[inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] supporting others. It goes a long way, reducing the debt. [inaudible conversations] can you hear me . [inaudible conversations] good morning, you are with us today. Good morning. Will a [inaudible conversations] will subcommittee will come to order. Welcome to todays hybrid hearing. Most numbers will appear remotely by webex. I may be the only member appearing at present though all three witnesses are appearing in person and appreciate that. Since many members are appearing, let me remind by pursuant to the latest guidance, all individuals attending in person must wear a face mask. I am wearing mine except to make this statement. Members not wearing a facemask will not be recognized was let me make a few reminders to those appearing in person, actually they are not. A timer is visible directly in front of you. All members appearing remotely, youre familiar with webex by now but let me remind you of a few points, if you are in personal remote, to active speaker of the you. If you have any questions please Contact Committee staff as soon as possible. We have a timer that should be visible on screen with a thumbnail view. Those who want to talk to the Committee Staff for assistance. House rules require that we see you so please have your cameras turned on at all times to be enacted in this hearing. Members appearing remotely who are not recognized should remain muted to minimize background noise and feedback. I will recognize members verbally in regular order. Members will be recognized in seniority for questioning. Lastly if you want to be recognized outside of regular order you can identify yourself in several ways, you can use the chat function, or you may unmute to seek recognition. We dont want people talking over each other. Email to facilitate formal verbal recognition. Committee staff will ensure you are made aware of your request and i will recognize you at the appropriate time. We will begin the hearing in a moment when they tell me we are ready to begin live stream. Okay. Committee will come to order without objection. The chair is authorized to declare a recess at any time. Without commission, katie porter, the gentlewoman from california and representative bill pascale from the ways and Means Committee, shall be permitted to join the subcommittee and to be recognized for questioning during the course of this hearing. Without objection the so ordered. I now recognize myself for Opening Statement. The Internal Revenue service collects 3 and a half trillion dollars access, 95 of federal revenue. And manage distribution of 370 billion in refunds. The revenue the irs collects from the federal Government Funds critical programs like Social Security, medicare and Veterans Health services. The billions of dollars in refunds distributed to taxpayers each year is a lifeline for Many Americans especially those at or below the poverty line. The irs is a Critical Agency that we turn to in the nations are at need. How that agency was ill prepared to meet those needs, a look at how deliberate starvation of the irs prompted a dire financial situation and left an agency with what a former Taxpayer Advocate referred to as a prehistoric infrastructure. We will show how a decade of attrition hindered the irss ability to meet the complex needs of the nation during the on precedented pandemic. From 2010 through 2018 when republicans were in control of Congress Lawmakers cut the irs budget 20 in inflation adjusted dollars resulting in a 22 stack reduction. 30 of the staff were in the irs enforcement positions. After years of this, unpaid annual taxes owed but not collected are estimated at 450 billion a year. The starvation and chronic under thefunding prevented the irs from investing in it systems. I ask unanimous consent to enter into the record the Tax Administrations report entitled Legacy Management needs improvement which finds that nearly 3 4 of the 400 active irs systems are legacy systems meaning very old is another disturbing finding is the report, the irs does not have a handle on how many legacy systems it actually has for costs associated with those systems. This does not sound like an agency ready to fully serve the American People during a pandemic. The past year this highlighted how many individuals rely on the irs. In addition to administering the tax filing system, the irs was also tasked with distributing emergency Economic Impact or stimulus checks to americans. The irs had to manage the effects of the pandemic while it was simultaneously expected to mail 170 million additional stimulus checks to americans in need. Years of it system neglect and failure to modernize legacy systems that date back to the Kennedy Administration in some cases prevented the irs from effectively transitioning to virtual operations, like many agencies the irs sauce to find ways to keep its workforce safe while trying to meet its expanded mission but didnt stand a chance. It has gutted workforce and an asterisk and i can stick it systems were not enough to keep up. The pandemic forced the irs to shut down many of its core operations across the country including taxpayer phone lines. The agency largely abandoned taxpayers many of whom, all of whom are our constituents in a moment of great confusion and concern. The irs operations almost did not happen overnight as shown in tables on the screen, since 2010, the previously controlled Majority Congress ransacked the irss budget and the agency was forced to reduce its workforce by 22 , 20,000 fulltime employees, these significant repeated budget cuts forced the irs to make difficult allocation tradeoffs, leaders had to choose among Quality Customer service to taxpayers, enforcing tax laws and updating it systems. The severe financial and staffing problems are a direct result of years of partisan hostility, reckless investigations and unwarranted budget cuts from the majorities before congress and today when the American People are relying on the irs the most the agency is gasping for air. Our witnesses did what it could with available resources, that is troubling. It is the millions of taxpayers who are unable to get their refund because they filed a paper return. Millions of tax returns hit a snag and taxpayers couldnt get assistance because call centers were closed. It is the 9 million americans who have yet to receive the stimulus check from april primarily because the irs does not have their in formation or their income is so low they dont qualify to return. These are the nations most vulnerable people. We have a duty to help the minutes of this crisis. Millions of people who rely on the irs to receive muchneeded Financial Assistance to pay for medical care, groceries, housing, still waiting for those refunds in stimulus checks. These people, my constituents joseph did not receive his 2018 tax refund until february of this year. Because his wife passed away and the irs held up his returns to get more in formation. The same issue the irs promised joseph would not be a problem again plagued his 2020 tax return which is not been processed. I ask to insert a statement, continued deterrence with the irs. Constituents followed rules and being told to just wait, people cant afford to just wait. They need this Financial Assistance now. On september 16th i wrote the irs asking about these delays and the response is staff have provided constituents. It is important to check out budget cuts to the irs burden the nations for in another important way. When the irs collects taxes each year and relies heavily on taxpayers to report their income and calculate the tax they owe. Most people, 99 of them do. Some taxpayers often the most wealthy among us including the current president of the United States failed to properly pay their taxes, they hide earnings, such as 70, 000 to hairstyling, a deduction that is available to most of us. And failed to properly pay their taxes as a result. Since 2010 is a direct result of these budget cuts from the past the irs has done less to enforce tax laws because it cant. If you look at the chart on the screen you will see that between 20112019 the percentage of individual income taxes it examined dropped by half, that is catastrophic. And it directly impacts revenue for the federal government. The week ending of these oversight efforts harms Public Confidence in the tax system. It helps the wealthy and encourages them to cheat the tax system. I was pleased with reports that the irs is finally investigating allegations of criminal tax fraud at the National Rifle association. Long lead congressional efforts asking for the department of justice to investigate the nra and its ceo wayne lapierre. According to studies by beefing up the audit capacity of the irs to allow more oversight of the superwealthy those claiming 10 million in adjusted gross income our government would collect 7. 5 trillion over the next decade. More than paying all the pandemic related expenses by this federal government, that is the size of the tax gap with the wealthy. A little consequence right now from a beleaguered irs and they have left the nations caucus. I look forward to hearing from our Witnesses Today in ways congress can help support the irs instead of targeting the agency and stripping it there of the resources we desperately need as we have done all too often and we hope the chief Information Officer and cio play a pivotal role in developing Agency Performance goals. I look forward to working with my colleagues on both sides of the aisle on legislation that does that. I hope this hearing, the justification needed for congress to build back the agency that has so unjustly ravaged over the last decade. It is free paired to help struggling americans in dire need of assistance during the worst pandemic in 100 years. With that i call in the distinguished Ranking Member for his Opening Statement. Thank you. I appreciate the opportunity and like you i have constituents who are awaiting refunds and say have been sinking as far back as february and i certainly i would like to say mister chairman that it is improper to accuse the president were seemingly accused him of not paying his taxes. In the first place you dont know that and i hope this hearing today will stay focused on issues that are germane to the topic at hand, specifically it modernization is what this should be focused on and i hope we do that and with that let me just say the subcommittee has been tracking as you all know the legacy it systems and the reality that those legacy systems pose a risk to federal Agent Missions and the purpose many of our agencies have. With many of these agencies especially the irs some of the older it systems are very complicated and are going to require modernization, it is inexcusable for us to be facing the issues we are facing and our constituents and the american taxpayers to be the ones taking it in debt over this and modern Technology Systems that meet modern Technology Challenges, our Agency Missions are at risk and taxpayer resources will continue to be spent on archaic and inefficient Technology Systems of ages past in this committee understand how the federal government continues to spend the majority of the it budget maintaining legacy systems instead of investing in it modernization reforms which means the majority of agency it spending going to operation and maintenance of old systems these assessments are crowded out. This is where we need to get some answers today. Weve talked about different approaches that can be utilized and bring multiyear it funding mechanisms to be established. We need to go beyond talk and get some answers where these agencies are doing to implement modernization efforts and it is up to the agencies to utilize resources that have been made available. Modernization efforts despite repeated large investments by congress which, investments from the american taxpayer. The irs continues to drag on, seemingly never reach completion, we need answers to those types of problems. How can congress have faith that another 1 billion or 2 billion or whatever it may be composed by the house and senate will get anything done in return. We need answers to these questions. This committee wants to understand how these continual challenges can be addressed. This is a bipartisan issue with potential bipartisan legislative solutions but we have to understand the problems preventing agencies like the irs from moving into modern, agile, and robust environments in the future. To be fair we all know in a Rapid Response in the Global Pandemic and programs passed into law and has been unprecedented. There have been a lot of mandates and as a result weve seen every american taxpayer was received checks and that occurred in an extraordinarily swift manner by the irs and for that we are grateful. Look back at the economic stimulus act of 2008 it took weeks and weeks for that to be doled out but like every other large