To address our concerns and the priorities of democrats on this side of the dais. I remain confident we can find a way to have a positive and strongly bipartisan markup of mr. Lighthizer. And ill wrap up by saying my sense is this place cant have enough comity. Thats comity with a t. And i thank you for your efforts to work with us. I look forward to our hearing, of course. I thank you for your efforts. Its been a pleasure to work with you in the past. I look forward to working with you in the future. I think we make a good team. Well continue with our hearing on taxrelated matters. Every year, a committee holds a meeting on the tax Filing Season. It provides us with an opportunity to discuss and examine the operations of the Internal Revenue service the Agency Charged with implementing our tax code and collecting taxes from workers and employers. With each passing year, taxpayers face new challenges as they file their tax returns. Including, but not limited to protecting their private information. Today well discuss among other things the irss efforts to address these challenges as well as the plans for progress and modernization in the near future. The finance committee has always taken its oversight responsibility with the irs very seriously, and for good reason. The irs is virtually the only federal agency that deals with every american citizen, everyone who does business here every mom and pop business and every community organization. Over recent decades as our tax code has grown more complex we have given the irs more and more to do, including implementing an ever growing number of rules, regulations and notices, frankly, i dont think many people are satisfied with the results. I know the people at the agency point to limited funding, there are other matters that have contribute today the current level of dissatisfaction, including out dated collection practices and bureaucratic wrangling as well as a number of poor management decisions. This committee has conducted oversight on the number of those poor decisions, including the politization of Tax Administration, excessive spending on executive travel and improper contracting practices. Congress needs to look closely at the irs and work to modernize and stream line its operations. This should include changes to the bloated and poorly managed Technology Used by the agency. And the elimination of bureaucratic waste. Hopefully, during the course of todays hearing we can get a better sense of the agencys plans to address these and other issues as well as suggestions for congressional action. Looming over this conversation, is the ongoing and hopefully bipartisan effort to reform our broken tax system. Tax reform, if done right, should simplify the tax code and make the irss job easier and allow the agency to focus on collecting revenue in the fairest and most efficient manner possibility. Tax reform, if done right, should improve the way taxpayers interact with the irs, reducing the countless hours and billions of dollars spent every year to comply with the tax code and file accurate returns. The irs is probably the most feared of all government agencies. The irs yields immense power and authority over the lives of our citizens. And for hard working taxpayers direct contact with the irs is rarely, if ever, desirable. I think we can take steps to improve this. But it will likely require us to take significant changes to the tax code. And to the irs itself. Hopefully the leadership of the irs will be willing partners in this effort. Toward that effort i appreciate the discussion of these important issue and i appreciate personally appreciate the work hes done over the years. We have a good relationship. Hes worked well with me. And i personally want to thank him and tell him i appreciate him and appreciate the service that hes given this wonderful country. With that ill turn it over to senator widen for his opening remarks. Thank you very much. Mr. Chairman. Ill have a couple comments about tax reform at the end as well. Now that americans are getting into crunch time with tax Filing Season, i want to begin todays hearing by discussing what usually happens when early april rolls around. Around this time of year, president s usually release their tax returns to the public. Its been a tradition for decades. But apparently thats not going to happen in 2017. It looks like this president will choose to keep hiding his returns and ignoring this very low ethical bar, even though its clear his blind trust isnt blind at all. And the separation he promised hed make from his businesses seems to be nonexistent. Second, around this time of year, is when the whole executive branch gets on the same page to pitch its Budget Proposal to the public and the congress. Not so this year. With this executive branch it seems like the one hand often doesnt know what the other hand is up to. On the one hand, you have the treasury secretary who came before this committee as a nominee, and said he was committed to making sure the irs had the resources to do its job. Mr. Mnuchin said he wanted to protect taxpayer data, close the tax gap, inprove Customer Service and he said big staffing cuts in recent years were to mr. Mnuchin a concern, and it would be a very quick conversation with donald trump to get it fixed. Apparently, that conversation hasnt happened. Or if it did, the message didnt get through. When the public got its first glimpse of the trump budget, the irs didnt get the investments senator mnuchin talked about when he was here at the committee. For next year, instead it got another 239 million cut. But that would mean that Customer Service would get worse, more taxpayers would fall victim to hackers and preventible scams and the good times will roll again while honest taxpayers get fleeced. This is not an academic debate. Right now, the online data retrieval tool that students and families use to fill out their Financial Aid forms is down because of Cyber Security problems. Hackers were using stolen personal information like names, bir birth dates and Social Security numbers to steal taxpayer dollars. You would thinking about a government that talks about running government like a business would want to invest in cybersecurity when it finds a hack. But thats not whats happening here. Instead the administration is repeating the same old pattern. Cut after cut to irs resources, meaning Taxpayers Service and Data Security could get worse and worse. Usually around this time, taxpayers are collecting all their forms and receipts, sitting down to file their tax and theyre saying, will the congress ever manage to simplify this mess we call the tax code and help the middle class. And they might even be a little hopeful this year because theyve heard the president and members of congress say tax reform is at the top of the agenda. But so far, when you parse the details, it looks like some republican members of congress and the administration are locked in competition to see who can propose the biggest tax cut for the fortunate few. For the typical family, there isnt any plan that helps that working class family get ahead. In some respects it looks like theyre getting a tax increase. Ill close, mr. Chairman, by way of saying that to me, right at the heart of bipartisan tax reform is recognizing that we really today have two tax codes. Theres one system for the cop and the nurse. And its compulsory. Every time they get a paycheck, that tax is taken right out of it. No special deals for them in the cayman islands. Then theres the other system for those who are fortunate. Who can hire all the lawyers and accountants and take advantage of these murky kind of rules. And that system, with the right advice from the tax experts, you can sort of pay what you want, when you want to and sometimes you pay nothing at all. Its grossly unfair to just sit by when you have these two tax systems in america, one of which is stacked against the working family. That has to be a key part of bipartisan tax reform. And nobody is going to tell me that its not possible to do