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GAO-13-599R: 

United States Government Accountability Office: 
Washington, DC 20548: 

May 3, 2013: 

The Honorable Frank Lautenberg: 
Chairman: 
The Honorable Mike Johanns: 
Ranking Member: 
Subcommittee on Financial Services and General Government: 
Committee on Appropriations: 
United States Senate: 

The Honorable Charles W. Boustany, Jr.
Chairman: 
The Honorable John Lewis: 
Ranking Member: 
Subcommittee on Oversight: 
Committee on Ways and Means: 

House of Representatives: 

Internal Revenue Service: Preliminary Observations on the Fiscal Year 
2014 Budget Request: 

This letter transmits briefing slides based on our work to date in 
response to your requests for a preliminary review of the fiscal year 
2014 budget request for the Internal Revenue Service (IRS). See 
appendix I and appendix II for the briefing slides that include the 
information used to brief your staff in April 2013, and were 
subsequently updated. 

Our briefing objectives were to (1) describe the fiscal year 2013 
budget for IRS and potential reductions resulting from sequestration; 
(2) describe IRS's budget data and trends from fiscal years 2010 
through 2014 and the fiscal year 2014 new program initiatives, return 
on investment (ROI) information, and major information technology (IT) 
investments; (3) list any analyses we have done related to legislative 
proposals highlighted in the congressional budget justification; and 
(4) identify our open matters for Congress and recommendations to IRS 
with a potential financial benefit. 

To conduct this work, we summarized the President's budgets and IRS 
congressional budget justifications from fiscal years 2010 through 
2014, reviewed Office of Management and Budget guidance on 
sequestration, reviewed revenue estimates from the Department of 
Treasury's Green Book, and interviewed IRS officials in the offices of 
the Chief Financial Officer and Corporate Budget. We interviewed IRS 
officials and determined that the data presented in this briefing were 
sufficiently reliable for our purposes. 

We conducted this performance audit from April to May 2013 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. 

In summary, 

* The fiscal year 2013 annualized continuing resolution rate shown in 
the fiscal year 2014 budget ($11.9 billion) is not the enacted funding 
level, and the actual amount is $689 million lower. 

* For fiscal year 2014, the President's Budget requests an increase 
for IRS of 9 percent ($1,044 million) in discretionary funding over 
the fiscal year 2012 appropriation and an increase of 8 percent (6,732 
full-time equivalents) in staffing over fiscal year 2012 actual 
levels. In addition, the funding request includes: 

- Twelve new program initiatives related to enforcement activities and 
6 new program initiatives related to taxpayer service, infrastructure, 
or other activities. 

- New information on actual return on investment for enforcement 
activities, and expanded information on IT investments, such as 
lifecycle costs, projected useful life of the current asset, and 
anticipated benefits. 

* The request includes 33 legislative proposals, including 12 related 
to our prior work. 

* As of March 2013, 39 of our products contained 10 matters for 
congressional consideration and 88 recommendations to IRS with a 
potential financial benefit that have not been addressed. Since March 
2012, IRS has implemented 24 recommendations with a potential 
financial benefit. See appendix III for a complete listing of all 39 
products. 

Agency Comments: 

On May 1, 2013, IRS provided technical comments on our findings, which 
we have incorporated where appropriate. 

As arranged with your office, unless you publicly announce the 
contents of this report earlier, we plan no further distribution until 
5 days after the date of this report. At that time, we will send 
copies of this report to other Chairmen and Ranking Members of Senate 
and House committees and subcommittees that have appropriation and 
oversight responsibilities for IRS. We also will be sending copies to 
the Acting Commissioner of Internal Revenue, the Secretary of the 
Treasury, and the Chairman of the IRS Oversight Board. Copies also are 
available at no charge on the GAO website at [hyperlink, 
http://www.gao.gov]. 

If you or your staffs have any questions about this report, please 
contact us at (202) 512-9110 or mctiguej@gao.gov. Contact points for 
our offices of Congressional Relations and Public Affairs are on the 
last page of this report. GAO staff members who made major 
contributions to this report are listed in appendix IV. 

Sincerely yours, 

Signed by: 

James R. McTigue, Jr.
Director, Tax Issues: 
Strategic Issues: 

[End of section] 

Appendix I: Briefing Slides: 

Internal Revenue Service: Preliminary Observations on the Fiscal Year 
2014 Budget Request: 

Prepared for the Subcommittee on Oversight, Committee on Ways and 
Means, U.S. House of Representatives (April 23, 2013) and the 
Subcommittee on Financial Services and General Government, Committee 
on Appropriations, U.S. Senate (April 25, 2013): 

Updated May 3, 2013: 

Briefing Objectives: 

You requested preliminary information on the fiscal year 2014 budget 
for IRS. This briefing: 

* describes the fiscal year 2013 budget for IRS and potential 
reductions resulting from sequestration; 

* describes IRS’s budget data and trends from fiscal years 2010 
through 2014, and the fiscal year 2014 new program initiatives, return 
on investment (ROI) information, and major information technology (IT) 
investments; 

* lists any analyses we have done related to legislative proposals 
highlighted in the congressional budget justification; and; 

* identifies our open matters for Congress and recommendations to IRS 
with a potential financial benefit. 

Scope and Methodology: 

To conduct this work, for each objective, we: 

* summarized the President’s budgets and IRS congressional 
justifications from fiscal years 2010 through 2014, reviewed Office of 
Management and Budget (OMB) guidance on sequestration, reviewed 
revenue estimates from the Department of Treasury’s Green Book, and 
interviewed IRS officials in the offices of the Chief Financial 
Officer and Corporate Budget. We interviewed IRS officials and 
determined that the data presented in this briefing were sufficiently 
reliable for our purposes. 

We conducted this performance audit from April to May 2013 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. 

Results in Brief: 

In summary, 

* The fiscal year 2013 annualized continuing resolution rate shown in 
the fiscal year 2014 budget ($11.9 billion) is not the enacted funding 
level, and the actual amount is $689 million lower. 

* For fiscal year 2014, the President’s Budget requests an increase 
for IRS of 9 percent ($1,044 million) in discretionary funding over 
the fiscal year 2012 appropriation and an increase of 8 percent (6,732 
full-time equivalents (FTEs)) in staffing over fiscal year 2012 actual 
levels. In addition, the funding request includes: 

- Twelve new program initiatives related to enforcement activities and 
6 new program initiatives related to taxpayer service, infrastructure, 
or other activities. 

- New information on actual return on investment for enforcement 
activities, and expanded information on information technology (IT) 
investments, such as lifecycle costs, projected useful life of the 
current asset, and anticipated benefits. 

* The request includes 33 legislative proposals, including 12 related 
to our prior work. 

* As of March 2013, 39 of our products contained 10 matters for 
congressional consideration and 88 recommendations to IRS with a 
potential financial benefit that have not been addressed. Since March 
2012, IRS has implemented 24 recommendations with a potential 
financial benefit. 

Fiscal Year 2013 and Sequestration: 

Funding Levels Down Again, while Demands on Resources Increase with 
Implementation of Four New Laws: 

The fiscal year 2013 annualized continuing resolution rate shown in 
the fiscal year 2014 budget ($11.9 billion) is not the enacted funding 
level, and the actual amount is $689 million lower due to 
sequestration ($594 million), the final continuing resolution 
adjustment ($71 million), and a 0.2 percent rescission ($24 million). 

* According to IRS budget officials, IRS adjusted its fiscal year 2013 
operating plans to reflect these reductions, which are described in 
the operating plan for fiscal year 2013, released on April 30, 2013. 

* As a result, comparisons in the congressional justification are 
based on fiscal year 2012 instead of fiscal year 2013. 

The fiscal year 2013 decrease follows a fiscal year 2012 cut of $305 
million. 

IRS has been implementing four new laws, relating to (1) the Patient 
Protection and Affordable Care Act (PPACA),[Footnote 1] (2) merchant 
card transaction,[Footnote 2] (3) basis reporting,[Footnote 3] and (4) 
the Foreign Account Tax Compliance Act (FATCA),[Footnote 4] which have 
resulted in additional demands for its existing resources. 

Sequestration Reduces Fiscal Year 2013 Budget Levels for IRS: 

According to the Acting IRS Commissioner, as a result of 
sequestration, IRS may plan to: 

* continue to operate under a hiring freeze; 

* reduce funding for grants and other expenditures; 

* cut costs in areas such as travel, training, facilities, and 
supplies; 

* review contract spending to ensure only the most critical and 
mandatory requirements are fully funded; and; 

* furlough all staff for a total of 5 to 7 days after the filing 
season ends.[Footnote 5] 

Table 1: IRS Funding Subject to Sequestration and Subsequent 
Reductions to Discretionary IRS Appropriation Accounts for Fiscal Year 
2013[A]: 

Discretionary appropriation account: Enforcement; 
Total sequestrable budget authority amount: $5.348 billion; 
Sequester percentage: 5%; 
Total sequester amount: $267 million. 

Discretionary appropriation account: Operations support; 
Total sequestrable budget authority amount: $3.983 billion; 
Sequester percentage: 5%; 
Total sequester amount: $199 million. 

Discretionary appropriation account: Taxpayer services; 
Total sequestrable budget authority amount: $2.271 billion; 
Sequester percentage: 5%; 
Total sequester amount: $113 million. 

Discretionary appropriation account: Business Systems Modernization 
(BSM); 
Total sequestrable budget authority amount: $332 million; 
Sequester percentage: 5%; 
Total sequester amount: $17 million. 

Discretionary appropriation account: Total discretionary; 
Total sequestrable budget authority amount: $11.934[B]; 
Total sequester amount: $594 million. 

Source: GAO analysis of OMB and IRS data.Note: Numbers may not add due 
to rounding. 

