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November 22, 2021
Internal Revenue Service Appropriations, FY2022
Overview of the Budget Request
The FY2022 budget proposal includes $176.1 million to
The Internal Revenue Service (IRS) has two primary
implement numerous changes in how the IRS interacts with
responsibilities: (1) to collect most of the revenue to fund
taxpayers that were mandated by the Taxpayer First Act
federal government agencies and programs, and (2) to
(P.L. 116-25). Among the changes are creating an internet
enforce taxpayer compliance with federal tax laws.
platform for filing Form 1099s, achieving 100% e-filing by
According to the IRS Data Book, in FY2020, the agency
tax-exempt entities, and developing uniform standards for
processed over 240 million tax returns and 3.4 billion
electronic signatures.
information returns, collected nearly $3.5 trillion in gross
revenue, and issued $736 billion in refunds to all types of
Table 1. IRS’s FY2021 and FY2022 Appropriations,
taxpayers.
Excluding Nonappropriated Funds
(millions of dol ars)
The IRS’s operating budget consists mostly of annual
appropriations. In FY2020, 93.5% ($11,510 million) of its
FY2022
operating budget came from appropriations. The remaining
FY2021
FY2022
H.R.
FY2022
6.5% ($787 million) consisted of (1) reimbursements from
Account
Enacted
Request
4502
S. 3179
other government agencies for services rendered by the
IRS, (2) offsetting collections, (3) user fees, and (4)
TS
$2,556
$2,941
$2,941
$2,941
carryovers of unobligated balances from previous years.
ENF
5,213
5,463a
5,463a
5,463a
Current law gives the IRS considerable control over how
nonappropriated funds are used.
OS
3,928
4,448b
4,448b
4,448b
Historically, IRS appropriations have been distributed
BSM
223
305
305
305
among four accounts: taxpayer services (TS), enforcement
Total
$11,919
$13,157
$13,157
$13,157
(ENF), operations support (OS), and business systems
modernization (BSM). As Table 1 shows, enforcement
Sources: IRS’s FY2022 Budget Justification, Consolidated
accounted for $5,231 million (43.7%) of the $11,919
Appropriations Act, 2021 (P.L. 116-260), Division D of H.R. 4502 as
million in enacted appropriations for FY2021, followed by
passed by the House, and S. 3179 as introduced on November 4,
OS (33.0%), TS (21.4%), and BSM (1.9%).
2021.
The Biden Administration is requesting $13,157 million in
Notes:
IRS appropriations for FY2022, or $1,238 million (10.4%)
a. Excludes requested new budget authority of $287.5 mil ion as a
more than the enacted amount for FY2021. Relative to
program integrity cap adjustment.
FY2021, requested BSM funding is $82 million (36.8%)
greater; requested TS funding is $385 million (15.1%)
b. Excludes requested new budget authority of $129.5 mil ion as a
greater; requested OS funding is $520 million (13.2%)
program integrity cap adjustment.
greater; and requested ENF funding is $250 million (4.8%)
greater.
Main Appropriations Accounts
The figures in Table 1 do not include a proposed $417
Taxpayer Services (TS)
million program integrity cap adjustment for nondefense
This account covers the cost of printing forms and
discretionary spending under the Budget Control Act of
publications, processing returns, filing and account
2011 (BCA; P.L. 112-25, as amended). Such an adjustment
services, and taxpayer assistance from the Taxpayer
would allow Congress to increase allocations of annual
Advocate Service (TAS).
appropriations for particular purposes. One purpose is
federal agency activities to maintain a program’s “integrity”
The Administration requests $2,941 million in FY2022 for
by enforcing compliance with its regulations. The IRS’s
TS. Of this amount, $11 million is set aside for the Tax
enforcement actions are not considered a qualified purpose
Counseling for the Elderly (TCE) Program, $13 million for
under current law.
low-income taxpayer clinic (LITC) grants, $30 million
(through the end of FY2023) for matching grants for the
According to budget documents, the proposed $417 million
Community Volunteer Income Tax Assistance (VITA)
cap adjustment in FY2022, together with the proposed
Program, and $211 million for the TAS.
annual cap adjustments through FY2031, could produce a
net revenue gain of $43.6 billion in that period. This
H.R. 4502, as passed by the House, would match the
estimate may understate the revenue impact from increased
Administration’s appropriations request for TS in FY2022:
enforcement, as it does not include any gain in tax revenue
$2,941 million. Of this amount, the House measure calls for
from the impact of enhanced enforcement activities on
$11.0 million to be set aside for the TCE Program, $13.0
noncompliant taxpayers.
million for LITC grants, and $30 million for matching
https://crsreports.congress.gov
Internal Revenue Service Appropriations, FY2022
grants for the VITA Program (available through the end of
Business Systems Modernization (BSM)
FY2023). H.R. 4502 would allocate $213 million for TAS.