it. In my time on this committee, ive been involved with a number of our thoughtful members from the other side of the aisle. Senator greg and i sat next to each other on a sofa every week for two years to produce a bipartisan comprehensive federal income tax plan. And danny coats, when he was on this committee, did exactly the same thing. But what we have to do is get away from this partisan reconciliation only kind of approach and say from the get go democrats and republicans, as you and i do so often, sit down at the outset and we try to make sure that shes got a system that works for everybody. And that the working person gets a fair shake. And i want to renew that i think there are a lot of members on our side of the aisle who would like to work in that kind of vein. And i look forward to our discussions. Thank you, senator. Appreciate your comments. Todays wins witness is john koskinen. He was confirmed to this position in december 2013. Before coming to the irs, commissioner koskinen served for four years as a nonexecutive chairman of freddie mac including a period where he was the acting ceo. Prior to that he held Public Service positions including president of the u. S. Soccer foundation. Deputy mayor of the District Of Columbia and Deputy Director for management at omb. He spent two decades in the private Sector Holding various leadership positions, including Vice President , ceo and chairman. This came after his work for several years in various legislative and Administrative Offices in federal and municipal government as well as a number years practicing law. Commissioner koskinen has a law degree from Yale University school of law and a bachelors degree from duke university. I want to welcome you back to the finance committee. Mr. Commissioner, and i want to thank you once again for being here today. We would like to have you please begin with your opening remarks. And i ask that you limit your Opening Statement to around five minutes if you can. Thank you, mr. Chairman. Chairman hatch, Ranking Member widen, members of the committee, thank you for the opportunity to appear before you today. And mr. Chairman, i genuinely appreciate your kind and thoughtful words of support. Im pleased to report that the 2017 filling season has gone well so far. Through march 31st, the irs has received more than 93 million individual returns, on the way to a total of about 152 million. Weve issued over 74 million refunds from more than 213 billion. With an average refund totalling 2,900. The 2017 Filing Season is notable for a change congress made in 2015 that took effect this year. It requires the irs to hold tax returns until february 15th each year if the claim if they claim the earned income tax credit or the additional Child Tax Credit. This change slowed the overall pace of refunds early in the Filing Season, but that pace accelerated with the release of more than 50 billion in eitc and actc refunds after february 15th. The new requirement to hold earned income tax credit and Child Tax Credit returns and another change enacted by congress to accelerate the filing date of forms w2 help the irs spot incorrect or fraudulent turns. It also allows us to release refunds to compliant taxpayers more quickly. Avoiding unnecessary delays. In regard to phone service, im pleased to report we are again seeing an improved level of service on our toll free lines. As we did during the Filing Season 2016. Our phone level of service is currently running above 76 . And we anticipate the average for the Filing Season overall will be about 75 . The improvement is the direct result of additional funding granted by congress in 2016 to improve service to taxpayers as well as to sprentrengthen Cyber Security and expand our efforts against Identity Theft. It freed up resources to reduce our correspondence inventory, which totalled 850,000 pieces of correspondent at the end of fiscal 2015 and thats down to 660,000. We experience Strong Demand for online services. Taxpayers have visited our website, irs. Gov. 320 million times so far this year. The popular where is my refund has been more than 228 million times. Other tools including direct pay, which allows taxpayers to made tax payments online, has been used more than 4. 6 million times this year. A brandnew tool, the balance due feature, lets taxpayers view their irs account, balance online including the amount they owe for tax, penalties and interest. This online tool has been used 547,000 times since it was launched in november. The new balance due feature is also important because it represents the first step toward a fully functional irs online account for taxpayers. Were developing this as part of our efforts to enhance and expand Important Services for all taxpayers, no matter what their circumstances. Service at our Taxpayer Assistance Centers has also improved this year. In recent years, many Assistance Centers saw such heavy demand during the Filing Season, taxpayers were lining up for hours before the centers opened. In 2015, we tested the idea of letting people make appointments in advance. This worked so well we extended appointment process to all of our assistant centers this Filing Season, we have no reports of long lines so far anywhere in the United States. Another important area is the growing problem of stolen identity refund fraud. Weve made steady progress in protecting against that crime and the process has accelerated since 2015 thanks to the efforts of the Security Summit group. The strong unique partnership between the public and private sectors has produced real results. In fact, the number of people who reported to us that they were victims of Identity Theft declined from 698,000 in calendar year 2015 to 376,000 in 2016. A drop of 46 . Even with this progress, the fraud filters in our systems are still catching a large number of false returns. Last year, our system stopped more than 6. 5 billion in fraudulent refunds on 969,000 returns filed by identity thieves. It shows that Identity Theft is a major threat to Tax Administration and we need to keep up the fight. Turning to upcoming legislation, we recognize the congress is considering tax reform. The irs doesnt take a position on policy questions in tax reform or any other area. We do have a great interest in working with congress to make sure whatever policies are adopted are easy for us to administer and easy for taxpayers to understand. We also hope that congress will make any tax changes prospective and build in lead times so we can prepare taxpayers and our systems for the changes. Chairman hatch, Ranking Member widen and members of the committee, that concludes my introductory statement and i look forward to your questions. Thank you mr. Chairman. We appreciate you being here and appreciate your comments. Let me begin the questioning with this question. Last month the Internal Revenue service and the department of education took down the data retrieval tool for student aid applicants. You took this action after it became apparent that data thieves may have used previously stolen stolen information of taxpayers to access the system and obtain sensitive Tax Information. I appreciate the confidential briefing the irs provided to the Committee Staff last week. And i wont go into more details given the ongoing criminal investigation. But this is not the first time thieves have used stolen information to obtain sensitive taxpayer information. And likely wont be the last. Mr. Koskinen, is it true that the Inspector General warned your agency of this threat last year, and if so, what actions did the irs take following that warning . And number two, has the irs notified each of the tens of thousands of taxpayers affected by this incident, if not, when does it expect to do so . After our problem with the get transcript two years ago, i asked the agency to take a look at every way anyone gets either money or information out of our systems. I thought there might be 30 or 40. It turns out there are over 200 different ways we provide tax data to Mortgage Companies, finance