[A] Discretionary appropriations are budgetary resources that are 
provided in appropriations acts, and do not fund mandatory programs. 
Sequestration also requires reductions of 5.1 percent to other 
nonexempt nondefense mandatory programs. IRS has eight appropriation 
accounts, such as the IRS Miscellaneous Retained Fees account, that 
fall into this category. The total sequester amount for those 
appropriation accounts is $232 million. 

[B] This amount includes reimbursables($46 million) and the final 
continuing resolution adjustment ($71 million). 

[End of table] 

Cost Saving Actions Taken in Fiscal Year 2012 Resulted in a Lower Base 
Budget for Fiscal Year 2013: 

IRS realized $426 million in savings in fiscal year 2012. 

* Savings and efficiencies resulted from, for example: 

- Reducing FTEs by 3.4 percent ($206 million) through targeted 
buyouts, attrition, and hiring freezes; 

- transferring lock box fees to taxpayers as part of their installment 
agreements;[Footnote 6] 

- reducing IT infrastructure costs (e.g., renegotiating contracts); 

- reducing printing and postage (e.g., stopped weekly mailings of 
Publication 15, Employer's Tax Guide); and; 

- reducing travel and training. 

The savings were $236 million more than IRS projected for fiscal year 
2012. 

According to IRS budget officials, some savings from fiscal year 2012 
are being used in fiscal year 2013 to cover implementation of 
legislative mandates and sequestration. 

Fiscal Year 2014 Budget Data and Trends: 

Summary of Key Budget and FTE Data: 

The fiscal year 2014 budget request for IRS is $12.9 billion and 
96,218 FTEs. 

* The budget shows a: 

- 9 percent increase ($1.044 billion) over the fiscal year 2012 
appropriation. 

- 8 percent increase (6,732 FTEs) in staffing over fiscal year 2012 
actual levels. 

* In fiscal year 2014, IRS expects to gain base budget savings and 
efficiencies of $217 million from cost reduction strategies, such as 
hiring restrictions, space consolidations, and savings resulting from 
more electronically filed tax returns.[Footnote 7] 

* The requested increases include: 

- Twelve new enforcement initiatives, such as a request for $101 
million to improve identification and prevention of refund fraud and 
identity theft. 

- Six taxpayer service, infrastructure, and other initiatives, such as 
$306 million to implement IT changes to deliver tax credits and other 
requirements for PPACA. 

Dollars by Appropriation Account, Fiscal Years 2010 through 2014: 

Table 2: IRS Fiscal Years 2010 through 2014 Budget by Appropriation 
Account: 

Appropriation account: Enforcement; 
Fiscal year 2010 enacted: $5.504 billion; 
Fiscal year 2011 enacted: $5.493 billion; 
Fiscal year 2012 enacted: $5.299 billion; 
Fiscal year 2013 annualized continuing resolution[A]: $5.331 billion; 
Fiscal year 2014 requested: $5.667 billion; 
Dollar change fiscal year 2012 enacted compared to fiscal year 2014 
requested: $367 million; 
Percent change fiscal year 2012 enacted compared to fiscal year 2014 
requested: 7%. 

Appropriation account: Operations support; 
Fiscal year 2010 enacted: $4.084 billion; 
Fiscal year 2011 enacted: $4.057 billion; 
Fiscal year 2012 enacted: $3.947 billion; 
Fiscal year 2013 annualized continuing resolution[A]: $3.971 billion; 
Fiscal year 2014 requested: $4.481 billion; 
Dollar change fiscal year 2012 enacted compared to fiscal year 2014 
requested: $533 million; 
Percent change fiscal year 2012 enacted compared to fiscal year 2014 
requested: 14%. 

Appropriation account: Taxpayer services;
Fiscal year 2010 enacted: $2.279 billion; 
Fiscal year 2011 enacted: $2.293 billion; 
Fiscal year 2012 enacted: $2.240 billion; 
Fiscal year 2013 annualized continuing resolution[A]: $2.254 billion; 
Fiscal year 2014 requested: $2.413 billion; 
Dollar change fiscal year 2012 enacted compared to fiscal year 2014 
requested: $173 million; 
Percent change fiscal year 2012 enacted compared to fiscal year 2014 
requested: 8%. 

Appropriation account: BSM;
Fiscal year 2010 enacted: $264 million; 
Fiscal year 2011 enacted: $263 million; 
Fiscal year 2012 enacted: $330 million; 
Fiscal year 2013 annualized continuing resolution[A]: $332 million; 
Fiscal year 2014 requested: $301 million; 
Dollar change fiscal year 2012 enacted compared to fiscal year 2014 
requested: -$29 million; 
Percent change fiscal year 2012 enacted compared to fiscal year 2014 
requested: -9%. 

Appropriation account: Health Insurance Tax Credit Administration 
(HITCA)[B]; 
Fiscal year 2010 enacted: $16 million; 
Fiscal year 2011 enacted: $15 million; 
Fiscal year 2012 enacted: [B]; 
Fiscal year 2013 annualized continuing resolution[A]: [B]; 
Fiscal year 2014 requested: [B]; 
Dollar change fiscal year 2012 enacted compared to fiscal year 2014 
requested: n/a
Percent change fiscal year 2012 enacted compared to fiscal year 2014 
requested: n/a. 

Appropriation account: Subtotal;
Fiscal year 2010 enacted: $12.146 billion; 
Fiscal year 2011 enacted: $12.122 billion; 
Fiscal year 2012 enacted: $11.817 billion; 
Fiscal year 2013 annualized continuing resolution[A]: $11.888 billion; 
Fiscal year 2014 requested: $12.861 billion; 
Dollar change fiscal year 2012 enacted compared to fiscal year 2014 
requested: $1.044 billion; 
Percent change fiscal year 2012 enacted compared to fiscal year 2014 
requested: 9%. 

Appropriation account: Other resources. such as user fees;
Fiscal year 2010 enacted: $539 million; 
Fiscal year 2011 enacted: $655 million; 
Fiscal year 2012 enacted: $695 million; 
Fiscal year 2013 annualized continuing resolution[A]: $905 million; 
Fiscal year 2014 requested: $497 million; 
Dollar change fiscal year 2012 enacted compared to fiscal year 2014 
requested: -$198 million; 
Percent change fiscal year 2012 enacted compared to fiscal year 2014 
requested: -29%. 

Appropriation account: Total funding available for obligation; 
Fiscal year 2010 enacted: $12.686 billion; 
Fiscal year 2011 enacted: $12.777 billion; 
Fiscal year 2012 enacted: $12.512 billion; 
Fiscal year 2013 annualized continuing resolution[A]: $12.793 billion; 
Fiscal year 2014 requested: $13.358 billion; 
Dollar change fiscal year 2012 enacted compared to fiscal year 2014 
requested: $846 million; 
Percent change fiscal year 2012 enacted compared to fiscal year 2014 
requested: 7%. 

Legend: n/a = not applicable. 

Source: Fiscal year 2012, 2013, and 2014 congressional budget 
justifications for IRS. 

Note: Dollars are nominal and not adjusted for inflation, and numbers 
may not add due to rounding. 

[A] A full-year 2013 appropriation for this account was not enacted at 
the time the budget was prepared; therefore, the budget assumes this 
account is operating under the Continuing Appropriations Resolution, 
2013 (P.L. 112–175). The amounts included for 2013 reflect the 
annualized level provided by the continuing resolution and do not 
include reductions due to sequestration. 
[B] In fiscal year 2012, administrative resources for HITCA were moved 
to the taxpayer services appropriation under the Consolidated 
Appropriations Act, 2012 (Pub. L. No. 112-74). 

[End of table] 

Staffing by Appropriation Account, Fiscal Years 2010 through 2014: 

Table 3: Fiscal Years 2010 through 2014 Full-Time Equivalents (FTEs) 
by Appropriation Account: 

Appropriation account: Enforcement; 
Fiscal year 2010 actual: 50,400; 
Fiscal year 2011 actual: 49,920; 
Fiscal year 2012 actual: 47,189; 
Fiscal year 2013 annualized continuing resolution[A]: 46,702; 
Fiscal year 2014 requested: 49,987; 
FTE change fiscal year 2012 actual compared to fiscal year 2014 
requested: 2,798; 
Percent change fiscal year 2012 actual compared to fiscal year 2014 
requested: 6%. 

Appropriation account: Operations support; 
Fiscal year 2010 actual: 12,262; 
Fiscal year 2011 actual: 12,103; 
Fiscal year 2012 actual: 11,499; 
Fiscal year 2013 annualized continuing resolution[A]: 12,240; 
Fiscal year 2014 requested: 13,143; 
FTE change fiscal year 2012 actual compared to fiscal year 2014 
requested: 1,644; 
Percent change fiscal year 2012 actual compared to fiscal year 2014 
requested: 14%. 

Appropriation account: Taxpayer services; 
Fiscal year 2010 actual: 31,607; 
Fiscal year 2011 actual: 31,574; 
Fiscal year 2012 actual: 30,236; 
Fiscal year 2013 annualized continuing resolution[A]: 30,402; 
Fiscal year 2014 requested: 32,575; 
FTE change fiscal year 2012 actual compared to fiscal year 2014 
requested: 2,339; 
Percent change fiscal year 2012 actual compared to fiscal year 2014 
requested: 8%. 

Appropriation account: BSM; 
Fiscal year 2010 actual: 337; 
Fiscal year 2011 actual: 309; 
Fiscal year 2012 actual: 562; 
Fiscal year 2013 annualized continuing resolution[A]: 513; 
Fiscal year 2014 requested: 513; 
FTE change fiscal year 2012 actual compared to fiscal year 2014 
requested: -49; 
Percent change fiscal year 2012 actual compared to fiscal year 2014 
requested: -9%. 

Appropriation account: HITCA[B]; 
Fiscal year 2010 actual: 12; 
Fiscal year 2011 actual: 0; 
Fiscal year 2012 actual: 0; 
Fiscal year 2013 annualized continuing resolution[A]: 0; 
Fiscal year 2014 requested: 0; 
FTE change fiscal year 2012 actual compared to fiscal year 2014 
requested: n/a; 
Percent change fiscal year 2012 actual compared to fiscal year 2014 
requested: n/a. 