enterprise in the world the irs had its operational challenges related to the pandemic. We get that. There have been issues with the cares acts stimulus payments reaching their intended destinations and a number of issues but not all the issues and problems have been technologically related. There have been legal issues, procedural issues, workforce issues, data access challenges but we need to understand the actual cause of problems before recommending policy solutions and i hope the hearing today will provide information in that regard. To that point, i hope you and the other Witnesses Today can help me and my colleagues understand how we can address the underlying barriers preventing Successful Technology modernization so we can assure the success of the irss critical mission. Congress cannot afford to blindly continue throwing money at it problems. Weve got to find a new approach, weve got to have answers and modernization so with that i want to thank our witnesses for dealing with congress in these proceedings and thank them for participating in todays hearing and appreciate the opportunity to have each of them here today and with that i yield back. I think the gentleman and look forward to working with him and i thank him for the bipartisan spirit he has laid out for us moving forward in terms of trying to address especially the Technology Challenges the irs is facing and i ask unanimous consent the series of articles talking about the president s tax situation including the assertion that he paid 750 per year and no taxes, thats not just the chairmans opinion, that is a series of analyses based on documents not denied by the white house, not a single item including the deductions and payments i cited has been denied by the white house so i enter that into the record so it is clear it is not just one members opinion. With that i see the chairwoman of the full committee is on and i want to d for to her for any opening remarks with respect to this hearing. Welcome, chairwoman maloney. Thank you to chairman connolly for the hearing on the irs and the pandemic. I want to congratulate you on already convincing the irs to move back the deadline for low income individuals to register for Economic Impact payment. Until monday the deadline to register was next wednesday october 15th and now these individuals who earn so little they dont qualify to pay taxes have until november 21st to claim this vital resource and without this hearing and the chairmans work that extension was unlikely so congratulations on improving the lives of those who need this money. It is a huge victory for the subcommittee and those struggling on the brink of poverty across the nation. For the past decade theres been a concerted effort to gut the irs and starve it of the funding it needs to do its job on behalf of every taxpayer in the nation. After years of partisan attacks and neglect it was no surprise the irs is not prepared to handle unique circumstances the coronavirus presents. After all the agency is operating on information Technology Systems that date all the way back to the Kennedy Administration. You now see the real consequences of the past decade. We cant decimate essential federal agencies and expect them to miraculously in june a few months into the pandemic we discovered the irs send 1. 4 billion in eits to death people. Some of my constituents told me, they are waiting for their own checks before the irs had access to the Social Security administration, the Treasury Department of bureau Fiscal Service which distributes payment this 6 seems simple. Lets reduce improper payments in the next round of stimulus checks, lets make it happen. Today we are going to hear from witnesses who claim the irs did the best it could with what it had but thats not the real question. We need to ask what the irs could have done to help our country if it had been properly funding and adequately step act instead of being subjected to years of bitter republican abuses and another example my constituents told me they threw away irs issued debit cards because they looked like a scam and the irs failed to inform them that the cards were coming. Others said the payment quotes tool was confusing and made them think they were in eligible when they were in fact eligible. Today we will hear individuals across the nation including my constituents are still waiting to receive money the government owes them, money they need to buy medicine, pay rent and put food on the table, they prevented the irs from investing and staff technologies that would allow a smooth transition and a continuity of service to all taxpayers throughout the pandemic. Because of decades of partisan attacks many individuals and Small Businesses might not need to see their tax returns anytime soon. They may not see their Economic Impact payments until september of 2021. They need this money now, not in 11 months but now. Thats how congress designed stimulus payment and it is clear the irs is not equipped to meet this moment. The systemic, decadesold gutting of the irs forced the agency to shut down Taxpayer Services just when the rules were most confusing and taxpayer needs were greatest. For longterm starvation of the irs the victims of Domestic Abuse have their stimulus payment seized because the irs doesnt have the resources and staff it needs to address this problem. For Domestic Abuse victims, this lack of virus resources means they cant achieve economic independence, this is a complicated problem, the irs shouldnt simply shrug its shoulders and point them to the court system which they cant afford to participate in, lets find a solution here today and help these women. The lack of resources, for proper taxes. The enforcement staff available to audit them. There is little chance they will be audited and prosecuted. The irs has been auditing because it is easier. Our government is leaving off the table trillions of dollars by the wealthy. Finally i want to express my support for the legislation, that the chairman is working on, legislation that will require the agency to think about how technology has Service Delivery and Agency Performance across the enterprise of federal government and critical measures that take place under the legislative radar. Thank you so much for all of your hard work that you have done in the area. Thank you for supporting the work in every way, it is important we reach this point of reckoning and we need to move forward. Mister chairman, congratulation on your achievements holding the irs responsible and moving forward with ideas to make them more up to date and it savvy. Thank you and i yield back. I think the distinguished chairwoman for your leadership and your support, very much appreciated. I want to introduce our witnesses, our first witness is Charles Rettig, commissioner of the Internal Revenue service and we will hear from aaron collins, national Taxpayer Advocate and finally we will hear from vijay dsouza from the Government Accountability office. The witnesses, if you would all rise and raise your right hand, we swear in our witnesses as a matter of course, do you swear or affirm the testimony or about to give is the truth, the whole truth and nothing but the truth so help you god . Lectured let the record show all 3 witnesses answered in the affirmative. Thank you. Without objection your fool written testimony will be entered into the record in fool. With that, Charles Rettig is recognized. Welcome. Thank you, Ranking Member hice and represent the subcommittee, thank you for the effort to help taxpayers during the covid19 pandemic, i remain proud to work with the irs, 96 of the gross receipts of the company flow through the irs to strengthen a healthy, functional irs, critical to the overall success and wellbeing of the country. The imprint of the irs to every american is especially apparent since the spring since the nation has faced unprecedented challenges. The irs has been at the forefront of providing rapid economic releases taxpayers during covid19. The irs response serves to illustrate how critical it is to receive consistent, timely and adequate multiyear funding to succeed in providing services the country deserves. The funding is critical and the nation continues to whether covid19 and also help the agency prepare for future emergencies. Irs employees have worked around the clock since midmarch to implement major provisions of the cares act during those challenging times. 160 million Economic Impacts have been issued, 270 billion with many payments recognizing more than two, in delivering Economic Impact payments we balance the statutory requirement to deliver these payments as rapidly as possible with the need for accuracy to see potential fraud. I call your attention to an important number, for Tax Administration confirmed the irs correctly computed the payment amount for 98 of the payments as of may 21st, the 98 figure is great, the strength of the agency, agencies want to do more and we will do more with assistance of congress. We are concerned about getting payments out to people who dont normally file a return his including underserved communities of the nation such as lower income tax payers and others who dont normally interact with the government or Internal Revenue service. We work with our partners to translate Economic Impact payments, into more than 35 languages and distributed these materials throughout the country. Weve been aggressively seeking communitybased organizations and others in identifying eligible americans. We ask your help and the help of every member of congress in sharing and dispersing this information widely and broadly. We realize how difficult this period has been, the irs provided important administrative relief, we postpone the deadline from april 15th through july 15th, the latest tax day ever in administrative the history of our country. The People First Initiative under which we temporarily adjusted our processes to help people and businesses during these uncertain times. While pursuing our responsibility is with respect to the cares act in covid19 relief, we redeployed resources and our employees remains dedicated to the 2020 Filing Season as they process electronic returns, issued direct deposit refunds and accept Electronic Payments which as of september 20 fifth we have processed 153 million individual returns and issued 122 million 122 million refunds for a total exceeding 289 billion while we were also processing Economic Impact payments and preventing cyberattacks. During this time we focused on enhancing the experience of taxpayers with limited consistency. For the first time ever, form 1040 filed next year will be available in spanish, basic income Tax Information is available in 20 languages, people who call in can get Interpreter Services for 350 languages and i am extremely proud of our employees. We have redeployed resources to the best of our abilities to highlight and focus on high income individuals and certain transactions that such individuals participate in. Our faith and reopening is difficult for members of congress, taxpayers and others which however the health and safety of our employees had to remain paramount throughout. Our employees share the same health and safety concerns shared by every other american for themselves, their family and neighbors and communities and we had to focus on that while trying our best to respect our responsibilities to the country with respect to Filing Season and the issuances of these payments, maintain a vigilant robust enforcement atmosphere, protecting cybersecurity issues, receiving 2. 5 million attacks per day. We understood in this situation where we scale back our activities where we closed the majority of our facilities, moved 57,000 people to teleworking we undertook that while also doing our best to maintain responsibilities to this country from every perspective. With that i want to reemphasize we depend on consistent multiyear of funding to deliver topquality services to taxpayers to protect the health and safety of employee to conduct enforcement initiatives, provide guidance and support badly needed modernization efforts. Chairman connolly, Ranking Member hice and other members of the committee, this concludes my statement and im happy to take questions. Thank you. Miss collins. You are recognized for your 5 minutes. Distinguished members of the subcommittee, thank you for inviting me to testify it todays hearing. I started my job as national Taxpayer Advocate on march 30th just after the irs and much of the country let me interrupt, that is my birthday so congratulations. It was an important day for a lot of reasons. Most of the country was shutting down to the pandemic, little did i know then how much the pandemic would impact Tax Administration or irs but also with respect to taxpayers. As we continue to grapple with the pandemic of the best wishes. I will share 3 predominate points the past 6 months, first despite its constraint the irs did his best not to handle more work with reduced funding. The revenue collection suffered over the years as you have noted. In the height of this years Filing Season it was given the impact payments from 160 million eligible individuals and their families. Millions of them ordinarily dont file a tax return with the irs and the irs had to find them. The overwhelming majority of taxpayers did not experience problems in filing a return or the receipt of a refund. 