Treasury Inspector General for Tax Administration 2025-2S8-041 (Progress of Information Technology Modernization Efforts for Calendar Year 2024)
Summary
Final Report 2025-2S8-041 of the Treasury Inspector General for Tax Administration, issued August 13, 2025, evaluates the progress of IRS information technology modernization efforts for Calendar Year 2024, including efforts funded by the Inflation Reduction Act. The report states that the IRS initially received $79.4 billion from the Act and that, as of March 2025, Congress subsequently reduced the funding to $37.6 billion. It states that during Fiscal Year 2024 the IRS spent approximately $2.1 billion of IRA funding on 37 of 38 key programs and projects. TIGTA reviewed six modernization projects and agreed with the IRS's reported completion status for all six. The report also describes a new operating model about which IRS management informed employees in May 2025.
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I’.
TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION
Progress of Information Technology Modernization
Efforts for Calendar Year 2024
August 13, 2025
Report Number: 2025-2S8-041
1
TIGTACommunications@tigta.treas.gov | www.tigta.gov
HIGHLIGHTS: Progress of Information Technology Modernization Efforts for Calendar Year 2024
Final Report issued on August 13, 2025 Report Number 2025-2S8-041
Why TIGTA Did This Review What TIGTA Found
In August 2022, Congress enacted The IRS made progress advancing transformation efforts in
the Inflation Reduction Act (IRA) to Calendar Year (CY) 2024. These advancements include modernizing
improve the administration of the tax account processing, promoting agility across operations,
tax system and services provided to implementing new technology solutions, empowering business
taxpayers. growth, strengthening network communications, reinforcing
enterprise security, and enhancing operations. During Fiscal
The IRS initially received
Year (FY) 2024, the IRS spent approximately $2.1 billion of IRA
$79.4 billion from the IRA. However,
funding on 37 of 38 key programs and projects.
as of March 2025, Congress
subsequently reduced IRA funding In addition, the IRS continued to advance its modernization efforts
to $37.6 billion. The funding is in CY 2024. These modernization efforts focused on key areas to
designated in the areas of enhance overall efficiency and adaptability across the enterprise.
operations support, enforcement, The IRS reported that it completed four of the six modernization
business systems modernization, projects we selected for review.
taxpayer services and energy
Completion
security. Project Name/Description
Status
We evaluated the progress of the
IRS’s information technology Customer Account Data Engine 2 Tax
modernization efforts including Account Management – Individual - Initiate
transforming core account data and development for pre-processing functionality.
processing efforts funded by the Strategic Portfolio Management Approach
IRA. and Tool (Phase 1) - Implement the strategic
Impact on Tax Administration management system tool.
Information technology plays a Enterprise Data Platform – Deploy
critical role in enabling the IRS to foundational capabilities.
carry out its mission and Network Modernization – Expand network
responsibilities. The modernization bandwidth.
of its information technology and
business systems is essential to Enhance Data-at-Rest Encryption – Reduce
fulfilling its mission of providing the risk of data exposure.
America’s taxpayers with top-quality Enhance Multifactor Authentication –
service, helping them understand Implement multifactor authentication for four
and meet their tax responsibilities, IRS mainframe platforms and seven high value
and enforcing the law with integrity assets.
and fairness to all.
We reviewed the project documentation for the six projects and
agreed with the IRS’s reported completion status for all six CY 2024
projects.
In May 2025, IRS management informed their employees about a
new operating model for a “leaner, more focused IRS Information
Technology organization” to guide its modernization efforts. The
new operating model is centered on technical leadership, simplified
structures, and mission-aligned delivery. As of June 2025, the IRS
had nine key initiatives as part of its modernization efforts.
