Internal Revenue Service
Review of the Fiscal Year 2010 Budget Request Gao ID: GAO-09-754 June 3, 2009The financing of the federal government depends largely on the Internal Revenue Service's (IRS) ability to administer the tax laws, which includes providing service to taxpayers and enforcing the law so that individuals and businesses pay the taxes they owe. The President's fiscal year 2010 budget request details how IRS intends to allocate its resources to achieve these goals while also continuing its investment modernizing its tax processing systems. GAO was asked to (1) describe budget trends, including dollars and full time equivalents; (2) describe legislative proposals that, if enacted, could result in savings or increased revenues; (3) describe the requested increases in funding for new initiatives; (4) assess return on investment (ROI) information; and (5) assess and the status of the Business Systems Modernization (BSM) program. To do this, GAO compared the budget request to prior years, analyzed key documents, and interviewed IRS officials
The President's fiscal year 2010 budget request for IRS of $12.1 billion is a 5.2 percent increase of $603 million over the fiscal year 2009 appropriation, with increases for enforcement (7.6 percent), operations support (5.6 percent), and BSM (10.3 percent) and a 1.0 percent decrease for taxpayer services. The President's budget documents include legislative proposals aimed at reducing the tax gap. Five are directly supported by prior GAO work and could result in just over ten billion dollars in savings or increased revenues over the next 10 years, such as requiring information reporting on payments to corporations (potential increased revenue of about $8.2 billion over 10 years). The budget request includes $463 million for program increases, of which about 72 percent is for new enforcement initiatives. Four new initiatives are expected to cost $332 million in fiscal year 2010 with an initial ROI of 1.8, or a return of $1.80 on a dollar invested. By fiscal year 2012, the total 3-year investment is estimated to be almost $900 million and the annual ROI rises to 7.8 when new hires are expected to reach their full potential. IRS also provided a projected ROI for each initiative. IRS includes projected ROIs only for new enforcement initiatives, not existing programs. GAO previously reported that such additional information would be useful for funding and resource allocation decisions. While developing actual ROI information could be challenging, IRS does not have plans to compare actual performance results to ROI projections in the budget. Under BSM, the Customer Account Data Engine (CADE), a taxpayer account database, has so far cost over $400 million and delivered about 15 percent of the capability intended. IRS is pursuing a new strategy because of increasing complexities in system development and has suspended new work on CADE and another application while exploring the new strategy. A preliminary road map and cost estimates are due June 30, 2009. Until then, it is difficult to determine whether fiscal year 2010 funds are justified or adequate.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-09-754, Internal Revenue Service: Review of the Fiscal Year 2010 Budget Request
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Report to Congressional Committees:
United States Government Accountability Office:
GAO:
June 2009:
Internal Revenue Service:
Review of the Fiscal Year 2010 Budget Request:
GAO-09-754:
GAO Highlights:
Highlights of GAO-09-754, a report to congressional committees.
Why GAO Did This Study:
The financing of the federal government depends largely on the Internal
Revenue Service‘s (IRS) ability to administer the tax laws, which
includes providing service to taxpayers and enforcing the law so that
individuals and businesses pay the taxes they owe. The President‘s
fiscal year 2010 budget request details how IRS intends to allocate its
resources to achieve these goals while also continuing its investment
modernizing its tax processing systems.
GAO was asked to (1) describe budget trends, including dollars and full
time equivalents; (2) describe legislative proposals that, if enacted,
could result in savings or increased revenues; (3) describe the
requested increases in funding for new initiatives; (4) assess return
on investment (ROI) information; and (5) assess and the status of the
Business Systems Modernization (BSM) program. To do this, GAO compared
the budget request to prior years, analyzed key documents, and
interviewed IRS officials.
What GAO Found:
The President‘s fiscal year 2010 budget request for IRS of $12.1
billion is a 5.2 percent increase of $603 million over the fiscal year
2009 appropriation, with increases for enforcement (7.6 percent),
operations support (5.6 percent), and BSM (10.3 percent) and a 1.0
percent decrease for taxpayer services. The President‘s budget
documents include legislative proposals aimed at reducing the tax gap.
Five are directly supported by prior GAO work and could result in just
over ten billion dollars in savings or increased revenues over the next
10 years, such as requiring information reporting on payments to
corporations (potential increased revenue of about $8.2 billion over 10
years).
The budget request includes $463 million for program increases, of
which about 72 percent is for new enforcement initiatives. Four new
initiatives are expected to cost $332 million in fiscal year 2010 with
an initial ROI of 1.8, or a return of $1.80 on a dollar invested. By
fiscal year 2012, the total 3-year investment is estimated to be almost
$900 million and the annual ROI rises to 7.8 when new hires are
expected to reach their full potential. IRS also provided a projected
ROI for each initiative.
Figure: Estimated Costs and Projected Revenue and ROIs for New IRS
Enforcement Initiatives in the Fiscal Year 2010 Budget Request:
[Refer to PDF for image: four vertical bar graphs]
Reduce the tax gap attributable to international activities (dollars in
millions):
Year: FY 2010;
Cost: $128.1
Revenue: $93.8;
Return on Investment: $0.7.
Year: FY 2011;
Cost: $105.0;
Revenue: $447.0;
Return on Investment: $4.3.
Year: FY 2012;
Cost: $103.4
Revenue: $736.6;
Return on Investment: $7.1.
Improve reporting compliance of Small Business/Self Employed taxpayers
(dollars in millions):
Year: FY 2010;
Cost: $94.2;
Revenue: $159.6;
Return on Investment: $1.7.
Year: FY 2011;
Cost: $73.0;
Revenue: $431.0
Return on Investment: $5.9.
Year: FY 2012;
Cost: $72.6;
Revenue: $567.2;
Return on Investment: $7.8.
Expand document matching for business taxpayers (dollars in millions):
Year: FY 2010;
Cost: $26.2;
Revenue: $191.8;
Return on Investment: $7.3.
Year: FY 2011;
Cost: $23.0;
Revenue: $309.0;
Return on Investment: $13.4.
Year: FY 2012;
Cost: $22.8;
Revenue: $386.5;
Return on Investment: $17.0.
Address nonfiling/underpayment and collection coverage (dollars in
millions):
Year: FY 2010;
Cost: $83.6;
Revenue: $165.9;
Return on Investment: $2.0.
Year: FY 2011;
Cost: $64.0;
Revenue: $284.0;
Return on Investment: $4.4.
Year: FY 2012;
Cost: $64.0;
Revenue: $359.4.
Return on Investment: $5.6.
Source: GAO analysis of IRS data.
[End of figure]
IRS includes projected ROIs only for new enforcement initiatives, not
existing programs. GAO previously reported that such additional
information would be useful for funding and resource allocation
decisions. While developing actual ROI information could be
challenging, IRS does not have plans to compare actual performance
results to ROI projections in the budget.
