The laboratory was put here because they could grow the plants onsite and do the preliminary research. It is exciting project. The laboratory is interesting for many reasons. Part of the reason this lab was so important is that caused the government to come forward with what was called the patent, the u. S. Patent law. Which said if you invented something with plants, and it processs worthy of worthy of patenting, it was issued a patent. History and, the literary life of fort myers florida, including a stop at the botanical research laboratory. On cspan2 and cspan3. And taxnment officials preparers told the Senate Finance committee that a simpler tax code in the National Licensing are the rest bang the best policies for preventing fraud. Included h in our ceo h r block ceo. They were also asked about the legend irs targeting. This hearing is 2. 5 hours. The finance committee will come to order. There is just a week to go before the april 15 deadline. Millions of americans are spending a good portion of the spring struggling to fill out tax forms. The complexity of the code causes errors to flourish. Congress is not blameless. That is one reason it is time to rewrite the tax code and make filing your taxes easier in america. Americans, maybe even a majority, nothing will have a bigger impact on their pocketbooks all year long. The majority of americans want to get it right. But because the tax code is so byzantine and cub located complicated, nearly 80 million americans pay their return. Ring and most of those preparers dont have to meet any standards for competence in order to pair prepare summary elses return. Because of the baffling outcome of the court case, protection has taken as significant below. Us too often seems to be the case, the most bowler ball people will bear the brunt of the effects of this decision. These are often people struggling from paycheck to dayseck, counting the until the refund comes through to help them make ends meet. They could be seniors or working families who qualify for the earned income tax credit. Or they could be immigrants, proud to pay taxes in their n tocountry, and just wanted make sure they are following the rules of the tax code that is hard for anybody to understand. Heres my bottom line. For the second time in 18 years, the Government Accountability office has done in independent inquiry and has found that the absence of meaningful oversight is harming too many citizens who can least afford it. The problems they run into could be as simple as a typo or miscalculation. They could also be much worse. Cases, theygious skipped the line who says to did the work. Then they boosted the refund, filed the return, and pockets the difference. Unless the taxpayer can prove what happened, they are running for the money when out. Rs finds i am proud to say my home state of oregon gets this issue right. With theers keep up theirng code to maintain licenses. Oregon standards work. The gao to collect the system a few years ago and found that the took a look at the system a few years ago and found that oregon tax returns were 72 more likely to be accurate than the rest of the country. There are ways for congress to help in this arena. I believe that comprehensive tax reform must make simplifying the tax code and filing easier. That must be a priority. Committee passed the act last week, practically sent agreed it isenter time to and stop and go policies and give americans more certainty about their taxes. The plan i worked on with former senator greg which makes filing it triples more the standard deduction, which would illuminate the need of 80 to itemize their deductions. Has let ouron charge to protect taxpayers from Identity Theft. Senator carson has also fought hard for taxpayer right. They have valuable ideas on how to solve the challenge. That is the date challenge of today posterior ends. Todays hearings. As long as the crow does code is so overgrown, they shouldnt have to worry about crooked or incompetent preparers. It is that simple. Nk ofld like to tha witnesses. Senator hatch and i plan to work on this issue in a bipartisan way. We welcome your comments. Thank you, mr. Chairman. The day for individuals to complete their income tax reforms returns is one week away. No means of millions of americans have had difficulties complying with the deadline. The majority of americans seek the services of a paid preparer to comply with the tax code. Of the 142 million returns filed by individuals, nearly 80 million, or roughly 56 , were prepared by a paid preparer. Our system relies heavily on that faith voluntary compliance which in turn requires the services of paid preparers who competent and ethical. The irs tried to implement regulations that imposed ethical standards on any person that try to prepare returns for compensation. Fromrs has been prevented upholding those rules. Among the approaches to solving a problem is government regulation. There are other approaches. Our approach is comprehensive tax reform that results in a much simpler and straightforward tax system with fewer compliance and administrative burdens. A less complex system that allows for simpler compliance rules to read it will ruin r errors. L reduce it will reduce the need for complex tax filings and eliminate opportunities to cheat the system. It is my belief the bestwick to taxpayersy to protect is to implement a fair and simple tax system that reduces their dependence on paid return preparers. Towe get there, we need minimize the damage that unethical preparers can cause. Ideas forward to hearing about how to publish this. The commissioner testifying before us today there are other matters that deserve our attention. The Ongoing Investigation into the targeting of conservative groups during the 2010 and 2012 campaign seasons. For congressional committees are looking into this matter. The irs officials have with some exceptions been a walk rating. Cooperating. Been quarter that is why it was disheartening to hear the fact is that the Inspector General used to work [no audio] and in testimony before congress, he stated that the allegations had proven to be true. Furthermore, the