The IRS agreed with the draft report and did not provide a response.
o
U.S. DEPARTMENT OF THE TREASURY
WASHINGTON, D.C. 20024
TREASURY INSPECTOR GENERAL
FOR TAX ADMINISTRATION
August 13, 2025
MEMORANDUM FOR: COMMISSIONER OF INTERNAL REVENUE
FROM: Diana M. Tengesdal
Acting Deputy Inspector General for Audit
SUBJECT: Final Report – Progress of Information Technology Modernization
Efforts for Calendar Year 2024 (Review No.: 20252S8001)
This report presents the results of our review to evaluate the progress of the IRS’s information
technology modernization efforts, including transforming core account data and processing
efforts funded by the IRA. Specifically, we reviewed the status of the Calendar Year 2024 projects
under the Foundational Technology outcome grouping, related to Objective Four in the IRS
Inflation Reduction Act (IRA) Strategic Operating Plan. We performed this review during the
period October 2023 through December 2024. We are issuing this report to document the
actions taken by the IRS. This review is part of our Fiscal Year 2025 Annual Audit Plan and
addresses the major management and performance challenges of Managing IRA Transformation
Efforts and Information Technology Modernization.
If you have any questions, please contact me or Linna K. Hung, Acting Assistant Inspector
General for Audit (Security and Information Technology Services).
Progress of Information Technology Modernization Efforts for Calendar Year 2024
Background
Information technology plays a critical role in enabling the Internal Revenue Service (IRS) to
carry out its mission and responsibilities. The modernization of its information technology and
business systems is essential to fulfilling its mission of providing America’s taxpayers with
top-quality service, helping them understand and meet their tax responsibilities, and enforcing
the law with integrity and fairness to all. It is also necessary to maintain the integrity of the
nation’s tax system, collect trillions of dollars, and keep up with economic and population
growth.
In August 2022, Congress enacted the Inflation Reduction Act (IRA) of 2022 to improve
the administration of the tax system and the services provided to taxpayers.1 The IRS initially
received $79.4 billion from the IRA. However, as of March 2025, Congress subsequently reduced
IRA funding to $37.6 billion.2 The IRA funding is designated in the areas of operations support,
enforcement, business systems modernization, taxpayer services, and energy security.
In April 2023, the Department of the Treasury (Treasury Department) and the IRS developed the
Strategic Operating Plan (SOP).3 The SOP outlines how the IRS will deploy investments from the
IRA to better serve taxpayers, tax professionals, and the broader tax ecosystem. In addition, the
IRS created the Transformation and Strategy Office to work with the business units to deliver the
objectives and initiatives outlined in the SOP and oversee the IRS’s transformation efforts.
The IRS’s IRA SOP defined five major objectives, each with a set of initiatives that needed to be
completed to achieve the transformation efforts. In May 2024, the IRS issued a 2024 Annual
Update to the IRA SOP and a 2024 IRA SOP Annual Update Supplement report that further
refined the IRS’s transformation and near-term priority efforts to achieve its vision.4 A key
component of this work was the development of outcomes which are aligned to the five
objectives in the SOP. These documents also outlined the IRS’s priority efforts and key results
planned to be delivered over Fiscal Years (FY) 2024 and 2025. Figure 1 shows the updated SOP
objectives and the related transformation priorities.5
1
Pub. L. No. 117-169, 136 Stat. 1818.
2
The Fiscal Responsibility Act of 2023 (Pub. L. No. 118-5, 137 Stat. 10) rescinded $1.4 billion; the Further Consolidated
Appropriations Act, 2024 (Pub. L. No. 118-47, 138 Stat. 460) rescinded $20.2 billion; and the Full-Year Continuing
Appropriations and Extensions Act, 2025 (Pub. L. No. 119-4, 139 Stat. 9) rescinded another $20.2 billion.
3
IRS Publication 3744, Internal Revenue Service Inflation Reduction Act Strategic Operating Plan FY 2023 - 2031
(Rev. 4, April 2023).
4
IRS Publication 3744-A, IRS IRA Strategic Operating Plan Annual Update Supplement (April 2024); IRS Publication
3744-B, IRS IRA Strategic Operating Plan Annual Update (April 2024).
5
The IRS also refers to the transformation priorities as roadmap outcome groupings.
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Progress of Information Technology Modernization Efforts for Calendar Year 2024
Figure 1: SOP Objectives and Transformation Priorities
Source: 2024 IRA SOP Annual Update Supplement.
