Department of the Treasury – Internal Revenue Service Coronavirus Response Discretionary Spending Plan April 10, 2020 Coronavirus Response Discretionary Appropriations - Internal Revenue Service Appropriation FY 2020 - 2021 Taxpayer Services Treasury Account Fund Symbol $352,900,000 Families First Coronavirus Response Act (P.L. 116-127)1 $0 20-0912 2020/2022 $293,500,000 20-0912 2020/2021 CARES Act - Supplemental (H.R. 748, P.L. 116-136) $59,400,000 20-0912 2020/2021 Enforcement $79,200,000 CARES Act - Rebates (H.R. 748, P.L. 116-136) Families First Coronavirus Response Act (P.L. 116-127) $0 CARES Act - Rebates (H.R. 748, P.L. 116-136) $37,200,000 20-0913 2020/2021 CARES Act - Supplemental (H.R. 748, P.L. 116-136) $42,000,000 20-0913 2020/2021 Operations Support $333,600,000 Families First Coronavirus Response Act (P.L. 116-127)1 $15,000,000 20-0919 2020/2022 CARES Act - Rebates (H.R. 748, P.L. 116-136) $170,000,000 20-0919 2020/2021 CARES Act - Supplemental (H.R. 748, P.L. 116-136) $148,600,000 20-0919 2020/2021 Total Funding $765,700,000 1. $15 million transferred from Taxpayer Services to Operations Support for customer service representative telework per P.L. 116-127. Families First Coronavirus Response Act (Public Law 116-127): $15,000,000 Continuity of Operations (FY 2020: $15,000,000) The $15 million in Operations Support will allow the IRS to offer maximum telework flexibilities for employees to work from home to minimize community spread of the Coronavirus. The IRS quickly implemented polices to “telework enable” thousands of employees starting with the Customer Service Representatives (CSRs) in call sites to address existing and anticipated significantly increased toll-free demand. Information Technology (IT) will use the funds to purchase laptops, headsets, and other equipment necessary for employees to become telework ready to perform their work. This funding partially addresses the equipment needed to “telework enable” employees and the remaining requirement is reflected under the CARES Act ─ Supplemental (P.L. 116-136), Continuity of Operations section. 1 Coronavirus Aid, Relief, and Economic Security (CARES) Act (Public Law 116-136) Appropriations to Carry Out Rebates: $500,700,000 Programs, Applications, Systems (FY 2020: $23,000,000) Extension for Tax Year 2019 Income Tax Returns for Individuals and Businesses: IRS will use funds to modify systems/applications and testing to set conditions on all taxpayer accounts so they calculate correctly based on a filing due date of July 15, 2020, and a payment due date of October 15, 2020. Economic Impact Payments: Funds will be used for programming and system changes to enable the IRS to issue Economic Impact Payments. New capabilities will enable the IRS to review previously filed returns and data available to IRS to calculate payments and process requests for direct deposits and paper checks as quickly and effectively as possible. Capabilities will include steps to mitigate risks for erroneous payments and fraud. Service Calls and Taxpayer Support (FY 2020: $7,000,000, FY 2021: $160,000,000) This will fund about 2,400 seasonal FTE (and an additional 975 seasonal FTE will be funded using CARES Title V for a total of 3,375 seasonal FTE). These additional FTE are needed to process increased call volumes with minimal holding times. The Economic Stimulus Act of 2008 included a refundable tax credit that increased the IRS toll-free demand by 83 percent in the year of enactment. The IRS assumes similar increases in volume related to the Economic Impact Payments. It also anticipates taxpayers will inquire about economic impact payment checks and/or the status of their filing requirements; businesses and tax professionals will seek legal certainty for organization-specific issues and technical guidance; taxpayers will reschedule existing appointments and deadlines; taxpayers will expedite refund requests to access funds and offset unpaid leave; and the IRS will receive other inquiries about credit eligibility, penalty relief, and interest relief. This will help pay for recovery efforts from work that was not completed while buildings were closed and while employees were on weather and safety leave. The IRS expects to extend the year for the existing seasonal workforce, increase overtime, and hire additional seasonal employees later in the fiscal year. This funding provides 100 FTE for Taxpayer Assistance Centers to expand virtual service delivery in critical areas affected by closures and to use mobile