effective

internal controls.

Over the past year, our office has made progress in modernizing

financial management systems and processes. These efforts are part of a broader strategy to

enhance efficiency, improve data accuracy, and ensure the highest standards of accountability in

the use of taxpayer dollars. This year’s achievements are exemplified by:

Strong Internal Controls: The IRS has received an unmodified opinion on its financial statements

for the 25th consecutive year. Our external auditors also provided an unmodified opinion on the

overall effectiveness of our internal controls over financial reporting. After 11 years, the IRS resolved a

long-standing significant deficiency in information system controls, marking substantial improvements

and strengthened information technology internal controls. The IRS continues to make progress in

resolving the remaining significant deficiency and the single noncompliance instance identified in prior

years related to internal controls over unpaid assessments and federal financial management

systems requirements. The efforts to remediate the remaining significant deficiency demonstrate the

IRS’s overall commitment to continuous improvement and fiduciary responsibility.

Financial Reporting Excellence: The IRS received AGA’s Certificate of Excellence in

Accountability Reporting recognition for the second consecutive year, including a Best-In-Class

award for Excellent Overall Management’s Discussion and Analysis for outstanding explanation of

the strategic plan, providing performance measures for all goals and effectively addressing prior

year comments provided by the AGA’s review panel. This fiscal year, our financial management

operations oversaw about $5.1 trillion in tax collections, $553 billion in tax refunds and outlays and

$566 billion in unpaid assessments.

Key Modernization Efforts: We take pride in innovating our business processes to enhance

efficiency, accuracy, data analytics, and on-demand reporting to support critical decision-making

and become more agile. CFO has streamlined operations through the development and

implementation of interactive dashboards and data visualizations, introducing robotic process

automations, and data retrieval and validation. By leveraging data-driven insights, we are better

equipped to identify cost-saving opportunities and make informed decisions that maximize the

impact of every dollar spent.

FInAnCIAl InForMAtIon

IRS FY 2024 AGENCY FINANCIAL REPORT

Strategic Advisor Expertise: IRS leadership depend on CFO as a key enabler to successfully

transform the IRS. Our advisory role is well-regarded by the IRS Commissioner and the

Transformation Strategy Office for its data-driven analysis that frames the impact of both near-term

and strategic decisions. We are trusted to provide our objective expertise as exemplified by our

partnership with the Human Capital Office on workforce planning and recruitment and retention

strategies, collaboration on long-term information technology investments, teaming with missionfocused organizations on the launching of new energy credit programs, and as co-author with the

Research, Applied Analytics & Statistics organization on a whitepaper describing new return on

investment perspectives which will impact future investments in the IRS.

Enhanced Transparency: We made great strides in increasing transparency across the IRS. CFO

introduced quarterly reporting on IRA spending on IRS.gov allowing the public to track how these

funds are being used. As part of our ongoing commitment to openness, we continue to make the

IRS’s Agency Financial Reports and budget requests publicly available on IRS.gov, allowing for

greater visibility into our financial operations.

Workforce Investment: We continue to foster a culture of creativity among employees by offering

multiple training avenues to ensure they are equipped with the latest skills and knowledge to

navigate the complexities of federal financial management. We encourage CFO employees to

explore process improvement opportunities, develop automations, and empower them to

recommend innovative ways of leveraging new technologies.

I want to express my deep appreciation to the dedicated professionals in the CFO organization and

across the IRS. Their unwavering commitment to excellence is the foundation of our success.

Moving forward, our focus remains on continuous improvement to further innovate and enhance

our financial systems, expand our use of technology, and foster a culture of employee

empowerment and accountability. We remain steadfast in our commitment to responsible financial

stewardship and understand the importance of our role as guardians of the vast majority of revenue

collected for the U.S. government and will continue to work tirelessly to ensure that every dollar

appropriated to the IRS is used wisely and transparently.

Sincerely,

Teresa R. Hunter

Chief Financial Officer

November 1, 2024

FInAnCIAl InForMAtIon

IRS FY 2024 AGENCY FINANCIAL REPORT

INDEPENDENT AUDITOR'S REPORT

GAO Independent Auditor's Report, page 1

441 G St. N.W.

Washington, DC 20548

Independent Auditor’s Report

To the Commissioner of Internal Revenue

In our audits of the fiscal years 2024 and 2023 financial statements of the Internal Revenue

Service (IRS), we found

•

IRS’s financial statements as of and for the fiscal years ended September 30, 2024, and

2023, are presented fairly, in all material respects, in accordance with U.S. generally

accepted accounting principles;

•

although internal controls could be improved, IRS maintained, in all material respects,

effective internal control over financial reporting as of September 30, 2024; and

•

no reportable noncompliance for fiscal year 2024 with provisions of applicable laws,

regulations, contracts, and grant agreements we tested.

