IRS Accountability and Transparency hearing

commissioner Whirlpool uh thank you for being here today uh I first want to address an issue that has been widely reported last week a whistleblower came forward with troubling claims about abuses of power and we are conducting a review of this matter and we'll go wherever the facts lead us and I expect full cooperation from the IRS particularly with regard to ensuring this whistleblower is protected from any retaliation we value the importance and the role of whistleblowers in ensuring the Integrity of our governing institutions which is why we established an online portal providing IRS employees a direct Avenue to provide information regarding any wrongdoing that they may witness or believe to be occurring commissioner while I know you are fairly new on the job it would be irresponsible not to put you on notice about the various concerns the American people have about your agency over the past two years the IRS has leaked private tax information of Americans at the same time the Biden Administration was pushing tax increases on those very individuals accidentally posted online the private taxpayer information of thousands of retirees they apologize they took it down said it would wouldn't happen again and did the very same thing four months later they destroyed over 30 million tax returns due to the backlog they tried and then delayed for a year a new paperwork nightmare of gig economy workers under the new 1099-k reporting requirements and promised to release a spin plan for the 80 billion dollar pay raise Democrats gave the agency only to fail to explain whether low-income taxpayers will be protected from increased Audits and failed to show exactly how many bureaucrats in total you plan to put on the payroll repurpose 3.9 billion of the 80 billion to support costly green corporate handouts and request an additional 43 billion for your agency last month on top of the 80 billion it received last August concocted plans to become the tax preparer the tax Filer and government auditor of the American people I was surprised that after receiving the greatest windfall in agency history the president's fiscal year 24 budget requested an additional an additional 43 billion dollars that's 91 percent of which is targeted toward enforcement and operations like further increasing audits on middle-class families meanwhile the IRS cannot tell us in total beyond the next two years how many people it plans to hire with its new funding statements from you and secretary Yellen make clear that audit rates will rise for Americans earning less than four hundred thousand dollars the only question left is how fast those rates will rise when I asked for a plan I was not looking for assurances I was looking for concrete proposals of how the treasury Department and your agency will protect lower and middle income Americans I look forward to you making good on your commitment from last week to follow up with far more detail about how your agency plans to to spend these funds over the next 10 years Democrats supercharged the IRS with the hopes of raising billions to pay for special interest tax breaks for the wealthy that are now projected to cost three times that amount now the IRS is dedicating billions to support these green corporate handouts and it's clear Democrats are all about subsidizing the low emission lifestyles of the wealthy it's not only new audits Americans have to worry about the inflation reduction act includes new reporting requirements for any venmo or PayPal transaction over six hundred dollars is it really a top priority for tax collectors to know whether someone is selling a used couch or unused concert tickets or paying for their neighbor's kid to mow the lawn this gives your agency too much power and it effect creates a surveillance Network that will invade Americans privacy and squeeze them out of more of their hard-earned dollars the IRS has a lot of work to do to repair the trust that is broken with the public over the last decade I hope we can begin the conversation to do that in today's hearing and I'm pleased to recognize the gentleman from Massachusetts ranking member nil for his opening statement thank you Mr chairman and I want to Welcome to the committee on Ways and Means commissioner warfolk it certainly is an honor to have you here today and we look forward to working with you as you start your time as the commissioner so let's start by saluting the dedicated workers of the Internal Revenue Service it's their commitment to taxpayers that is allowed for the inflation reduction act to make such quick Headway many members on the other side of the aisle in their constituencies are already taking advantage of the inflation reduction act in terms of Investments as they relate to the tax credits your testimony this morning or this afternoon comes at an important time for the IRS the Democratic multi-year investment in the Internal Revenue Service has already unlocked a new era of service for America's taxpayers this filing season alone Americans experience the historic level of customer assistance and support two million more calls were answered through live assistance wait times were drastically decreased new digital tools were introduced in in-person services at taxpayer assistance centers were expanded modernizing the IRS should have been a bipartisan undertaking its systems needed to be remodeled and we are appreciative of the fact that it appears as though the much needed Headway is now underway updates to technology infrastructure will pay dividends for the American taxpayers for decades to come still is the old adage people at the bottom shouldn't be paying for more than they ordinarily would because people at the top are able to escape their fair share the inflation reduction act also reverses Decades of Republican targeted cuts to the IRS taking action to close the tax Gap and eliminate our two-tier tax system far too long the wealthy and the well-connected have been able to get away with not paying their share at the expense of everyday Americans interesting to note that the compliance rate for those who pay taxes through withholding is in the high 90 percentiles the IRS recently released strategic operating plans it's a strong blueprint for bringing our historic legislation to reality soon the IRS will be better equipped to ensure that top one percent of those who avoid the tax system will be held accountable once again the contrast between our achievements and the extremism that the other side could not be more clear we have pushed for decided action to regain taxpayers trust and build a fairer tax code and just yesterday our colleagues on the other side doubled down on doing this progress and thereby adding to the deficit while we are looking out for workers and their families they apparently were looking out for their own costing taxpayers 100 billion dollars that is sadly not the limit of that extremism they have advocated for legislation that would abolish the IRS in favor of a 30 percent national sales tax I served on this committee when members on the other side did precisely that Republicans would raise the cost of groceries gas medicine child care and just about all aspects of life for the middle class while extending the unfunded tax cuts for the wealthy and well-connected that would create more harm than good so I look forward to working with you as we continue to implement the inflation reduction act and deliver on our shared commitment to a tax system that works for all members of the American family thank you commissioner thank you Mr chairman thank you thank you ranking member nil um today's sole witness is the the very new commissioner of the Internal Revenue Service of Mr Daniel warful the committee has received your written statement and it will be made part of the formal hearing record today commissioner werfel you uh can begin when you're ready thank you chairman Smith ranking member Neil and members of the committee thank you for the opportunity to testify on the filing season and the IRS budget I'm pleased to report the IRS provided substantially better service to taxpayers during the 2023 filing season we delivered a strong tax season for the nation the best in several years IRS employees were able to make substantial improvements this tax season because of funding Congress provided through the inflation reduction act this funding made a difference it allowed us to hire more than 5 000 phone assisters which led to a phone level of service averaging 85 percent during the filing season the average wait time on the phone was three minutes this is a major improvement from last year when service levels were under 16 percent and wait times average 28 minutes perhaps most telling was this IRS employees answered 7 million calls to help taxpayers that's 2.7 million more than last year improvements were seen in other areas we increased face-to-face visits at our taxpayer assistance centers to 523 000 up about 30 percent from the year before and we expanded digital scanning efforts to speed up the processing of paper returns providing a better filing season experience this year was an important step but more work remains a long-term funding gives us a unique opportunity to transform our agency over the next decade historically the IRS received funding that allowed our staffing and operations to keep Pace with the size of the U.S population in 2010 that changed cuts and annual funding caused IRS Staffing levels to decline by nearly 17 percent to less than 80 000 full-time employees by 2022. while the IRS shrank the U.S population grew by more than seven percent reaching 334 million these reductions caught up with us you could see that in the poor taxpayer service levels in previous years including last year we were able to improve this filing season by shifting inflation reduction reduction act funds over to our day-to-day operations if we continue using IRA funds this way focused on short-term operations rather than long-term systemic improvements we will not be able to transform the taxpayer experience modernize outdated IRS technology and deliver more effective enforcement of the tax laws as the IRA envision the IRA funding was designed to restore IRS core operations and prepare the agency to serve the nation in its future but that work is outside of our base funding levels that level of funding which is 12.3 billion dollars for fiscal year 2023 has not materially increased since fiscal year 2010 in in fact in real terms we are 33 percent below our funding level in FY 2010 if we had just received inflationary adjustments it's not enough resources to fund a tax system in an economy that grows in size and complexity every year so I asked for your help to build on the remarkable progress we saw this filing season by supporting the 1.8 billion dollars in incremental discretionary funding requested for fiscal year 24. this funding will enable us to maintain our current performance in the next filing season while allowing us to use Ira resources as Congress intended to modernize our operations so we can sustain and improve our service to taxpayers into the future our strategic operating plan lays out in detail our path forward describing how we will improve all aspects of our operations the plan which I call our public to-do list lays out more than 200 projects for improvements for taxpayers tax professionals and IRS employees that will transform our work on the phones in person and online Ira funding also gives us an important opportunity to improve enforcement efforts to promote fairness while respecting taxpayer rights the agency will follow secretary yellen's directive not to raise audit rates above historic levels for small businesses and households making less than four hundred thousand dollars I want to be Crystal Clear we are not increasing audit rates for hard-working taxpayers making under four hundred thousand that is my pledge there is no new surge of audits coming for workers retirees and others we have plenty of other areas we need to focus on I am optimistic we can build on the accomplishments of this filing season the question is not whether the IRS can improve taxpayer services this year we prove that dramatic Improvement is possible the question is whether we continue to improve chairman Smith ranking member Neal and members of the committee that concludes my statement I would be happy to take your questions thank you commissioner we'll now proceed to the question and answer session and I I will begin nearly two years since a massive leak of confidential taxpayer information was published by propublica the American people are still without answers from the Biden Administration on who is responsible and how this could have occurred this leak happened at the same time the administration was pushing for higher taxes on the same taxpayers who had their information disclosed given this terrible breach of trust at the IRS what has the agency done in the last two years to secure its systems to prevent something like this from happening again Mr chairman data security is essential to everything we do for the whole system to work taxpayers have to have trust in our abilities here and as I roll up my sleeves on the job I'm taking numerous steps to assess our current capacities and our current gaps and I have to tell you there are areas that I have been impressed with we successfully defend more than a billion cyber attacks a year and I've looked into our employee training it's very robust including what are the consequences of failure to secure our data but as you mentioned there are areas we need to improve and I would point to tigta and GAO have a series of recommendations for how to strengthen our overall data security process in particular with respect to RIT and underfunding is one major reason why we don't have the score an A on that report card but with funding under the IRA and with renewed purpose around data security and I.T modernization my objective is to get that a on the report card for those Tig to recommendations and those GAO recommendations let's get the a commissioner absolutely as we discussed previously we uh set up an online whistleblower portal for IRS Personnel wishing to share information with the committee I continue to urge you to let your employees know about the portal I believe it will encourage agency Personnel who witness wrongdoing to come forward and just this last week we were we received Outreach from an IRS whistleblower requesting the committee look into concerns of the individual has about allegations of misconduct so can you commit that there will be no retail retaliation against that whistleblower Mr chairman well I can't comment on a specific case I can say without any hesitation there will be no retaliation for anyone making a an allegation or a call to a whistle whistleblower hotline thank you commissioner the Biden Administration first asked for 80 billion to hire 87 000 new employees the administration later claimed it would be hiring to replace retirements and it would not be adding 87 000 additional employees however the information you release related to how the agency will spend the funding shows 30 000 new employees in just the next two years at that rate you will surpass 87 000 over 10 years can you clear up the discrepancies here and right now you have 85 000 employees at the IRS how many total employees do you intend to have working at the IRS in 10 years Mr chairman as I uh told the Senate finance committee last week we are working on a final set of estimates for that and I'll have that information the full 10-year view of the hiring plan within the next few weeks I can clarify a couple of things though about your question which is one important point is also to recognize the attrition that we have through 24 2024 16 000 IRS employees are expected to retire so this is not all about plussing up Iris staff we are also making up for the staff that we're losing to retirements and and other attrition the other point I want to make about Staffing increases is that Staffing increases are necessary to keep Pace with the tax system that we have today you know in my opening statement I talked about the rise in the population that's rise in the number of filers the rise in the complexity of the tax law that means we get more phone calls to our call center that means we get more people walking into our uh our walk-in centers and if we don't have the staff to meet them answer their questions and we're failing the American people and doing our job to serve them and on the enforcement side just one more point today we have 2 600 IRS employees that are responsible for assessing the most wealthy taxpayers the most wealthy filers that's individuals large corporations and complex Partnerships there are roughly 390 000 of these wealthy taxpayers I'm not talking about four hundred thousand dollars a year I'm talking about 10 million dollars a year I'm talking about 10 million in assets I'm talking about for these large corporations 250 million dollars in assets for the very top of our income strata 390 000 filers 2600 staff and as a result we've seen a dramatic decline in the audit coverage of our wealthiest filers and and when you see our staffing numbers over the next 10 years and you have them through the three-year window I I ask you to to think about what we're doing is closing the gap when we talk about enforcement between those 2 600 employees and the 390 000 of our wealthiest filers in America um in regards to your comments earlier about not increasing audit rates on people making less than four hundred thousand dollars a year um there's been a lot of statements uh from secretary Yellen um that says that the audit rates will not be above that of the historical audit rates which was 2010 was the peak um when you say that there's not going to be an increase in audit rates are you referring to the audit rates last year or the historical like what secretary yellin has said let me provide some clarity on that Mr chairman here's where I'm at on this in in Consulting with uh with secretary Yellen and her team we have a lot of work to do over the next few years we're going to be focused completely on uh doing what I said earlier closing the gap between our staff and the enforcement we need to do with our wealthiest what that means is the audit rate the most recent audit rate we have that's complete and final is 2018. that is the rate that I want to share with the American people the audit rate will not go above that rate for for years to come because for the next several years at least we're going to be focused on the work that we're doing with the highest income filers now once we start and and reconsider that because the 2008 rate is so low it's not anywhere near the historical rate if you've probably looked at the the years and said well the historical rate's a lot higher than the rate in the most recent years so even if we did start increasing our audit footprint a few years from now then you're still not going to get anywhere near the historical average for quite some time so I think there can be assurances to the American people that if you earn under 400 000 there's no new wave of audits coming the probability of you being audited before the inflation reduction act and after the reduction inflation reduction act are not changed at all the inflation reduction act spends 15 million dollars to pay for a supposedly independent analysis about the feasibility of setting up an e-file system through the IRS which would essentially make the agency America's it would make the agency the American people's tax filer their tax collector but also their auditor asking the IRS to do your taxes is like asking your kid to guard the cookie jar um the temptation to to take more than their so-called fair share is is is too much nevertheless uh you all choose to hire an organization new America and a tax attorney both of which have stated their support for establishing such an e-file system how are we to expect this will be an impartial review if those in charge of it are already committed to seeing it happen thank you for the question Mr chairman when I arrived at the IRS I learned that we have this study that's mandated under the inflation reduction act to study uh direct file option I want to stress the word option there because I think one the important thing is whether we go forward with a direct file solution or not and if we were to it is an option for taxpayers if they feel concerned about engaging with the IRS in a direct direct file solution they don't have to do it there are other ways to engage with the IRS and that's by the way part of our Our Hope and our vision that we will meet taxpayers where they are if they want to file in paper we're not thrilled with it but we'll be ready for it if they want a fully digital experience if they want to work with a third party servicer we want to accommodate that they currently don't have a direct file option so my understanding from the inflation reduction ask is to study it and see if it's viable the report's not done yet it will be done by mid-may and I understand Mr chairman that there that that you have a keen interest in seeing what this report says I will make myself available once the report is out to answer any questions that you have I'm happy to come back to this committee and testify on it I just think it would be premature to get into the details of the study before it's finalized you know our committee has learned that a different organization a miter uh that occasionally does work for the IRS conducted a study around taxpayer opinions about an IRS e-file system among their findings most working-class Americans who file simple tax returns do not want an IRS system and the plan is only popular in cases where the IRS could pull off handling complex tax returns and providing providing State returns basically adding a tax preparation software company inside the IRS a lack of trust in government was one of the main reasons taxpayers would oppose an IRS system and without objection I'll be submitting the miter study for the record it's ordered commissioner warful why wasn't the IRS transparent with the American people about this study well I want to make clear Mr chairman the IRS didn't ask for this study we didn't commission the study often you have companies non-profits academics on their own writing white papers writing studies that the IRS didn't ask for but if they send it to us then we absolutely will look at it in particular if it's credible and miter is a very credible organization and we have received the study from miter and we were under the impression that it was going to be made public so that there wasn't a need to um to immediately report it out but there was no intention of holding anything back here as people send us studies we review them and we will incorporate the findings from the Meyer miter study into our final study I now recognize the ranking member for questions thank you uh commissioner warfold there have been a lot of false claims made about who the IRS will audit I know you attempted a few moments ago to address some of that but with the additional money from the IRA how many armed Revenue agents will be hired to accomplish these audience these audits none sir that's what I thought so let me go over some other facts here last year secretary Yellen sent a letter to the in commissioner reddig a republican directing that none of the additional money provided by the IRA would be used to raise the historical audit rates on families and small businesses making under four hundred thousand dollars a year the former commissioner also sent a letter to Congress reiterating this fact without objection I would like to enter both letters into the record so ordered thank you commissioner do you stand by the letter sent to Congress from commissioner Reddick stating that audit rates will not rise relative to recent years for households making under four hundred thousand dollars a year I do thank you commissioner with the additional money provided by the IRA does the IRS plan to hire 87 000 Revenue agents to carry guns to audit families and small businesses we do not thank you commissioner Americans are very tired of the two-tiered tax system that allows the wealthy and well-connected to play by one set of rules why those who use withholding they play by another set of rules I have consistently stated that repealing the IRA additional enforcement funds will let the wealthy large corporations and tax Dodgers off the hook last year the committee reviewed the IRS mandatory audit program for presidents and found that it was not working as intended for a former president who operated a complex web of more than 500 businesses given this program the fact that it was not working how can we be certain that audits for other wealthy individuals are taking place and how would the additional enforcement monies be used to assist the IRS with auditing complex returns Congressman as I said earlier the first thing that concerns me is the chasm between the number of IRS employees we have today to assess the number of high wealth filers that are out there and as a result over the period of time from 2010 to today there is a steep decline in the audit coverage of our wealthiest filers and you know from my vantage point one of the reasons why I I came to the IRS and and I'm excited about the job is thinking about to honest taxpayers you know those that own a small business middle income lower income and right now the IRS does have the capability to evaluate we have that capability because those are simple Returns the returns that come in from our wealthiest filers are sometimes thousands tens of thousands and sometimes hundreds of thousands of pages long and so when you have a team outsized 2600 personnel well to 390 000 filers and those files are not only voluminous they're complicated and Multinational Corporation the way it's structured today is more complicated than it was structured 10 years ago Partnerships are becoming more layered and more complex harder to find where the actual taxpayer is we have to up our game if we're going to effectively assess whether these organizations are paying what they owe so it's about hiring it's about training and it's not just hiring Auditors it's hiring economists scientists engineers and when I mean science I mean data scientists to truly help us strategically figure out where the gaps are so we can close those gaps commissioner if the proposals that have come from the other side were to take place including repealing the funding that came from the IRS what would that prohibit you from doing in terms of modernization yeah this is very concerning because as I said earlier