Remain confident we can find a way to have a strongly bipartisan markup, and ill wrap up by saying my sense is this place cant have enough come mitty thats comity with a t, and i thank you for your efforts to work with us and i look forward to the houring. I look forward to looking with you. We make good team. Well now proceed with our scheduled hearing on taxrelated matters. Every year, the committee holds a hearing own thanks Filing Season, provides us as discussion toing a charged with administering our complicate, convoluted tax code and collect taxes. Taxpayers face new challenges as the file their tax returns. Including but not limited to protecting their private information. Today we will discuss among other things the irss efforts to address these types of challenges and times for progress and modernization. The finance committee has always taken the oversight responsibility with the irs very seriously and for good reason. The irs is the only federal agency that deals with every american citizen, everyone who does business here, every large employer, every mom and pop business and every community organization. Our tax code as grown more complex and we have begun the irs more and more to do includings a mr. Ing social policy and implementing rules, regulations and notices. Frankly i dont think many people are satisfied with the results. I know the people the agency often point to limit funding, there are other matters that have contributedded to the current level of dissatisfaction, including outdated collection practices and bureaucratic wrangling and poor management decisions. This committee has conducted oversight on a number of those poor decisions, including the privatization of Tax Administration, excessive spending on executive travel, and improper contracting practices. Congress needs to look closely ther is and modernize and streamline the processes, including changing the Technology Used by the agency and elimination bureaucratic waste. Hopefully today we can gate better sense of the agencys plans to address these and other issues as well as suggestions for congressional action. Of course, looming over this conversation is the ongoing and hopefully bipartisan effort to reform our broken tax system. Tax reform if done right should simply identify the tax code and make the irss job must each er and allow the agency to focus on collecting revenue in the first fairest and most efficient manner possible and should improve the way the taxpayers interact with the irs, reducing billions spent just to comply with the tax code and filed accurate returns elm the irs is probably the most feeder of all Government Agencies elm irs yields immense power and authority over the lives our citizens and for Hardworking Taxpayers direct contact with the irs is rarely if ever desire able. We can improve this but will require significant changes to the tax code and the irs. Toward that end i appreciate commissioner koskinens willingness to appear today and look forward to a meaningful and substantial discussion of these issues and i personally appreciate the work he has done. We have a good relationship. He has worked well with me and i personally want to thank him and tell him i appreciate him and appreciate the service that he has given to this wonderful country. With that ill turn if over to senator wyden for his comments. Thank you, mr. Chairman. 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 traditioning for decade but this president will choose to keep hiding his returns and ignore this very slow ethical bar even though its clear his blind trust is not bottom line at all and the separation he promises he would make from his businesses seems to be nonexistent. Second, around this time of year, is when the hole executive branch gets on the same page to pitch its proposal. This year the one hand doesnt know what the other hand is up to. On the one hand you have the treasury secretary, who came before the 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 tax tear data, employ the tax gap, improve Customer Service and 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 has not happened or, if it did, the message didnt get through. When the public get to the first glimpse of the trump budget the irs didnt get the investments senator mnuchin talked about when he was here the committee. For next year, instead it got another 239 million cut. But that would mean is that Customer Service would get worse, more taxpayers would fall victimmers to hacker ands 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 family use to fill out theyre Financial Aid forms is down because of Cyber Security problems. Hackers were using stolen personal information like names, birth dates and Social Security number to steal taxpayer dollars. Youd think an administration that talks about running government like a business would want to go out and invest in Cyber Security when it finds a hack. But that is not what is 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. And i want to close with a couple of comments as it relates to this whole discussion of tax reform that the chairman mentioned. Usually around this time, taxpayers are collecting all their forms and receipts, theyre sitting down to file taxes and theyre saying, will the congress ever manage to simplify the mess we call the tax code and help the middle class . And they might even be a little hopeful walls the heard the president and members of Congress Says tax reform is right 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 and for the typical working plan there isnt a lot in the trump plan or the house blueprint that helps the working class family get ahead and some respects it looks like theyre getting a tax increase simple close, mr. Chairman, by way of saying that me, right 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 okay camen island d kay men island and then the other sim for those who are fortunate who can hire lawyers lawyers and acs and take advantage of these murky 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 buy when sit by when you have 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 twoyears to produce a bipartisan comprehensive federal income tax plan, and danny coats when he was on the committee did exactly the same thing, but, mr. Chairman, what we have to do is get away from the partisan, reconciliation only kind of approach, and say, from the getgo, democrats and republicans, as you and i do so often, sit down the outset and try to make sure that weve 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 lot of members on our side of the aisle who would like too work in that kind of vin and n and i look forward to that process. With us today john koskinen. Confirmed to this position in december 2013. Before coming to the irs, commissioner koskinen served for years as a nonexecutive chairman of freddie mac and he was the acting ceo. Prior to that he held various positions including president of the u. S. Soccer foundation, deputy mayor of the district of columbia and. The onb and spent two decades in private sector, the pal merery palemeri co. He worked in various legislative and Administrative Offices in federal and municipal government and a number of years practicing law. Commissioner has 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 and we like to have you please begin with your opening remarkss and lilt your