90 of individual taxpayers file the returns electronically, efile capabilities were operational through the pandemic. 70 of the taxpayers claimed refunds which were paid without delay, particularly 83 that were dispersed by direct deposit. The people who did not receive refunds were most concerned with. Second, despite the irss Strong Performance many taxpayers experienced significant delays resulting in financial hardship. Many taxpayers still file the return on paper either by choice or by necessity. The irs received 18 million individual paper income tax returns. This year the protection of the health and safety of its employees the irs shutdown Mail Processing operations from march to early june. During that time millions of tax returns and other correspondence piled up. As of september 19th the irs estimated they had a backlog of 5. 8 billion pieces including an estimated 2. 8 million unopened returns. For taxpayers counting on those refunds to meet basic living needs, they have been particularly painful. The irs receives 100 million telephone calls and several million businesses to its walkin Taxpayer Assistance Center. Due to the pandemic the irs shutdown its tollfree lines for a month and slowly began resuming service. It also shutdown the Taxpayer Assistance Center for 3 months. Some taxpayers experienced delays in the receipt of the Economic Impact payment it is the commissioner noted the Inspector General found the irs computed 98 of the amount of the eits correctly. Based on 160 million payments that leaves 3 million payment of eligible individuals claiming additional amounts they are now requesting from the irs. We identified several million cases where they were not paid at all. At first the irs took supposed edition most taxpayers increased payments amounts for 2020 return. My office and others urged the irs to find ways to correct these underpayments immediately. They developed processes and programs to fix many of these problems. The irs does not have resources necessary to make a manual casebycase adjustment of several million cases. The individuals have a right to file on their upcoming tax returns but that brings me to my final point. The irs needs more resources to do its job of helping taxpayers and collecting revenue. Theres an old expression, you cant get blood from a turn up. If they restart resources it will continue to struggle. It needs more taxpayer representatives, agents, and to assist us taxpayers needs more modernization of its it system. The it struggles are known. The chairman noted to compound its challenges the irs budget has been reduced by 20 since 2010 while the number of tax returns is increased 13 . As a result the irs lacks the staffing it needs to serve taxpayers lose although i am new at this job it is clear the irs is well behind privatesector Financial Institution in providing muchneeded services. Americans are entitled to topquality service and a Tax Administration they can trust and work with. Thank you for inviting me here, i welcome working with you and your staff in the future and happy to answer questions. Welcome, mister dsouza. You are recognized for your summation. Thank you, members of the subcommittee, thank you for the opportunity to testify on the ngos prior work related to the modernization efforts. I am director of Information Technology and Cyber Security steam, this is directed by our team and Strategic Issues and Financial Management team. Effective it is essential to irs operations and as everyone noted important to the distribution of millions of Economic Impact payments as part of the cares act. Currently work is underway looking at irss efforts in this area. For the most recent fiscal year the irs sent 3 billion which 80 was Ongoing Operations in less than 20 for modernization activities. Irss it budget has been brought over the past ten years. One of irss goals is to reduce the proportion of spending for ongoing it operations. Irs does make effective use of transactions our prior work has found numerous issues related to it operations and modernization. Unleashing a few of these issues now, first geos responsible for Financial Statement as part of the process that we assess it controls related to irs Financial Systems and identify Cyber Security issues and make recommendations. We track irs progress in addressing prioryear recommendations. Most recently in may we identified 18 new Cyber Security recommendations including these new recommendations which totaled 132 Cyber Security recommendations remain outstanding. As part of our ongoing assessment of irs operations we identify issues that limit the ability to conduct its mission while highlighting a couple of them. In january 2020 we reported on computer problems that Service Representatives experienced the cause and taxpayer phone calls to disconnect when you call. We recommended an irs degree that identify the causes of the problem and track a problem during downtime. In february we reported they could capture certain business Tax Information in pdf format which is harder for it to use in electronic open data formats that would better allow the agency to analyze information in these returns for enforcement and other analytic activities. We recommend irs consider the cost of converting this information. Irs disagreed, but this is worth doing it would help irs compliance efforts. Weve conducted numerous examinations of irs management activities including those related to efforts to modernize the Computer Systems some of which are based on programming language of more than 50 years. May of 2016 we reported on irss use of programming languages for key Computer Systems most notably at individual master file which is core individual tax processing system. We recommended irs develop a plan with timelines to replace imf. Irs has an average which will replace core parts of the imf but does not have a plan for the overall system. Recently irss acting scale told us what was developing such a plan. We reported on irss process for prioritizing it investments for Ongoing Operations and modernization activities. For modernization activities we found irs had not fully developed and documented prioritization process. The acting cio told the agency it was fully implemented for fiscal year 2022. In june of 2018 we looked at the management of several operations and modernization investments, we addressed a number of Risk Management activities that were needed around those investments and identified several weaknesses in irs workforce planning activities. From this report we made 21 recommendations. As of today irs addressed 3 of these recommendations and taken steps to address others, we recently worked to update this assessment. Every aspect of it including Cyber Security operations and modernization effort is critical to irss mission in service to the american taxpayer. Going forward continued attention to the efforts weve identified is important to irss ability to meet challenges that face us and others noted stable and consistently funding these efforts. This concludes my statement. Just a clarification, your testimony, you refer to the fact the irs budget has been relatively flat. Do you consider 20 cut in its budget relatively flat, resulted in 22 reduction in its workforce . Talking about the it budget, not the overall budget. I just want to clarify. The chair calls undistinguished congresswoman miss norton for her 5 minutes of questions. Thank the good friend from maryland. I am from the commonwealth of virginia, not maryland. Terrible mistake. We love maryland but we love virginia more. I want you to know the district formed out of maryland and virginia so thank you for that too. Listening to this testimony the average taxpayer and the American People at a historic narrative of compliance astonished by what theyve learned about the irs. I am particularly interested in Economic Impact payments, people who dont pay income taxes because their earnings are not enough. According to the statistics, the irs it was going to mail letters to these 9 million americans for income taxes, the Economic Impact payments, the people whose who have very low income but i want to say how happy i am they just extended the registration for these nonfilers to claim the Economic Impact to november 21st, asking all members to consistently email your constituents and let them know you know they are democrats and republicans, they still get an Economic Impact payments until november, that is our obligation. Is my question for you. How many of these roughly 9 Million People who are eligible to get these fonts, this Economic Impact payment, have yet to register a claim for an Economic Impact payment, these low income filers . How many people have not received the eip, is that the question . Of the 9 million have not yet registered to claim that economic imp to claimant Economic Impact payment, how many of these low income peoplese have not that is not necessary low income. That pools but together with her variety of indirect methods of federal agencies and thin try to match it to our system. I would not wrap that its about 8. 4 million. The. The letters have gone out. Okay, thank you. I just wanted to know how many have yet to claim their Economic Impact payment. Im having a little difficulty hearing you. Is the question how many people have not claimed the payment . Were not able to quantify the number of individuals have not been identified. Mr. Chairman, mr. Chairman, i ask that that number be required to be later given to the committee. Mr. Rettig, is a possible and eligible individual not receive a payment . Is everybody going to receive it . We intend for everyone to receive it. Were holding over seven outreach events this week, pretty much any week. We have e provide toolkits to 55 members of congress too be distributed to all of the local offices. We have interacted with 137 different ethnic Media Outlets around the country, hundreds and hundreds of homeless shelters. I have participated in person at homeless shelters around the country and other similar events. My time isth so limited, ive got to go to the next question but thats very good to hear. Mr. Rettig, the cares act says of that provisions regarding the stimulus should be directed, thats 1200, to every eligible individual. There is no language in the statute that directly or indirectly suggests that incarcerated peopleec are not eligible. Why were incarcerated people not receiving their 1200 . Thats an issue to present to treasury, and its an issue that is actually in litigation and that would be inappropriate for me to comment upon litigation. Mr. Chairman, i just want to say that many of these are joint filers. They have families. They have childsupport payments, and i asked the committee to follow up on why incarcerated people didhi not receive these payments which the cares act says every eligible person may receive. I thank you very much for the time given, thank you. I think the congresswoman and i assure her we will follow up on that because there is no language prohibiting such payment. The chair now call on the distinguished Ranking Member mrd and very comfortable for his five minutes of questioning. Mr. Hice. Thank you, mr. Chairman. And i am very relaxed, but its good to be part of this hearing. I do want to respond, ms. Collins brought up some interesting issues during her Opening Statement and one of which, and its been said by some other should today about the irs starting inn terms of funds. I would just for the record starving. I would bring back to reality that in 2010 that was kind of a watermark year irs funding, and what did they do when they had that kind of funding. There were lavish conventions, ridiculous videos that were targeting conservative groups, and i think its important for these type of things to not be repeated. Commissioner rettig, we are hopeful and trustful that you will be able to make sure that this type of wasteful spending does not happen again but also as mentioned, i believe it was, at a think ive got these numbers correct, i was tryingo make themwa down, 18 million par filings of tax returns for this past year, 5. 5 million and backlog, at a believe it was 2. 8 million that were unopened. As as a relates to the paper filings, those that were mailed in, that is certainly nowhere near 90 of completions. 18 million file and 5. 