Advocacy, irs modernization, tax enforcement, international partnerships, and the future of the irs. This portion is about one hour and 20 minutes. Thank you for coming out tonight. It is an exciting time at the Internal Revenue service. It is an exciting time at the Internal Revenue service. As i mentioned, our commissioner is coming up on his oneyear anniversary. We have a lot of people at 1111 constitution avenue. There are a lot of new people coming on and a lot of people that were there that have been there and were thinking about leaving in the past, are thinking about staying. We have some amazing speakers to discuss hiring, staffing, and current priorities. And what we can expect in the year or two years to come. Let me get right to introductions. Mary beth murphy, commissioner of Small Business, selfemployment division. The criminals Investigation Division at the irs and nina olson, National Taxpayer advocate. Bios are online. I will leave you to review them but they are amazing individuals. Have done tremendous work on behalf of of the taxpayers in this country and it will be a great evening. Let me start by having each of them talk a little bit about the state of the irs in their division. And then we will go into some q a and open it up to the audience for any questions you might have. Mary beth, can you kick us off . Ms. Murphy i want to thank the , the new york city bar for inviting us today. Sixth year. I think nina and i were nina for sure has the longest tenure. I have one of the longest of the commissioners. What are we doing . We have a really interesting role. With a mission to help Small Businesses and selfemployed taxpayers as well as 40 taxpayers. Help them understand how to meet their tax obligations. And doing it with fairness, integrity to all taxpayers. When you think about the number , ourxpayers that we serve Customer Base is huge and it is such a diverse work group. As i go around the country and see the work that we do, sometimes, i think i cannot believe that we do all that we do whether it be specialty tax, employment tax, excise tax. Side, wee collection have seen a lot of changes in collection. We are responsible for 57 million returns a filed annually. Six point 8 million corporate returns. 27 million employment tax returns. 875,000 excise tax. Gift taxstate and returns. And then trust returns as well. About 35,000. We have a big job in Small Business. Caroline mentioned the modernization plan and the new commissioner and i think they go hand in hand for us. We really need to increase the use of technology to really change the way we do business. Especially in Small Business small selfemployment. We have to empower our employees. Lays outnization plan some great foundations and then one of the things we will be working towards over the next couple of years i will talk about a few of them but you will hear some common themes and one of them is an appropriate balance of enforcement and customer service. And we cannot do that without engaging our employees. They meet facetoface. They are the face of the irs. A facetoface contact or over the telephone. We have been working hard. A couple of years ago, one of our big pushes was our future into which has involved our modernization plan as well as our strategic goals. Getting our employees focused on those and listening to them going forward. This last year has been really big. First and foremost for us, our biggest priority was tax reform. 29were responsible for provisions in Small Business. We did not get any extra staffing to do it and i think we had a great team. We are on track. On target. We are in the process of getting ready to train and our commissioner has said we will put out our training so you can see that. It is not yet online but we are working with our communications folks as we finalize all of our training so you know what we are training our folks as it relates to tax reform. And the 29 provisions we are responsible for. Theriorities for us passport program. It has been hugely successful for us. It is a great program. Us. Ayers come to it amazes me the number of full paid taxpayers we see on a weekly basis. And these are taxpayers that as wellge balance due as small. That is working well with the department of state. And we really have not had any problems. I like to add does anyone here have any taxpayers with a passport case . A couple. We are continuing to work that program. You have had some . Hopefully, it went well and you were able to get it resolved. In the process . Ok. Our nonfiler strategy with a reduction of staffing, we have taken a hard look at nonfilers. That is an area where we are looking for stakeholders to help us to figure out the best way to get these people to file again. We are looking at test and learn. Many of you know some of the programs we have had the substitute for return program. That is a laborintensive program for us as well as for the taxpayer as well as for the practitioners. We are looking at the refund hold program and how we can make better decisions using data. Looking at data instead of doing the same things we have. We are looking right now at educational letters for taxpayers that may have stopped filing. We have nonfilers, stopped filers how do we get those taxpayers back into compliance . For us isiority disaster relief. We have been lucky. We have not had any fires or bad storms but we are responsible for those programs as well across the irs as well as penalties and interest. We do service wide penalties. Looking ata we are as well is taxpayer Digital Communications. It is in its infancy that we authenticatedg on ticated hopefully, in the future we can use automated responses to give taxpayers basic answers to questions a half. We are doing text chats and a small number of single issue audits in our correspondence examination area. We hope to grow that. Taxpayers are adopting it. They have to authenticate themselves and there are some challenges. Security is paramount. We hope to increase the number of Digital Communications we can do with taxpayers. That is our state. Revenue officers and revenue agents. 