Section I – Budget Request

Provide America’s taxpayers top-quality service by helping them understand and meet their tax responsibilities and enforce the law with integrity and fairness to all.

The IRS is responsible for administering the Federal Government’s tax system and meeting the needs of U.S. taxpayers by helping them understand their tax responsibilities and enforcing the law with integrity and fairness. Operations at the IRS, as required by law, include collection of individual and corporate taxes, examination of returns, taxpayer assistance, oversight of tax-exempt organizations, administering multiple refundable tax credits, and other specialized programs.

In FY 2025, the IRS collected about $5.3 trillion in taxes from 271 million returns, which represents a vast majority of the revenue that supports operations of the federal government. Due to the complexity of the U.S. tax code, core responsibilities of the IRS include making it easier for taxpayers to understand and meet their tax obligations.

Some Key Tax Statistics in FY 2025 Include:

Note: These statistics are from October 1, 2024, through September 30, 2025. The Average Individual Refund amount includes refunds issued in FY 2025 for all tax years.

Section I – Budget Request 1

The FY 2027 Budget requests $9.8 billion from Congress, a decrease in funding of $1.4 billion or 12.2 percent from the FY 2026 Enacted level of $11.2 billion. When including other resources, the total request of $15.9 billion represents a change of -2.5 percent from FY 2026.

The FY 2027 Congressional Justification represents a comprehensive assessment of the IRS’s financial condition and underscores its stewardship of public resources in service of the American people. Central to the Administration’s economic agenda is the implementation of the One Big Beautiful Bill Act (OB3) and Working Families Tax Cuts, which deliver historic tax relief measures such as No Tax on Tips, No Tax on Overtime, and expanded deductions for seniors and families. Throughout FY 2025, IRS employees focused on ensuring these benefits were delivered accurately, efficiently, and on time. To support this mission, the IRS aligned its efforts around three strategic priorities: data-driven enforcement, a simplified digital-first taxpayer experience, and a renewed commitment to taxpayer privacy.

Through modernized systems and advanced analytics, including artificial intelligence, the IRS strengthened its ability to identify fraud, reduce non-compliance, and protect taxpayers from identity theft, allowing enforcement staff to focus on higher-value work. At the same time, the IRS significantly improved taxpayer service by expanding online account capabilities and enhancing guidance and resources, while maintaining strong phone and in-person support. These efforts contributed to exceptional operational results in FY 2025, including the collection of more than $5.3 trillion in revenue, the processing of over 271 million returns and forms, and the issuance of approximately 113 million refunds totaling nearly $358 billion. Service improvements culminated in the most successful filing season in years, with telephone assistors answering 87 percent of calls and an average wait time of just three minutes.

These achievements were realized through smarter spending and operational discipline. An all-inclusive review of the IRS technology portfolio eliminated roughly $2 billion in planned, mostly one-time, IT spending, reduced inefficiencies tied to outdated paper processes, and redirected resources toward modernization. The IRS also maintained strong financial accountability, earning an unmodified audit opinion for the 26th consecutive year and demonstrating reliable internal controls over financial reporting. As the IRS continues its transformation, it remains focused on advancing technology, strengthening its workforce, and fostering a culture of efficiency, integrity, and accountability—laying the foundation for a modern IRS that Americans can trust to fulfill its mission. IRS is also modernizing how we measure customer service by sunsetting our legacy Customer Service Representative Level of Service measure and replacing it with new enterprise metrics to reflect new technologies and service channels.

2 Section I – Budget Request

Unresolved U.S. federal tax returns can result in interest payments on delayed refunds—costs borne directly by the U.S. Treasury. In FY 2025, these payments totaled $16.82 billion, up from $3.54 billion in FY 2022.

Adequate funding for the Taxpayer Services account is necessary to support timely return processing and reduce inventory levels, particularly older returns that drive interest accrual.

Lower and more stable inventory levels help limit the growth of interest costs over time. Accordingly, reducing interest costs requires both sustained Taxpayer Services funding and targeted operational improvements. The IRS is focused on reducing existing inventory, prioritizing older returns, improving processing times, and preventing future backlogs.