units in rural areas, if feasible. In Enforcement, this supports 100 FTE for return integrity and identity verification compliance, including overtime, to reduce fraud. Verification and Collection (FY 2020: $2,500,000, FY 2021: $26,000,000) These resources will be used to support Title II, Phase 3 of the CARES Act, including 68 FTE for Examination and 92 FTE for Collection, plus $6.5 million for overtime. Administering $250 billion to $500 billion in additional payments, credits, and tax-related loans will require Examination and Collection resources to ensure program integrity and compliance-related services. Rebates and provisions that allow for tax credits against payroll deposits will increase the volume of calls and will generate a significant increase in paper documents for Collection. In the examination function, IRS will need more staff to review claims for the sick and family leave tax credits for both employers and self-employed workers and the employee retention credit, to 2 conduct compliance contacts and full examinations where appropriate. Examination also will conduct compliance activities across relief provisions allowing for increased deductions or exemptions from taxable income. Forms and Publications (FY 2021: $4,000,000) These funds will be used to provide timely interpretation of provisions and updates to forms, instructions, publications, and internal guidance documents along with updates to irs.gov, the Internal Revenue Manual, and training materials. In addition, this funding will support recovery efforts from the work that was not completed while buildings were closed and employees were on weather and safety leave. Printing/Postage/Informational Notices-- Form 941 (FY 2020: $10,000,000) These funds will be used to print, issue, and mail about 25 million Form 941, Employer's Quarterly Federal Tax Return, informational notifications. Printing/Postage/Informational Notices-- Stimulus Rebate (FY 2020: $137,000,000) These funds will be used to send notices to each eligible taxpayer. The IRS estimates that 171 million taxpayers will be eligible. Paper Check Issuance (FY 2020: $38,000,000) These funds will be used to reimburse the Bureau of the Fiscal Service for costs related to mailing an estimated 81 million paper economic impact payment checks. Stimulus Return Processing (FY 2020: $60,000,000, FY 2021: $30,000,000) The IRS will need about 1,215 FTEs (about 607 in FY 2020 and 608 in FY 2021) for Submission Processing to extend seasonal employees terms. This funding will support processing the additional information IRS expects to receive from 10-12 million non-filers who will file electronically or by paper. These additional returns will not include Social Security Old Age Disability Insurance or Railroad Retirement Board recipients, who will receive their economic impact payments automatically. These FTEs also will support recovery efforts from the work that was not completed while buildings were closed. Individual returns filed increased by 11.7 percent in 2008 mostly due to the Economic Stimulus Act of 2008, which required a return to be filed to qualify for a payment. IRS will extend the existing seasonal workforce year, increase overtime, and begin some hiring in later stages to support the extension of the April 15 filing date to July 15 and estimated tax payments to October 15. Taxpayer Advocate (FY 2020: $3,200,000) This will fund about 30 additional Taxpayer Advocate staff to help resolve issues arising from the various law changes related to the coronavirus response. 3 Coronavirus Aid, Relief, and Economic Security (CARES) Act (Public Law 116-136) IRS Administrative Provision – Coronavirus Response: $250,000,000 Programs, Applications, Systems (FY 2020: $89,000,000, FY 2021: $18,000,000) Funds will be used for labor and non-labor requirements to address the expansion of telework capabilities, support IRS operations, and program changes to systems and applications needed to implement the coronavirus legislation as follows: Network/Remote Access: Due to the expansion of telework, IT must expand the network infrastructure to ensure no degradation of service for employees accessing the network remotely to execute mission essential work affecting both IRS operations and taxpayers. Also, the IRS needs additional software licenses for employees to access the network remotely and obtain critical support from the IT Enterprise Service Desk and Enterprise Field Operations staff. Funds will be used to support the monitoring of devices