Under BSM, the Customer Account Data Engine (CADE), a taxpayer account
database, has so far cost over $400 million and delivered about 15
percent of the capability intended. IRS is pursuing a new strategy
because of increasing complexities in system development and has
suspended new work on CADE and another application while exploring the
new strategy. A preliminary road map and cost estimates are due June
30, 2009. Until then, it is difficult to determine whether fiscal year
2010 funds are justified or adequate.
What GAO Recommends:
GAO recommends that the Commissioner of Internal Revenue develop actual
ROIs and compare them to the projected ROIs included in the budget
request. While not explicitly agreeing with our recommendation, IRS‘s
Chief Financial Officer said IRS will continue to improve analytical
tools used for resource decisions for major enforcement programs.
To view the full product, including the scope and methodology, click on
[hyperlink, http://www.gao.gov/products/GAO-09-754]. For more
information, contact Jim White, (202) 512-9110, whitej@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Conclusions:
Recommendation for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: Updated Slides from the May 26 and May 28, 2009 Briefings:
Appendix III: GAO Contact and Staff Acknowledgments:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
June 3, 2009:
The Honorable Richard J. Durbin:
Chairman:
The Honorable Susan Collins:
Ranking Member:
Subcommittee on Financial Services and General Government:
Committee on Appropriations:
United States Senate:
The Honorable John Lewis:
Chairman:
The Honorable Charles W. Boustany, Jr.
Ranking Member:
Subcommittee on Oversight:
Committee on Ways and Means:
House of Representatives:
The financing of the federal government depends largely on the Internal
Revenue Service's (IRS) ability to effectively administer the tax laws-
-this includes providing taxpayers service to make voluntary compliance
easier and enforcing the laws so that individuals and businesses pay
the taxes they owe. The President has requested $12.1 billion to fund
IRS's fiscal year 2010 operations, including $11.9 billion for
enforcement, service to taxpayers, and support of IRS's operations.
Another $254 million is for the Business Systems Modernization (BSM)
program, IRS's ongoing effort to improve the agency's tax processing
systems.
The IRS Strategic Plan 2009-2013 and Phase 2 of the Taxpayer Assistance
Blueprint (TAB) Report to Congress guide the fiscal year 2010 budget
request. The strategic plan recognizes, among other things, the
increasing complexity of tax laws, changing business models, and
accelerating growth in international tax activities. The TAB outlines a
5-year plan for taxpayer services that will help IRS enhance the
services delivered to taxpayers. Given competing priorities in IRS's
spending for its programs, limited resources make it even more
important that budget decision makers have sound information on how
proposed spending is related to achieving IRS's goals and whether there
are opportunities to revise IRS's spending plans so that resources
expended achieve maximum impact on desired service and enforcement
results.
Based on your requests, our objectives were to (1) describe budget
trends, including dollars and full time equivalents for fiscal years
2006 through 2010; (2) describe legislative proposals that, if enacted,
could result in savings or increased revenues; (3) describe the
requested increases in funding for new initiatives; (4) assess return
on investment (ROI) information in the budget and (5) assess the status
of the BSM program.
To address these objectives, we compared IRS's appropriations for
fiscal years 2006 through 2009 to the budget requests for fiscal year
2010, interviewed IRS officials, and reviewed and analyzed various
documents including strategic planning documents, descriptions of IRS's
ROI methodology, and the BSM expenditure plan. Based on previous tests
of the major data system IRS uses to prepare its budget request, we
determined the data in that system were sufficiently reliable for our
purposes.
We conducted this performance audit from January 2009 to June 2009 in
accordance with generally accepted government auditing standards. Those
standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives. For a more detailed
discussion of our scope and methodology, see appendix I.
Results in Brief:
On May 26, 2009, we briefed the Senate staff and on May 28, 2009, we
briefed the House staff on our initial observations of IRS's fiscal
year 2010 budget request. This report transmits updated materials we
used at the briefings, which are reprinted in appendix II.
In summary, we made the following major points:
* The President's fiscal year 2010 budget request for IRS of $12.1
billion is a 5.2 percent increase of $603 million over the fiscal year
2009 appropriation with increases for enforcement (almost 7.6 percent),
operations support (5.6 percent), and BSM (about 10.3 percent) and
about a 1.0 percent decrease for taxpayer services. While BSM has the
largest proposed percentage increase, the dollar increase, about $24
million, is small relative to IRS's overall budget request. The
requests for these appropriations are mostly consistent with trends for
the past 4 years, with the main exceptions being for taxpayer services,
which has generally remained stable, and for BSM, which has fluctuated
during this period. Of the $603 million increase, about 23 percent
($140 million) is for adjustments to the base, including pay raises,
inflation, and a governmentwide reduction for productivity
improvements. The remaining 77 percent ($463 million) is for program
increases in enforcement initiatives to reduce the tax gap, addressing
information technology (IT) operations and security, and modernizing IT
systems. The budget request also includes an increase in the number of
full time equivalents for enforcement and operation support while
taxpayer services would decrease and BSM would remain the same. IRS's
workload over the 5-year period has or is projected to increase in
terms of total returns filed.
* The President's budget documents include a number of legislative
proposals aimed at reducing the tax gap. Five are directly supported by
our previous work and could result in just over ten billion dollars in
savings or increased revenues over the next 10 years, including (1)
requiring information reporting on payments to corporations (potential
increased revenue of about $8.2 billion for detecting underreported
income and increased voluntary compliance over the next 10 years), (2)
applying the Federal Payment Levy Program to contractors before
providing pre-levy collection due process proceedings (potential
increased revenue of over $2 billion over the next 10 years), (3)
eliminating the Advance Earned Income Tax Credit (almost $900 million
in savings over the next 10 years), (4) expanding electronic filing
requirements for tax return preparers (potential savings of about $56
million per year, without any consideration of enforcement revenue),
and (5) requiring the reporting of additional details of rental real
estate activities on tax and information returns (potential increased
revenue unknown, but could be substantial based on the estimated $12.4
billion of net misreported income from tax year 2001)[Footnote 1].
Although no additional funding was requested for these proposals at
this time, if they are enacted there will be associated costs and
additional funding may subsequently be requested, according to IRS
officials.
* Under the proposed budget request, $463 million is for program
increases, of which about 72 percent is for enforcement initiatives.
Four initiatives are expected to cost about $332 million in fiscal year
2010 with an initial ROI of 1.8, or a return of $1.80 on a dollar
invested. By fiscal year 2012, the total 3-year investment is estimated
to be almost $900 million, and the annual ROI rises to 7.8 when the new
hires are expected to reach their full potential. IRS also provides a
projected ROI for each initiative. Reducing the tax gap attributable to
international activities is the largest of the four proposed
enforcement initiatives in terms of costs and potential revenues. Total
costs from fiscal year 2010 through fiscal year 2012 are estimated by
IRS to be $336 million. There are eight components to this initiative,
and while IRS only has revenue projections for three, expected total
revenue from fiscal year 2010 through fiscal year 2012 is about $1.3
billion for these three. Although IRS does not have a tax gap estimate
for international noncompliance, IRS justified the investment for this
initiative using a variety of trend data. The cost and revenue
projections for the international initiative show that in the first
year, fiscal year 2010, it will cost more than the revenue it will
generate, but that by fiscal year 2012, IRS projects the initiative
will generate seven times more revenue than the cost.
