Section III – Additional Information

Technology and Operations Support (TOS) funding is essential for maintaining the technology infrastructure and systems that support the IRS mission of tax administration. The funding enables IT to deliver a successful filing season, provides employees and taxpayers with reliable and efficient technology tools to perform compliance and customer service, and ensures robust cybersecurity controls are in place to protect sensitive taxpayer data.

The table below shows the IT budget with its discretionary and mandatory funding sources including IRA Business System Modernization funding. Non-discretionary funding for IT allows the IRS to dedicate 30-35% of its IT budget towards new development, modernization, and enhancements. In the years when the IRS had a discretionary BSM allocation, it could only dedicate roughly 10% of its total IT budget to Development, Modernization, and Enhancement (DME) activities.

Dollars in Millions

FY 2027 IRS IT Budget by IT Investment DME O&M Total

Case Management 144 119 263

Compliance 75 82 157

Compute Services 493 493

Digital Services 241 110 350

Engagement Channels 37 53 91

Enterprise IT Management 123 278 401

Filing and Intake 168 186 354

Infrastructure Management 99 226 326

Internal Operations 32 259 291

IRS Cybersecurity 17 427 444

Network Services 90 344 434

Platforms and Applications 154 210 364

Storage Services 74 74

Tax Account Management 195 76 271

User Services 277 277

Total $1,375 $3,215 $4,590

Dollars in Thousands

FY 2027 IT Funding Sources with Percent Breakdown

IT Funding Source Total % of Total

Technology and Operations Support 1,124,324 24%

IRA Business Systems Modernization 727,300 16%

IRA Operations Support 2,716,009 59%

Reimbursable 22,000 0%

Private Collection Agencies 281 0%

Total $4,589,914 100%

Section III – Additional Information 25

A summary of capital investments, including major information technology and non-technology investments, can be accessed at home.treasury.gov/about/budget-performance/Pages/ summary-of-capital-investments .

In FY 2027, the IRS will continue advancing critical IT modernization initiatives that strengthen service delivery, automate end-to-end taxpayer processes, and improve operational efficiency while reducing long-term costs. These investments include capabilities designed to automate, integrate and standardize data across the enterprise, strengthen analytics and reporting, and accelerate the delivery of digital services. Modernization of infrastructure is essential to ensure the IRS can adapt to evolving technologies, protect sensitive taxpayer information, and administer the tax code effectively. Without modernization, the IRS would be unable to sustain performance with a reduced headcount. The FY 2027 IT modernization budget, allocated across the IT Investments, supporting key modernization initiatives below, represents a prudent and necessary investment to sustain performance, enable future workforce efficiencies, and deliver enduring value to taxpayers and the Nation.

Dollars in Millions

IRA BSM Planned DME

IRA OS Planned DME

Total Planned DME

Vertical/Foundational Area Key Initiative

Discretionary TOS Planned DME

Mission-driven infrastructure, telecommunication, network bandwidth, cybersecurity, government labor, equipment, software, and business-driven enhancements

60 477 537

Total $0 $680 $873 $1,553

Note: All estimates are pre-decisional and do not include labor costs.

1 Filing Season and Legislative Delivery, while not formally a key modernization initiative, includes funding to strengthen core systems, improve capability and performance, and increase operational flexibility—supporting a successful Filing Season and enabling timely implementation of legislative requirements, including the One Big Beautiful Bill Act (OB3).

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Taxpayer 360 Taxpayer 360 (TP360) will continue to advance the modernization of the IRS contact center by building a single, unified interface that provides customer service representatives with the right data, at the right time, and in the right format to resolve taxpayer inquiries. This “single pane of glass” approach reduces manual tasks, unifies taxpayer data, and incorporates knowledge management and artificial intelligence–enabled features such as agent assist and real-time research support. Once fully implemented, TP360 is expected to reduce average call handle time by 40 to 60 percent, improving both customer service representative productivity and taxpayer satisfaction.

Online Accounts IRS digital services enable taxpayer or representative self-service, reduce operational burden, and ensure system accuracy and stability for filing season. This capability gives taxpayers and representatives easier access and control of their account information, more ability to complete necessary actions via self-service, and reduce paper-based processes. More than 38 million taxpayers have accessed their Individual Online Account since inception, with additional growth expected. In FY 2027, IRS continues to expand access to more partnerships, exempt organizations, and tax professionals to view account status, make payments, and manage authorizations through the same digital channel. Additional authorization tools will allow taxpayers and their representatives to securely share information with approved third parties—such as tax software providers and mortgage lenders—through time-limited, consent-based access, reducing the need for paper copies and manual data entry.

