Taxpayers and corporations. [inaudible conversations] [inaudible conversations] are right. This joint hearing of the subcommittee on Government Operations and the federal workforce and healthcare and Financial Services committee will come to order. Welcome everyone. Without objection the chair may declare a recess at any time. Recognize myself for the purpose of making an opening statement. First and foremost thank youst l for being here in this crazy but at times were in. Nevertheless, what were talking about is extremely important. The irs has been played really with dysfunction for decades. The dysfunction is across the board from data breaches complex, and didnt except to slow audits, backlogs, and really Terrific Customer Service got at least for my constituents. Despite years of congressional oversight and government watchdog warnings, not much has changed. My colleagues on the other side of the aisle believe that more money and more power is thee solution. In fact, the last years Inflation Reduction Act Congressional Democrats to 80 billion into the irs. With this influx of cash, that rest plans wrapup audits on all americans. This funding spree prioritizes enforcement over improving Taxpayer Services. Taxpayers sources like processing taxpayer returns receive a 9 funding boost. With enforcement receiving asphyxiation 9 funding boost. The irs need stronger leadership, not more money and not more audits. The irs needs to work at getting the American People their money back in ar timely fashion, not auditing the lower and middle class americans. The irs in my opinion needs to invest in highly skilled experts, not simply hire more employees, but Higher Quality got not so much quantity. Put simply, the irs just needs to do a better job. There needs to be consequences for their in action. Ifif a private business did what the irs does on a daily basis, i it would quickly go out of business. If they private business repeatedly left you on hold for hours as my constituents and actually myself has evenn experienced god at a a timer didnt answer a phone call, it really would go out of business and customer clicks would go through the roof. If a private business repeatedly left sensitive Tax Information unsecured or lost itve entirely, it would face criminal penalties and go out of business. But since the government is involved, theres no accountability for yet any accountability that i have seen for its poor performance and thats one of the things i would like to talk about is who owns it, whats the accountability . But also what are we doing to improve it . Right . So even if we did get more money, what with the Solutions Look Like . Right . Because we consider and complain that we also have to focus on solutions. Why do we accept this . Hardworking americans accept this because they follow the law and they know they face consequences like penalties and fines if they dont, and those penalties and fines are their money. It comes out of their pockets. If we make a mistake on our tax returns, it costs us, right . In contrast, when the irs makes a mistake, there are really no consequences. Or if there are, i would like to talk about what those consequences are. Do people lose her job . Are the put in action plans . Do they get demoted . What are the consequences . And i really dont think its too much to ask to have the federal agencies play by the same rules as we expect American People to play by. I mean, the irs asked for more money to fund or mistakes got more data breaches, more ineptness. It shouldnt be acceptable and we have to hold our Government Agencies to at least the same standards that we hold the American People to with their tax dollars. Instead of doing the job, the irs are struggling to complete its basic functions. Instead of processing tax returns in a timely manner, americans are waiting months and sometimes years for money that is a rightly theirs. And the issue is yes, we pay them cost you know, interest on that money, but a lot of the business are going to go out of business by the time they get the rightly deserved money. The irs can do something as simple as answering the phone. Instead of being trustworthy to the irs carelessly leisure Sensitive Information unsecure and vulnerable to leaks, fraud and Identity Theft. Frankly, the irs is the perfet example of bureaucracy failure. And theres not been a lot of accountability, if any accountability for it. We talk about these issues today. Today. We need remember that these are real problems that impact real people with real money, their money. Since i entered congress, helps constituents have approached my Office Asking for help with the irs. I have constituents of file returns on time in april and have yet to receive the refund. When they seek help from the irs they can get hold of anyone on the phone even to get an update. Ill cover those later but often they wait hours t to reach Customer Service representatives only to get disconnected due to an overloaded switchboard. Which you can imagine incenses them and the frustration goes through the roof. I havein constituents or busines owners who have outstanding applications for the Employee Retention tax credit. One of these cases has been pending since february. They wait, these wait times are unacceptable really for Small Businesses because they depend on those dollars, especially to the pandemic. We are here this afternoon to demand answers and accountability on behalf of the American People. So mr. Werfel, thank you for being here too the subcommittee today. I look forward to your fruitful discussion. I now recognize Ranking Member mfume, for the purpose of making an opening statement. Thank you very much, madam c. Good morning is a a still . Good afternoon. Im living in that other universe i see. Welcome, everyone, and thank you very much, madam chair. Pain once theirir share is an important obligation in whats known as the American Social contract. With an estimated 168 billion individual taxpayers filed returns this year alone, processing high volumes oflo returns requires sufficient personnel, modernized technology, and streamlined systems. A little over a year ago, President Biden signed the Inflation Reduction Act, or the ira, into law. As most of you know this groundbreaking legislation reached the irs at a critical time, right before the twin 23 tax Filing Season, and delivered 80 billion to the irs over the next ten i years. The funds allowed the irs to hire new staff, modernize technology, and audit wealthy tax cheats. Who had been getting away with murder. The poster board behind me illustrates that this is a win, a win for low and middle class americans. S. These ira back improvements achieved as you can see, achieved 87 peak levels of performance and Service Success as a result of their implementation. 87 , higher than at any of the time. Ig it was a dramatic increase from the previous tax filingg your alone. Irs answered 6. 5 million more calls than last year, cut wait times by 86 , which i think is phenomenal. It certainly the 140,000 additional taxpayers, and cleared the backlog of unprocessed 2222 individual tax returns immediate results that show investment in the irs improves with no errors. Now you got to be doing something right to have those kind of numbers that are certifiable and verifiable. So these are real and tangible and immediate results that show that investment in the irs improves Taxpayer Services. Dont take my word for it. The irs pointed out in a sweeping release that by the way i would ask unanimous consent he entered into the record, showing that the agency will continue to prioritize efforts of high income individuals and companies without running away, turning a blind eye, or refusing to do what they should in fact, do. So these are real as i said before they are tangible, their immediate results that show that investments in the irs improves Taxpayer Services. Unfortunately, after this years tax Filing Season, and the budget negotiations the nation was forced to heed republicans persistent call for rescinding the irs funding. There were a lot of bogeyman stories that took place all over the floor of the congress about what was going to happen to almost virtually scared the american taxpayer into believing something that was not true. Reality is thehe agency kept its promise and commitment to the nation and its stated goal of cracking down on delinquent tax evading millionaires. Who had been getting way, as i said before, with robbery. The agency kept its commitment, and so despite cuts to its funding and the persistent and dangerous mischaracterizations of irs agents as sort of an army of bogeyman waiting to kick in your door and lock you up, weve got tock stop playing games like that and we have to make that middleclass americans know with the facts are, what the intentions were, and more important, whate the goals have been and the conclusions that bear those goals out in this. To the extent that irs has collected nearly 160 million in back taxes from individuals earning over 1 million speaks volumes about who theyre trying to help and who are they trying to keep us from being takeel advantage by. These millions of dollars in missing tax payments were not an accident. It was not manna from heaven. It was a clearcut delivered effort to make sure that enforcement was a weight should be by the agency and to make sure that tax cheats got particularly the wealthy, wealthy, wealthy ones did not have a safe haven. For example, the irs identified one individual who just last month was ordered to pay 15 million in restitution for falsifying personal expenses as deductible business expenses. I dont know what kind of neighborhood that person lives in, when you can get that kind of find it suggests you been getting away with some serious crime, and was caught. These efforts to defraud the federal government included financing of the 51,000 square foot manchin. Im glad whoever the hell it was got caught. I really am. Thats the affront and thats the tragedy here, and thats what weve got to find a way to make the irs protect middle income people by going after the high income abusers. These sorts of greedy tax cheats exacerbate the 688 billion tax gap highlighting the stark contrast between the amount of money owed in the amount of collected by the irs on time period in other words, the more millionaires and billionaires who scored around and play around with paying theirki fair share, the larger the burden that falls on hard working Everyday Americans