Appropriation account: Subtotal; 
Fiscal year 2010 actual: 94,618; 
Fiscal year 2011 actual: 93,906; 
Fiscal year 2012 actual: 89,486; 
Fiscal year 2013 annualized continuing resolution[A]: 89,857; 
Fiscal year 2014 requested: 96,218; 
FTE change fiscal year 2012 actual compared to fiscal year 2014 
requested: 6,732; 
Percent change fiscal year 2012 actual compared to fiscal year 2014 
requested: 8%. 

Appropriation account: Other resources, such as user fees; 
Fiscal year 2010 actual: 752; 
Fiscal year 2011 actual: 1,003; 
Fiscal year 2012 actual: 2,185; 
Fiscal year 2013 annualized continuing resolution[A]: 1,698; 
Fiscal year 2014 requested: 1,093; 
FTE change fiscal year 2012 actual compared to fiscal year 2014 
requested: -1,092; 
Percent change fiscal year 2012 actual compared to fiscal year 2014 
requested: -50%. 

Appropriation account: Total FTEs; 
Fiscal year 2010 actual: 95,370; 
Fiscal year 2011 actual: 94,909; 
Fiscal year 2012 actual: 91,671; 
Fiscal year 2013 annualized continuing resolution[A]: 91,555; 
Fiscal year 2014 requested: 97,311; 
FTE change fiscal year 2012 actual compared to fiscal year 2014 
requested: 5,640; 
Percent change fiscal year 2012 actual compared to fiscal year 2014 
requested: 6%. 

Legend: n/a = not applicable. 

Source: Fiscal year 2012, 2013 and 2014 congressional budget 
justifications for IRS. 

[A] A full-year 2013 appropriation for this account was not enacted at 
the time the budget was prepared; therefore, the budget assumes this 
account is operating under the Continuing Appropriations Resolution, 
2013 (P.L. 112–175). The amounts included for 2013 reflect the 
annualized level provided by the continuing resolution and do not 
include reductions due to sequestration. 

[B] In fiscal year 2012, administrative resources for HITCA were moved 
to the taxpayer services appropriation under the Consolidated 
Appropriations Act, 2012 (Pub. L. No. 112-74). 

[End of table] 

Unobligated Balances by Appropriation Account Fiscal Years 2010 
through 2014: 

* Funds showed an expected decline in unobligated balances from fiscal 
years 2012 to 2014. 

* IRS’s unobligated balances are primarily resulting from no-year, 
multi-year, and carryover funding and transfers from IRS’s 
Miscellaneous Retained Fee Fund (e.g., user fees) to its discretionary 
appropriation accounts. 

* Fiscal years 2013 and 2014 unobligated balances represent estimates 
of multi-year and user fee balances for future years. 

Table 4: Fiscal Years 2010 to 2014 Unobligated Balances for IRS 
Appropriation Accounts: 

Appropriation account: Enforcement; 
Fiscal year 2010: $11 million; 
Fiscal year 2011: $16 million; 
Fiscal year 2012: $30 million; 
Fiscal year 2013 estimated: $43 million; 
Fiscal year 2014 estimated: $18 million. 

Appropriation account: Operations support; 
Fiscal year 2010: $97 million; 
Fiscal year 2011: $142 million; 
Fiscal year 2012: $178 million; 
Fiscal year 2013 estimated: $291 million; 
Fiscal year 2014 estimated: $22 million. 

Appropriation account: Taxpayer services; 
Fiscal year 2010: $150 million; 
Fiscal year 2011: $148 million; 
Fiscal year 2012: $192 million; 
Fiscal year 2013 estimated: $205 million; 
Fiscal year 2014 estimated: $158 million. 

Appropriation account: BSM; 
Fiscal year 2010: $119 million; 
Fiscal year 2011: $179 million; 
Fiscal year 2012: $119 million; 
Fiscal year 2013 estimated: $97 million; 
Fiscal year 2014 estimated: $104 million. 

Appropriation account: Total;
Fiscal year 2010: $377 million; 
Fiscal year 2011: $485 million; 
Fiscal year 2012: $519 million; 
Fiscal year 2013 estimated: $636
Fiscal year 2014 estimated: $302 million. 

Source: GAO analysis of IRS data. 

[End of table] 

$217 Million in Net Savings and Efficiencies Projected for Fiscal Year 
2014: 

The fiscal year 2014 budget request for IRS continues efforts to seek 
savings through: 

* Agency-wide strategies: 

- Hiring restrictions (e.g., not replacing attrited staff) ($78 
million); 

- Reducing IT infrastructure ($58 million); 

- Reducing costs and streamlining operations in the human capital 
function ($8 million); 

- Consolidating and closing offices ($39 million (net)): 
Space optimization (e.g., close, consolidate, or reduce 123 of 648 
offices) ($77 million); 
One-time reinvestment to implement space optimization, which requires 
building and consolidating space and relocating employees ($38 
million). 

* Program strategies: 

- Savings related to increases in electronically filed returns ($5 
million); 

- Reduction in funding to BSM ($30 million). 

The Administration Requested a Program Integrity Cap Adjustment of 
$412 Million for IRS: 

Figure 1: Breakdown of IRS Fiscal Year 2014 Requested Increase: 

[Refer to PDF for image: vertical bar graph] 

Congress passes program integrity cap adjustments to allow additional 
funding above discretionary spending limits for certain activities 
that are expected to generate benefits that exceed cost. 

The discretionary spending cap for fiscal year 2014 is $12.449 billion. 

Total requested fiscal year 2014 budget: $12.861 billion; 
* Fiscal Year 2014 base budget request: $11.725 billion; 
* Base budget increase requested: $724 million; 
* Requested increase requiring cap adjustment: $411.9 million. 

Requested increase before the cap adjustment: 
* Improve identification and prevention of refund fraud and identity 
theft; 
* Implement merchant card and basis matching; 
* Address impact of Affordable Care Act statutory requirements; 
* Implement FATCA; 
* Implement IT changes to deliver tax credits and other requirements; 
* Improve taxpayer service and meet increased demand; 
* Leverage data to improve case selection (taxpayer services portion). 

Requested increase requiring the cap adjustment: 
* Increase audit coverage to address tax compliance issues; 
* Increase collection coverage; 
* Leverage data to improve case selection; 
* Address international and offshore compliance issues; 
* Improve coverage of partnerships and flow-through entities; 
* Expand coverage of high-wealth individuals and enterprises; 
* Build out tax return preparer compliance activities; 
* Leverage digital evidence for criminal investigation; 
* Develop new online services; 
* Develop converged telecommunication networks; 
* Transfer to the Alcohol and Tobacco Tax Bureau for high-return on 
investment tax enforcement activities; 
* Expand virtual services delivery. 

Source: GAO analysis of IRS data. 

Note: The scale begins at $7.000 billion. 

[End of figure] 

New Initiatives and Return on Investment: 

IRS Proposed 12 Enforcement Initiatives, Totaling $605 Million: 

Table 5: Funding Requested for Enforcement Initiatives: 

Description of budget adjustments: New enforcement initiatives; 
Fiscal year 2014 funding requested, by appropriation account: 
Taxpayer services account: $38 million; 
Enforcement account: $365 million; 
Operations support account: $202 million; 
BSM account: [Empty]; 
Total[A]: $$605 million; 
Projected ROI for fiscal year 2016[B]: n/a. 

Description of budget adjustments: * Increase audit coverage to 
address tax compliance issues; 
Fiscal year 2014 funding requested, by appropriation account: 
Taxpayer services account: [Empty]; 
Enforcement account: $71 million; 
Operations support account: $39 million; 
BSM account: [Empty]; 
Total[A]: $111 million; 
Projected ROI for fiscal year 2016[B]: 3.2%. 

Description of budget adjustments: Improve identification and 
prevention of refund fraud and identity theft; 
Fiscal year 2014 funding requested, by appropriation account: 
Taxpayer services account: $19 million; 
Enforcement account: $48 million; 
Operations support account: $33 million; 
BSM account: [Empty]; 
Total[A]: $101 million; 
Projected ROI for fiscal year 2016[B]: 14.4%. 

Description of budget adjustments: * Increase collection coverage; 
Fiscal year 2014 funding requested, by appropriation account: 
Taxpayer services account: [Empty]; 
Enforcement account: $36 million; 
Operations support account: $24 million; 
BSM account: [Empty]; 
Total[A]: $60 million; 
Projected ROI for fiscal year 2016[B]: 9.3%. 

Description of budget adjustments: * Leverage data to improve case 
selection[C]; 
Fiscal year 2014 funding requested, by appropriation account: 
Taxpayer services account: $10 million; 
Enforcement account: $4 million; 
Operations support account: $37 million; 
BSM account: [Empty]; 
Total[A]: $52 million; 
Projected ROI for fiscal year 2016[B]: 1.5%. 

Description of budget adjustments: Implement merchant card and basis 
matching; 
Fiscal year 2014 funding requested, by appropriation account: 
Taxpayer services account: $8 million; 
Enforcement account: $30 million; 
Operations support account: $12 million; 
BSM account: [Empty]; 
Total[A]: $50 million; 
Projected ROI for fiscal year 2016[B]: 8.5%. 

Description of budget adjustments: * Address international and 
offshore compliance issues; 
Fiscal year 2014 funding requested, by appropriation account: 
Taxpayer services account: [Empty]; 
Enforcement account: $43 million; 
Operations support account: $6 million; 
BSM account: [Empty]; 
Total[A]: $49 million; 
Projected ROI for fiscal year 2016[B]: 4.5%. 