Zero Paper This effort transforms how the IRS manages tax form submissions and correspondence by shifting away from manual, paper-based processing at campus centers and instead relocating paper mail to third-party sites for digital scanning and ingestion. Using cloud-based technology, this modernization enables data to be extracted and transmitted directly into IRS processing systems, reducing the need for physical storage, and improving efficiency. In FY 2027, this initiative will continue enterprise scanning and data capture enabling large-scale digitization of the next priority forms beyond Forms 940, 941, and 1040. The Zero Paper initiative will continue building upon its scanning capacity to scale digital intake across forms and correspondence prioritized by the IRS to include high-volume tax forms, correspondence, and information returns. This work will be connected to back-end inventory management systems such as Accounts Management Services (AMS) and Digital Inventory Management (DIM), so that scanned work is routed digitally to downstream teams without delay, helping reduce backlogs and speed resolution for taxpayers.

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Unisys Modernization This initiative replaces the IRS’s aging Unisys mainframe tax processing systems with modern technology so returns can be processed faster and more reliably. Today, more than 45 subsystems—built on 15+ million lines of COBOL—handle validation, error resolution, and access to return data for over 30,000 employees. Although artificial intelligence is reducing the burden, legacy systems are expensive to maintain and increasingly hard to support as the workforce with these skills shrinks. Moving these core functions to secure, scalable platforms with modern languages, interfaces, and automation will reduce operational risk, improve system uptime during filing season, and ensure the IRS can continue to process returns and serve taxpayers efficiently in the years ahead. In FY 2027, modernization of validation, perfection, and error processing for additional forms continues, reducing reliance on Unisys while improving the speed and consistency of extension processing. IRS also plans to migrate more Integrated Data Retrieval System subsystems to the modern architecture, prioritizing those that most directly enable Unisys retirement and better, more timely access to taxpayer account data.

Case Management The Case Management initiative is replacing fragmented legacy systems with a unified and automated platform that streamlines the full lifecycle of compliance cases. By consolidating applications into modern environments such as leading commercial Software-as-a-Service platforms and calculators, the IRS is building streamlined workflows that provide integrated access to taxpayer data and offer customizable platforms and advanced tools that enhance productivity of IRS employees, improve case cycle time, and promote taxpayer compliance. This initiative will reduce operational costs, improve case accuracy, shorten issue resolution times, allowing compliance personnel to spend more time on high-value work while enabling taxpayers to receive more efficient case resolutions. In FY 2027, the program continues to broaden both the technology platform and the range of workloads it supports by deploying several new modern workflows onto the Pega platform.

Case Selection & Anomaly Detection The Case Selection & Anomaly Detection initiative is modernizing the IRS’s ability to identify and prioritize compliance cases by moving from legacy systems to a next-generation, data-driven platform. This investment leverages artificial intelligence and machine learning to improve fraud detection, prioritize high-impact cases, and embed real-time compliance verification into tax return submissions. By transforming how the IRS selects and routes compliance work, Case Selection will enable faster identification of pre-refund risks, shorten audit cycles, and improve both compliance revenue and taxpayer fairness.

In FY 2027, Case Selection & Anomaly Detection will continue to implement new capabilities that use artificial intelligence to augment examiner capacity by automating evaluation of taxpayer responses and onboarding workflows to the enterprise platform to expand automation to additional workloads.

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Enterprise Data Platform The Enterprise Data Platform initiative makes IRS data easily accessible to any authorized application by providing a semantic layer that standardizes data across the enterprise, enabling seamless access and collaboration, exposing curated, contextualized data through Open API-compliant interfaces, and accelerating integration with modern applications and services. In FY 2027, the program will consolidate data from approximately 40 distinct systems into a unified Enterprise Data Platform. The objective is to consolidate 120 systems and expand integration to more than 200 data sets in the future state. This gives users a single, trusted source they can reuse across efforts, reducing duplicate data stores and helping initiatives like Taxpayer 360, Online Accounts, and Unisys Modernization move faster and more reliably with more consistent and secure data.

Virtual Infrastructure Replacement The Virtual Infrastructure Replacement initiative is modernizing the IRS’s virtual infrastructure by transitioning from legacy systems to a unified, cloud-ready platform and moving off older, more expensive systems. This effort will improve scalability and resiliency, reduce operational costs, and provide a secure foundation for mission-critical applications. By consolidating environments and leveraging modern tools, the IRS will be able to support faster deployments, strengthen cybersecurity, and ensure that infrastructure remains aligned with evolving business needs. By FY 2027, the initiative will execute the migration of approximately 10,000 virtual machines with no interruption to production services, shifting workloads to lower-cost, higher-performing infrastructure and transitioning day-to-day operations from a managed service provider to in-house staff.