employees use for teleworking to identify issues and resolve problems quickly. Video/Audio Conferencing and Webcast Services: Funds will be used to expand the bandwidth of the Voice Over Internet Protocol (VOIP) circuitry to accommodate the communications needs of IRS teleworkers; provide additional audio/video conference equipment and maintenance as more conference calls are held; expand audio, video and Webcast Services to support the increase in the number of large virtual meetings; and expand the use of audio conferences. System/Application Development and Enhancements: Funds will be used to deliver programming, applications, and infrastructure modifications, as well as end-to-end testing to ensure all changes are implemented properly. These changes will accommodate processing of the Refundable Credit to Employers for Sick Leave Paid to Employees. They also will assist businesses in receiving refunds for sick leave paid and for retaining employees before filing their return via the submission of Form 7200 Advance Payment of Employer Credit Due to COVID19; provide the ability to claim a refundable credit for sick leave paid quarterly via Form 941 Employer’s Quarterly Federal Tax Return; and provide the ability to claim a refundable credit for sick leave via Forms 943, Employer’s Annual Federal Tax Return for Agricultural Employees, and Form 944, Employer’s Annual Federal Tax Return. Additionally, IRS will change its downstream compliance systems to detect, deter, and address potential abuse of the coronavirus-related credits and payments. Customer Callback: Toll-free demand increases significantly during times of tax changes and the IRS expects a similar demand increase with the coronavirus tax relief. To help address increased call volume, the IRS will use funds to expand the customer callback capability. Customer callback allows taxpayers choose between waiting on the line or receiving a return phone call when an assistor becomes available. This will improve the caller’s experience and will help manage high call volumes. Contact Recording Centralization: The IRS call sites are being configured manually to enable customer service representatives to telework and to ensure all taxpayer contacts are recorded per 4 Congressional Mandate. Funds will be used to migrate the IRS Contact Centers to a centralized contact recording platform. Conversion of Paper Processes to Electronic/Digital Processes: Funds will be used to digitize and modernize how the IRS collects forms. Currently the IRS receives tens of millions of fax transmittals each year. The IRS will use these resources to develop a solution that will read the faxed information and automate its capture and loading to the receiving system. For example, IRS currently receives, prints, distributes and transcribes more than 15 million fax documents annually, including Form 2848 Power of Attorney and Declaration of Representative, Form 8821 Tax Information Authorization, and Form 706 United States Estate (and Generation Skipping Transfer). In addition, the IRS will accelerate and expand the implementation of Secure Messaging/File Transfer capabilities to additional IRS employees. The Secure Messaging/File Transfer capability allows certain IRS employees to securely share files and messages with taxpayers and other third parties. In some instances, the capability allows taxpayers to send documents to the IRS electronically. This would allow the IRS to continue to meet taxpayers’ needs during a period when IRS’s ability to retrieve and process mail is severely limited because of the crisis. Notices: IRS will implement IT system changes to allow for new and modified notices needed because of the coronavirus legislation. Infrastructure/Telecommunication: Funds will be used to expand the telecom infrastructure environment, including hardware and software costs for the enterprise, and to implement solutions to enable coronavirus-related legislation. For example, establishing the “Get my Payment?” capability for taxpayers to check on the status of their payment and provide additional direct deposit bank information. Funds will be used to cover increased telecommunication costs and toll-free phone demand. Service Calls and Taxpayer Support (FY 2020: $55,400,000) The IRS plans to hire 975 seasonal FTE to process additional call volumes quickly. The IRS expects additional calls from small business and self-employed taxpayers who will have questions about Section 7001─Payroll Credit for Required Paid Sick Leave, Section 