Description of budget adjustments: * Improve coverage of partnerships 
and flow-through entities; 
Fiscal year 2014 funding requested, by appropriation account: 
Taxpayer services account: [Empty]; 
Enforcement account: $39 million; 
Operations support account: $6 million; 
BSM account: [Empty]; 
Total[A]: $45 million; 
Projected ROI for fiscal year 2016[B]: 7.7%. 

Description of budget adjustments: Address impact of Patient 
Protection and Affordable Care Act statutory requirements; 
Fiscal year 2014 funding requested, by appropriation account: 
Taxpayer services account: $1 million; 
Enforcement account: $26 million; 
Operations support account: $17 million; 
BSM account: [Empty]; 
Total[A]: $44 million; 
Projected ROI for fiscal year 2016[B]: 1.9%. 

Description of budget adjustments: Implement Foreign Account Tax 
Compliance Act; 
Fiscal year 2014 funding requested, by appropriation account: 
Taxpayer services account: [Empty]; 
Enforcement account: $20 million; 
Operations support account: $16 million; 
BSM account: [Empty]; 
Total[A]: $35 million; 
Projected ROI for fiscal year 2016[B]: 3.7%. 

Description of budget adjustments: * Expand coverage of high-wealth 
individuals and enterprises; 
Fiscal year 2014 funding requested, by appropriation account: 
Taxpayer services account: [Empty]; 
Enforcement account: $29 million; 
Operations support account: $5 million; 
BSM account: [Empty]; 
Total[A]: $34 million; 
Projected ROI for fiscal year 2016[B]: 13.4%. 

Description of budget adjustments: * Build out tax return preparer 
compliance activities; 
Fiscal year 2014 funding requested, by appropriation account: 
Taxpayer services account: [Empty]; 
Enforcement account: $16 million; 
Operations support account: $2 million; 
BSM account: [Empty]; 
Total[A]: $18 million; 
Projected ROI for fiscal year 2016[B]: [D]. 

Description of budget adjustments: * Leverage digital evidence for 
criminal investigation; 
Fiscal year 2014 funding requested, by appropriation account: 
Taxpayer services account: [Empty]; 
Enforcement account: $1 million; 
Operations support account: $4 million; 
BSM account: [Empty]; 
Total[A]: $5 million; 
Projected ROI for fiscal year 2016[B]: [D]. 

Description of budget adjustments: New nonenforcement initiatives; 
Fiscal year 2014 funding requested, by appropriation account: 
Taxpayer services account: $130 million; 
Enforcement account: $8 million; 
Operations support account: $392 million; 
BSM account: [Empty]; 
Total[A]: $531 million; 
Projected ROI for fiscal year 2016[B]: n/a 

Description of budget adjustments: Inflation adjustment and pay raises; 
Fiscal year 2014 funding requested, by appropriation account: 
Taxpayer services account: $22 million; 
Enforcement account: $51 million; 
Operations support account: $52 million; 
BSM account: $1 million; 
Total[A]: $126 million; 
Projected ROI for fiscal year 2016[B]: n/a. 

Description of budget adjustments: Savings and efficiencies, net 
reinvestment; 
Fiscal year 2014 funding requested, by appropriation account: 
Taxpayer services account: -$18 million; 
Enforcement account: -$57 million; 
Operations support account: -$113 million; 
BSM account: -$30 million; 
Total[A]: -$217 million; 
Projected ROI for fiscal year 2016[B]: n/a. 

Description of budget adjustments: Total appropriations adjustment; 
Fiscal year 2014 funding requested, by appropriation account: 
Taxpayer services account: $173 million; 
Enforcement account: $367 million; 
Operations support account: $533 million; 
BSM account: -$$29 million; 
Total[A]: $$1.044[A] billion; 
Projected ROI for fiscal year 2016[B]: n/a. 

Legend: * = requested increase would require a program integrity cap 
adjustment; 

n/a = not applicable. 

Source: Fiscal year 2014 congressional budget justification for IRS. 

Notes: Numbers may not add due to rounding. 

[A] The total does not include the final continuing resolution 
adjustment of $71 million. 

[B] According to IRS, new fiscal year 2014 hires will reach full 
potential in fiscal year 2016. See appendix II for more information on 
ROI. 

[C] The taxpayer services portion of this initiative ($10 million) 
would not require a program integrity cap adjustment. 

[D] IRS does not have assurance that the Build Out Tax Return Preparer 
Compliance and Leverage Digital Evidence for Criminal Investigations 
initiatives will produce direct revenue. 

[End of table] 

IRS Proposed Six Taxpayer Service, Infrastructure, and Other 
Initiatives, Totaling $531 Million: 

Table 6: Funding Requested for Taxpayer Service, Infrastructure, and 
Other Initiatives: 

Description of budget adjustments: New enforcement initiatives; 
Fiscal year 2014 funding requested, by appropriation account: 
Taxpayer services account: $38 million; 
Enforcement account: $365 million; 
Operations support account: $202 million; 
BSM account: [Empty]; 
Total[A]: $605 million; 

Description of budget adjustments: New nonenforcement initiatives; 
Fiscal year 2014 funding requested, by appropriation account: 
Taxpayer services account: $130 million; 
Enforcement account: $8 million; 
Operations support account: $392 million; 
BSM account: [Empty]; 
Total[A]: $531 million. 

Description of budget adjustments: Implement IT changes to deliver tax 
credits and other requirements; 
Fiscal year 2014 funding requested, by appropriation account: 
Taxpayer services account: [Empty]; 
Enforcement account: [Empty]; 
Operations support account: $306 million; 
BSM account: [Empty]; 
Total[A]: $306 million. 

Description of budget adjustments: Improve taxpayer service and meet 
increased demand; 
Fiscal year 2014 funding requested, by appropriation account: 
Taxpayer services account: $130 million; 
Enforcement account: $3 million; 
Operations support account: $44 million; 
BSM account: [Empty]; 
Total[A]: $177 million. 

Description of budget adjustments: * Develop new online services; 
Fiscal year 2014 funding requested, by appropriation account: 
Taxpayer services account: [Empty]; 
Enforcement account: [Empty]; 
Operations support account: $24 million; 
BSM account: [Empty]; 
Total[A]: $24 million. 

Description of budget adjustments: * Develop converged 
telecommunication networks; 
Fiscal year 2014 funding requested, by appropriation account: 
Taxpayer services account: [Empty]; 
Enforcement account: [Empty]; 
Operations support account: $15 million; 
BSM account: [Empty]; 
Total[A]: $15 million. 

Description of budget adjustments: * Transfer to the Alcohol and 
Tobacco Tax and Trade Bureau for high return-on-investment tax 
enforcement activities; 
Fiscal year 2014 funding requested, by appropriation account: 
Taxpayer services account: [Empty]; 
Enforcement account: $5 million; 
Operations support account: [Empty]; 
BSM account: [Empty]; 
Total[A]: $5 million. 

Description of budget adjustments: * Expand virtual services delivery; 
Fiscal year 2014 funding requested, by appropriation account: 
Taxpayer services account: [Empty]; 
Enforcement account: [Empty]; 
Operations support account: $4 million; 
BSM account: [Empty]; 
Total[A]: $4 million. 

Description of budget adjustments: Inflation adjustment and pay raises; 
Fiscal year 2014 funding requested, by appropriation account: 
Taxpayer services account: $22 million; 
Enforcement account: $51 million; 
Operations support account: $52 million; 
BSM account: $1 million; 
Total[A]: $126 million. 

Description of budget adjustments: Savings and efficiencies, net 
reinvestment; 
Fiscal year 2014 funding requested, by appropriation account: 
Taxpayer services account: -$18 million; 
Enforcement account: -$57 million; 
Operations support account: -$113 million; 
BSM account: -$30 million; 
Total[A]: -$217 million. 

Description of budget adjustments: Total appropriations adjustment; 
Fiscal year 2014 funding requested, by appropriation account: 
Taxpayer services account: $173 million; 
Enforcement account: $367 million; 
Operations support account: $533 million; 
BSM account: -$29 million; 
Total[A]: $$1,044 million [A]. 

Legend: * = requested increase would require a program integrity cap 
adjustment. 

Source: Fiscal year 2014 congressional budget justification for IRS. 

Notes: Numbers may not add due to rounding. 

IRS does not calculate ROI for nonenforcement initiatives. 

[A] The total does not include the final continuing resolution 
adjustment of $71 million. 

[End of table] 

$440 Million and 1,954 FTEs Proposed to Implement PPACA in Fiscal Year 
2014: 

Table 7: Fiscal Year 2014 PPACA Budget Request: 

Initiative: Improve taxpayer service and meet increased demand (PPACA 
portion of initiative); 
Taxpayer services: 
Dollars: $70 million; 
FTEs: 908; 
Enforcement: 
Dollars: $3 million; 
FTEs: 32; 
Operations support: 
Dollars: $16 million; 
FTEs: 9; 
Total: 
Dollars: $90 million; 
FTEs: 949. 

Initiative: Address impact of PPACA statutory requirements; 
Taxpayer services: 
Dollars: $1 million; 
FTEs: 8; 
Enforcement: 
Dollars: $26 million; 
FTEs: 223; 
Operations support: 
Dollars: $17 million; 
FTEs: 52; 
Total: 
Dollars: $44 million; 
FTEs: 283. 

Initiative: Implement IT changes to deliver tax credits and other 
requirements; 
Taxpayer services: 
Dollars: [Empty]; 
FTEs: [Empty]; 
Enforcement: 
Dollars: [Empty]; 
FTEs: [Empty]; 
Operations support: 
Dollars: $306 million; 
FTEs: 722; 
Total: 
Dollars: $306 million; 
FTEs: 722. 

Initiative: Total fiscal year 2014 PPACA budget request; 
Taxpayer services: 
Dollars: $71 million; 
FTEs: 916; 
Enforcement: 
Dollars: $29 million; 
FTEs: 255; 
Operations support: 
Dollars: $339 million; 
FTEs: 783; 
Total: 
Dollars: $440 million; 
FTEs: 1,954. 

