We havewe have a few other things that are going on. Members will come in and out. They are here today is to examine Taxpayer Advocates 2015 annual report. The Taxpayer Advocate is a statutorily required to provide a report toa report to congress and must also identify 20 of the most Serious Problems facing the american taxpayer. Our personal note i want to say thank you for coming to Western North carolina. It just shows their going to extra mile. I would also like to thank you for your dedication to working to protect the american taxpayer. It was also interesting to see the other information of us helpful to understand about Tax Administration. As far as this years annual report, as we looked to spend considerable time discussing the future plans that are currently being developed, this plan will lead to a greater Electronic Tax Administration an online service. We obviously have a witness year from my home state of greensboro North Carolina. A positive an important trend. Want to make sure that we have the responsibility to ensure that these are done in a safe, secure manner that protects information and rights of the taxpayer. I would welcome comments of the Taxpayer Advocate on this topic as well as the chairman of electronic tax a ministration Advisory Committee conducts the oversight of the irs future state plans. The report also discusses troubling trends and proper payment of the earned income tax credit mastering the Affordable Care act. The itc is one of the largest and most important tax credits available below incomefor low income tax players and the Taxpayer Advocate report has been estimated 27 percent in the itc clients roughly 17. 5 million. Potentially a massive waste. We look forward to hearing more from the Taxpayer Advocate about what is being done with regard to the itc payment program. Regarding the aca, the irs is seeing massive overpayments of the individual mandate penalty fee. Last year approximately 412,000 taxpayers overpaid by an average of 123 per return. The irs is to help taxpayers understand precisely what is the penalty for payments under the aca. The employer shall responsibility payment. We have sworn constituents my district as it relates to the complex issue as well. The irs is not issued any clear guidance to help this document the payment obligation. Furthermore, the Taxpayer Advocate reports the irs is not poised to handle as complex cases, lacking the specialized training needed to do their job effectively. So in short, the aca has closed burdensome requirements on the american taxpayer, but thetaxpayer, but the irs is not doing enough to help the public understanding why. I look forward to hearing from both of our witnesses today, and i want to thank each of you for coming. I will now recognize the Ranking Member providing an Opening Statement instead of mr. Conley. She is now recognized for her Opening Statement. Thank you very much, mr. Chairman. Good morning to you. I 1st want to thank them for the work that they do and for being here today. I sincerely believe the work that you both do on behalf of taxpayers in congress is vitally important, especially this time of year when americans are filing a taxes. Frustrating. I think i have stomachaches during this time of year. I hear from my constituents find themselves this time of year frustrated and stressed. I appreciate the form year thanyou have been Holding Around the country listening the stakeholders and pastors alike we can learn what there concerns are and how we can find solutions. Many of these frustrations stem from having a difficult time getting through to a person at the irs for this the long wait times for calls were not having a call answerable. Unfortunately, this less than Robust Service is not unexpected. In congress lashes the inflationadjusted budget of the irs by 1. 2 billion, i doi do not know what we could expect to happen to Taxpayer Services. You addressed this in your report, the national Taxpayer Advocate has been recommending against significant reduction in the irs budget because reductions of this magnitude on taxpayers. Because of the budget cuts congress has imposed the irs has cut staffing and now has 13,000 fewer fulltime permanent employees. Because of the budget cuts irs it systems are totally obsolete. Some of the systems day back i thought this was a typo, but it says kennedy administration. The systems are so old that young it professionals and recent College Graduates do not know how to work on them. The irs does not find people who can cold in those languages i run the systems. This is absolutely unsustainable. The irs has outlined his plan to modernize its it system, create efficiencies through online taxpayer and future state initiatives. Congress needs to fund this initiative so that we can reverse the trend of degrading Taxpayer Services because of the cuts we face. Congress approved 290 million in additional funding. Which was a step in the right direction, but we need to make strides, steps. With Online Customer service not being a onesizefitsall, there are millions of taxpayers who do not have access to or feel comfortable doing Financial Transactions online. The irs needs to take this into account. I understand you have concerns about this plan and i look forward to hearing from you today in the irs needs to take these concerns into account. The irs needs to be transparent and engagement taxpayers in congress is the develop the future state