This account pays for costs related to upgrading various
IRS information technology systems.
As introduced by Senator Van Hollen on November 4,
2021, S. 3179 would also appropriate $2,941 million for TS
Under the Administration’s budget request, the BSM
in FY2022. With one exception, the bill would allocate the
program would receive $305 million in appropriations for
same amounts for the TCE program, LITC grants, and the
FY2022. The requested funds would be available for
VITA program as H.R. 4502. TAS would receive a slightly
acquiring and implementing new information technology
larger budget: $215 million.
(IT) systems through the end of FY2024.
Enforcement (ENF)
The budget request would require the IRS to submit
This account pays for expenses related to assessing and
quarterly reports to the Senate and House appropriations
collecting taxes owed, providing legal support, and
committees and the U.S. Comptroller General on the status,
conducting criminal investigations.
cost, and results of and plans for major IT investments
under the IRS’s Integrated Modernization Business Plan.
The Administration requests $5,463 million in
appropriations for IRS enforcement activities in FY2022.
H.R. 4502 and S. 3179 would also appropriate $305 million
Of this amount, $21 million would be set aside to purchase
for the BSM program in FY2022 for the same purposes and
new technology for the IRS’s Criminal Investigation
require the IRS to prepare the same quarterly reports.
Division (CID).
Policy Issues
The budget request also calls for $287.5 million in new
According to budget documents, the Biden
budget authority under the BCA to shrink the federal tax
Administration’s FY2022 budget proposal for the IRS is
gap, which is the difference between taxes owed and taxes
intended to serve as the first step in a multiyear effort to
paid in full on time. According to the IRS’s latest estimate,
expand the IRS’s resources to reduce taxpayer
the FY2019 tax gap (after adjustment for late payments and
noncompliance, improve taxpayer services, and further the
revenue collected through IRS enforcement actions) was
modernization of the IRS’s IT systems. This initiative
$554 billion.
would cost an estimated $79.2 billion from FY2022 to
H.R. 4502 would provide the same amount of
FY2031 and collect an estimated $316.2 billion in added
appropriations for ENF in FY2022 as the budget request.
gross revenue.
Included in this amount is $21 million for CID technology
The Build Back Better Act (H.R. 5376), as passed by the
upgrades. The bill also includes the requested $287.5
House, contains a similar provision. There are differing
million in new budget authority from a budget cap increase.
estimates of the revenue it would raise. According to the
S. 3179 would provide the same level of ENF funding in
Congressional Budget Office, spending an additional $80
FY2022 as H.R. 4502, with the same set-asides.
billion on IRS enforcement over 10 years would raise
additional gross revenues of $207 billion, or about 33% less
Operations Support (OS)
than the Administration’s estimate.
This account covers expenses associated with facility
There is a debate over the need for such a sustained and
services (including rent), postage, telecommunications,
substantial increase in the IRS budget. Some argue that the
security at IRS facilities, research, and the maintenance,
IRS should be funded at higher amounts than it has in
security, and upgrade of agency information systems.
recent years through a multiyear funding stream. The IRS
The Administration has requested $4,448 million in
Advisory Council, for instance, recommended in a 2020
appropriations for OS in FY2022. Of this amount, $275
report to the IRS Commissioner that the agency should be
million would be available for obligation through the end of
funded annually at a minimum amount of $14.3 billion,
FY2023; $10 million would be set aside (until spent) for the
which is $2.4 billion more than the IRS’s enacted FY2021
construction, renovation, and repair of IRS facilities; $1
appropriations.
million would be designated through FY2023 for research;
But not everyone agrees that the IRS budget (especially for
and $10 million would go to developing a system to allow
enforcement activities) should be greatly expanded in
federal contractors and other entities to electronically
coming years. Critics express concern that large increases
certify that they do or do not have “seriously delinquent”
in the IRS enforcement budget could lead to numerous
federal tax debt.
violations of taxpayer rights to privacy and due process.
The budget request includes $129.5 million in new budget
They also argue that large, sustained increases in the IRS
authority for OS investments linked to enforcement actions
budget would enlarge the potential for waste, fraud, and
targeting the federal tax gap.
abuse in the use of those funds. Some critics say that the
proposed increases in the IRS’s resources would likely raise
H.R. 4502 and S. 3179 match the Administration’s budget
much less revenue than the Administration has claimed.
request for OS in FY2022, including set-asides.
Gary Guenther, Analyst in Public Finance
IF11979
https://crsreports.congress.gov
Internal Revenue Service Appropriations, FY2022
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