In FY 2024, the IRS estimated an overall improper payment rate of 21.9 percent and estimated improper payments totaling $21.4 billion for the Additional Child Tax Credit, American Opportunity Tax Credit, Earned Income Tax Credit, and Net Premium Tax Credit. Besides ensuring taxpayer compliance with the Internal Revenue Code, funding to strengthen enforcement, data analytics and matching, and outreaching and education reduces improper payments which are currently double the total of this budget request. Adequate IRS Enforcement funding ensures taxpayer compliance and limits wasteful overpayments of taxpayer-funded credits.

Taxpayer Services

• Pre-Filing Taxpayer Assistance and Education funds expenses to assist with tax form preparation, including tax law interpretation, publication, production, and advocate services.

• Filing and Account Services funds programs that provide filing and account services to taxpayers, process paper and electronically submitted tax returns, issue refunds, and maintain taxpayer accounts.

Enforcement

• Investigations funds the Criminal Investigative (IRS-CI) programs that investigate potential criminal and civil violations of tax laws, enforce criminal statutes relating to violations of tax laws and other financial crimes, and recommend prosecution as warranted.

• Examinations and Collections funds programs that enforce the tax laws and increase compliance through Examination and Collection programs, which ensure proper payment and tax reporting.

• Regulatory funds the development of published IRS guidance materials; interpretation of tax laws; internal advice to IRS on general non-tax legal issues; enforcement of regulatory rules, laws, and approved business practices; and support for taxpayers in the areas of pre-filing agreements, determination letters, and advance pricing agreements.

Section I – Budget Request 3

Technology and Operations Support

• Infrastructure funds administrative services related to space and housing, rent and space alterations, building services, maintenance, guard services, security countermeasures and non-IT equipment.

• Shared Services and Support funds policy management, administration, IRS-wide research support; strategic planning; communications and liaison; protection of sensitive information and the privacy of taxpayers and employees; finance, human resources, printing and postage; business systems planning; and procurement.

• Information Services funds staffing, equipment, and related costs to manage, develop, modernize, enhance, maintain, and operate the information systems supporting IRS critical business operations and tax administration programs.

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Dollars in Thousands

1 FY 2025 represents the Operating Plan level before the Inter-Appropriations Transfer (IAT) of up to $272 million from Enforcement to Taxpayer Services. Other Resources and Full-time Equivalents (FTE) reflect actuals.

2 FY 2027 User Fees will be allocated as follows: $1B to Enforcement and $256M to Taxpayer Services.

3 These amounts are adjusted to exclude IRA recoveries.

4 Unobligated balances from prior years includes unexpired amounts that remain available for obligation in the year shown (FY 2026 actual of $631 million and FY 2027 estimate of $70 million).

5 Reflects the rescissions to enforcement including $1.4 billion from the Fiscal Responsibility Act of 2023 (P.L. 118-5), $20.2 billion from the Further Consolidated Appropriations Act, 2024 (P.L.118-47), $20.2 billion from the Full-Year Continuing Appropriations and Extensions Act, 2025 (P.L. 1194), and $11.661 billion from the Consolidated Appropriations Act, 2026 (P.L. 119-75). In addition, this includes the proposed budget cancellation of $371 million of unobligated balances from Energy Security appropriated by P.L. 117-169.

6 Resources from Other Accounts reflect planned spending from Private Collection Agency retained earnings.

Section I – Budget Request 5

IRS IRA funding was almost $80 billion at enactment, however, $54 billion has been rescinded as of FY 2026. The IRS has relied heavily on IRA funds. IRA funding is expected to be exhausted in FY 2028. While the IRS remains focused on technology to improve productivity and efficiency, with the impending exhaustion of these funds, the IRS is in the process of re-evaluating its modernization plan to duly prioritize investments in FY 2026 and FY 2027. The IRS looks forward to partnering with Congress to maintain and continue modernization of its IT portfolio.

Dollars in Thousands

1 Amounts reflect original enacted IRA level, before rescissions or proposed cancellations.

2 Reflects the rescissions to enforcement including $1.4 billion from the Fiscal Responsibility Act of 2023 (P.L. 118-5), $20.2 billion from the Further Consolidated Appropriations Act, 2024 (P.L.118-47), $20.2 billion from the Full-Year Continuing Appropriations and Extensions Act, 2025 (P.L. 1194), and $11.661 billion from the Consolidated Appropriations Act, 2026 (P.L. 119-75). In addition, this includes the proposed budget cancellation of $371 million of unobligated balances from Energy Security appropriated by P.L. 117-169.