Source: Fiscal year 2014 congressional budget justification for IRS. 

Note: Numbers may not add due to rounding. 

[End of table] 

* In fiscal year 2014, PPACA funding is included in three of IRS’s new 
funding initiatives. 

* In fiscal year 2013, IRS requested $360 million to implement PPACA, 
but did not receive it. 

* In fiscal years 2010 through 2012, IRS received a total of $488 
million and 1,272 FTEs to implement PPACA from the Department of 
Health and Human Services’ Health Insurance Reform Implementation Fund 
(HIRIF). 

Table 8: IRS HIRIF Funding for PPACA, Fiscal Years 2010 Through 2012: 

Fiscal year: FY 2010: 
Dollars: $21 million; 
FTEs: 31; 

Fiscal year: FY 2011: 
Dollars: $168 million; 
FTEs: 577; 

Fiscal year: FY 2012: 
Dollars: $299 million; 
FTEs: 664; 

Total: 
Dollars: $488 million; 
FTEs: 1,272. 

Source: Fiscal year 2014 congressional budget justification for IRS. 

Note: Numbers may not add due to rounding. 

[End of table] 

IRS Reported Actual Return on Investment Data for Three Enforcement 
Programs for the First Time: 

Table 9: Actual ROI for Major IRS Enforcement Programs: 

Enforcement program: Examination; 
Fiscal year 2009: 
Cost: $3.965
Revenue: $17.446
ROI: 4.4%; 
Fiscal year 2010: 
Cost: $4.371
Revenue: $23.563
ROI: 5.4%; 
Fiscal year 2011: 
Cost: $4.333
Revenue: $18.924
ROI: 4.4%; 
Fiscal year 2012: 
Cost: $4.232
Revenue: $14.476
ROI: 3.4%. 

Enforcement program: Collection; 
Fiscal year 2009: 
Cost: $1.880
Revenue: $26.871
ROI: 14.3$; 
Fiscal year 2010: 
Cost: $1.948
Revenue: $29.105
ROI: 14.9%; 
Fiscal year 2011: 
Cost: $1.939
Revenue: $31.060
ROI: 16.0%; 
Fiscal year 2012: 
Cost: $1.742
Revenue: $30.442
ROI: 17.5%. 

Enforcement program: Automated Underreporter; 
Fiscal year 2009: 
Cost: $223
Revenue: $4.569
ROI: 20.5%; 
Fiscal year 2010: 
Cost: $262
Revenue: $4.924
ROI: 18.8%; 
Fiscal year 2011: 
Cost: $270
Revenue: $5.245
ROI: 19.4%; 
Fiscal year 2012: 
Cost: $267
Revenue: $5.269
ROI: 19.7%. 

Enforcement program: IRS total; 
Fiscal year 2009: 
Cost: $6.068
Revenue: $48.886
ROI: 8.1; 
Fiscal year 2010: 
Cost: $6.581
Revenue: $57.592
ROI: 8.8%; 
Fiscal year 2011: 
Cost: $6.543
Revenue: $55.229
ROI: 8.4%; 
Fiscal year 2012: 
Cost: $6.242
Revenue: $50.187
ROI: 8.0%. 

Source: Fiscal year 2014 congressional budget justification for IRS. 

Note: Numbers may not add due to rounding. 

[End of table] 

* IRS made significant progress by calculating average direct actual 
ROI for the Examination, Collection, and Automated Underreporter 
programs, as shown in table 9. 

* IRS is not yet able to calculate ROI data that measure the marginal 
revenue produced by additional spending, such as program initiatives, 
or that include indirect effects of enforcement on voluntary 
compliance. 

* IRS stated that developing actual ROI at the program initiative 
(marginal) level is challenging. As we reported in December 2012, 
developing a methodology and using data to improve the allocation of 
IRS enforcement resources could result in a significant increase in 
direct revenue.[Footnote 8] 

Fiscal Year 2014 IT Investments: 

$2.6 Billion Requested for IT in Fiscal Year 2014 and IRS Expanded 
Information on IT Investments: 

Of the $2.6 billion requested, 

* $1.5 billion is planned to fund 18 major IT investments.[Footnote 9] 
The funding for major IT investments comes from multiple sources: 

- $1.2 billion from the operations support appropriation account, 
- $260 million from the BSM appropriation account, 
- $40 million from operations support user fees, and, 
- $12 million from other funding sources.[Footnote 10]. 

* $1.1 billion is planned to fund nonmajor IT investments. 

IRS included expanded information on its IT investments in the fiscal 
year 2014 budget request, including lifecycle costs, projected useful 
life of the current asset, anticipated benefits and how performance 
will be measured. 

Major IT Investments’ Planned Cost: 

Table 10: Cost Information for IRS’s Major IT Investments: 

Investment name: Account Management Services (AMS): Enhances customer 
support by providing applications that enable IRS employees to access, 
validate, and update individual taxpayer accounts on demand; 
Fiscal year 2013 funding type[A]: O&M; 
Fiscal year 2013 to 2014 cost[B]: $44 million; 
Lifecycle costs: $212 million; 
Projected useful life of the current asset (estimated): 2019. 

Investment name: Customer Account Data Engine 2 (CADE 2): Provides 
timely access to authoritative individual taxpayer account information 
and enhances IRS’s ability to address technology, security, financial 
material weaknesses, and long-term architectural planning and 
viability. 
Fiscal year 2013 funding type[A]: O&M and DME; 
Fiscal year 2013 to 2014 cost[B]: $496 million; 
Lifecycle costs: $1.479 billion; 
Projected useful life of the current asset (estimated): 2019. 

Investment name: Electronic Fraud Detection System (EFDS): Assists in 
detecting fraud at the time that tax returns are filed in order to 
eliminate the issuance of fraudulent tax refunds.
Fiscal year 2013 funding type[A]: O&M; 
Fiscal year 2013 to 2014 cost[B]: $38 million; 
Lifecycle costs: $150 million; 
Projected useful life of the current asset (estimated): 2015. 

Investment name: e-Services (e-SVS): Comprises several web-based self-
assisted services that are intended to allow authorized individuals to 
do business with the IRS electronically.
Fiscal year 2013 funding type[A]: O&M and DME; 
Fiscal year 2013 to 2014 cost[B]: $24 million; 
Lifecycle costs: $211 million; 
Projected useful life of the current asset (estimated): 2019. 

Investment name: Foreign Account Tax Compliance Act (FATCA): Intended 
to implement provisions of the Foreign Account Tax Compliance Act 
regarding financial institutions reporting to IRS information about 
financial accounts held by U.S. taxpayers, or foreign entities in 
which U.S. taxpayers hold a substantial ownership interest. 
Fiscal year 2013 funding type[A]: DME; 
Fiscal year 2013 to 2014 cost[B]: $32 million; 
Lifecycle costs: $91 million; 
Projected useful life of the current asset (estimated): 2019. 

Investment name: Implement Return Review Program (RRP): (Replaces 
EFDS) Currently under development, is intended to maximize fraud 
detection at the time that tax returns are filed to eliminate issuance 
of questionable refunds.
Fiscal year 2013 funding type[A]: DME; 
Fiscal year 2013 to 2014 cost[B]: $75 million; 
Lifecycle costs: $169 million; 
Projected useful life of the current asset (estimated): 2019. 

Investment name: Individual Master File (IMF): Represents the 
authoritative data source for individual tax account data. All other 
IRS information systems that process IMF data depend on output from 
this source. This investment is a critical component of IRS’s ability 
to process tax returns.
Fiscal year 2013 funding type[A]: O&M and DME; 
Fiscal year 2013 to 2014 cost[B]: $18 million; 
Lifecycle costs: $108 million; 
Projected useful life of the current asset (estimated): 2019. 

Investment name: Information Reporting and Document Matching (IRDM): 
Intended to establish a new business information matching program in 
order to increase voluntary compliance and accurate income reporting.
Fiscal year 2013 funding type[A]: O&M and DME; 
Fiscal year 2013 to 2014 cost[B]: $46 million; 
Lifecycle costs: $186 million; 
Projected useful life of the current asset (estimated): 2019. 

Investment name: Integrated Customer Communication Environment (ICCE): 
Includes several projects that are intended to simplify voluntary 
compliance using voice response, Internet, and other computer 
technology such as the Modernized Internet Employee Identification 
Number, which allows third parties to act on the behalf of taxpayers.
Fiscal year 2013 funding type[A]: O&M and DME; 
Fiscal year 2013 to 2014 cost[B]: $33 million; 
Lifecycle costs: $534 million; 
Projected useful life of the current asset (estimated): 2019. 

Investment name: Integrated Data Retrieval System (IDRS): Intended to 
provide systemic review, improve consistency in case control, 
alleviate staffing needs, issue notices to taxpayers, and allow 
taxpayers to see status of refunds. It is a mission-critical system 
used by 60,000 IRS employees. 
Fiscal year 2013 funding type[A]: O&M and DME; 
Fiscal year 2013 to 2014 cost[B]: $37 million; 
Lifecycle costs: $322 million; 
Projected useful life of the current asset (estimated): 2019. 

Investment name: Integrated Financial System/CORE Financial System 
(IFS): Used by IRS for budget, payroll, accounts payable/receivable, 
general ledger functions, and financial reporting; also used to report 
on the cost of operations and to manage budgets by fiscal year. 
Fiscal year 2013 funding type[A]: O&M and DME; 
Fiscal year 2013 to 2014 cost[B]: $32 million; 
Lifecycle costs: $483 million; 
Projected useful life of the current asset (estimated): 2019. 

Investment name: Integrated Submission and Remittance Processing 
System (ISRP): Processes paper tax returns, and updates tax forms to 
comply with tax law changes. 
Fiscal year 2013 funding type[A]: O&M and DME; 
Fiscal year 2013 to 2014 cost[B]: $24 million; 
Lifecycle costs: $192 million; 
Projected useful life of the current asset (estimated): 2019. 