companies, department of education. So we have begun an agency wide process over the last two years to look at each of those avenues of approach, see where the risks are, and solve those risks. One of the things we did a year ago was it used to be you could file your return by going online and getting whats called an efile pin. All you needed was your Social Security number and name and address. But of course Social Security numbers can be bought online for 10 by organized criminals. Last year we discovered in addition to legitimate taxpayers, criminals were filing fraudulent returns with the use of the efile pin. We shut that down. This year, any criminal filing of tax return, a fraudulent one had to have last years adjus d gross income. Last summer working with our criminal investigators we got preliminary indications that when Mortgage Companies through consolidators were asking us to confirm income for people applying for a loan or mortgage, the data was coming through a system that did not necessarily make us comfortable. That the consolidators knew their customers. We shut that system down for two weeks while we developed a program in a short run as well as the long run to insure they know with whom theyre dealing before they pass those requests on to us. As we move through the early fall we focused on the student loan application process at the department of education. We had an early indication in september that it was possible with relatively stolen information to pretend you were a student, go online and start to fill out an application, give permission for us to populate that application with tax data, most importantly the adjusted gross income and complete the application. We started working with education in october telling them that we were very concerned that that system could be utilized by criminals. We recognize the 12 million to 15 million applicants use the convenience app of populating their application with their own tax return. Education and we worked together and they developed a long Term Solution that will mask that data. They cant execute and implement that until next october. So we agreed with them, since we did not have at that time, any volume of criminal activity. Rather than shutting it down and add to the burden of people applying for Financial Aid, we would then monitor that system. I told them as soon as there was any indication of criminal activity we would have to take that application down. That occurred as we monitored into the early part of february, middle of february. It became clear there was a pattern of activity i wont go into detail, we briefed you on it it was clearly not consistent with people going on and applying for Student Loans as we tracked that pattern down we discovered it was clear that some of that activity was legitimate students, some of it was criminals. We shut the system down and spent the last three or four weeks working with that to see was there any interim solution we could use before they finished their work in october to bring the system back up. It turned out there was no way we could satisfy ourselves that opening that avenue again would be free from risk. Criminals would get in. Our highest priority is to make sure we protect taxpayer and their identity as well as against fraudulent refunds. Whats going on is at this point, you can still file a student loan application. You just have to put in the Tax Information yourself. If you dont have it, you can go online with our new authentication system or well mail to your last address of record the Tax Information you need. What you wont be able to do until probably october, is go in and have the data automatically populated. Fortunately we caught this at the front end. We think at this time we estimate fewer than 8,000 fraudulent returns were actually filed, processed and refunds issued. Again, were at the front end of the problem. But weve been monitoring it. We have other areas were monitoring. Were trying to anticipate where will the criminals attack next. Thank you, mr. Chairman. Were working closely, the chairman and i to get on top of this. Because this isnt complicated. Cyber thieves have been ripping off students and parents. I heard you give a number that i thought commissioner, was for february. Did you go back, you know, earlier . Give us your best estimate of how many taxpayers will end up having their data stolen . Because i think what people want to know, you work with us and we appreciate it. Is this the tip of the iceberg . Is it going to be more . Go back briefly and give us your sense overall about how much more is still out there. Originally we were concerned about the Filing Season but have gone back as far as last september and determined that there are no indications at this point, although were looking at it, any illegal activity in september through december. You can track the changes, theres a spike of activity that begins in the latter part of january. As we work through the pool of people in the suspicious area of activity who did not complete their application, is about 100,000 people. But its clear some of those are legitimate people who actually just didnt complete the application. But our position has been as weve been working with education, we cant confidently distinguish the smaller part of that pool or the part of the pool that had their data stolen from those that may have had their data stolen. Out of an abundance of caution were going to notify 100,000. 35,000 of those letters are already on the way. Our filters stopped 52,000 returns out of that 100,000. Of those 52,000, right now we know 14,000 were identify theft refund illegal returns that didnt get out the door but were there. We marked all 100,000 accounts. Whenever a return is filed theyll be protected. A number of them again, we dont want to unnecessarily worry people. Well advise everyone there is some indication that may be at risk. Are you confident that the pool of possible students and parents who got ripped off is not greater than 100,000 . These numbers always have a way of growing. We are actually now starting to look through all of last year, although last year you didnt need this information, as i said if youre a criminal you could get an epin file to file. What is motivating the criminals, they need adjusted gross income. Thats the key we have this year for all taxpayers. The number may grow, but weve continued to look at it and analyze it. At this point, all of the analytics with the department of education shows the pool is about 100,000 people. If you could continue, commissioner, as you have to inform chairman hatch and i about it. Were working together on this. Were going to make sure we get to the bottom of it. Let me ask you about the president s tax returns. As you know, since watergate its been routine for president ial nominees and sitting president s to release their returns. It seems to me Public Disclosure is all the more important today, stories, practically every few hours about conflicts of interest, ties to foreign governments, all these issues being debated in the press and leaks hanging over President Trump and his administration. If irs agents found ties to russia in the president s tax returns, would they now be able to share that information with National Security agencies . I cant talk about anyones individual tax this is just a question. Would they be able to. As a general matter, Tax Information and tax audits are highly protected. We think every taxpayer needs to be confident when they deal with us that theyre going to be dealing with us and were not sharing that information with anyone else. As a general matter, if we find evidence of criminal activity in an audit our criminal investigators work with the department of justice on that matter. But for the vast overwhelming majority of taxpayers that information about their return, the information about the audit is highly secretive. And no irs employee, for instance, can look at anyones tax return unless they have a good reason to and we monitor that. The irs commissioner cant look at anybodys