initiative. He also raised an excellent point when you state, in this environment it is easy to bash the irs. This bashing and turn can produce a mentality in the irs that makes it wary of sharing things with the public until their absolutely finalized. That means they will almost certainly miss things process that because it is not engage the public before they become set in stone. He also recommend congress assert Oversight Authority and its is the irs come sooner rather than later to explain the specifics of the future state initiative. He also state, it is important that these hearings be kept separate from the hearings congress has accepted over actual or perceived irs shortcomings. Letting us see their plans and initiatives and thoughts on moving forward, not just having hearings about what specifically they are doing. Speaking directly to this committee, were you not . I, republican colleagues to bury the hatchet so that we can Work Together to improve Taxpayer Services for all of our constituents. Thank you very much. I think digital woman for her comments and want to follow up briefly on that. We start to look at problems in the federal government, pain with a very broad brush had the opportunity. You know i have the opportunity to visit some employees at the irs as part of a longer process or not only to revisit them here but throughout the country as you and i have discussed. And so i want for the record today for all those irs employees, the vast majority of them, want to serve the american taxpayer only a professional manner that in one that is indicative of Customer Service, the best of the private sector. I am committed in a bipartisan way to make sure that we address the real problems and focus on that. Applaud those the day in day out. I would like to say to all the record open now recognize our panel of witnesses. National Taxpayer Advocate of the Internal Revenue service. Chairman of the electronic tax a ministration Advisory Committee and the Internal Revenue service. Welcome to you both. All witnesses will be sworn in before the testify. Please rise and raise your right hand. He is on the swear or affirm the testimony you are about to give will be the truth, the whole truth and nothing but the truth . Thank you. At the record reflect the witnesses answered in the affirmative. In order to allow time for discussion and questions we ask that you limit your oral testimony to five minutes. The entire written statement will be made part of the record. Ranking member, distinguished members of the subcommittee, thank you for holding todays hearing on the national Taxpayer Advocate 2015 annual report to congress. Identify the irs state plan is the number one most serious problem for taxpayers and will focus on that issue in my testimony today. To my mind taxation involves taking money from one person and applying that to the greater good of many if not all. An extraordinary thing as people willing to offer up there hardearned or save dollars to let the money be applied to everyone. The central question tax ministration is out of the comeau that willingness . What is the need to do that expand taxpayer willingness . Drive the current and future state. Taxpayers are experiencing many problems today because the irs asked lacks adequate records. Since fiscal year 2010 we estimate the irs budget has been reduced by 19 percent on an inflationadjusted basis. A huge reduction for any organization, particularly one is laborintensive is the irs. Congress is given the irs an additional 290 million which is helpful, and i am hopeful congress will continue to provide additional funding in the coming years to ensure our nations taxpayers receive the assistance they deserve. Budget constraints of greatly influence the irs future state plan that envisions how to cooperate. A central component is the creation of and reliance on online taxpayer accounts. They believe online accounts will produce significant cost savings and enable it to substantially reduce expenditures. The crux of my disagreement boils down to the taxpayers will ultimately use online accounts as a substitute whether they will use them as a supplement for personal service. While i have long advocated that the irs will offer online account access, i believe the irs is wrong in assuming online accounts will substantially reduce taxpayer demand for telephone and facetoface assistance. For many reasons including the millions of taxpayers do not have Internet Access for millions of taxpayers with Internet Access to not feel comfortable trying to resolve important financial matters over the internet, particularly in the face of massive Security BreachesOnline Government systems, and many taxpayers are not cookiecutter, thus requiring a degree of backandforth discussion that is better suited for conversation and the taxpayers will insist upon. Therefore, it is critically irs not develop future plans is to assume cost savings that may not materialize. The irs likes to say it needs to provide the same type of service the Financial Institutions provide to their customers. Well, thewell, the results of the most recent annual survey conducted by the board of governors shows that while mobile banking users utilizing technological platforms at a high rate and on a consistent basis, they have also maintain connection to the banks through the more Traditional Branch and 18 channels. Yet despite this evidence of Consumer Behavior in the Financial