5 million backlog and nearly 3 million and opened is frankly an unacceptable amount. Were hearing from our constituents right and left why their tax returns have not come back. So really just on behalf of his constituents, not only in my district but across thent count, when can they expect those mailed in returns to be opened, dealt with, and then to receive their refunds . As of september 25, we have have received 12. 9 million paper returns. We have a current paper backlog of approximate 5. 3 million, of which we estimate approximately 2. 5 million is returns. We are processing are backlog at the rate of about 1. 3 million per week, which i think is exceptional. In march, april time frame we were at about 23 million backlog so we have about 1. 3 million. We are going through per week. In mind we average summer between three to 500,000 pieces of mail each week, its a menu to open the mail to determine visit a return or is it some other type of correspondence. So we do prioritize the returns in terms of the processing of the paper mail, including corresponded that is received. We process returns on a priority basis, and of that we process refunds on a priority basis. And so i can certainly tell you that our people are working really hard. We are doing to shifts and have offered overtime to all of our people to get through this. From youre saying thatmost of the backlog should be pretty much dealt with by the end of this month, is that correct . I cant say that because it depends what they open. If the straight averages work, we are going through 1. 3 million per week. We have 5. 2, 5. 3 million pieces total but keep in mind 3 to 500,000 come in on top of that so its a process. I can vouch for the efforts and certainly vouch for the desire and sensitivity and remember that our workforce is reflective of the communities they live in and the communities that their processing processing these returns for. Thank you for your effort but effort does not resolve the issuefor those who are waiting. We have a lot of people who are struggling. Let me get an it collection here. Congress has provided billions as you well know of funding for it modernization and theres mixed results. Were still a long ways behind. If more funding is given for it modernization, how can you ensure that those funds are going to be effectively used and managed so that we actually have the end result of it modernization rather than continually trying to maintain and support legacy systems . The upper patient your marks what the funding would be four and with the separate allocations, i think we could cover that. Also in terms of efficiency and it efficiency it should be noted filing seen in 2019 we set records for processing per second per hour and permit and we broke those Filing Season 20 during the covid pandemic with most facilities shut down and came to 2. 275 million returns processed per hour, 632 per second without any logical errors at the same group of it folks who handled our Filing Season were also responsible for implementing the it payments which were not only for individuals that we had information but individuals we did not have information and then we inherited the programming as well as for Social Security administration and we created portals that more than 14 Million People came in through a nonviolence portal took care of all that at the same time. We dont have the luxury of on boarding. With that situation. We had people who had to multitask and they were 15 to 17 hour days, from march through july and i would say that our folks, i would suggest and request on an it appropriation a specific appropriations from where we are, Taxpayer First act was passed from bipartisan support and has tremendous provisions for modernizing the systemsof the Internal Revenue service but it did not yet have any funding associated with it. So in my mind that these things come together. We take our responsibilities to congress, to the American People and to our employees and the neighborhoods are employees live very seriously. We want to perform and we want people to be proud of the Internal Revenueservice. It was a great answer but i know my time has expired. Im available. Let me just say mister in hindsight it may be implicit in your line of questioning is despite the accomplishments for the irs. I think mister is pointing out, i gave some examples in my opening remarks, were hearing from people who are being well served, who are panicking in some cases about their responses in direct payments. And we need a better response frankly in terms of liaison with them to congress to be able to answer those your because generally, we hear frompeople when things arent working. So that maybe a false incentive but its real human beings and real so i know what my friend mister highest and said. We need to work on that and i think frankly, that the liaison was to be able to go to some kind of ombudsman who can help solve problems taxpayer would be very welcome under these. May i provide a brief comment. In conjunction with that we had a phone line for that essentially overrun with the volume so where sensitive and understanding and it was my bright idea to create an email box that our folks could work around the clock on emails received. We received i think over 100,000 emails from a house. Gov or senate. Gov so my bright idea overran usas well but it was an effort to get there. I spent 36 years on the outside representing individuals with respect to the Internal Revenue service and tax related matters. I very much understand the concepts that each of you are there. I take these concepts to heart and there have been comments with respect to lower income individuals as well as different ethnic communities and i have not been in front of many of you before but i want to add into this two points that im proud and im closing here , on the first commissioner in the history of the Internal Revenue service who came into the United States as a refugee from the refugee camp and whose parents did not speak english what happens now live in the United States. Im also the first commissioner to come to the Internal Revenue service has a son or daughter was activeduty United States military has deployed twice as the privilege of wearing the flag on his shoulder and i think that to heart. Those are the issues as to why i came on board. Thank you Mister Reddick and we certainly honor your personal history and commitment. Remember, members of thomas are also patriots and committed to their constituents, trying to make things workunder very adverse circumstances. Thank you mister highest and for allowing me to piggyback on that. The chair calls on the gentleman from maryland for five minutes. Thank you mister chairman, can you hear me . We can hear you loud and clear. Terrific, thanks for the hearing. Mister reddick, i want to give you credit because were certainly putting a brave face on in view of these dramatic cuts that the irs has experienced over a period of years nowand the numbers are breathtaking. The workforce having been reduced by 22 percent since 2010 is obviously under copy irs daily operations in a significant way. I want to salute the frontline workers at the irs the rankandfile who are really engaged in acts of heroism every day trying to lift up a caseload that i think is drowning so we have to get more resources to the irs and that has to be a number one priority. For congress and i think it ought to be a priority of any administration. Unfortunately we have not seen that from the trumpet ministration. When the irs doesnt have enough resources, the fact of the matter is that the rich get richer, highend tax sheets away with not paying their taxes, fraud fraudsters are able to get away with their schemes. And those who ought to be on the receiving end of severe and significant enforcement by the irs are not. Meanwhile, those average americans out there who play by the rules and look to the irs to engage with them in a straightforward way just getting their refunds, make sure the urge income tax credit is accessed, make sure that these economic payments that come from these stimulus measures being put in place are getting to them. Theyre the ones that are getting short shrift here though i think thats whats so offensive to me is when the irs doesnt havethe resources that it should. It cant do whats necessary to enforce against those who are trying to evade the tax obligations. On the one hand. And it cant provide the kind of service to every day americans for playing by the rules on the other hand read ms. Collins, can you talk a little bit more with us about how Adequate Funding around enforcement can actually pay huge dividends for the irs. And plan went down on the kinds of schemes and efforts to avoid tax payments that we know aregoing on out there every single day. Some numbers behind. Archive system is a voluntary tax system and depend on people willing every year is down, a lot that form and pay the appropriate amount of taxes so i think enforcement is a reward to those who voluntarily comply and i think if the book does not see that the irs is enforcing the law were going to be at risk of losing people continuing to voluntarily comply. I appreciate that because sometimes those who want to attack the irs on ideological grounds so to say, be afraid, the taxman is coming but when the irs is coming for those who arent paying their taxes, are playing by the rules, thats the appropriate kind of enforcement and the resources that you can garner if you do that enforcement well be redeployed again to help serve those taxpayers out there that arent paying by the rules. Thats the tradeoff we see and we have an obligation to make sure that the irs is funded in a way that it can do his job and do its job on behalf of the. Mister chairman, thankyou for this hearing. I think it emphasizes once again why we as a committee, why Congress Needs to work hard to get the resources to this agency but also why we need leadership from the top and im not talking about commissioner rettig right now, im talking about the president of the United States who understands the valuable service the irs can provide and with that ideal back. Thank the gentleman mister kaufman is now recognized for his five minutes. Mister grossman, icu. There we are. We can hear you. First of all id like to thank Mister Rettig for being here. I think his agency is professional and i think any implication that they are intentionally avoiding segments of the population is misplaced and insulting. That being said is not a Perfect Agency so we have some questions for you. In wisconsin we had a lot of people who couldnt get their taxrefunds. And at least we were informed out of the problem was they had shut down the Fresno Office. Unrelated as far as i can see the quality of ip. Just its a decision to apparently have a lot of tax return sitting there on on a as a result people waiting months for their tax returns. Maybe some still dont happen and i wonder if you comment on the decision to shut down the Fresno Center and what was work is being done to make sure people were getting their tax refunds. Here we have both already work for you and in any kind income and if its your belief right now all or almost all of the funds that will end up in theFresno Center are paid off. The Fresno Service center is scheduled for a closing, we close to other centers and i think to others beyond that. As part of a consolidation been going on for the Internal Revenue Service Service for your paper filings were reduced filings increased in our current specific Electronic Filing is almost 92 percent so used to the 92 percent lets say in paper filings so we had campuses around the country. Some dedicated individual return, some dedicated to business returns so the concept that fresnowould be in the process of closing and about your project from now , were working you should know very hard for the placement of our employees within the Internal Revenue service and also working with the private sector doing career day to place articles on the outside. We are one family but in terms of the, can you hear me . I dont even get the gist of the question. The problem is we are told that returns were sent to the Fresno Office and whether it was your decision or the governor of california, i dont know what after returns were sent tothe Fresno Office , they were never open and sat there. Not a matter of a longterm decision toshut down the Fresno Office. I was told that the Fresno Office was as a practical matter not working at all through the coronavirus and therefore people present tax return there were not getting their refunds. They just remain there ona. Is that accurate . And if so, is office now up and running for what has become of the refunds for people newspaper returns were sent to fresno . It was my decision to close almost 90 percent of our 511 facilities on health and safety concerns for our fleet. We get it procedurally with respect to local guidance although we were exempt from guidance during march, april, may. Our physical