return. So at this point, i think the more Important Message we have for taxpayers is, if youre dealing with the irs, we view that information as important to protect, important to keep within the bounds of the activities of the irs. I think what were interested in knowing is just how because this is a very unique situation. You know, in effect, irs agents may be looking at information that involves the boss. Involves the president. And i was pondering for a second your comment about the relationship with the justice department. So if an agent now found matters that could be criminal on tax returns of the president as it relates to the president and russia under current irs rules and procedures, that information would go to the justice department, is that right . Senator, were not in a position to talk about anybodys situation or any hypothetical. All i can tell you is we treat taxpayer data confidentialally. We protect it to the maximum extent we can. And every taxpayer gets treated the same. Mr. Chairman, can i ask one other question from colleagues forbearance, because chairman grassley is gone. Sure. We have introduced legislation to strengthen incentives for whistle blowers under the tax code while enhancing whistle blowing protections the chairman cant be here, hes on the floor. You cant endorse legislation, obviously. Id be interested in just one quick question. Do you believe that there is a need for additional whistle blower protections and set aside the bill senator grassley and are i have. Do you believe there is a need for more protection . Im a big supporter of the whistle blower program. I think that whistle blowers ought to be protected against retaliation whether theyre a private Sector Company or government agency. We need to encourage people if they think there is a problem going on, wherever it is to be able to raise their hand, make that problem known without having retaliation against them. Thank you, mr. Chairman. Thank you for the extra time. Senator roberts. Thank you, mr. Chairman. The former chairman of the committee, my good friend, max bacchus had a short confirmation vote, one of the essential tasks you had was to rebuild public trust in the irs after the political targeting scandal. I note with interest let me just back up. See if i can make sense out of this. This really gives me no pleasure and it is with some degree of sadness i want to ask you this question. The house ways and Means Committee chairman kevin brady and 14 members of this committee have called for you to step down immediately. I have their letter and i would like to insert it in the record at this point. And ask unanimous consent for that. Without objection. Thank you. This is always been about the First Amendment and protecting it those rights and preventing the government from restricting them. I want to go back to when you first came to my office. I was very pleased to see you. You told me confidently you would focus on implementing the Affordable Care act, that you would use your business expertise to make the agency run as smoothly as possible and would keep the irs free from any political interference. These are all laudable goals. I was persuaded you would run the agency in a businesslike manner. Seemed like you would be the man for the job. Again, it gives me no pleasure and with sadness that with all due respect, i have been disappointed in your record in the agency. Im not going to go over all of the things listed in this letter. Im sure youre familiar with them and would have a quite a rebuttal. But, again, this has always been about the First Amendment and protecting those rights. Seven years after the irs commenced its campaign against conservative groups and four years after lois lerner publicly apologized for what was going on, i do not believe we have meaningfully addressed the issues that political targeting raises whether it be conservative, liberal, whom ever. I dont think anybody has been held accountable. In checking these organizations are still experiencing delays and i think this is really unacceptable. Now, the advent of a new administration and new leadership does give us a chance for a clean break. Basically my question to you is that do you intend to serve out your term or will you submit your resignation to secretary mnuchin as soon as possible . Well, i appreciate the inquiry. I regret that youre disappointed in the performance. I think the record will demonstrate in a number of members of the finance committee, the ways and Means Committee did not sign that letter. Our record will demonstrate we have implemented everything, including the majority and minority recommendations to insure the situations never occurs again. The ig have verified we have implemented the rules and regulations. The ig has reviewed our production of information and documents and found that no one has done anything purposefully at any level at the organization to interfere with any congressional investigation. Weve produced over a million 300,000 pages of documents to everything. There is no indication the ig has responded to every indication in question about whether anyone has been targeted unfairly for an audit ever since this unfolded. Theyve worked in over 100 cases, not found a single one. In light of that, my concern as i have made very public. My term ends in early november. I talked with the Transition Team for the administration. I said publicly i think it is important for there to be continuity in leadership for this organization. Have you received anything back from the administration . I have not received feedback. My position has been ive encouraged them to find somebody in the next month or two to nominate for this position. As you know, the confirmation process appropriately for the irs commissioner is lengthy, thorough and detailed. Any confirmation process at this particular time in the United States senate has proven to be lengthy. I wont go into that right now. I understand that youre doing a very good job at summarizing what you believe you have accomplished at the agency. Im not going to quarrel with that. I note the letter from the ways and means folks. I simply do not agree with your summation in terms of whats been done with regards to the First Amendment rights of many americans. So i take it your answer is no. I was going to say let me respond to that. My plan i signed up for a term that ends in november where i come from, if you sign up for a commitment, you complete the commitment. My concern is in fact, that there wont be a commissioner ready to take charge when i leave. Running an organization without a permanent head is not a good idea in the private or public sector. I encourage, again, i talked to secretary mnuchin about it. We need to find someone to occupy this space. Its going to be vacant come november. In the meantime, i plan to complete my term. I appreciate that. Im way over time, thank you. Senator scott. Commissioner good to see you again. The treasury ig for Tax Administration issued a report just last week detailing how irs criminal investigators mainly pursued law abiding citizens and businesses when seizing assets in forfeiture cases related to antistructuring rules. The irs seized more than 17 million worth of assets. The report found the rights of some individual and businesses were compromised during the investigations. Mr. Commissioner, i am pleased that the irs has undertaken some policy changes to deal with civil assets forfeiture in alleged structuring cases fiasco. The management responds and the report from the irs noted that the irs never violated structuring laws and the relevant laws do not differentiate between legal or illegal sources. Since what you enacted is a policy change. I believe the legislation introduced on the house side and i have introduced with senator brown on this side, which would limit the irss ability to seize peoples money without first charging them with a crime is absolutely necessary to insure we do not read about and our citizens do not undergo any further nightmare scenarios like these