who pay their fair share every year on time period the irs reports that even small declines in taxpayer compliance can cause the nation billions of dollars in lost revenue, underscoring the need for simplicity and efficiency during the tax Filing Season. Thats why i coled with my colleague here ms. Porter and with mr. Connolly of virginia the trust in Government Act which directs the department of the treasury to expand electronic tax filing and other Customer Support via email. Also led the streamlining irs operation act which requires the tax returns filed on paper can be readily digitized. The irs heeded that task and that request by expanding, not reducing, by expanding it its digital scanning efforts this tax season. So Congress Must continue to ensure that the irs has the funding and the resources necessary to maintain its remarkable progress since ira became law. Progress that is unheralded in many respects and unnoticed by others who hide behind the fake characterizations. Take no mistake, further cuts will hamper the irss ability to execute transformative change. And so i urge my colleagues on both sides of the aisle to reserve irs funding as we move f forward from our current stalemate and get back to the business of funding the Government Operations. I want to thank our witnesses, commissioner werfel and director lucasjudy for your participation in todays hearing. I am particularly looking forward to hearing fromcu commissioner werfel about the status of the irss upcoming tax Filing Program known ass direct file. We have the duty and obligation inin this committee to ensure tt the government operates at a top tier level for all americans. And ian look forward to discussg as members of congress how we can work to support those efforts. Ideally back, madamo chair. Thank you. I now recognize chairman sessions for the purpose of making an opening statement. Chairwoman mcclain, thank you very much. Im sorry to each of you for being late. Weve had business in another part of the complex. Commissioner werfel, thank you so much for being here. And ms. Judy, thank you very much. The opportunity for us to meet today that we spoke about yesterday, commissioner, is one of natural inquiry that this committee has. Its about the effectiveness of Internal Revenue service as a relates to the ongoing business, that the subcommittee believes is very important. But perhaps it goes into much deeper points, and that is why we are also here today. We need to make sure that the irs in its performance does do its job as mr. Mfume saint says. We need to make sure theyre properly and funded. We need to make sure that they treat all people fairly, not just some that they which used to. We believe that there have been reasons why youou were brought n board the first time mr. Commissioner, acting commissioner. Ve we believe there are reasons why there today, perhaps second year at the irs. Theres a lot of things that we will want to get into, but perhaps its most important for me to say this, that i believe confidence in the irs is what we are after. I spoke to you about this yesterday, about the sizing models, about the professionalism, about the ability to attention to detail for the American People, to be able to get it not just a good answer but to be able to get through on the phone without having to wait for hours. The effectiveness of the irs ability to get the job done is important. We know that the irs is going to cooperate with us because you told me that yesterday on sensitive matters take you and i spoke about that you actually did not want to get into actual information today, and i concurred. But were going to talk today to get an idea that you will cooperate and you will cooperate fully with us, that you will make sure that the. Questions thatu we ask while you do not have to go into the specifics about those, certainly not names, certainly not times, certain not about the investigation, but about your agreement that you will cooperate with this committee and with congress in those regards. So we know that you have been given some extra 80 billion. We are going to want to talk about that, and the deployment of that and how thats going to aid in do the things that would be necessary. I think its important that you know that the irs touches almost every single american. And so the information we get back, the things we hear back, comes at a time that you got to defend a lot of ground. I want to thank you for being here today. I wantan to thank mr. Mfume at a want to thank chairwoman mcclain for allowing us to start this hearing without me. Madam chairman, i yield back the time so we can cut opening statements. I now recognize Ranking Member carper for the purposes of making an opening statement. Have you heard of death by a thousand paper cuts . Its how to get rid of something by subtly attacking it over and over until it is finally gone. Death by 1000 a thousand c. For too many years washington politicians have worked to get the Internal Revenue service and they found creative ways to cut the irs time and time again. How did he do that . Phase one, they start by attacking its credibility. Look, i know that the agency that collects our taxes isnt easy to love. Believe me, opportunistic politicians know that, too, so they go on tv and they give the irs of verbal slash often suggesting that the irs is spying on us, targeting us for our political beliefs are going after us today more money than we owe. What a bunch of bs. But even though those claims lack any evidence, we might be inclined to believe negative things about an agency that collects taxes. Look up even the bible isnt that kindev to Tax Collectors. These politicians easily succeed in creating and spreading hostility, making it even easier to slash the irs again. Q phase two, full on partisan investigations and the tax on the hardworking employees of the irs. Look no further than the last time the Committee Republicans went hard after the irs. Under the Obama Administration republicans falselys claimed the irs was unfairly targeting conservative organizations more than progressive organizations applying for taxexempt status. The irs spent 20 million and produced 1 million pages of documents in response. Ultimately, republicans it didnt prove anything. They instead used itca to justiy diverting resources from irs Customer Service, i. T. , and enforcement. But thats what produces politicians wanted, to turn people against the irs. Tos divert resources so the agency cant do its job and think to take one last slash. That brings us to phase three. Budget cuts. When politicians tell us our Tax Collector is after us, no one wants to fund the collector, and thats exactly whats happened. Opportunistic politicians have succeeded in cutting irs staffing 20 lower than it was in 2010, even though the country has grown by 7 since then. The agency has been so battered that we will need 52,000 new irs employees just to meet the agencies needs. Thats a bad its gotten, folks, year after year of politicians taking slashes at the irs. Opportunistic politicians havent succeeded and totally killing the irs by 1000 cuts, but the cuts have gotten deep and the agency iss badly wounde. Who suffers from all this . We do. We all suffer. When we need help with our taxes and no one is available at the irs to pick up the phone, blame a politician who slashed the irs budget. When we want the irs to make tax filing easier or workn harder to make our information more secure, but the irs cant invest in technology with adequate cybersecurity, blame a politician who slashed the irs. When we pay our fair share of taxes and just what the irs to make sure billionaires do the same, but they dont have the staff or the resources to do it, blame a politician who slashed the irs. Our current House Republican majority has too many of these politicians who love to slash government institutions to the breaking point. As we sit in yet another republicanled hearing to attack the irs instead of making it work better, other republicans are often slashing our entire congress at the same time period they stop congress from doing its work because they havent been able to elect a speaker of the house so we cant pass any legislation. The most opportunistic republicans have spent so long attacking our government that now republicans dont even trust each other. But thats what the opportunists wanted, a week congress, a week irs. Its what they call smart government. But in reality its a federal government cant serve its people. Right now the opportunists are creating that reality. Ang Bipartisan Coalition of reasonable members of congress o can stop them. Today, everything that we do and say matters. Before my colleagues block the irs cant consider that your whack might be one of the thousands of cats over time that weakens our government in her to the American People. Instead, we should all use today to determine what the irs needs to serve the American People and how congress can be an effective partner. That is, if republicans ever electt a speaker so we can legislate. I yield back. Thank you. I am pleased to welcome our witnesses for today, commissioner danny werfel and jessica lucasjudy. Danny werfel is commission of the internaluc Revenue Service d jessica lucasjudy is the director of strategy issues at the Government Accountability office. We look forward to hearing what you have to say on todays important subject. Pursuant to the committees rule 9g the witnesses will play stand and raise the right hands. [witnesses were sworn in] lacked the record show that the witnesses answered in the affirmative. Thank you, and you may have a seat. We appreciate you being here today and we look forward to your testimony. Let me remind the witnesses we have regular written statement and it will appear full in the hearing record. Please limit your oral statements to five minutes. As reminder please plus the button on the microphone in front of you so that it is on and the members can hear you. When you begin to speak the light in front of you will turn green. After four minutes the light turns yellow. When the red light comes on your five minutes has expired and we would ask that you please wrap up. I now recognize commissioner werfel for his opening statement. Chairman sessions, chairwoman mcclain, Ranking Member engel may and porter and members of the subcommittee, thank you for the opportunity to testify on irs operations. I am pleased report irs continue to make important progress in our effort to transform our agency through implementation of the Inflation Reduction Act. Using ira funding, the irs has three objectives to help taxpayers and the nation. Taxpayers can easily contact the irs whether in person on the phone and accessing the credit they deserve. Two, identify the growing number of wealthy taxpayers between individuals, large corporations and complex partnerships who are shielding income to evade their tax responsibility and third, address the growing risk of tax scams and schemes by protecting honest taxpayers from them and root out nefarious actors and perpetrate them. Achieving the ambitious agenda that will require we rebuild areas in the irs that have suffered more than a decade of underfunding that preceded the Inflation Reduction Act. Is providing irs workforce with the right tools including training, technology, smarter processes. So we are ready now and in the future to meet our core mission of supporting taxpayers and the nation. The ira funding we are clearly making a difference. Good examples phone service at this point last year we had an average level of service of the phones of about 14 and we answered fewer than 9 million calls. This year after hiring more than 5000 additional phone assistors our level of service exceeded 85 during the Filing Season and answered more than 15 million calls. We also improved in Person Service sensing fusion of ira funding reopens 46 centers is allowed to serve more than 1. 