facilities were shut down so mail didnt create a backlog during that time that we had been working on that backlog and i indicated earlier that i believe we are within a couple of million paper returns inside of a backlog which isalso why we distrust for people who have yet to file a return , to file that return electronically because we are in process. We did as we open. Campuses, we did shifts physical mail from one campus to another when it was more of an ability to open based on health and safety in certain environments compared to others but we were moving is only around the country to where we had the Customer Service representatives and others to process the mail similarly we get the same thing electronically but electronically we could do it within 30 minutes, shift entirely from one has to another area physical mail required. Help me cut you off. Pay off of the returned save file by april 13, that went to fresno because if youre in wisconsin i think youre supposed to mailto fresno. Have they been processed as far as you know that and mark. I will get back to you with specifics but my understanding is where already into july so if somebody files or return in march or april. One more question before i want out of time. A lot has been said about people not being able to get the 1200 check. As i understand they were not supposed to go to people who were here illegally. Are you making sure those refunds are not going to people who are here illegally. We have a series offilters and checks and markers that go into our system based on the information that we have. We dont have complete information to every person but based on the information we have , our systems are in line with the information we have is to should or shouldnt getpayment. The gentleman time has expired. Congresswoman from the United States islands is recognized for her five minutes. Thank you very much mister chair and thank you to the witnesses for being here. Mister rettig, before i go into my line of questioning i dont want to leave that hanging out there as if theres a perception on the part of the irs that you have been checks to illegal aliens as they are being called. Theres no reason to believe that irs are giving checks to individual have not filed income taxes and are therefore permanent residence andshould be here lawfully, is that correct . To my knowledge we follow the law as the law is written. Thank you. Thank you for that. Lets not begin thinking these stimulus checks are being given out willynilly and are not serving the purpose for which congress intended them. That being to assist americans and those who are qualified to receive that from receiving them. I wanted to ask you some questions with regard to how this funding is being, the pandemic is panning out and your tremendous support to the people of the territories and to the Virgin Islands. So in september i wrote a letter to Mister Reddick, commissioner and two seconds religion questing temporary labor of requirements and bona fide residents of the Virgin Islands he hospitalized in order to maintain physical presence in the territory for tax purposes on days that are sent on the mainland through medical reasons. As you know, pursuant to our tax structure and for some individuals who utilize our Economic Development program and receive tax benefits for being in the Virgin Islands, they have a certain number of days they have to reside in the territory. However, due to the covid pandemic many of those are still on the mainland or have medical purposes. Do you have a response or do you have any status requests, status give me on the update of request to you . The treasury is responding and that response will be coming, i hate to use the term soon my understanding is soon let me say that we have followed up and we will follow up and as soon is not in the space of less than 10 days will hear from me or somebody on my behalf giving you a better timeline but its treasury is handling the response to area. Thank you. In washington you hate here the word soon. Thats the kind of work that i give my kid when i saymaybe you can go somewhere. I share your apprehension to ensure. I wanted to find out, we had a terrible situation. Irs, you and the treasury were so good to support us in terms of when our governors gave you the number of individuals were going to be receiving stimulus checks. Rather than seeking reimbursement for the money, under the code you gave money up front that has been helpful to us based on those numbers. However, you may be aware that there was a back room that occurred in that primarily those individuals who receive Social Security checks. Were given two checks, one from puerto rico in the form ofdirect deposit and the Virgin Islands. Many of these are elderly people. Some of them rely solely on Social Security and they are really concerned because theyve been told to write a check to the government of the Virgin Islands for the money that may have come from puerto rico and the government of the Virgin Islands will then money puerto rico for the double payment. The people are concerned that puerto rico will still in turn come after them, that money has been set. Are you aware of this issue and is there any clarification on what the correct figure is for those individuals who receive those checks to take care of that . Specific after the Virgin Islands that came to my attention this week and i also am in understanding of a situation where potentially there is a concern a person might issue a check but also have the same amount removed from their account in which case essentially received zero. Our intention is every eligible american receive their payment and receive their payment in the correct amount. So i will actually personally look into that deeper and as far as the advice, we do have advice for people who receive duplicate checks and some of those issues are because we received information from multiple sources. We were trying to do it as rapidly as possible. We did the best of our ability there were situations where things happen because of certain programs Work Together maybe and thingslike that but as far as that , there is a payment provision on our site where people can send checks. As far as sending them to the puerto rico, Virgin Islands folks in puerto rico i need to look into because im not sure personally of that connection. We do have people there but ourintention , desire and support is as strong for the people in the territories around the world as it is for people in Downtown Washington dc or new york or wherever. We understand the need and purpose of these payments and we are trying our best. You will hear back from me and if not, i encourage you to again reach out to me read something you sent forward yesterday to get you on my desk so i hope i have the rightchannel. Gentle lady time has expired will take you at your word that you will get back to the gentle lady in terms of that inquiry area i checked the gentle lady gentleman from alabama Mister Palmer is recognized for five minutes. Mister rettig, we had a hearing before the oversight committee, i dont know. Two years ago and i asked then commissioner costin about a problem that chairman connolly brought up and that is the tax gap. And i asked him why it is that were failing to collect about 450 billiona year. And his response was the complexity of the taxcode. I know our whole focus has been on the it issue certainly is the major issue but isnt that part of the problem . Complexity is always a problem. The tax gap is multifaceted and runs from guidance to a strong visibleenforcement presence. It runs to information reporting, information reporting with withholding. The ability for the irs to require Electronic Filing and return are obviously quicker for us to process paper returns a lot of issues with respect to your partnerships. We have grant over the course of the last year, our office of fraud enforcement which is extremely visible , the office of motor investigations the respective individualswho participate in certain abusive transactions. So trying to maintain a visible presence on that side , criminal investigation forces have been extremely visible. I need to move on. I would like for you to respond to that in writing if you dont mind because i do think that an issue. Theres another issue that i would like to discuss and its something that i think the chairman has been supportive of our work on dealing with improper payments. And a lot of that has to do with Technology Issues and other agencies including irs. One of the suggestions that ive made and were trying to get into legislative format introduced to allow agencies as they reduce their improper payments to take part of the funds they save for use to modernize their it systems. Is that something Mister Rettig that you think wouldbe helpful to the irs . The irs is all in on issues that need to funding for the Internal Revenue service assuming there approved by congress and appropriated. My next question would be with the realization that you got these major it issues, but the irs as the modern modernization plan has nearly defined objectives, and an achievable schedule because there are issues that have been raised about the achievability of the schedule. And a budget for replacing it systems. Because ive heard some of these electricity systems operate on the old cobol systems, is that true and do you have a clearly defined objectives for modernizing your it systems often mark. We do, we dont have hardware that goes back to the 60s but we do have language that goes back to the 60s and we have a modernization plan that was launched april 2019 area we also have modernization coming forth under the Taxpayer First. Both of those are running together but independent so that theres not overlap between those and we will be please to have our folks, and do everything for you for your staff or however its appropriate to show you exactly where weare and where were headed. I want to get back to the funding for this. I would propose that congress amend the payment integrity information at to allow agencies to direct a portion of recovery proper payments into a fund for modernizing their it systems. This does not deny the problem, its throughout the federal government and it includes those states as well so i would like to mister chairman, worked with the committee if we can on an Initiative Like that and the last few seconds that i have left, im going to go off topic here but i want to congratulate the department of justice, fbi and our Intelligence Services in the arrest of alexandercompany and el sheikh. These are the alleged kidnappers of james kelly, stephen sought off and caleb mueller. They are alleged to have kidnapped, tortured and murdered these people and while we have been in this hearing it was announced that theyve been arrested. And i hope this brings some peace and closure for those families who been involved in that and with that mister chairman i yelled back. I welcome his comments on the need to systematically develop plan for modernizing the irs and leading into the 21st century and i pledged to work with my good friends on developing this plan in the subcommittee. I know you mean that and i think the chairman. I think my friend. The gentleman from maryland mister raskin is recognized for his five minutes. Mister rettig, greetings. Last week i sent you a letter from more than 100 different members asking you to ensure that victims of Domestic Violence rather than their abusers get their stimulus checks. As you know, Domestic Violence has soared during the pandemic but the irs often didnt help them get their money through a divorce settlement is callous and irresponsible. Would you establish a process for Domestic Abuse survivors to notify the irs that its been stolen away by their abuser and will you issue payments to those who have their paymentsstolen . As tax administrators we do not have the discretion to issue payments other than as provided during the cares at. The cares act requires the irs to use tax return information to the extent we had and the situation involving Domestic Violence, if a joint return was filed that required 2500 plus 500 per dependent. To the joint filers and if theres banking information is required to bedeposited into that amount. The cares act does not provide the Internal Revenue service with discretion to add an additional day in this context 1200 to the victim of Domestic Violence. We as people are very sympathetic. In the irs seek counsel concluded in 2009 that the stimulus payment is stolen or not received the irs can issue a replacement payment . Why would not apply in this circumstance. Unrelated and if you want to get into specifics we can do it but some people are reliant on the wrong issue there. When we make a payment into a joint account, the way that the statute requires us to make that payment, it goes into that jointaccounts. What happens to it once the payment there. We