seizures. Tell me you agree. I agree. This is wonderful. But for a second, im going to have leave and senator widen will chair the rest of the hearing. I apologize for truinterrupting you. No. When you get such a clear answer, you can take all the time you want to. This is fantastic. Let me elaborate a little bit. We changed the policy a year and a half ago. Yes, sir. Since then, one seizure and it has been in a criminal matter. We are mindful of this. It is a policy change that is now fully implemented. If the legislation were passed to make clear that that policy change was now a legislative change we would be supportive of that. Right now, again, the act provides if you structure your payments, whether with criminal funds or otherwise to avoid taxes or convenience, its a violation of the law. A legislative change making clear that unless the funding is from an illegal source there wont be a seizure would be fine with us. Perfect, thank you, sir. In 2012 irs employees spent 573,319 hours of official work time. That is 72,000 days worth of official work being done by irs employees not helping u. S. Taxpayers. If you have these hours back, what Better Service and efficiency could you provide to the americans currently suffering through long wait times and courtesy disconnects and process delays. Clearly if we had my position has been for some time the more resources we have the Better Service we have. As i noted the wait times have been cut significantly. Service is much better. I would note the hours is down by 100,000. We have a program as part of our contract with the union to Work Together to try to limit official time hours wherever we can. Official time is provided to employees in the union by statute. We dont have an ability to tell them they cant do it. We do have the ability to work with them to contain it and make sure its used for official purposes. Theres never been an investigation showing that the union has misusered those times and the employees under the law have a right to be represented by Union Representatives and thats what the official time is used for. No question theres a suggestion, of a violation law. Were talking about 573,000 hours that could be better used to help taxpayers with their taxes as opposed to Union Activities so they can do those activities off the clock from my perspective. Thank you very much for your clarity and being succinct. Senator scott, senator carper is next. Welcome excuse me. [ inaudible ] i object. No. Literally raced down the hall to get ahead of me so he could get seated. Thats okay. Ill get over it. The senator from delaware is so fast. Thank you, mr. Chairman, and thank you commissioner for appearing this morning. And we appreciate your update and testimony on the irss progress with the 17 Filing Season. There are a couple of issues id like to ask about with tax reform, of course, on the immediate horizon. I think this is a once in a Generation Opportunity to simplify the tax code, which is critical to taxpayers but also ought to help the irs when it comes to administering the tax law in a more efficient manner. I hope that during the remainder of your term youll redouble your efforts to help put the irs back on the right path in terms of improving Customer Service and preventing taxpay related Identity Theft. I would say its one of the biggest issues under your jurisdiction thats facing south dakotens when it comes to taxes and thats tax Identity Theft. It affects not only those who find their refund delayed while the irs confirms their identity. I know you probably perhaps touched on this already. But the steps the irs is taking to improve its defenses and help taxpayers fight id theft and are there any statutory changes that Congress Needs to make to help you in those efforts to protect americas tax data and minimize the risk of related Identity Theft . If you could, in the context of talking about that, also, just weve had some reports of people in south dakota when they had an Identity Theft issue its taking up to a year to resolve. If you would talk about how we might be able to get those cases resolved fast. Reporter we have the time down to 103 days and were sensitive to that and irking haworking hard. One of the reasons we can process faster is because last year for the first time, the number of taxpayers identifying themselves as victims dropped by almost 50 . That drop is a result of not only improved filters on our part and the chairman had asked and are writing in tomorrow more details about our return review program. We have over 200 filters. Equally importantly, two years ago, we brought in ceos of h r block, turbo tax, all the Software Developers and all the state tax commissioners, not to tell them what to do but to create a partnership where we could in real time during the tax Filing Season share information, where we think there are problems. But also we could jointly Work Together to improve the level of security from the time a taxpayer signs on to their Software Till the time they file with us and file with the states. We have included Financial Sector participants who can help us if an illegal refund does get out to recapture the funds. A big part of the decline in the number of identity them victims is a result of this Public Private partnership. If you cut the number by half obviously you can be more effective. For a number of years we made steady but very slow progress. I think together with the technology, a lot of software we bought some of it with the money ca Congress Gave us, i think were in a better position. Were dealing with organized crime syndicates around the world. We will continue to have to upgrade our systems, continue to expand our partnerships with the private sector and reaching out to individuals. Vin individuals have a role to play protecting their data, make sure they have security on their systems. Its a joint effort. I think thats why weve made the progress we have. In addition to the funds get appropriated by congress, there are other sources of revenue you collect. Could you share how you allocate the user fee and the extent to which theyve been dedicated to Customer Service for this Filing Season . We file a plan with the Congress Every year how were allocating those funds. Historically weve allocated a significant portion to Taxpayer Service. But we also have significant needs in cybersecurity and Information Technology as well as enforcement. Each year, we make a decision as to where the funding is, our funding comes in those buckets. Where we need to in fact support that funding. Initially fees were meant to allow us to respond to Unfunded Mandates or other activities coming up during the year. Our hope is one of these days we would Fund Information and Cyber Security and operations so the user fees would allow us to respond to changes. Right now we use all of them filling those gaps. This year as i noted, our level of Taxpayer Service partially with user fees but also the funding that congress provided is over 75 . It means that were reaching our goal would be to be in the low 80s. It takes a little more funding to do that. Were at double the rate we were in 2015 when we had an unacceptable level. Since then, combination of user fee and support from congress has allowed us be able to raise the level of service. Equally important, its allowed us in our communications in writing with taxpayers the significantly lower the inventory so we can respond in a timely way to those laeretters. Thank you. Now get to carper here. A long waiting senator carper. Thank you. Mr. Commissioner, my father used to have a saying he had a lot of sayings quitters never win and winners never quit. And i would just urge you to stay on the job until your term expires in november. And i know you have some critics, we all do. And we take on tough jobs, theres been people critical of us, hard to imagine. Thank you for all you do, the leadership you provide in a very difficult job. One of the things i like to do, used to do as governor, i do customer calls. And i know you come out of the private