6 Million People at our walk in centers this year which is 18 temperate walk in centers to serve taxpayers who dont live near and person center. We do have the resources you in the past. Modernizing operation is key to meeting many of our transformational goals for those who choose to interact with us. For example we added new features to enhance online accounts we recently launched the business package neither of which were able to do before the ira funded. The transformation extend to enforcement as well. Before the Inflation Reduction Act the irs for several years were unable reasonable percentage of complex returns especially wealthy individuals, large corporations, complex partnerships. We are turning that around. We are hiring accountants, attorneys, engineers, calmness and data scientists needed to tackle these complex returns. We are already seeing results. For example in just the last few months we have recovered more than 100 million from delinquent tax cases involving millionaires. As part of these efforts recently announce the initiative to step up audits of the Largest Corporations and partnerships we have been to korea valuing our enforcement activities and other areas and will be producing correspondence audits and return that claim the earned income tax credit and other refundable credits. Irs prioritizing the taxpayer the ira funding allows us an additional controls to secure our systems. This includes adding new restrictions limiting access to key data to protect against insider threats. Our Data Security posture has been strengthened to make taxpayer data safer now than ever before. To ensure transparency update on irs. Gov all of the latest improvements in security will continue to do more to ensure taxpayers in our own systems are protected. Chairman sessions, Ranking Members and members of the subcommittee that concludes my statement. Ill be happy to answer questions. Thank you. I now recognize jessica for his opening statement. Thank you. Chart mclean, sessions, Ranking Members, members of the subcommittee. Thank you for this opportunity to be here today will thin and vicious and vision my written statements key findings from prior reports. Also my remarks on open recommendations that will be important as irs implements as a Strategic Operating plan. These following three key areas improving Taxpayer Services efficiently processing tax returns, so the Sensitive Information. But first taxpayer service. The irs is late in responding to more than half its correspondence in 2022 including amended returns and Identity Theft documentation. We recommend irs communicate timeframe for resolving this backlog. Delay of correspondence can cost taxpayers to write again or call. In 2020 we recommend the irs identify goals for improved taxpayer experience. Without such information will be challenging to assess progress made toward print taxpayer experience. Irs attrition rate for critical Filing Season staff is high relative to the agencys overall attrition additionally i data it shows agency. About 23 of new recruits within two or three years. Irs faces challenges hiring employees and lacks information about where skills gaps exist what skills will be needed in the future. In 2019 we recommend irs fully implement workforce planning initiative. Irs intends to do so by march 2024. Implementation continues to develop staffing requirements. Were continuing to review all of these issues a part of a review of the 2023 Filing Season. The second area i will covers processing tax returns. In 2018 we recommend irs digitized information for paper returns to control costs irs transcribing a limited amount of information for paper inches databases. By Filing Season 2025 irs aims to digitize all paper file returns received consistent with the recommendation. Irs can improve Electronic Filing for businesses. In 2021 we recommend irs identify identify barriers but has not taken action to it address them due to competing priority is addressing these barriers help irs reduce the volume a more costly paperbased work and improve services to business filers. Congress can also help to include return processing. Broadening irs authority to correct full tax return errors this could facilitate correct tax payments help avoid costly burdensome audit. In addition congress can allow irs to establish requirements for paid taxpayers this could increase the accuracy of tax returns they prepare tension reduce the tax gap. The third areas and protected information. Is critical for Public Confidence in voting data breaches expose Sensitive Information to fraudsters. As of october 2023 irs and implement 85 of the more than four to 50 recommendations previously made in this area. But others remain open. Increasing oversight access taxpayer information as a recommend in august of 2023 irs no one contractors are not meeting their training requirements. Providing guidance to employees responsible for contractor oversight will give assurance those employees will report incidents timely and accurately. Irs generally greeted his recommendations that it plans to act on them. Irs also use recommend recommendations internal control over Financial Reporting that remain on implemented following our fiscal year 2022 audit of the irs financial statement. And finally as we report in january 2023 irs uses a significant number of outdated or aging Application Software assets. Reliance on these Legacy Assets can contribute to security risks, but on that Mission Needs and costs. For example irs needs replaced 60 of individual master fires the ims the authoritative data for tax account data. Irs has been working to replace for more than a decade. Suspended two related initiatives as unclear time frames for completing them. Implementing a recommendations to establish time frames for disposing and other legacy systems would provide accountability and reduce risk. Irs sale document complete modernization plan. So in summary refining and caring on its Inflation Reduction Act, irs should work toward implementing open recommendations. Chairwoman mclean, chairman sessions Ranking Members and members of the subcommittee and i look for jury questions. Thank you now recognize myself for five minutes. I feel like im watching movie one side says are things going great the other side said is going horrible let me talk about for my district. Because i represent the people from my district today. I would like to begin by sharing more about the complaints i have received in my short time. This year. I have four constituents who have contacted my office because they have yet to receive their 2022 tax refund. Some have thousands of dollars stuck in limbo as they wait for the tax refund credit. Others cannot get assistance from the irs via phone despite waiting on hold for hours. They cannot get updates on their delayed refund status. The phone seems to be an issue i have a constituent who run Small Businesses say they cannot get an answer on the status just the status of their employee return on the tax credit application. My office recently for leasing this refund total would release them the advocate service intervene as well as the encounters. These are handful of the first i handful front frustrations for my constituents. May beat my office is alone on this and the people on the other side of the aisle have no issue. It is interesting. These are specific to my constituents the underlying pattern is essentially the same across the country. It seems like the irs is not performing efficiently or effectively. So my question is, why cant the irs provide taxpayers with quality phone service . At least in my district . Madame chairwoman, i appreciate the opportunity to respond too. First i think we did have a tremendously improved Filing Season from 2022 until 2023 as a result of the infusion of Inflation Reduction Act to fund specifically were able to immediately hire 5000 Customer Service representatives and put them on the phones. So for those who called to during thats the end of dinner to mid april we were able to answer 87 of calls within three minute wait times. Now, theres more to do print some issues you are raising is taking off in my brain different modernization plans we have underway. So for example if you file your original tax return electronically and you give us a pink count we can automatically debit for those taxpayers on average you get your refund within 13 days. That is what we achieved but if you do not file electronically now you are in a paper process. Quick switch takes longer we understand that. American taxpayer should have a choice we would love for them to file online but they choose to file on paper. Is your assumption there filing on paper if they moved to the electronic . That will be incredibly improve their odds. Quick sometime but phone service. Where you file electronically or file paper if i call you i still need to get someone on the phone to speak with me. I just met with a constituent they have been trying to get information from you since february. They said they would get an answer