The Internal Revenue Service (IRS) announced Thursday that it reached a major milestone in fiscal year (FY) 2024 by resolving a longstanding significant deficiency in its information system controls 11 years after it was identified.
In its FY24 Financial Reportthe Government Accountability Office (GAO) revealed that the IRS had made “significant progress” in a decade-long security deficiency in its financial reporting.
“Specifically, IRS sufficiently addressed certain control deficiencies in security management, access controls, and configuration management – including several long-standing deficiencies related to cryptography and multifactor authentication,” GAO’s audit report noted.
GAO said its FY24 audit continued to find a deficiency in internal control over financial reporting concerning IRS’s unpaid assessments – an enforceable claim against a taxpayer for which specific amounts are due – but said that this does not represent a significant deficiency in internal control over financial reporting. GAO warned that this deficiency may cause misstatements in unaudited financial information reported internally and externally.
“It will be important for IRS management to continue to build on the progress it has made in addressing the remaining deficiencies in internal control over financial reporting, as well as focusing efforts on strengthening its information security program,” the GAO said.
IRS CFO Teresa Hunter said improving the IRS’s IT security was “part of a broader strategy to enhance efficiency, improve data accuracy, and ensure the highest standards of accountability in the use of taxpayer dollars.”
IRS Commissioner Danny Werfel said the IRS was able to reach key milestones in FY24 through funding provided to the agency by the 2022 Inflation Reduction Act (IRA). The agency was originally granted $80 billion from the IRA, but this number was eventually reduced to $58 billion. As of July 1, the IRS had spent nearly $7 billion, 12 percent, of that allocated funding.
Werfel noted in the 2024 Financial Report that the IRS was able to leverage IRA funding to make strides in digital customer experience, including by saving taxpayers 1.5 million hours of time during last year’s filing season and launching its online Direct File pilot.
“The IRS estimates it can maintain the taxpayer services workforce at the level required to deliver exceptional service in FY 2025 but will not be able to sustain these efforts through FY 2026 once IRA funding is depleted,” the agency said.
The report highlights nearly a dozen key areas of focus for the IRS through FY25, including expanding online services, modernizing foundational technology, improving IRS employee tools, and expanding Direct File.
“The IRS will continue focusing on making improvements and efficient use of funding,” the report says. “It is critical that the IRS has stable, secure funding to allow technology modernization and taxpayer service improvements to continue and ensure those with complex returns, including certain high-income individuals, large corporations, and complex partnerships pay the taxes they owe.”
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