can work with you specifically. I wrote to secretary mnuchin expressing concern about the president s plan to require employees to accept a payroll tax deferral. This is a political point and it seems that federal employees are earning more money in their early. Only to reach the end of the deferral period next year when suddenly will have a significant back tax payments. During the recent Senate Hearing i was encouraged to hear secretary mnuchin agree with holland it would be reasonable to give federal employees a choice in this matter Mister Rettig you agree with secretary mnuchin and will the government allow. Of this tax deferral. If not, why not. The Revenue Service is a bureau of the department of treasury secretary, i report to secretary mnuchin so the way that he indicates for us to go on policy and other issues is the way the Internal Revenueservice will go. All right. My constituents have been trying to avoid opposition to this plan, groups are up in arms about it and we should not be using federal workers as ponds. Ms. Collins, was determined to you in april you told me your office did not help the public with certain eip payment issues. You updated guidance in august and help with some but identified four categories with which the office couldnt help. This includes the eip determined based on the wrong capacity here. Your response has been those taxpayers will have to wait until sometime in 2021 to receive the money their own. Is for funds that were intended to provide relief in an emergency. After collins, Weiser Office advocating for people in that position. Advocating for those people that challenge we have is at the time the payments were issued, the irs relied on the cares that says they have an option to rely on the 2018 return if the 19 return was filed so the challenge these taxpayers have is the amount when it was issued was correct on 18 of the 19 return for example, someone had a child so now they have a qualifyingchild. Theyre entitled to another 500. That would have to be manually process by someone within the irs. Thats our challenge is the irs does not have enough staff to potentially do 3 million individual entries for those individuals so we are continuing to advocate for those people i do understand the problems the irs has in working these cases. Not something that can automate. They would have to go through potentially hundred 60 million return to see what change to the two years. Mister rettig, let me ask you when will the irs set up procedures to allow them to assist all taxpayers have not yet received their eip funds . The dental time has expired Mister Wright may respond. We currently have 11,300 Customer Service representatives available on phones. Obviously we get more calls than that we dont have the ability and staffing to answer all the call we are doing our best on, and i cannot for the fact that the Taxpayer Advocate has advocated for the issues presented. The Internal Revenue service, an area needing to prioritize what few issues when looked at individually, clearly come across as an extreme high priority then when you look at it you look at the volume of individuals in this country, and provisions in the care that we have to prioritize those as on our resource availability and we are doing our best we certainly cares act itself provided for us true up amount based on 20 20 filing and thats where the language comes through the filing the return in 2020 and on the comment about expending the portal date to november 21 from october 15, i would hope for to take to heart the fact of our announcement on that called into that any further extension of that would jeopardize our ability to handle a 2020 Filing Season. We are really trying to be cognizant of many issues so i thank you for the additional times are. Gentleman from florida mister steube is recognized for five minutes. My questions are for Mister Rettig. Thank you for your service to our country and for being here and also for your sons service to our nation in the armed services. Its been reported that the gao has provided information the irs took the 1. 4 billion in payments to deceased or incarcerated individuals. Ive got a lot of people in my district who received checks as family members were deceased and a lot of people want to know how this could happen so that would be my first question is how that amount of money to go to people who are deceased. If you look at the stimulus payment that went out in 2008 youll see the process for payments to deceased individuals and then treasury look at the specific issues about the third week in may and determine the deceased individuals were not eligible to receive payments so from the third week of may forward those payments did not occur. But those were called made outside of the Internal Revenue service. And the vast majority of those funds have been back to work payments not sent out. Was my followup question was how much of that and what are you guys doing those funds. I have visited, it would take me a moment to get to it but i believe something on the order of, this is off the top of my head. I think on the order of 1. 1 million of the 1. 4 billion or 800 million of the 1. 1 billion, something along those orders have been either returned or not sent. So the net figure i believeis approximately 300 million. If you can get me those exact numbers id appreciate it at your convenience. What other changes have the irs made to prevent improper payments of existing funds or future stimulus payments. Are there parameters in place to prevent it from going out . Certainly theres Lessons Learned anytime an agency undertakes a massive responsibility like we did for the care that the issuance of these payments and keep in mind there were business Provisions Incorporated within the carryback as well our hopes were there so under , we constantly monitor for Lessons Learned. In terms of our ability and if there was to be another round, i know theres been discussions but there was to be another round we are confident we are able to do so and it shouldnt go unnoticed that we issued about 81 million payments for only 47 billion. Within less than two weeks when the cares act was enacted and acquired substantial programming buyouts so were as prepared as we can be but we are better prepared than we were the last time i think we had admirably the last time. And your expertise and your position, what specific legislative reforms do you think that congress and this committee should be looking at. Since 2011, every administration has proposed the Program Integrity which is funds directly to enforcement. Theres a pending this year about 400 million for enforcement. The last integrity actually approved by congress was in 2010. I think that significant. In a lot of areas, in terms of my the itc payments given the Internal Revenue service this is congressional rectal error authority would be substantial, it would lessen the burdens on individuals given the Internal Revenue service the ability to regulate return preparer the financial. Enhancing the requirements for Electronic Filing of forms. It would be substantial accelerating Electronic Filing of w2 forms to the Internal Revenue service would be substantial rid those theres a lot of issues that would come together to assist us both from the perspective as well as an enforcementperspective. And in my mind those two go handinhand, the person whose late at night trying their best seems to understand what it is requirements are which is why we gone wholesale into assisting people who either are not comfortable with the english language or do not speak english. Weve also tried to buy the languages. Got two codes on things leave them directly to points on our website but similarly we got to go out on the enforcement side maintain a visible presence. I agree with that if you could send those specifics that you referenced, if you have more specifics and information on that to my office i would love to look at those issues. Thank you for your time today and my time is expired, thank you for being here. Gentleman from california, mister, is recognized for his five minutes. 90 mister chairman. The irs is responsible for collecting about 3. 5 trillion dollars in revenue. One of the things that i kept hearing from my constituents is why are people not getting the checks in time, why its taking so much time for the irs to deliver stimulus checks or you process payments or collections. It turns out that the irs is still reliance on the legacy system, some dating back all the way from the Kennedy Administration and in Silicon Valley they dont understand is it that we havent had Software Updates since then. So as you know, in 2019, the irs paid almost 3 billion to operate its current Information Technology and 2. 3 billion of that was on legacy it systems. Could you describe the impact that on the legacy it systems on the irs ability to deliver business to its taxpayers and fulfillments its overall mission. Id be glad to. I do want to make sure. Although the systems rely on older technology, the underlying hardware much of it has been updated but what the limitations are using these older technologies is one most notably, its hard to find gaps in these skills, programmers they are coming on the School Learning how to program in languages that are 50 yearsold. Secondly, it makes it harder for irs to implement more Online Services. Because the senate can use contemporary technologyeasier for it to implement those. Relating to your point about the time it takes to do things, one of the biggest things that make it easier for theirs to do things more quickly is for people to do things electronically versus on paper. We have issued work where we identified recommendations for irs to look at limiting more Online Services and those kinds of things will help things along. Why did it take so long for that, then for the stimulus payments to go out and how is thatconnected to the it systems . So the vast majority of the payments did go out i think fairly quickly. I think any of the issues that we talked about related to the things had more to do with policy and procedural issues versus the Underlying Technology actually i think the one outstanding issue is identifying the remaining people have been able to claim their payments and getting them access the online portal that we talked about area. How has the Technology Systems that limited the ability to operate during the pandemic and what are one or two main things you would recommendthe change . A lot of irs operations, certainly back a second, many of irs employees have the ability to work remotely already some of them didnt. So for example those in Customer Service positions. Those obviously opening mail. You cant do that work remotely. To the extent that we can change work processes to allow more of those irs folks to do work remotely, i think that would have longerterm benefits beyond the pandemic so that primary area for them to focus on. Mister rettig, two questions for you. Does the cio of the irs does not support you directly, is that correct . The cio does not report directly but i talked to the cio at least once a week and many times seven days a week. A provision that is in the Taxpayer First and irs is being reorganized Going Forward so i think youll see thataddress. Thats good and what do you think we need to do to modernize the irs and to help deal with these legacy it systems and what is the plan to do that. We actually have a plan independent of the Taxpayer First and i think given the interests, im very familiar from california with the valley and i had three brothers in law who are in it in the valley so im understanding that where i is lets say in the valley compared to where it might be in terms of the Internal Revenue service i have had visits up there, the Internal Revenue service, they need to come of age to serve the people of this country in the manner that the people of this country deserve to be served. I think that universally, we all support that. And we want the best for our people. We dont want to tax administrative for, administrator that is behind the times so we have to earn that trust and respect through providing that information to them i would welcome the opportunity for myself and others to meet with you or your staff to give you the details on two separate plans that are independent. There is no overlap but because one came on the scene first , we are looking at them from a somewhat jointly but we have a modernization Business Plan was april 2019. We have yet to receive a funding request on an annual basis but a secure plan for that and then the Taxpayer First act as modernization in it as well i think as are all familiar with their no funding appropriations associated with the Taxpayer First. We need both of those. Gentleman, mister pascal, thegentleman from new jersey isrecognized for five minutes , welcome. Mister pascal, you need to unmute yourself. We okay now. I