commissioner describe the activities as quote targeting during his confirmation hearing. I want to remind you of that. I really appreciate you being here today. More than you know. Seem like we are engaging in semantics. The words we use are important. Administration, rather than acknowledging what went on, is going to engage in work like play to minimize what happened, we will have difficulty minimizing these issues. On top of that, we have the regulatory effort at the irs that is designed to further marginalize the same conservative groups. We are talking about the proposed regulations targeting 501 c organizations. The spectrum have condemned these regulations. They undermine free speech and the ability of citizens to participate in the political process. Number ofd a record Public Comments filed in response to the proposal from all points on the political spectrum. From what i gather, they were almost uniformly negative. This regulation would silence grassroots organizations. Ofwould ensure that a number industry should critics remain on the a number of administration cracks remain on the sidelines. In theuld work both ways future. This proposal was disturbing given what has gone on at the irs with the tightfitting targeting scandal. To me, that is not good enough. Should go awayns entirely. The commissioner has the power to make that happen. Throughout the public debate over the proposal, little has been said in the role of the irs commissioner. As was confirmed by secretary has the commissioner authority to prohibit these regulations from taking place. Thank you, senator hatch. Our hearing will consist of two panels. The first consists of two witnesses. The second includes the General Accounting Office and individuals who are knowledgeable about tax preparation. We have eight witnesses. We hope you will limit your testimony to five minutes. The first witnesses the commissioner of the irs. The second is nina olson. Thank you both for coming. Youre prepared statements are going to automatically be made part of the record. Went up to start, commissioner. Thank you. For the opportunity to discuss irs regulation of paid return preparers. The community is a key ally in our efforts to for fill our mission of Taxpayer Service and compliance. Each year, paid preparers are called on to complete 80 million returns. About 56 of total individual income tax returns filed. A make the irs posture easier by helping clients report their taxes. At the same time, the level of oversight has traditionally been on even at rest. Meet attorneys must mandated competency requirements, they only make up 40 of the universe of prepared return people. That leaves the other 60 without any oversight. Like oregon have regulated unlicensed preparers, but most of the community favors federal oversight to avoid a patchwork of state requirements. Will the majority preparers are competent, there are those who engage in fraud. Others do not have enough training and are not equipped to do an adequate job. Returnthat richard preparers are competent, date and that they launched the Preparer Initiative in 2010. Individuals must register with the irs if they prepare refunds for compensation. The initiative required paid preparers who are not cpas or attorneys to pass a competency exam and complete education requirements. The irs also extended the asical rules, commonly known Treasury Department to 30, to all preparers. This allows us to suspend or otherwise discipline preparers who engage in unethical or distributable conduct. Since 2010, more than one million individuals have registered with the irs and obtained a number. ,s of next last month, 677,000 preparers were active in our database. They must use this as the identifying number and returns on returns they submit for compensation. The irs has a comprehensive compliance and enforcement strategy. Note that thet to registration requirement gives the irs a better line of sight than ever before. The information we obtain through the registration process helps us do more to analyze trends. Spot anomalies. The irs announced the testing phase of its return program in 2011. The test was designed to develop 84,000 testsour were given. He pass rate was 74 this means that 26 were unable to pass. The education requirement consisted of 10 hours of federal tax law topics, three hours of updates, and two hours of ethics or professional conduct. Lawsuit resulted in a Court Decision that the testing and education requirements in january, 2013. An Appellate Court upheld that decision. It is truetinues that preparer registration does help identifying the bird butared commit competency and continuing education may put us on a path to insure all preparers provide the appropriate level of service to taxpayers. Level services will translate into improved overall Tax Compliance. And certainly with that, more administration more effective administration. Urge congress to pass the item that will require us to regulate preparers. In the meantime, we are taking a close look at the possibility of an interim step involving a program of voluntary continuing education. Before moving forward, we will solicit feedback from a wide range of external stakeholders as to whether such an interim step would be useful. The better solution is for congress to grant us authority to provide better oversight. This concludes my testimony. I would be happy to take your testimony questions. Members of the committee, thank you for holding the hearing on a subject i consider among the most important for u. S. Taxpayers. Nearly 150 million individual taxpayers filed tax returns every year. Many jointly with their spouses. A significant majority of taxpayers he paper bearers to prepared pay preparers submit their returns. In recent years, around 80 of filers have received refunds. The average refund amount is a little under 3000 per return. Often higher for low income taxpayers. Preparer does can have a significant Financial Impact on the taxpayer. Professionals whose work affects the Financial Lives of their clients are widely regulated. Anyone can hang out a shingle as. Tax return preparer no skill is