sector. I visited businesses in delaware large and small. Business outside of delaware that have operations in delaware, large and small. And businesses outside of america that have operations in delaware. Large and small. And i ask them three questions. How are you doing. I ask them how are we doing. We state of delaware, we federal government. And then i ask a third question. What can we do to help you. And youve done a lot to in the time youve been our commissioner to lead a team to do a better job. Even though we have reduced your resources by about 20 in real numbers i believe since the time that you were confirmed. A reduction of 20 . We passed that changes in the tax code. We dont give you plenty of time to adjust and train your employees to respond to questions and prepare the programs and the paperwork and everything to allow folks to file the taxes. We pass it right before christmas. Right before its time for people to start preparing their taxes. And we dont make the tax code easier, and we say go off and do a great job. In spite of that, i think the irs is doing in a number respects, despite the hacks and Cyber Attacks i think youre doing a better job. I think its no small part because of your leadership. Three areas i think that we might be able to help the irs do an even better job is one, to fund the irs. Were looking again at another request to reduce funding for the irs from this administration. And i understand for every dollar we invest in the irs, not only do we get Better Service for taxpayers, as they prepare their taxes, we also find we get for every dollar we invest we increase revenues by 4, maybe more. Obviously, there might be something we could do on the budget side here. Thats one thing ive heard about. The issue of paid tax return preparers, youve been asking the irs for years, to make sure fo folks are helping folks prepare tax returns are qualified and competent to do that. In terms out one of the number s i saw, 60 of tax preparers who are not cpas, 60 are erroneous. Youve asked us to do something about that. I think we should. The i mentioned the funding. The last thing i wanted to mention and ask you to comment on these. Stream line Critical Pay Authority. We have had over 1,000, maybe 2,000 vacancies at the department of Homeland Security for cyber war iriors. I think one of the things, stream line Critical Pay Authority expired a couple years ago. That would seem to me maybe another area we could help. Would you respond to at least those three. Those in the past are those still needs and requests you have . On funding, we are still in absolute terms 900 million below seven years ago even with ten million more taxpayers. Down 900 million compared to how many years ago . Well, if were looking at the 18 budget, eight years ago. 2010. Thats a budget of 12 billion . Budget wise is 12. 3 billion. Close to 10 . Okay. Taking inflation youre closing to 32 . Funding is an issue particularly in regard to personnel. Were down over 17,000 people. That impacts not only Taxpayer Service, it impacts enforcement, impacts i. T. On stream lined critical pay it was historically used for the 14 years or so we had it cybersecurity, our architecture for i. T. Were stream lined critical pay. Last of those people are rolling off. The most critical thing it does, it allows us when were compete ing with the private sector, when we find someone we can say we want to hire you for cybersecurity purpose and put you on the pay roll with stream line critical pay in a month. If we go through the normal process, its four to six months. Asking them to hang around while we process them through the system generally doesnt work very well. We have great people in the irs. Wonderful people working in i. T. Without stream lined critical pay its a challenge for us to upgrade those folks. Otherwise, as you say with paid preparers, the saying goes your barber has more qualifications to cut your hair than to prepare your tax return. Our proposal is not to regulate preparers or do anything different. Its requiring them to know something about the tax code if theyre going to represent themselves as being competent and have a continuing education requirement just the way lawyers and cpas do. We ran the program for a year and a half so people could see what it looks like. Its a requirement, minimum standards of competence. I think that would be important. It wont drive criminals out of business but it will give taxpayers some confidence when they show up with a preparer the person knows something about the tax code. Thank you. Senator, you have led the way on this point for years. Ive been your wing man i sign up again. Hopefully it wont be a long nonmission. We need to get this done, this is crazy. Thank you, in a bipartisan way. Senator bennett. If we all go five minutes it would go bennett, cassidy and kentwell. Im going to go 45 minutes. My answer will be long. Just kidding. Commissioner, this may be the last time you testify before this committee. And i want to take a second to thank you for your willingness to serve as irs commissioner at what has been an enormously difficult time in the countrys history. Through budget cuts, and unfortunately, i would say sometimes pathetic, actions by some that inappropriately turn the irs into a political football. You have taken on the difficult task of leading this agency. You have not been perfect, none of us in Public Service is perfect. Im sure, you like me, would have things you do differently in hind sight. The irs is an easy target in washington, and you have taken on more incoming than most in your role. So much of what youve endured has not been a reflection of you or your work, but a system of the dysfunctional moment in our countrys politics. With that as a backdrop and in this last hearing that you have, id like to offer you the opportunity to tell anyone who is watching who may not understand, why did you take this job in the first place. What have you achieved in the job, and roughly 40 months into the experience and far longer than that in your Public Service, what would you have to say to other americans who are contemplating Public Service . I took the job, took me 15 seconds to agree to do it. I knew having been around washington the Critical Role the irs plays both in funding the government, we collect 3. 3 trillion a year. But also because we touch virtually every american. Well get 152 million individual tax returns this year. To the extent we could make the sense work more efficiently and effective we could improve the situation for 152 million taxpayers filing. What weve achieved. We talked about the gains in Identity Theft. We talked about the gains in the ability to access information at the irs more efficiently for taxpayers. Theres no reason that ultimately we shouldnt be able to provide a totally secure way for taxpayers to deal with us without having to call. Weve managed to get through the last three and a half years with, i think, a reasonable amount of employee morale even though the agency has been under continued attack. While we havent been able to replace most people leaving, we have demonstrated giving resources as the Additional Resources in 2016, we can do the job and do it well. One of the ironies is its not a time for irony these days, one of the ironies is while the irs continues on occasion to be under attack, when theres a new idea or new program, often times people say lets give it to the irs because theyll get it done. We appreciate that confidence. And, in fact, we do get it done y. Told the employees sometimes were our own worst enemies because we do so well even in the face of resource constraints people can think they can continue to eliminate, to cut the resources and it wont make a difference. The in resource they can cut the resources and it wont make a difference. My concern is it will make a difference, both to the effectiveness of the agency, its ability to collect revenues and its ability to service taxpayers. What i would like taxpayers to know is that we take Taxpayer Service very seriously. We