by october 20 someone would call them back with the status of just an answer its the 24th we still have not had an answer. This was a Small Business i i mean, this is a Small Business in our community and that doesnt cost that has to do with Customer Service. Let me offer two things that will help. Adding more Customer Service reps, training them is all in process. The second thing that will help is modernizing our call center, investing things like more callback options like you can sign up we will call you back. It also means more automation. There are certain things that can be done by pressing buttons versus waiting for human. Maybe your constituents need a human but iff of the people in queue can be deflected i doubt it. One last point. I think what youre m saying isf we can modernize our Systems People would get a return call faster. Actually. If thats the case then why in the Inflation Reduction Act is only roughly 7 billion targeted to system modernization and taxpayer service, and the other out of the 80 billion, if thats a problem cargoes to enforcement and operational support. With that i will yield back. The chair now recognizes hang on the ranking mr. Mfume. Thanks very much madam chair. Mr. Commissioner, you dont have an easy job. It goes without saying that thes more that this congress can help you do that job, the better the performance for all americans. We seem sometimes to forget we continued increase in population, and yet want to decrease the funds that are there to apply services to those people. So because we represent all of 00them, 770,000 in each of our districts, we are born here from time to time from people who for whatever reason would want better service. But im glad to be able to take the good news back, that things are improving as a result of the Inflation Reduction Act, and improving mandate in be thee right word in some c case there actually astonishing, some of the peaks that the irs is achieving. Ms. Lucasjudy, you said there were three things youou thought should be highlighted, taxpayer service, performance by the irs and performance goals, and protection of information. And you pass this information along to the commissioner. What are your early greetings tell you doesnt look like the irs is, in fact, trying to find a way to get to those achievable goals . Yes. As george the performance and the Filing Season the most recent Filing Season was significantly better than in prior years. It does comes at a cost though because the people were answering the phones are the ones who are processing returns and correspondence. So we think its important there be a longterm strategy in place for dealing with issues like that. Thank you. Thats good news. At some point in time we ought to shout good news when it occurs. Try to am going to yield the balance of my time to the chairman of the full committee, the distinguished gentleman from maryland, mr. Raskin. Thank you so much for that and thank you for your excellent remarks and for pointing out that its only after decades of deliberate understaffing and under financing and political attacks that the irs had grown so unresponsive and ineffective and vulnerable to ripoffs by big corporations and by the wealthiest people but in the Inflation Reduction Act that we passed last year, unfortunately without any republican support for the democrats set about toid increase the responsiveness of the irs to improve the effectiveness, and to advance equity there. The u. S. Tax system is disproportionately targeted, lower income taxpayers giving preferential treatment to the wealthiest filers. When we passed the Inflation Reduction Act it provided the irs with resources to make certain that billionaires and large corporations would pay their fair share. Earlier this year ourhi committe held a hearing to examine gaos 2023 high risk list which highlights the federal programs and operations most vulnerable to waste fraud, corruption, abuse and mismanagement. Enforcement of our federal tax laws has been on that list since 1990, for the last 33 years. In this use update gao present a a startling data about irs audit rates for individuall between 20102019. Now, the dotted reded line shows the audit rate forin tax filers making 5 million a yearax or more, and you see the dramatic reduction in audits taking place of the wealthiest american citizens, less than 1 ofn the American People. Ms. Lucasjudy, gao identified that audit rates decreased for everyone, in other words, the irs was much less efficient in general, but the dotted red line shows that it declined the most for people making the most micah is that right . Yes. Okay. What has the Inflation Reduction Act done to your ability to actually do the audits and to crack down on tax cheating schemes . Well, ill take that question, mr. Chairman. I appreciate it. It makes all the difference in the world. I mean, the emphasis of the Inflation Reduction Act is that if you are middle or lower incomeou you receive better service. But if you are wealthy or a bad actor of any wealth, you receive more scrutiny. That is the agenda where undertaking under the Inflation Reduction Act. So were using the funds not to increase audits on middle and low income or Small Businesses. We are using the funds and our laser focused on why do some people do not want that . What is a a whole political ly trying to undermine the effectiveness of the irs . That is a big question, mr. Chairman. Ive been in and around the irs for a long time period i find that we are often kind of the poster child of government and when youre debating Big Government versus small government s we usually enter te argument. But i can tell you this. Ive been at the irs in this role now for seven months. All i find when i get there are absolute dedicated, passionate Public Servants that want to do the right thing. They are not perfect. They dont always do itre correctly but theyre trying to do the right thing and we are rallying around this mission, this threepart mission ive outlined. If you need to reach the irs you should be able to reach the irs. For the wealthy and bad actors, we are increasing scrutiny. Third, we are going to help victims of tax scams, were going to try to prevent them and hold the perpetrators accountable. Thats the agenda and theres thats a focus i would want the American People understand that a wellfunded irs can achieve great things along those three areas. Thank you. Yield back. Thank you. The chair now recognizes mr. Sessions. Madam chair, thank you very much and appreciate the Ranking Member for his questions. With that said, mr. Commissioner, yesterday we spoke about the effectiveness of the irs, their ability to adapt themselves to what might be nearterm companies that offer Wide Services ander how they hae adapted them, to Technology Come to the things that would be necessary to be aware of them offering good Customer Service. I also talked to you about kind you and i spend a good bit of timelk talking about questions that you dont want to answer that are extraneous to that matter. And you would be agree with you, looking for an answer now but want you to know that i am penned a letter today to you that will be in the mail, and essentially echoes back to some hearings that we have held here in our committee on the testimony about irs agence who were whistleblowers. And they brought up information that they are faced retaliation and i want you to know that im sending you a letter going ask a series of questions about that retaliation, about yourns involvement about the agency. Were going to match up your answers without that weve received detailed from these irs agency who came into contact on a regular basis with the department of justice, department of the treasury, and were overridden on what seemingly could be described as, in a, perhaps imperfect system, but they were held back for what we all see as political reasons. Recent Court Documents talk about how the irs contractors have released information, a number of highprofile people, and we just want to make sure that you answer just as you have today about other things that are not going so well, about the steps that you have taken at gao. We will be interested in that. Others will be interested in that. Even things like threeee years o the New York Times ran a story about the release of data and information, and we have yet to hear back awe specific informatn pertinent to that about investigation you may have made. Commissioner, please know this, that we do have problems with the w irs and we also know the s has their own problems of trying to stay up with people and to do things. But we believe that this new money that is coming there should also go directly to fix the problems of people who are honest taxpayers who are trying to get their work done, getting phone calls that come in, training thats necessary to wear an answer would be given, to where youve strongly identify people. We talked yesterday about this dot gov portal that perhaps you are relying on and how ineffective that is. Billions of dollars come hundreds of billions of dollars that without to people that probably should not have received them based upon data that you were counting on thats fraudulent, about those individuals. So i what you do know that we believe that you are under the gun. We believe you do not have the adequate resources that your Computer Systems are outdated. With that said we are also concerned about the integrity of highvalue people that you just spoke about. You spoke about the number of people making 5 million not paying taxes. Do you not find out until the end of the year that youre not getting a regular 941, that youre not receiving information that you receive . Why is it that you cannot look at those people who are these highvalue people and make some determination earlier . We are trying to build the infrastructure to be able to do it moree effectively. Its not one simple answer. A way in which taxes are invaded sometimes they are set up an extremely complicated structures using offshore tax havens. Sometimes as mentioned its overstating deductions. It comes in a variety of different forms, and what happened over the 12 years that predated the ira is due to budget cuts and lack of investment, we lost track. We fell behind. So for those taxpayers they can hire an army of lawyers and an army of accountants, we fell behind in terms of keeping pace with the complex methods they are using in some cases to shield their incomes, and now were catching up. And