Financial Audit: IRS's FY 2024 and FY 2023 Financial Statements

What GAO Found

In fiscal year 2024, the Internal Revenue Service (IRS) collected about $5.1 trillion in taxes and paid out more than $553 billion in tax refunds, credits, and other payments.

2024 IRS Collections of Federal Taxes, by Type

In GAO's opinion, IRS's fiscal years 2024 and 2023 financial statements are fairly presented in all material respects, and although internal controls could be improved, IRS maintained, in all material respects, effective internal control over financial reporting as of September 30, 2024. GAO's tests of IRS's compliance with selected provisions of applicable laws, regulations, contracts, and grant agreements disclosed no instances of reportable noncompliance in fiscal year 2024.

Limitations in the systems IRS uses to account for federal taxes receivable and other unpaid assessment balances, as well as other control deficiencies that led to errors in taxpayer accounts, continued to exist during fiscal year 2024. These control deficiencies affect IRS's ability to produce reliable financial statements without using significant compensating procedures. These control deficiencies are significant enough to merit the attention of those charged with governance of IRS and therefore represent a continuing significant deficiency in internal control over financial reporting. Continued management attention is essential to fully addressing this significant deficiency.

IRS continued to take steps to address deficiencies in its internal control over financial reporting. IRS sufficiently addressed certain information system control deficiencies such that GAO no longer considers the control deficiencies in this area, individually or collectively, to represent a significant deficiency. However, it is important for IRS management to continue to build on the progress it has made in addressing control deficiencies.

In commenting on a draft of this report, IRS stated that it was pleased to receive an unmodified opinion on its financial statements. IRS also commented on its progress in reducing open recommendations and in resolving a significant deficiency in information system controls. IRS also noted its intention to continue working to improve its internal controls.

Why GAO Did This Study

In connection with fulfilling GAO's requirement to audit the consolidated financial statements of the U.S. government, and consistent with its authority to audit statements and schedules prepared by executive agency components, GAO has audited IRS's financial statements because of the significance of IRS's tax collections to the consolidated financial statements of the U.S. government. GAO annually audits IRS's financial statements to determine whether (1) the financial statements are fairly presented and (2) IRS management maintained effective internal control over financial reporting. GAO also tests IRS's compliance with selected provisions of applicable laws, regulations, contracts, and grant agreements.

IRS's tax collection activities are significant to overall federal receipts, and the effectiveness of its financial management is of substantial interest to Congress and the nation's taxpayers.

For more information, contact Dawn B. Simpson at (202) 512-3406 or [email protected].

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