In February 2025, the IRS lost 450 employees from its Information Technology business unit
because of its workforce reduction efforts. In March 2025, the IRS reported that it placed
48 senior Information Technology employees on administrative leave.6 Of the 48 employees
placed on leave, 27 were either in key management positions or were individuals recruited for
their expertise related to the IRS’s restructuring efforts. In addition, the IRS disbanded the
Transformation and Strategy Office in March 2025 as part of its workforce reductions and
restructuring efforts.
In May 2025, IRS management informed their employees about a new operating model for a
“leaner, more focused IRS Information Technology organization” to guide its modernization
efforts. The new operating model is centered on technical leadership, simplified structures, and
mission-aligned delivery. As of June 2025, the IRS had nine key initiatives as part of its
modernization efforts.
Objective
The overall objective of this review was to evaluate the progress of the IRS’s information
technology modernization efforts, including transforming core account data and processing
efforts funded by the IRA.
Results of Review
The IRS made progress in advancing transformation efforts supported by IRA funding in
Calendar Year (CY) 2024. These advancements include modernizing tax account processing,
promoting agility across operations, implementing new technology solutions, empowering
business growth, strengthening network communications, reinforcing enterprise security, and
enhancing operations. The IRS spent approximately $2.1 billion of its IRA funding on 37 of the
38 key programs and projects during FY 2024.7 No expenditures were recorded for the Payments
6
TIGTA, Report No. 2025-IE-R017, Snapshot Report: IRS Workforce Reductions as of March 2025 (May 2025).
7
The IRS reports on the completion status of its projects and programs on a calendar year basis, whereas it reports
funding for these projects and programs on a fiscal year basis.
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Progress of Information Technology Modernization Efforts for Calendar Year 2024
Modernization program during FY 2024.
Figure 2: Key Programs Backed by IRA Funding by
SOP Objective and Transformation Priorities
SOP Objectives and
Transformation Key Programs
Priorities
Objective 1 Live Assistance Customer Relationship
Management Business Licenses
Enhance Live Assistance Multilingual
Direct File
Expand Online Services Digitalization
Online Tools / Self Service
Accelerate Digitalization Taxpayer Accessibility
Payments Modernization
Improve Employee Tools Taxpayer 360
Authentication, Authorization,
Online Accounts and Access
Objective 2
Simplify Notices Modernized Correspondence, Notices, and Letters
Disrupt Scams
Objective 3 Digital Asset and Cryptocurrency Program
Ensure Fairness in Enterprise Case Selection / Enterprise Anomaly Detection
Enforcement Legacy Systems Changes for Unified Compliance Organization
Objective 4 Individual Master File Enterprise Service Management
Modernization
Modernize Foundational Enterprise Tax Calculator
Information Technology Business Master File Service Provider
Modernization
Enterprise Data Platform
Unified Intake Tax Processing
Advanced Analytics Platform
Integrated Data Retrieval
System Modernization Network Modernization
Information Returns Virtual Desktop Infrastructure
Modernization Robotic Process Automation
Enterprise Case Management Event Driven Architecture
Accelerated Technology Delivery Cybersecurity and Data
Modernized Accounting and Protections
Financial Systems Customer Relationship
Common Enterprise Services Management Platform
Information Technology IRA Modernization Portfolio
Operations Transformation Support
Objective 5
Human Capital
Enhance Human Capital IRS Expansion
and Culture
Source: Analysis of IRA SOP documentation and IRA funded programs.
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Progress of Information Technology Modernization Efforts for Calendar Year 2024
Foundational Technology Review: Status of Selected Projects for Calendar
Year 2024
The IRS identified 49 projects scheduled for completion in CY 2024 that align with the key
program areas in Objective Four: Modernize Foundational Information Technology. We selected
a judgmental sample of six of these projects and evaluated their completion status because
successful delivery of most of the initiatives in the SOP is dependent upon the IRS modernizing
its core information technology infrastructure.8 Figure 3 shows the projects selected for review
and the completion status reported by the IRS. The IRS can close a project as incomplete and
then reopen a new project the following calendar year to complete unfinished tasks from the
previously closed project and add new tasks.
Figure 3: CY 2024 Projects Selected for Review
Completion
Project Name/Description
Status
Customer Account Data Engine 2 Tax Account Management –
Individual - Initiate development for pre-processing functionality.