The following sections discuss in more detail (1) our report on the financial statements and on

internal control over financial reporting, which includes an emphasis-of-matter paragraph related

to federal taxes receivable, a section on required supplementary information (RSI), 1 and a

section on other information included with the financial statements; 2 (2) our report on

compliance with laws, regulations, contracts, and grant agreements; and (3) agency comments.

Report on the Financial Statements and on Internal Control over Financial Reporting

Opinion on the Financial Statements

In connection with fulfilling our requirement to audit the consolidated financial statements of the

U.S. government, and consistent with our authority to audit statements and schedules prepared

by executive agency components, we have audited IRS’s financial statements because of the

significance of IRS’s tax collections to the consolidated financial statements of the U.S.

government. 3 IRS’s financial statements comprise the balance sheets as of September 30,

2024, and 2023; the related statements of net cost, changes in net position, budgetary

resources, and custodial activity for the fiscal years then ended; and the related notes to the

1The RSI consists of Management’s Discussion and Analysis and the Required Supplementary Information section,

which are included with the financial statements.

2Other information consists of information included with the financial statements, other than the RSI and the auditor’s

report.

3See 31 U.S.C. §§ 331(e)(2), 3515, 3521(g), (i). Pursuant to the authority of 31 U.S.C. § 3515, the Office of

Management and Budget (OMB) requires IRS to issue annual audited financial statements that are separate from

those of the Department of the Treasury or that are presented separately in the department’s audited, consolidated

financial statements. See Office of Management and Budget, Audit Requirements for Federal Financial Statements,

OMB Bulletin 24-02, app. B (July 29, 2024).

FInAnCIAl InForMAtIon

IRS FY 2024 AGENCY FINANCIAL REPORT

GAO Independent Auditor's Report, page 2

financial statements. In our opinion, IRS’s financial statements present fairly, in all material

respects, IRS’s financial position as of September 30, 2024, and 2023, and its net cost of

operations, changes in net position, budgetary resources, and custodial activity for the fiscal

years then ended in accordance with U.S. generally accepted accounting principles.

Opinion on Internal Control over Financial Reporting

We also have audited IRS’s internal control over financial reporting as of September 30, 2024,

based on criteria established under 31 U.S.C. § 3512(c), (d), commonly known as the Federal

Managers’ Financial Integrity Act of 1982 (FMFIA). In our opinion, although certain internal

controls could be improved, IRS maintained, in all material respects, effective internal control

over financial reporting as of September 30, 2024, based on criteria established under FMFIA.

Our fiscal year 2024 audit continued to identify a significant deficiency in internal control over

financial reporting concerning IRS’s unpaid assessments. 4 We considered this significant

deficiency in determining the nature, timing, and extent of our audit procedures on IRS’s fiscal

year 2024 financial statements.

Although we identified some new control deficiencies, IRS made significant progress during

fiscal year 2024 in addressing the significant deficiency in information system controls that we

reported as of September 30, 2023. 5 Specifically, IRS sufficiently addressed certain control

deficiencies in security management, access controls, and configuration management—

including several long-standing deficiencies related to cryptography and multifactor

authentication. As a result, we concluded that the remaining control deficiencies, including the

new control deficiencies we identified, do not, individually or collectively, represent a significant

deficiency in internal control over financial reporting as of September 30, 2024. Our audit of

IRS’s internal control over financial reporting also considered the findings reported by the

Treasury Inspector General for Tax Administration in its recent annual evaluation of IRS’s

information security program. 6 It will be important for IRS management to continue to build on

the progress it has made in addressing the remaining deficiencies in internal control over

financial reporting, as well as focusing efforts on strengthening its information security program.

Although the significant deficiency in internal controls over unpaid assessments did not affect

our opinion on IRS’s fiscal year 2024 financial statements, misstatements may occur in

unaudited financial information reported internally and externally by IRS because of this

significant deficiency.

4An unpaid assessment is an enforceable claim against a taxpayer for which specific amounts are due, have been

determined, and the person(s) or entities from which a tax is due have been identified. See implementing guidance in

Internal Revenue Manual § 1.34.4.1.6(1)p, Terms/Definitions (Aug. 25, 2015). A deficiency in internal control exists

when the design or operation of a control does not allow management or employees, in the normal course of

performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material

weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is

a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or

detected and corrected, on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in

internal control over financial reporting that is less severe than a material weakness, yet important enough to merit

attention by those charged with governance.