* As in the fiscal year 2009 budget request, the fiscal year 2010
budget request for IRS includes projected ROIs only for enforcement
initiatives, but not existing programs--even though we previously
reported that such information would be useful for funding and resource
allocation decisions.[Footnote 2] The fiscal year 2010 budget request
includes some new ROI information, such as references to the indirect
effect that enforcement activities have on voluntary compliance and a
description of the methodology used to compute the labor component of
the estimated ROIs. Comparing projected ROIs to actual ROIs is
consistent with the concepts of project management and internal control
standards and guidance from the Office of Management and Budget, GAO,
the Government Performance Results Act of 1993, and nongovernmental
entities.[Footnote 3] IRS does not have plans to compare actual
performance results to projected ROIs in the budget request, according
to IRS officials. However, while challenging to develop and perhaps not
initially complete, actual ROIs would provide information about how
programs and initiatives are performing and the possible need to adjust
ROI methodologies to more effectively project results of future
proposed initiatives.
* Since 1999, IRS has spent about $2.6 billion on BSM. The fiscal year
2010 budget request proposes about a 10.3 percent increase, or $24
million, in BSM funding. The major changes include an increase of $25
million for the Modernized e-File project to support the incorporation
of additional forms to expand its reach to a greater number of
taxpayers; another almost $8 million for the new Customer Account Data
Engine (CADE) strategy, which arose as a result of increasing
complexities and questions of scalability with the system; and a
decrease of about $11 million for core infrastructure activities. After
nearly 5 years and over $400 million, CADE has only delivered about 15
percent of the full capability intended. All new work on CADE and the
Accounts Management System, a related application, has been suspended
while IRS explores the new strategy. IRS has established a leadership
team and a preliminary road map and program cost estimates are targeted
for completion on June 30, 2009. Until these and additional analyses
currently under way have been completed, it will be difficult to
determine whether the funds requested for fiscal year 2010 are adequate
or justified.
Conclusions:
By presenting ROI projections for the proposed enforcement initiatives
in its budget request, IRS is providing important information about
estimated costs and potential revenues. Such information should be
useful to Congress for budgeting and oversight. However, without actual
ROI information, Congress, IRS management, and the public will not know
whether the approximately $900 million investment from fiscal year 2010
through fiscal year 2012 for enforcement initiatives actually realized
the projected results.
Recommendation for Executive Action:
We recommend that Commissioner of Internal Revenue take steps to
develop ROIs for IRS's enforcement programs using actual revenue and
full cost data and compare the actual ROIs to the projected ROIs
included in the budget requests.
Agency Comments and Our Evaluation:
IRS's Chief Financial Officer provided comments via email on June 1,
2009. While not explicitly agreeing with our recommendation, she wrote
that IRS will continue to improve the analytical tools it uses to
inform its resource decisions for major enforcement programs. She noted
that IRS already uses cost/benefit analysis, ROI, and other techniques
for a wide range of resource allocations decisions, such as service and
enforcement initiatives included in the President's budget. She also
noted that ROI is but one tool that can be used to improve resource
allocation decisionmaking and that IRS currently uses a broader set of
tools, such as cost/benefit analysis that incorporates a wide range of
tangible and intangible costs and benefits. She further wrote that
while the IRS believes the responsible course of action would be to
continue the development and application of a wide range of analytical
tools to improve resource allocation decisions, the development process
is complex and is dependent on funding of research projects.
We agree that ROIs are one important tool for resource allocation
decisions and that they can be challenging to develop. However, IRS has
no plans for developing actual ROIs. Having actual ROI data would
provide important program information on the results of investments.
IRS also made technical comments to a draft of this report and we made
changes where appropriate.
As agreed with your offices, unless you publicly announce the contents
of this report earlier, we plan no further distribution until 30 days
from the report date. At that time, we will send copies to Chairmen and
Ranking Members of other Senate and House committees and subcommittees
that have appropriation, authorization, and oversight responsibilities
for IRS. We are also sending copies to the Commissioner of Internal
Revenue, the Secretary of the Treasury, the Chairman of the IRS
Oversight Board, and the Director of the Office of Management and
Budget. Copies are also available at no charge on the GAO Web site at
[hyperlink, http://www.gao.gov].
If you or your staffs have any questions or wish to discuss the
material in this report further, please contact me at (202) 512-9110 or
whitej@gao.gov. Contact points for our offices of Congressional
Relations and Public Affairs may be found on the last page of this
report. GAO staff members who made major contributions to this report
are listed in appendix III.
Signed by:
James R. White:
Director, Tax Issues:
Strategic Issues:
[End of section]
Appendix I: Objectives, Scope, and Methodology:
Our objectives related to our review of the President's fiscal year
2010 budget request for the Internal Revenue Service (IRS) were to (1)
describe budget trends including dollars and full time equivalents for
fiscal years 2006 through 2010; (2) describe legislative proposals that
if enacted, could result in savings or increased revenues; and (3)
describe the requested increases in funding for new initiatives; (4)
assess return on investment (ROI) information in the budget request;
and (5) assess the status of the Business Systems Modernization (BSM)
program.
To address these objectives, we compared IRS's appropriations for
fiscal years 2006 through 2009 to the budget request for fiscal year
2010. We identified and analyzed legislative proposals in various
budget documents, such as the IRS Congressional Justification and the
Office of Management and Budget's Terminations, Reductions, and Savings
report. We compared the legislative proposals to our previous work to
determine which, if any, we had determined would result in savings or
increased revenues.[Footnote 4] We reviewed the funding requests for
new initiatives, including the ROIs and the ROI methodology. In
addition, we reviewed pertinent IRS documents, such as the IRS's
Strategic Plan 2009-2013, the 2007 Taxpayer Assistance Blueprint Phase
2, and Phase I of the Advancing E-File Study dated September 30, 2008.
We interviewed officials at IRS's National Office including officials
in the Chief Financial Officer's Office; the Office of Research,
Analysis, and Statistics; and the headquarters of the Wage and
Investment Division in Atlanta. Based on previous tests of the major
data system IRS uses to prepare its budget request, we determined the
data in this system were sufficiently reliable for our purposes.
To provide a status of the BSM program, we relied on the results of our
recent BSM expenditure plan review[Footnote 5]. We also received
briefings on the status of the new CADE strategy from BSM officials
including the Chief Technology Officer, the Deputy Chief Information
Officer for Modernization, and members of the leadership team
established to guide the work on the new strategy. We also reviewed
documentation supporting these officials' statements.
We conducted this performance audit from January 2009 to June 2009 in
accordance with generally accepted government auditing standards. Those
standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.