Investment name: IRS End User Systems and Services (EUSS): Supports 
products and services necessary for daily functions for over 100,000 
IRS employees at headquarters and field sites. 
Fiscal year 2013 funding type[A]: O&M; 
Fiscal year 2013 to 2014 cost[B]: $381 million; 
Lifecycle costs: $1.684 billion; 
Projected useful life of the current asset (estimated): 2025. 

Investment name: IRS Main Frames and Servers Services and Support 
(MSSS): Intended to support the design, development, and deployment of 
server storage infrastructures, software, databases, and operating 
systems. 
Fiscal year 2013 funding type[A]: O&M; 
Fiscal year 2013 to 2014 cost[B]: $810 million; 
Lifecycle costs: $6.016 billion; 
Projected useful life of the current asset (estimated): 2025. 

Investment name: IRS Telecommunications Systems and Support (TSS); 
Supports IRS’s broad and local network infrastructure such as servers, 
and switches for voice, data, and video servicing of about 1,000 IRS 
sites. 
Fiscal year 2013 funding type[A]: O&M; 
Fiscal year 2013 to 2014 cost[B]: $594 million; 
Lifecycle costs: $2.583 billion; 
Projected useful life of the current asset (estimated): 2021. 

Investment name: IRS.Gov-Portal Environment: Provides web-based 
services such as tax filing and refund tracking, to internal and 
external users, such as IRS employees and other government agencies, 
taxpayers, and business partners.
Fiscal year 2013 funding type[A]: O&M and DME; 
Fiscal year 2013 to 2014 cost[B]: $131 million; 
Lifecycle costs: $612 million; 
Projected useful life of the current asset (estimated): 2020. 

Investment name: Modernized e-File (MeF): Provides a secure web-based 
platform for electronic tax filing of individual and business tax and 
information returns by registered Electronic Return Originators. 
Fiscal year 2013 funding type[A]: O&M and DME; 
Fiscal year 2013 to 2014 cost[B]: $140 million; 
Lifecycle costs: $575 million; 
Projected useful life of the current asset (estimated): 2019. 

Investment name: Service Center Recognition/Image Processing System 
(SCRIPS): Used as a data capture, management, and image storage system 
using high-speed scanning and digital imaging to convert data from the 
940, 941, K-1, and paper returns from Information Returns Processing 
into electronic format. 
Fiscal year 2013 funding type[A]: O&M and DME; 
Fiscal year 2013 to 2014 cost[B]: $19 million; 
Lifecycle costs: $195 million; 
Projected useful life of the current asset (estimated): 2019. 

Source: GAO analysis of fiscal year 2014 congressional budget 
justification for IRS. 

Notes: 

[A] O&M = Operations and Maintenance; 
DME = Development/Modernization/Enhancement. 

[B] The fiscal year 2013 to 2014 cost is defined as the base fiscal 
year 2013 budget plus the fiscal year 2014 request. 

[End of table] 

Legislative Proposals: 

GAO Conducted Analyses Related to 12 of the 33 Legislative Proposals 
in the Fiscal Year 2014 Budget: 

Table 11: Legislative Proposals Related to Prior GAO Work: 

IRS legislative proposals related to prior GAO work: Modify reporting 
of tuition expenses and scholarships on Form 1098-T, Tuition Statement; 
Projected revenues over 10 years: $1.095 billion; 
Not available; 
Related GAO reports: 
[hyperlink, http://www.gao.gov/products/GAO-10-225]; 
[hyperlink, http://www.gao.gov/products/GAO-13-279SP]. 

IRS legislative proposals related to prior GAO work: Increase 
certainty about the rules pertaining to classification of employees as 
independent contractors; 
Projected revenues over 10 years: $9,097 billion; 
Projected costs over 3 years: $1.9 million; 
Related GAO reports: 
[hyperlink, http://www.gao.gov/products/GAO-09-717]. 

IRS legislative proposals related to prior GAO work: Extend IRS math 
error authority in certain circumstances; 
Projected revenues over 10 years: $185 million; 
Projected costs over 3 years: $1.4 million; 
Related GAO reports: 
[hyperlink, http://www.gao.gov/products/GAO-10-349], 
[hyperlink, http://www.gao.gov/products/GAO-10-225], 
[hyperlink, http://www.gao.gov/products/GAO-11-481]. 

IRS legislative proposals related to prior GAO work: Allow IRS to 
absorb credit and debit card processing fees for certain tax payments; 
Projected revenues over 10 years: $19 million; 
Projected costs over 3 years: $9.6 million; 
Related GAO reports: 
[hyperlink, http://www.gao.gov/products/GAO-10-11]. 

IRS legislative proposals related to prior GAO work: Provide Treasury 
with the regulatory authority to require additional information to be 
included in electronically filed Form 5500, Annual Return/Report of 
Employee Benefit Plan, and electronic filing of certain other employee 
benefit plan reports; 
Projected revenues over 10 years: No revenue effect; 
Projected costs over 3 years: $11.2 million; 
Related GAO reports: 
[hyperlink, http://www.gao.gov/products/GAO-05-491]. 

IRS legislative proposals related to prior GAO work: Require taxpayers 
who prepare their returns electronically, but file their returns on 
paper, to print their returns with a two-dimensional bar code; 
Projected revenues over 10 years: No revenue effect; 
Projected costs over 3 years: $6.8 million; 
Related GAO reports: 
[hyperlink, http://www.gao.gov/products/GAO-12-33]; 
[hyperlink, http://www.gao.gov/products/GAO-08-38]. 

IRS legislative proposals related to prior GAO work: Require all Form 
990 series tax and information returns be filed electronically and 
provide IRS with regulatory authority to make the electronically filed 
Form 990 series returns publicly available in a machine readable 
format in a timely manner; 
Projected revenues over 10 years: No revenue effect; 
Projected costs over 3 years: Not available; 
Related GAO reports: 
[hyperlink, http://www.gao.gov/products/GAO-02-526]; 
[hyperlink, http://www.gao.gov/products/GAO-02-444]; 
[hyperlink, http://www.gao.gov/products/GAO-06-799]. 

IRS legislative proposals related to prior GAO work: Restrict access 
to Death Master File; 
Projected revenues over 10 years: $1.303 billion; 
Projected costs over 3 years: Not available; 
Related GAO reports: 
[hyperlink, http://www.gao.gov/products/GAO-02-233T]. 

IRS legislative proposals related to prior GAO work: Provide 
whistleblowers with protection from retaliation; 
Projected revenues over 10 years: Negligible revenue effect; 
Projected costs over 3 years: Not available; 
Related GAO reports: 
[hyperlink, http://www.gao.gov/products/GAO-11-683]. 

IRS legislative proposals related to prior GAO work: Provide stronger 
protection from improper disclosure of taxpayer information in 
whistleblower actions; 
Projected revenues over 10 years: No revenue effect; 
Projected costs over 3 years: Not available; 
Related GAO reports: 
[hyperlink, http://www.gao.gov/products/GAO-11-683]. 

IRS legislative proposals related to prior GAO work: Add tax crimes to 
the Aggravated Identity Theft Statute; 
Projected revenues over 10 years: Negligible revenue effect; 
Projected costs over 3 years: Not available; 
Related GAO reports: 
[hyperlink, http://www.gao.gov/products/GAO-13-132T]; 
[hyperlink, http://www.gao.gov/products/GAO-09-882]; 
[hyperlink, http://www.gao.gov/products/GAO-02-766]. 

IRS legislative proposals related to prior GAO work: Impose a civil 
penalty on tax identity theft crimes; 
Projected revenues over 10 years: Negligible revenue effect; 
Projected costs over 3 years: Not available; 
Related GAO reports: 
[hyperlink, http://www.gao.gov/products/GAO-13-132T]; 
[hyperlink, http://www.gao.gov/products/GAO-09-882]; 
[hyperlink, http://www.gao.gov/products/GAO-02-766]. 

Source: IRS, Fiscal year 2014 congressional budget justification, and 
Department of the Treasury, General Explanations of the 
Administration’s Fiscal Year 2014 Revenue Proposals(Washington, D.C.: 
April 2013). 

[End of table] 

Open Matters and Recommendations: 

Implementing Open Matters for Congress and Recommendations to IRS 
Could Result in Financial Benefits: 

* We highlighted several areas where IRS could achieve cost savings 
and revenue enhancements in our duplication, overlap, and 
fragmentation reports.[Footnote 11] 

* As of March 2013, 39 of our products contain 10 matters for 
congressional consideration and 88 recommendations to IRS with a 
potential financial benefit that have not been addressed. In addition, 
we have multiple other recommendations that could improve IRS 
operations if implemented. See appendix III for a list of products. 

* Since March 2012, IRS has implemented 24 recommendations with a 
potential financial benefit. 

Figure 2: Recommendations to IRS and Open Matters for Congress with a 
Financial Benefit: 

[Refer to PDF for image: stacked vertical bar graph] 

Number of recommendations and matters: 

IRS: 
Increase revenue: 25; 
Increase savings: 8; 
Increase savings and revenue: 15; 
Indirect financial benefit: 40; 
Total: 88. 

Congress: 
Increase revenue: 5; 
Increase savings: 1; 
Increase savings and revenue: 4; 
Total: 10. 

[End of figure] 

Briefing Slides Footnotes: 

[1] PPACA, Pub. L. No. 111-148, 124 Stat. 119 (Mar. 23, 2010), as 
amended by the Health Care and Education Reconciliation Act (HCERA), 
Pub. L. No. 111-152, 124 Stat. 1029 (Mar. 30, 2010). All references to 
PPACA include amendments by HCERA. 

[2] Housing Assistance Tax Act of 2008, Pub. L. No. 110-289, div. C, 
§3091, 122 Stat. 2654, 2908-2911 (July 30, 2008). 