3 Includes adjustments to prior year obligations and does not include recoveries.

4 FY 2026 and 2027 estimated obligations will be adjusted to align with actuals in future submissions.

The table below is a summary of actual and estimated IRA FTE.

FY 2024

Actual

FY 2025

Actual

FY 2026 Estimated

FY 2027 Estimated

Internal Revenue Service FTE

FY 2023

Actual

Taxpayer Services 10,518 3,956 11,182 6,241 1,024

Enforcement 495 8,047 8,676 745

Operations Support 2,317 3,608 3,693 300 350

Business Systems Modernization 327 621 612 310 300

Direct File Study 4

Energy Security 764 57

Total Budgetary FTE 13,661 16,996 24,220 7,596 1,674

IRA resources in FY 2026 and FY 2027 will be used to support customer service for taxpayers and for technology modernization and operations.

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Dollars in Thousands

FTE Amount

FY 2026 Enacted 59,880 $11,195,365

Changes to Base:

FY 2027 Maintaining Current Levels (MCLs): $22,969

Pay Annualization (1.0% average pay raise) $22,969

Subtotal Changes to Base $22,969

FY 2027 Current Services 59,880 $11,218,334

Program Changes:

Program Increases 1,132 $94,363

Maintain Customer Service 1,132 $94,363

Program Decreases (4,875) ($1,481,329)

Reduction to Offset Unfunded FY 2026 MCLs (161) ($22,969)

Staff Reductions (4,714) ($777,841)

Non-Labor Reductions ($680,519)

Subtotal FY 2027 Program Changes (3,743) ($1,386,966)

FY 2027 President's Budget Request 56,137 $9,831,368

Pay Annualization (1.0% in 2026) +$22,969,000 / 0 FTE

• Per guidance issued by the Office of Management and Budget, funds are requested for annualization of the January 2026 1% average pay raise.

Maintain Customer Service +$94,363,000 / +1,132 FTE

• This investment will provide funding to meet OB3-related phone and online demands, to implement OB3-related outreach activities that inform taxpayers about new legislative initiatives and provide support to taxpayers and tax practitioners on multiple platforms that encourage voluntary tax compliance.

• Implementing the OB3 is a coordinated and involved effort to turn new law into stellar services for taxpayers and tax practitioners. OB3 implementation updates involve careful planning, clear communication, and strong coordination across IRS Business Units to ensure the IRS is responsive to taxpayers’ needs while improving the taxpayer experience.

Section I – Budget Request 7

• The IRS toll-free telephone customer service operation is one of the world’s largest service providers and is a key part of the IRS’s service delivery. Taxpayer experience research continues to indicate phone service as a preferred service channel. If the IRS does not receive full funding, taxpayers will experience longer telephone wait times, delayed responses on the IRS’s online service portals and to correspondences. Historically, when taxpayers are unable to access streamlined and efficient service channels, telephone and online communication demands shift to higher cost service channel options such as paper correspondence. Taxpayers’ use of less efficient service channels will negatively impact taxpayers’ ability to remain tax compliant.

Reduction to Offset Unfunded FY 2026 MCLs  -$22,969,000 / -161 FTE

• The IRS will reduce staffing to offset the unfunded FY 2027 annualization cost of the FY 2026 1.0% pay raise.

Staff Reductions  -$777,841,000 / -4,714 FTE

• IRS is in the process of conducting workforce restructuring efforts that will result in fewer staff by the end of FY 2027. This effort will yield significant savings to the taxpayer, once fully implemented.

Non-Labor Reductions -$680,519,000 / 0 FTE

• IRS is in the process of conducting workforce restructuring efforts that will result in reduced non-labor spending by the end of FY 2027.

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Dollars in Thousands

FY 2026 Estimated Obligations ¹

FY 2027 Estimated Obligations

Object Classification

FY 2025 Operating

Plan

11.1 – Full-time permanent 6,259,980 6,055,631 5,596,925

11.3 – Other than full-time permanent 78,371 64,124 59,779

11.5 – Other personnel compensation 421,338 505,389 478,246

11.8 – Special personal services payments 101,036 92,946 78,328

11.9 – Personnel Compensation (Total) $6,860,725 $6,718,091 $6,213,278

12.1 – Personnel benefits 2,357,683 2,297,166 2,113,811

13.0 – Benefits for former personnel 12,486 6,571 6,486

Total Personnel and Compensation Benefits $9,230,894 $9,021,828 $8,333,575

21.0 – Travel and transportation of persons 65,607 62,013 50,586

22.0 – Transportation of things 31,842 31,393 27,271

23.1 – Rental payments to GSA 610,845 591,037 211,846

23.2 – Rental payments to others 1,271 983 423

23.3 – Communications, utilities, and miscellaneous charges 289,136 257,478 240,006