want to thank you for this opportunity and as chair of the oversight subcommittee , i am very interested in the irss operations. A lot of communities and constituents, weve heard some very very Big Questions from both sides of the aisle today. Theres still neighbors in new york city towns without Economic Impact payments or the irs refunds that would help make ends meet. So im pleased the commissioner is here to answer questions. Unless it must be said that its utterly ignored the ways and Means Committee and 116 congress but the commissioner , how can the congress and the American People assured that the order for the president s tax returns are being conducted in a fair and stupid was way and without political interference. How can we be assured of that . As you know i cannot specific matters as to whether any taxpayer has issues with respect to an examination of the return and to what might be in the return or in the examination. Earlier there was a reference with respect to a criminal investigation of an organization reference did not come from the Internal Revenue service and the information anyway associated with that did not come from the Internal Revenue service. I cannot confirm or deny that information. Everytaxpayer in this country is assured confidentiality and privacy with respect to their tax matters. So as you knowsir , under 6103 and otherwise i cannot. I dont want to get into a debate about privacy. That was part of 6103 in the code. I understand that. Privacy is very critical to me. My record is my record but the point of the matter is it would seem that we put that aside under the investigation of our commissioner learner, i believe it was 10 taxpayers belong to certain organizations were made public without any apology because they found out they were wrong so that answer is notacceptable. The recent revelations over the president s lifetime of tax abuse and malfeasance threatens confidence in the irs. Im talking about the legitimacy of our federal tax system. Im not sure you understand or appreciate that, sir. To begin to restore this trust you must fulfill the ways and Means Committees legally binding request for the president s tax returns red his business and personal tax returns under 60 103f. You have been illegally withholding them for the last 500 and today, 470 days. 547 days. Will you lawfully fulfill chairman neils request . Sir, as you know at issue is pending litigation and its not appropriate for me to discuss pending litigation and we have made the committee is aware of that. Mister rettig you admitted in a recent report that the irs audits for low income taxpayers disproportionately offer wealthy tax cheat because its easier to pick on regular americans. This is importan issue but this is also a leadership issue. Do you have animmediate plan to end this shameful disparity . I call it shameful. That report is absolutely false. Let me repeat it for people who didnt hear the first time. For taxpayers who have more than 10 million per year we audit at the rate of 8. 16 percent. For the e itc community we audit at the rate of 1. 129 percent. Those facts are in our data book that was issued for fiscal year 2019 so the earned income rate is 1. 1 percent. Taxpayers over 10 million. It is the. 16 percent taxpayers over 5 million and about four point something percent in taxpayer between one and 5 million. Its something on the order of three percent so those numbers are disparate. The issue with respect to earned income tax is there is a 17 billion dollar improper payment associated with that per year. But the irs does all it can do to get those out individuals as rapidly as possible. 90 percent of the pc payments are issued within 21 days. To present 42 the fraud filters id and other issues that require an annual look like a person. And we processed in a prior fashion. , who is going to the Internal Revenue service anyway and any lower income and community, geographically diverse community, Rural Community is absolutely wrong that should never,. Those comments hardworking those comments taint the hardworking, dedicated career employees at the Internal Revenue service who create our audit plans and thats not what the Internal Revenue service is about and i take obviously extreme discomfort in anybody asserting the contrary and we would meet with any and every of you to go through that in detail. The gentlemans time has expired. Let me just say that on half of mr. Pass dceral looking at the ders talent of the audits receiving eict was on par with the percentage of audits of peopling making more or reporting more than 10 million of disposable income. You have vigorously denied that report. I respect congressman pasquel, there is chatter is implicate where i went with respect to that and its unacceptable to the irs. I understand that. But its not unacceptable for the distinguished member of congress on the ways and Means Committee and this subcommittee to ask that question. No, sir, and i agree and i respect the congressman and we both agree with that, we both respect him. The gentleman acknowledges miss porter for her five minutes. Commissioner rettig, [inaudible] you have a responsibility to remain impartial and unbiased in your role as irs commissioner, correct . Correct. And as irs commissioner, do you believe its important to hold criminals accountable for violations of the tax code. This is the Internal Revenue service has a very aggressive let me make sure you can hear me. I am having difficulty hearing you, maam. As irs commissioner, do you believe its important to hold criminals accountable for tax fraud evasion and other violations of the tax code . The enforcement efforts yes or no. Enforcement of the Internal Revenue service are there for those who do not comply with the tax codes. Reclaiming my time. Do you believe in holding criminals accountable, yes or no. Thats what the criminal ref into you service, we investigate, we do not prosecute. And holding those criminals accountable through investigation stems from your sworn commitment to upholding the constitution, correct . Thats correct. I ask that because in addition to the salary you receive as an irs commissioner, you also earn between 100,000 and 200,000 per year from your ownership of two units at Trump International waikiki. You have continued to earn this additional income while in office, correct . Yes or no. Correct, and all of that was approved before i came on board and each year by the ethics official of the Internal Revenue agency. Mr. Rettig, did you disclose that information to the Senate Finance committee when you were nominated for the position . Absolutely and anybody who asserts in any way, shape or form that there was a concealment is absolutely wrong. During my confirmation process the Senate Committee received over 80 pages of invoices that specifically identified that property. The instructions were that property specifically say to support the city and state where all properties are located. That is exactly what transpired with respect to those properties and other properties that i own and anybody who asserts to the contrary really does not know what theyre talking about or the process. Okay, commissioner rettig. No need to get upset maam, i have been dealing with that since i came on board and my time or my familys. And attacking the members of the committee. I do not intend to attack you so if its perceived like that, i apologize to you and to others. The gentle lady controls the time. [inaudible] mr. Chairman. Miss porter. The time belongs to me. Mr. Rettig since youre getting upset about that line of questioning id like to try another one. How many Economic Impact payments, how many people are still waiting on their Economic Impact payments. First, let me apologize to you if you took that as an attack, maam. I have to indicate that that issue has been out there and if it came across as hostile or aggressive towards you, i do apologize, thats not who i am and i certainly would not imply that to you or other members. Committee, so, would i hope that you would accept my apology with respect to that. With respect to individuals and payments that we are struggling to issue, its very difficult for us to identify people who do not interact with the government, with the Internal Revenue service with the homeless shelters and what not. We dont have a figure for you. I have been asked earlier today to provide a figure. We are i can tell you currently let me reclaim my time, its about 9 million and since you said that some of these people havent reached out to the government, i just want to share our experience in our office where we have had 114 people reach out. 114 constituents in my district alone and work tirelessly, our Casework Team to get answers for those people for months and months and months. At this point we have answers for 13 of them. That is, as you know, 11 , so these other people we have no information. 50 cases of these 114 we have not been able to get any response at all from the irs. So i would respectfully ask you to please communicate with your team about responding in a timely way to congressional inquire ris because for every american who is reaching out to our office and is asking for help, one, were not able to get them help because the irs doesnt respond to us in almost half the cases, and two, for every american who does reach out to us, there are literally hundreds of thousands of more who are just waiting and dont have that information. So id really appreciate your going back to your team and getting the committee a clear answer of the estimated number of people who have not received Economic Impact payments who are waiting and how many outstanding and unresponded to congressional inquiries you have on both sides of the aisle. Thank you very much, i yield back. Let me thank you and let me just say to miss porter before she joined the hearing, i made that the same point that there are a number of constituents in all of our respective offices who have not heard, who have confused instructions, have not received payments and we represent those constituents and the numbers youve shown are probably reflective of so many of us and i might add its a bipartisan issue. The Ranking Member made the same point about his constituency in georgia and what the chair asked mr. Rettig to do was to go back and look at the liaison functions with members of congress because we when somebody contacts our office, it means Everything Else has failed. And so weve got to have more responsive reactions from the irs and mr. Rettig, i would say miss porter, i believe, committed to doing just that and we will follow up on that, but miss porter raises a very good issue and i think its universally shared by members of congress. Thank you, miss porter for bringing that up and using that handy dandy white board youre so adept at, thank you. And once again, congresswoman i apologize if its received as hostile, but obviously a personal issue, so thank you. Thank you. The chair new recognizes himself for five minutes. Can i interrupt for one sec . Miss collins. You talked about a liaison and ombudsman, thats what we do. That is what our function it that congress created the national Taxpayer Advocate solely for that purpose. So our local offices do have contact with various Staff Members and happy to help on all the cases that we and we appreciate that. But when a member of Congress Calls a federal agency that falls under our purview, i expect an answer. Not to a third party, directly. When i write a letter, i expect that letter to be answered. I think for the record, ive presented a letter i sent three weeks ago that has not yet been responded to. And again, theres a certain insurgentsy here, thats arent idle thoughts from members of congress. Were trying in realtime helping constituents for whom whatever reason the system has not worked. Youre a resource and an asset that we should not overlook, but i think we were talking directly about communication with the agency, and trying to get a better line of communication that works for everybody. Mr. Rettig, did you sir, we accept that. The Taxpayer Advocate is housed within the Internal Revenue service and we have a shared responsibility that when things come in through legislative affairs, certain items are automatically routed and certainly items are obviously not. We accept and appreciate that we could do a better job. We will not give you excuses for staffing and funding and what not. I will only vouch for the dedication and desire of, i think, one of the most hardworking, dedicated work forces in the entire federal government. We will stipulate that. But again, remember ill take that back, sir. We operate in realtime, too, and sir, if youre not happy were not doing our job. We understand each other. Now, my line of questioning, mr. Dsouza, im going to give mr. Rettig a little bit after break. What do we know about the scope of the i. T. Challenge at