Strategic Portfolio Management Approach and Tool (Phase 1) -
Implement the strategic management system tool.
Enterprise Data Platform – Deploy foundational capabilities.
Network Modernization – Expand network bandwidth.
Enhance Data-at-Rest Encryption – Reduce the risk of data
exposure.
Enhance Multifactor Authentication – Implement multifactor
authentication for four IRS mainframe platforms and seven high
value assets.
Source: Analysis of IRA SOP and the Strategic Implementation Management System.
Enhancing Customer Account Data Engine 2 Tax Account Management – Individual for
Efficient Processing
The Tax Account Management-Individual (TAM-I), which is a project under the Customer
Account Data Engine 2 program, builds on the latest effort to modernize tax account processing.
The TAM-I project leverages the Individual Tax Processing Engine to move the IRS from its
current, sequential batch processing to real-time processing of individual taxpayer accounts.9
The TAM-I project modernizes how the IRS receives, processes, and closes the accounting cycle
(e.g., posting, settlement, and analysis) for individual taxpayer accounts. The IRS initiated TAM-I
Release 1 Wave 1, to develop the pre-processing functionality of TAM-I. Specifically, Release 1
8
A judgmental sample is a nonprobability sample, the results of which cannot be used to project to the population.
We selected a judgmental sample for this review because we wanted to narrow our focus to a specific subset of
projects under the Foundational Technology outcome grouping based on the amount of IRA funding and strategic
importance.
9
See Appendix I for a glossary of terms.
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Progress of Information Technology Modernization Efforts for Calendar Year 2024
Wave 1 focuses on initializing and updating the Event and Account Stores through the TAM-I
components. Subsequent releases are planned to deliver the remaining functionality.
As of December 2024, the IRS reported the project milestone for initiating the development for
pre-processing functionality, as closed and complete. We reviewed key information technology
documents (e.g., TAM-I Vision, Scope, and Architecture and Project Charters) associated with
this project and its developmental activities and agree with the IRS’s reported status.
Optimizing the Strategic Portfolio Management Approach and Tool (Phase 1) for
Oversight and Project Tracking
The IRS created the Strategic Portfolio Management Approach and Tool (Phase 1) project to
manage the IRA portfolio of investments and implement the Strategic Implementation
Management System (SIMS) tool. The SIMS tool was designed to provide information for all
products and platforms by providing consolidated data collection, enhanced dashboards, and
decision tracking.
As of December 2024, the IRS reported the Strategic Portfolio Management Approach and Tool
(Phase 1) project is closed and complete. The IRS implemented the SIMS tool as the official
source of record for monitoring and tracking the IRA portfolio in September 2023. We met with
key Transformation and Strategy Office and Information Technology organization personnel,
reviewed key information technology documents and accessed the SIMS tool. We agree with the
IRS’s reported status.
Advancing the Enterprise Data Platform for Universal Access and Efficient Management
The Enterprise Data Platform (EDP) enables universal access to tax data, third-party data,
metadata, and other data needed across the IRS. The EDP will serve as a foundational
component for and will help accelerate other modernization initiatives, especially for data
access, data management, reporting, and analytics to enable a data-driven culture. The
foundational component consists of an application programming interface to enable data
access and integration services; data fabric services to connect data from multiple sources; a
universal data hub to store common enterprise data in different formats; and analytical tools
and services.
In March 2025, the President signed an executive order aiming to remove barriers and promote
inter‑agency data sharing, which may increase the frequency and volume of data sharing
between the IRS and other agencies.10 In June 2025, we reported that the IRS implemented
incorrect business requirements during the development of its application programming
interface to share Federal Tax Information with the Department of Education.11 It is imperative
that the lessons learned from the IRS’s inaccurate data exchange are used to inform similar
future agreements and prevent the transfer of inaccurate taxpayer data. We plan to continue
performing reviews in these areas because such data sharing agreements and application
programming interfaces could have potentially profound consequences.
As of December 2024, the IRS reported that the EDP foundational capabilities were closed but
incomplete. The IRS planned eight releases for this project in CY 2024; however, only six releases
10
Executive Order 14243, Stopping Waste, Fraud, and Abuse by Eliminating Information Silos, (March 20, 2025).