required. I know this well because i began my prepare career in tax preparation in 1975. I hang out a shingle hung out a shingle. Widely Available Software packages. To do my job, i had no choice but to study and learn. One next we had to know something about the tax law to be a return preparer. Payers had some assurance. Today, there is no such assurance. These transformational changes have taken place in the return preparation field. First, the advent of software has eliminated barriers of entry into the profession. The impact meant of refundable the enactment of refundable have a and preparers financial incentive to inflate refunds. As a result of the radical ianges in the industry, congressed that certify these preparers. I recommended that congress strengthened Due Diligence requirements. There is an important distinction between these approaches. Well Due Diligence is an important part of any due only occurs after the taxpayer has been harmed. Prevention is less costly and more effective. Congress should clarify that the irs has the authority to establish an him standards for the unenrolled preparer population. They should require test and continued education. The only argument i have heard against this is the cost will be passed onto the consumer. The per taxpayer cost of the Program Director was implementing seemed very reasonable compared to the far more significant cost the gao and others have found. Where errors cause some payers to over pay by thousands of dollars and others by to underpay and then face irs enforcement action. In the absence of clear legislative authority, i believe the iris should do the following. Offer unenrolled return preparers the opportunity to have a voluntary certificate. Ofond, restrict the ability preparers to represent taxpayers unless they earn the certificate. Mount a Consumer Protection campaign that educates taxpayers. Reminds taxpayers to obtain a copy of their tax return with the preparers signature. Ae iris should develop database to include all preparers that register with the irs. The vest and enforcement best enforcement is to have an informed and educated consumer face. In this instance, taxpayers. The clearcut ways to do understand which preparers meet levels of competency and which are not willing to make the effort. That is why having a mandatory designation along with cpas and attorneys is so important. It it is a line that the taxpayers can understand. Missiles and, thank you. Olson, thank you. You are the National Taxpayer advocate. It is your job to go to bat for the kind of people we are seeing getting sleaze fleeced. I would like to you to amplify on the new incentives and opportunities for the unscrupulous taxpayer to rip people off. Could you describe that in more detail . There are several ways. One is entities that would not normally be involved in the profession of return preparation use the ability to give advance loans on the refund to cross cars theyds, whether could purchase with the down payment but at high interest rates, or just simply be loan product itself. Like paystub loans. Fraud. Er is out and out where preparers will take the taxpayers return after the taxpayer has approved it, its items they will inflate on the return and pocket the refund. Then the taxpayer find out about this when the irs is contacting them insane, you always taxes. Them to be engaged in a long and extended conversation. The preparer is long gone by that point. I appreciate your clarifying that. Id be that the standards were adequate even before we saw taxpayers bumping up against the kind of problems you are talking about. I appreciate your demonstrating. That is usually the case that the unscrupulous or always one or two steps ahead. I gather, so were clear on this hast, the loving decision created new problems in terms of protecting taxpayers. The decision, first of all my reading is it did not owe to the fact of whether regulation is desirable. It addressed whether the irs has the authority to regulate the taxpayer. Right now, there is an injunction against the irs being exam andmplement the education requirement. That is an obstacle. We can register taxpayers but cannot require them to be tested. How limited are the tools that are left, given the loving decision . Is there are some 12 left that they are narrow. They dont go to the heart of what you have been talking about. Protection against the unscrupulous preparer. I share the view there are many if that the majority of preparers who are honest and reputable. But it sure looks like some new opportunities, trapped indoors, have been accreted for those who are unscrupulous. Given thew decision in the loving case how restricted the tools are. The irs has penalties that can apply against preparers it identifies. Incomeires in the earned credit for preparers to complete Due Diligence certification. We have the ability to seek an objective release in jumped of root injuctive relief. But the irs cannot audit itself out of the situation. It cannot apply penalties or even do injunctions with 1. 2 million preparers. It can get the kind of competence that we need to engender by doing oneonone audits. We need a much rotter approach. Taxpayers need the designation so they can say, this is someone that has decimated competency. I appreciate that. And especially the last point. We need a system that upfront to those who need these services where the, as you call it, the bright lines are. And where you have to go to get the Consumer Protection. In the alternative to that, but we are stuck with his reactive kind of tools where you are playing catchup. Is that a fair appraisal . The taxpayer has already experienced the horror harm. Is helpful to have your views. Senator hatch. Let me ask you what the irs is doing to educate the public about how to set up lacked select a competent preparer . And what else should do . Alluded to answer to this, but i would like to have more. As part of our outreach, we provide a wide range of information and advice to taxpayers trying to trying to assist them. We advise people they should be preparerho their tax is. They should check them out. There is no way we ca