were catching up by investing in data scientists and engineers, economists and subject Matter Experts that are going to help us now keep pace and identify at greater specificityes and at greater accuracy where the species are so we can select the right cases for audit and bring those funds that are due back to the American People. One last question and then i will yield back my time period the gentlewoman, ms. Lucasjudy, refer to the recommendations and the irs has afforded himself of whats in it i 85 of the recommendations. Were recommendations made to you from, ms. Judy got to them about these highvalue accounts, about how to look at that . We have recently issued a report on the Partnership Audit program and makeer recommendatis that irs should improve its audit selectionts models, and ao make sure that it is defining large, complex partnerships and putting in place measures to assess the effectiveness of the audit program. And what was that response . I believe they agreed with the recommendation. Thank you very much. I yield back my time. The chair now recognizes mr. Raskin. Thank you chair mcclain for calling the hearing, and also ms. Porter and mr. Mfume for the thoughtful remarks today. Look, the American People wantoa tax system that is simpler, fairer and more responsive. And i wish we could have hearings on each of those. Just to take a look at simplicity, for example, i have lived in Foreign Countries where there will have a multibilliondollar business in h r block and all of these companies that are trying to help people understand their taxes, and most peoples taxes, 90 of peoples taxes could be done in 15 minutes or 20 minutes which is what its like in countries around the world. We should be having a hearing about why we have a 10 billion a year plus business in helping people do what the government should be helping them do instead. But what weve got is one more hearing to beat up on the irs as part of the program to deconstruct the administrator state, and steve bannon promised at the beginning of the top administration, and we are right the throes of it. One can only regard with amazement that any member of the Republican Party today would lecture the commission ofod the irs about efficiency or organization, or anything else. Look at what the republicans are saying about the republicans today on capitol r hill. As we live through all of the reverberations of the chaos caucus. So the world is burning around us. B we are fiddling. We dont have a strategy. Thats representative steve womack republican from louisiana. We are fractured chalcedony of the screen, ms. Luna from florida. Its not a normal majority says representative tom call, republican of oklahoma. Heres Marjorie Taylor green talking about the republicans, this conference is absolutely broken. Heres Kevin Mccarthy are used to be speaker before he was deposed by the republicans. This is embarrassing for the Republican Party. Its embarrassing for the nation. Heres david joyce from ohio who probably sums it up best. We are i a party they cant govern. Heres troy kneels from texas we are a broken conference. Tom emmer said if it were a family quote, well be the most dysfunctional family on the face of the planet. Heres austin scott who ran briefly for speaker in the speakership sweepstakes taken place right now. Makes us look like a bunch of idiots. And mark alford from michigan another republican, we are a ship that doesnt have a rider right now. So it would be great if we could actually our writer speak with house and a functioning house of representatives so we could deal with these issues now, the implementation of the ira shows that provide adequate resources to the irs traumatically imprisoned services to our people and the effectiveness of the overall mission. In the 2023 Filing Season, irate investments allowed the irs to create and adopt Digital Tools to process tax returns more efficiently. The agency greatly improved in personon service, service over e telephone, and online Customer Service. But we know a lot more needs to be done. Av i had a constituent who came in to see us in august. He and his wife had filed their taxes in april. They got the refund from the state of maryland in two weeks. After five months and multiple attempts to get the irs to send their tax refund, they still couldnt get it. They reached out to my office in desperation, and we are a able o work with the Taxpayer Advocate to make it happen. Nobody should have to go through that experience a bureaucratic lethargy and frustration like that. But we know youre making improvements. Its moving in the right direction but you are against the background of decades of deliberate underinvestment. Well, the ira is also making administrative taxes to more equitable. You were hiring experts who can audit and enforce tax laws againstt big corporations and ultrawealthy filers who been able to get away with a lot before that. Commissioner werfel, how has the ira allowed irs to crack down on tax cheats . Is investment the American People have made paying off in terms of the money we are getting back . Are putting them money to work today to take a variety of different steps. We are increasing the number of audits on the Largest Corporations using analytics that weve invested in to make sure that we select the right corporations of the highest risk of shielding income. We increase the number of audits on complex partnerships, something the gao pointed our Partnership Audit rate is and again, were using invested new tools and analytics to make sure that were understanding the types of trends necessary to know where those complex partnerships are that are actually evading taxes. So, we improve the efficiency of our audit and as mentioned earlier, weve launched an effort to get back taxes from millionaires and billionaires and identified 1600 high priority targets, if you will, of millionaires and billionaires and collected in the early months over 100 million in back taxes. All of that is ira money put to work on the Services Side we have a lot to do. Building block by building block, were making changes to the service toss make the story you told a thing of the past. Thank you, chair. The chair now recognizes the gentleman from alabama, mr. Palmer. You keep going after billionaire and millionaires and going after taylor swift fans who told their tickets for over 600. The previous rule if someone had 20,000 and 200 transactions, but the bill lowered to 600 regardless of transaction. Its not just millionaires and billionaires youre auditing Small Businesses and others and i want to point something out to you, one of predecessors john hoskins testified before the committee in 2015 and said it would not be advisable to audit our way out of the tax gap, but yet, thats exactly what youre trying to do. I have a question for you, commissioner, werfel, if a tax manipulated a tax document would that be considered a form of tax fraud . Based on the way you described it, if they willfully manipulated to misdirect or misreport, that could be tax evasion. And the penalty for that could be a fine up to 250,000 and up to five years in prison, is that correct . Well, each the business it could be up to 500,000 and five years. If government auditors were found to be back dating or manipulating tax forms private citizens, would that also be considered a form of tax fraud . Its concerning no, no, i asked you a direct question. If a private citizen altered information on a tax document, whether its a date or a signature from a supervisor, it would be considered tax fraud and it would be prosecuted, it is a felony, they could have to pay up to 250,000 in fines and they could serve up to five years in prison. So what are the penalties for irs employees who do the same thing and possibly jeopardize a private citizen on their tax filing . So whats the penalty . Yeah, there should be accountability. Yeah, but what no, what is the penalty . If you allow me to elaborate. I dont want a long answer. I want you to tell me what is the penalty. Well, there is no specific penalty. It depends on the circumstances and it does depend on the circumstances with the taxpayers as well. The wall street journal reported on this. Youre in court right now tllc, versus the commissioner, the commissioners would be you for where you had people who falsified documents. And thats not the only one. So did anybody get fired . Let me tell you whats going on. When any did anybody get fired . We are looking into the appropriate personnel for well, if you find they did this intentionally and the documents indicate they did because theres an email chain, and maybe, madam chairman, mr. Chairman, we need to investigate this on behalf of the taxpayers. Plus, im i have Major Concerns about the tax gap. Major concerns. The biggest problem with the tax code is its complexity. We need a simpler tax code and i think we would collect more taxes rather than audit people, rather than manipulate tax documents, so that somewhere down the line, somebody who files a legal, accurate tax return doesnt face a tax bill and potentially a penalty because somebody at the irs falsified the document. So, theres got to be some penalties. I can assure you, congressman, were taking steps to correct the record to make the taxpayer whole, to, in any of those situations and they are extremely limited that we are taking all the right steps and all the right procedures to make sure that that situation is corrected. And any accountability well follow the right procedures. Will anybody be fired . Will anybody be fired . Thank you. Im not going to comment on an employee process that hasnt happened. If you find its done intentionally as the evidence indicates, keeping in mind the severity of the penalties that are imposed on private citizens, the least that anybody can expect is that someone be dismissed from their job and i hate to say that because i hate to fire anybody, but the consequences for their families, but think about the lack of trust that the American People have in the irs and put that first and foremost. I yield back. Thank you, the chair now recognizes ms. Norton for five minutes. Thank you, madam chair and i appreciate this hearing. Mr. Werfel, when the american taxpayers reach out to the irs for help with their taxes, a specific filing or troubleshoot Identity Theft, they rightfully expect and deserve prompt assistance. In the past, the irs has at times fallen short of its duty to serve the American People through timely and