Sector for several years the irs is been reducing facetoface Taxpayer Service options and Taxpayer Assistance Centers and it has recently decided to switch to an appointment only system by the end of 2016. The tax previously known will no longer accept taxpayers. And the irs is conducting a pilot under which it will not even accept tax payments for walkin taxpayers. The irs will use the data to justify further reductions in service. As a basis to cut the service further and eliminated entirely. To me that is disingenuous. I believe the irs must adopt, as its north star, the needs of the vast majority of taxpayers who are willing to comply with the law. I use the word willing deliberately because it includes taxpayers who may not now be in compliance. These are taxpayers who want to comply but for one reason or another are not able to. My point here is that rather than designing tax it ministration around the minority of those deliberately avoiding tax payments, we should make it easier and clear for the willing tax payers to comply. In my opinion any plan will fail unless they change their focus to do a better job of listening to taxpayers and the representatives about what it takes to maintain and in hands voluntary compliance. Thank you and ill be glad to answer any questions. You are recognized for five minutes. Thank you. If you will push that red button or it will be read once you push it. Thank you mr. Chairman and thanks to the subcommittee for holding todays hearing on that National Tax Payers advocate annual report to congress. They are critical voices of the rights of all taxpayers and the improvement of taxa ministration. Each year nina olson and her team take a very productive approach to reducing Taxpayer Burden and increasing overall comply advisor is formed by law to make strategic recommend to congress on how to improve overall Tax Administration through a electronic means. In short we are an outside consultant to the irs. In the past few years big challenges. The first is Identity Theft in the second is in adequate levels of the Tax Payer Service at the irs caused by an antiquated Customer Service model. The committee believes the key solution to both of these problems is a more innovative, digital irs. Most of this is outlined in their future state initiative. To address the urgent problem of tax Identity Theft, they have formed a Security Summit. We applaud this coalition with the industry and will be working together with this Important Group to find a solution. Authenticating taxpayer identity is absolutely foundational to a digitally enabled irs. Today im gonna focus on the future state of Taxpayer Service at the irs. First lets take a look at where we are today. The most taxpayer, interacting arrest is not quick or easy and its mostly done by paper and phone. Most have no idea about their Tax Information or their status at the irs. When they do have to interact with the irs, theyre often greeted with long wait time and answer periods. These are big problems, especially for the 43 of taxpayers who have to interact with the irs outside of filing a tax return. The irs current state and their history could be feeling quite pessimistic about modernizing but they have contributed to a digital plan. It outlines how taxpayers should be served by their tax administrator. An ideal Taxpayer Experience allows them to fully understand the tax obligations, have transparent access to the information and allows them to interact with their tax administrator in a way that they want to be served. These are big things with but they are not revolutionary. First it will need transparency when there is hardly any today. Taxpayers will get information customized to their circumstances including their responsibilities. The future state would also mean real time Taxpayer Service and they will be able to interact with the irs online. What about taxpayers who want or need to deal with the irs in person or by phone . These taxpayers are not left behind. Its true that increasing numbers prefer interacting online but when they create Digital Tools they can meet their expectations. By doing so theyre also free up phone lines for taxpayers who really need and prefer human interaction. The irs will meet taxpayers where they want to be served whether its online, by chat or other they need to allow the irs to maximize its limited resources. It creates targeted capacity to serve all taxpayers the way they want to be served. It endorses the Digital Service components of the irs future state plan. To take it a step further, we have advocated to congress that they actually accelerate these plans. This wont be easy. Oh they have many obstacles to overcome. Thank you for inviting us to testify on this important topic of the future state of the irs. Id be happy to take your questions. Thank you so much. The chair recognizes the vice chair of the Government Operations subcommittee, the gentleman from washington. Thank you mr. Chairman probably the three of us being here indicates that we dont work for the irs. So why are we here. I certainly agree with the comments he made about the general irs employee attempting to do their job, a a difficult job. Ms. Olson, 2015 is the first year that they had to implement a number of measures tied to the Affordable Care act. For example, one of those being the employer shared responsibility. Your report suggested that the irs doesnt know which employees are going to be