our base budget is about running the train schedules that we have today you know and if we don't fund our base budget basically what I want you to picture is the platform's getting more and more crowded as the trains aren't coming and people getting frustrated and that's not the way to serve taxpayers that's our base budget our modernization budget which is what the IRA provides is how we modernize the whole system how we improve everything about the system so it's the difference for example between just having the person to answer the phone when it comes in for the IRS versus having the option to do a callback versus having a bot set up so rather than wait I can get my transcript by just hitting one or two it's the difference between just basic services and Advanced Services and one of the concerns that we should all have if you're a taxpayer you should come to the IRS which you're required to do to pay your taxes and get the same level of functionality that you would from a bank from an airline and right now because of steep Cuts in our funding we're not up to Snuff with what taxpayers can see around the corner at their local bank so we want to be able to do that there's other and I don't know I know I don't have enough time but there's other ways we can spend the modernization money that is in the benefit of taxpayers including securing data and including as I said you can go to sleep at night knowing that the IRS has the capability to assess the wealthy in the same way we can assess middle and low income because we've built that capacity thank you commissioner thank you Mr chairman Mr Buchanan is recognized thank you Mr chairman and commissioner I know you're doing a job and I guess the acting commissioner for about six months eight months in 2013 sir but let me just mention there's just a lot of misinformation out there and disinformation whatever you want to call it you know they've got a budget they originally set up an additional 80 billion and now they're talking about another 43 billion how do you distill that down where is the money going and I just got to tell you we've got to do a much more you've got to do a much better job in terms of communicating that because the taxpayers want to know I'm telling you my district but across the country they want to know where the 80 80 billion plus another 43 billion dollars would go and you'll be the one to decide that yeah I would love the opportunity and I appreciate the feedback of how we can be more effectively communicating uh the budget so let me let me take a moment what we're asking for in 2024 is 1.8 billion dollars that's what we're asking for on top of the base budget that we already have and again that's just to keep the current train schedules on On Target what is that additional 1.8 billion do about 1 billion of it is more people more people demand the phones more people to process transactions and then about 800 million is mostly inflationary adjustments pay increases it's a large organization how much are the the Recruitment and stuff is going to go into auditing what's the percentage there for that it's mostly taxpayer Services uh the um what we need in terms of more people it's it's um I can get you specifics on the on the percentage breakdown the billion metric I just want to make sure is understood what we're asking for in 24 is 1.8 billion and that's really all I want to stand here and defend most of the money that's in that 43 billion is either already in our base or is way out in 2030 2031 because as we uh move forward let me mention the reason I say that because one of the Commissioners in the past I chaired oversight we had a Frank discussion is he brought up the idea for every dollar that you invest we can get you back five or six dollars it's set with me the wrong way so I just want to make sure we're kind of get a better understanding of where the dollars are going so we've got a better sense of that the other thing is some s groups outside conservative groups I would say are estimating that you know people under 400 000 there could be as many as 650 000 audits do you have any sense of that or can I is that something I can get to you I would love to to better uh dig into the math as I mentioned earlier at least for the last for the next several years there will be no increase in the audit rate from the most recent rate that we have which is 2018 which is which is a historically low rate the other thought is just on before I got here I was in business 30 years and dealt with obviously a lot of entities that were called pass through you're familiar with those Partnerships and limits partnership well the idea that in terms of auditing a lot of these are over that size they're claiming that it could be uh millions or hundreds hundreds of thousands of organizations and I just want to tell you when you get if it's a company that's got 150 employees it happens to make 400 000 it doesn't all go to the owner but the bottom line is and what I'm concerned about on these pass-throughs when they do get a dispute or some of the IRS is that you do everything you can to move that along and and try to resolve it as quickly as you can because it's very expensive in terms of CPAs and tax attorneys and the time taken away from their business so I don't know what more you could do in that area I'd like to see more resources putting that so when you have disputes at any level but especially small business and individuals you do everything you try to resolve it I would I'd make the best deal and go and get onto something else but that's just my opinion yeah and I I appreciate that and I agree with it when I when I made that analogy earlier of the train schedules and that we have to improve them that's one of the improvements we have to improve the ability to resolve issues quicker first of all well it's one of the central Bill of Rights tax we have a taxpayer Bill of Rights and one of the rights is the right to Quick resolution and I want to meet that right so for example we're putting into place because of the inflation reduction act online accounts for both small businesses and individuals that will allow them to go in real time and see if they have an issue and have real-time ways of solving it so if we're successful this it'll end the era of weeks and weeks of letters and correspondence let me just ask one quick you made a comment about answering the phone yes I think it's got a little better but it's still unbelievable I mean people can't get through it takes hours and I just hear that in our office constantly now maybe different parts of the country it's different but I'd like to have you make sure that whatever numbers you've got is an area you're working on because people their time is important they want information they want to resolve things with the IRS they don't want sleepless nights thank you and I yield back Mr Doggett is recognized like there's German thank you commissioner for your service you know in December this committee got a good in-depth look at the sorry state of high-end tax enforcement after years of Republican obstruction for members of this committee outside the committee we finally secured some of the tax returns of ex-president Trump as the public record reflects and I refer only to the public record there were years of paying little or no taxes tens of millions of dollars in questionable losses carried forward for prior years questionable foreign tax credits we learned that the IRS had assigned a single auditor one person to review the returns of the Trump organization's 500 entities even after that auditor indicated that he could not buy himself do a really thorough audit no one was assigned from The Specialist referral system and he appears to have been provided no reinforcements beyond the question of whether Trump himself got special treatment from his Republican appointees and without asking you to comment on the returns of any particular non-taxpayer of the entire episode gives reason for concern that similar ulti wealth ultra wealthy individuals who may have well have committed tax fraud recognize that they if they have enough high paid accountants tax lawyers can get away with it in reviewing the few available Auditors notes on Trump's returns a joint committee on taxation as you're probably aware faulted the IRS auditor for assuming that using high-priced accountants and lawyers ensures the accuracy of claim credits and deductions on returns my first question to you is is it standard practice that the IRS to assume that the ultra wealthy can employ a tax consultant and just assume that the tax result consultant said that the income and credits and deductions were accurate that they are again I honestly I appreciate the ability or the opportunity to to clarify that I am would never and cannot comment on any specific taxpayer and my responses will relate only to uh to generalities sure um the issue is as I've been describing it's the depletion of IRS resources has taken a toll and it's taken a toll on our ability to uh to do certain things and one of them is to assess or unpack complicated uh voluminous returns from our highest income files individuals Partnerships and and organizations and you know whether you have the visual of a truck backing up with tens of thousands of pages for a given return or the individual or the visualization of a team of attorneys and accountants that uh that a taxpayer might bring to the table the reality is and that's that's their right to do that but we want to have an IRS that's resourced to ask the right questions to challenge in the right uh issues to make sure that there's fairness across the taxes is it fair is it fair to say you would agree with the joint committee on taxation in their analysis that they were not comfortable with any Reliance on professional tax preparation as an indication of accuracy it's absolutely a trust but verify situation and we need the ability to verify and we don't have that right now and and is it standard practice to assign one auditor to cover 500 organizations a taxpayer might submit right now representative as I said we have 2 600 Personnel for 390 000 of our wealthiest filers so we have to make the smartest decisions we can given that Chasm hopefully with the increase in resources we can change that what are the factors that would would cause an audit to remain unresolved for seven eight nine years complexity um and again a lack of resources yeah a lack of resources complexity if we eliminate all of the funding that you received as an addition last year as the very first bill that these Republicans passed in the house will that facilitate this same kind of minimal enforcement with one auditor for 500 organizations it would I I would point this stat to you Congressman audit rates in 2010 for entities corporations between 100 million and a billion dollars in assets range between 20 and 30 percent today they hover near five percent and if we don't have the resources they will continue to hover near five percent and that means we're leaving money on the table thank you so much gentleman from Nebraska is recognized thank you Mr chairman thank you commissioner for being here today I want to clarify perhaps I was mentioned earlier about special agents especially within criminal investigation now uh it's my understanding from a communication I received from your agency last fall that criminal investigation plans to hire 360 special agents per year per year over the next five years for an approximate net gain of 1200 special agents considering attrition is that accurate that sounds about right again criminal investigation division which deals with um fraud and significant cases of taxes correct and those are official agents put their own those special agents are armed is that correct they are armed it's less than three percent of the IRS they avoid magnetometers at airports and things like that so their law enforcement Personnel now you said earlier that you're not hiring any new special agents that will be armed but it sounds to me like you are well that I my understanding I'm glad you're clarifying my understanding of the question was around audits our CI division our criminal investigation division they do not conduct audits what they do is they uh are uh investigating acute issues of Fraud and and attacks evasion and typically they're armed when they're putting themselves in in danger I understood I I understand uh but I think it's important to note that there is a difference there will be new hires that that will be armed for the record now last September secretary yellin sent a letter to then chairman Neil supporting Ways and Means Committee Democrats efforts to provide additional funding for the IRS I'd like to ask for unanimous consent to include that letter in the record without objection thank you in that letter secretary Yellen addressed the long-term decline in the number of Auditors at IRS and provided data showing the decrease in the percentage of taxpayers audited across a number of filer categories between 2010 and 2018. can you clarify whether 2010 the date put forward by secretary Yellen in 2021 is the historical average you were referring to as a long-term goal emphasis long-term goal once IRS ramps up to high ramps up to audit High net worth individuals now I I would not clarify that I would not characterize that as a goal it's a benchmark and we look at 2010 because that's the first year that started the Steep decline in Iris resources so we want to provide transparency to the American people that at the start of our decline in discretionary resources this is what the world looked like in terms of audit rates okay and there's a lot of confusion here in terms of what a lot of these numbers are but you know we there's consideration of income brackets what those targets will be and the percentage of taxpayers within each bracket who are being audited but when you're attempting to adhere to the instruction what metric will you actually be using will it be that distribution across brackets or or there are other are there other numbers to consider I think what we would do uh congressman is look historically at the type of coverage we had when we were at our healthiest so for example if you look back at our audit rates when are our healthiest we had Fairly High audit rates for uh individuals with more than 20 billion our companies with more than 20 billion dollars in assets we are more than half of that right now and so I wouldn't call it a Target but it's a trend to make sure we're getting back to healthy levels now um The Joint Committee on taxation found that more than 90 percent of underreported income actually came from taxpayers earning less than four hundred thousand dollars so how how can we expect to generate 191 billion dollars in new Revenue over the next decade without drastically actually increasing the number of audits on families making less than four hundred thousand dollars not even considering for the impact of inflation since the president sent the set the 400 000 threshold uh not long ago I mean the the math seems to be difficult to to reach yeah and this is a very important question and I'm and I'm glad you you asked it look there is a lot of mounting evidence that uh that there is uh significant uh Under reporting or tax Gap in the highest income filers for example there's a study that was done by by the U.S treasury Department that looked at the top one percent of Americans and found as much as 163 billion 163 billion dollars of tax dodging roughly 90 of the the new audits 99 percent of the new audits will be of those making less than four hundred thousand dollars is that correct now none of the new audits will be of people earning under four hundred thousand so maybe I'm not understanding your question there will be new audits under the inflation reduction act but those will all be focused on our highest wealth filers individuals oh the historic average is not relevant then as as referenced earlier not for a number of years no it won't be I wish I had more time thank you Mr Thompson is recognized thank you Mr chairman commissioner thank you for uh being here commissioner uh yesterday our Republican colleagues passed uh off the floor of the house a bill that uh slashed 80 billion dollars in IRS funding that we had put in uh last year uh to help you solve some of these issues that have been discussed today uh they cut they did made that cut saying that this was going to save money it sounds like crazy math to me can you help us understand when we fund you with proper funding levels does that cost money or does it allow you to recoup the money that's owed it allows us to recoup the money that's uh there's long-standing historical and robust analytics that points to a return of six dollars of return to the taxpayer for every one dollar invested in the IRS budget thank you very much I appreciate that I appreciate the fact that you cleared up this nonsensical argument that we heard of continuously over the course of the last year that this 80 billion dollars was going to pay for heavily armed of Agents running around kicking uh indoors so thank you for that I appreciate also the fact that we've made improvements in regard to customer service at the IRS and uh I know all I have to do is talk to my District staff about how bad things were and things do seem to get better but I I just want to say you got some work to do last week my wife spent three hours on the phone with the IRS and she still hasn't gotten through and most people at least working people such as my wife don't have time to spend it was three different calls trying to get through so she just didn't have time people don't have time to spend an hour on the phone so that uh that yes garnishment it's stories like that that is motivating I know we have more work to do but what worries me congressman is if we reduce our funding we'll hear more stories well I get it I I get it completely I just need to let you know that we understand I like when people tell me these stories because it's motivating uh commissioner uh we have some devastating wildfires in California 2015 2017 and 2018. fire survivors throughout California received a payments from an established trust after the Pacific Gas Electric bankruptcy my constituents and other Californians began receiving partial compensation from that trust in 2021 and they continue to receive payments uh today none of the people that we're talking about will ever be made whole they're going to get less money than it's going to take to repay their uh to rebuild their homes than their businesses and Heavens knows what all they lost that or just just Irreplaceable now in many cases these folks are being told that they owe taxes on the payment they received from the trust including taxes on the lawyers fees the lawyers that were associated with that trust I have legislation with representative lamalfa that will make these payments non-taxable and I appreciate that your staff has been working with mine on this issue and I would ask that you will continue to work with Congress this is wrong this should not be like this and I know the 2017 tax bill teed up some of this inappropriate taxation to take place but we need to fix this it's uh it's it's not a good situation for American taxpayers understood is that a yes your work continue well I'm absolutely will work with you one of the one of the limits that I have is the IRS commissioner is not being able to comment on uh Pro or Con on legislative uh proposals only to talk about whether it's administrable I will say this though I'll be satisfied with the yes I'll continue to work with you on helping the taxpayers absolutely we appreciate when we are provided tools to help taxpayers in need especially those that are impacted by natural disasters thank you I also just want to say that Mr Kelly who's not here today and I have legislation along with chairman Wyden and ranking member Grassley over in the Senate to strengthen the IRS whistleblower program we've got some common sense fixes that will strengthen that help you guys out and I guess it's not your policy to comment on legislation you can tell us uh if this will be helpful yes I can we can work with you on that you know I I will say we we at the IRS will will fiercely defend the Integrity of The Whistleblower process we welcome suggestions on how to strengthen and approve it so I'd love to work with you on that thank you very much you're back Mr Schweikert is recognized thank you Mr chairman um Mr commissioner um I have a fascination with the adoption of Technology as a way to deal with so many of your issues um I have a exit actually an IRS press release from just a couple weeks ago talking about your adoption of a chat bot for simple a simple collection questions do you know do you know anything about that I do how is it working well we have we have had a very successful filing season as I understand it with the introduction of new chat Bots for things like getting a transcript for things like setting up an installment agreement if you have less than twenty five thousand these are relatively and the article makes it clear your press release also makes clear it's fair relatively simple but you've just engaged an experiment of adopting the technology that we see much of corporate America very quickly I desperately what can I do as a member of Congress on this August committee to help you do a hell of a lot more of this yes the fact the matter is being someone who's been screwing around with chat GPT since the end of last year it is remarkable I've had it write code for me the fact the matter is you could build a stack in the IRS and my ability to even ask complex questions the ability to actually say here's here's the discussion I can have and over here is functioning the video on filling out the form um I I guess I'm just desperate of what can I do to drag you in to the adoption of the technology that is truly customer Centric Congressman I'm a convert there's not a lot you have to do to convince me and if my team behind me and those back at the IRS are watching they're probably laughing because of how often in my first five or six weeks I've raised this exact issue so if I went online right now though and actually called in and talked to the chat and you would direct me to here's the video that would walk me through how to fill out the form in multiple languages that exists I I look forward when I think about it about it I just make sure like if you call in the IRS three years ago and you need a transcript you got in line with everyone else no no it's what not anymore I want to help you with this because I also must tell you I think it's insane you maintain your own servers when you have substantial portions of the Department of Defense on highly encrypted Cloud servers yes and you want to keep your own server Farm not necessarily no we are well not necessarily yes or no what can I do to help you to join this Century of Technology both the storage and your Computing capacity it's it's absurd that you still have that server Farm in West Virginia it really is first thing that you can do to help is make sure that we're not underfunded to modernize but but stop the the the migration because because I we spend some time looking at your plan I didn't see the migration away from all your own storage and all your own processing because this is really expensive I mean you still are maintaining what's an as400s and some of these things that's insane what you have to pay someone to do that it it's in there Congressman I will explain it if you give me one second please in the plan we are committed to replacing our core main core systems stop that's actually what I was going on I don't want you to replace it I want you to migrate out yeah that's one of the Alternatives I can't you know we should talk offline about large Capital technology transformation because I want to make sure that I'm following best practice and one of the things we need to do is an alternative analysis and I'm very interested maybe as interested as you in what the cloud-based service-oriented architecture looks like as an alternative you do realize we're having a conversation that's a decade out of date I agree I mean when the Department of Defense did this a decade ago and you guys are still putsing around with it and and this conversation I had for the first week I was on this committee and this isn't Republican or Democrat it's just modern practices it's it just you know we complain about resources and funding people are really expensive and the rest of the world the rest of corporate and rest of other parts of government have made these migrations I want to and this is one I want to help you if it's resources if it's talent I want to help you do these migrations but the fact the matter is this made me very happy that you guys put this out because it's a demonstration you're at least experimenting with technology but my pitch at the end here is a very simple one so far every witness here part of the response is resources resources resources okay okay you're saying the modern use of the resources you have you could dramatically cut your operational costs by moving into this Century of Technology that's all and I want to help I would I would appreciate that help I would love to meet with you offline one of the things I will walk you through with some successes that we've had on technology that we can build on you've pointed to one but there are others but I am not disagreeing with you okay I just the last sentence is I was underwhelmed with the vision on your migration plan it just go okay you had a sentence or two there were throwaway lines with that I yield back gentleman from Connecticut is recognized thank you Mr chairman and thank you Mr chairman for having this uh hearing I think it's enlightening to have a hearing and uh to re-engage with were from the IRS and we're here to help and uh I want to say at the uh start I want to associate myself with the remarks of the Democratic leader Neil that he so artfully put out but not also uh talk about that service and especially for the service putting aside for a moment people earning above 400 000 but people who actually need the help uh and uh the Vita program which has been in place for a number of years I can't tell you how successful that is and how we need to expand upon that is there something in the works to to do that as well yeah I think about improved Service as meeting taxpayers where they are and working with Community groups intermediaries to help us do that Vita is an essential partner they do incredible work the number of of times that Vitas are helping people file their taxes is increasing the trend is going in the right direction we're ready to