[3] Energy Improvement and Extension Act of 2008, Pub. L. No. 110-343, 
div. B, §403, 122 Stat. 3765, 3854-3860 (Oct. 3, 2008). 

[4] Hiring Incentives to Restore Employment Act, Pub. L. No. 111-147, 
Title V, 124 Stat. 71, 97-117 (Mar. 18, 2010). 

[5] The Acting IRS Commissioner announced 5 furlough days, including 
May 24, 2013, June 14, 2013, July 5, 2013, July 22, 2013, and August 
30, 2013, and that two other furlough days may be scheduled in August 
and September 2013. 

[6] A lockbox is a post office box established by a financial 
institution to receive payments made to the IRS. 

[7] The savings and efficiencies of $217 million include a net 
reinvestment of $37.5 million. 

[8] See GAO, Tax Gap: IRS Could Significantly Increase Revenues by 
Better Targeting Enforcement Resources, [hyperlink, 
http://www.gao.gov/products/GAO-13-151] (Washington, D.C.: Dec. 5, 
2012). 

[9] According to IRS, major investments are defined by Treasury as 
those that cost $10 million in either the current year or budget year, 
or $50 million over the 5-year period extending from the prior year 
through budget year +2. Last year, IRS reported 20 major IT systems. 
The Current Customer Account Data Engine (Current CADE) and Affordable 
Care Act (ACA, the IT investment supporting IRS’s implementation of 
the PPACA requirements) are no longer on the list.Current CADE was 
terminated in December 2011. According to IRS, ACA will now be 
reported as separate nonmajor investments instead of one major 
investment. 

[10] Other funding sources include, for example, IRS Operations 
Support Reimbursables. 

[11] See GAO, 2013 Annual Report: Actions Needed to Reduce 
Fragmentation, Overlap, and Duplication and Achieve Other Financial 
Benefits, [hyperlink, http://www.gao.gov/products/GAO-13-279SP] 
(Washington, D.C.: Apr. 9, 2013), 2012 Annual Report: Opportunities to 
Reduce Duplication, Overlap and Fragmentation, Achieve Savings, and 
Enhance Revenue, [hyperlink, http://www.gao.gov/products/GAO-12-342SP] 
(Washington, D.C.: Feb. 28, 2012), and Opportunities to Reduce 
Potential Duplication in Government Programs, Save Tax Dollars, and 
Enhance Revenue, [hyperlink, http://www.gao.gov/products/GAO-11-318SP] 
(Washington, D.C.: Mar. 1, 2011). 

[End of section] 

Appendix II: Return on Investment Charts: 

IRS Estimated Future ROI for 10 of the 12 New Enforcement Initiatives: 

Figure 3: Implement FATCA: 

[Refer to PDF for image: combined vertical bar and line graph] 

Fiscal year: 2014; 
Cost: $35.2 million; 
Revenue: $49.6 million; 
ROI: 1.4%; 
Fiscal year: 2015; 
Cost: $32.2 million; 
Revenue: $85.6 million; 
ROI: 2.7%; 
Fiscal year: 2016; 
Cost: $31.5 million; 
Revenue: $115.4 million; 
ROI: 3.7%. 

Source: GAO analysis of IRS data. 

[End of figure] 

Figure 4: Address International and Offshore Compliance Issues: 

[Refer to PDF for image: combined vertical bar and line graph] 

Fiscal year: 2014; 
Cost: $49.3 million; 
Revenue: $86.2 million; 
ROI: 1.7%; 
Fiscal year: 2015; 
Cost: $44.1 million; 
Revenue: $128.7 million; 
ROI: 2.9%; 
Fiscal year: 2016; 
Cost: $42.4 million; 
Revenue: $192.8 million; 
ROI: 4.5%. 

Source: GAO analysis of IRS data. 

[End of figure] 

Figure 5: Implement Merchant Card and Basis Matching: 

[Refer to PDF for image: combined vertical bar and line graph] 

Fiscal year: 2014; 
Cost: $50.3 million; 
Revenue: $152.4 million; 
ROI: 3%; 
Fiscal year: 2015; 
Cost: $43 million; 
Revenue: $272.7 million; 
ROI: 6.3%; 
Fiscal year: 2016; 
Cost: $42.5 million; 
Revenue: $362.9 million; 
ROI: 8.5%. 

Source: GAO analysis of IRS data. 

[End of figure] 

Figure 6: Address Impact of PPACA Statutory Requirements: 

[Refer to PDF for image: combined vertical bar and line graph] 

Fiscal year: 2014; 
Cost: $44.4 million; 
Revenue: $36.3 million; 
ROI: 0.8%; 
Fiscal year: 2015; 
Cost: $43.9 million; 
Revenue: $61.3 million; 
ROI: 1.4%; 
Fiscal year: 2016; 
Cost: $43.9 million; 
Revenue: $83.9 million; 
ROI: 1.9%. 

Source: GAO analysis of IRS data. 

[End of figure] 

Figure 7: Improve Coverage of Partnerships and Flow-Through Entities: 

[Refer to PDF for image: combined vertical bar and line graph] 

Fiscal year: 2014; 
Cost: $45 million; 
Revenue: $136.3 million; 
ROI: 3%; 
Fiscal year: 2015; 
Cost: $40.1 million; 
Revenue: $191.3 million; 
ROI: 4.8%; 
Fiscal year: 2016; 
Cost: $38 million; 
Revenue: $293 million; 
ROI: 7.7%. 

Source: GAO analysis of IRS data. 

[End of figure] 

Figure 8: Increase Audit Coverage to Address Tax Compliance Issues: 

[Refer to PDF for image: combined vertical bar and line graph] 

Fiscal year: 2014; 
Cost: $110.9 million; 
Revenue: $155.9 million; 
ROI: 1.4%; 
Fiscal year: 2015; 
Cost: $97.7 million; 
Revenue: $258.6 million; 
ROI: 2.6%; 
Fiscal year: 2016; 
Cost: $92.8 million; 
Revenue: $295.6 million; 
ROI: 3.2%. 

Source: GAO analysis of IRS data. 

[End of figure] 

Figure 9: Increase Collection Coverage: 

[Refer to PDF for image: combined vertical bar and line graph] 

Fiscal year: 2014; 
Cost: $60.5 million; 
Revenue: $221.5 million; 
ROI: 3.7%; 
Fiscal year: 2015; 
Cost: $53.6 million; 
Revenue: $397 million; 
ROI: 7.4%; 
Fiscal year: 2016; 
Cost: $53.3 million; 
Revenue: $496.3 million; 
ROI: 9.3%. 

Source: GAO analysis of IRS data. 

[End of figure] 

Figure 10: Expand Coverage of High-Wealth Individuals and Enterprises: 

[Refer to PDF for image: combined vertical bar and line graph] 

Fiscal year: 2014; 
Cost: $34 million; 
Revenue: $176.3 million; 
ROI: 5.2%; 
Fiscal year: 2015; 
Cost: $29.6 million; 
Revenue: $243 million; 
ROI: 8.2%; 
Fiscal year: 2016; 
Cost: $27.6 million; 
Revenue: $368.9 million; 
ROI: 13.4%. 

Source: GAO analysis of IRS data. 

[End of figure] 

Figure 11: Improve Identification and Prevention of Refund Fraud and 
Identity Theft: 

[Refer to PDF for image: combined vertical bar and line graph] 

Fiscal year: 2014; 
Cost: $101.1 million; 
Revenue: $631 million; 
ROI: 6.2%; 
Fiscal year: 2015; 
Cost: $88.3 million; 
Revenue: $946 million; 
ROI: 10.7%; 
Fiscal year: 2016; 
Cost: $87.7 million; 
Revenue: $1.261 billion; 
ROI: 14.4%. 

Source: GAO analysis of IRS data. 

[End of figure] 

Figure 12: Leverage Data to Improve Case Selection: 

[Refer to PDF for image: combined vertical bar and line graph] 

Fiscal year: 2014; 
Cost: $51.7 million; 
Revenue: 0; 
ROI: 0; 
Fiscal year: 2015; 
Cost: $50.2 million; 
Revenue: $63.2 million; 
ROI: 1.3%; 
Fiscal year: 2016; 
Cost: $50 million; 
Revenue: $75.7 million; 
ROI: 1.5%. 

Source: GAO analysis of IRS data. 

Note: Figures 11 and 12 do not use IRS’s traditional ROI calculation. 
Figure 11 shows an initiative to protect revenue and Figure 12 shows 
an initiative to enhance revenue. 

[End of figure] 

[End of section] 

Appendix III: GAO Products with Open Matters for Congressional 
Consideration and Recommendations to IRS with a Potential Financial 
Benefit: 

39 GAO products contain 10 matters for Congressional consideration and 
88 recommendations to IRS with a potential financial benefit that have 
not been addressed. Thirty have the potential to increase revenue 
(IR), 9 increase savings (IS), 19 increase both savings and revenue 
(ISR), and 40 may have indirect financial benefits (IFB). 

Table 12: List of Open Matters for Congress and Recommendations to IRS 
That Could Result In Potential Savings or Increased Revenues or Both. 

Addressing identify theft: 

Report title and number: Identify Theft: Total Extent of Refund Fraud 
Using Stolen Identities is Unknown (GAO-13-132T); Website for current 
status of matters and/or recommendations: [hyperlink, 
http://www.gao.gov/products/GAO-13-132T];
Potential financial benefits: IFB. 

Detecting abusive tax avoidance transactions: 

Report title and number: Abusive Tax Avoidance Transactions: IRS Needs 
Better Data to Inform Decisions about Transactions (GAO-11-493); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-11-493]; 
Potential financial benefits: IR, IFB. 

Enhancing budget requests: 

Report title and number: IRS 2013 Budget: Continuing to Improve 
Information on Program Costs and Results Could Aid in Resource 
Decision Making (GAO-12-603);
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-12-603]; 
Potential financial benefits: IS, IFB. 