24.0 – Printing and reproduction 41,987 37,276 36,471

25.1 – Advisory and assistance services 916,981 332,392 287,598

25.2 – Other services from non-Federal sources 112,058 107,083 89,383

25.3 – Other goods and services from Federal sources 317,890 290,592 255,799

25.4 – Operation and maintenance of facilities 194,707 192,338 77,265

25.6 – Medical care 19,095 19,124 19,044

25.7 – Operation and maintenance of equipment 34,860 2,638 2,194

26.0 – Supplies and materials 61,951 58,568 43,025

31.0 – Equipment 252,531 60,932 56,005

32.0 – Land and structures 42,698 40,946 12,734

41.0 – Grants, subsidies, and contributions 81,000 86,000 86,000

42.0 – Insurance claims and indemnities 3,701 2,745 2,142

91.0 – Unvouchered 10,000

Total Non-Personnel $3,088,160 $2,173,537 $1,497,793

Total Obligations $12,319,054 $11,195,365 $9,831,368

Full-time Equivalents (FTE) 66,796 59,880 56,137

1 Amounts reflect obligations of annually appropriated discretionary resources. FY 2026 and FY 2027 excludes obligations from multi-year carryover. See footnotes in 1.1 – Appropriations Detail Table.

Section I – Budget Request 9

Appropriations Language Explanation of Changes

TAXPAYER SERVICES

For necessary expenses of the Internal Revenue Service to provide taxpayer services, including pre-filing assistance and education, filing and account services, taxpayer advocacy services, and other services as authorized by 5 U.S.C. 3109, at such rates as may be determined by the Commissioner, $3,130,969,000; Provided, That not to exceed $206,500,000 of the amounts provided under this heading shall remain available until September 30, 2028, of which not less than $17,000,000 shall be for the Tax Counseling for the Elderly Program, not less than $22,000,000 shall be available for low-income taxpayer clinic grants, including grants to individual clinics of up to $200,000, not less than $62,500,000 shall be available for the Community Volunteer Income Tax Assistance (VITA) Matching Grants Program for tax return preparation assistance, and not more than $5,000,000 shall be available for the VITA Incubator Grant Program: Provided further, That not less than $251,600,000 of the amounts provided under this heading shall be available for operating expenses of the Taxpayer Advocate Service, of which not less than $7,000,000 shall be for identity theft and refund fraud casework.

ENFORCEMENT

For necessary expenses for tax enforcement activities of the Internal Revenue Service to determine and collect owed taxes, to provide legal and litigation support, to conduct criminal investigations, to enforce criminal statutes related to violations of internal revenue laws and other financial crimes, to purchase and hire passenger motor vehicles (31 U.S.C. 1343(b)), and to provide other services as authorized by 5 U.S.C. 3109, at such rates as may be determined by the Commissioner, $4,102,375,000; of which not to exceed $250,000,000 shall remain available until September 30, 2028; of which not less than $60,257,000 shall be for the Interagency Crime and Drug Enforcement program; and of which not to exceed $35,000,000 shall be for investigative technology for the Criminal Investigation Division: Provided, That the amount made available for investigative technology for the Criminal Investigation Division shall be in addition to amounts made available for the Criminal Investigation Division under the "Technology and Operations Support" heading.

10 Section I – Budget Request

The budget proposes allocating an additional $5 million for the Volunteer Income Tax Assistance (VITA) Incubator Grant Program. This would allow the IRS to expand on the success of its existing VITA and Tax Counseling for the Elderly (TCE) grant programs. The VITA Incubator Program Grant would provide financial support for organizations that are new to the VITA program, which provides free tax return preparation services to low and middle-income taxpayers. These startup grants will allow organizations to implement their tax preparation infrastructure and operations, while engaging volunteers and providing initial return preparation services during the first year as a grant recipient. Recipients of the VITA incubator grant would not be required to provide matching funds equal to the grant award.

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