[inaudible conversations] [inaudible conversations] the committee will come to order. Before we began i now, i know speak for anyone here when i wish our Ranking Member a belated happy birthday yesterday. And lets have some cake later so lets celebrate. But late happy birthday. We appreciate serving with you. Thank you, commissioner werfel, for appearing before the ways and Means Committee a little earlier than usual this year. We have a lot to go over with use appreciate you answering the request of our members to come before the Committee Early this year. First, as it pertains to the current 2023 tax Filing Season i want to thank you and your team for the Technical Work to ensure the quick and without delay implementation of provisions of the tax relief for American Families and workers act. We particularly appreciate the steps the agency is taken right now to be ready to immediately implement the legislation once the Senate Passes the bill and it is signed into law, especially with regard to adjustments to the Child Tax Credit. I think were also largely aligned on the boards of rooting out fraud in the Employee Retention tax credit program. We look for different about your efforts not just in a limiting the fraud but also making sure that Small Businesses across america who filed legitimate claims receive their credit as soon as possible. While im grateful for your partnership in these efforts, it wont surprise you that also have a number of concerns about the Biden Administrations approach to the irs and about the irs handling of several important issues. Last time you were before this committee the irs had chosen to lay a provision of a law crafted of the Biden Administration and Congressional Democrats that would syntax forms the 44 million americans, just for engaging in transactions over 600 in a year. This includes this includes transactions like simply selling a used couch or a concert ticket through a thirdparty payment platform. Once again, the irs unilaterally chose to delay implementing the law for sending these forms. This time in an election year. To be clear, republicans are united behind repealing this terrible policy, and i want to thank representative carol miller for her leadership on the repeal effort. But the way to fix this terrible law is to repeal it, not to use the irs to shield the Biden Administration from the consequences of its own policies. Also, last time you were before this committee you said the irs would not retaliate against whistleblowers. One of the irs whistleblowers who has appeared before this committee has since alleged the irs retaliated against him for exposing the truth about the dojs preferential treatment of hunter biden. I hope you will share what steps have been taken to protect whistleblowers. Just a couple weeks ago a a je sends an irs contractor to five years in prison for the greatest theft of taxpayer information in american history. I think the department of justice woefully, woefully under charged this individual. But im pleased the judge applied the maximum sentence available to her. But this story doesnt end with that case. The irs must be accountable for allowing this that to have ever happened. And must ensure that it takes is security vulnerabilities at the agency. A recent report from the Inspector General described along with details about how current irs security flaws that demonstrate the problem has not and has not been resolved here i hope that you will commit today to address their findings quickly for the sake of millions of taxpayers. We have serious questions about numerous other issues such as the implementation of an irs direct file scheme that the American People didnt ask for, how the irs is spending its windfall of 80 billion in fantasy land claims about how much revenue the Agency Thinks it will generate from increased audits. Frankly, more of the irs is time and resources should be directed toward improving its Customer Service for its existing duties, not spending money and resources on new systems no one has asked for. Part of that focus should be on deploying new technology to make the irs more efficient. Proper use of technology can help avoid the need to hire thousands and thousands of new employees. I want to thank mr. Schweikert from leading the charge to ensure that the irs is taking advantage of new technology to help taxpayers. Clearly, there is a lot the irs needs to answer for, and i look forward to hearing how your agency plans to follow the law and protect taxpayers moving forward. I am pleased to recognize Ranking Member neal for his Opening Statements for thank you, chairman. We want to welcome the commissioner back to the committee on ways and means. As always, its delightful to have you with us in the middle of what promises to be another recordbreaking Filing Season if the dedication of employees of the Internal Revenue service is remarkable. We want to thank them for their commitment to our taxpayers and their Tax Administration, emphasis on the word fare. And for this recommendation of the Inflation Reduction Act. Last unless he was a first impact by the democrats will to your investment from this historic legislation. While Taxpayers Service was dramatically improve it was really the consequence of a well laid wellfunded plan results can be quite remarkable. In this era of service to americas taxpayers the irs delivered its goal 87 quality level of service. 