The Internal Revenue Service will continue to face significant management challenges in fiscal year 2010, according to the Treasury Inspector General for Tax Administration. In its annual report outlining the management and performance challenges confronting the IRS in the new fiscal year, TIGTA notes that these challenges include: modernizing its computer systems and business processes; ensuring security of its resources, including taxpayer data; addressing the tax gap; balancing customer service and enforcement while protecting taxpayer rights; strategically managing its human capital; and a new challenge - globalization.

A continuing challenge for the IRS in fiscal year 2010 will be tax compliance. The IRS's estimate of the tax gap, which is defined as the difference between what taxpayers are supposed to pay and what is actually and timely paid, is currently $345 billion. The IRS has significant challenges in obtaining complete and timely data regarding compliance and developing the methods for interpreting data. Even with better data, the IRS needs broader strategies and better research to determine what actions are most effective in addressing noncompliance.

Additionally, the numerous tax provisions in the American Recovery and Reinvestment Act of 2009, commonly referred to as the Recovery Act, will pose significant challenges to the IRS as it administers approximately $60.5 billion in tax credits and other provisions through 2019.

The IRS also will face significant enforcement challenges due to the scope, complexity and magnitude of the international financial system. The IRS Commissioner has emphasized that international issues will be a top priority during his tenure.