7002─Credit for Sick Leave for Certain Self-Employed Individuals, Section 7003─Payroll Credit for Required Paid Family Leave, and Section 7004─Credit for Family Leave for Certain SelfEmployed Individuals. The IRS expects to extend the existing seasonal workforce year, increase overtime, and hire additional staff in later stages. Verification and Collection (FY 2020: $4,000,000, FY 2021: $38,000,000) These resources will be used to hire 240 FTE including 102 FTE for Examination and 138 FTE for Collection. Of these resources, IRS will use $9.5 million for overtime and $1.5 million for contractor support to conduct data analysis. Administering $250 billion to $500 billion in additional payments, credits, and tax-related loans will require Exam and Collection resources to ensure program integrity and compliance-related services. Rebates and provisions that allow for tax credits against payroll deposits will increase the volume of calls and will generate a 5 significant increase in paper documents for Collection. In the examination function, IRS will need more staff to review claims for the sick and family leave tax credits for both employers and self-employed workers and the employee retention credit, to conduct compliance contacts where appropriate, and to conduct full examinations where appropriate. Examination also will conduct compliance activities across relief provisions allowing for increased deductions or exemptions from taxable income. Forms and Publications (FY 2020: $2,000,000) These funds will be used to provide timely interpretation of provisions and updates to forms, instructions, publications, and internal guidance documents along with updates to irs.gov, the Internal Revenue Manual, and training materials. Program Management (FY 2020: $2,000,000) This funding will be used to develop a comprehensive strategy to ensure that the IRS implements the various tax provisions and significant changes quickly and accurately. Continuity of Operations (FY 2020: $20,000,000) These funds will be used to purchase more wireless devices, additional software license, and laptops for IRS employees. This will allow IRS to meet taxpayer expectation and ensure the safety of its workforce. In addition, the IRS will use these funds to support the IRS Continuity of Operations Planning (COOP). Other Emerging and Future Needs (FY 2020: $21,600,000) The IRS has set aside $21.6 million of the $765.7 million appropriated for emerging and future needs. The IRS may use these resources for deep cleaning services in locations that may have been contaminated by COVID-19; personal protective equipment for those dealing with mailhandling; trailers to store mail at closed building sites; and additional equipment to facilitate telework. The IRS also is continuing to evaluate IT and staffing requirements to implement tax credits and other tax changes and equipment needs for those teleworking. IRS will notify the Committees on the use of these funds through a second spending plan before obligation. 6 Coronavirus Implementation Estimates -- All "Phases" ($ Millions) Requirement Programming, Applications, Systems Service Calls and Taxpayer Support Verification and Collection Forms and Publications Printing/Postage/Informational Notices-- Form 941 Printing/Postage/Informational Notices-- Stimulus Rebate Program Management Taxpayer Services Enforcement Operations Support Total Phase 2 Phase 3 Total Phase 2 Phase 3 Total Phase 2 Phase 3 Total Phase 2 Phase 3 $0.0 $0.0 $107.0 $23.0 $130.0 $107.0 $23.0 $55.4 $158.3 $213.7 $4.0 $2.0 FY 2020 FY 2021 $112.0 $18.0 $8.7 $8.7 $0.0 $55.4 $167.0 $222.4 $62.4 $160.0 $28.5 $70.5 $0.0 $42.0 $28.5 $70.5 $6.5 $64.0 $6.0 $0.0 $0.0 $2.0 $4.0 $6.0 $2.0 $4.0 $0.0 $0.0 $10.0 $10.0 $0.0 $10.0 $10.0 $10.0 $0.0 $0.0 $0.0 $137.0 $137.0 $0.0 $137.0 $137.0 $137.0 $0.0 $2.0 $0.0 $0.0 $2.0 $0.0 $2.0 $2.0 $0.0 $0.0 $2.0 All $130.0 $42.0 Paper Check Issuance $38.0 $38.0 $0.0 $0.0 $0.0 $38.0 $38.0 $38.0 $0.0 Stimulus Return Processing $90.0 $90.0 $0.0 $0.0 $0.0 $90.0 $90.0 $60.0 $30.0 $3.2 $3.2 $0.0 $0.0 $0.0 $3.2 $3.2 $0.0 $3.2 Continuity of Operations $0.0 $0.0 $35.0 $35.0 $35.0 $0.0 $35.0 $35.0 $0.0 Other Emerging and Future Needs TOTAL $0.0 $0.0 $21.6 $21.6 $21.6 $0.0 $21.6 $21.6 $0.0 $79.2 $163.6 $333.6 $265.0 $500.7 $765.7 $486.5 $279.2 Taxpayer Advocate $59.4 $293.5 $352.9 $42.0 $37.2 $170.0 Comments Perm labor assumed to come on board by 10/1/20, with 25% of the total expended by 12/31/20, and 100% by 9/30/21. All non-labor assumed to be obligated by 9/30/20. 7