also take treating every taxpayer the same and fairly very seriously. Which is why the whats been called the targeting of conservative groups, solely on the basis of their name for further review was unacceptable, should never have happened. I personally apologize to anyone who was stuck in that queue. You should be able to get an answer from the irs quickly, not have to wait for a year or two or longer to get that answer. But it is important for people to understand that even with our limited resources, we will still do a million audits this year. And those will be audits of people who are democrats, republicans. Theyre people who go to church, theyre people who dont go to church. There will be people who are active in a campaign or not active in a campaign. It doesnt make any difference to us. It you felt a letter from us, if you get an examination by us, its because of something in your tax return. And subject to resource constraints, anyone else who had that issue in their tax return would hear from us, as well. That it is a we are involved in Tax Administration, theres not a political way to do, theres not a republican or a democratic way to administer the tax code. There is a professional way to do that. We have a group of employees dedicated to service to taxpayers, to service to the country. Thank you, commissioner. I thank you for your service. Thank you thank my colleague. Senator cassidy, we have three senators here, and the vote is going to start in ten minutes. Senator caddie. Sas de. Mr. Commissioner, thank you for your service. As you know, one of the things before us right now are proposals to replace obamacare, repeal obamacare, are to repair obamacare, whatever the semantics are. And one of the criticisms of the approach that would use an advanceable refundable tax credit, there is a fairly significant overpayment rate. Now, i guess my issue my question, and i you know, this is a conversation, its not a got you. Is what you think of the irs capability of administering an advanceable refundable tax credit, using as a context both the eitc and the subsidies paid out to Insurance Companies under the Affordable Care act. Well, i would start out by, as i do with tax reform, saying we dont have a policy view about what should happen with health care. Totally get that. Just talking mechanics. So you can blow it up if you like, and thats fines with us. One of the areas we have struggled from the start is improper payments in the eitc. Any time you have a tax credit that is refundable, that is you get it whether you owe taxes or not, its a magnet. A target for identity thieves, target for criminals, target for preparers, who are fraudulent. Hanging out signs, saying come with me, ill get you a big refund. The advanced premium tax credit in the present system has not presented that problem, becauses money doesnt go to the taxpayer. Let me interrupt. The proposal Susan Collins and i put forward would have an account that could only be used for health care or health insurance. That would bridge the difference. It doesnt go to the individual but under the individuals control and subject to irs regulations, hsa regulations. So thoughts in that context. Anything that causes you to be able to not have the money just disappear into somebodys bank account is a major significant advantage in terms of dealing with the risks of improper payments. So if i may say, then, the concern that eitc is the kind of paradigm through which we should review these advanceable refundable tax credits, you would say maybe its judged as in the Affordable Care act subsidy in which it doesnt go directly to the individual. Rather is somebody who has fiduciary responsibility. Right. And thats why as i have said the policy decisions are your decisions. Totally get that. Were anxious to continue to have discussions about these kinds of levels let me ask you something else. I have limited time and the chair is kind of rapping me. Another concern is i have a Health Savings account. And or at least i did, before obamacare took it away from me. And i had a card and i would swipe it and it would tell me automatically if it was an allowable expense. Somehow that was there. Its also been suggested the Health Savings account law and the ability to monitor how the expenditure truly works is lacking. Do you have a sense the degree to which these folks that issue these cards, Insurance Companies issuing cards, and the coordination between that card, what it will pay for, and what is considered allowable under the irs statute of appropriate care for hsas, how well that works . Is there fraud there, or do you think it works pretty well . Thus far, we have not seen any major indications. So when someone says they have seen folks go up to the counter at the pharmaceutical store with a bunch of potato chips and swipe their hsa card, is that an urban myth, or you dont see evidence of that . We dont see evidence of that that i know of at this point. And do you know if youve audited that. Again, not accusetorily, im just asking, because i have to defend this to others. I do not know what our audit history on that is. Could you ask . Could you ask your staff to let me know that . I would be delighted to do that. Again, this is purely interest. Lastly, let me tell you, i have been a victim of Identity Theft. So let me revisit that. Because its rather personal. And i remember the way it happened is that somebody filed on my behalf. Somehow they got my social. But it was pretty evident from you know, i was in the campaign. So either it was my opponent or probably not. But it was somebody that could just look at news reports and knew a lot about me and somehow got my social. And so i guess my when i looked at it, though, you could have easily and when your folks came to talk to me, you could have easily looked at that which the irs had about me. I had an income stream from my work as a physician, as a teacher, i should say, and my income stream from working in congress. And you could have coordinated those and seen that the filing was not correct. And they told me that these databases, yes, it should be done. But the databases did not communicate with each other. And really, what would have been a very simple sort of this drops out because either historically it doesnt match or because it doesnt match from what has been filed currently. And it didnt happen. I see that your data systems may not come online until 2022. It really seems like google could have figured that out about me real quickly. You follow what im saying . Yes. We figure that out about you now pretty quickly. We have put in place our return review program that has 200 filters looking for just those anomalies. This was a yearandahalf ago this occurred. So youre saying in a yearandahalf this has transpired. As part of the way Identity Theft victims have dropped by 50 last year. The filters are better this year. And we have information coming from states and preparers. So we are significantly more capable and aggressive at stopping. Last year we stopped 1 million fraudulent refunds with 6 billion worth of refunds that never went out. Thank you very much. Senator cantwell. I was heartened to hear the irs was understaffed and that we need to make sure we move beyond the punitive budget cuts. So has the irs been exempted from the president s hiring freeze . We have not been. Do you know of any steps the secretary is taking to advocate for the irs exemption . The secretary has been very supportive in his staff of working with us to identify areas where we should be able to make hires in areas that are critical of the operation of the agency. The treasury and the secretary have been very supportive. So they are pursuing some exemptions . And they are pursuing we have given them a list, we worked on a list, they are working with omb on a set of exemptions. How is that affecting the agency not having the staff . What would you say the effects of that are . Well, as i have said, were kind of poster child for a hiring freeze. We havent hired many people for the last