5GAO, Financial Audit: IRS's FY 2023 and FY 2022 Financial Statements, GAO-24-106472 (Washington, D.C.: Nov.

9, 2023).

6Treasury Inspector General for Tax Administration, Fiscal Year 2024 IRS Federal Information Security

Modernization Act Evaluation, Report Number: 2024-200-039 (Washington, D.C.: July 29, 2024).

FInAnCIAl InForMAtIon

IRS FY 2024 AGENCY FINANCIAL REPORT

GAO Independent Auditor's Report, page 3

In addition, because of the significant deficiency in internal controls over unpaid assessments

that existed during fiscal year 2024, IRS’s financial management systems did not comply

substantially with federal financial management systems requirements as required by the

Federal Financial Management Improvement Act of 1996. 7

In addition to the significant deficiency in internal controls over unpaid assessments, we also

identified other deficiencies in IRS’s internal control over financial reporting that we do not

consider to be material weaknesses or significant deficiencies. Nonetheless, these deficiencies

warrant IRS management’s attention. We have communicated these matters to IRS

management and, where appropriate, will report on them separately.

Significant Deficiency in Internal Controls over Unpaid Assessments

During fiscal year 2024, the systems IRS uses to account for federal taxes receivable and other

unpaid assessment balances continued to have limitations. Because of these limitations, IRS’s

systems were unable to provide the timely, reliable, and complete transaction-level financial

information necessary to enable IRS to appropriately classify and report unpaid assessment

balances. 8

As in prior years, 9 IRS used a manually driven statistical estimation process to compensate for

the effects of its system limitations and other deficiencies on a material portion of its federal

taxes receivable balance to help ensure that this balance was free from material

misstatement. 10 During fiscal year 2024, IRS recorded adjustments totaling about $14.3 billion

to correct the effects of continued errors in its underlying data that it identified during its

7Section 803(a) of the Federal Financial Management Improvement Act of 1996 (FFMIA), which is reprinted in 31

U.S.C. § 3512 note, requires that certain federal agencies, including Treasury, implement and maintain financial

management systems that comply substantially with federal financial management systems requirements, applicable

federal accounting standards, and the U.S. Government Standard General Ledger at the transaction level. While

IRS’s financial management systems did not comply substantially with federal financial management systems

requirements, IRS’s financial management systems did comply substantially with federal accounting standards and

the U.S. Government Standard General Ledger at the transaction level. As a Treasury component, IRS is not

required to be assessed separately; however, it is included in Treasury’s agency-wide FFMIA assessment. Since IRS

is a significant component of Treasury, we conducted this assessment to support the audit of the Treasury agencywide financial statements. See Office of Management and Budget, Management of Financial Management Systems –

Risk and Compliance, OMB Circular No. A-123, app. D, § VII.A (Dec. 23, 2022).

8Federal accounting standards classify unpaid assessments into one of the following three categories for reporting

purposes: federal taxes receivable, compliance assessments, and write-offs. Federal taxes receivable are taxes due

from taxpayers that IRS can support through the existence of a taxpayer agreement, such as filing of a tax return

without sufficient payment, or a court ruling in favor of IRS. Compliance assessments are proposed tax assessments

where neither the taxpayer (when the right to disagree or object exists) nor a court has affirmed that the amounts are

owed. Write-offs represent unpaid assessments for which IRS does not expect further collections because of factors

such as the taxpayer’s death, bankruptcy, or insolvency. Federal accounting standards require that IRS report only

federal taxes receivable, net of an allowance for uncollectible taxes receivable, on the financial statements. See

Statement of Federal Financial Accounting Standards No. 7, Accounting for Revenue and Other Financing Sources

and Concepts for Reconciling Budgetary and Financial Accounting (May 10, 1996). See also implementing guidance

in Internal Revenue Manual, § 1.34.4, Unpaid Assessments (Mar. 17, 2023).

9GAO-24-106472.

GAO-24-106472

10In fiscal year 2024, IRS’s reported federal taxes receivable consisted of a combination of two distinct types of taxes

receivable with different internal control and accounting processes in place: amounts derived from (1) IRS’s unpaid

assessments statistical estimation process and (2) the Section 965(h) repatriation of foreign earnings provision of the

Tax Cuts and Jobs Act of 2017, Pub. L. No. 115-97, § 14103, 131 Stat. 2054, 2195-2208 (Dec. 22, 2017), which is

codified at 26 U.S.C § 965.