accurate responses to taxpayers because of insufficient funding. But i am really pleased to see that the irs remarkably improved its Customer Service in the most recent tax Filing Season. Democrats historic investments in the irs through the Inflation Reduction Act, have already improved taxpayers services. So commissioner werfel, the irs achieved an 87 level of success answering taxpayer phone calls, exceeding the ambition the ambitious 85 success treasury secretary yellen set for your agency, is that correct. Thats correct. And mr. Werfel, the irs cut the average time they have to wait on hold to speak to the irs, to an irs employee, is that correct . Thats correct. Commission werfel, for taxpayers who are unable to reach a live assistance immediately, the irs expanded its customer callback option, correct . Correct. Commissioner werfel, how was the irs able to make these telephone and online Customer Service improvements . I understand the irs expanded inPerson Service in 50 Taxpayer Assistance Centers across the country. That is correct. Commissioner werfel, what help can irs taxpayers expect to receive from one of these taxpayer centers in addition to these permanent Taxpayer Assistance Centers the irs started a new initiative, initiative popup Taxpayer Assistance Services to assist filers in hard to reach areas who might have difficulty getting a Permanent Location . Yeah, we want to meet the taxpayers where they are. As i mentioned, not every taxpayer can afford an accountable and not every taxpayer has the means to travel to a location where we have a walkin center. So we are going to where the taxpayers are and we are setting up what were calling popup walkin centers where were being accessible as we can to taxpayers that need help. Were having saturday hours for taxpayers that cant make it during the week because theyre working and were Holding Special Sessions with low income taxpayers to help them with their refundable credit application so they get it right the first time. Commissioner werfel, when taxpayer im sorry, when democrats enacted the Inflation Reduction Act, we prioritized the taxpayer experience. We priority were focused on building an irs that can meet the needs of taxpayers. From your testimony, mr. Werfel, it is clear that the investment has already helped address the irss longstanding Customer Service issues, but everyone on this dias still hears from constituents who have problems getting the refunds they deserve. So, commissioner werfel, Inflation Reduction Act funding runs through fiscal year 2021. Briefly, what is your vision for how the irs will serve the nation in fiscal year 2031 and how do you plan to achieve this vision . I appreciate that question. The vision is, is that taxpayers who need to reach us will be able to reach us quickly, get their issue resolved because theyre either doing it in an automated way or with an effectively trained irs agent and that the supply is meeting the demand of taxpayer needs. That means we have the right sized staff. That we have the right number of walkin centers where people want to meet us in person. That we have the right sized staff in our call centers and the call centers modernize with the right call back, right call routing so theyre bench marked against the private sectors best call centers and our operating for Online Banking and you can go in and never have to talk to a person or walk in a walkin center, you can manage your taxes in your online account. As i said, brick by brick, were building these functionalities after 12 years of underfunding we fell behind. Some of the stuff we can do immediately. Some of the stuff cant be rushed, so as youll see in Filing Season 24 thats coming up, there will be new functionality in the individual online account, new functionality in our new Business Online account. More call back options, more chat bots. Incremental changes every season the taxpayer arrives they should see a better, increasingly better experience versus what the opposite was before the Inflation Reduction Act and before we had the funding, and each day gets worse. As long as we can hold onto the Inflation Reduction Act funds and make smart investments. Ill yield back. Recognizing the gentle lady from north carolina. Thank you, madam chairman and thank our witnesses for being here today. Commissioner werfel, can you explain what the applicable federal rate or afr is . I think youre referring to the overall tax rate for the public, if i understand correctly . Well, the applicable federal rate, as i understand it, its a minimum Interest Rate that the Internal Revenue Service Allows for private loans, is that correct . I believe youre correct, maam. Okay. So if someone gave his or her Family Member, including a brother, a loan, would that person have to charge an Interest Rate equal to or higher than the current afr . I dont believe they would have to charge an Interest Rate, but again, if youre going to walk me into a hypothetical, id want to make sure im getting it right and consult with my team. I dont think theyre required to provide an Interest Rate. Whether theyre going to treat it as a gift or a loan and a lot of implications there. I have a followup. If a rate its my understanding that there is an afr and that it is to be charged, but if the rate is less than the afr, so if somebody gives you a loan and they dont charge you an Interest Rate, then the loan is technically a gift, which carries certain tax implications, is that correct . Yes. Yeah you yes. Sorry, yes. So if someone gave his or her Family Member a personal loan of, say, 200,000, but an Interest Rate equal to or higher than the afr at the time was not charged, would that loan then be considered a taxable gift . Again, youre getting into a hypothetical where id want to know a lot of other facts and have kind of expert accountants with me advising, so, i think its dangerous for me to say yes or no unequivocally on a fact pattern where id probably need a lot more information. There might be counter veiling factors in play. What kind of counter veiling factors would you hypothesize. Im not sure where youre going with your fact pattern. I dont know well, lets just the circumstances, someone has been deceased the timing of this issue. Im just trying to determine if, if this loan does not have interest charged to it, then would that be considered a taxable gift . And other factors may come into play, but is it a taxable gift. I dont know the amount. For example, there is i used 200,000. Okay, fair enough. Again, at risk of walking through a hypothetical where i dont know the facts. As a general matter, yes, theres youre describing a situation that may have a taxable event. Okay. Great. Glad we were able to establish that. So next, the socalled Inflation Reduction Act gave the irs additional 80 billion in funding and youve been talking about that. Weve i think we can all agree that thats an incredible amount of money, right . Thats a lot of money, isnt it . It is. Even in todays days, way of judging money. And even after congress trimmed this amount down to nearly 60 billion in the fiscal responsibility act, how many new agents does the irs plan to hire . inaudible your mic is not on. Were hiring not just agents, were hiring Customer Service reps, accountants, agents. We have published our three year view of staffing which im very confident on because i can make Key Assumptions about needs and market trends. Okay, let me ask you we are at 90,000 today and i think over the next three years, we should be over 100,000, but not much over 100,000. Okay so how many tax enforcement agents out of the ones that youve planned to hire would there be in that threeyear plan . I might have that number on me. Congresswoman im about out of time. We should be hiring about 8,000 total, if im reading my charts correctly, by the end of 2025. Okay. So youve previously stated the irs would not target taxpayers earning below 400,000 per year. How can we be sure that the new irs agents and tax enforcement resources will not go to targeting middle class taxpayers and Small Businesses . I appreciate the question. We publish our audit rates each year and you can assess those audit rates by income level. So its a transparent way of being held accountable the audit rate for those earning less than 400,000 will not increase. So you are guaranteeing that you will not increase the number of audits of people making less than 400,000 a year . My marching order to the irs, if we fall short of that i can be i will be held accountable for it. We will publish those rates. I notice before you said your marching orders and a little while ago you said you had control of the irs. Im glad to know somebody in federal government feels that he or she has control of some agency. So well come back to you with that, im sure its going to show up in the minutes that you are in control. Thank you. Congresswoman if you could indulge me i want to offer that a mentor of mine, linda colmes, who is a constituent of yours passed away recently. Yes, im aware. A wonderful Public Servant and i know she looked up as a mentor as well and thank you for mentoring her as she mentored me in her career. What a nice thing for you to say, mr. Werfel, thank you. Linda was a very beloved person. And the chair recognizes a gentle lady porter. Washington scrutinizes how they collect taxes. What do Americans Care about . They want their filings to be free, low effort and mistakefree, thats it. They want their filings to be free, low effort and mistakefree. And they want a good experience doing it. So lets cut through the washington noise and help people decide what tax filing method can get them there. Commissioner werfel, lets say someone wants to file their taxes the oldfashioned way, by hand. I used to think that was fun when i had more free time. Would that be a free way to file . That would be. That would be free. I cannot get this marker off. All right. Yeah, so that would be free. How about low effort . No. No, its a lot of work, you read a bunch of documents, cross reference things. Exactly. Do filers who use this method make minimum mistakes . No, more mistakes. More mistakes. Ive made a mistake and had one of your correction notices. One out of three, not too good. Lets look at tax preparation software, this is a multibillion dollar industry as my colleague mr. Raskin mentioned. Would that be a free way to file. Generally, no. They sell you a lot of things along the way, audit defense and the extra help that you can