Opening Statement to five minutes. Thank you mr. Chairman, chairman hatch, ranking maybe wyden, and other members of the committee. I appreciate your words of support. Im pleased to report that the 2017 Filing 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 152 million. We have issued over 74 million refounders more than 213 billion, with an acknowledge refund totaling 2,900. The 2017 Filing Season is noted for a change congress made. In 2015 that took effect this year. It requires the irs to hold tax returns until february 15th february 15th each year if the claim if they claim the earned income tax credit or this change slowed the pails of refund early on but the pace access railed with the release of 50 billion in eitc and act refund 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 day of forms w2 have helped the irs spot incorrect or fraudulent returns. Receiving w2s earlier also allows us to release refunds to compliant taxpayers more quickly, avoiding unnecessary delays inch record to phone service, we are again seeing an improvement level of service on toll free lines as we did during Filing Season 2016. Our phone level of service is returningve 76 . We anticipate the average for the Filing Season will be 75 . The improvement is the direct result of additional funding grantedded by the congress in 2016 to improve service to taxpayers and strengthen Cyber Security and expand efforts against id the. The funding freed up resources to reduce the corporations inventory. The inventory totaled more than 850,000 pieces 60 corporations the end of fiscal 2015 and thats knew down to 660,000. We continue to experience Strong Demand for our online services. Taxpayers are visited our web site, irs. Gov. And the owhere i miss refund has been yankees more than 228 million times. And direct pay allows taxpayers to make payments online has been used. A brand new tool, the balance defeat tour, lets taxpayers view their irs account, balance online, including the amount they owe for tax, penalties and interests. This tool has been used 547,000 times since it was launched in november. The new balance defeat tour is also important because it represents the first step toward a fully functional irs online account for taxpayers. Were developing this as part of the efforts to enhance and expand Important Services for all taxpayers no matter their circumstances. Service at taxpayer assistant centers has improved this year. In recent years, many Assistance Centers sufficient such heavy demand that taxpayers were lining up for hours before the centers open. In 2015 we tested the idea of letting people make appoint appointments in advance, and we have no reports of long lines so far anywhere in united states. Another important area is the growing problem of stolen identity refund proud. We have made progress protect against the crime some it was improved thanks to Security Summit group, strong unique partnership between the public and private sectors has produced results. In fact, the number of people who reported to us 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 system are still catching a large number of fault returns. Last year our system stopped more than 6. 5 billion in fraudulent refunds on 969,000 returns filed by identity thieves. This showed that Identity Theft is still major threat to Tax Administration and we need to keep up the fight. Turning to legislation we recognize the congress is considering tax reform. The irs does not take a position on policy issues but we do have a great interest in work 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 and members of the committee, that concludes my introductory statement and i look forward to your questions. 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 after it became apparent that data thieves may have used previously stolen personal information of taxpayers to access the system and obtain additional sensitive Tax Information. I appreciate the confidential briefing the irs provided to 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. 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 the warning . 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 probable live problem two years ago i asked the agency to look at every way anyone gets either money or information out of our systems. Thought there might be 30 or 40. There are over 200 different ways we provide tax data to mortgage companies, finance companies, the department of education. So we have begun an agencywide process over the last two years too look at each of those avenues of approach, see where the risks are and solve the risks. One thing we did a year ago was it used to be you could file your return by going online and getting what is called an efile pin. Just need your Social Security number, name and address, but Social Security numbers can be bought online for ten dollars by organized criminals. Last year we discovered that in addition to legitimate taxpayers, criminals were filing fraudulent returns with the use of the efile pin so we shut that down and that meant that this year any criminal filing of tax return a fraudulent one had to actually have last years adjusted gross income. Last summer, again working with the Inspector General, we got some preliminary indications that when mortgage companies, through consolidators were asking us to confirm income for people applying for a loan or mortgage, that data was coming through a system that did not necessarily make us comfortable that the consolidators knew their customers. So last summer we shut that sim town for two weeks while we developed a program with the consolidators to ensure that they know with whom theyre dealing before the pass the requests on to us. As we move through the early fall we also focused on the student loan application process the department of education. We had an early indication in september that it was possible with relatively little stolen information to pretend you were a student, go online, start to fill out an application, give permission for us to populate that application with tax data most importantly the adjusted gross income, by and then complete he application. We started working with our education in october, telling them we were concerned that the sim could be utilized by criminals but oregon we recognize that on the other hand we recognize that 12 million to 15 million applicant use the convenience app of populating their return with their ohno indication, so they domestic a longterm resolution that with mask the data but cannot implement that until next october. So we agreed witch them since we did not have any volume of criminal activity that rather than shutting i down and add to burden of people applying for Financial Aid would we monitor the system through the tax system itch told them as soon as there was any indication of criminal activity we would have to take the application down and that occurred as we monitored into the middle of february, came clear there was pattern of activity that i wont go into details that was clearly not consistent with people going on to actually apply for student loans, and as we tracked the pattern down we discovered that in fact it was clear that some of that activity was legitimate students, some was criminals. So we shut the system down and spend three or pour works working with ed to see if theres any interim solution to do to bring the system back