Zero Trust Instead of assuming that anything inside the IRS network is trusted, Zero Trust requires every user, device, and system to prove who they are and what they are allowed to do — every time they try to access data or applications. This is important because it strengthens defenses against modern cyber threats, better protects taxpayer information across cloud and on-premise systems, and keeps the IRS aligned with federal cybersecurity requirements.

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This section describes the IRS’s three major enforcement programs—Examination, Collection, and Automated Underreporter (AUR). These programs show the actual program costs to actual revenue collected from FY 2022 through FY 2025. The purpose of this analysis is to provide insight into how efficiently enforcement resources generate revenue and support overall tax compliance. The data reflects real-world operational outcomes and serves as an indicator of average return on investment (ROI) over time, rather than a precise measure of individual enforcement actions.

The Examination Program verifies the accuracy of tax reported by individuals, businesses, and other entities, including large corporations, partnerships, international filers, tax-exempt organizations, estates, and government entities. Examination activities include both field and correspondence audits and are supported by the IRS Chief Counsel and Appeals functions. Program costs reflect the full scope of resources required to conduct these examinations.

The Collection Program focuses on securing delinquent taxes and unfiled returns through enforcement tools such as liens, levies, asset seizures, installment agreements, offers-incompromise, substitute-for-return procedures, and summons authority. It also emphasizes taxpayer education to promote future compliance. Program costs include activities carried out through the Automated Collection System, Field Collection, and correspondence-based payment compliance efforts and an estimate of associated support costs which include dollars from the Operations Support appropriation prorated using actual FTE realized for each major enforcement program.

The Automated Underreporter (AUR) Program compares information returns filed by third parties—such as Forms W-2 and 1099—with amounts reported on individual tax returns. When discrepancies are identified, tax examiners review and research the cases. If discrepancies cannot be resolved, the IRS issues proposed notices and assessments. The AUR program is largely datadriven and plays a key role in identifying underreported income.

ROI is calculated by dividing enforcement revenue by program cost, providing an estimate of how much revenue is generated for every dollar invested in enforcement activities. Enforcement revenue includes tax, interest, and penalties collected during a fiscal year, even when the enforcement actions relate to prior tax years or extend across multiple years. Because some enforcement cases take significant time to resolve, costs and collections may not align within the same fiscal year, making the ROI an average measure rather than a precise annual return.

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The section emphasizes that the reported ROI reflects only direct enforcement outcomes and does not account for indirect effects, such as increased voluntary compliance resulting from the deterrent impact of enforcement activities. While net revenue is theoretically maximized when resources are allocated based on marginal direct and indirect returns, those marginal effects are difficult to measure reliably. As a result, the IRS uses average ROI as one of several tools to guide decisionmaking and continues to allocate enforcement resources across a broad range of activities to ensure fairness, compliance, and that taxpayers pay the taxes they owe.

Dollars in Millions

1 The cost of the enforcement programs was calculated using budget data from the IRS Integrated Financial System (IFS) and includes direct dollars and FTE from the Enforcement appropriation, Exam and Collections budget activity, and dollars from the Operations Support appropriation prorated using actual FTE realized for each major enforcement program.

The table below shows the different types of FTEs and how they drive compliance activities leading to high measurable ROI (across a ten-year average). Reductions in enforcement spending create missed opportunities and lost revenue for the United States, as compliance activities generate more revenue than their operating costs.

Section III – Additional Information 31

In the Joint Explanatory Statement accompanying the Consolidated Appropriations Act of 2026, P.L. 119-75, Congress directed the IRS to include in the FY 2027 budget request “a table and description of the equipment acquired, and the construction, repair, and renovation of facilities made in the prior year and planned for the current and budget years by project, location, and office.”

1 Amounts include the cost of space consolidation.

Equipment purchases include furniture acquisition, appliances, A/V equipment, electrical infrastructure, warehouse equipment, installation services, and associated logistics/administrative costs. The items reflect both new office setups and upgrades to existing workspaces, including conference rooms, open offices, training rooms, warehouse areas, and breakrooms.

Plans for FY 2027 have not yet been developed; new equipment and facilities expenses are currently expected to be consistent with previous years.

32 Section III – Additional Information