The threat that you face caused by the fear that youve identified and very often its not, particularly when it comes to issues of undocumented immigrants and their impact on the economy. You can watch this event tonight beginning at 8 00 eastern on cspan. Irs commissioner spoke recently about his agencys operations and the impact on taxpayers including stolen identity tax refund fraud, phone and Online Services and tax Assistance Centers. He gave these remarks before the committee. The committee will come to order. We are in a scheduled executive session to consider and hopefully report the nomination for the u. S. Trade representative. Unfortunately due to scheduling conflicts it is apparent we will not obtain a sufficient quorum to vote on this nomination today. This is a nominee who enjoys bipartisan support on this committee. I hope we can move on this matter after the Senate Returns from recess. The executive session will be in recess subject to the call of the chair. Can i make a brief comment with respect to the nomination . First, with respect to the nomination, i would like to thank you for your continued work with us to address our concerns and the priorities of democrats on this side of the d diaz. Ill wrap up by saying my sense this place cant have enough comedy and i thank you wito you efforts to work us. Its been a pleasure to work with you in the past and i look forward to working with you in the future. I think we make a good team. We will proceed with our regular hearing on tax related matters. Every year the committee holds a hearing on the tax Filing Season to discuss and examine the operations of the irs. The Agency Charged with administering our complicated tax code and collecting taxes from workers and employers across the country. With each passing year, taxpayers face new challenges as they file their tax returns, including, but not limited to protecting their private information. Today we will discuss the efforts to address these types of challenges as well as the plans for progress and modernization in the near future. The finance committee has taken its responsibility with the irs seriously and with 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. Over recent decade as the tax code has grown more complex, we have given the irs more and more to do including implementing a number of rules, regulations and notices. I dont think many people are satisfied with the results. I know the people at the agency often point to limited funding, there are other matters that have contributed to the current level of dissatisfaction, including outdated collection practices and bureaucratic wrangling and a number of poor management decisions. This committee has conducted oversight on a number of those poor decisions, including the politicalization of Tax Administration, excessive spending on executive travel and improper contracting practices. Congress needs to look at the irs and work to modernize and stream line its operations. This should include changes to the bloated and poorly managed Technology Used by the agency and the elimination of bureaucratic waste. Hopefully, during the course of todays hearing we can get a 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 simplify the tax code and make the irss job easier and allow the agency to focus on collecting revenue in the fairest and most efficient manner possible. Tax reform, if done right, should improve the way taxpayers interact with the irs, reducing the countless hours and billions of dollars spent every year to comply with the tax code and file accurate returns. The irs is probably the most feared of all government agencies. The irs yields immense power and authority over the lives of our citizens and for hard working taxpayers direct contact with the irs is rarely if ever desirable. We can take steps to improve this, but it will require us to make significant changes to the tax code and to the irs itself. Hopefully the leadership at the irs will be willing partners in this effort. Toward that end i appreciate the willingness to appear today and what will be a meaningful discussion of these important issues and i appreciate the work that hes done over the years. We have a good relationship. Hes worked well with me and i personally want to thank him and tell him i appreciate him and appreciate the service that hes given to this wonderful country. With that ill turn it over to the senator for his opening remarks. Thank you very much. I have a couple of comments about tax reform at the end as well. 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 tradition for decades, but exaapparently that not going to happen in 2017. It looks like this president will choose to keep hiding his returns and ignoring this very low ethical bar, even though its clear his blind trust isnt blind at all and the separation he promised hed make from his businesses seems to be nonexistent. Second, around this time of year is when the whole executive branch gets on the same page to pitch its Budget Proposal to the public and congress. Not so this year. With this executive branch it seems like the one hand often doesnt know what the other hand is up to. On the one hand you have the treasury secretary who came before this committee as a nominee and said he was committed to making sure the irs had the resources to do this job. Mr. Ma mnuchnuchin was concerne. That conversation didnt happen or if it did the message didnt get through. When the public got its first glimpse of the budget, the irs didnt get the investment senator mnuchin talked about when he was here at the committee. It got another 239 million cut. That would mean that Customer Service would get worse and more taxpayers would fall victim to 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 families use to fill out Financial Aid forms is down because of Cyber Security problems. Hackers were using stolen personal information like names, birth dates and Social Security numbers to steal taxpayer dollars. You would think that 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 thats not whats happening here. Instead the administration is repeating the same old pattern. Cut after cut to irs resources, meaning Taxpayer Service and Data Security can get worse and worse. 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 congress ever manage to simplify this mess we call the tax code and help the middle class . They might be hopeful this year theyve heard the president and members of Congress Take tax reform is right at 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. For the typical working family there isnt a lot in the trump plan that helps that working class family get ahead and in some respects it looks like theyre getting a tax increase. So ill close, mr. Chairman, by way of saying that to me right at 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 kaymen islands. Then theres the system for those who are fortunate who can hire the lawyers and accountants 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 by when you have these 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. Nobody is going to tell me that its not possible to do it. My time on this committee ive been involved with a number of thoughtful members on the other side of the aisle. Greg and i sat together every week for two years to present a bipartisan tax plan and danny coats did the same thing. What we have to do is get away from this partisan