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February 03, 1996
FY 1997 IRS Budget Request
The FY 1997 President & thorn's budget enables the IRS to continue
funding its ongoing operations and providing additional resources
for specific programs and investments. By applying technology and
innovative approaches to management, the IRS will be able to
continue making real progress improving services to taxpayers and
doing its job more efficiently and effectively.
The budget request contains $359 million that will allow the
IRS to continue its long-term strategy to improve voluntary
compliance. This initiative is expected to generate an additional
$1.5 billion in revenues in FY 1997 alone.
Serving Taxpayers Better
The last three years have seen real improvements in IRS
service to taxpayers. Last year 118 million taxpayers telephoned,
wrote, or visited the IRS. The IRS answered 61 million TeleTax
calls (the service that offers taped information on 148 tax topics)
and telephone assistors answered 39 million calls, an increase of
more than 3 million over the prior year. The IRS was able to serve
more taxpayers by increasing productivity, expanding hours of
service, and installing call routing equipment that allows the IRS
to manage telephone workload better. Last year access to certain
taxpayer account information was provided nationwide, and telephone
assistors were able to resolve issues with a single call 75 percent
of the time.
Technology is also creating new ways for taxpayers to get the
tax forms and information they need while at the same time reducing
postage and printing costs. Forms are now available on CD-ROM, via
fax, and from the IRS Web Site on the Internet. A recent count
shows that an average of 25,000 items a day, mostly tax forms, are
being downloaded from the Internet.
More filing choices are making it easier for taxpayers to file
their returns. This year 23 million taxpayers can file returns with
a 10-minute telephone call, without any paperwork at all. On-line
filing from a home computer has increased significantly over last
year, and taxpayers in 31 states can satisfy both their federal and
state tax obligations with a single electronic transmission.
Electronic filing of the employer & thorn's quarterly tax return (Form 941)
is now available to businesses, and a TeleFile option of a simple
Form 941 is being planned.
Electronic payments to taxpayers are also increasing -- most
of the more than 90 million taxpayers getting refunds this year can
have them directly deposited to their bank accounts. TaxLink and
the Electronic Funds Transfer Payment System allows employers to
pay employment and other taxes faster, more easily and more
accurately. In FY 1995, more than $232 billion was deposited
electronically in this way, an increase over the $6.2 billion
deposited this way the prior year.
Paper tax returns have increased since 1992, but the staff
needed to process these returns has decreased, and in the past 3
years we have realized a productivity improvement of 12.4 percent.
Improving Compliance
The collection yield increased by 10 percent from FY 1993 to
FY 1995, despite a 9.5 percent decrease in collection staffing in FY
1994. This increase is due to IRS efforts to request payments
earlier in the process, primarily through the taxpayer service
function after account questions are resolved over the telephone or
at the time an audit is closed. In FY 1995 the examination function
secured payment of 64.2 percent of agreed tax assessments.
Collections through installment agreements increased from $2.28
billion in FY 1992 to $5.4 billion in FY 1995.
Technology improvements in field collection offices are
helping the IRS collect overdue accounts more efficiently. For FY
1997 the IRS is asking for an additional $150 million to improve the
Integrated Collection System (ICS), which provides on-line access to
current account information and improved case management.
Productivity increased more than 30 percent in the IRS districts
where ICS is now being used. In FY 1996 seven more districts will
be using ICS, and it should be fully installed nationwide in FY
1999.
The IRS continues to refine its compliance tools by developing
new compliance approaches. Programs like advanced issue resolution
and advance pricing agreements allow issues to be resolved early, a
practice that saves everyone time and money.
Revenue Protection
This filing season the IRS is continuing to devote substantial
resources to detecting and stopping erroneous and fraudulent claims
for refund. The IRS is continuing to look for suspicious returns
and check social security numbers. There should be fewer delayed
refunds this year as taxpayers now understand the importance of
filing returns with correct social security numbers.