partner and continue that trend I think that's an important thing and something we should can learn in government I hope uh along with Dr Ferguson to talk about using a similar program with more than ten thousand Baby Boomers a day becoming eligible for Social Security that there's also a tremendous need for volunteer help at no cost to make sure that people are getting the benefits that they richly deserve and need it also brings to mind Etc something like the passage of the child tax credit uh that's on the books and then off the books and for so many families out there that were eligible that probably never even took advantage of this and so again giving new meaning to we're from the IRS and we're here to help and to augment your team also with volunteers but making sure that you have the resources to carry out uh what the regular taxpayer needs to understand and we have a chart behind us and I want to commend you because we keep a record as I'm sure most members do the same thing of the number of cases that we take up and here just in the area of tax filing for the year we have what went on in 2022 and what transpired in 2023 and as you can see with the new resources the tremendous effort that was put forward as Mr Thompson said yeah we can we can do better and I hope that that's the the plan as well but between modernization and also having that human being there the most frustrating thing I talk to to our constituents is not having a person on the other end of that phone or being able to go be being able to talk to the fact that you're open on Saturdays now as well and provide that opportunity if you could comment on that as well yeah I really appreciate the opportunity to comment I mean when we had lower resources it was so frustrating for Iris employees not just because we couldn't have the right amount of people on the phone but also we couldn't do what we need to do as part of meeting taxpayers where they are and serving them effectively in underserved populations so what funding allows us to do is to do what the base of what we're supposed to do which is be there to answer the phone but it allows us to lean in and provide a more fulsome service experience that means meeting taxpayers where they are allowing them if they want to walk into a walk-in Center that that walk-in center is open staffed and there's no line outside one of the things we did congressman is we've opened 16 additional walk-in centers this filing season that would have not been those are in local communities around the country some of the districts of the members of this of of this committee we could not do that without the inflation reduction act so there's really no agenda here other than to meet the demand of a very complicated tax system though so that we can serve Americans effects it's a great thing for the American taxpayer to understand that you are from the IRS and you are here to help and we need to take advantage of that thank you for your testimony I yield back Mr lahood is recognized thank you Mr chairman uh commissioner werfel welcome thanks for being here today let me start by echoing the concerns of many of my colleagues on the supplemental funding for the IRS received last year and the Democrats IR ra that disproportionately focuses on Audits and enforcement over customer service and technological modernization like anything in the federal government things need to be made more efficient more effective and more accountable and that concerns me law-abiding families and small businesses in Illinois need their tax returns processed and phone calls answered and we've heard immense frustration here today regarding the lack of that being done we don't need more IRS agents knocking on their doors with burdensome audits I want to focus my time today though on a specific provision included in the ira the 15 million dollars in funding to study the feasibility of implementing the free direct e-file tax return system at the IRS we've heard that the study is on track to be shared with us next month and that it's likely that the group code for America would be involved in this endeavor at this time Mr chairman I'd like to ask unanimous consent to enter into the record an article from The Wall Street Journal dated April 26 yesterday titled cooking the IRS study books the tax agency wants to decide what you owe before you do so approved thank you thank you um uh with that in that article as I'm sure you're well aware commissioner um uh it outlines uh that the IRS direct e-file system in the pending feasibility study are of grave concern um and I guess I'm trying to figure out the general premise behind the direct e-file study as I look at the extensive list of already existing problems at the IRS uh and and your plans that you have to focus on the coming years and the fact that free e-filing Services already exist in the market today as you know tax preparation industry already provides free filing services for roughly 30 million uh returns each year so I'm not quite sure why trying to tackle this concept in the near term would be beneficial to the IRS or more importantly to the American taxpayers now I know you're new coming into this and I heard your comments earlier before but don't you think the e-file effort could lead to the IRS Binding off more than it can chew with all those things that I mentioned that you talked about further complicating the tax filing experience I would start by saying we have a responsibility to provide tax to meet different taxpayer preferences not everyone wants to engage in the IRS in the same way and not everyone has the means or the position to do so so we have to create this menu the menu includes walk-in centers the menu includes our irs.gov platform and working with our the free file Alliance and the third party preparers it involves advancements on the smartphone as Congressman Schweikert was holding up his the question I think being posed here is is this an additional menu item for certain taxpayers to Avail themselves up if that's the way they prefer to engage the IRS this direct file so the Congress said study it and they my understanding of the Congressional provision is what would it cost what are uh uh what are the taxpayers opinions on it and then an independent assessment of its feasibility and that's what we'll produce in mid-may and we'll come in we'll talk about it and and and you'll have more grounding to ask me the tough questions well I understand that and I understand the study but obviously you're the new commissioner you've had opportunity to digest this and look at this what is your opinion well I don't want to get in front of of the the report itself because the report's not done and I don't want to get out in front of a report that isn't complete my take on it is I want to make sure that we are meeting customers taxpayers in this case where they are I think it's a best practice for an organization to not have a one-size-fits-all I don't know yet whether the direct file solution is the right additional menu item to put in place so that taxpayers that prefer to engage that way can do it what I'd like to do is have the report issue and then engage in a conversation with the right set of stakeholders and figure out what the go forward is well I I would just say and we look forward to that conversation but it appears to me that it seems very problematic and the focus on the IRS should be those things we talked about prioritizing customer service modernizing technology you have enough to do there and so again we look forward to getting that study back and look forward to trying to do all we can to help make the IRS more efficient effective and accountable to the American people I yield back thank you the gentleman from Oregon thank you very much Madam chair Mr commissioner thank you very much for being here thank you for taking what is arguably the most thankless job in America I've had this conversation with a number of your predecessors and I feel the same way anybody who's qualified to be appointed has lots of other career opportunities with less grief less pressure and probably more remunerative so I really appreciate your willingness to take this assignment on particularly considering some of the combative attitudes that you have to put up with I my experience with your employees unbalance is one that is very positive I routinely meet with treasury employees in Oregon and I found in the midst of the pressures that literally reduced them to tears because they couldn't answer the phone and get the job done and Congress Congress is complicit in this Congress has routinely underfunded the agency while all the time we make the tax code more complex and you have more returns to deal with I I just one question do you have 73 000 or 85 000 employees today we have roughly 85 000 which is uh still kind of at a level of Staffing that's no yep I hear you um your reference here in terms of trying to meet the taxpayers where they are I think is commendable are there other countries in the world that have an automatic system that com that uh provides taxpayers with their returns it computes it for them there are other countries that have adopted that type of system um I don't find that particularly threatening I will say that I I wish people had the same ire against some of the of the private tax preparers who've been involved with tax scams that take advantage of taxpayers who aren't particularly sophisticated you don't have to look very far to find taxpayers who are cheated by this industry not all not many but it is a not insignificant number I appreciate what you were talking about being able to equip the IRS to meet the challenge I remember an article a few years ago that GE had 80 had 1200 it was one of the largest law firms in the country was their tax department 1200 tax attorneys for one Corporation filing I imagine extraordinarily complex returns and to the point one of my colleagues made earlier these are very difficult to move through I meet routinely with CPAs and tax advisors and attorneys in my district talking to them about the challenges most of them Lament The understaffing and the inability of the IRS to be able to respond and they acknowledge that audits largely are a thing of the past very few of them have clients that go through this and they're talking about the most wealthy and privileged so I appreciate the the course you're trying to navigate here to try and equip the agency to meet the challenges I think you said almost 400 000 very high wealth and expensive programs that are complex and you have maybe 2 600 people you know not much larger than General elect General Electric's former Law Firm dealing with these I think it's an admirable challenge I appreciate your being forthcoming with us willing to work and explore these items the things that my colleagues have raised I think are worthy to be looked at but I do think we need to be mindful of the fact that this Committee in the past did not cover itself with glory in terms of some pretty outrageous activities in terms of some of the hearings that we can can convene and Sensei sensationalize them I think we can do better than that and I appreciate what you're trying to do your attitude and cooperation and look forward to working with you thank you sir the gentleman from Ohio Dr wenstrup thank you madam chair and I'm grateful that we're having this hearing today commissioner werfel I want to thank you for being here look forward to working with you throughout and appreciate your candor today and I do want to make a plug for my IRS Advocate at home I will tell you that we've had great success good relationship working there sometimes it's unfortunate we have to go to The Advocate as much as we do but that cooperation has been good and I just think it's good to give some good feedback here and there great to hear the couple topics I'd like to ask you about today so I'm just going to jump right into it my staff back home has been working for several months now with constituents who are having trouble getting their employee retention tax credits released because they've contracted with a professional employer organization or peo for payroll and related tax duties and from what I understand the peo and IRS are following the law trying to resolve the issue but it's been more than six months of ongoing case work now and it it seems that the use of the peo is what's delaying them from getting their their their tax credit released and you know I know you mentioned before the phone's being answered more quickly well that's good that's a good first step but resolving the issues too is is really the ultimate step so if you don't mind how is the IRS handling this peo related ertc claims and and the delays that are taking place yeah it's I I am concerned about um about any time we have a a backlog and we need to focus on it and what happened during the filing season is we moved and concentrated our Personnel Resources on the phone to make sure we were answering the phone we've made progress on the backlog during filing season we were resolving and processing about 20 000 employee retention credits a week but that was not enough to keep up with the demand because more come in there's still eligibility through 2025 so this is a a growing Target not a stable one now that the filing season is over we can reset our staffing I'm hoping that we can more than double the rate for closer to forty to fifty thousand resolved a week plus we have teams looking at ways we can improve the process and and be more aggressive in our efforts to to manage that backlog so it is an absolute priority it's got my attention and we're uh you know and I'm holding people to uh to more aggressive targets inside the IRS I appreciate that and glad to have this opportunity to discuss the awareness of the issue that you seem to have shifting gears the IRS strategic operation operating plan I want to ask you specifically about the energy security lines in the ira allocations summary table on page 129 and the FTE table on page 131 for context the SOP allocates just 3.2 billion to taxpayer Services even the national taxpayer Advocate noted in a recent blog post that the funding in this plan was quote disproportionately allocated for enforcement activities and at the end quote and that the IRS needed to quote not lose sight of its core Mission so I look at the 3.2 billion allocated for taxpayer Services which is seemingly woefully inadequate as a share of the total funding here and I'm wondering why more than one-third of that is earmarked for energy security because the SOP lays out five transformation objectives dramatically improved Services quickly resolve issues Focus expanded enforcement deliver Tech improvements recruit and retain work those are all challenges I get it and then there's this energy security line item tacked on after those five objectives and under the taxpayer Services is energy security is siphoning off 1.2 billion quickly resolving taxpayer issues when they arise for objective number two as another quote um let me just cut to the chase What specifically about the those 1 800 new IRS employees um what will they be doing to support energy security that warrants a specific line item rather than funding improved Tax Administration through the five transformational objectives yeah it's a great question and and just lifting up for one moment you know just the tax code is constantly changing and and the inflation reduction act change but even before that between July 2019 and December 2022 there were 950 amendments enacted under the Internal Revenue code and what that means is and that's in congress's wisdom and and the president's wisdom to sign out those what that means is it changes the forms it changes the types of questions that we get it changes the type of processing that we need to do and we need to make those adjustments the energy related credits in the ira are new and there's some novel elements to them and so we have to do what we're doing now which is we've issued rounds of of public comment asked for information we're doing advance and notice of proposed rulemaking we also have to hire more people to be in the phone center because calls will come in with questions on am I eligible or not how is this working new forms will come in that we'll have to assess we'll have to have strong program Integrity so that those funds are really dedicated to administration of these new tax provisions the gentleman's time has expired the gentleman from New Jersey Mr pascarell thank you Mr chair commissioner warful congratulations on your confirmation and hopefully a successful IRS filing season I can't imagine the enormity of the job we've had some hearings over the past session about the IRS and I think it comes down to leadership that's my opinion my perception I think you got great workers they have to face a tremendous amount of filing and questions throughout the year not just until April 15th every year the historic funding enacted in the last session empowers the IRS to answer phones and get refund checks out and looking at the numbers I think you put it in your testimony I think we're going in the right direction we have a long way to go and you said that I want to make writing out your taxes as easy as possible we've promised that a number of times we even had the postcard Theory now we hear lip service about protecting working Americans from audits let's get that one thing straight I believe there's been a sabotage of the IRS over the last years and when Democrats were in charge we didn't do much about it because you have to have a budget you can sweet talk all you want if you don't have the money you can't get the resources you marked seven different places where you've improved in this year's filing season uh tremendous and you've already got 117 million people who have filed so we're halfway there because 50 percent of those folks got a check a refund already so we're ensuring Working Families face big audits while the rich it's got free our hearing last year laid that out and when you see in numbers it's startling smearing fear enforcement is just code for protecting somebody commissioner your uh predecessor shielded Donald Trump's tax returns for years whether he never read 6103 or not is still dubious IRS began a ham-fisted audit the same day chairman Neil made his appeal it was clear it was moderate it was fair Republicans did nothing while Trump's commissioner broke the law because you don't know the law exists or you don't know what the law says is not an excuse 6103 is very clear as the courts pointed out and I don't want to hear that we went after Mr Trump unfairly where the heck were these people 10 years ago when they investigated miss Warren Lerner who had your job threw around and then exposed the names of 12 taxpayers who leaned to the left whatever the heck that means lean to the left in the Charities that they represented I want you to comment to following our recommendations to clearly detail the mandatory presidential audit program in the eternal revenue man manual I've read it have you yes I'm familiar with the with the irm on this where are we well first I'm required to clarify of course that any remarks that I make are prohibited to be attributed to any individual taxpayer right we have a requirement amongst many in the presidential tax review program to review the taxes of of a president and I am in the process of understanding the different ways that the uh reduction in Irish resources have impacted our abilities to carry out a variety of different functions including potentially this one so Congressman Pasquale I think my answer for you right now is that I want to work with you and provide you more detailed updates on what we're doing on this program but right now there are a lot of different activities underway as we reset the priorities and in particular as I've mentioned several times in this hearing we have a significant opportunity to change the way we assess the complex filings of the wealthy we have capacities that we need to build skill sets that we need to hire resources that we need to put in place that right now we are not able to do the types of the review that I think middle and lower income Americans want us to be able to do then demonstrate that the tax system is fair and so holistically we're going to improve our overall efforts in this area and then separately I would like to the opportunity to come back to you with an additional briefing on how that impacts anything related to the presidential tax review program fair enough thank you Mr Ferguson is recognized thank you Mr chairman commissioner thank you for being here today I've got a lot to cover and would like to jump right into it I'm going to make a plea to you to for to to help my constituents all of our constituents get their money back from the IRS and to get what's what's owed to them I'm going to make a plea to you to help with the mental health of my District staff that works with your agency all of the time in all of the district staffs because they are losing their minds over the frustrations of dealing with things like a taxpayer advocacy service that simply is not responsive and not working they are they are losing their minds over four and a half hour courtesy hang-up calls they are losing their minds trying to help my constituents day in and day out and we have heard about all of these vast improvements and I'm glad that somewhere in the rest of the country that's happening so I'm going to beg you if I get you certain cases or get you will you work with my staff to help get the folks the relief let me give you a couple of examples of why this is important we had one small business that was looking for 1.4 million dollars in in earned income tax credits because of the delays it costs a hundred and fifty thousand dollars in interest in 2021 interest payments grew to 3.3 billion dollars up 33 percent I've got list after list after list here of the number of quarterly interest payments that in just a very few cases that my staff Works think about this one of these interest payments could provide benefits for Social Security beneficiary for for maybe up to six years think about that we're struggling to figure out how to pay to solve in solvency to fix sense officer problem with Social Security and one if you just fix one of these cases we could we could cover somebody for up to six years so will you work with my office to handle this because another case that's very interesting is that we have a letter one of my constituents has a letter that says you have you you are due a seven figure refund says it from the IRS and for three years they can't get an answer on it three years so I'm proud that somebody's getting a little relief but we ain't getting it down to the peach state so will you help us will you please help my constituents and my staff yes you have my commitment okay good look now here's the other challenge that we've got this is the data that you provided regarding where the new hires and the IRS are going to be through fiscal year 31. this is this is the data that you provided and we've just put it into a nice little graph for a mirror and so with this wonderful customer service that you have right now and I say that very facetiously what we see taxpayer services in the out years begins to drop significantly so a bad problem is getting worse yet the enforcement number is going straight through the roof and Operational Support is coming down based off of where we are right now this whole thing is backwards you need to be funding taxpayer Services a heck of a lot more getting folks their money back and you don't need to be going after the enforcement side the way that you are so I mean this simply does not make sense every single person here is talking about the problems that they have that their constituents have with the IRS and getting their money back and yet what we see from your own data is that this line is coming down so this doesn't make any sense so taxpayer services are going down enforcement is going up just doesn't make sense so one other issue that's out there I'm going to bring your attention to just get your thoughts on it I I I I guess maybe just get a commitment you are not planning to implement a a bank surveillance scheme with IRS that was proposed before that was not but you're but but you're making no effort to implement that's great okay good so if you were a representative and I know that you're the commissioner but if you were a representative you would have absolutely no problem with HR 1010 our bill that would prohibit IRS from implementing that uh from implementing that bank surveillance yeah I defer to this treasury secretary on those types of questions okay well she was fairly non-committal as well but it sounds like it's not something that you that you have no intention so good you wouldn't you would you wouldn't have a problem with this so I look I looked at this and I look at these numbers and I go back I look at the enforcement side of it in the out years so you say oh don't worry about it here nothing here so we're going to have all of this enforcement so the final question I've got for you is how many rounds of ammunition does IRS plan to purchase this year I can get back to you on that but thank you I look forward to it because if you're not going to hire armed agents it doesn't make sense for you to be hiring to to be hiring agents but by the way on your job posting board today on your job posting board today there's an application for armed agents so that Mr chairman I yield back Mr Davis is recognizing thank you Mr chairman and first of all Mr Warfield let me congratulate you on your new assignment and say that I look forward to working with you secondly let me thank Tracy Walker Carter and your spec team for their efforts to help Foster and homeless youth better understand tax resources I know how much the earned in term term tax credit expansion helped homeless and Foster youth in 2021. given its expiration I'm very grateful that the Internal Revenue Service has continued its Outreach to help these vulnerable youth third I've got a tip my hat to our new Chicago taxpayer advocate I see all of oremia and her team were very helpful to my office and to my constituents Mr commissioner I would appreciate your updating me with some information when it's available in particular when the IRS has data on tax year 2021 I would appreciate reports about the benefits of the expanded Earned Income Tax Credit the CTC and the cdcts in 2021 this information will greatly help us better understand how these credits impacted families and workers and finally like other systems in our country the seemingly race neutral tax policies and audit practices can