get. The softwear itself costs money. It call costs money. Does that method involve low effort . Depends, but it can. Yeah, i think usually. Easier. Easier. And how about filers at mistake levels, who are you mistake fewer mistakes if the software catches your mistakes in realtime. Yes, lets look at accountants, is that free . Definitely not. Definitely not, all right. Does that involve low effort . Its a higher effort for the accountant, but low effort for the taxpayer. We all hear the stories about dropping off shoe boxes full of paper work. Do they make minimal mistakes. I do, but id love to talk to you about holding them accountable about the mistakes they do. Ill follow that that up. Look at irs direct file. A new option in 2024, a pilot program, correct . Correct. Will this be free . Yes. Yes. Will this require a minimum amount of effort. Yes. Will people have the benefits of eliminating common mistakes . Yes, because were going to follow the same structure as the Tax Prep Software in mid stream. All right, three for three, thats what im talking about, im glad that some americans will have this option the next time they file, but commissioner werfel, why is this just now becoming an option for taxpayers . Well, its theres a long story here where weve tried a variety of different ways to get free Electronic Filing for eligible citizens. We have something called the free file alliance. It has had mixed results over the years, where some of the Software Providers have offered free solutions, but congress in its wisdom and the Inflation Reduction Act said to the irs, you need to study a direct solution and you know, frankly, i think it aligns with our mission to offer taxpayers more options. I think its absolutely important as you walk me through these questions that all of these still should be options for taxpayers. If they want to do it by hand. If they want to hire a tax wear softwear or hire an accountable or file direct with the irs. They dont have to, but have the option, you would say an agency would offer that option. And the one with the best, looks like the best thing. Who could possibly oppose the irs doing its job this effectively and making it freeway and streamlined and lowering the effort for people to pay their taxes . Who is on the other side against this . I think theres a concern that if we issue a direct file solution, it will be disruptive to the software industry. Disruptive to the software industry, you mean, these industries right here, that are making billions of dollars off taxpayers to simply assist taxpayers in doing something they should be able to do by working directly with our government . Thats the concern that ive heard expressed, yes. Does the irs have any profit incentive. No. Do Tax Prep Software companies have a profit incentive . Yes. Do accountants have a profit incentive. Yes. And the only thing for the irs to make it free and easy for people to file taxes. Lawmakers have had a choice, we can support and invest in the irs Whose Mission is to help the taxpayers and hold accountable for delivering a free, low cost, mistakefree option or we can stand with special interests who want to see an underperforming irs so they can profit to the tunes of billions of dollars off taxpayers. I know where i stand. And i yield back. Thank you. The chair now recognizes the gentleman from minnesota, mr. Goetheman. laughter . I was explaining to people the other day how people from other states cant tell the difference between minnesota and wisconsin. Were just alike. My apologies. Thats okay, its a nationwide problem. Okay. I was just saying, in china they invest in power plants and education degrees, and in america here we invest in irs auditors. Grim sign for the future. Just a general question. Say between 2010 and 2023, about, what percentage of returns were paper and what percent were computer filed and i take every year that the gap shrinks or the about . Im not going to political fact you. Were up over 90 that are filed electronically. Do you know what it was 15 years ago . A lot lower, i think closer to 50 . When you go from 50 computer filed to 93 or something, you would expect youd need less auditors, wouldnt you . It would be something wrong if you computerized to the same degree and have the same number of auditors . I think it depends on the complexity of the filing, because some of the files that are we receive electronically are thousands of pages long and were seeing a spike in the complexity of large multinational corporations. Ill just rely on common sense, if we have more computized returns we would expect less irs auditors, thats why we encourage people to file electronically, but well go onto something else. Ive had clients feel that political activity on their part leads to audits. I dont know that thats true or not. Weve talked on the Oversight Committee about the politicalization of the fbi. I wondered, if you ever done a study we dont do it in wisconsin, but other states people register republican, democrat. Is your employee pool about 5050 or are we tilting too much towards one political belief . Do you have any idea . We absolutely dont ask that question. I think it would be inappropriate for us to ask that of our staff. We do make it clear that it is fundamental value of the irs that politics has no place in our operations or our decision making. Okay. Next question. We talk about wealthy people not paying taxes and weve got to look into it. And sometimes they dont pay taxes because of foolish Public Policy decisions made by the people up here. Im thinking things like a tax credit for a fancy electric vehicle or section 42 tax credits for wealthy builders. Could you give us an idea why wealthy people may not be paying taxes . I think we see two trends. One is, what ill call very aggressive avoidance where theyre looking for the best tax advantage status, but because we have not been on appropriate watch theyve pushed too far into the gray area and need to be pulled back. And the second is intentional. Intentional evasion. Moving money into off shore usually when wealthy people put a zero at the bottom of the tax return, they did something wrong . Certainly not in every case and, but the numbers why dont you look into it or do a study, i dont know, people who appear to have a lot of wealth who arent paying taxes, and let us know why. There have been studies done, ill be happy to share some with you. Good, good, good. Now, the next question, the Inspector General reports that the irs erroneously issued 3. 3 million advance Child Tax Credits to one and a half million ineligible americans. Can you explain how this happened . And can you explain why one for one tax credits invite cheating . Yeah, theres always a Program Integrity challenges with any federal program where youre outlaying money to beneficiaries. Unfortunately, there are many who would look to exploit the complexity of our tax system, either for their own financial advantage or victimize someone along the way and a credit, its a problem. Im sorry dollar for dollar credits, earned income tax credit. Child tax credit, its so easy to cheat and make a lot of money, right . Isnt that the problem with those things . One clarification id offer, a large amount of the error is more basic mistakes how complicated it is to apply for it. A part of the error which is concerning, its a small part, but concerning, which is intentional fraud. Okay. Well go for another one, if youre not going to stop me. Did the irs see more Child Tax Credit claims filed after the American Rescue plan made an increase in the Child Tax Credit . . Did the number of claims go up . Im not sure. Id have to get back to you on that. Okay. Be illuminating if they are. The irs reported as of july 31 ill turn it back over to my substitute chairman here. The distinguished gentleman from wisconsin yields back. Its time for the gentleman from florida recognized for five minutes. Thank you, mr. Chair and thank you to our witnesses for being here. Republicans spent more than a decade working to kneecap the irs through funding cut after funding cut. At the same Time Congress tasked the agency with enforcing one of the most complex tax codes in the world on a growing population with increasing wealth inequality. The irs struggled for years to provide the level of Service Taxpayers deserves, whether that was processing peoples tax refunds in a timely matter. Performing audits against high risk individuals or enforcing tax laws against fraudsters and false business statements in order to get loans and the agency struggles with Customer Service in several ways. Those that cant digitize forms and blunders. Miss lucasjudy, the Government Accountability office, gao, found the irs uses massively outdated i. T. Systems. How do these systems impact the taxpayers . Well, their legacy i. T. Systems are at the heart of a lot of irs on returns side and accounts management as well as enforcement so its very important and that also has an effect on accuracy and on speed of processing. So, its very important that the irs is available to implement plans and prioritize the different modernization initiatives it has in place and that it be clear about the goals and the timelines and progress. So, it seems like it also contributes to security risks, unmet Mission Needs and increased costs . Correct. In may, one of my constituents waited more than six months for her tax return, and she needed for rent. She was told 120 days, 60 days, a letter, the letter said a year. The irs has operated with more than 600 legacy systems, including the individual master file 60yearold system and the software is written in language that isnt in schools anymore. The irs set a goal to retire the individual master file between 2007 and 2029. Mr. Commissioner, what is the importance of the irs meeting the retirement goal for the system and what does the irs have the does the irs have the funding it needs to stay on track with that really important goal . Yeah, im really glad its an essential part of what ive been talking about and mentioning. Were laying the bricks for Customer Service. That individual master file is kind of the engine, its the infrastructure. The example i often give if you went here and went to the atm machine and withdrew money. By the time you got home and logged onto the bank account, it already knows that you withdrew. Thats not with the irs, it takes time to process and move it into an account and the old system written on cobalt cant move or communicate