chair pascrell: good morning and welcome to everybody. i want to call order the subcommittee on oversight and thank you for all the work you guys and gals have been doing on the committee on both sides of the aisle. i think we struck something in getting something done with the american people. our two witnesses today. we're holding this hearing in a hybrid forum. you know what i think about that and i know what many of you think about that. we are what we are. [laughter] we're holding this hearing in compliance with the regulations for remote committee proceedings pursuant to house resolution 8. before we turn to today's important topic, i want to remind members of a few procedures to help you navigate this hybrid format. first, consistent with regulations, the committee will keep microphones muted to limit background music and noise. members joining virtually are responsible for unmuting themselves when they seek recognition or when recognized for their five minutes. committee staff will mute members only in the event of inadvertent background music. second, when members are present in the proceeding via webex, they must have their cameras on. if you need to step away to attend another proceeding, please turn your camera and audio off rather than logging out of the platform. finally, we will dispense with our practice of observing the gibbons rule and instead going in order of seniority for questioning. alternating between the majority and minority, beginning with members of the oversight subcommittee, of course. i thank you, all, for your continued patience as we navigate the procedures to continue serving our country together in this great time of need. with that i'll turn to the important topic of today's hearing on taxpayer fairness across the i.r.s. the oversight subcommittee meets today to discuss a very important topic -- taxpayer fairness across the i.r.s. easy to say. we've talked about it for about 15 years. i firmly believe the i.r.s. must treat all taxpayers fairly and equitably, not only in policy but just making a phone call to the 800 number which is a disaster admitted by the i.r.s. this is essential to the i.r.s.'s core mission and to the taxpayer experience. whether the i.r.s. is processing returns, answering taxpayer questions, or conducting audits, there cannot be one tax system for the wealthy and another for everyone else. and yet, that is exactly what we have. for years, i've sounded the alarm on our two-tier tax system. since i've been chairman of this subcommittee, with the cooperation of the people on the right and the people on the left, we have held multiple hearings on making our tax system fairer. we haven't done much in getting things accomplished, though. that's interesting. clearly, our tax code can be fairer. i have offered legislation to close that gapping loophole and many loopholes in our laws that have faced resistance by vested interests. and that's not all republicans. my own party, sometimes we can't get out of our own way. so i've been fair about it. that's my job. based on testimony submitted before this subcommittee -- and believe me, i've read through it twice on this particular subject -- i've also made important suggestions to the treasury and i.r.s. on actions they can take themselves to make things fairer and better. i mean, i don't think that's a big ask. apparently it is. we will continue to press the administration on these points. today -- today's hearing we will highlight administration and enforcement, looking at some of the ways in which millionaires, billionaires have vastly different experiences with the experience than the average american. we have heard reports about returned backlogs in the tens of millions, not thousands, millions. we have uncovered erroneous notices being mailed to taxpayers. that's great. that's wonderful. we have learned about millions of taxpayers calling the i.r.s. only to receive no answer from the agency. you don't have to be lieutenant columbo to see the i.r.s. has major problems. these i.r.s. failures cannot continue, and to learn more about the i.r.s. and how it's fixing these issues, we've invited mr. ken corbin. mr. corbin is the i.r.s. commissioner for investment and the chief taxpayer experience officer. we got the guy. we brought him here. we thank him for the time he's taking, along with his colleague. mr. corbin, we're eager to learn how the i.r.s. is actively working to improve the taxpayer experience for americans who aren't millionaires. there are many reports showing that the i.r.s. is auditing low-income families at a much higher rate than high-income taxpayers. that's not what we were told by the director of the i.r.s. and you know what i think about that. i don't talk behind his back. specifically, data shows that a taxpayer with income under $25,000 -- get this -- is twice as likely to be audited than someone earning between $200,000 and $500,000, etc. i mean, if that isn't an outrage, i don't know what is. and it's even worse if you claim the earned income tax credit. probably one of the greatest, greatest tools we have in fighting poverty in the united states of america. the i.r.s. is four times more likely to audit you if you are getting earned income tax credits. why? because it's quicker and it's less expensive. the i.r.s. seems to see poor americans the same way the harlem globetrotters view the washington generals. the i.r.s. goes after people who can't easily defend themselves. you got it. and no use mincing words. if you want to change things, there's nothing to hide. i asked the g.a.o. to study -- i asked them to study the audit books and the trends. today, mr. james mcthai -- did i pronounce it correctly? thank you, james. the accounting office. will report on g.a.o.'s findings. we asked for this. we got it today. as a little movie preview, take a gander at the graph behind me showing nose diving audit rates of the superrich the last decade. the purpose -- and i'll say this again of me being here in the chair. equally, anybody in the committee could have been the chair. but the reason is very important to understand. we're not here to soak the rich. that's not going to get us to nirvana. people paying their fair share and how we treat all people that come to the i.r.s. with their particular problems is very important, not just to me, but to the most american people. so the audit rates are an important part of that. i understand the i.r.s. justifies its auditing record on its staff limitations. how many times have we heard that since 2008? i know that the i.r.s. has a difficult time operating. there are many people in the