11
TIGTA, Report No. 2025-2S0-029, The IRS Transferred Incorrect Federal Tax Information to the Department of
Education for Federal Student Aid (June 2025).
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Progress of Information Technology Modernization Efforts for Calendar Year 2024
were shown as closed and complete. For the remaining two releases: one was transferred to
CY 2025, and the other was canceled. The IRS stated that the EDP is a multiyear project.
To confirm the status of this project, we reviewed system release documents and Prior to
Production checklists for three of the six releases, as follows:
· Advanced Analytics Platform Release 3.3 – Provides a central location for managing,
storing, and retrieving software packages and building artifacts as part of package
management.
· Access Management Release 4.0 – Assists in the development of policies to protect and
prevent disclosure of sensitive data that can be pushed to as many data stores as
required.
· Graph Release 5.0 – Enhances the EDP platform with graph analysis capability
supporting various graph analyses, such as data profiling, to possibly identify risks and
fraud.
The remaining three releases have been transferred to CY 2025. We also reviewed key project
documents (e.g., Configuration Management Plan and Project Charter), and attended EDP
demonstrations. We agree with the IRS’s reported status of closed but incomplete for this
project.
Network Modernization Increase Network Bandwidth (383 Post of Duty Sites
(Phase II)) for Enhanced Connectivity
The Network Modernization program provides critical support to the workforce and integrates
modern technologies to enhance the end users’ experience. The program focuses on expanding
network bandwidth by implementing wireless technologies, proactive remediation and analysis,
network resiliency, and trusted access and secure communications.
The Network Expansion project optimizes the IRS wide area network by reducing delays during
transmission and increasing network speed. This should allow IRS staff to work more efficiently
and deliver faster response times for IRS systems while enhancing the taxpayer’s experience. The
Network Expansion project ensures that the IRS’s circuits can adequately handle network
improvement projects that demand more bandwidth capacity.
As of December 2024, the IRS reported this project as closed and complete. The IRS increased
the network bandwidth at 383 Post of Duty Sites. We met with key Enterprise Operations and
Network Engineering function personnel and reviewed the Bandwidth Upgrade Spreadsheet to
confirm that upgrades for 383 sites were completed. We agree with the IRS’s reported status of
closed and complete.
Enhance Data-at-Rest Encryption to Minimize Unauthorized Access
The IRS defines data-at-rest as data that resides in databases, file systems, and other structured
storage methods. Data-at-Rest Encryption (DARE) is implemented on IRS critical systems to
strengthen data protections and prevent unauthorized access. DARE reduces the risk of data
exposure in support of IRS business objectives, Cybersecurity initiatives, and the Office of
Management and Budget Data-at-Rest mandate. Project success will be achieved by protecting
IRS enterprise-wide data-at-rest by deploying the DARE solution to project scope by the end of
CY 2024. The project scope includes Federal Information Security Modernization Act (FISMA)
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Progress of Information Technology Modernization Efforts for Calendar Year 2024
applications, 13 Tier I and Tier II high-value assets (HVAs), and remaining Tier I and Tier II critical
filing season and financial applications.
As of December 2024, the IRS reported the Tier-I FISMA encryption as closed and complete. The
IRS implemented encryption on 169 DARE 1.0 applications. We interviewed the DARE program
support team, reviewed project supporting documentation, and evaluated the evidence
supporting the 169 FISMA applications as DARE compliant. We determined that the cloud
applications are DARE compliant. We agree with the IRS’s reported status of closed and
complete for the Tier-I FISMA encryption.
Enhance Multifactor Authentication for Secure Access
Multifactor Authentication (MFA) is defined as verifying the identity of a user, process, or device
using two or more factors to achieve authentication, often as a prerequisite to allowing access
to resources in an information system. The scope of this project was to implement the MFA to
all mainframe platforms and seven additional HVAs.
As of December 2024, the IRS reported the Enhance MFA project as closed but incomplete. The
IRS completed the MFA implementation on five HVAs and opened a Plan of Action and
Milestones on the remaining two HVAs until technical issues can be addressed in CY 2025. We
reviewed system documentation, including screen shots of the user login process. The IRS
planned to implement the MFA on four mainframe platforms. However, we only confirmed the
implementation of the MFA on two of the mainframes. For the remaining two mainframes, one
contained sufficient documentation to verify that an MFA solution exists in a test environment.