six years. So its not as if we have casts of thousands we could afford to fund. Were talking about a relatively small number of physicians that are leadership positions in i. T. Or critical areas. And those are hampering us a little. But again, i would stress the secretary in the Treasury Department couldnt be more supportive working through this. Well, we definitely want to see those exemptions, and i guess i would be the wing woman on the wingman team of on this issue of streamline Critical Pay Authority. Because this the notion that you say that the hiring freeze does affect i. T. , and that we then need to find other people. To me, this whole issue of Cyber Security and information and securing the irs database is so important. So i hope that i hope that we can do if we need anything from us, to help push that, awareness or advocacy, please let us know. Thank you. Thank you, senator cant well, for making that point and so succinctly. Senator cardin, well wrapup and go vote. Thank you, mr. Chairman. I want to raise the issue of private debt collection. I understand its law. And in addition to receiving other information, taxpayers are now receiving a notice theyre going to be they may be contacted by private debt collectors. With all of the risk factors that go along with that. I regret that we are at this point. But i understand the law, and i understand your responsibilities to carry out the law. My concern is that the last time we tried this between 2006 and 2009, the treasury ended up receiving 63. 4 million in refuse views, but paying out 67. 8 million for a net loss of 4 million. Can you share with us and perhaps youll do it for the record with a written response because of the time we dont have today. How youre taking steps to first protect the public against the abuses of private debt collectors . And secondly, how you are going to ensure that were not going to lose money by using private debt collectors. Im protecting taxpayers. We have had good sessions with the private debt collectors in terms of training. People understand they have to whats the consequences if they dont follow . Ultimately, we can terminate the contract if they do not follow the normal structure. And thats clear in the contract . The companies have been very cooperative. The last thing in the world any of them want so when i get a complaint, youll follow up on it . We are monitoring and if its accurate, youll fire the debt collector . Yes. If there is a pattern of activity obviously, nobody is perfect. Its hard for me to find a pattern. I get individual complaints. Well collect those and would be delighted to have those. And make sure we dont lose money. And make sure we dont lose money. One of the arguments in the past, we kind of to protect taxpayers, overloaded the system with a lot of overhead and activities. And this time around, we dont have the resources to do that. We have streamlined the program. My commitment has been that we will do everything we can to make sure this program is effective, both in terms of protecting taxpayers, but also collecting revenue. Because if it works, that would be fine. If it doesnt work, i dont want anyone saying we actually sandbagged it one way or another. We will monitor carefully the expenditures, monitor carefully the resource that is are returned to the government and we think well have a very good database. Well, you make Information Available to my office as to how this process is moving forward, including the accountability issues that youve talked about and how the accounting is being done in a straight forward way to make sure the taxpayers arent subsidizing private debt collectors . I would be delighted to do that. Thank you. Thank you, mr. Chairman. Thank you, senator cardin. No speeches, mr. Commissioner. Weve got this chairman hatch wanted me to thank you very much for appearing today. He also wanted to make it clear that were going to be working with you all on trying to improve the tax system. And i would ask that members who have written questions submit them by 6 00 p. M. On thursday, april 13th. Those are all comments from chairman hatch who has to be on the floor. I would just like to add one last, you know, thought. And that is, mr. Commissioner, i think everybody understands that nobody likes the irs. And the irs will always be a punching bag. And my view is, you have been accessible, and you have been honorable in your service. And we will look forward to talking with you further, undoubtedly on a variety of issues. With that, the finance committee is adjourned. Thank you. If you missed any of this hearing with irs commissioner, kosk anyone, you can watch it any time in the cspan video library. Go to cspan. Org. Type irs operations in the search bar. And a busy day on capitol hill today. The u. S. Senate taking its first votes on the Neil Gorsuch Supreme Court nomination. Those votes just getting under way and theyll determine whether or not to move forward with debate on the nominee. Assuming members do agree to hold debate, mit. Its also expected he will invoke whats called the nuclear option, which would change senate rules to allow civil majority to confirm the nominee. You can watch that debate and votes of the Supreme Court nomination live on our companion network, cspan 2. News from the house side today. The hill reporting that House Intelligence Committee chair devin nunes will temporarily step aside in his committees investigation into russias meddling in the 2016 president ial election. Congressman nunes said in a statement he thinks its in the best interest of the committee, but went on to say that the charges are entirely false and politically motivated, and theyre being leveled just as the American People are sging beginning to learn the truth about the improper unmasking of the identities of u. S. Citizens and other abuses of power. Congressman nunes said he will step aside while the house ethics committee, quote, looks into this matter. You can read more about it at thehill. Com. This weekend on American History tv on cspan3, saturday at 8 00 a. M. Eastern, United States Holocaust Memorial Museum Director sara bloom field talks about the creation and message behind both museums. But why would you build it in washington, people asked . Doesnt it belong in berlin or jerusalem . So we designed the architecture and the exhibitions to try to answer that question. So the first part of your Museum Experience is hearing from that american g. I. Who asked that big question, which is, how is it that human beings can do this to one another . And then throughout the exhibition, we keep bringing back what america knew and when america knew it. Sunday, the centennial of americas entry into the great war from the National World war i museum and memorial in kansas city, missouri. And at 2 00, Pulitzer Prize winning historian, David Mccullough on how the founders valued education, viewed slavery and persevered in the face of hardship. First seven president s of the United States, john adams was the only one who never owned a slave. Out of principle, not because he couldnt necessarily afford one. But out of principle. And abigails feelings about it were even more strongly voiced than his. And then at 8 00, on the presidency, university of virginia president ial scholar, barbara perry, talks about the traits of a great president. The sign of a good leader is a leader who is self confident, but not arrogant. So confident so confident in his own leadership and in his intellect that he didnt worry about having really smart people around him. For our complete American History tv schedule, go to cspan. Org. Up next, a senate Homeland Security Committee Hearing examining the planning, designing and cost of President Trumps proposed fence for the u. S. mexico border. Witnesses include former customs and Border Protection acting commissioner, david aguilar, who said that infrastructure, technology and personnel are critical aspects to stopping illegal border crossings. This is about two hours
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