18,200currently at about in Small Business and our goal is to get up to a thousand or 22,000 the end of september. We have had challenges. That weentioned to don have seen a number of folks we have made offers. Jobs tough for us in the market. It is really expensive to live in new york city, california, the boston area. Had some have challenges but we are on track to hire about 750 revenue officers and 1200 revenue agents. New hires. We are excited about that. We have already started with the revenue officers who are in their first week of training. We will be on boarding revenue agents by the end of the september. The lapse of funding of the government slowed us down so we are catching up but we are really excited to get those new folks on board. Thank you,ned mary beth for the update. Let me turn it to nina. Can you tell us about what is happening in the advocate office . Know, this isyou on the clock, running down. I will be retiring july 31 after 18 years. This will be one of my last public appearances. I have been spending a lot of my time trying to think about how to prepare my office to hand it off and to ensure the work we are doing, protecting taxpayer rights, continues. That is my focus. And i have a very short list of some issues i feel i need to tidy up before leaving. One of the things that is happened to us over the years when i came in 18 years ago, we 2200 employees in 74 offices 1000 650e are down to employees spread out over 79 offices. We have been shrinking our offices over the last five years. So that we can open up more offices. Irselieve that as the becomes more centralized and disappears from having a geographic footprint around the nation, that we need to be there. Gress has said in the law my position is described in the Internal Revenue code. That i have to have at least one office in each state. We have been opening more offices that are smaller. One is in elnt paso, texas which i will visit before i leave. We are trying to get out there in the community with fewer employees which is difficult. Ci, or anyone else that gets to decide how many cases they will start in a given year, we do not. If a taxpayer is experiencing significant hardship, they call us and the case comes in. Sometimes, my offices try to reject a case but then they email me. They let me know my office is rejecting them and then they get back into the system. Congress has told us that where taxpayers are experiencing significant hardship as a result of the irs, they get through the door. I do not know how to say you are experiencing significant hardship but you do not get through the door. I dont know how you do that. It has been difficult juggling the cases. Some have been brought on by systemic problems in the irs to verrilli simple cases but they take up peoples time. That is whyng we are concentrating on some fixes in the fraud detection system. As you file returns and are asking for a refund, you go to the fraud detection system. It has a high false positive rate. 81 of the returns last year identified for questionable related to Identity Theft, but like inflated wages or a mismatch of information, 81 of the returns the irs stopped were legitimate. High falseabominably positive rate. We have been really focusing systemically on getting that fixed because that has been a large portion of our cases. 287 last yearby from the year before and if we could get them cleared out of our system, we could do a lot of good things. Mary beth mentioned the modernization plan. This is something in my annual report to congress. I made the number one legislative recommendations that the irs needed multiyear funding in order to replace its archaic 1960s based databases. Has the two oldest databases in the federal government according to the Government Accountability office and they happen to be the individual master file and the business masterfile which are the two official records of the taxpayers account. Let us stop and be afraid of that. We really need to modernize those databases. Butjust lift them up actually replace them. And all of the plans on the digital and modernization plan hinge on us getting into 21st Century Technology and if we cannot, we will not be able to deliver meaningful digital accounts to the taxpayers. Times that the employee says i cannot see that because theit is systems do not talk to one another. All of that needs to be changed and Congress Needs to fund that with a multiyear stream so we do not start and stop and start and stop and never get ahead. But on the topic of digital and this is something i have been focusing on a lot with all of the commissioners i have worked under, all 5, 6, or seven depending on if you count of the acting was 41 million taxpayers in the united states, taxpayers, people that have filed a return in the last three on ourbased statistically representative survey that we did two years ago 41 million do not have Broadband Access in their home. 49 million of the 150 million taxpayers that we have filing returns each year. Strategy thation does not understand that you personalrovide in service for taxpayers, persontoperson service, and on the phones as well is moving them to digital is going to not serve the taxpayers. It will create harm to them that mary beth mentioned and that they will have to deal with the downstream consequence. One of the things i have been thinking about in terms of the Digital Future and i will throw this out and then turn it back over to caroline is i have been noodling about and i will probably write it in my report, is something i am calling the taxpayer anxiety index. And that is that that is a way to think about how you want to communicate with taxpayers from perspective. S let us say they are perfectly comfortable when they filed their return. They are willing to check online. You can do an analogous situation to you. You send something in and you can be be checked to see that the document has been received. You are fine about that. You go in. That is great. It saves you a phone call. But let us say