have a substantial disproportionate impact on taxpayers of color I'm glad that the Internal Revenue Service is beginning to examine these disparities and I hope that you will keep me updated about this work and any legislation that may be needed to build on these efforts to ensure that our tax code applies fairly to all taxpayers and I thank you and look forward to your response thank you congressman and I will provide you with those updates and we are working in response to a a request from Senator white and chair of the Senate finance committee on an assessment of of the report that I think you were alluding to with respect to potential disparate impact of of IRS audits on racial minorities once that report is complete and we've since submitted it to Chairman Wyden I'd be happy to come and brief you on on its findings and what we're doing to uh to move forward from here thank you very much and while all of your offices throughout the country do outstanding work there are none that does what the office in Chicago does they're the best thank you very much and I yield back gentleman from Kansas is recognized well thank you Mr chairman and thank you commissioner werfel for for joining us today you know as a new commissioner I know you have your work cut out for you uh as far as things going on and you know I look forward to working together to help clarify the agency's priorities and and deliver a better experience for for taxpayers and at the end of the day helping them uh retain as much as their income as possible after though they they work for it and uh and paying the taxes is a is a task that we want to do as part of as part of our our uh our country and the process we have here uh we're all aware tax day was last week and I know that it's fresh on the Kansas Minds about how much money had gone into the federal government in Washington DC buy their taxes and they want to know and have a right to know that they're the hard-end dollars dollars are going and and what where they're going and what's being used for that's true across the federal agencies uh uh any any agency that uh exists in the federal government I I want to talk a little bit about you know in instead of increasing the audits on on ordinary Americans um where what's the IRS doing about uh dedicating their efforts to help focus on security and protocol given the uh some of the major leaks of confidential information this happened in recent years you know it's been nearly two years now since Pro public I published confidential information obtained through a massive leak and still no one's held accountable and just last week the IRS disclosed Continental information contained in a 10 in a in a form 99 990 t uh when it was not once but twice posted on uh online and you know mistakes like this don't Inspire confidence that the IRS can be trusted with this cure confidential taxpayer information um so why is it that nobody's been held accountable for the pro public leagues and and you know as the new commissioner will you commit that uh you know to that is going to focus on finding why these leaks occurred and and will work to make sure that they don't happen again well let me start Congressman by saying um and I mentioned earlier how important data security is and when I first was approached about doing the IRS job and I sat down to get ready for my Senate confirmation hearing I wrote down what are the most important implementation factors and the first thing I wrote in Tax Administration is data security it is it is the top most priority and as I mentioned earlier in my early weeks here I'm trying to figure out and determine what's our state of the union in terms of data security where do we have strength for example right now I'm comfortable with our our cyber profile in terms of what we're doing but we need to stay ahead and and keep investing in the right Solutions and there are areas as for example there are several TIG recommendations that we have not done yet that we need to do and I want to close those gaps in the inflation reduction act provides us the resources with respect to the specific issue that you raised it's my understanding that the issue has been referred to the Inspector General and the appropriate protocol for me at that point once an issue has been referred to the Inspector General is to stand back let the Inspector General do any review that they deem necessary and to offer to the Inspector General any support that is needed from me and I had a general conversation with Russell George early in my term that confirmed my understanding that my role is to refer issues let him do his work and when he needs my help and investigation I will be there to help him which is great and I we want to make sure that inspector generals are able to do their job wherever the the work that they're doing I guess the frustration that we feel is now two years in we're here in this constant story there's an investigation underway and we're not hearing anything and it is a do you have are you getting updates from the Inspector General are you having meetings or you have a schedule that you'll get together every three months every quarterly get an update or what's what's the process typically in any investigation what the Inspector General will provide is immediate input to us if there's an action that we can take to close a critical Gap let's say they're doing a review of a system for security they won't wait five months and say we see a gap they'll come to us early and say we see a gap even though their studies not done yet or the audit or the investigation so anything that the inspector General tells us mid-audit or mid investigation is for us to take an immediate action and I think in general broader than their ongoing Inspector General reports on data security and ongoing recommendations that were in place for years that haven't been closed and my focus is on closing well and and that that's that's good I I guess there's just a frustration it sounds like this is being swept under the rug two years now nothing happening so uh I know I'm about out of time I've got so many other questions you know one of the things that concerns me and I know several members already talked about it is the the inflation act when it came out only dedicated 3.2 billion dollars out of the 80 billion dollars for for uh support and customer service and that that's a concern I think that a lot of us have so my time's expired but I'll yield back Mr chairman gentleman from Oklahoma is recognized thank you Mr chairman Mr orfield thank you for uh drinking from a fire hose for the first six weeks of the new job and sitting here for almost two hours now and probably have another couple hours to go here but uh you know this the IRS is something that's you know most people out in America I'm sure you've heard this kind of considers the Boogeyman and sort of a place to be um in the last two and a half years you know every Congressional office has acted as the customer service reps for the IRS trying to reach out and find people and you when I say fine I mean let me get my Oklahoma accent fined with a d on the end not fine with an e on the end and um you know a lot of the when you talk to preparers a lot of that is due to the fact that you know you couldn't get answers to uh you know certain things on the returns and then people would make adjustments and they'd find out after a period of time there are penalties and so we're trying to get penalties abated and and things of that nature so you know I hope as you work through this there's some consideration as that as well I want to ask you a couple questions here in the time I have remaining you know in we talk about the IRA and the allocation um when you look at the tax credits and the so-called inflation reduction act it's been widely reported the green energy incentives in the ira will cost us astronomically more than originally scored last year the JCT and Congressional budget office scored the tax credits last year to be 271 billion dollars yesterday JCT amended that score and now the IRA tax credits will be 570 billion more than double the original cost and this score does not include an update for the EV credits the Goldman Sachs has said the provision cost 392 billion which is 28 times more than the original score of 14 billion now we know implementing these tax credits or tax incentives will also be far more expensive than we've ever imagined in fact when you look at the Omni last year omnis bill it allocated 500 million for the IRS to implement these Provisions however when we look at this in in the Bloomberg tax article it says it's going to cost 3.9 billion so there's a little bit of a discrepancy there between what was originally appropriated and what you're saying you need first of all I guess part of my question is is can you explain why it's eight times more than expected and are you seeing a potential for abuse in these hundreds of billions of dollars in credits and with the cost of the bill going up almost 80 in fact your current estimate 3.9 billion has said is that even accurate now if you can answer that I've got one more question as it relates to that yeah so I'll try to provide some some clarity on that there are funds that are in the inflation reduction act that are necessary to administer the energy credits we also felt that we needed additional funds in our base funding so again this is a point the inflationary reduction act funding is on it sits on top of our base funding our base funding is roughly at this point 12 billion dollars a year and we've asked for 1.8 billion increment for 24. within that 1.8 billion increment is 100 million dollars to pay for additional people to be on the phones for Energy Credit related questions so what you're seeing over the 10-year period is the full cost of what the IRS feels is necessary to administer the energy credits that were in the inflation reduction Act so with the ever escalating anticipation of the take rate of those EV credits we've heard it's widely reported outside of any governmental agency does that mean that you're going to come back for a second by it to Apple as this continues to rise and more and more people are taking which is going to generate more and more questions and more and more oversight I'm not sure I mean you're this is why we have this annual budget process is to is to figure out if the world changes exigent factors assumptions that we may have made that were incorrect but based on our best assessment right now we've provided you the best understanding we have of what the cost to the IRS will be over the next over the life of the inflation reduction act to administer the energy related provisions So currently there are already tax credits out there that are energy uh tax credits and and so you're only is this 500 incremental just to have the new EV credits and so do you feel like adequately you're adequately doing oversight and answering questions on the existing with what your current budget is we currently have a budget to administer the credits as you've heard uh earlier we haven't had sufficient resources and therefore we have a backlog for some of those credits so the idea with our funding plan is to make sure that we are in a state of Readiness for the changes that have been made to the Internal Revenue code so that we can administer it but yes we already do manage energy related credits the this is the inflation reduction act expands the number of credits or the types of credits that are available and thus we have to adjust our operations to accommodate that so this 3.9 billion you have set aside right now in in the 80 billion that's what you anticipate based on the original projections of the EV credits this take rate increase which again will be more individuals taking it more businesses when you come back for your next budget we if we felt that we didn't have enough operational resources we would come back and ask for a plus up yes I mean and it's not and again I go back to There's No Agenda here we just want to make sure that we can meet the demand of of American citizens who come to the IRS for help well I guess Mr chair if I may just the point being with this is is as these costs rise outside of your control your responsibilities to do oversight answer questions yes so the point being here is is that as these costs rise there are other ancillary add-on expenses to the American taxpayer not just what the allocation of the EV credit is but the oversight of those credits the administration of those credits that are going to impact the American taxpayer I yield back thank you thank you and uh now you have five minutes to uh Miss Sanchez from California thank you Mr chairman and I want to thank you commissioner werfel for being with us today um it really can't be overstated how challenging last tax filing season was for our constituents um and that's why I along with others led a bipartisan effort last year to try to urge Treasury and the IRS to give taxpayers some breathing room while the agency tried to dig out from that enormous backlog and it wasn't the irs's fault that there was a global pandemic and it wasn't the irs's fault that after years of being demonized and attacked and underfunded the agency just didn't have the capacity to keep up with all of the extra strain and complexity so I do want to take a moment here to appreciate how far we've come since then we still have work to do but it's you know from dramatically improved individual and business backlogs to just being able to talk with a live IRS employee we are in a much much better place and I want to thank you and the employees of the IRS who've been working non-stop to get us to this point I feel like we don't think IRS employees enough for a for the work that they do that is often thankless commissioner warfall my colleagues on the other side of the aisle are sort of constantly repeating the false claim that the IRS is planning to send hordes of Agents after Working Families using the funding that we pass to under the inflation reduction act and in reality the fact is that the lowest earners who are disproportionately people of color are already audited at far higher rates than wealthy taxpayers and that's because it takes as you said a lot more resources to audit a single wealthy taxpayer who can afford a skilled accountant and who has you know many complexities going on in the in their returns um so it's kind of interesting that the first bill this Republican majority passed was to gut IRS enforcement funding and what that would have is the Practical effect of protecting very wealthy tax cheats you can use the com complexities to their advantage um I wonder if you could expand on the differences in time and resources that it takes to audit a millionaire compared with filers who are at the lowest income levels is thank you for the question you know as you know most of Americans file their single Source income filers most of their taxes are administered through their payroll it's a very straightforward operation when we have multi-source income like large Partnerships corporations billionaires and multi-millionaires it takes up to 50 times longer for the IRS to assess exam or audit those returns and that's due to their volume their complexity um and uh you know I I you know to even put more of a fine point on it it takes about five hours on average to audit a middle and low income taxpayer when those audits do occur it takes uh can take 250 hours or more to audit a wealthy or more complex filing so it is a much harder job and it requires a specialized skill that has deteriorated at the IRS while the complexity of these organizations have increased so we have a lot of work to do and that's if you're a mom-and-pop shop if you're a middle-income individual the message that the IRS has for you is the inflation reduction Act is going to be focused for you on improving your service that's where our focus is great and the audit efforts and enforcement will be on these very complex returns for the wealthiest taxpayers individuals corporations and Partnerships perfect thank you commissioner if my colleagues were to Succeed In cutting the inflation reduction acts funding what would that mean for the irs's ability to improve audit rate disparities and make it harder for wealthy filers to game the system if your funding is cut yeah I mean I mentioned earlier you know our audit rates in 2010 for uh corporations between 100 million and a billion dollars in assets range between 20 and 30 percent and now they're hovering near five percent so we're not doing enough to assess and when you don't do enough to assess you know you create risk you create risk that the laws are not being followed especially if there's a sense that no one's ever going to look at what we're doing and so then you can be more risk preferred in how you file this is you know this is something that we can never perfect but if we have the right amount of resources and if we're effective at looking at these complex returns then we can rebalance that and and they'll take less risks and that will be beneficial to the U.S government's bottom line great um I want to just briefly touch on another issue which is the reporting threshold for folks who report business income on the 1099 case yes um if we raise the reporting threshold to a more reasonable dollar value without reinstating the 200 transaction requirement will we still see greater reporting of true business income while avoiding some needless confusion yeah I mean the way I would answer that question is the way in which the law was enacted is extremely complicated and we're learning in real time it's complicated it was complicated for the IRS to administer and it was uncomplicated for employers to uh to determine how to work with third-party pay providers to make it all work so as you know we took a pause and you know in retrospect we want to get better and better at not having to take pauses and planning better but this provision turned out to be way more complicated than was anticipated so anything that can be done to to change the the dimensions of how complicated it is would be helpful for the way we administer question is a broader tax policy one that is best answered by the Secretary of Treasury but in terms of the question of would it help with the Simplicity of administration yes great I appreciate that and I yield back thank you and now you have five minutes to uh Miss Miller from West Virginia thank you chairman send thank you for being here today um the IRS is facing many many hurdles and I don't think your job has gotten any easier in the last year or two I wish you the best of luck in taking on this huge Challenge and facing what you have to face and I encourage you to do it transparently and as productively as you possibly can I've been working to solve an issue for over two years that was caused by the incessant greed of the current Administration for our tax dollars it involves the lowering of the threshold for taxpayers to receive a 1099-k form and moving it back to its original intent the lower ring has created significant challenges for taxpayers small businesses and payment processors along with the IRS because President Biden needed to pay more for his agenda luckily though we avoided an imminent disaster because of the delay in implementation last year it saved an estimated 40 million taxpayers from a tsunami of impossible paperwork and I'd like to remind you that it is the role of Congress to make policy and it's the role of the IRS to implement it not upside down last year the IRS cited difficulty in administering the program is one reason for this delay and the IRS did have a full year to send taxpayers a bill that they likely really didn't owe and the agency wasn't really prepared to handle that type of a burden if this policy was too difficult for the IRS to get right in that year with all your new employees some of whom still are not back in the office I believe how do you expect an individual who is selling a bicycle or paying their rent as a group to handle the cost and the compliance burden now I think one of the most important principles of Tax Administration is that taxpayers have Clarity on what is expected of them and sometimes a law change in the Internal Revenue code sometimes we can administer it fluidly without any impact on the clarity and sometimes the change is complex to administer in this case we were not ready to administer in a way that provided taxpayers the clarity they need so we paused it this was before I got there I think it was the right decision though to pause it now we have work to do and we're working very closely and engaging all the stakeholders to figure out because the law hasn't changed yet it's still the same law how do we when we resume next year do a much better job and providing the type of clarity what are the questions we need to answer what are the flexibilities we need to explore we're asking all those questions of of your constituents and other stakeholders around the country and I'm hopeful that we're going to get it right this time but I will say again it is complicated to administer absolutely would the IRS welcome Congress raising that threshold back to the time-tested standard of twenty thousand and two hundred separate transactions again as I said earlier I cannot opine on the wisdom or the preference of a particular policy outcome but I will share that a change in the threshold would be easier to administer and so at my seat at the table I'd say the iris would have an easier time administering it thank you because then my next question would be do you have a plan to delay it again if indeed nothing had happened but I'm hoping it will happen with this bill and I also want to thank all my Republican colleagues who had signed on to the bill and I certainly hope that my Democrat colleagues will do so as well in order to protect our constituents and make life a little bit easier while we support what we can support thank you so much I yield back thank you and now yield five minutes to the gentleman from North Carolina Dr Murphy thank you Mr chairman and thank you commissioner for coming heard good things about you and I know you've just been two months on the job congratulate you for going and being a tar heel undergrad I'm sorry you couldn't get into a real graduate school as you had to go to Duke so um anyway har har um look forward to positive things and I actually believe the IRS needs new more people 100 percent but I I just want to follow up because this chart um is concerning to me can you just comment on that because you know it it shows an absolute meteoric rise in enforcement and we're not we're not uh pushing people to take care of the our taxpayers can you briefly comment on this yeah well yes thank you for the question my job is to do both actually to do all three um the job of the IRS is to serve Americans and help them with their tax obligations it's to enforce the code to make sure people pay what they owe and then obviously we need a foundation at the IRS that's stable and operational right now I mean I'll just ask you this do we meet this many more enforcers rather than that many more people to pay take care of taxpayers I will say Congressman I am concerned with the chasm that exists today between the number of people people we have to assess and unpack complex filings of very wealthy Americans and therefore I believe we're going to put those enforcement dollars to very good work and make a lot of Americans proud in terms of how we equitably I I would say this and we can get off this but you know you've heard from both sides of the diocese or both sides talk about absolute unbelievable taxpayer frustration and I think that needs to be the number one priority that you have we are in the business of customer service and everybody in government should be and that's customer service all right thank you um uh let me just ask this you've been saying a couple times you know about the 400 000 dollar limit that you wouldn't get working on those individuals to tax them to audit for a while for a while you know when I have patients come in that I say how long has it been hurt and how long you've been doing this they say a while and I say is that two weeks three months five years how long is a while can you give me like two years two and a half years can you give me a number yeah I I would say that um that if I'm fortunate enough to still be in this seat in 2026 we should sit down and talk through where we go from there because I think you're going to say four years you're you're those people are gonna I would say in the three to four year time frame we will I will have enough information in the capacity building that we're doing for high income filers that I'll be able to turn to you and say okay what's next all right do you have a percentage that you have a close that you say Americans are not honest on their taxes let's just begin let's see what it is my understanding taxpayers come in so you would say 85 percent of the people on this diet no I'm just kidding all right okay so that's an alarming numbing in some ways it's not alarming in other ways it's sad it's it's whatever so let me just ask this because we always hear about this fair share thing what percentage of tax receipts come from those who make the top one percent that I'd have to get back to it it's like 45 I mean the top one percent and the top and the bottom 50 percent we all know hardly pay any taxes at all I just want to put this in relative terms I'm not saying we should not go after people the multi-billionaires who you know make all this money and pay relatively small all amounts but when they say the fair share come on Joe let's let's get real I mean it's just you know when you're paying almost half the tax burden the top one percent let's just be real and I just want to be fair about those things um let me get back to to just one other thing um so much time um you talked about that you need about 2 900 employees to audit the 390 000 wealthiest and that's about a roughly one we have 2 600 today 2600 I'm sorry um and that's roughly about a 1 in 150 ratio let's flip that um let's look at the say the people that make under a hundred thousand what's the ratio there oh it's it's much much much higher in terms of because there's so many more uh Americans that make under hundred and fifty thousand and so but it's a different challenge in other words you have a return that comes in that's just a couple of pages versus a return that comes in a hundred thousand Pages it's just kind of optimizing the Staffing that we have for the challenge of the materials that are coming in and most middle and low income files process very quickly very easily especially if they file