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Updated November 16, 2020
IRS Appropriations, FY2021
Overview of Budget Request
revenue gain of $64 billion in that period. This estimate
The Internal Revenue Service (IRS) has two primary
does not take into account the revenue gain from the
responsibilities: (1) to collect most of the revenue to fund
deterrent effect on taxpayers from increased enforcement.
federal government agencies and programs, and (2) to
enforce taxpayer compliance with federal tax laws .
The FY2021 budget proposal includes $106.4 million to
According to the IRS Data Book, in FY2019, the agency
implement changes in IRS operations mandated by the
processed over 253 million tax returns and 3.5 billion
Taxpayer First Act (P.L. 116-25). Among these changes are
information returns, collected over $3.5 trillion in gross
creating an internet platform for filing Form 1099s,
revenue, and issued $452 billion in refunds.
allowing 100% e-filing by tax-exempt entities, setting a
comprehensive service and training strategy and developing
Appropriations provide most of IRS’s operating budget. In
uniform standards for accepting electronic signatures.
FY2019, according to the agency’s FY2021 budget request,
93% ($11,302 million) of its operating budget came from
Table 1. IRS’s FY2020 and FY2021 Appropriations,
appropriations. The remaining 7% ($817 million) was from
Excluding Nonappropriated Funds
several other sources, including (1) reimbursements from
(millions of dollars)
other government agencies for services rendered by the
IRS, (2) offsetting collections, (3) user fees, and (4)
FY2021
FY2021
carryovers of unobligated balances from previous years.
FY2020
FY2021
House-
Senate
The IRS has unrestricted authority over how
Account
Enacted
Request
passed
Drafta
nonappropriated funds are used.
Taxpayer
$2,512
$2,563
$2,603
$2,512
Historically, IRS appropriations have been distributed
Services
among four accounts: taxpayer services (TS), enforcement
(TS)
(ENF), operations support (OS), and business systems
Enforce-
5,010
5,071
5,206
5,010
modernization (BSM). As Table 1 shows, enforcement
ment
accounted for 43.5% of the $11,511 million in enacted
(ENF)
appropriations for FY2020, followed by OS (33.0%), TS
(22%), and BSM (1%).
Operations
3,809
4,105
4,058
3,809
Support
The Trump Administration has requested $12,039 million
(OS)
in IRS appropriations for FY2021, or $528 million (4.6%)
Business
180
300
250
180
more than the enacted amount for FY2020. Relative to
Systems
enacted amounts for FY2020, funding for OS would rise by
Moderni-
$196 million (7.8%), for BSM by $120 million (66.7%), for
zation
ENF by $61 million (1.2%), and for taxpayer services by
(BSM)
$51 million (2.0%).
Total
$11,511
$12,039b
$12,117
$11,511
The Administration is also proposing to make more funding
Sources: IRS’s FY2021 Budget Justification, H.R. 7668, H.R. 7617,
available for reducing the federal tax gap by asking
and Senate Appropriations Committee’s summary of draft bil for
Congress to exempt a total of $400 million of the proposed
Financial Services and General Government Appropriations, FY2021.
budget ($280 million for ENF and $120 million for OS)
from the FY2021 caps on nondefense discretionary
a.
As released by the Senate Appropriations Committee. No
spending under the Budget Control Act of 2011 (BCA; P.L.
number has been assigned to the bil .
112-25, as amended). The requested exemption is known as
a program integrity cap adjustment. It permits Congress and
b. Excludes $400 mil ion in Program Integrity Initiatives under the
the Administration to increase congressional allocations of
ENF and OS accounts.
annual appropriations for particular purposes. These
purposes include activities to maintain “program integrity,”
Specific Appropriations Accounts
such as boosting a program’s effectiveness by enforcing
compliance with its regulations.
Taxpayer Services (TS)
This account covers the cost of printing forms and
According to budget documents, the proposed $400 million
publications, processing returns, filing and account
cap adjustment in FY2021, together with proposed annual
services, and taxpayer assistance from the Taxpayer
cap adjustments through FY2030, would result in a net
Advocate Service (TAS).
https://crsreports.congress.gov
IRS Appropriations, FY2021
The Administration is asking for $2,563 million in FY2021
The OS budget request also includes $120 million in new
for TS, or $51 million more than the enacted amount for
budget authority for activities linked to enforcement actions
FY2020. Of this amount, $11 million would be set aside for
aimed at reducing the federal tax gap.
