United States Government Accountability Office GAO November 2010 Report to the Secretary of the Treasury _part4 pot

Management Discussion and Analysis
Page 36 GAO-11-142 IRS’s Fiscal Years 2010 and 2009 Financial Statements




INTERNAL REVENUE SERVICE
Management Discussion and Analysis
For the Fiscal Year Ended September 30, 2010
16
Financing Sources
The IRS receives the majority of its
funding through annual and multi-year
appropriations, which are available for use
within certain specified statutory limits.
Besides appropriations, the IRS used
other financing sources. These included
net transfers from other federal agencies,
and revenue from user fees for direct
services provided to customers (for
example, installment agreement fees,
photocopy fees, and letter rulings and
determinations fees).
Financial Highlights
Revenue and Refund Trend Information
FY 2010 revenue receipts collected by IRS remained constant at $2.3
trillion. Federal tax revenues are collected through six major
classifications: individual income and FICA/SECA, corporate income,
excise taxes, estate and gift taxes, railroad retirement, and federal
unemployment taxes.
FY 2010 tax refund activity totaled $467 billion, representing an increase

of approximately 7% from FY 2009. Federal tax refunds include refunds
of tax overpayments, payments for interest, and disbursements for
refundable tax credits such as Earned Income Tax Credit and the
Additional Child Care Tax.
Excise Tax Trust Fund
The Quarterly Federal Excise Tax Return, Form 720, reports taxpayer
liability for excise taxes. Taxpayers make periodic deposits in advance of
filing the return. These deposits are classified as Federal Excise Tax.
After the IRS receives and processes the returns, the IRS certifies
amounts for several trust funds. Amounts reported on the Statement of
Custodial Activity are for fiscal year collections (October 1 through
September 30). Because Form 720 reporting requirements are
completed after receipt of most of the deposits, the certification amounts
will not match the amounts collected in the fiscal year. The table below
shows revised receipts certified to the Airport and Airway Trust Fund,
Black Lung Disability Trust Fund and the Highway Trust Fund for the
eight liability quarters from December 2007 through September 2009.
The Department of the Treasury prepares the warrants and allocations to
the trust funds.
Liability Quarter Ended
December 2007 –
September 2008
December 2008 –
September 2009
Airport & Airway Trust Fund $11,734,723,000 $10,533,488,000
Black Lung Disability Trust Fund 644,590,000 631,138,000
Highway Trust Fund 38,052,198,000 36,445,773,000
Total $50,431,511,000 $47,610,399,000
Analysis of Unpaid Assessments – Most Unpaid Assessments Are
Not Receivables and Are Largely Uncollectible

The unpaid assessment balance includes amounts owed by taxpayers
who file returns without sufficient payment as well as amounts assessed
through the IRS enforcement programs. As reflected in the supplemental
information to the IRS FY 2010 Financial Statements, the unpaid
assessment balance was $330 billion as of September 30, 2010, and
$184 billion (56%) of this balance consists of interest and penalties.
Furthermore, the total outstanding balance of IRS unpaid assessments is
largely uncollectible because it is composed mostly of compliance
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