electronically you know we run our math checks and we run you know an automated review and many of those files just go through and hopefully if they file electronically and direct deposit they're getting their refund within 21 days at this point all right the reason we need a lot of people is because for billionaires and large multinational corporations it's just a complicated return understand I absolutely understand but you also need not unless I need to understand surely understand that especially in the last two years the American people are tired of government overreach now you can't have a puddle on a farm with it being regulated by the Biden Administration you can't have a boat that speed is not regulated you can't do so many things the they feel the federal government needs to be in every single pocket of Americans and every single thing that you do so when you hear the IRS knocking on the door when you see the differential on that slide that or that graph that shows so many more people knocking on your door it scares the hell out of the American taxpayer so please give us some reassurance that we're going to come back to the fact that we want to be customer service first rather than enforcement lender law enforcement agency we have a lot of work to do on customer service in the Strategic operating plan that we issued on April 6th there's roughly 200 projects I referred to it earlier as my public to-do list a lot of that is about changing the way we serve Americans by opening up our taxpayer assistance centers answering phones better putting on tools on their smartphones and our website there's a lot of focus on that and yes there's three billion dollars to do that and we have that the challenge that we have but you have 46 billion for enforcement yes okay so I'm sorry I've probably gone all my time here but boy that just they don't pass the smell test thank you you got a hard job but I would say if businesses ran their business like the federal government runs its business we'd be bankrupt oh by the way we are bankrupt so thank you so much time's expired thank you and now I yield five minutes to the gentleman from New York Mr Higgins thank you Mr chairman um the uh The Brookings Institute came out with the report it's said over the past 10 years seven trillion dollars of taxes that were owed were not paid is that an accurate figure if I'm doing the math right our tax cap assessment is roughly 500 billion dollars a year so if you multiply it by you know you get into the trillions once you start multiplying that over a 5 10 15 year time frame so if nothing changes over the next 10 years how much money will be lost in revenue of taxes that are owed but not paid if nothing changes about five trillion dollars okay so that's uh that's 12 trillion dollars of the past 20 years um you know there's a lot of talk here about concerns about a debt the national debt which is 31.6 trillion dollars well there's 12 of it right and you know you talk about one of your main objectives is to enforce the tax code but obviously it isn't being enforced fairly to include everybody now a teacher will pay about 22 percent in federal taxes 50 American corporations that are recording record profits pay nothing and many of them get a return the uh the 1960s Harvard Economist Peter Drucker said the whole point of creating an economy is to create a middle class because they fight our Wars they teach our kids they build our roads and bridges and they pay our taxes your predecessor one of your predecessors it may have been once removed came to a senate hearing two years ago and put the number of taxes that are owed but not paid at a trillion dollars it's a lot of money and you can't at the same time talk about debt and deficit and with any credibility not be bullish about collecting this money that is fairly taxed against corporations for income taxes that are reporting billions of dollars of profits so I just want to make very clear this is not about enforcement this is not about meeting taxpayers where they are because I'll tell you where they're not they're not in Corporate America and if you look at the list of these corporations Amazon you know we first of all in 2017 we lowered the corporate tax rate from 35 percent to 21 percent right well Amazon the next year paid six percent in corporate income taxes Exxon Mobil paid a little less than three percent a t got a rebate of 1.2 billion dollars Ford paid one percent Charter Communications got a rebate of 1.2 million dollars an American teacher pays 22 percent 22 percent in federal income taxes so the problem here it's not really customer service it's about the fair not aggressive but the fair enforcement of the U.S tax code which this committee is primarily responsible for so I know I threw a lot out there but you know the institution on Taxation and economic policy says at least 55 of the largest corporation in America in America largest 55 corporations in America paid zero federal income taxes Teachers Pay 22 percent sir this is not a customer service problem this is a fairness problem in the middle class is getting screwed again and there is no denying it if it's not seven trillion dollars in ten years there are many other reports that you could point to as you know that put the number at 10 trillion dollars a year some put it at six trillion dollars a year but these are trillions of dollars that contribute to the federal debt that this body has been preoccupied obsessed with over the past 48 hours so I yield back gentleman from Tennessee is recognized thank you Mr chairman thank you for commissioner for appearing today I asked this and I realize you're less than two months into the job but I want to follow up if I can about the pro-publica leagues based on what you know now do you think that the controls and the protocol are in place today to prevent another type of pro-publica leak it's a very good question uh I I I said earlier a couple things I said data security is a top priority and it is I said I'm in the process of assessing where our strengths and gaps are and I am there are gaps and I want those gaps to be closed and I've asked the team to put together an action plan and I'm really leaning on tigta because it the taxpayer Inspector General basically gives us the road map they have recommendations as long as those recommendations are open I think we have a higher risk than we should have and so the way I'd answer that question is we have risks to mitigate and I am prioritizing mitigating them you can appreciate why those types of leaks are concerned not only to wealthy Americans but to all Americans fair enough uh we sent a letter Congressman Ferguson who questioned you earlier in my and myself to your predecessor and the secretary Yellen on on October the 6th regarding the employee retention tax credit so um I appreciate the letter was not sent to you was sent to your predecessor it regards the the number of backlogged uh for 941 claims I think at that time when we sent the letter there were a little over two hundred thousand unprocessed forms the number today is substantially higher again I understand I sent the letter we sent the letter to your predecessor and not to you uh my question is first of all can based on what you know can you address the backlogs and the status of the backlogs I can look without um it's it's absolutely important that speed and processing is is done I think taxpayers expect and demand that when they file for a credit it's going to be take a reasonable time not an unreasonable time for the IRS to process it the employee retention credit has a two particular challenges but probably more but I'll highlight two of them one is is that it's it turns out to be an extremely difficult uh credit to process because it impacts multiple tax years so the individual the IRS that has to process it has to make sure they get the information right in each of the right tax years that takes time it takes expertise and in order for the credit to register we have to get it right the second is it's a problem with the number of fraudulent where credits we're getting in so we're having to set aside credits that just don't seem to add up and it's clogging the system a bit these are not excuses these are these are just realities I have still made it an absolute commitment to to drive that backlog down earlier in the hearing I mentioned during the filing season we were processing about 20 000 a week now that filing seasons is over and we can reset staff a bit I've asked the team to up that to double that rate and I'm happy to come back and report to you periodically on whether that direction that I've given and whether the impact is bearing fruit I expect it will I appreciate that if I could ask you again it was sent to your predecessor the letters dated October 6 2022 if if you could if you could respond to the to the letter oh yes in the letter I will lastly Lots been asked about the new employees and the and the enforcement agents enforcement staff however you want to characterize it let me just ask you uh whether they're armed unarmed whatever who are you looking for what are there on the enforcement staff the enforcement agents what are their qualifications what's their background who are they question so to under the inflation reduction act our focus is to rebuild our capacity to unpack complex filings to do that we need people that understand how these filings are put together so we need expert accountants we need expert economists we need data scientists that can help us analyze Trends and economic behavior so that we can understand where there might be risks of balances owed that haven't been paid so we're looking for a um a a a pretty sophisticated group of employees that can help us unpack sophisticated returns and that's the focal point and look there are labor market realities that are challenging we have to improve our overall human capital operations people have said this is a hard job and it is but I have confidence that we're gonna we're gonna get this done there's a shortage of accounts I so we have a shortage of a lot but but that doesn't mean we're not putting a full court press in play to make sure that we get the right staff at the IRS recent reports said that that more than 300 000 accounts and Auditors quit their jobs in the last two years yeah thank you I yield back my time thank you commissioner Mr Arrington is recognized commissioner good afternoon um thank you for your time um so I served with some of my colleagues here on the budget committee and I'm trying to do the math here on the numbers and then connect the sources to uses um 12 billion I think before Ira annual budget and then you've got the 80 billion from Ira that's 8 billion a year so you've seventy five eighty percent increase and then in the president's budget this year there's a another 15 percent increase so correct and then the so the first eight billion a year coming out of the Ira was for compliance and enforcement um the analysis on 2010 audit rates and the historic data from the IRS suggests that the uh that the audits would result or the additional audits with the additional monies would result with a million more audits per year and that of those million additional audits six hundred thousand would be people individuals families making seventy five thousand dollars or less a year so that'd be certainly over half maybe as high as two-thirds of your audits a million more on people making seventy five thousand dollars or less that's using IRS historical data is that consistent with your uh your analysis of your own information with our plans I would I want to unpack your math a little bit or the math that's been presented and I appreciate the question because I think it's important to clarify for Middle low income and small businesses what the plan is but the plan as I've mentioned is to focus our enforcement efforts on uh on complex returns of high wealth filers and with respect to those making less than four hundred thousand you can go to the 2018 audit rate and that's all we're going to audit to at least for the next couple of several years in commissioner you can imagine how concerned people are that with your past practice if that's any prediction of future Behavior they see a deluge of new audits on working people on small businesses and they're having to they're having to hear the line we're from the government we're here to help and you can trust us I mean and listen I'm not questioning your commitment or Integrity but I think too often we take the American people for fools and they are just going on their past experience and the data so I you know certainly hope that the commitment's genuine and that the Fulfillment of that commitment is consistent with what you're saying um because I'd find that unacceptable and if you're going to focus on the more complicated and the high net worth individual I don't see any justification for the 8 billion a year and then the president's budget asking for 15 more percent increase now I'm not asking for you to respond to that okay if I may let me jump to another question seemed a little uh unrelated to that one but another concern I was at the rules committee talking matters of budget and debt ceiling but the issue of the IRS your agency came up and firearms and the idea that in some of your job listings I don't know if it's all of them but that says that people who are looking to be employed are should be willing to use deadly force there was an article in the New York Post that was cited in this hearing uh that stated that the IRS had almost 5 000 guns 3282 handguns 600 plus shotguns 539 rifles 15 fully automatic weapons anyway big cache of weapons is that true or not true with no sort of commentary on or a value judgment is it true I'm not going to make a value judgment I'm just going to make sure that I point out that our criminal investigation division is where we work to reduce and engage in tax fraud and acute areas of tax evasion where in order to enforce we're putting federal employees life in danger and therefore there's a need to arm this is less than three percent of the IRS it's a small part of the overall operation just can you confirm that that that so I remember that I can get back to you I don't know the specifics on on the data that you provide but I certainly can get back but I think context is important well I know my time has expired and I I regret that I didn't get to talk about the customer service challenges that you face we can talk about that offline but I would like that I've got real concerns like my colleagues do on that front thank you and I yield back thank you Mr commissioner could you make sure that at some point you get us the total number of um employees that are armed at the IRS you said less than three percent but less than three percent I can do that I would love to get the telephone number and I will do that please thank you Ms Del Bennett you're recognized thank you Mr chairman and thank you commissioner for taking the time to be with us today appreciate it um along with uh my colleagues Mr Pascal and Miss Chu I've LED an Appropriations letter requesting increased funding for the IRS after years of neglect through decreased Appropriations the IRS has reduced Workforce and staff to levels not seen since the 1970s so the reduction in Workforce has had a direct impact on taxpayer Services as folks have talked about and with the funding provided by the inflation reduction act the IRS can be brought into the 21st century and provide taxpayers with a customer service and transparency they deserve I'm disheartened that funding for the very agency that's responsible for generating 96 percent of the funds that support the federal government's operations including infrastructure and education has become such a partisan issue so commissioner I wondered if you could speak to why annual discretionary funding for the IRS is still necessary and how the inflation reduction act funding will supplement it I really appreciate the question I have a we've been saying I have a hard job to do and one of the hardest jobs is to explain the funding that we need and why it's so important and you know the our base budget which is currently at 12 uh roughly 12 billion dollars that pays for ongoing operations you know answering the phones processing the returns that are coming in and as you mentioned what happens over the last 10 or 15 years is our population grew filing went up the economy grew filings got more complicated and our staff went down to about 1970s level and so we really couldn't keep pace so we have to build back to where we can meet that demand I gave the analogy earlier of people waiting on the train platform and if you don't fund our base budget they either they wait longer and the platform gets more and more crowded and what we're trying to put in our budget is here's what it takes to make sure that people aren't waiting too long on the platform and then it doesn't get too crowded that's what it takes just to run the train schedules but we need to modernize because right now the system that we have is outdated and when taxpayers go to their favorite Airline or their favorite local bank they engage and see a suite of tools on the call center on the website on their smartphones that they don't get from the IRS and why because in the funding cuts that we've had over the past 10 or 15 years we haven't had the ability to modernize we've just kind of kept everything together and we know that during covid we were no longer to keep it together as well as we could and and the bottom dropped out and we went to Historic low levels of service and historic long wait times one concern I want to make sure is clear and especially since it's been raised how important our taxpayers service Investments are because our base budget has not been increased in order to keep those trains going this year we had to use inflation act reduction inflation reduction act service money to pay just for base operations so essentially we've rated modernization dollars so that we could answer the phones and by doing that we now have less resources to modernize the phone system it's the difference of can the IRS answer the phone yes can the IRS modernize the phone system to improve the Callback option to produce increase automated options no not if we raid to pay for base and that's why it's important that Congress fund both our base and our modernization because it's the American people that end up suffering they're the ones waiting on that train platform for the next train to come that's taking too long and it's getting really crowded and what we're doing in our budget is explaining what we need to do to keep those trains running and what we need to do to give them an experience commensurate with what they get around the block when they go to their local bank and it will just get harder the longer we wait yes because it's getting more complicated when I say 390 000 wealthy filers that number's from 2019 it's probably a lot higher than that now we're just catching up with the data um I also wonder if you could speak to how the enforcement funding and the inflation reduction act would improve taxpayer compliance and would close the tax Gap and what their revenue impacts of that might be yeah I mean I mentioned earlier when you think about the the train platform you think about service but there's also an enforcement component there as well and our audit rates of our most wealthy filers I know there's been a lot of discussion about the 400 000 level I thought it might be helpful to explain to the American people let's lift that up let's lift it up to individuals that make 10 million or more Partnerships and S Corps that have uh 10 million or more assets corporations that have 250 million or more assets so this is the wealthiest of the U.S filers right that is where we have 2600 staff today with the right skill set uh and the right responsibilities to assess those 390 000 filers and I know it's it sounds weird for the IRS to say it but we're overmatched in that moment because we don't have enough people with the right skill sets to assess these filers and if your middle income low income own a mom and pop we want to build your trust we want to improve your service but I don't know that we can effectively build your trust if we have the capacity to audit you but don't have the capacity to audit the most wealthy filers because those filings are most complex I would also share and reiterate my message to those Mom and Pops there is no new wave of new audits coming we are focused on building that capacity for the most wealthy filers that is the directive from secretary Yellen and I'm going to meet it thank you um thank you Mr commissioner I yield back Mr chairman gentleman from Pennsylvania is recognized thank you Mr chairman um commissioner Warford thank you for being here you got a tough job um so we appreciate your service the IRS gets a lot of scrutiny but it should because it's the one agency that touches literally every single American um it's really a question of you know and we all understand it's important to collect Revenue the question is how to best do it in the fairest most efficient way and the most just way possible and it really comes down to an allocation of resources you're hearing a lot about this 87 000 IRS Personnel it's not agents as you put it out personnel but with the addition of 87 000 additional Personnel the IRS will now be larger than the entire State Department it's our border patrol it's our Pentagon and the entire FBI not individually but combined first of all my first question is do you accept that metric as a fact I'm going to be providing an update with uh with the Staffing numbers over the 10-year period but I'm willing to accept the premise that the IRS will grow and be larger than those agencies my response to that is that that's the size of the organization needed to address the complexity of our tax system today so you you do accept it um and it's just a question of math I don't I will we'll have the the next time I'm sitting here we'll have all the numbers that we could but I don't dispute the fact that under the inflation reduction act the IRS will grow um do you believe that simplification of the tax code would uh reduce the number of needed IRS Personnel yes I agree with that do you think that the tax code should be simpler as I said earlier it's not my jurisdiction to uh to weigh in on that that is the the domain of the treasury secretary on behalf of the administration but I will say the simpler the code the more effective the IRS can be in administering and how is the decision made between uh CID agents criminal investigative divisions which is a law enforcement arm of the IRS and uh non-law enforcement Personnel how is that allocation decision made and how would you describe to the American people into this committee who don't understand the difference how would you describe that difference I mean in virtually every interaction you're going to have with the IRS it's not going to involve the criminal investigative Division if you're calling to get help if you are get a a letter that's saying you missed filing if you owe an amount uh you know in most in virtually all cases you're going to be dealing with an IRS employee that's not part of our criminal investigation division so what happens though is is that certain tax issues become acute they become more challenging you know we've reached out there's nefarious Behavior there's an unscrupulous actor this unscrupulous actor is known to be dangerous we work with local law enforcement we work with the justice department this is all and I would be happy to unpack this with you uh in a separate you've answered you've answered officially but can you can you understand the concern because people you know there's been abuses in the past as there have been with other agencies and and I hope you're working to correct that but just the allocation of resources the state the state Department's required for diplomacy after across the globe border patrols require you know responsible for protecting the entire Southern border 1300 miles and the entire northern border with Canada from Gun Runners and Drug Runners drug dealers terrorists CI concerns the Pentagon is a nerve center of our entire United States military and the FBI is responsible for counterintelligence counterterrorism criminal and cyber security those are very Broad and it's encapsulating the size of all four of those agencies so what would your response be I mean it's clearly you want them as many people as you can to execute your mission but for America they're more concerned about the right amount of people to execute our mission I want to right size the IRS I mean I've heard the phrase supersize the Irish that is not the intent we have to meet the demand if there's a certain amount of calls coming in we have to have the right amount of people on the phones if they're people coming into our walk-in centers they can't be closed it's not fair to the taxpayers the taxpayers don't have a choice they have to pay their taxes they have to work with the IRS if we are ill-equipped to work with them then we're not serving the American people do you believe that that demand is is the case because of how complex the tax code is I think that's a big driver of it it also is the number of filers that we have we're a growing economy a growing population something we should be proud of but with that comes a larger tax system I'm glad we can agree on one thing the tax code needs to be simplified because it's tens of thousands of pages of a monstrosity that uh you know you need a sophisticated tax attorney to to navigate so uh with that I'm sorry I appreciate your service thank you Mr chairman yo back Mr subie is recognized thank you Mr chairman on March 9th 2023 the IRS and agents to the home of Twitter files journalist Matt taibi during his testimony in front of the house select committee on weaponization of the federal government IRS agents don't generally just show up at taxpayer homes making the situation even more bizarre the agents left a note telling Mr taibi to call them if this was an issue that could be handled with a phone call there would seem to be no reason to send the agents in person the presumption has to be that this was an attempt to intimidate a witness unless it can be proven otherwise I mean this is the type of tactics you see in Soviet or communist China are you willing to state that there is an appearance of impropriety when an executive branch Agent shows up at the home of a witness testifying before Congress literally at the time while he's testifying before a committee Congressman section 6103 prohibits me from responding to specific