congress have spent a decade slashing the funding for i.r.s. to sabotage tax enforcement against the rich. and now we have the numbers to prove it. too many things are looking at what can be done rather than what should be done. low-income families should not face the consequences of the i.r.s.'s funding problems while the rich get off scot-free. deliberate sabotage of the i.r.s. -- that's what i'm calling it -- has created an agency that cannot process returns, cannot correspond with taxpayers quickly, cannot even answer telephone calls for help. thirst is failing -- this i.r.s. is failing to modernize and prepare for the future, and both parties are responsible. these failures are why i have now called on the president to fire the commissioner appointed by the last president and quickly select a replacement now that he's only got a certain time left as well as another one -- the last administration's appointment. so wait until the end and they'll walk out three months earlier than before. you know, you think all the public is blinded to this? they don't know what's going on? if we say it enough times, they'll understand what we're talking about. they deserve nothing but the truth. i believe in investing in the i.r.s. i support additional funding wisely spent, but the i.r.s. must do more to improve its operations to eliminate backlogs, to answer more telephone calls, to improve audit selection. these are the absolute basics, and there is no excuse in 2022 when you fail the basics. you're not going to the next step. so welcome today's witnesses. we're lucky to have you both, mr. corbin, mr. mmctigue. i yield to mr. rice -- i think we're still friends -- for five minutes. mr. rice: yes, we're still friends. i want to thank the employees at the i.r.s. for their dedication to the agency's mission. at a time of increased complexity brought on by changes in the tax code, the i.r.s. undertook an unprecedented effort to organize and distribute hundreds of millions of covid relief payments while suffering the same staffing issues as the rest of the world, all in the midst of a pandemic. and your efforts have been heroic. none of that has been easy. and i want to say thank you for your hard work and dedicated public service. now the topic of taxpayer fairness across the i.r.s. is important, but it is also one that's been covered by this subcommittee many times. i hope we can move beyond talking points and work on solutions. i believe the most significant unfairness facing american taxpayers now is the lack of customer service at the i.r.s. the i.r.s. is sitting on 13 million unprocessed tax returns and over 26 million tax returns that are waiting, needing further i.r.s. action. at the same time, i.r.s. phone service levels are near all-time lows, making it nearly impossible to reach an i.r.s. agent for help with tax or audit matters. many taxpayers have been waiting for resolution to their tax filings and to receive long overdue refunds. this is unfair and it needs to be fixed. i know we'll hear from at least one of our witnesses about audit rates and the earned income tax credit. mr. chairman, we've counted at least six prior hearings under your leadership that have touched on this audit rate issue. and while it is a perfectly fine topic, a seventh hearing on this issue doesn't seem designed to make progress toward a solution. the g.a.o. report indicates what we already know -- there are real administrative issues around the earned income tax credit. the program has an annual improper payment rate of around 25%. it's not just the i.r.s. that's been telling us this. the states as well. in the last fiscal year, the improper payment amount on the earned income tax credit totalled $19 billion. this is a huge problem, and it necessitates audits. the earned income tax credit is complex when it comes to claiming a qualifying child and producing the necessary documentation to establish eligibility. the problem must be addressed. i'd like to see us work on solutions to address the drivers of the high earned tax credit error rate, which is at least partially responsible for auditing a higher percentage of taxpayers claiming this credit. instead of criticizing the audit rate, let's fix the underlying problem. another hearing to cover the same talking points we've heard over and over and over again won't accomplish much. i do wish we could have worked together in commissioning this report, mr. chairman. i'd like to point out the report leaves out important variables related to the earned income tax credit that would better assist congress in understanding the data. these problems include failure to adequately discuss the differences between the earned income tax credit correspondence audits and traditional in-person audits and whether they even ballooning in the -- belong in the same data set. claiming a tax credit with a 25% error rate is the same as tax returns from taxpayers that earn their income and reported with a w-2 with a 99% voluntary compliance rate, failure to include the results of secretary mnuchin's 2020 directive to the i.r.s. to prioritize increasing audit rates for high-income earners and failure to adequately explain that the i.r.s. received $1.86 billion in appropriations on top of its annual budget through covid relief legislation and the american rescue plan, bringing its total funding to 2010 levels. with that said, mr. chairman, there are real problems with the earned income tax credit administration, and congress can and should play a role in trying to solve these problems. if we work together on creative solutions. we need to think creatively about how to make the credit easier to administer and bring down improper payment rates. to say the i.r.s. has a lot of room for improvement may be the understatement of the year. from i.t. modernization, which would solve a lot of these problems, to improved taxpayer service to some of the audit rate issues discussed in the g.a.o. report, both the i.r.s. and congress have a role to play in improving the situation. i hope we can move forward, after this hearing, and work together on solutions. thank you and i yield back. chair pascrell: i just want to bring attention to -- we're going to lose one of our staff members, and that's important. she's going on to greater things at treasury. she's going to be an assistant over there in terms of the treasury department. i want to acknowledge isabel moore. isabel, thank you for your work for the last three years. did a terrific job. we're proud of you. we know you'll take over the treasury department when you get there. hard work on this subcommittee