irs . I mean, we talk in generalization about legacy systems, do we know how many legacy systems there are . I think we actually had a finding that irs didnt have a complete inventory of its legacy systems, but i think generally we do. I think that, as we go ahead. Can you give a number to that generally . I would have to get back to you. Are we talking about hundreds of systems, dozens of systems, what . I think on the order of hundreds. Hundreds. But part of the thing i get to keep in mind, it depends on how the agency defines the system so thats why i have to ill get back to you with a more exact number. I would appreciate that, in fact, this subcommittee is going to formally request gao for a comprehensive inventory of the scope of the problem and challenge. And by the way, whats wrong with a legacy system . Well, as we discussed, they rely on older tech nothing. Yeah. And harder to find people to employ to keep it uptodate. You have a limited range of vendors that support that technology. Over time if youre. But im more interested thats all interesting. Okay. But im interested in how it affects capability. I mean, a system thats 40 years old does not have the same capability of handling the mass volume mr. Rettig has to handle than a contemporary system, is that correct . So i would say that actually the irs system do handle very large volume. That wasnt my question. My question was, when you compare a legacy systems capability to assist with what weve deployed today. The former is inadequate compared to the latter. It is, but its not in terms of volume. Its probably in terms of capabilities it provides. We talked about the ability to provide services online, provide information more quickly to taxpayers. Well, is it more costly to maintain . Yes. Yes. Any idea of what percentage of the i. T. Budget mr. Rettig overseas is devoted simply to maintaining legacy systems . So 80 of the budget goes for Ongoing Operations. The exact percentage of that, thats for legacy systems, again, i need to get back to you on that. So, what is your estimate of what it would cost to update completely the i. T. Systems both hardware and software and these and retire these legacy systems at the irs . I dont have an exact number, but what i can say is that the modernization plans that weve talked about are good first steps, but they actually dont fully address what it would take to retire these legacy systems. One of the things we ask the acting cio is whether or not they had a full plan to retire imf one of the biggest legacy systems and they said they were working on that. I think over time theyve taken various attempts at it and they havent been successful, so, i you know, well have to see wait, wait, thats not an adequate answer. They havent been accessful. Why have they not been successful . To what extent this hearing is about resources for the irs to make sure its as responsive as it can be to the American People and weve documented how they will staffer the resources and vilified by this very committee, i might add, for 10 years, at the cost of reinvestment. So, how has this affected capability . Sure, so, as the budget for these modernization activities has been cut, or as weve had situations like a lapse and appropriations and continuing resolutions, irs has continually had to replan and reprioritize efforts. That takes time and slows things down and they have to move staff around if they dont have enough staff, then they have to triage and focus on high priority activities, theyre not able to do certain things. One of the things we reported on, indirectly answers your question though, what this most recent tax cut and jobs act. Irs had to shift its i. T. Resource toss i resources to implement to enhance its systems. So thats are all some examples that tradeoffs that irs has to make when it doesnt have resources. You say tradeoff. Somebody might use a different image, cannibalization. By the way, its not just legacy systems, is it . I remember a few years ago when we this committee was vilifying your predecessor, mr. Costinen, who i considered a exemplan exe public servants, but vilified him because of crashes throughout the agency. One of the things not discussed of course, because it would have been inconvenient, was the age of the hardware, that would be pcs. So in the private sector, when i was in the private sector for 20 years, excuse me, we kind of replaced our pcs about every three years. What is the replacement rate. What is the age and replacement rate for pcs for irs employees currently . So, i dont have a current rate. What i can say is when we did look issue a few years ago, we find that the majority of irs i. T. Equipment was outdated. Since that time we did mr. Dsouza, outdated, how many years . How old . Again, id have to get back to you with the specifics on that. Mr. Rettig, do you know . [inaudible] were making, to the extent we get funding, were making real inroads into updating our system. Most of our systems are far beyond their useful life and for most of those systems weve extended on useful life like laptops and such and we extend with warranties and what not and then end up having to go beyond that because we dont have the ability to replace. One comment just quickly on terms of efficiency as we were to update our systems, something thats all stayed in my head and its Pretty Simple as we modernize and bring in chat box for people who call in. One employee can handle one telephone call, but one employee can handle four chat bots at the same time. An and thats 41. We have 11,500 Customer Service representatives in theory if it was direct math you would put us up to 40,000 by getting us there. Our ability to efrj will resources through modernized system which includes both language and software and includes hardware would be greatly received by the every employee of the Internal Revenue service as well as by every american. Let me just say mr. Dsouza, we need more from gao than what weve got here. We need a comprehensive inventory of the nature of the i. T. Systems, legacy systems, hardware, software, zoom capabilities, whatever. So that we understand the scope of the problem and we need dollar figures so we understand the investments required. The other thing we need is an assessment from you and with cooperation with the irs, whats the return on investment . I mean, we talk about gao, the agency for which you work, that roughly every dollar we invest in gao we get at least an 8 or 11 return. Whats the comparable figure for irs . If irs can do double the audits it does currently, presumably the return on that is quite considerable. Especially when we know at least 450 billion dollars is left on the table, taxes owed, but not paid because of capability. Capability of auditing, tracing, collecting, enforcing. And so, those are important considerations in addition to were in a pandemic. And while i think mr. Rettig and miss collins have both indicated that theyve done a very credible job in trying to respond under the most adverse circumstances, with a history of disinvestment for 10 years, nonetheless, we know things are on the table. With all of that, we know that millions of Americans Still havent gotten their direct payment. Millions of americans are still complaining about a responsiveness from irs in terms of refunds or filing or processing a claim or making an appeal or dealing with an audit. And so these, the relationship between the investment in i. T. And the capability of the irs to do its job on behalf of the American People, and by the way, part of its job, because of voluntary compliance, which is so high in america compared to other places, is based on the fact that i perceive the system to be fair. Its going to treat me the same as it treats anybody else, rich or poor. Theyre going to hold that person and me accountable. And if that trust is damaged, compliance will fall. And that will hurt the ability of the United States government to fund itself and the services it provides people, especially during this period of time which is so challenging. So, we need the gao to really look more closely and provide us with more comprehensive data in terms of the scope of the problem and what it will take to address that problem. We do have work underway thats looking at some of the issues. And well be glad to update. Well, we want you to expand that so that its not some of these issues, its everything weve just described. Thats why were having this hearing and we need gao as a resource to help us understand the analytics and the boundaries of those analytics. Yes, mr. Rettig. Well obviously cooperate with gao in that record. We look at service and compliance together. We look at the desire of the irs to earn the trust and respect of every american. When i made the comments about getting into different languages, lower income communities, expanding vital resources, expanding resources to low income taxpayer clinics, when you consider that fiscal 19 our gross receipts were 3. 56 trillion dollars which is 96 of the gross receipts of the United States of america, and that the part of a tax gap, a voluntary hovers around 83 , thats for americans who pay and maintain compliance. If we can help the folks trying it get it on their own by in language, simple language, understandable things, open up those avenues and answer the phones when they place the calls and we are only to bump the voluntary compliance rate 1 , sir, thats 35 billion a year from americans who want to get it right, who are proud to be americans. Who are proud to file tax returns. And theres a lot of people there. This is the first time, to my knowledge in the history of the Internal Revenue service that weve done such an expansion into languages. Im very proud to be the son of an immigrant and the husband of an immigrant, very respectful for the challenges people have who come here and its incumbent upon us, collectively, sir, to get it right. Modernization helps us significantly in that regard, it also helps our enforcement component. So we welcome the assistance of congress. Well, thank you and the fact that you are the son of immigrants, im the grandson of an immigrant, and you married a refugee, i think just gives living proof to the fact that immigration rewards and enriches america, it doesnt detract from it and by the way, with respect to refugees, i will just say editorially curbing the number of refugees, people fleeing violence is a very unamerican thing from this members point of view and we ought to be doing exactly the opposite, open our welcoming arm to people suffering violence and persecution abroad. Thats what refugee means and thats what the Refugee Program is designed to provide. Sir, to help with you perspective, my wife was born and raised in vietnam after the fall of vietnam, april 30th, 1975 her father was taken away to an education camp for three years nine months she in 1982 fled by boat. Shes a boat person for the term i dont mean in a derogatory sense, im hugely proud of her. As you should be. And thats the story of america. And i know were digressing, but the idea that we would cap the number of refugees who are who perhaps worldwide are now at a Record Number at 15,000 is disgraceful and from my point of view, unamerican. Any rate, on to irs. We need more progress, we need more help from gao in broad going the scope, mr. Dsouza working with you on mr. Daro on that and mr. Rettig and hopefully miss collins who is new on the job, will be creating mechanisms to be more responsive to congressional inquiries, remember, were also representing taxpayers, but taxpayers who have found for whatever reason the system doesnt work. With that, we have five days for additional questions that may be submitted to our witness is and we would ask for a speedy and expeditious response in writing should you get those questions through the chair. And with that, this hearing is concluded. Thank you. Thank you, sir. [inaudible conversations] thank you. Thank you, sir. [inaudible conversations]. [inaudible conversations] [inaudible conversations] [inaudible conversations] this afternoon, the house ways and means oversight subcommittee holds a hearing on Health Insurance provided by the Affordable Care act. Watch that live on cspan. Org or listen live on the free cspan radio app. Tonight, vicepresident pence holds a Campaign Rally in cincinnati. Watch live at 6 p. M. Eastern on cspan, online at cspan. Org or listen live on the free cspan radio app. [no audio] up live next we take you to the u. S. Court of appeals in washington d. C. , a threejudge panel will be hearing oral argument in trump v mazars, regarding a congressional subpoena for the president s financial records. Looking that President Trump failed to fully disclose in a report. And President Trump and his associates sued mazars saying that the subpoena is invalid and unenforceable. And a court ruled thatt
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