questions to an incident involving a taxpayer okay well do you did did you approve of the visit to Mr taibi's home again who would approve that what would be the approval process again I would be breaking the law if I asked a question specific to a specific incident of a taxpayer okay well let me ask you this way is there any incidences with any taxpayer that you would have to approve the involvement of either an agent going to their house or approval of an investigation as a general rule the IRS commissioner is not involved so who would be as a general rule as a general rule we have IRS Personnel that work to ensure that individuals are complying with the tax code so for example if they don't file we will send a letter if they owe a debt we will reach out with a letter there are I think it's important to understand it a very broad sense without commenting on any specific taxpayer the IRS reaches out in multiple ways to educate taxpayers while ensuring it fairly enforces well obviously there's got to be some type of approval process for investigations right so like whether it's Mr taibi or whoever what is that process within the IRS and are there instances depending on the profile of the taxpayer that you would be involved and if you would not be involved who is the approval process for opening an investigation going to an individual's home how does that work okay again making sure that I'm careful I'm speaking completely generally here yeah well I think I I would like the opportunity to get back to you on the on the specific so you can't as you sit here right now tell me how the approval process works for opening an investigation on a taxpayer going to their home an agent showing up at their home any of that you can't give me any specifics on that I will offer as a general matter one important clarifying point to your questions which is any home visit that occurs is typically uh after the taxpayer has been contacted through a letter or some less invasive method and we were not able to contact the taxpayer in that way as a very general matter I can share that with you but in terms of your question of the the complete process of an investigation being opened at the IRS it's a closure I'm not prepared to provide you an answer with full Fidelity because I'm still learning the process and I will get back to you okay um so you said you said generally that if somebody's showing up to somebody's house that's obviously been elevated so would that be a criminal investigation I did not say it was elevated I said that we would you said you would have opened an investigation right I did not say that I said that we would typically try to reach a taxpayer through a letter uh before we would do uh any kind of additional Outreach and if if we fail to hear back from that taxpayer then going to someone's home is a possible so would that be a criminal investigator within the department that would go there or a non-criminal investigator as a general matter would often be a non-criminal investigator the oversight the house oversight committee has discovered numerous llc's affiliated with Hunter Biden where it appears he was laundering money through the LLCs and paying for basic living expenses out of the llc's now I know you can't speak to specific taxpayers so I'm not going to ask you that question but if the house oversight committee has evidence of a crime that was committed or what appears to be tax fraud or tax evasion who would they get those documents to within your department is that something that we should get directly to you now again the IRS commissioner would not be involved when there is an again not specific to any specific taxpayer but when there is an allegation of any kind particularly from a a whistleblower or anything like that or evidence to Do's from a oversight Committee in Congress exactly who would it be within your department that would handle that investigation Inspector General in within IRS yes well he doesn't it's the tax Inspector General uh for it's the Inspector General for tax administration Russell George and anytime I I learn of of an allegation a credible allegation that something isn't right I immediately refer it to the Inspector General to do the investigation and as I said then I stand back let the Inspector General do their work and my one ask of the Inspector General is let me know how I can help and I wait to hear back from him so just to I'm just trying to wrap this around so I fully understand yes so you as the commissioner are not involved in making any of those decisions so it regardless of who it is again I'm not asking a taxpayer at no point in time do you get involved in making investigative decisions enforcement decisions and that and your your testimony here today is that's the IG and only the IG for when when there's an allegation of wrongdoing amongst an IRS employee or an allegation that some that that requires additional investigation but but you know I think we might be talking past each other if there is I'm not talking about I'm not talking about internally I'm talking about a taxpayer we need to we need to wrap it up okay I think we should take this offline but uh but again I will go back to the the important point the IRS commissioner does not generally engage in decisions about individual taxpayers if there is an allegation that something is not right with respect to IRS operations the Inspector General investigates it if it just involves a taxpayer and they're being investigated for tax evasion that decision is made not at the commissioner level but at the uh at the bureau level within the IRS I yield back my times expired Mrs Chu is recognized commissioner werfel I want to congratulate you and every IRS employee on what was by all accounts a tremendously successful filing season the IRS hit an 87 level of service which is five times higher than last year hired 5 000 new customer service Representatives assisted 100 000 more taxpayers in person and cut the phone call wait time from 28 minutes to just three minutes the reason for this incredible turnaround is clear Democrats led by this committee finally gave the IRS the resources that needed to operate properly the inflation reduction act reversed over a decade of intentional disinvestment in the agency and I was proud to play a part in its Passage contrary to the misinformation we've heard from the other side of the aisle the IRA is improving taxpayer service and improving tax compliance by the wealthy it's not targeting low-income taxpayers and in fact actually I've been long concerned about the unfair burden of enforcement that low-income taxpayers shouldered in recent years it was back in 2022 that I asked numerous times in in hearings with our IRS commissioner about the data that showed that low-income filers earning less than 25 000 had been audited as as much as five times higher than the other filers and these were the eitc filers and so um commissioner could you describe how the IRA funding has impacted iris's ability to ensure that both the wealthy taxpayers are obeying the law and that low-income filers are not unfairly targeted and thank you for the question uh congresswoman and um that the critical thing that the inflation reduction act provides the IRS that we haven't had previously is the resources to build capacity to assess complicated returns of high income filers you know I've talked earlier in the hearing about our coverage or our audit rate for organizations that make more or have more than 100 million in assets and it is historically low today and that's because as you described there's been an era of divestment in IRS resources the inflation reduction act allows us to to essentially stop that reduction and start to build a capacity that existed previously and we have a lot of catching up to do because the world is very different right now in terms of the complexity of these organizations Partnerships are more complex than they were 10 years ago multinational corporations are more complex and I believe even the way that that billionaires uh operate uh their finances change as an example cryptocurrency didn't exist 10 or 15 years ago so we have an Ever complicating environment by which to enforce the code and a lot of these complications don't Impact Middle and low income most middle and low income are single Source income paying their taxes essentially through their payroll a lot of these changes really only impact the wealthiest Americans and if the IRS is unable to develop a capacity to keep up with that well that means that we're not doing our job to fairly enforce the tax code so that you are just as likely to uh to uh to be assessed of meeting your commitment if your lower middle income as you are higher income and that doesn't exist today and I think what you're describing is there's an opportunity because of the inflation reduction act to create more fairness in the system that will build trust and ultimately I do think that's my bottom line as commissioner is to build trust with the American people that we're meeting our mission effectively thank you so much commissioner as a member representing a district with a high percentage of people that speak other languages I'm very thankful of the efforts the IRS is making to meet the needs of taxpayers with limited English proficiency I see that these efforts are mentioned as a goal in the inflation reduction act but what specifically are you going to be doing to help these taxpayers with that limited English proficiency there's a section in our strategic operating plan that points to efforts under the inflation reduction act to improve the way we serve underserved populations service improvements across diverse taxpayers segments including those with limited English provision see that means digital tools accessible and taxpayers preferred languages again we have now the investment to do that it we have funds and resources now to expand Community Partnerships to engage with taxpayers to understand how to educate and meet people where they are again this is the type of unlock that the inflation reduction act provides I said earlier the difference between just being able to answer the phone versus being able to provide a callback option well it's more than just a callback option it's the it's it's the difference between just standing back and waiting for the taxpayer to comment on being only able to serve them in one language versus meeting the taxpayers where they are understanding what their needs are to comply with the tax code and meeting them where they are thank you I yield back Miss tinney is recognized uh thank you Mr chairman and thank you ranking member and thank you to our witness and I know you have a tough job I used to do tax law I know how difficult it can be and how scary it is actually for consumers small businesses and those and and I appreciate your comments today understanding that as well I think a lot of what the concern is and a lot of consumers and and taxpayers see the IRS is all-powerful trying to be too intrusive trying to be too controlling interfering in our lives now going online to not only be uh you know the tax collector but the tax preparer and you know the 600 transactions uh that I might you know buy something for my sister and I've got to report that for six hundred dollars you know or whatever I think people are concerned about that and the concern about our system of justice and that's why I think you see so many questions surrounding power in this case and I've always looked at the IRS is very all-powerful it's you know the core principles of our system is you are innocent until proven guilty it seems the IRS operates on the opposite principle you're guilty until proven innocent and I think that's a lot of the presumption that people feel sensitive about it and I know that you had an extensive dialogue with my colleague Mr stuby on the situation with Matt taibi and a lot of the the eyebrow eyebrows that raised that all of a sudden here he is testifying in a sensitive issue dealing with the administration and suddenly he has an IRS agent at his door and um and I understand you can't talk about that but I know there were a couple of issues surrounding that and and one of those is that chairman Jim Jordan actually asked you about providing some of the requested documents to Chairman Jordan did you did you in fact provide those documents that were requested by Jim Jordan I need to check and I'm not sure I can answer that question in this setting um this is not a this is a this is a document request response and answer so you should be able to answer that question I apologize Congress congresswoman it's my understanding that if I answered that question it's a violation of 6103 if I'm wrong about that I will make a correction let me let me ask this in the is that is that document request going to be granted whether it's been done or not well let me lift up and say it is my absolute commitment to comply with all document requests from this committee from Congressman Jordan's committee like I welcome the oversight I really do I think it's important to be able to answer the tough questions that's how we build trust and Congressman Tenney you said it there's this power Dynamic and one of the ways we can reduce that power Dynamic is making sure that we're complying with oversight entity requests and that is my commitment right and I appreciate your sensitive to that issue as well but let me ask you this and uh was the IRS agent that showed up at Mr taibi's door armed with a weapon again another question that I can't answer because it involves an individual let me ask you let me ask you on the technical side of that since we'll get into procedure let's take Mr taibi out of that uh assuming what is the standard for somebody that has an IRS agent show up at their door what is the standard for being showing up armed I mean obviously we know that we have a drug dealer that's not for example paying their taxes but if we have a journalist who probably isn't making a whole lot of money I mean it just concerns me that that standard is something that really we should look into as the IRS I mean it's not every day that an IRS Agent shows up at your door with you know with weapons so I think that should be more uh you know rare than the rule so let me just go back and I want to get to another substantive question I just wanted to talk to you if we could a little bit about applying the r d credit or the r e creditors it's known under 22 or 26 U.S code AS section 41. there's been a lot of inconsistencies expressed to me in my district through my tours through businesses and and really having a legacy of a lot of small business a lot of innovation a lot of Technology there's been a lot of confusion about uh you know inconsistency and enforcing that r d Rule and you know real and a lack of clarity and uh and uh there was a question raised in last last term about getting some guidance on that and I just want to say it was not provided and I just want to for the record Mr chairman I want to actually put into the record two general guidance documents one on Architects and whether they qualify and one on engineers and whether they qualify that we obtained on the irs's view of that so I want to for the record if the chairman would accept these so ordered thank you also uh I just want to also so so where are we going with this r d credit I mean we're in a situation we had the IRA passed we have all these tax credits we want to see we want to see Innovation we want to see our supply chains come back we want to get ours ourselves in a better situation against some of our competitors and adversaries like China on Innovation wouldn't shouldn't we really look into this r d credit and make it consistent and fair for for taxpayers because that's really all many taxpayers ask you know there are many many people are willing to pay their taxes they just want consistency fairness neutrality in their in their IRS uh regulations so that we can have a fair playing field especially for our innovators in our communities would you agree with that assessment I I agree and you know as you were talking earlier congresswoman about about the the power Dynamic I I reached for you know some people carry around the the Constitution of the United States and I certainly respect them doing that I carry around the taxpayer Bill of Rights and I make sure that I'm reminded of what my responsibility ability is as the IRS commissioner to make sure that we're protecting those rights and a lot of those rights deal with things like the right to know what you owe and what you're entitled to and so you're well no if I could just I know I don't have any time left but I just I haven't I worked a lot with a lot of tax preparers and we we have to come up with the laws to make it easier for you and for us to collect the taxes that are properly due and also to give rights to our citizens and I I have a a long time tax preparer I was one of my mentors who said here's how we should look at our tax preparation Simplicity transparency stability and neutrality that's how we make tax law and I think that's something that the IRS and you as the new commissioner would be grateful if you could look up and and make that kind of policy on based on those rules of the road which are so simple and and really what we're all looking for for fairness so you got to wrap it up I know my time is up and I thank you so much for your your service I appreciate it okay we're going to be very specific on the time frames because it's been two members that's went over for a minute and 30 seconds just in the last three times so I will cut you off much quicker um Miss fishbach please and and Mr chair thank you very much and I take that very seriously and um I will say a lot of the questions that I had um were you know we've been discussing already but so I have just a couple of follow-up things uh Dr Murphy had asked um about how many people you think um I don't know if he used the word cheated or um on their taxes you came up with about 85 percent you said 85 percent if you're recalling that yeah I'd like to I'd like to confirm that number I'm not sure I understand the question in terms of cheated that's not a technical definition I can certainly come back to this committee with a very precise detail in terms of where the different categories of non-compliance okay and and I appreciate that because that was going to be a kind of my question when you came up with that number and and maybe this will help with your follow-up I'm looking I'm wondering what percentage of that would you consider or what part of that would you consider actual cheaters I mean who intentionally write something wrong or you know deceptive on their on their taxes and how many of those people don't understand the complicated tax code that we have in place and that leads so so for your follow-up please because I would like to pledge and I would like to understand that glad you provided me the opportunity and in particular um again maybe even the breakdown with those poor middle class folks that are you know doing their own taxes and trying to figure out what's going on um and and it leads into uh kind of a follow-up that I had you know he you said you're doing more audits on the middle class than because the um because the wealthier have more complicated uh and and correct me if I'm wrong but this is what I've been hearing um the wealthier have more complicated returns and it's more difficult more time consuming to do those and I'm wondering if that's the case why are we why are we looking at quantity versus quality instead of you know moving resources and focusing on potentially some of those folks um but it seems like you're just saying oh well there's more of them so we do it instead of actually moving resources and focusing on some of those that potentially have more complicated returns well first of all I want to make a clarification the audit rates are going down for all for uh for Middle income as well and I mean that's one of the issues that I raised earlier that the as example the latest rate we have 2018 is a is a historically low rate and that's okay but and I am reclaiming my time since these sorry the chair just gave me the warning um but you know kind of the answer your question is yes we are moving resources in a way to go after the more complicated returns that are going to have the highest return on investment that's the that's the goal okay because I because it really felt like you know is there is there kind of a quantity kind of focus because obviously with one guy you can do more for the middle do more on the middle class than the um than the more complicated returns but um I guess in in you know what I'm going to do is given that since you're going to follow up on the 85 percent I got one minute and 51 seconds left and I am going to yield back I just made points with the chair you definitely have some gold stars um Miss Seoul you're recognize I'll try to do the same um Mr commissioner uh you did in your openings uh testimony talk about how the added resources that were given in the inflation reduction Act did bring up the number of calls that were answered the number of uh you know audits that were resolved and so but I also heard you say that more complicated tax returns are challenging for the IRS and I can tell you that my district in Alabama and the black belt is one of the largest districts that has um that that gets the Earned Income Tax Credit audit these are working Americans who make less than minimum wage sometimes and the fact that 20 to 30 percent of those audits are in poor vulnerable communities seems to me you should be going using those resources to go after I mean what you're getting what the federal government gets by auditing them while it makes a big difference to those families it's peanuts in the grandstand of things so can you talk to us about why that is and what you're doing about it it's a really important question Congressman uh congresswoman because you know I think what happened for example with the Earned Income Tax Credit just to go back in history a little bit is that that uh program because of the uh the improper payments law that is on the books that program has a historically High improper payment and so as part of IRS historical remediation of those improper payments audits increase I hear you I'm not defending it or not I'm just giving you the history you know pro-publica did a survey I mean this is this is documented yeah um and that the pre in the report shows the study found that eitc audits are mostly heavily concentrated in the South and in southern black belt and I represent them Greene County where the median income for a family there is right around twenty dollars twenty thousand dollars twenty thousand dollars for four was among the 10 most audited counties in the country for eitc recipients in fact audit rates in many of these areas are more than 40 percent I gave them Thirty forty percent higher than the national average hitting rural communities of color the hardest yeah we gave you some money gave you a lot of money actually I don't expect you to Target poor people so I understand that there's a problem that needs to be in the policy of ITC then we should do something about that but if you think that there's uh you know a reason I don't I and I don't know to ask you other than to say please do something about that yeah my response to you congresswoman would be first I absolutely am in The Firm belief that fairness and equity in our tax system is essential you're asking important questions we are looking and studying and assessing the potential for uh that that our eitc audit program is not consistent with these values of fairness and I'm gonna have to report back to you on what we find and work together to make sure that it is fair I mean that we are on a journey to get to more fairness and I think identification of the issue is maybe even not half the battle but an important part of the battle now the battle begins and I will work with you on this that's my commitment I look forward to that I yield back the balance of my time 55 seconds thank you representative a gentleman from Pennsylvania is recognized thank you Mr chairman good afternoon commissioner thank you for being here and thank you for your willingness to take on this this role I want to raise a few concerns I've heard from constituents regarding uh the processing IRS process of the employee retention tax credit the ortc and I do I do understand the program was implemented quickly and you know the the IRS had to learn to run it as it was being developed almost but um you know so I know there were Kinks that needed to be ironed out but we're now three years out from enactment and I'm still hearing from employers who've had challenges receiving the funds some maybe still be waiting and in some cases even had to shut down the business completely because they they did not receive the funds that that were promised the relief the pro program appears to be Rife with inconsistencies and I'm I just want to raise this hoping for maybe your feedback and and hopefully you're planning to make some program improvements so for one example an employee shared with me that they had received their Quarter Two and quarter four refunds 20 weeks after applying but never got the quarter three the IRS somehow determined they were ineligible for the payment for quarter three although they got two and four because they considered the employer a government entity after successfully appealing that employer finally received the quarter three check a year later and I asked a tax preparer how that could happen and they revealed that they must send in that 941x form separately for each quarter or else do not get scanned into the system um so it seems like there's a problem there they were also told that initially they were not told that initially so many sending their claims formed for the year which which delayed refund checks another employer received a refund check but then shortly after was contacted by the IRS being told to return the funds um and uh in the weeks this employer spent trying to get clarification he received another check so uh it's actually sort of frightening for employers when they're trying to do the right thing and they're getting a lot of mixed messages uh and a lot of different results um another uh conversation with tax preparers they shared that they were not informed when the IRS removed the Kansas City processing center from ertc processing so I understand that you may be redeploying agents to help process the backlog of these claims but I'd like to understand what is being done to expedite on processed backlog at the Kansas City facility or anywhere else