[End of section]
Appendix II: Updated Slides from the May 26 and May 28, 2009 Briefings:
Briefing Prepared for the Subcommittee on Financial Services and
General Government, Committee on Appropriations, U.S. Senate and the
Subcommittee on Oversight, Committee on Ways and Means, House of
Representatives:
A Review of the Internal Revenue Service‘s (IRS) Fiscal Year (FY) 2010
Budget Request:
May 26, 2009 (Senate):
May 28, 2009 (House):
Objectives, Scope, and Methodology:
For the FY 2010 Treasury budget justification submitted for IRS,
* describe trends for budget and full time equivalents (FTE), for FY
2006 through 2010,
* describe legislative proposals,
* describe requested increases in funding for new enforcement
initiatives,
* assess return on investment (ROI) information, and,
* assess the status of Business Systems Modernization (BSM).
We conducted our work at IRS headquarters in Washington, D.C., and its
offices in Atlanta. We based our work, in part, on comparisons of prior
fiscal year appropriations and the FY 2010 requested budget for IRS;
reviews of other documents, such as strategic plans; and interviews
with IRS officials. Our BSM work was based, in part, on our expenditure
plan analysis.
Results in Brief:
The President‘s FY 2010 budget request for IRS is $12.1 billion,which
is a 5.2 percent increase over FY 2009 levels. The requested FTEs are
95,081, which is less than a 1.0 percent increase from the prior year.
Various FY 2010 budget documents contain several legislative proposals,
supported by prior GAO work that, if enacted, could result in just over
ten billion dollars in savings or increased revenues over the next 10
years.
About 72 percent, or $332 million of the $463 million requested for
program increases is for new enforcement initiatives, including
international activities, Small Business/Self Employed (SB/SE)
taxpayers, document matching for business taxpayers, and
nonfiling/underpayment and collection.
The FY 2010 budget request provides ROI projections for the new
proposed initiatives. While some new ROI information is included, such
as references to the indirect effect that enforcement activities have
on voluntary compliance, IRS does not have any plans to compare actual
performance results to projected ROIs in the budget.
The FY 2010 budget request proposes about a 10.3 percent increase in
BSM funding, although the dollar increase is relatively small, at about
$24 million. The bulk of this increase is to continue development on
Modernized e-file and to support a new Customer Account Data Engine
(CADE) strategy.
Budget Trends, FY 2006 through FY 2010:
Table 1: FY 2006 through FY 2009 IRS Amounts Appropriated and FY2010
Requested Budget (Dollars in Thousands):
Appropriation: Enforcement;
FY 2006 enacted: $4,708,441;
FY 2007 enacted: $4,686,477;
FY 2008 enacted[A]: $4,780,000;
FY 2009 enacted[B]: $5,117,267;
FY 2010 requested: $5,504,000.
Appropriation: Taxpayer services;
FY 2006 enacted: $2,142,042;
FY 2007 enacted: $2,138,238;
FY 2008 enacted[A]: $2,191,085;
FY 2009 enacted[B]: $2,293,000;
FY 2010 requested: $2,269,830.
Appropriation: Operations support;
FY 2006 enacted: $3,461,205;
FY 2007 enacted: $3,544,835;
FY 2008 enacted[A]: $3,841,109;
FY 2009 enacted[B]: $3,867,011;
FY 2010 requested: $4,082,984.
Appropriation: BSM;
FY 2006 enacted: $242,010;
FY 2007 enacted: $212,659;
FY 2008 enacted[A]: $267,090;
FY 2009 enacted[B]: $229,914;
FY 2010 requested: $253,674.
Appropriation: Health insurance tax credit (HITC) administration;
FY 2006 enacted: $20,008;
FY 2007 enacted: $14,856;
FY 2008 enacted[A]: $15,235;
FY 2009 enacted[B]: $15,406;
FY 2010 requested: $15,512;
Appropriation: Total;
FY 2006 enacted: $10,573,706;
FY 2007 enacted: $10,597,065;
FY 2008 enacted[A]: $11,094,519;
FY 2009 enacted[B]: $11,522,598;
FY 2010 requested: $12,126,000.
Source: IRS data.
Notes: FY 2006 appropriation account structure has been adjusted for
comparability across fiscal years. Dollars are not adjusted for
inflation.
[A] FY 2008 includes supplemental funding for Economic Stimulus payment
of $202.1 million.
[B] FY 2009 amounts exclude the $123 million IRS received to implement
the American Recovery and Reinvestment Act (Recovery Act) as well as
the $80 million for HITC.
[End of table]
The President‘s FY 2010 budget request for IRS is $12.1 billion, a 5.2
percent increase of $603 million over FY 2009 levels. Changes in the
amounts requested include the following:
* Enforcement increases by almost 7.6 percent, or about $387 million,
with nearly 86 percent of the increase going toward the Exam and
Collections account.
* Taxpayer services‘s around 1.0 percent decrease, or about $23
million, comes from an approximate 2.3 percent decrease of about $38
million in Filing and Account Services in combination with about a $15
million increase for Pre-Filing Taxpayer Assistance and Education.
* Operations support‘s nearly 5.6 percent increase, or about $216
million, is largely for Information Services.
* BSM increases by around 10.3 percent; however, the dollar increase,
about $24 million, is small relative to IRS‘s overall budget.
Of the $603 million increase, about:
* 23 percent ($140 million) is for base adjustments that include
raises, inflation, and a governmentwide reduction for productivity
improvements and;
* 77 percent ($463 million) is for program increases in new enforcement
initiatives, addressing information technology (IT) security, and
modernizing IT systems.
Figure 1: FY 2006 through FY 2009 Amounts Appropriated and FY 2010
Budget Request for IRS (dollars in millions):
[Refer to PDF for figure: multiple line graph]
FY 2006:
HITC: $20;
Business Systems Modernization: $242;
Taxpayer Services: $2142;
Operations Support: $3461;
Enforcement: $4708.
FY 2007:
HITC: $15;
Business Systems Modernization: $213;
Taxpayer Services: $2169;
Operations Support: $3644;
Enforcement: $4686.
FY 2008:
HITC: $15;
Business Systems Modernization: $267;
Taxpayer Services: $2191;
Operations Support: $3841;
Enforcement: $4780.
FY 2009:
HITC: $15;
Business Systems Modernization: $229;
Taxpayer Services: $2293;
Operations Support: $3867;
Enforcement: $5117.
FY 2010:
HITC: $16;
Business Systems Modernization: $254;
Taxpayer Services: $2270;
Operations Support: $4082;
Enforcement: $5504.
Note: dollars are not adjusted for inflation.
The enforcement and operations support appropriations generally
increased over the last 4 years, while taxpayer services and HITC
remained more stable. BSM has fluctuated.
[End of figure]
FTEs, FY 2006 through FY 2010:
Table 2: IRS FY 2006 through FY 2009 FTEs and FY 2010 Requested FTEs:
Funding FTEs: Enforcement;
FY 2006: 49,534;
FY 2007: 48,307;
FY 2008: 47,596;
FY 2009[A]: 48,939;
FY 2010 requested: 51,200;
Funding FTEs: Taxpayer services;
FY 2006: 32,050;
FY 2007: 31,557;
FY 2008: 31,949;
FY 2009[A]: 32,652;
FY 2010 requested: 31,217.