3 million more phone calls were answered while wait times were cut from 2 40 minutes to three minutes, over 140,000 additional taxpayers were served in person. The backlog was a limited and many Digital Tools were introduced to make Taxpayer Experiences even easier. A reminder to our republican colleagues, many of the recommendations that we entertain and discussed this morning came from commissioner rettig, republic of the work with all of us to ensure quality service. We know that expectations have an increased based on the success of the irs has had so far. It was just less you that we discussed the future of the irs the ability to hold top 1 of tax cheats accountable and in a matter of months over 500 million were recovered from 1600 wealthy tax avoiders. Another major victory is taxpayer fairness and a victory for the irs. A reminder, if the revenue is not collected in a fair manner that meets the rest of us pay more. The biggest threat to the irs right now is extremism of some of our colleagues. From the government shut down the looms in just five legislative days tour colleagues to cut her investments every chance they have gone, that only with this end up costing taxpayers money and adding to the deficit, but how can you argue with the success . I find this a wondering out loud about who wins with the irs is stored for its resources. Perhaps our colleagues love a chance to answer that this morning. Under republican funding cuts the audit rate on millionaires fell by more than 70 from 20102019. Those are numbers of commissioner rettig and automated large corporations felt by more than 50 , i request an commissioner rettig. Workers and families pay their fair share in the American People can count on us to ensure that wealthy and wellconnected people are paying their fair share, too. While the promise of direct file here, im optimistic that some prospects, im disappointed it wasnt already time for the public to take advantage of it. I want to thank you, commissioner, for your diligence being here today we look for to continue work on the behalf of the American People. With that i give back the balance of my time, mr. Chairman,. Thank you, Ranking Member neal. Todays so what is his commission of the Internal Revenue service danny werfel. The committee has received your written statement it will be made part of the formal hearing record. Commissioner werfel, you may begin when youre ready. Chairman smith, Ranking Member neal, and members of the committee, thank you for the opportunity to testify on the Filing Season and irs operations. I am pleased to report that the 2024 Filing Season opener on schedule on january 29, and is gone smoothly so far. Along with Filing Season and other daytoday operations, we continue to make important progress in our efforts to transform our agency through implementation of the Inflation Reduction Act. Using ira funding is centered on three fundamental themes. First, ensuring taxpayers can easily contact the irs, whether in person, on the phone, or online. We want them to get help navigating complex tax laws and accessing the credits they deserve. Second, identifying the growing number of taxpayers with complex returns, including certain wealthy individuals, large corporations, and complex partnerships your shielding income to evade their tax responsibility. We want to collect from them what is owed. And third, addressing the growing risk of tax scams and schemes like protecting honest taxpayers from them. We want to root out the nefarious actors that perpetrate them. These investments allow us to strengthen the overall effectiveness of irs operations. As commissioner i want people to know that the irs is on the side of taxpayers, and were working to reflect that in every aspect of our operations while administering the nations tax laws. The irs has been working hard to build on the accomplishments of last year. Our transformation goals for this Filing Season include providing an 85 level of service on our main toll te phone line during the Filing Season. On the compliance side we continue to increase scrutiny on those who evade taxes. We are working to reverse the historically low audit rates for large corporations, complex partnerships, and high wealth individuals. During the past year the irs has taken dramatic steps to strengthen our internal systems, protocols and procedures by putting in place numerous improvements to bolster how we protect the systems and information. Our recent steps enabled with new funding have sharply reduced risks for taxpayers and tax system. While taxpayers should rightfully be concerned about recent reports of the unauthorized access and disclosure that occurred in the 20172021 timeframe, the Data Security environment at the irs is dramatically improved today. We have worked tirelessly this past year to close gaps that allow this unfortunate event to transpire. However, there is always more to do in this area, and well continue our laser focus on strengthening Data Security. Another important aspect of our mission is simple but in the tax fairly and justly. A key part of this involves making sure everyone pays the taxes they owe. But we also have a responsibility to protect taxpayers from being overly burdened in fulfilling their Tax Obligations. We work continuously to balance these two backsides of the nation. This is an issue we face in implementing 600 threshold for 1090 9k reporting that Congress Passed from 2021. While its import first of information provided under the lower threshold, we must also consider the burden placed on taxpayers in meeting this requirement. Our administration of tax laws should be