yeah thank you for the question congressman and you know lifting up before I get into the ERC like we are on we are getting healthier we are in the process of getting healthier and I think the our low point was during covid after years of funding decrease and then having to shut down our operations and then retool our operations into a virtual environment we lost a lot of ground the paper piled up including new requirements such as the employee retention credit such as economic impact payments so it was a bit of a perfect so all these cases being processed now and I'm sorry yes they are but they are being processed now as I mentioned earlier none being held back like at this point the only reason why it would be on hold is if we if we thought there was an issue of fraud or error otherwise it's being processed where we were up to 20K a week at the end of filing season in terms of the number we're process thank you and the issue of all of the 941s being in one envelope can you commit that the individuals processing these will process multiple uh I mean let me look into that and and commit to get back to you on that question all right thank you um and just I have a minute left you've talked a lot about the um 80 billion dollars you continue describing the hiring at the IRS and the new funding is merely right-sizing the agency and you even push back today on the argument that the funding is supersizing the agency yes I do want to point out I'd like to submit for the record uh Mr chairman if I may an article from The New York Times from April 27 2021 and in this article former IRS commissioner koskinen I hope I'm pronouncing that right said that he he thought and this is a quote the 80 billion being proposed by the by demonstration might be too much in his quote in the interview was I'm not sure you'd be able to efficiently use that much money that's a lot of money so again Mr chairman I know I'm almost out of time but without objective that for the record if I could thank you gentleman from Utah is recognized thank you chairman we're getting down to the point where it gets serious business everybody's left for votes let's get down to position a few people left on the dice this is where we get the real work done I'm going to ask us to actually suspend reality for a minute and talk as if we weren't in a congressional hearing say in a client consultant type of relationship and as I look at this whole and I represent Ogden Utah which is an amazing processing center thousands of employees my constituents and so I have taken this issue to heart to really dig into and truly understand you know what we need to be doing here um and I want to what I want to highlight is there is area of consensus here my frustration comes with how this all came out this was you know For Better or Worse usually for worse when one party rule in Washington they always you know you have to do big things and you know you try to get as much through legislation as you can and and there was a big Bill that cost a lot of money last year in the inflation reduction act and in order to get that accomplished we needed to find the Democrat Party needed to find Revenue so they did a huge IRS bill because the CBO would score it so they could gain revenue over time like of course we're going to be frustrated at that we don't want to manipulate a government agency in that way to be able to just satisfy a CBO score so all that aside setting that context like we've got real areas of consensus here and as I go meet with my constituents in Ogden and as I hear and address issue there is a lot of opportunity for tech technical modernization customer service capabilities to enhance that and my point is if I was like Consulting the IRS and say let's take this as a huge win and there's areas of consensus let's dig in and really go out and and find that opportunity the workforce that you have is strapped they don't have the tools they need to do their job so before we go and add on an enormous amount of individuals in Workforce to an already sort of system that doesn't work for them currently let's Shore that up and then after we evaluate the improvements that we've made in this Tech modernization in customer service capabilities in a toll-free number Automation opportunity for them to not have to be so bogged down with with phone calls that they can't answer like why don't we try that and then ultimately take another look and say this is where the workforce needs to go I would love your just sincere response to that is that something that if we were to be serious adults back here instead of you know any of the partisan back and forth could we actually get something done if we did that I understand correctly I think your your question resonates completely with me you know thinking about the folks in Ogden and I really appreciate you uh calling them out for the amazing civil servants that they are um and going back to this question of what kind of IRS are we going to be are we going to be an IRS that just can answer the phones are we going to be an IRS that actually enhances and modernizes and let me give a good example with respect to the employee retention credits that those folks in Ogden are working really hard to process right now currently the IRS does not have the capability to ingest an amended return electronically we need to be able to advance our technology to be able to do that now you can say well that's outrageous why why don't they have that capability and we can relitigate it from the past and I can make the case that resources have been dwindling for years and years and that's why we haven't done it and someone might make another case I don't know but to your point can we roll up our sleeves and figure out what do we need in Ogden Utah to improve that operation because ultimately it's going to help the employees but more importantly I think the employees would agree it helps the taxpayers people are waiting for their retention credits I don't want them waiting for their retention credits I want them to get their attention credits as quickly as possible and these types of gaps are what we're dealing with and these types of gaps this is the part that and if I haven't seen it if I haven't done enough research I apologize in advance but from the IRS plan and from uh GAO reports or the plan that was released in in early April you know technology the word technology was referred to many times but I haven't seen the specificity City on what is needed because I know there's a motivation on our side because our offices are getting bogged down with requests and we can't even help our constituents to the extent that we need like we would love to see the specificity laid out knowing that I'm sick and tired of saying there needs Tech modernization if I say that one more time without real seven layers of additional things specifics that we need to do for these folks like that's the area that I want to get to so I'll rep I will add my comments from the gentleman from my colleague from Zona I'm ready to roll up my sleeves too and dig in and actually get this part done before we add on thousands and thousands and tens of thousands of more employees to A system that doesn't work currently let's fix that and then figure out where we need to go future and I definitely am going to stop thank you thank you for staying on schedule the chair now recognizes Mr buyer for five minutes thank you madam chair very much commissioner werfel I just want to thank you for being here and taking on this task of leading the IRS through a very pivotal time and I I represent many many IRS employees and I know they're thrilled to see that with your leadership through the inflation production act we're finally providing the employees with the resources they need to serve the American people better I just want to say too that I don't know maybe we're lucky but our taxpayer Advocates have been terrific and I've done a really really good job thank you for that feedback however we do still get a lot of incoming requests which we're able to fix can you tell us about how the backlog is we're not that many months away from this huge Washington Post New York Times stories of cafeterias filled with unprocessed IRS insurance so look I said earlier to an earlier question we are in the process of getting healthy right coming into this from last filing Season 22 into this filing season we cut our backlog in half we did that by and people working hard some of the people that you represent over time you know anytime they're not doing something they're they're working the paper backlog but we also scanned more and this is part of a modern IRS and you know we were not doing enough before we had the funds in the inflation reduction act to Avail ourselves of the sophisticated technology that's out there to take a tax return and convert it to machine readable format a paper return a lot of the backlog most of the backlog if not all is caused by paper and the fact that we don't have an automated way of processing it so you have individuals keying it in which seems like decades-old technology and that's what it is but because we're now adding a scanning technology that we previously didn't have the resources to Avail ourselves of we now have a more sophisticated technology on the ground turning forms into machine readable so they can be ingested into IRS systems that's an example of what we're doing between this filing season and next filing season it is an absolute priority to further make an enormous dent in our in our paper backlog and I'm hoping that citizens start to see the the results of that great great thank you I also want to thank you on the tax cap in the unfairness of having the rich paid by one set of rules and Working Families pay by another is pernicious and dangerous and it really undermines the basic social contract that's kept our country so strong so thank you for that I want to touch on something I don't think anyone's mentioned yet I was Ambassador to Switzerland for four years incredible privilege and one of the biggest problems we had was Americans paying their taxes the American expats and the challenge was that so many of them didn't know any taxes to the United States but still had to pay three four five six thousand dollars in CPA fees to get the tax returns processed over here I know you have a new initiative right now on allowing them to pay with their foreign bank accounts can you update us on what you're trying to do to make America's tax compliance the the three to six million Americans who live overseas a lot easier than what it is right now yeah and I'm glad you asked this Congressman because it goes back to this broader theme of tax pay we have to meet taxpayers where they are some of them are overseas some of them are in rural communities some of them don't have the means to hire an accountant or or or pay for a a third party provider and some of them are hiring an army of accountants and for those taxpayers that are that are international that want to meet their obligations even though they're expatriates which is great and that's what we would expect we need to work with them to figure out how to make their filing easier as well and to the extent that they're paying CPAs for filing with no balance due we want to work to fix that great we we have legislation which you can't comment on but bipartisan which we will bring before you and one last thing in my last minute the by a 217 to 215 vote the Republicans passed that their bill yesterday what would happen if we actually took away that 80 billion dollars yeah I've tried I'm trying Congressman to explain in the plainest possible language how devastating that would be for the American people not just for the IRS because again we are not resourced to meet the demand that is created by the complexity of our tax system today that complexity is in part the code but it's in part just the number of filers the population and I keep on going back to this analogy of the train platform right now because of the IRA we can get those trains moving we can move people off the platform get them where they want to go if you repeal the inflation reduction act you eviscerate our ability to fix the problems that we've had historically those trained platforms will get more and more crowded the trains won't come Americans will be frustrated they'll be calling your offices they'll be saying I'm a terrible person that's okay but but the important point is is that eliminating the inflation reduction act actually Harms taxpayers I now recognize myself for five minutes and I would first like to um first let me let me start by saying that the taxpayer advocates in New York City will start on a positive note they've done a great job great um with my office we've spoken with them they've been very helpful 528 constituent cases that have my office has had to intervene in which is the negative part the fact that these American Tax paying Citizens need to contact their member of Congress to get a solution or resolution so I would ask one question um are you are your staff members still working from home you still have that covid telework or are they all back in the office today it is a a mix like all other federal agencies I would emphasize that everyone's working um I will say that in my my first few weeks at the IRS the question that I focused on with the IRS right now is are we getting the job done are we are we answering the phones are we fighting off cyber attacks are we processing the backlog as long as the answer to that question is yes then that's going to be my priority now if the answer is no then I want to go deeper into the issue and figure out what the issue is and if the issue happens to be the telework policy is negatively impacting our ability to get the job done for the American people then we will make a change well I I would just I would love to suggest that it's time to bring everyone back to the workplace as you know Republicans passed a bill to get all federal employees half the workforce still working from home and I think that does have an issue to do with constituent services and making sure that these calls are answered the fact that one Congressional office in just two years had to intervene in over 500 cases is a problem when we were in our Hearing in Peachtree Georgia uh one of the accountants who testified said that she been transferred four times it was placed on hold for three hours until she received assistance I want to also move on to another major issue that I'm seeing with my constituents sadly we have had over a dozen issues of uh check thefts check fraud either stimulus checks or tax refunds that have been stolen someone had signed the checks and deposited the money and I are you aware of this happening and are you working what are you doing to try to resolve that issue are you working closely with U.S Postal Service and the Department of Justice to address that yeah I know another early priority of mine congresswoman is to in particular address issues where there's a victim look I I It's upsetting when someone doesn't pay their taxes because that victimizes the U.S government's Financial bottom line and we're of course concerned about that but when there's an individual victim whether it's identity theft or money is stolen they're taken advantage of that is that is something that we absolutely have to prioritize so I I absolutely commit to working with the Postal Service the justice department on on on cracking down on that type of Nefarious Behavior I appreciate that and I would I would also make the argument that that should really be a priority I see some of the other initiatives that you're focusing on whether it's the 1099s for you know selling something on eBay or whatnot going after these small these small uh you know just middle-class people I think what we should do is focus on these types of things to prevent those fraudsters but in addition to that you said earlier that you cannot meet the demands of today and now we're also seeing that the IRS is interjecting itself in government populated returns trying to you know we have a whole industry of tax preparers uh that are hundreds of thousands of of of jobs um good paying jobs that they do this in the private sector and they do it right I think this is a case of government coming in saying that they feel they could do something better than the people who actually do it every day and I would say if you can't meet the man's demands of today and we have a lot of backlog here uh why why interject yourself in doing something more uh why fix something that's not broken of what two responses that first Congress asked us to study it so we're going to study it and the second is any product that would go forward would be an option for taxpayers they would not have to use it if they didn't want and for me the question is are we offering the right set of services based on taxpayer preference you know whether the question whether they're overseas whether they still need to fire paper whether they want to walk into our walk-in Center I think we have a a an obligation to to be able to provide diverse enough services to meet taxpayer preferences so once this study is done we'll we'll take a look at it we'll talk with you about it and see if this makes sense to meet a taxpayer preference that's out there if it's feasible and the cost so you can imagine for some of us it's just looking like IRS looking to do more big government more bureaucracy interjecting itself in an area where it really should just leave it to the private sector but I would I would love to work with you to see how we can fix some of the issues that I brought up earlier today because it truly is my constituents and other American citizens who are being victimized thank you very much for your time I now recognize Miss Steele of California for five minutes thank you commissioner thank you for participating today this is such a long hours that you've been sitting and enduring so thank you and thank you for your service too having said that American families and small businesses are having a hard time trusting in the IRS our constituents should not have to fear that the IRS might come after them previous data t-i-g-t-a treasury Inspector General for tax administration half of large corporate audit Reserve result no change the article from this morning titled the surprising risk in ramping up IRS audience according to that article states that nearly half of those making 10 million dollars or more who are audited so no changes in their tax bills in 2020 2018 13 of audits are people making between a hundred thousand to two hundred thousand dollars were no change audits in 2018 IRS data does show more than one in four people in with the income between one million dollars and five million dollars were given clear bills of Health and almost half of audits of cooperation with at least one billion dollars in assets found they owed nothing more why are so many Americans being audited for no reason this article that the surprising risk and ramping of IRS are they saying that could be because of the IRS is picking the wrong people to audit or it doesn't have the right specialist to go Toe to Toe with big law and accounting firms through though we are not really sure so we all kind of like questioning that sounds like a problem is not needing more money or doing more audits but one of wasted resources commissioner um how will you ensure that the correct people are getting audited in the first place and so the objective congresswoman is Equitable tax enforcement right we should be able to demonstrate to the American people that no matter what your means are and no matter how complicated your return is the IRS is treating you the same so just because your return is simpler to review doesn't mean you should be more likely to get an audit if your return is more complicated to review we should be equally equipped and currently we're not equally equipped the reason I believe my hypothesis is the reason why you see zero balance due audits is because we don't have the right capacities today to unlock these complex returns in an effective way and there isn't a lot of audit coverage in fact a lot of we are at historic low audits across the board including for these uh these the wealthiest most taxpayers the thing is zero balances because of that didn't have enough sufficient enough we need we need the right economists data scientists attorneys we need to tap into the people that know how these returns were constructed the world is moving very quickly in terms of the complexity of these corporations the staff supposed to be trained for that we haven't had the resources to train so you are not training your people for not as effectively as we could not we haven't had the funds to train we have again we've we have a staffing level pre-inflation reduction act that's equivalent to where we were in the 1970s we have we have we have not had enough resources to meet the requirements of today's tax system and with these resources and being able to train and hire the right mix of people I anticipate that we will not have as many zero balance due audits in the future and when we don't it's going to be a tremendous return for the taxpayer and that's why I think repealing the IRA costs so much in the eyes of the Congressional budget office because if the plan is to engage at that level a two percent a three percent of four percent Improvement in some of these metrics will easily pay for what the inflation reduction act investment is then why don't you just reduce the Audits and just go really dig in those people that you are auditing instead of those two percent three percent and you don't have to increase those numbers on that it's a great question I I think and it was another Congressman asked the question as well I think we do have to optimize it isn't about quantity it isn't about doing more audits of of wealthy taxpayers it's doing the right Audits and making sure that we have the right balance and the right optimized approach to how we exam the wealthiest taxpayers we are not optimized right now we are leaving money on the table Mr chairman actually I prepared five different questions but it seems like my time is already up so what I'm gonna do is I'm gonna do inviting and answer these questions perfect please submit your questions into writing and I would like that thank you we'll have that thank you representative Miss Moore is recognized thank you Mr chairman I want to thank our brand new IRS commissioner join my colleagues in thanking you for your patience um you're you're new so I just am curious about your background were you hired from within IRS or you came from I started my career in government I worked for many years at the Office of Management and budget I worked at the justice department and I also worked at the IRS all right so I'm returning you're returning okay and I I only ask that question so I can just get a baseline of what you know about the laws that we have passed recently um so so in 2013 uh we we reauthorized the violence against women act and during that particular reauthorization we required um housing providers would receive the low-income housing tax credit uh funding to um to to no longer evict victims as they had been doing along with their abusers and so treasury really has informally indicated that the agency does not see itself that they need to act because non-compliance with the violence against women act uh 2013 is not considered to be non-compliance under the statute that created the low-income housing tax credit but the IRS is required to administer this so are there any plans are there any priorities for it because you know women who are leaving abusive situations that they are more in danger of losing their life at a time that they decide to leave a relationship and so housing can be really critical in terms of their safety is this something that you're aware of or is this a priority for you to I was instantly made aware of it I'm really glad you're asking the question I understand that we are looking into the regulations and seeing whether they could be revised to expressly reference housing protections under the violence against women act I think that would potentially resolve the issue I it's really important that this committee raised these types of issues to our attention because that will allow me to prioritize and make sure that we close these types of issues that are problematic I got some more for you Mr commissioner the Earned Income Tax Credit um I just want to congratulate the IRS they did a fantastic job during the pandemic getting money out to people who otherwise would not have gotten it the uptake in the earned income tax credit and the child tax credit is low but through the um the non-filer portal you are able to contact people um who otherwise would not have received the benefit we have been talking to treasury about using that that uh non-filer portal to identify people who could benefit from earning from the Earned Income Tax Credit in the child tax credit is that something that the IRS would be supportive of these are really low uh income people and they could benefit from this resource that is available in the and for which they're eligible yeah 100 look when we Implement something new we learn a lot uh when we as the IRS and this predates me and I also congratulate the IRS Workforce for the amazing work they did during the pandemic you know we had to turn on a dime and uh and Implement these economic impact payments in many cases you know essentially life-saving payments for people in well I just want to work with you to make sure that you actually Implement that you actually use that that portal that is so valuable suggestion um to do it um implementation of the safer act last Congress as a part of uh secure 2.0 um there was a bill uh that congresswoman mcbath and our Congress uh Min Schmucker from this committee and I uh all um uh LED saving access for escaping and rebuilding Act safer act again domestic violence yes um often means that you know women will not appropriately receives the tax refunds to which they may be entitled and if if the non-custodial parent files first and then the custodial parent filed second there's a big hassle with straightening it out they may have to file um you know paper a lot of paperwork are there is there any interest in helping victims of domestic violence we saw this a lot during covet those uh where you know the the non um custodial parent found themselves getting the check for the children and not sharing it with uh with the actual custodial parent and tires they could do nothing it's a very unfortunate outcome and I would absolutely be interested in making sure that that that the right