the Tax Counseling for the Elderly Program, $12 million
for low-income taxpayer clinic grants, and $25 million
H.R. 7617 would provide $4,058 million in appropriations
(available through the end of FY2022) for matching grants
for OS in FY2021. This amount would be $167 million less
in the Community Volunteer Income Tax Assistance
than the budget request with the $120 million program
program. In addition, $209 million would go to the TAS.
integrity cap adjustment, and $47 million less without the
The budget request calls for a reduction in full-time staffing
adjustment. The bill does not endorse the cap adjustment.
within TS of 1,081 employees, which represents 91.4% of
the net reduction in overall full-time staffing (1,183
The draft Senate bill would give the IRS the same amount
employees) at the IRS called for by the budget request.
in OS appropriations that it received in FY2020 without the
proposed cap adjustment.
H.R. 7617, as passed by the House, would provide $2,603
million in FY2021 appropriations for taxpayer services, or
Business Systems Modernization (BSM)
$40 million more than the budget request.
This account covers costs related to upgrading key IRS
information technology systems.
The draft bill issued by the Senate Appropriations
Committee would provide the same amount of
Under the IRS’s budget request, the BSM program would
appropriations for TS in FY2021 that was enacted for
receive $300 million in appropriations for FY2021, or $120
FY2020.
million more than the enacted amount for FY2020. The
requested funds would be available for obligation through
Enforcement (ENF)
the end of FY2023. They would cover the cost of acquiring
This account covers expenses related to assessing and
information technology systems.
collecting taxes owed, providing legal support, and
conducting criminal investigations.
H.R. 7617 would provide $250 million in appropriations for
the BSM program in FY2021, or $50 million less than the
The Administration is requesting $5,071 million in
budget request.
appropriations (without a $280 million cap adjustment) for
IRS enforcement activities in FY2021, or $61 million more
The draft Senate bill would provide $180 million in BSM
than the enacted amount for FY2020.
appropriations for FY2021, the same amount as FY2020.
The funding request for enforcement also includes $280
Administrative Provisions
million in new budget authority under the BCA to address
The FY2021 IRS budget request contains 12 administrative
the federal tax gap. According to the IRS’s latest estimate,
provisions (or policy riders) that establish new operational
the annual net tax gap averaged $381 billion from FY2011
priorities or reiterate existing ones for IRS managers. H.R.
to FY2013.
7617 contains 10 of the riders from the budget request plus
one that is not included in the request. The draft Senate bill
H.R. 7617 would provide the IRS with $5,206 million in
contains the same 10 riders as the House bill and the budget
FY2021 appropriations for enforcement activities. This is
request and no others.
$145 million less than the budget request (including $280
million for a program integrity cap adjustment). The bill
The budget request contains two provisions not in either
does not endorse the requested cap adjustment. Without the
bill. Section 111 would allow the IRS to transfer its
adjustment, ENF appropriations would be $135 million
unobligated, expired appropriations to OS to pay for
more than the budget request.
information technology (IT) investments and facility
improvements.
The draft Senate bill would provide $5,010 million in ENF
appropriations, the same as the amount enacted for FY2020
Section 112 of the budget request would allow the IRS to
with no cap adjustment.
repurpose up to $10 million in unused appropriations at the
end of a fiscal year without prior congressional approval.
Operations Support (OS)
This account covers expenses associated with facility
Section 111 of H.R. 7617 would create a “Nonrecurring
services (including rent), postage, telecommunications,
Expenses Fund” not tied to the OS account.
security at IRS facilities, research, and the maintenance,
security, and upgrade of agency information systems.
Two floor amendments approved during House
consideration of H.R. 7617 would have the same impact as
The Administration has requested $4,105 million in
an administrative provision. One provision would direct the
appropriations (without a $120 million cap adjustment) for
IRS to reduce the taxpayer correspondence backlog caused
OS in FY2021, or $296 million more than the enacted
by COVID-19. The other provision would add $10 million
amount for FY2020. Of the requested amount, $250 million
to OS appropriations to improve IRS’s ability to deliver
would be available for obligation through the end of
remaining economic impact payments and respond to
FY2022; $10 million would be available until spent for the
congressional inquiries about casework.
construction and repair of facilities; and $1 million would
be available through FY2023 for research.
Gary Guenther, Analyst in Public Finance
IF11607
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IRS Appropriations, FY2021
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https://crsreports.congress.gov | IF11607 · VERSION 5 · UPDATED