Funding FTEs: Operations support;
FY 2006: 13,468;
FY 2007: 12,890;
FY 2008: 12,495;
FY 2009[A]: 12,270;
FY 2010 requested: 12,316.
Funding FTEs: BSM;
FY 2006: 317;
FY 2007: 317;
FY 2008: 358;
FY 2009[A]: 333;
FY 2010 requested: 333.
Funding FTEs: HITC;
FY 2006: 17;
FY 2007: 17;
FY 2008: 17;
FY 2009[A]: 15;
FY 2010 requested: 15.
Funding FTEs: Total;
FY 2006: 95,081;
FY 2007: 94,209;
FY 2008: 92,415;
FY 2009[A]: 93,088;
FY 2010 requested: 95,386.
Source: IRS data.
Note: FY 2006 appropriation account structure has been adjusted for
comparability across fiscal years.
[A] The $123 million that IRS received in FY 2009 to implement the
Recovery Act generally assumed the extension of seasonal employees or
increased overtime, rather than new hires. HITC‘s FTEs for FY 2009 and
requested for FY 2010, shown above, do not include FTEs provided by the
$80 million Recovery Act funding.
[End of table]
Under the proposed budget, IRS‘s overall FTEs increase by less than 1
percent for FY 2010 with:
* Enforcement increasing nearly 5 percent,
* Taxpayer services decreasing about 4 percent,
* Operations support increasing less than 1 percent, and,
* both BSM and HITC remaining the same.
IRS expects HITC to expand by almost 50 percent, or an additional seven
FTEs in FY 2011 as a result of changes provided through the Recovery
Act.
Figure 2: IRS FY 2006 through FY 2009 FTEs and FY 2010 Requested FTEs:
[Refer to PDF for figure: multiple line graph]
FY 2006:
HITC: 17;
Business Systems Modernization: 317;
Taxpayer Services: 13,468;
Operations Support: 32,050;
Enforcement: 49,534.
FY 2007:
HITC: 17;
Business Systems Modernization: 317;
Taxpayer Services: 12,890;
Operations Support: 31,557;
Enforcement: 48,307.
FY 2008:
HITC: 17;
Business Systems Modernization: 358;
Taxpayer Services: 12,495;
Operations Support: 31,959;
Enforcement: 47,596.
FY 2009:
HITC: 15;
Business Systems Modernization: 333;
Taxpayer Services: 12,270;
Operations Support: 32,652;
Enforcement: 48,939.
FY 2010:
HITC: 15;
Business Systems Modernization: 333;
Taxpayer Services: 12,316;
Operations Support: 31,217;
Enforcement: 51,200.
Enforcement FTEs have generally fluctuated with an upward trend in FY
2009 and requested in FY 2010. Taxpayer services has fluctuated with a
downward trend through FY 2010 and operations support FTEs generally
declined, while BSM and HITC FTEs remained fairly stable. HITC‘s FTEs
for FY 2009 and requested for FY 2010 do not include FTEs provided by
the Recovery Act.
[End of figure]
Total Number of Returns Filed FY 2006 through FY 2008 and Projected, FY
2009 through FY 2011:
Figure 3: Paper and Electronic Tax Returns Filed, FY 2006 through FY
2008 and Projected Filings for FY 2009 through 2011:
[Refer to PDF for image: stacked vertical bar graph]
FY 2006:
Paper tax returns: 147 million;
Electronic tax returns: 81 million;
Total tax returns: 228 million.
FY 2007:
Paper tax returns: 148 million;
Electronic tax returns: 87 million;
Total tax returns: 235 million.
FY 2008:
Paper tax returns: 148 million;
Electronic tax returns: 102 million;
Total tax returns: 250 million.
FY 2009:
Paper tax returns: 136 million;
Electronic tax returns: 104 million;
Total tax returns: 240 million.
FY 2010:
Paper tax returns: 132 million;
Electronic tax returns: 111 million;
Total tax returns: 243 million.
FY 2011:
Paper tax returns: 129 million;
Electronic tax returns: 117 million;
Total tax returns: 246 million.
Source: IRS data.
The total number of actual returns filed increased from FY 2006 through
FY 2008, with a significant increase in FY 2008, which IRS attributes
to the 2008 Economic Stimulus Payment.
[End of table]
Legislative Proposals Could Reduce the Tax Gap:
Various FY 2010 budget documents contain several legislative proposals,
supported by prior GAO work that, if enacted, could result in just over
ten billion in savings or increased revenues over the next 10 years, as
follows.[Footnote 6]
* Requiring information reporting on payments to corporations could
increase tax revenue by about $8.2 billion over 10 years, in part
because of increased voluntary compliance and IRS‘s ability to detect
underreported payments received by businesses.[Footnote 7]
* Applying the Federal Payment Levy Program to contractors before
providing pre-levy collection due process proceedings could increase
revenues by over $2 billion over the next 10 years.[Footnote 8]
* Eliminating the Advance Earned Income Tax Credit (AEITC) could save
almost $900 million over the next 10 years.[Footnote 9]
* Requiring electronic filing (e-filing) for tax return preparers who
file over 100 returns per calendar year could save about $56 million in
processing each year. In addition, it could improve IRS‘s enforcement
strategy, as more return data are captured from e-filed returns.
[Footnote 10]
* Requiring the reporting of additional details of rental real estate
activities, such as expense payments, on tax and information returns
could improve taxpayer compliance and increase tax revenue.[Footnote
11]
No additional funding was requested for these legislative proposals to
improve tax compliance in FY 2010. IRS officials stated that if the
proposals are enacted, there will be associated costs and additional
funding may subsequently be requested.
Generally, Payments to Corporations Are Not Subject to 1099-MISC
Reporting (Potential Increased Revenue: About $8.2 Billion Over the
Next 10 Years):
Certain payments to unincorporated persons or businesses are subject to
information reporting on Form 1099-MISC, but payments to corporations
generally are not, requiring payers to determine the status of their
payees.
IRS data suggest payees are more likely to report income on their tax
returns if IRS receives third-party information returns.
Removing the general exemption on reporting payments made to
corporations lessens the burden of determining payee business status
and also provides IRS with information to help detect underreported
miscellaneous income.
GAO recommended expanding reporting requirements for payments to
corporations on the Form 1099-MISC. Projected increases in revenue are
$8.2 billion, in part because of increased voluntary compliance and IRS‘
s ability to detect underreported payments received by businesses.
Many Federal Contractors Are Delinquent in Federal Taxes (Potential
Increased Revenue: Above $2 Billion Over the Next 10 Years):
Thousands of federal contractors abuse the federal tax system and owe
billions in unpaid taxes.
Currently, a government payment cannot be reduced until all debt
collection administrative procedures are complete”a lengthy process,
often resulting in a lost opportunity to collect unpaid taxes.
Additionally, technical issues impair IRS‘s ability to fully implement
the legal provision to increase the continuous levy on federal payments
from 15 percent to 100 percent.