reconciliation only kind of approach and say from the get go democrats and republicans, you and i do so often, sit down at the outset and we 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 a lot of members on our side of the aisle who would like to work in that kind of vein and i look forward to our discussions. Thank you, senator. I appreciate your comments. Todays witness the honorable john coskinin. He was confirmed to this position in december 2013. Before coming to the irs, the commissioner served for four years as a nonexecutive chair cameraman of freddie mac including a period where he as acting ceo and he was president of the u. S. Soccer foundation, deputy mayor of the district of columbia. The commissioner spent more than two decades in the private Sector Holding various leadership positions at the polmary company, including Vice President , ceo and chairman. This came after his work for several years in federal and municipal government and a number of years practicing law. The commissioner has a law degree from the Yale University school of law and a bachelors degree from duke university. We want to welcome you back to the finance committee, mr. Commissioner, and i want to thank you again for being here today. Wed like to have you please begin with your opening remarks and i ask that you limit your Opening Statement to around five minutes, if you can. Thank you, mr. Chairman. Thank you for the opportunity to appear before you today and mr. Chairman i appreciate your kind and thoughtful 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 a way to a total of about 152 million. Weve issued over 74 million refunds for more than 213 billion with an average refund totaling 2,900. The irs is required to hold tax returns until february 15th each year if the claim if they claim the earned income tax credit or the additional Child Tax Credit. This change slowed the overall pace of refunds early in the Filing Season, but that pace accelerated with the release of more than 50 billion in eitc refunds after february 15th. The new requirement to hold earned income tax credit and Child Tax Credit returns and another change to accelerate the filing date of forms w2 have helped the irs spot fraudulent returns. Receiving w2s allows for unnecessary delays. Im pleased to report we are seeing an improved level of service on our toll free lines. Our level of service is running above 76 and we anticipate the average for the Filing Season overall will be about 75 . The improvement is the direct result of additional funding granted by the congress in 2016 to improve service to taxpayers and strengthen Cyber Security and expand efforts against Identity Theft and freed up resource to reduce correspondence inventory. The inventory included more than 50,000 pieces of correspondence and thats done to 660,000. We continue to Strong Demand for our Online Services. Taxpayers have visited our website, irs. Gov more than 76 times this year. Track my refund has been used more than 228 million times. Other tools which allows taxpayers to make payments online has been used more than 4. 6 million times this year. The balance due feature lets taxpayers view their irs account balance online including the amount they owe for tax, penalties and interest. This tool has been used about 546,000 times since it was launched in november. The new balance due feature is important because it represents the first step toward a fully functional irs online account for taxpayers. Were developing this as part of our efforts to enhance and expand Important Services for all taxpayers no matter what their circumstances. Service at our Taxpayer Assistance Centers has improved this year. In recent years many Assistance Centers saw such heavy demand during the Filing Season that taxpayers were lining up for hours before the centers opened. In 2015, we tested the idea of letting people make appointments in advance. This worked so well that we extended the appointment process to our Assistance Centers this Filing Season. As a result we have no reports of long lines so far anywhere in the united states. Another important area is the growing problem of stolen identity refund fraud. Over the past few years weve made steady progress in protecting against this crime and that progress has accelerated since 2015 thanks to the efforts of the Security Summit group, the Strong Partnership between the public and private sectors has produced real results. In fact, the number of people who reported to us that 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 systems are still catching a large number of false returns. Last year our system stopped more than 6. 5 billion in fraudulent refunds on 969,000 returns filed by identity thieves. It shows that Identity Theft is still a major threat and we need to is keep up the fight. We recognize that the congress is considering tax reform. The irs doesnt take a position on policy questions in tax reform or any other area, but we have an interest in working with congress to make sure whatever policies are adopted are easy to administer and easy for taxpayers to understand. We also hope that congress will make any tax changes prospective and build in lead time so we can prepare taxpayers and our systems for the changes. Chairman hatch, Ranking Member and members of the committee, i look forward to your questions. Thank you. We appreciate you being here and we appreciate your comments. Let me begin the questioning with this question. Last month the irs and the department of education took down the data retrieval tool for student aid applicants. You took this action after it became apparent that data thieves may have used stolen information to access the system and obtain additional sensitive Tax Information. Now, 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. Commissioner, 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 that warning . Number two, has the irs notified the taxpayers effected by this incident . If not, when does it expect to do so . After our problem with the get transcript two years ago, i asked the agency to take a look at every way anyone gets either money or information out of our systems. I thought there might be 30 or 40. It turns out there were over 200 different ways we provide tax data to mortgage companies, finance companies, the department of education. So we have begun an agency wide process over the last two years to look at each of those avenues of approach, see where the risks are and solve those risks. One of the things we did a year ago was it used to be you could file your return by going online and getting whats called an efile pin. All you needed was your Social Security name and address. Social security numbers can be bought online for 10 by criminals. Last year we discovered in addition to legitimate taxpayers, criminals were filing fraudulent returns so we shut that down and any criminal filing of tax return had to actually have last years adjusted gross income. Last summer, 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 ormortgage, that data was coming through a system that did not necessarily make us comfortable that the consolidators knew their customers. We shut that system down for two weeks while we developed a program in the short run and the long run to ensure they know with whom theyre dealing before they pass those requests on to us. As we moved through the early fall we focused on the student loa