you are waiting for a response . Checko back in online to and the message has changed. Or the message is the same. Or the message goes we are , check at your return back in two weeks. Suddenly, that clutching feeling in the thread of the taxpayer your anxiety has just increased. And you may even be willing to check back in two weeks but another time, if you dont get an answer, you are going to pick up at the phone and try to force people to digital. While their anxiety is increasing all of along the way which will undermine what you are trying to do in driving compliance. The practitioner an elegy is you get in there and you can see a document has been received. And now youre waiting for a response. You get no response. You are going to want to call. You have a paying client. You also want to know what the irs is thinking about that document. If you are getting pushed online and cannot get to a live human frustration may be because there is not a meeting of the minds. Understanding where anxiety levels are and where you need to have that persontoperson interaction should be the driver of our modernization plan. And i fear that with the budget the wet the budgets of the way they are, it puts the driver of the modernization plan to how many people we can get on my because it is cheaper and eliminate some employees that would be answering the phones etc. I am watching that like a hawk. Whether i am inside or outside the irs. I can talk more about the passport program. I do not have the same sanguine view of it. Offshore issues. International issues. People trying to resolve multiple International Tax issues with regimes that have very different concepts of taxpayer rights and dispute resolution. Those are all things i have been looking at. Mentioned this is her last appearance in her tenure and it has been an amazing tenure. We are extremely grateful to have you here tonight. Questions so i hope you brought them with you. There is a treasure trove of information out there for the Taxpayer Advocate see advocacy office. Speaking of taxpayer anxiety, he is aurn to don. Career agent. The eight years. Time flies. With the service. He does. Ows ci like we are so lucky to have him as chief and his deputy chief, erik kelton, tony is in the audience. Be thesereat place to days. Not as a target but as an agent under this leadership. Tell us what is going on. A wewill start with will start with the fact that im not a morning person. And add to that, i just came back from a 10 day trip to scotland and ireland so it feels like it is about 1 00 a. M. In the morning. Be here. O and honored to be here with my colleagues. With nina and mary beth. We dont do this enough. This is a good and diverse panel. And caroline, i have had the pleasure of working with and the doj. I am 28 years with ci. I am a cpa as well and have had the unique experience of basically having almost every position within ci. Knowingxperience basically every corner of the organization and all the work that we do. It is an exciting time. We will talk about some of the priorities and initiatives. It is a great year for us. We celebrated our 100th anniversary as a Law Enforcement agency. Not many Law Enforcement agencies can say this. Oneting with six agents hundred years ago, and tradition within ci. To leadis agency this agency is incredible. In my 28 years, there are not many where we were not led by a career agent. I think some of you are familiar with us. I will give you a quick overview of the work that we do. That hase only Agency Jurisdiction over federal tax crimes. I like to say that if you hear about or read about any federal criminal tax case, there is 100 were involved in that. We have a much broader jurisdiction than that. I also like to say that if you hear of any significant financial investigation, Money Laundering, cyber chase cyber case, there is a very good innce that ci was involved that as well. I always say that i believe we have one of the largest and broadest jurisdictions of any federal agency because of the ability that has the text restriction. Having jurisdiction over Money Laundering opens up our ability to be involved in literally hundreds of predicate offenses. We are also heavily involved in bank secrecy cases. That being said, my priority is to make sure that we have our core mission coverage. The tax cases. We are the only agency that can do that. Staffing, we have about 2100 special agents down from about 3600. About 20 years ago. I have been here for the height and for the level we are at now. It is where we were at about 50 years ago. Some of your not old enough to think about what the world was like 50 years ago but if you are, think about how many more people, how many more tax returns are filed, how much more complicated the system is with fewer people. Substantial declines, we will talk about the good news, but the decreases create challenges. It is a perfect storm. A 56 yearhave over period, you have 1000 agents leaving. And that is leaving for optional retirement. 1000 of your most experienced employees are leaving. Have only hired about 250. Two or three classes of 24 agents each year over the last five or six years is not enough to keep pace. We are no different than any other operating division. Nina and mary beth both talked about their staffing. We are all competing for limited resources. The hiring there are brighter days ahead. We talked about the operating divisions hiring. For us, we have unique challenges. We do not have complete control over the hiring system. We set the parameters and the bar for who we will hire but all of our agents go through the federal agency in georgia. To 100 federal agencies competing for space at that academy. Almost every federal agency is hiring so there is intense competition. It is ironic that we are in about mode and worrying getting our agents through it. I spend a lot of my time i talked about the First Priority being the protection of the core tax mission but the second is the hiring. Getting them in and getting them trained. Our agents go to training for six months befo