Legislative proposals are aimed at (1) levying payments before all debt
collection administrative procedures are complete by providing the
taxpayer the opportunity for a collection due process hearing within a
reasonable time after levy and (2) obtaining a technical correction to
allow levies up to 100 percent.
The AEITC‘s Low Use and Small Dollars Paid Impede IRS‘s Efforts to
Reduce High Noncompliance (Potential Savings: Almost $900 Million Over
the Next 10 Years):
Only about 3 percent of Earned Income Tax Credit recipients potentially
eligible for the AEITC received it in tax years 2002 through 2004, or
about 514,000 of the 17 million potentially eligible individuals each
year.
Of those who did receive it, most got relatively few dollars with about
half of all recipients receiving $100 or less in AEITC and 75 percent
receiving $500 or less for the year.
Furthermore, as many as 80 percent of AEITC recipients did not comply
with at least one of the program requirements reviewed, and some were
noncompliant with more than one during the 3 years reviewed.
GAO recommended steps to improve AEITC compliance, but suggested the
Department of the Treasury inform Congress as to whether the AEITC
should be retained.
Efficiency Savings Result with Increases in Electronic Filing
(Potential Savings: About $56 Million per year, without Any
Consideration of Enforcement Revenue):
Processing paper returns cost IRS $2.52 more per return than processing
e-filed returns.[Footnote 12]
Increases in e-filing move IRS closer to a time when it might be able
to capture all tax return data to use for enforcement purposes.
[Footnote 13]
As of the 2009 filing season, 20 states have mandated that preparers e-
file state tax returns if they met certain filing thresholds.
GAO asked Congress to consider mandating that certain paid preparers e-
file client returns. The Electronic Tax Administration Advisory Council
also made a similar recommendation.
The legislative proposal requests to expand electronic filing
requirements for tax return preparers.
Requiring tax preparers filing more than 100 tax returns to e-file
could save IRS about $56 million in processing each year, result in
more than 22 million additional e-filed returns, and bring IRS closer
to meeting the 80 percent e-file goal.
Over Half of Taxpayers with Rental Real Estate Misreport Associated
Income (Potential Increased Revenue: Unknown but Expected to Be
Substantial):
For tax year 2001, misreporting by an estimated 53 percent of
individual taxpayers with rental real estate resulted in an estimated
$12.4 billion of net misreported income.
Misreporting of rental real estate expenses was the most common type of
rental real estate misreporting.
Given the magnitude of underreporting, even small improvements in
taxpayer compliance could result in substantial revenue.
GAO recommended that IRS require the reporting of additional details of
rental real estate activities on tax and information returns and that
Congress consider that expense payments be included.
This proposal would require rental income recipients making payments of
$600 or more to a service provider to send an information return to IRS
and the service provider.
Requested Increases in Funding for New Enforcement Initiatives:
The President requested $463 million for IRS program increases, of
which about 72 percent is for new enforcement initiatives, focusing on:
* international activities,
* SB/SE taxpayers,
* document matching for business taxpayers, and,
* nonfiling/underpayment and collection coverage.
For FY 2010, the total planned cost for these initiatives is about $332
million and they are expected to generate about $611 million in
revenue. The initial ROI is projected to be 1.8 to 1.
The total estimated investment from FY 2010 to FY 2012 is about $900
million and IRS projects the ROI to rise to 7.8 to 1 in FY 2012 when
the new hires are expected to reach their full potential.
If IRS falls behind on its hiring plans, staff may not reach their full
potential as quickly as anticipated, which ultimately could delay
projected revenue gains.
ROI Calculations for Proposed Enforcement Initiatives in the FY 2010
Budget Request for IRS Predict Program Performance:
Figure 4: Estimated Costs and Projected Revenue and ROIs for New IRS
Enforcement Initiatives in the Fiscal Year 2010 Budget Request:
[Refer to PDF for image: four vertical bar graphs]
Reduce the tax gap attributable to international activities (dollars in
millions):
Year: FY 2010;
Cost: $128.1
Revenue: $93.8;
Return on Investment: $0.7.
Year: FY 2011;
Cost: $105.0;
Revenue: $447.0;
Return on Investment: $4.3.
Year: FY 2012;
Cost: $103.4
Revenue: $736.6;
Return on Investment: $7.1.
Improve reporting compliance of Small Business/Self Employed taxpayers
(dollars in millions):
Year: FY 2010;
Cost: $94.2;
Revenue: $159.6;
Return on Investment: $1.7.
Year: FY 2011;
Cost: $73.0;
Revenue: $431.0
Return on Investment: $5.9.
Year: FY 2012;
Cost: $72.6;
Revenue: $567.2;
Return on Investment: $7.8.
Expand document matching for business taxpayers (dollars in millions):
Year: FY 2010;
Cost: $26.2;
Revenue: $191.8;
Return on Investment: $7.3.
Year: FY 2011;
Cost: $23.0;
Revenue: $309.0;
Return on Investment: $13.4.
Year: FY 2012;
Cost: $22.8;
Revenue: $386.5;
Return on Investment: $17.0.
Address nonfiling/underpayment and collection coverage (dollars in
millions):
Year: FY 2010;
Cost: $83.6;
Revenue: $165.9;
Return on Investment: $2.0.
Year: FY 2011;
Cost: $64.0;
Revenue: $284.0;
Return on Investment: $4.4.
Year: FY 2012;
Cost: $64.0;
Revenue: $359.4.
Return on Investment: $5.6.
Source: GAO analysis of IRS data.
[End of figure]
Reducing the Tax Gap Attributable to International Activities:
This is the largest new initiative in the budget in terms of cost, $336
million, and potential revenues, about $1.3 billion, to be realized
from FY 2010 through FY 2012.
It has eight components, such as increasing withholding compliance
regarding foreign person's U.S. source income.[Footnote 14]
The revenue estimates for this initiative”$94 million in 2010, $447
million in 2011, and $737 million in 2012”represent estimates for only
three of the eight components. IRS does not have revenue estimates for
other components.
IRS has no tax gap estimates for international noncompliance and
justifies the investment using a variety of trend data.
First year projections are that this initiative will cost more than it
generates with a ROI of 0.7 to 1, but that by 2012 when new hires reach
their full potential, the ROI will increase to 7.1 to 1.
Treasury‘s Budget Justification for IRS Provides ROI Estimates for
Proposed Enforcement Initiatives:
As in last year‘s budget justification, the FY 2010 justification:
* provides projected ROIs only for new enforcement initiatives, but,
* there are no ROI projections for existing enforcement program.
IRS has no plans to include ROI for existing programs.
We have previously recommended that IRS expand its use of ROI
projections for all enforcement programs. In such, we recognize that
ROI projections have limitations, such as the indirect effects of an
enforcement program on voluntary compliance and that some enforcement
activities on all tax issues, despite ROI estimates, positively affect
voluntary compliance.[Footnote 15]
However, even limited ROI projections for existing programs and
activities would provide useful information for funding and resource
allocation decisions.