parent gets the credit and particular if the victim of domestic violence is you know is not getting that credit when it's rightfully theirs that is alarming and concerning and I would like to work with you on that well I appreciate that thank you so much and I would yield back my time miss van dyne's recognized thank you very much Mr chairman finally um Mr werfel you've been doing this for a really long time you came in nearly almost exactly 10 years ago as acting director of IRS correct under the Obama Administration yes when you came in at that time you um the IRS was facing tremendous amount of of criticism because it felt the number of people criticized that the IRS was targeting um specific political groups for tax-exempt status correct that was the allegation yes what did you find so um through the process and I was there for eight months we provided a tremendous amount of information to the authoritative committees and the Inspector General and I would really rely on the final reports of tigta and the permanent subcommittee on investigation that thoroughly over many years evaluated those issues and we can go over those results but yeah so the IRS 10 years ago that it was already being criticized for going after tea party groups in their tax exempts that was the allegation so fast forward 10 years later and I don't need to repeat the the questions that we heard from chairman Smith or from Congressman temney Congressman um stuby but it seems like the exact same thing is still happening in the IRS I mean nobody wants to pay their taxes uh the IRS has a reputation as an agency that most people most Americans feel and it doesn't help that we've seen in this this history that the IRS seems to be treating Americans different based on their you know their political affiliations or their family affiliations so Mr werfel without getting into details of those past cases how can you assure the U.S public moving forward that they can actually trust the IRS to treat everyone the same regardless of political views here's my assurances it is my firm commitment that there is absolutely no place for political bias at the IRS I will take very seriously any evidence of political bias and will immediately refer to the Inspector General so including the examples that any example at any time I appreciate that I will always refer to the Inspector General all right and also I will work twice my time because I I want to make sure that I'm staying on time I'd like to discuss ARS plan of how your agency intends to spend the a 80 billion dollars passed as part of the inflation reduction act I have voted to repeal this now twice but as of now this money will still be available to the IRS I'm concerned with a number of Provisions in this plan including the 45.6 billion dollars for auditing and enforcement compared to only 3.2 billion dollars for taxpayer Services which results in 14 spent on enforcement for every one dollar spent on taxpayer Services now you have said that you know we're hiring more people to answer the phones we are um and yet you're spending 14 times the amount on enforcement in a very slow small amount on customer service and in the dollars that you're spending on customer service over 30 percent of that is being used to implement Ira green energy provisions yeah so I'm not really sure I I know your question but I can comment on it are you spending 14 times as much on enforcement as you are on customers and we are spending consistent with the approach the appropriation amounts that happens to be 14 times as much on enforcement as on customer service even though the complaints that we have had have to do with our constituents not even getting their refunds on time my commitment congresswoman is to spend that those funds as effectively as we can with good program integrity and in the best interest of the taxpayer but we're still spending 14 times as much in enforcement with the promise that we're not increasing the percentages at all of audits we're not increasing the percentage 400 000 or less we are increasing the percentage of audits for those wealthy taxpayers where we also have historically low audit rates so the enforcement funds that you're describing are critically important in terms of ensuring that Americans at every income level know that the IRS is treating everything I just think it's disingenuous for you to say that you're spending much more money for people answering phones when you're spending 14 times as much we did and we've hired 5 000 people this filing season to answer phones and we are making improvements it's in our plan issued April 6th on all the steps we're working to with the money that we have but there is a chance to know that you can do that in two billion you can hire 5 000 people on that I if that's if that's the case then then I'm I'm thrilled to hear that we need more than just people I mean one of the challenges and I don't want to take up too much well I appreciate that and I've got seven more minutes I've got one quick question of the IRS agents that you the IRS people that are helping on customer service do you have 100 of your Workforce back to work five days a week everyone's working do you have your Workforce back to work in the office five days a week well not everyone is in the office but everyone's working and I will one thing about what percentage of your Workforce is back in the office I don't have the exact figure gentleman from Iowa's recognized thank you chairman Smith and ranking member Neil uh thank you chairman we're for for being here you've got a very tough job yeah very challenging um obviously we talked a lot about the 80 billion dollars of funding in the IRS I want to just note that but that's not where I'm going um 4.8 billion was for Business modernization Systems about six percent of the funding the key here is uh that in February that GAO has published a report outlining the status of IRS uh its I.T modernization which is concerning to me a third of the applications are nearly a fourth of the software is considered Legacy the way behind uh the assets range from 25 to 64 years of age including software that needs up to 15 versions of our first 15 versions of new new versions uh it also noted that the I the individual Master file has been in place since 1970 and barely uh has anybody that understands the code or or you know I mean it's it's stressed so the my question is you know it seems like we're cutting down a tree with a dull ax and could we be more efficient well let me back up is a 4.8 billion will that satisfy uh creating a whole new uh new new system that is required are needed I I would need to line up those funds but to make sure that I'm answering your your question we have a a larger fund of of money available in the inflation reduction act to improve our overall operation support which includes technology but the bottom line is we do need to update our core systems that's what I'm asking you so is the 4.8 billion enough to update your core systems that's simply what I'm asking I'd have to get back to you in terms of making sure that I'm lining up that 4.8 billion but there's multiple core systems there's the individual Master file there's the business Master file there's our Enterprise case so so uh chairman do you see this as a concern when you have such an archaic system I mean I I can't even imagine a banking industry or any business running on such a system I mean some of this is Dos I think yes I mean this is this is great I mean think about that running on dos yeah I don't mean to stomp you but no no I I I I mean you're preaching to the choir here in terms of the need to update these systems they are on Old Cobalt based language those need to be updated right I'd love to see the the colleges and universities that still teach Cobalt but so so this is my concern right so what has happened in the last year under the administration right is we're going down the path of oecd with pillar 2. we have guilty right now that has 16 data points that's being collected if you go down pillar two you're going to probably have 200 data points that needs to be collected we're also going it with the 15 minimum tax uh book tax I mean these are very complex things and yet would it be fair to say that we don't have a system to to handle all this like right now the systems are functioning um they need to function into the future better and so what I mean by that is not enough processes are automated we have updates we need to do to our data security uh requirements for these systems and we can't hire as agile as we could because people don't know Cobalt thank you you just answered my question that's exactly right uh here's here's my thing once you want to dramatically update your system first before you're updating all your Workforce I mean right now like I said you have to hire somebody that knows Cobalt or dos heaven forbid you know you hear what I'm saying I mean how does can you square this up yeah I mean I think we have to do multiple things to serve taxpayers in in different ways like I I if I stop and just focus on the technology then I'm not putting the people in the taxpayer Assistance Center and people come to shutter taxpayer assistance centers if I don't hire people to process the employee retention credit then people are waiting longer so we have to have the ability to manage multiple priorities simultaneously there's a lot a lot of things but this is what happens with such a complex tax code and and I mean I want everybody to know out there that I mean dos Cobalt uh this is when a system is probably 25 years or 60 up to 25 to 45 years of age the security concerns alone scare me just in great fear of of of what you know what data is you're collecting and what could be out in the public if we don't get this right so I humbly ask we got to make sure that we get a system uh that's updated that can handle these these these complex income returns because it's it's critical to our services it's actually a mission critical system and it needs to to be updated thank you thanks and are you back Mr Evans is recognized thank you Mr chairman I'd like to congratulate you first putting the job and all the things that you're trying to do I have two questions first question is Congressman Moore and I recently introduced legislation to expand poverty busting earned income tax I want to follow with this question what is the IRS doing to help low-income families who might not file the tax returns navigate through the tax system and access to benefits they have earned that's one question second question how does the agency plan to deploy inflation reduction act funds to improve customer service and provide timely response to our constituents yeah so I appreciate both questions on the first one we absolutely have an opportunity to up our game in terms of how we engage the public around what benefits and what credits they're eligible for and we try to we try to go out using press releases social media to remind people of what they might be eligible for we say we tell them they may be eligible for a credit they should file we've started to take other steps we started to we have eitc awareness day that we participate in we have taxpayer experience days at our at our walk-in centers on Saturdays where we try to work with local organizers to make sure people understand what might be available to them and then how they should go about working with volunteers like Vita which is one of our big Partners in helping them apply and and fill out their taxes with the credit in mind that's a healthy amount of activity but it's not nearly enough because I think there is a a not enough people eligible for these credits that are actually applying for these credits and I think there's an opportunity to to help that in terms of the the operating plan and you know there's a bunch of different things that we're trying to do to improve service speed accessibility so it's one thing we have to staff the all these centers correctly the calls if you if you want to walk in we should be staffed if you want to call us there should be someone waiting for that call if you want to go on irs.gov we should be able to be modern and for example have an individual account for you so that you can immediately go on not get on the phone with someone to see the status of your account but actually log in with your username and password and see here's the status of my account oh look there's a flag let me go see if I can resolve it and resolving it in real time and essentially end the era of letters back and forth and correspondence with the IRS in paper all of that will be made possible by the inflation reduction act if we don't have those funds then we're just reverting back to just answering phones and so that's why I keep emphasizing it's important to fund our modernization because the end of the day who benefits taxpayers thank you Mr Evans we we greatly appreciate it um Mr Kerry commissioner uh thank you for being with us I know it's been a long day I'm going to go through a few things I have I'm a huge believer in affordable housing but as well as conversion as it relates to many of The Office Buildings that we have in our inner cities which I represent but what I'm going to focus on is historical tax credits so I don't think anybody else has done that yet so I just want to get your mindset as I read through some of the examples that I have back in Ohio in January of 2021 nine of my colleagues in Congress including Ohio Senator Brown and Portman sent a letter to the former commissioner about the IRS denying historic preservation easement tax deductions because an Ohio building owner installed an ADA Compliant wheelchair ramp on a historic structure this building owner who's a taxpayer had worked with the National Park Service to design the ramp in a way that would protect the historic character of the building but the IRS said the law does not provide exemptions for local fire and safety laws for Americans with a Disability Act when considering whether an easement compliance with this structure is or the state statutory requirement the IRS subsequently reversed course and the IR IRS office of Chief Council released a memorandum in March of 21 that clarified that the installation of an ADA accessibility ramp was permitted they did that however I was recently made aware that the IRS has be has Again Begin to deny easement deductions on historic buildings this time over the hypothetical scenario that a building owner might sometime in the future install a wheelchair ramp the IR the IRS enforcement officer recently denied a historic preservation easement saying and I quote in the event the use changed to a retirement home for the elderly it would be likely required many modifications such as wheelchair ramps additional elevators removal of expansion of current street level doors and windows in order to comply with the codes of a retirement community a change in use would likely require changes on all sides of the building and would be inconsistent with the use of the building now we all believe in historic preservation I don't think there's any one of us so my question is do you agree with the IRS office of Chief Council memo stating that the Ada accessibility ramp should be permitted I haven't read that but yes if there's an IRS Council legitimate opinion out there then I would support it so should taxpayers historic building owners something that's very important in the state of Ohio but across the country in historic preservation community be forced to choose between complying with the Ada or to using using congressionally authorized preservation programs like the historic preservation easement as you've presented it Congressman it seems like there's an uh it's very incongruent and and not clear what the IRS and is is asking of in in relation to uh the Americans with Disability Act enhancements without commenting on any specific taxpayer I want to get back to you with uh some clarity on the overarching policy and this is a this is an issue that I I feel very strongly about because as we've seen in in many of our cities the the ability to go in and take over some of these structures many of them were eyesores for many many years so I would appreciate if you're if your team would get back to me because it is something that I I feel very strongly about and um and I appreciate your time and Mr chairman I yield back thank you thank you gentlemen uh Mr Schneider is recognized uh thank you Mr chairman and commissionerful uh thank you for your patience today it's been a long day save the best for the last uh but also congratulations on uh your recent appointment right in your you're the last uh that's the best but um I'm excited about working together I want to Echo what my colleague from Illinois Mr Davis said and praised the great people in the Chicago office for their efforts and I commend the incredible progress the IRS has made in general improving customer service over the past year largely thanks to the funding we secured through the inflation reduction act um a couple things I know Cobalt one I've done yeah programming on tax software but in 1984 but I also worked at Sears catalog overseeing their call center I know how hard it is we are hiring at the IRS so we'll talk afterwards but my team can attest to the quicker turnaround times and better service the IRS now available because of these funds and I've heard the same from uh our constituents as well as my friends in the accounting profession I do want to mention some outstanding constituent cases my office has been working with people who have not yet received their 20 21 22 tax refunds either due to identity theft or delays in the processing and verification of their Identity or backlog of paper tax returns we've been in touch with companies waiting for their employee retention tax credit uh it's compounded by the financial strain experience due to the to the pandemic been a burden on these companies so I'll forward everything to your office but uh can I ask for your help the commitment to work together uh thank you uh very very much I appreciate that let me go back to the tax cap for a second um you earlier said earlier said it's about 500 billion dollars a year correct that correct 5 trillion over the next decade that's correct what are the roughly the projected receipts coming in for fiscal year 23. I think it's around 4.6 trillion so we're talking about a Year's worth of uh receipts over the course of the year that then puts the burden on the law binding um very roughly I want to hold this to this but what percent of that tax cap do you think is in those 300 and some odd thousand tax returns well those people are filing returns but that top one percent who who here's here's the challenge congressman is that we have to evolve the way we measure the tax cap because of how quickly that landscape is changing for high income filers we can't measure effectively what we can't see and the reality is is because we've been under resourced and haven't had the capacity to assess these complicated returns that's why you have previous Commissioners you know kind of opining on what that number might be but it's a big number it's I believe it's going to be a very big number and I think CBO agrees with that and that's why they see the a lot of deficit Savings in our in our plan to go uh and uh better assess and I just want to be sensitive to time you you said you have roughly 2 600 people to review the returns of this High 390 000 of our highest wealth filers yeah uh how big do you think the army of tax experts the tax accountants tax lawyers helping that 390 000 filers might be bigger than I don't know it's big and it's their right to do it um but I also feel like for middle and low-income Americans to feel confident that the tax system is fair we have to be ready for those types of reviews and to be able to to assess them effectively and let me be clear they should have that advice they should be doing everything they can to not pay one penny more of the taxes they owe but their fiduciary responsibility to do so right I enjoy symmetry that we should be able to make sure that they're paying every penny their own exactly uh thank you let me let me go back now to the service levels beyond the antidotes we're hearing from our caseworkers and my constituents the IRS filing season 2023 report card notes that the IRS has exceeded even its own metrics for new hiring of personnel and customer service roles this includes nearly 6 000 customer service reps on board in nearly 3 000 employees and submission process being hired I ask unanimous consent that the IRS filing a season 2023 report card be submitted for the record without objection thank you commissioner my colleague earlier showed some charts asserting that the IRS priorities when it came to customer service were upside down made it look like the agency didn't care about taxpayer service but that's not really true even amid the anemic funding over the past years working with systems on Cobalt and dos and maybe even Fortran didn't the IRS always do its best to shift resources to try to handle all customer service needs I mean absolutely a priority customer service I mean if we're not answering the phones if we're not helping taxpayers meet their obligations then then the system isn't working effectively um and the reality is we have to be able to do both effectively and and I think we can and we have historically I think the reality is is because of 15 years of underfunding and then the impacts of the of the pandemic we found ourselves in a really unhealthy State and Americans suffered for it by not being able to get help from the IRS and meeting their tax obligation both are a priority enforcement and service but if you're a small business middle low income the what the inflation reduction act means for you is better service it doesn't mean a new increase in our enforcement capacity that is only for our highest wealth taxpayers thank you I yield back Mr Panetta is recognized thank you Mr chairman commissioner Warfield thanks for being here today and uh thank you for your testimony uh you've done a really good job and I do hope first of all it gives me confidence uh in your ability to lead the IRS but I hope it gives your employees confidence as well so I appreciate that um especially at this time when you're taking on this role following these historic Investments that we've made in the IRS and with that investment as you mentioned uh previously you're able to hire five thousand more employees allowing the IRS to answer 2.4 million calls than last year that's great but I think as you know it's just not good enough but I have confidence that you're going to get to good I'm not satisfied I get it good and I appreciate that thank you for saying that um I think you're going to because well you got some new callback options and you got new scanning technology as well uh which I think will help in addition uh to these customer improvements you've added funding for for the staff to reduce our tax cap uh and our deficits in the long run as well now despite the majority's bill yesterday I firmly believe that we have to protect this investment and ensure that we continue funding the IRS to serve con customers and administer the tax code fairly and also so that we can go after those tax cheats those people who are intentionally evading the taxes that they owe so once again thank you for your service now this is great I got a question here that being the last in line on this dice it's kind of nice that I no one's talked about this but I'm also proud of this question because this is a question from a constituent that was brought to my attention based on the good work of my staff or Mark Denon who basically talked about these ertc Mills basically exactly um you know you've I in my area in Central Coast California you listen to the radio and you're just bombarded by these advertisements for small businesses to apply for employee retention tax credits uh yet these advertisements they're directly targeting businesses who did not experience any pandemic losses and are most likely ineligible for the ER ertc now I'm concerned that some of these companies may be taking an overly generous view of the ertc taking fees or Cuts uh or of refunds but just disappearing if small businesses get audited if they are not in fact eligible so obviously you put out a warning and I'm grateful for that uh to small businesses in October about these ertc Mills but it's clear more needs to be done so I got two questions what else is the IRS planning to do to protect small businesses from these ertc Mills and are there actions that we in Congress can do to shut these things down yeah so thank you for the question um and I mentioned earlier one of the challenges we have with ERC processing and one of the there's a couple different reasons why there's a backlog one of them is that we do get a lot of fraudulent uh or ineligible uh applications and that clog the system and so we're working to try to figure out how to ferret those out as effectively as we can I think the first thing is as you said we have to be communicative like we have our we have what we call our Dirty Dozen scams we go out we try to explain to as many people that will will hear us and engage with us these are the things to be on the lookout for that this might not end well for you because the the person doesn't have your best interest or this is not a uh an advisable way of of getting tax advice so we can do more of that there are steps often that Congress can do to give us authorities to regulate I would love to work with you on what those steps maybe ultimately be up to the Secretary of the Treasury in terms of whether we would support them but I can certainly answer questions around the types of tools that would help us good look forward to working with you it's been a long long day for you for us that's why I'm going to yield back my minute thank you great chairman thank you gentlemen um thank you Mr Warfield We Appreciate You appearing before our committee today we appreciate that you were here for over four hours um I definitely appreciate appreciate your time and your comments please be advised that members have two weeks to submit written questions to be answered later in writing those questions and your answers will be made part of the formal hearing record with that the committee stands adjourning hey

Channel: Yahoo Finance

Views: 136,634

Keywords: Yahoo Finance, Personal Finance, Money, Investing, Business, Savings, Investment, Stocks, Bonds, FX, Currencies, NYSE, Equities, News, Politics, Market, Markets, Yahoo FInance Premium, Stock market

Id: 5tU9zHJjyaQ

Length: 238min 55sec (14335 seconds)

Published: Thu Apr 27 2023