United States Government Accountability Office GAO November 2011 Report to the Secretary of the Treasury_PART6 pot

Financial Statements Page 67 GAO-12-165 IRS’s Fiscal Years 2011 and 2010 Financial Statements INTERNAL REVENUE SERVICE Notes to the Financial Statements For the Years Ended September 30, 2011 and 2010 9 Abatements Section 6404 of the Internal Revenue Code (26 USC), authorizes the Commissioner of the IRS to abate certain paid or unpaid portions of assessed taxes, interest, and penalties. Abatements occur for a number of reasons and are a standard part of the tax administration process. Abatements may be allowed for qualifying corporations claiming net operating losses which create a credit when carried back and applied against a prior year’s tax liability. Additionally, abatements can correct previous assessments from enforcement programs, eliminate taxes discharged in bankruptcy, reduce or eliminate taxes encompassed in offers in compromise, eliminate penalty assessments for reasonable cause, eliminate contested assessments made due to mathematical or clerical errors and eliminate assessments contested after the liability has been satisfied. Abatements may result in claims for refunds or a reduction of the unpaid assessed amount. G. Property and Equipment Property and equipment is recorded at historical cost. It consists of tangible assets and software. The IRS depreciates property and equipment on a straight line basis over its estimated useful life. In the first and final years, one-half year depreciation is taken. Disposals are recorded when deemed material. The IRS capitalization policy for property and equipment is presented by asset class and capitalization threshold. Asset Class Capitalization Threshold ADP equipment Capitalized regardless of acquisition cost Non-ADP equipment Assets with bulk cost of $50 thousand or greater Furniture Capitalized regardless of acquisition cost Investigative equipment Assets with bulk cost of $50 thousand or greater Vehicles Capitalized regardless of acquisition cost Major systems Projects with costs of $20 million or greater Internal Use Software Major business systems modernization projects with an estimated cost of $5 million per year or $50 million over the life cycle. Leasehold Improvements Improvements with bulk cost of $50 thousand or greater Assets under capital lease Assets with bulk cost of $50 thousand or greater ADP Equipment includes related commercial off-the-shelf (COTS) software with a bulk cost of $50 thousand or greater. Major systems was a category for large-scale computer systems prior to Statement of Federal Financial Accounting Standards No. 10 (SFFAS No. 10), Accounting for Internal Use Software. Prior to fiscal year (FY) 2011, the IRS capitalized COTS software and leasehold improvements regardless of cost, and furniture, non-ADP equipment and investigative equipment with an individual asset cost of $5 thousand or greater. Internal Use Software captures the costs of major Business Systems Modernization projects in accordance with SFFAS No. 10. It encompasses software design, development and testing of projects adding significant new functionality and long-term benefits. Costs for developing internal use This is trial version www.adultpdf.com . and 2010 9 Abatements Section 6404 of the Internal Revenue Code (26 USC), authorizes the Commissioner of the IRS to abate certain paid or unpaid portions of assessed taxes, interest, and penalties Statements Page 67 GAO- 12-165 IRS’s Fiscal Years 2011 and 2010 Financial Statements INTERNAL REVENUE SERVICE Notes to the Financial Statements For the Years Ended September 30, 2011 and 2010. related commercial off -the- shelf (COTS) software with a bulk cost of $50 thousand or greater. Major systems was a category for large-scale computer systems prior to Statement of Federal Financial