Last year the use of technology and a different approach to
compliance helped stop erroneous refund claims. By using numerous
systemic verifications, including increased checks of social
security numbers, the IRS delayed 7.4 million questionable refunds
-- 8 percent -- and increased compliance resources devoted to
checking these refunds for accuracy. As a result, 1.5 million fewer
dependents were claimed on returns, and there were approximately
100,000 fewer earned income tax credit claims than in the previous
year. The criminal investigation division identified more than
4,100 refund schemes involving almost 60,000 returns and prevented
the issuance of $78 million in refunds. Through pre-refund
examinations, the IRS prevented the issuance of an additional $425
million in refunds.
Modernization
The modernization of the current tax administration system
requires an ongoing effort to improve business processes, develop a
flexible organization, and update technology. The IRS & thorn's business
restructuring includes consolidating 70 telephone and correspondence
operations into 34, and ultimately into 23, customer service
centers. Soon three computing centers will be responsible for
centralized mainframe computing instead of the 12 operating today.
The number of IRS regions has gone from seven to four, and the IRS
is now consolidating from 63 districts to 33. The number of
locations providing administrative support services has gone from
over 80 to 24, with three more to be eliminated this year.
To strengthen its technical performance capabilities, the IRS
is expanding the use of contractors to plan, develop and integrate
its overall modernization effort, as well as accomplish important
aspects of process reengineering and program management.
Maintaining Current Operations
One of the key objectives of the IRS in the coming year is to
maintain operations at the current level. To do this, the IRS must
fund the increased salary costs associated with the government-wide
pay raise and other inflationary price increases, such as postage,
printing and essential contracts. Additionally, the IRS must fund
the operations needed to cover the projected increase in the number
of returns filed. The amount needed just to keep the current levels
of IRS operations is approximately $276 million.
Mandated Reductions
Like all federal agencies, the IRS is expected to absorb some
cuts to its operating budget. As part of its response to an
Executive Order mandating across the board cuts in administrative
expenses, for FY 1997 the IRS is reducing administrative expenses
by 5 percent or $58 million. In addition, all bureaus of Treasury
are subject to a reduction in their respective funding to help
balance the Federal budget over the next seven years. The IRS
portion of that cut totals $80.5 million for FY 1997.
FY 1997 IRS BUDGET REQUEST OVERVIEW
The FY 1997 IRS budget request totals $7.995 billion, an
increase of $647 million (9 percent) above the 1996 authorized
level.
FY 1997 BUDGET ($ in millions)
Appropriation FY 96 Amount FY 97 Request
Processing, Assistance &
Management $1,724 $1,780
Tax Law Enforcement $4,097 $4,528
Information Systems $1,527 $1,688
Total $7,348 $7,995
Full Time Equivalent Employment Levels 109,050
(See attached chart for detailed breakdown by appropriation and
budget activity.)
FY 1997 Budget Summary By Appropriation and Budget Activity
(Dollars in Thousands)
FY 1996 FY 1997
Amount Amount
Processing, Assisting and Management
Management Services 105,663 111,386
Inspection 102,361 106,606
Submission Processing 773,008 829,666
Taxpayer Services 482,049 473,702
Resources Management 260,683 258,303
SUB TOTAL 1,723,764 1,779,663
Tax Law Enforcement
Tax Fraud & Finan. Invest. 378,566 410,316
Examination 1,492,374 1,716,668
Counsel 370,509 228,617
Employee Plans/Exempt Orgs. 131,330 133,389
International 36,168 33,718
SOI/Compliance Research 59,720 60,420
Collection 792,018 1,077,617
Document Matching 88,922 133,158
Resources Mgmt 47,687 733,918
SUB TOTAL 4,097,294 4,527,821
Information Systems
TSM-Modernized Dvmnt 695,000 850,000
Modernized Operational 58,191 62,452
Services and Compliance 668,749 670,169
Support Services 105,214 105,052
SUB TOTAL 1,527,154 1,687,674
TOTAL IRS 7,348,212 7,995,158
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