i think has paid off. we wish you well in your new position at the treasury department. so good luck to you. want to make sure i didn't forget that. thank you, were rice. without objection, all members' opening statements will be made part of the record. now we're going to turn to our witnesses. why these meetings have been numerous -- and we've had different topics and different subjects, but i wanted to make sure we have exhausted so that the public understands. and it's taken a long time to get us to understand what we're talking about, and that's why i asked for the g.a.o. report. on october 7, 2020, i was asked to appear before gerry connolly's committee, oversight committee. and i asked commissioner redick about a report that he had stated at that time. and we asked him face-to-face. i am not talking behind his back. the i.r.s. audits low-income taxpayers disproportionately of tax cheats because it's easy to pick on regular americans, and he replied at the october 7, 2020, meeting -- that report is absolutely false. for taxpayers who have more than $10 million in total positive income, the rate is 8%. he noted that. now, the earned income tax rate is 1.1%. i did not define wealthy tax cheats as the few who have over $10 million. it was after his testimony that the g.a.o. report was requested to get the facts. and now we have the facts. so the testimony from that meeting admitted in a recent report that the i.r.s. audits low-income taxpayers disproportionately over wealthy tax cheats. so now we're going to hear the report. things that i brought to this committee before this report will now have substance in the committee's report. and that's why we've asked you two gentlemen to be here today. and this testimony is devastating compared to what i'm going to hear and everybody on this panel and everybody here in the audience and out there. we're going to turn to our witnesses. our first witness is mr. ken corbin, the commissioner for wage and investment and a chief taxpayer experience officer at the i.r.s. our next witness is going to be james mctigue, director of strategic issues at the g.a.o. your statements will be made part of the record in its entirety. i'd ask you you summarize your testimony in five minutes or less. to help you with that time, please keep an eye on the clock, obviously. if you go over your time, i'll tell you about it. so mr. corbin, thank you for taking the time to be here today. take the time, make the presentation, and you're on. mr. corbin: all right. thank you. thank you, chairman pascrell, ranking member rice, and members of the subcommittee. thank you for this opportunity to testify. i've been serving as the commissioner of the i.r.s.'s wage and divestment division since 2017, and last year, i also became the i.r.s.'s chief taxpayer experience officer. speaking from both perspectives, i believe the i.r.s. has a responsibility to ensure everyone who interacts with us has both options and access. they should be able to choose how they interact with us and have access to the information they need. they should be able to accomplish their interactions without difficulty. this applies to everyone, individuals, business taxpayers, exempt organizations, tax professionals, and stakeholders in the tax community and elsewhere. during the filing season and throughout the year, the i.r.s. offers assistance so people can file their returns and receive their refunds quickly and easily. this help comes through a variety of channels -- online, over the phone, in person at our taxpayer assistance centers across the country, and another way we facilitate is in-person help through over 9,000 vita and t.c.e. sites, including military bases. due to many factors, the 2020 filing -- tax filing season has been complex and challenging. to address this, we took a number of steps to help taxpayers, including sending out more than 250 million letters to help people who needed to reconcile their economic impact payments or their advanced child tax credit payments. we expanded our customer callback technology to cover 70% of the toll-free demand and save taxpayers $1.7 -- 1.7 million hours of hold time. we've began to use voice and chatbots, but we understand that part of service comes in person. and so we've offered saturday hours at our taxpayer assistance centers in more than 90 cities across the country. we've made the earned income tax credit assistance tool on i.r.s.gov more user -- irs.gov more user friendly. enhancing the taxpayer experience also means improving service to diverse communities. we're committed to helping all taxpayers, including those who have limited english proficiency. we have shown that commitment in many ways. just to cite a few examples, in 2021, we issued the 1040 in spanish. we now give taxpayers the opportunity to indicate on a schedule l.e.p. whether they want us to contact them in a language other than english. this year for the first time, we also gave our vita partners access to interpreter services, which we offer on the phone and in person. these are all important steps, but we have a much longer term plan for enhanced taxpayer experience, stemming from the taxpayer first act of 2019. t.f.a. was the catalyst for our efforts to help develop this plan. the taxpayer experience office is taking the lead on these efforts. we are setting the strategic direction for improving taxpayer experience. we are implementing the taxpayer experience to ensure the i.r.s. meets the needs of all types of taxpayers, stakeholders who rely on us for information. we are very excited about the improvements we're making, but truly to be successful, we need help. we need help. and that means the president's fiscal year 2023 budget proposal, which seeks $14.1 billion for the i.r.s. if we allow us to continuing to improve taxpayer service, modernizing our systems, and ensuring fairness in the tax system. but we also need stable, multiyear funding to be able to truly deliver what taxpayers need, what they deserve, and what they expect. this concludes my statement. and i'll be happy to answer your questions. chair pascrell: thank you, mr. corbin. and now i want to call on mr. mctigue for your expertise and thank you for being here. mr. mctigue: thank you, mr. chairman. republican leader rice and members of the subcommittee, thank you for the opportunity to discuss our report on trends in i.r.s. audit rates of individual taxpayers. audits are one of the key tools that i.r.s. has to ensure compliance with our tax laws and provide assurance to the public that everyone is paying their fair share. taxpayers are also more likely t