9.5 COSTING METHODOLOGIES AND DETAILED COSTS

The Costing Methodologies and Detailed Costs sections contain pricing information for each strategy.

The Costing Methodologies Section outlines the process for how TFAO developed the pricing estimates for the three TFA strategies and other relevant enterprise-wide initiatives.

To build a comprehensive cost estimate for the Taxpayer Experience Strategy the TFAO created six components with approximately 140 capabilities. Capabilities were assigned to specific outyears, as prescribed in the legislation.

The TFAO convened a workshop of subject matter experts from across the IRS to develop cost estimates spread over the 1–2, 3–5 and 10-year timeframes mandated by the Act. During the workshop, facilitators spent an equal amount of time presenting each of the six components and encouraged a two-way dialogue to ensure participants understood the scope and goals of each.

The IRS CFO leveraged the completed costing worksheets to compile the FY2022 budget and the TFAO reviewed the FY2022 budget for gaps, redundancies, applicability and cohesiveness. Additional meetings with business units were scheduled to clarify issues and adjust submissions. Once all content issues were settled, the CFO compiled the business unit submissions for this Report and the FY2022 Treasury submission. Due to the high degree of overlap between the Taxpayer Experience Strategy and the IRS Modernization Plan, care was taken to deconflict costs to ensure they were captured under one or the other, but never both. See Section 9.5.2.1 for detailed costs of the Taxpayer Experience Strategy.

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The Human Capital Office worked with the TFAO to create a FY2022 budget and out-year costing using traditional methods and past practices to estimate labor, contractual support, and technology.

This same costing method was used for estimating the comprehensive Training Strategy’s seven core capabilities that support a continuous learning environment and the implementation of the Taxpayer Experience Strategy.

Part of the Training Strategy costing includes enhancements needed to use the Treasury Integrated Talent Management System to implement new training technology and improve existing technology-based training. See Section 9.5.2 for detailed costs of the Training Strategy.

The Organizational Redesign Strategy outlined in Section 6 of this report is high-level, so the full scope and scale of TFA-related restructuring is unknown at this time. However, we determined that we could estimate the full-scope costs of this restructuring by researching the costs associated with a previous IRS restructuring effort, the IRS Restructuring and Reform Act of 1998 (RRA ’98). The TFAO and CFO worked together to conduct the research and analysis of RRA ’98 to produce the initial cost assessment. These estimates adjust for inflation as well as the relative scope and scale of RRA ’98 to our current efforts.

Our current assumptions for the Organizational Redesign Strategy scope include that it will be a multi-stage reorganization and will be implemented over the course of five years starting in FY2021. Estimated costs include drafting implementation plans, executing implementation plans, and IT costs. See Section 9.5.2.3 for detailed costs of the Organizational Redesign Strategy.

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The CFO gathered estimates from the operating divisions on the costs to implement ten of the remaining 42 TFA Provisions, outside of the Taxpayer Experience Strategy, Comprehensive Training Strategy, and Organizational Redesign Strategy (See Section 9.3 for details on the Operating Divisions Provisions). Seventeen of the 42 provisions incurred additional costs to the IRS. IT Operation and Maintenance (O&M) and Program Support were also required. Provision 2201 was self-funded with user fees.

Many of the TFA requirements introduced significant changes to IT systems. The CFO has worked extensively with IT and the other business units to deploy and analyze the appropriate costing and operational strategies. The CFO and operating divisions utilized the unit cost rate calculator for labor requirements and estimated non-labor projections based on previous years’ actuals to generate a three-year costing plan to fully implement the TFA Provisions. See Section 9.5.2.4 for detailed costs for the Operating Divisions Provisions.

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The Estimated Costs Section outlines the estimated cost of the Taxpayer Experience, Training and Organizational Redesign Strategies from FY2021- FY2025. This Section also includes estimated costs of the Operating Division Provisions from FY2020-FY2025.

Taxpayer Experience Strategy ⁴⁸ Thousands of Dollars

FY2021-FY2025

TFA Costs

Expand Digital Services 337,000

Seamless Experience 378,000

Proactive Outreach & Education 149,000

Community of Partners 68,000

Focused Strategies for Reaching Underserved Communities 54,000

Enterprise Data Management & Advanced Analytics 241,000

Totals $1,227,000

48 Cost estimates were formulated prior to enactment of 2021 appropriations

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Training Strategy Thousands of Dollars

FY2021-FY2025

TFA Costs

Training on Organizational Awareness 7,000

Training Tied to Career Paths 13,000

“People First” Training 7,000

Employee Online Forum 13,000

Organization Liaisons to Discuss Common Problems 8,000

Internal Concierge Service 17,000

Enhance Training Technology & Strategy Implementation 58,000

Totals $123,000

Organizational Redesign Plan/ TFAO Operations Thousands of Dollars

FY2021-FY2025

TFA Costs

TFAO 36,000

Planning 10,000

Implementation 70,000

IT - Planning 20,000

IT - Execution 80,000

Totals $216,000

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Legislatively Mandated Provision Thousands of Dollars

1001 Establishment of IRS Independent Office of Appeals

1205 Private Debt Collection and special compliance personnel program

1206 Reform of notice of contact of third parties

1401 Return preparation programs for applicable taxpayers

FY2020 TFA Costs

FY2021- FY2025 TFA

Costs ⁴⁹

Total TFA Costs

3,055 42,000 45,055

495 - 495

448 - 448

387 - 387

1405 Whistleblower reforms 6,000 6,000

1406 Customer Service Information 113 - 113

2004 Compliance by contractors with confdentiality safeguards

2005 Identity protection personal identifcation numbers

• 4,000 4,000

49 223,000 223,049

2101 Management of IT Information 5,425 - 5,425

2102 Internet platform for Form 1099 flings

2201 Disclosure of taxpayer information for third-party income verifcation

8,736 58,300 66,736

17,527 - 17,527

2301 Electronic filing of Returns 34 - 34

2302 Uniform standards for the use of electronic signatures

2303 Payment of taxes by debit and credit cards

2304 Authentication of users of electronic services accounts

3101 Mandatory e-filing by exempt organizations

8,492 14,000 22,692

• 6,000 6,000

• 6,000 6,000

3,127 21,000 24,127

3201 Increase in penalty for failure to file 30 - 30

n/a IT TFA Program Management Office 13,736 10,000 23,736

n/a IT Operations and Maintenance - 148,000 148,000

n/a Misc non-IT costs 5,823 11,000 16,823

Totals $67,477 $549,300 $616,182

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