FInAnCIAl InForMAtIon

IRS FY 2024 AGENCY FINANCIAL REPORT

GAO Independent Auditor's Report, page 4

estimation process. While using this process to determine a material portion of taxes receivable

has enabled IRS to produce reliable related balances for year-end reporting, it does not provide

IRS management with readily available, reliable unpaid assessment information daily

throughout the year for effectively managing unpaid assessment balances. Further, these

limitations led to errors in taxpayer accounts, which create a burden for those taxpayers whose

accounts were affected.

While not collectively considered a material weakness, IRS’s ongoing control deficiencies

related to unpaid assessments are important enough to merit attention by those charged with

governance of IRS. Therefore, these issues collectively represent a significant deficiency in

IRS’s internal control over financial reporting as of September 30, 2024. Continued

management commitment and sustained efforts are necessary to build on the progress made to

date and to fully address IRS’s remaining unresolved issues concerning the management and

reporting of unpaid assessments.

Basis for Opinions

We conducted our audits in accordance with U.S. generally accepted government auditing

standards. Our responsibilities under those standards are further described in the Auditor’s

Responsibilities for the Audits of the Financial Statements and Internal Control over Financial

Reporting section of our report. We are required to be independent of IRS and to meet our other

ethical responsibilities, in accordance with the relevant ethical requirements relating to our

audits. We believe that the audit evidence we have obtained is sufficient and appropriate to

provide a basis for our audit opinions.

Emphasis-of-Matter: Federal Taxes Receivable

This matter deserves emphasis to put the information in IRS’s financial statements into context.

As discussed in note 1.E., Federal Taxes Receivable, Net, taxes receivable consist of unpaid

assessments (taxes, associated penalties, and interest) due from taxpayers. The existence of a

receivable is supported by a taxpayer agreement, such as filing of a tax return without sufficient

payment, or a court ruling in favor of IRS. Consistent with federal accounting standards, IRS’s

financial statements do not include an estimate for the annual tax gap—the difference between

the amount of tax that taxpayers owe and the amount they actually pay voluntarily and on

time, 11 nor do they include information on tax expenditures. 12 Further detail on the tax gap and

tax expenditures, as well as the associated dollar amounts, is provided in the unaudited other

information included with the financial statements. Our opinion on IRS’s financial statements is

not modified with respect to this matter.

11In October 2022, IRS released its most recent estimate of the tax gap, which covered tax years 2014–2016. IRS

estimated the average annual gross tax gap to be $496 billion for each of those years. IRS also estimated that $68

billion would be collected through enforcement actions or late payments, leaving a net annual tax gap of $428 billion.

In October 2024, IRS released projections of the tax gap for tax year 2022. For tax year 2022, IRS projected a gross

tax gap of $696 billion and a net tax gap of $606 billion.

12Tax expenditures are provisions of the Internal Revenue Code (Title 26, U.S. Code) that reduce taxpayers’ tax

liability and therefore the amount of tax revenue paid to the government. Examples include tax credits, deductions,

exclusions, exemptions, deferrals, and preferential tax rates.

FInAnCIAl InForMAtIon

IRS FY 2024 AGENCY FINANCIAL REPORT

GAO Independent Auditor's Report, page 5

Responsibilities of Management for the Financial Statements and Internal Control over Financial

Reporting

Management is responsible for

•

the preparation and fair presentation of the financial statements in accordance with U.S.

generally accepted accounting principles;

•

preparing, measuring, and presenting the RSI in accordance with U.S. generally accepted

accounting principles;

•

preparing and presenting other information included in IRS’s financial report, and ensuring

the consistency of that information with the audited financial statements and the RSI;

•

designing, implementing, and maintaining effective internal control over financial reporting

relevant to the preparation and fair presentation of financial statements that are free from

material misstatement, whether due to fraud or error;

•

assessing the effectiveness of internal control over financial reporting based on the criteria

established under FMFIA; and

•

its assessment about the effectiveness of internal control over financial reporting as of

September 30, 2024, included in the accompanying Management’s Report on Internal

Control over Financial Reporting on page 47.

Auditor’s Responsibilities for the Audits of the Financial Statements and Internal Control over

Financial Reporting

Our objectives are to (1) obtain reasonable assurance about whether the financial statements

as a whole are free from material misstatement, whether due to fraud or error, and whether

effective internal control over financial reporting was maintained in all material respects, and (2)

issue an auditor’s report that includes our opinions.

Reasonable assurance is a high level of assurance but is not absolu

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