Treasury‘s Budget Justification for IRS Contains New ROI Information:
New ROI information includes:
* references that enforcement activities yield indirect revenue by
deterring noncompliance, estimating it to be at least three times the
direct revenue impact,[Footnote 16] and;
* a description of the methodology used to compute the labor component
of projected ROIs in the budget.
Use of ROI Information to Evaluate Programs Provides Benefits:
While challenging to develop and perhaps not initially
complete,comparing projected ROIs to actual ROIs is consistent with the
concepts of project management and internal control standards and
guidance from the Office of Management and Budget (OMB), GAO, the
Government Performance Results Act of 1993, and nongovernmental
entities.[Footnote 17]
Comparing the projections with actual data can help decision makers
evaluate performance.
IRS has or is in the process of calculating actual cost benefit
analyses for some existing enforcement activities and programs, such as
Automated Underreporter and Field Exam, using full costs and actual
collected revenues.
Actual ROIs provide information about:
* how programs and initiatives are performing compared to estimates
and,
* the possible need to adjust ROI methodologies to more effectively
project results of future proposed programs.
However, IRS officials told us that there are no plans to compare
actual performance results to projected ROIs in the budget.
FY 2010 Business Systems Modernization:
Since 1999, IRS has spent about $2.6 billion on BSM.
The FY 2010 budget request proposes an increase in BSM funding of about
$24 million.
Table 3: Changes to BSM Funding (Costs in Millions):
Project: CADE Update (Modernized Taxpayer Account Program);
BSM Initiative: Accelerate CADE data conversion in accordance with
recent replanning efforts and accommodate tax law changes. (Includes
Account Management Service (AMS) and elements of previous CADE plan);
FY 2009 enacted: $78.100;
FY 210 requested: $85.654;
Change: +$7.554.
Project: AMS;
BSM Initiative: AMS functionality will be included under CADE;
FY 2009 enacted: 0.000;
FY 210 requested: 0.000
Change: 0.0.
Project: Modernized e-File;
BSM Initiative: Complete 122 additional forms to reach 93.7 million
taxpayers or 99 percent of the e-file population;
FY 2009 enacted: $25.000;
FY 210 requested: $50.000;
Change: +$25.000.
Project: Core Infrastructure;
BSM Initiative: Provide services in architecture, engineering and
deployment of standardized, consolidated, virtual, and secure
development environments;
FY 2009 enacted: $43.250;
FY 210 requested: $32.000;
Change: -$11.250.
Project: Architecture, Integration, and Management;
BSM Initiative: Provide system engineering management capabilities
across IT infrastructure. Provide management processes and tools,
including governance, life cycle support, cost estimation,
configuration and risk management, etc.
FY 2009 enacted: $35.000;
FY 210 requested: $35.000;
Change: 0.0.
Management Reserve:
FY 2009 enacted: $3.358;
FY 210 requested: %5.020.
Change: +$1.662.
Subtotal Capital Investments:
FY 2009 enacted: $184.708;
FY 210 requested: $207.674;
Change: +$22.966.
BSM Labor:
FY 2009 enacted: $45.206;
FY 210 requested: $46.000;
Change: +$0.794.
Total BSM Appropriation:
FY 2009 enacted: $229.914;
FY 210 requested: $253.674;
Change: +$23.76.
Source: IRS data.
[End of table]
Current Status of New CADE Strategy:
According to IRS increasing complexity and questions regarding the
scalability of CADE, a taxpayer account database intended to replace
the current Individual Master File, led IRS to stop work and reconsider
approach for modernization of taxpayer accounts.
* After nearly 5 years and over $400 million, CADE has only delivered
about 15 percent of the full capability intended.[Footnote 18]
The new strategy is to:
* establish a relational database for taxpayer accounts,
* populate it with data available from the current Individual Master
File (IMF) and CADE,
* move from IMF weekly processing to a daily cycle,•modify downstream
business applications,
* better address financial management and security weaknesses, and,
* define a target end state solution.[Footnote 19]
All new development on CADE and Account Management Service, a related
application, is suspended while new direction being formulated.
[Footnote 20]
* Until the new direction has been defined, the number of additional
taxpayers who would benefit from CADE processing in the near-term is
uncertain.
Leadership team and work teams have been established.
Preliminary road map and program cost estimates targeted for June 30,
2009.
* Until these and additional analyses currently under way have been
completed, it is difficult to determine whether the funds requested for
fiscal year 2010 are justified or adequate.
Budget Language Proposes Change in GAO Review of BSM Spend Plans:
Prior appropriation acts prohibited IRS from obligating funds for the
BSM program until, among other things, GAO reviewed an expenditure
plan.
Language proposed in the FY 2010 budget request would allow for
obligation after GAO receives (not reviews) the expenditure plan.
Conclusions:
By presenting ROI projections for the proposed enforcement initiatives
in its budget request, IRS is providing important information about
estimated costs and potential revenues. Such information should be
useful to Congress for budgeting and oversight. However, without actual
ROI information, Congress, IRS management, and the public will not know
whether the approximately $900 million investment from fiscal year 2010
through fiscal year 2012 for enforcement initiatives actually realized
the projected results.
Recommendation for Executive Action:
We recommend that Commissioner of Internal Revenue take steps to
develop ROIs for IRS‘s enforcement program using actual revenue and
full cost data and compare the actual ROIs to the projected ROIs
included in the budget request.
Agency Comments and Our Evaluation:
IRS‘s Chief Financial Officer provided comments via email on June 1,
2009. While not explicitly agreeing with our recommendation,she wrote
that IRS will continue to improve the analytical tools it uses to
inform its resource decisions. She noted that IRS already uses
cost/benefit analysis, ROI, and other techniques for a wide range of
resource allocations decisions. She further wrote that the process to
develop analytical tools is complex and is dependent on funding of
research projects.
We agree that ROIs can be challenging to develop. However, IRS has no
plans for developing actual ROIs. Having actual ROI data would provide
important program information on the results of investments.
IRS also made technical comments to a draft of this report and we made
changes where appropriate.
[End of section]
Appendix III: GAO Contact and Staff Acknowledgments:
GAO Contact:
James R. White, (202) 512-9110 or whitej@gao.gov.
In addition to the contact named above, David Powner, Director; Libby
Mixon, Assistant Director; Sabine Paul, Assistant Director; and Amy
Bowser, Ray Bush, William Cordrey, Bertha Dong, Charles Fox, Carol
Henn, Paul Middleton, Amanda Miller, Donna Miller, Audrey Ruge, Shellee
Soliday, Joanna Stamatiades, and Diana Zinkl made key contributions to
this report.