guided by what is best for taxpayers. In this situation we delayed imposing the lower threshold because we realize that he needed implementation pose a high risk of taxpayers being confused, and given the complexity of the 1099 reporting, some potentially paying taxes they didnt actually out. Thats something we take very seriously and will do everything in our power to avoid pics of the irs is continuing to work to reduce that risk before imposing the 600 standard for business transactions. We will continue working this and getting feedback from key groups are also want to assure the committee that the irs is paying close attention to the potential passage of the Child Tax Credit legislation. If Congress Acts, the irs is poised to quickly implement it, building off parts. With Economic Impact payments during the pandemic we may be able to start implementation as early as six to 12 weeks after passage dependent on the bills final language. But taxpayers should not wait for this legislation to file their returns. We will take care of getting any additional refunds to taxpayers who have already filed. It wont need to take additional steps. Chairman smith, Ranking Member neal and members of the committee, that concludes my statement. Im happy to take your questions. Thank you, commissioner. We will now proceed to the question and answer session. Commissioner werfel, as you know the house passed the tax relief for American Families and workers act, including adjustments of Child Tax Credit which is recently touched on that. I want to ask some additional questions to make the record reflect appropriately. But the bill passed Business Committee by vote of 40three and received 357 votes on the house floor. As i mentioned in my opening statement, i appreciate the work you and your team have done to help ensure that the bill can be implemented as quickly as possible. I just want to confirm a few details with you. The overwhelming majority of american taxpayers are guaranteed to have no adjustment to the Tax Liability due to the Child Tax Credit changes in this bill. In fact, can you confirm that only roughly 10 of households will be affected and will be received modest adjustments to the tax refund pgh yes. In fact, a look at the numbers come look at the same eligible population in fiscal year 22 and was about 22. 5 2. 5 million people. So that that you offered is in line with her understand is how its going to impact taxpayers going forward. Thank you. We work with your team to make sure the bill that the place a new burden on taxpayers and can be implemented without delay. Can you confirm that taxpayers do not need to file amended returns to obtain the adjustments the bill makes further speeding things up . Yes. Thank you. There is language in the legislation requiring the irs to process in a additional returns without delay. As a matter of fact, that was language we added during the market in this room. If the bill is passed by the senate and signed into law, how quickly will you be able to make the Child Tax Credit adjustment for this Filing Season . In other words, how long will it take after bill signed up for the irs to send that y additional refund . We gave you a range of six to 12 weeks required for implementation from the point of enactment. The reason we give a range is because we need to see the final language, but uncommitted to work diligently to make sure were closer to the six week end of that range than the 12 weeks. I appreciate hearing that, commissioner. So just to be clear, we have your commitment that the irs will move as quickly as possible . It will be a top priority to make sure that this gets done. Thank you, sir. In the past, congress has asked the irs to make changes during tax Filing Season. In fact, congress has asked the irs to make much larger changes than this bill does like sending stimulus checks to hundreds of millions of taxpayers, are creating a monthly checks and excessive for the Child Tax Credit on the fly. The number of taxpayers affected here is a fraction of those affected in those other programs. Given that, can you confirm the administrative adjustments needed to implement the tax will be for american and workers act are in much lighter lift for the irs than for those other programs . Yes, and mr. Chairman, the work that we did to implement the payments that you referred allowed us to build additional capacity to make a Stephen Moore ready for this change. Thank you, sir. Commissioner werfel, the individuals who stole and disclose the Tax Information of thousands of americans has now been punished with a sentence of five years in prison. While im glad the judge in the case sentenced him to the maximum available to her, i was surprised that the department of justice only charged the individual with one count, one count of unauthorized disclosure and no other crimes. Did you make the recommendation to the department of justice on how to charge in this case . No. Thats not the role of the irs commissioner. We allow and defer to the justice, department of justice on prosecutorial decisions. Do you think one count of disclosure matches of the crime committed . I think that protecting taxpayer information from unauthorized access is an absolute solemn responsibility of the irs. And also believe this individual betrayed the trust, he betrayed his own commitments. He betrayed irs employs in place and he betrayed the american tax people. And based, and the type of the troops should not be tolerated, and based on whats playing out in court its