Report title and number: IRS Budget 2012: Extending Systematic Reviews 
of Spending Could Identify More Savings Over Time (GAO-11-547); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-11-547]; 
Potential financial benefits: IS. 

Enhancing collection of user fees: 

Report title and number: User Fees: Additional Guidance and 
Documentation Could Further Strengthen IRS's Biennial Review of Fees 
(GAO-12-193); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-12-193]; 
Potential financial benefits: IFB. 

Enhancing electronic filing: 

Report title and number: E-Filing Tax Returns: Penalty Authority and 
Digitizing More Paper Return Data Could Increase Benefits (GAO-12-33); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-12-33]; 
Potential financial benefits: IS, ISR, IFB. 

Report title and number: Electronic Tax Return Filing: Improvements 
Can Be Made before Mandate Becomes Fully Implemented (GAO-11-344); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-11-344]; 
Potential financial benefits: IS. 

Report title and number: Tax Administration: Opportunities Exist for 
IRS to Enhance Taxpayer Service and Enforcement for the 2010 Filing 
Season (GAO-09-1026); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-09-1026]; 
Potential financial benefits: ISR. 

Enhancing electronic filing and improving accuracy of paid preparers: 

Report title and number: Tax Administration: Many Taxpayers Rely on 
Tax Software and IRS Needs to Assess Associated Risks (GAO-09-297); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-09-297]; 
Potential financial benefits: IFB. 

Enhancing internal controls; Addressing identify theft: 

Report title and number: Management Report: Improvements Are Needed to 
Enhance the Internal Revenue Service's Internal Controls and Operating 
Effectiveness (GAO-11-494R); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-11-494R]; 
Potential financial benefits: IS, IFB. 

Enhancing taxpayer services: 

Report title and number: 2012 Tax Filing: IRS Faces Challenges 
Providing Service to Taxpayers and Could Collect Balances Due More 
Effectively (GAO-13-156);
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-13-156]; 
Potential financial benefits: ISR. 

Report title and number: 2011 Tax Filing: Processing Gains, but 
Taxpayer Assistance Could Be Enhanced by More Self-Service Tools (GAO-
12-176); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-12-176]; 
Potential financial benefits: ISR. 

Enhancing treatment of appraisals issues: 

Report title and number: Appraised Values on Tax Returns: Burdens on 
Taxpayers Could Be Reduced and Selected Practices Improved (GAO-12-
608); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-12-608]; 
Potential financial benefits: ISR. 

Expanding use of math error authority or third party data: 

Report title and number: 2011 Tax Filing: IRS Dealt with Challenges to 
Date but Needs Additional Authority to Verify Compliance (GAO-11-481); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-11-481]; 
Potential financial benefits: IR. 

Report title and number: Recovery Act: IRS Quickly Implemented Tax 
Provisions, but Reporting and Enforcement Improvements Are Needed (GAO-
10-349); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-10-349]; 
Potential financial benefits: ISR. 

Report title and number: 2009 Tax Filing Season: IRS Met Many 2009 
Goals, but Telephone Access Remained Low, and Taxpayer Service and 
Enforcement Could Be Improved (GAO-10-225); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-10-225]; 
Potential financial benefits: IR, ISR. 

Report title and number: Tax Administration: IRS's 2008 Filing Season 
Generally Successful Despite Challenges, although IRS Could Expand 
Enforcement during Returns Processing (GAO-09-146); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-09-146]; 
Potential financial benefits: ISR. 

Implementing Information Reporting and Document Matching (IRDM) system: 

Report title and number: IRS Management: Cost Estimate for New 
Information Reporting System Needs to be Made More Reliable (GAO-12-
59); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-12-59]; 
Potential financial benefits: IFB. 

Report title and number: Information Reporting: IRS Could Improve Cost 
Basis and Transaction Settlement Reporting Implementation (GAO-11-557); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-11-557]; 
Potential financial benefits: IFB. 

Implementing Patient Protection and Affordable Care Act (PPACA): 

Report title and number: Patient Protection and Affordable Care Act: 
IRS Managing Implementation Risks, but Its Approach Could Be Refined 
(GAO-12-690); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-12-690]; 
Potential financial benefits: IFB. 

Report title and number: Patient Protection and Affordable Care Act: 
IRS Should Expand Its Strategic Approach to Implementation (GAO-11-
719); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-11-719]; 
Potential financial benefits: IFB;. 

Improving allocation of enforcement resources: 

Report title and number: Tax Gap: IRS Could Significantly Increase 
Revenues by Better Targeting Enforcement Resources (GAO-13-151); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-13-151]; 
Potential financial benefits: IR. 

Improving collection of unpaid taxes from Medicaid providers: 

Report title and number: Medicaid: Providers in Three States with 
Unpaid Federal Taxes Received Over $6 Billion in Medicaid 
Reimbursements (GAO-12-857); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-12-857]; 
Potential financial benefits: IS. 

Improving corporate tax compliance: 

Report title and number: Tax Gap: Actions Needed to Address 
Noncompliance with S Corporation Tax Rules (GAO-10-195); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-10-195]; 
Potential financial benefits: IR, IFB. 

Improving individual or corporate tax compliance: 

Report title and number: Financial Derivatives: Disparate Tax 
Treatment and Information Gaps Create Uncertainty and Potential Abuse 
(GAO-11-750); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-11-750]; 
Potential financial benefits: IFB. 

Report title and number: Federal Tax Collection: Potential for Using 
Passport Issuance to Increase Collection of Unpaid Taxes (GAO-11-272); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-11-272]; 
Potential financial benefits: IR. 

Improving management of information technology (IT) investments: 

Report title and number: Investment Management: IRS Has a Strong 
Oversight Process but Needs to Improve How It Continues Funding 
Ongoing Investments (GAO-11-587); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-11-587]; 
Potential financial benefits: IS, IFB. 

Improving offshore compliance: 

Report title and number: Offshore Tax Evasion: IRS Has Collected 
Billions of Dollars, but May be Missing Continued Evasion (GAO-13-
318)[A]; 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-13-318]; 
Potential financial benefits: IR. 

Improving real estate tax compliance: 

Report title and number: Tax Administration: Expanded Information 
Reporting Could Help IRS Address Compliance Challenges with Forgiven 
Mortgage Debt (GAO-10-997); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-10-997]; 
Potential financial benefits: IR. 

Report title and number: Home Mortgage Interest Deduction: Despite 
Challenges Presented by Complex Tax Rules, IRS Could Enhance 
Enforcement and Guidance (GAO-09-769); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-09-769]; 
Potential financial benefits: IR. 

Real Estate Tax Deduction: Taxpayers Face Challenges in Determining 
Report title and number: What Qualifies; Better Information Could 
Improve Compliance (GAO-09-521); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-09-521]; 
Potential financial benefits: IR. 

Improving rental real estate compliance: 

Report title and number: Tax Gap: Actions That Could Improve Rental 
Real Estate Reporting Compliance (GAO-08-956); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-08-956]; 
Potential financial benefits: IR. 

Improving sole proprietors' compliance: 

Report title and number: Tax Gap: Limiting Sole Proprietor Loss 
Deductions Could Improve Compliance but Would Also Limit Some 
Legitimate Losses (GAO-09-815); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-09-815]; 
Potential financial benefits: IFB. 

Improving tax credit administration: 

Report title and number: Small Employer Health Tax Credit: Factors 
Contributing to Low Use and Complexity (GAO-12-549); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-12-549]; 
Potential financial benefits: ISR. 

Improving third party compliance; Addressing identify theft: 

Report title and number: Tax Gap: IRS Could Do More to Promote 
Compliance by Third Parties with Miscellaneous Income Reporting 
Requirements (GAO-09-238); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-09-238]; 
Potential financial benefits: IR, IFB. 

Improving use of whistleblower claims: 

Report title and number: Tax Whistleblowers: Incomplete Data Hinders 
IRS's Ability to Manage Claim Processing Time and Enhance External 
Communication (GAO-11-683); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-11-683]; 
Potential financial benefits: IR, IFB. 

Increasing tax debt collection: 

Report title and number: Tax Debt Collection: IRS Needs to Better 
Manage the Collection Notices Sent to Individuals (GAO-09-976); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-09-976]; 
Potential financial benefits: ISR. 

Promoting effective use of third-party data: 

Report title and number: Tax Gap: IRS Has Modernized Its Business 
Nonfiler Program but Could Benefit from More Evaluation and Use of 
Third-Party Data (GAO-10-950); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-10-950]; 
Potential financial benefits: IR, IFB. 

Reducing tax evasion: 

Report title and number: Tax Gap: IRS Can Improve Efforts to Address 
Tax Evasion by Networks of Businesses and Related Entities (GAO-10-
968); 
Website for current status of matters and/or recommendations: 
[hyperlink, http://www.gao.gov/products/GAO-10-968]; 
Potential financial benefits: IFB. 

Legend: IR - Increase revenue, IS - Increase savings, ISR - Increase 
savings and revenue, IFB - Indirect financial benefit. 

Source: GAO. 

Notes: Products with open matters and recommendations identified as of 
March 11, 2013, with the exception of GAO-13-318 (see table note a). 
Some products may have matters and/or recommendations that do not have 
potential financial benefits or could be placed in different 
categories than provided above. 

[A] This product includes open recommendations identified as of March 
27, 2013. 

[End of table] 

[End of section] 

Appendix IV: GAO Contact and Staff Acknowledgments 

GAO Contact: 

James R. McTigue, Jr. (202) 512-9110, mctiguej@gao.gov: 

Staff Acknowledgments: 

In addition to the contact named above, Libby Mixon, Assistant 
Director; Amy Bowser, Chuck Fox, Paul Middleton, Ulyana Panchishin, 
Sabine Paul, Laurel Plume, Neil Pinney, Mark Ryan, Erinn L. Sauer, 
Cynthia Saunders, and Robert Yetvin made key contributions to this 
report. 

[End of section] 

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