[End of section]
Footnotes:
[1] The dollar savings or increased revenues are Joint Committee on
Taxation estimates, except for the electronic filing dollar savings
which is based on an IRS study. GAO, Tax Gap: IRS Could Do More to
Promote Compliance by Third Parties with Miscellaneous Income Reporting
Requirements, [hyperlink, http://www.gao.gov/products/GAO-09-238]
(Washington, D.C.: Jan. 28, 2009); Financial Management: Thousands of
Civilian Agency Contractors Abuse the Federal Tax System with Little
Consequence, [hyperlink, http://www.gao.gov/products/GAO-05-637]
(Washington, D.C.: June 16, 2005); Tax Compliance: Thousands of Federal
Contractors Abuse the Federal Tax System, [hyperlink,
http://www.gao.gov/products/GAO-07-742T] (Washington, D.C.: Apr. 19,
2007); Advance Earned Income Tax Credit: Low Use and Small Dollars Paid
Impede IRS's Efforts to Reduce High Noncompliance, [hyperlink,
http://www.gao.gov/products/GAO-07-1110] (Washington, D.C.: Aug. 10,
2007); Tax Administration: Most Filing Season Services Continue to
Improve, but Opportunities Exist for Additional Savings, [hyperlink,
http://www.gao.gov/products/GAO-07-27] (Washington, D.C.: Nov. 15,
2006); Tax Gap: IRS Could Do More to Promote Compliance by Third
Parties with Miscellaneous Income Reporting Requirements, [hyperlink,
http://www.gao.gov/products/GAO-09-238] (Washington, D.C.: Jan. 28,
2009); and Tax Gap: Actions That Could Improve Rental Real Estate
Reporting Compliance, [hyperlink,
http://www.gao.gov/products/GAO-08-956] (Washington, D.C.: Aug. 28,
2008).
[2] GAO, Internal Revenue Service: Fiscal Year 2009 Budget Request and
Interim Performance Results of IRS's 2008 Tax Filing Season,
[hyperlink, http://www.gao.gov/products/GAO-08-567] (Washington, D.C.:
Mar. 13, 2008).
[3] OMB Circular A-11, Part 6 Preparation and Submission of Strategic
Plans, Annual performance Plans, and Annual Program Performance Results
(Washington, D.C.: June 2008); OMB Circular A-94 Guidelines and
Discount Rates for Benefit-Cost Analysis of Federal Programs
(Washington, D.C.: undated); GAO, Cost Estimating and Assessment Guide:
Best Practices for Developing and Managing Capital Program Costs,
[hyperlink, http://www.gao.gov/products/GAO-09-3SP] (Washington, D.C.:
March 2009); Pub. L. No. 103-62; and Bill Whittmore, "The Business
Intelligence ROI Challenge: Putting It All Together," The Business
Intelligence Journal, vol. 8 no. 1 (Winter 2003).
[4] Legislative proposals, other than those described in this report,
may also result in savings or increased revenues.
[5] GAO, Business Systems Modernization: Internal Revenue Service's
Fiscal Year 2009 Expenditure Plan, [hyperlink,
http://www.gao.gov/products/GAO-09-281] (Washington, D.C.: Mar. 11,
2009).
[6] Budget documents include Office of Management and Budget,
Terminations, Reductions, and Savings: Budget of the U.S. Government,
Fiscal Year 2010; Department of the Treasury, General Explanations of
the Administration‘s FY 2010 Revenue Proposals, May 2009; and
Treasury's FY 2010 Congressional Budget Justification.
[7] GAO, Tax Gap: IRS Could Do More to Promote Compliance by Third
Parties with Miscellaneous Income Reporting Requirements, [hyperlink,
http://www.gao.gov/products/GAO-09-238] (Washington, D.C.: Jan. 28,
2009).
[8] GAO, Financial Management: Thousands of Civilian Agency Contractors
Abuse the Federal Tax System with Little Consequence, [hyperlink,
http://www.gao.gov/products/GAO-05-637] (Washington, D.C.: June 16,
2005) and Tax Compliance: Thousands of Federal Contractors Abuse the
Federal Tax System, [hyperlink,
http://www.gao.gov/products/GAO-07-742T] (Washington, D.C.: Apr. 19,
2007).
[9] GAO, Advance Earned Income Tax Credit: Low Use and Small Dollars
Paid Impede IRS‘s Efforts to Reduce High Noncompliance, [hyperlink,
http://www.gao.gov/products/GAO-07-1110] (Washington, D.C.: Aug. 10,
2007).
[10] GAO, Tax Administration: Most Filing Season Services Continue to
Improve, but Opportunities Exist for Additional Savings, [hyperlink,
http://www.gao.gov/products/GAO-07-27] (Washington, D.C.: Nov. 15,
2006).
[11] GAO, Tax Gap: Actions That Could Improve Rental Real Estate
Reporting Compliance, [hyperlink,
http://www.gao.gov/products/GAO-08-956] (Washington, D.C.: Aug. 28,
2008).
[12] Internal Revenue Service, Advancing E-file Study Phase I Report:
Achieving the 80% E-file Goal Requires Partnering with Stakeholders on
New Approaches to Motivate Paper Filers, 0206.0210 MitreCorp (Sept. 30,
2008).
[13] GAO, Tax Administration: 2007 Filing Season Continues Trend of
Improvement, but Opportunities to Reduce Costs and Increase Tax
Compliance Should Be Evaluated, [hyperlink,
http://www.gao.gov/products/GAO-08-38] (Washington, D.C.: Nov. 15,
2007).
[14] GAO, Tax Compliance: Challenges in Ensuring Offshore Tax
Compliance, [hyperlink, http://www.gao.gov/products/GAO-07-823T]
(Washington, D.C.: May 3, 2007).
[15] An even greater challenge is to determine ROI for service
programs, which do have a compliance benefit. GAO, Internal Revenue
Service: Fiscal Year 2009 Budget Request and Interim Performance
Results of IRS‘s 2008 Tax Filing Season, [hyperlink,
http://www.gao.gov/products/GAO-08-567] (Washington, D.C.: Mar. 13,
2008).
[16] Jeffrey A. Dubin, ’Criminal Investigation Enforcement Activities
and Taxpayer Noncompliance,“ Public Finance Review, vol. 35, no.4 (July
2007).
[17] OMB Circular A-11, Part 6 Preparation and Submission of Strategic
Plans, Annual performance Plans, and Annual Program Performance Results
(Washington, D.C.: June 2008); OMB Circular A-94 Guidelines and
Discount Rates for Benefit-Cost Analysis of Federal Programs
(Washington, D.C.: undated); GAO, Cost Estimating and Assessment Guide:
Best Practices for Developing and Managing Capital Program Costs,
[hyperlink, http://www.gao.gov/products/GAO-09-3SP] (Washington, D.C.:
March 2009); Pub. L. No. 103-62; and Bill Whittmore, ’The Business
Intelligence ROI Challenge: Putting It All Together,“ The Business
Intelligence Journal, vol. 8 no. 1 (Winter 2003).
[18] This figure was derived from data contained in IRS's BSM
expenditure plans through fiscal year 2008 and IRS's reported
obligations for fiscal year 2009 as of March 2009.
[19] This responds to a GAO recommendation. See GAO, Business Systems
Modernization: IRS's FY 2005 Expenditure Plan, GAO-05-774 (Washington,
D.C.: July 22, 2005).
[20] The funds originally intended for the suspended portions of CADE
and AMS were allocated toward the CADE replanning and additional
efforts to support the core infrastructure.
[End of section]
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