We received insufficient documentation for the other mainframe. As a result, we agree with the
IRS’s overall reported status of closed but incomplete.
Conclusion
The IRS continued to advance its modernization efforts focused on key areas to enhance overall
efficiency and adaptability across the enterprise. These advancements include modernizing tax
account processing, promoting agility across operations, implementing new technology
solutions, empowering business growth, strengthening network communications, reinforcing
enterprise security, and enhancing operations. The foundational technology advancements
enable the IRS to continue to improve the taxpayer experience and protect the integrity of the
nation’s tax system.
We examined a substantial amount of documentation and conducted multiple interviews to
verify whether the IRS accurately reported CY 2024 completion status of those projects selected
for review under the Foundational Technology outcome grouping. Our assessment aligns with
the IRS’s reported conclusions that the projects were either completed or closed but incomplete.
This report is a continuation of our reviews to assess the IRS’s information technology
modernization efforts and is provided for information only.
Performance of This Review
We conducted this review in accordance with the Council of the Inspectors General on Integrity
and Efficiency Quality Standards for Federal Offices of Inspector General. Those standards
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Progress of Information Technology Modernization Efforts for Calendar Year 2024
require that the work adheres to the professional standards of independence, due professional
care, and quality assurance, and follows procedures to ensure accuracy of the information
presented. We believe that the evidence obtained provides a reasonable basis for our finding
and conclusions based on the objective of our review.
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Progress of Information Technology Modernization Efforts for Calendar Year 2024
Appendix I
Glossary of Terms
Term Definition
A collection of sophisticated techniques and tools that are used to analyze
Advanced Analytics
large volumes of data from diverse data sources (e.g., cloud platforms), uncover
Platform
hidden patterns, and provide actionable insight.
Consists of federal tax returns and return information (and information derived
Federal Tax from it) that is in the agency’s possession or control, which is covered by the
Information confidentiality protections of the Internal Revenue Code and subject to
Section 6103(p)(4) safeguarding requirements including IRS oversight.
A modernization effort to convert two IMF programs written in an old
Individual Tax
programming language into a modern programming language with the intent
Processing Engine
of maintaining all current functionality and capabilities.
HVAs refer to those assets, systems, facilities, data, and datasets that are of
particular interest to potential adversaries. These assets, systems, and datasets
may contain sensitive controls, instructions, or data used in critical federal
High Value Assets operations or house unique collections of data (by size or content) making
them of interest to criminal, politically motivated, or state-sponsored actors for
either direct exploitation of the data or to cause a loss of confidence in the U.S.
government.
Office of Management
Per Executive Order 14028, federal agencies shall adopt multi-factor
and Budget Data-at-
authentication and encryption for data-at-rest and in transit.
Rest Mandate
A system that suitably interfaces a program with other programs or human
users in its environment. The tasks performed by software tools cover a wide
Software Tool
spectrum from mundane tasks such as interfacing to sophisticated tasks that
improve the effectiveness of a user’s activity.
Supercomputers and mainframe hardware and software, including peripheral
Tier I
subsystems used in a mainframe system environment.
Minicomputers (i.e., computers usually containing multiple microprocessors)
Tier II
capable of executing multiple processes simultaneously.
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Progress of Information Technology Modernization Efforts for Calendar Year 2024
Appendix II
Abbreviations
CY Calendar Year
DARE Data-at-Rest Encryption
EDP Enterprise Data Platform
FISMA Federal Information Security Modernization Act
FY Fiscal Year
HVAs High Value Assets
IRA Inflation Reduction Act
IRS Internal Revenue Service
MFA Multifactor Authentication
SIMS Strategic Implementation Management System
SOP Strategic Operating Plan
TAM-I Tax Account Management- Individual
TIGTA Treasury Inspector General for Tax Administration
Page 11
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affecting taxpayers, contact us at www.tigta.gov/form/suggestions.
Information you provide is confidential, and you may remain anonymous.
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