quickly enough with that online solution. Not only do we need to do it to move to the cloud and smarter and manageable architecture, its also going to be more secure. It is a keystone for a lot of the efforts and we do have some good news. The good news is in april, so after this Filing Season, we are going to turn on modern that modern system for the first time and we are going to run it in parallel with the legacy system and work out kinks and hopefully get it up and running in Filing Season 25. So we are making progress. Do we have enough money . Im glad you asked. We have a modernization budget as people pointed out and currently at 60 billion and its very, very large and very very impactful. The issue is our base budget. Our annual budget to run the trains every day, and thats underfunded and still underfunded and in order to run the trains, borrow from the modernization budget. As we do that, we raise the budget and we might not have enough money and the answer to your question, we have enough money as long as Congress Appropriates our business budget. Gives us enough to run the daily train schedules and then we have enough money to get our job done. Mr. Commissioner, how will these efforts that weve spoken about improve the 2025 Filing Season for the people of central florida, but also across the entire country . Well, theres a lot as i said earlier, my goal is that the improvements were making are visible and can be solved by taxpayers. When they come to us in january and april to pay the taxes, were making specific improvements. So were changing things for Filing Season 24, for example, replacing old scanner and processing equipment to be scanning more and processing paper more quickly and made changes to the online account and added more functionality to the individual accounts and updated and redesigning our notices and easier to read and follow and more plain language, were enhancing our outreach on tax scams. All of that is happening in Filing Season 24 and then a whole host of additional incremental in 2025. The idea is each year to better and better where i see opportunities to accelerate, ill push for acceleration. The goal is to do things for taxpayers as quickly as possible and safely as possible. Thank you very much. My constituents cant afford to wait a long time to get their tax returns and i think its every member on this committee, be on the same page. We dont need to defund the irs, we need to modernize it and want to thank the hard working employees at the irs serving our country and ill yield back. The yeah from South Carolina for five minutes. Thank you, mr. Chairman. Part of the irs duty make sure taxpayers are treated fairly and assured the protection of their privacy and confidentiality and i understand this is an Important Role for any agency to play. There are serious instances which preventative measures failed against Cyber Attacks or information mishandled. And gao made over 450 recommendations aimed at strengthening the safeguards for taxpayer information and access to tax processing systems. Director, i want to start by asking you, how many open gao recommendations are there with the irs currently . Welcome, as well, as i mentioned in my statement. 85 implemented and those that are key, 40 from the financial audit related to Information Systems security. Related to some of those 40, what types of what are most of them about . Its a its a range of different topics. Some of them have to do with identifying threats and being sure it has systems in place for that. Understanding and managing the risks to systems and the supply chain capabilities. There are some around protecting information, as well as detecting breaches. How many recommendations have been given to the irs since the appointment of commissioner werfel . That i would have to get back to you on. Okay. And in july of this year, the gao sent a letter to commissioner werfel that encouraged congress to hold hearings focused on the irs progress and withhold funds when appropriate or provide incentives. Director, are you concerned with the irss ability to keep pace with the gao recommendations . Certainly its an ongoing conversation between gao and irs. We have a rigorous followup process and weve seen progress, particularly on those recommendations that weve identified as being related to the enforcement of tax laws, that high risk area and those that our agency has designated as priorities. But there are others that are remaining open, including things about making sure that it has that its excuse me. That its got able to communicate information about the correspondence backlog, that it has a Human Capital strategy in place as i mentionled in my opening remarks, that on the Security Side that its adequately protecting information, that its got centralized monitoring of contractors who have access to taxpayer information and that employees who are at the irs, employees who oversee contractors know how to report if they see a breach. Thank you. Commissioner, your statement says the irs stops most fraud in tax returns. How long does it take for the irs to identify fraud after a form 14039 is submitted . Im unfortunately, i have to answer in that way, it depends. Sometimes we can see just with whats submitted, well run an algorithm and well say somethings very, very off. And well say theres a fraud situation. Sometimes someone will call with a tip into the tip line. Sometimes gao, or the Inspector General will point something out to us that lets us know theres fraud. There are a variety of ways it manifests itself, theres no set time. Are you able to say whether its on your watch . Too early, im seven months in. Right now i can make sure that were spending our money smartly investments to improve fraud detection. Has the irs entered into mou or agreement with the department or for the level of assuring data . Not that im aware of. Ill have to get back to you. Youre not aware of any mous or other agreements . Not at my fingertips, im not aware of that. When do you think you could get back to us on that . By tomorrow ill let you know. By tomorrow and if there are any other mous and copies by tomorrow. As long as im authorized to do so, yes. Great. Mr. Chairman, with that ill yield back. The gentleman yields back his time. We now go to the gentle woman from pennsylvania, miss lee for five minutes. Thank you, mr. Chair. To get to the core of what a nation values, all one would need to do is look at what its government encourages in tax credits and detections, what it penalize and who decides to audit. Unfortunately, the biases and inequities, per vad much of the tax code. And for economic and policy research, studies showing how our tax system disproportionately targets black taxpayers nearly three to five times more likely to be audited than nonblack taxpayers. Chair, i ask unanimous consent to enter this into the report. The shocking thing about the report, although the irs doesnt ask about race when a taxpayer is filing an individual tax return. Irs automated selection system disproportionally selects black taxpayers for audits. And gao is looking into how they can better understand how tax provisions can affect families and individuals differently based on race, ethnicity or sex. Miss lucasjudy, can you tell me what the office has discovered thus far . So, we have ongoing work looking at audit rates and audit selection and equity in audit issues and thats something that well be issuing a report later this year or early next year, but as far as the information thats available to irs on or treasury or others to be able to look at the disparities by race more broadly, weve recommended that Congress Help facilitate information sharing between those who are between treasury and others to be able to do studies on inequities and also that treasury consider things other than models to be able to do some of those studies. Thank you. The Racial Disparity in audit rates is unacceptable, especially when the irs has deprioritized audits on wealthy americans. The audits on millionaires, dropped by 92 in the last 10 years. And a team of economists and researchers found the top 1 of u. S. Income earners, failed to present 20 to the irs. Commissioner werfel, what data and evidence are you tracking to demonstrate equity as a priority at the irs. First, congresswoman, i want to acknowledge how important the question you are is raising could you move the mic closer . Thank you. First i want to acknowledge how important your question is and second, the case selection for credits is biased and we must change it. We have taken the awe at this time of refundable questions and shifted to high end tax evasion and begun making changes to our case selection algorithms to refundable credits to promote against all demographics and we have stated publicly how this is working on and stake holder groups continuing to work with the researchers at stanford. I am very motivated and very enspired to get this right. Thank you. What would you say makes auditing top earners so much more difficult . Those audits are very complicated. The financial structures are complicated and they hire lots of outside consultants, lawyers, accountants. They litigate. These things take a long time and unfortunately, as we have been talking about in the 12 years that predated the inflation redux act we werent making the appropriate investments to keep up. Think how different the world is 2023 when 2010 when the budget started. Cryptocurrency, more International Globalization of movement of funds. During that time, it became easier for wealthy individuals and organizations to work to shield their income. We have some catching up to do. Thank you. President biden issued his First Executive order to direct federal agencies to examine their policies and actions and how they may create or perpetuate however unintentionally outcomes that are a barrier. And commissioner werfel, im glad theyre taking it seriously. Earlier in the year they wrote a letter say assuring them youre taking the racial gap seriously and youve mentioned some of the steps youve taken and i appreciate you taking that for the record and i look forwarded work with you and with my colleagues in congress to assure that the tax system is fair and equitable for all americans not just the wealthy and elite. Ill yield back. Thank you. The gentle woman yields back time. And the gentleman is recognized for five minutes. I thank the chair. Mr. Werfel, welcome back. Great to see you. Miss lucasjudy. What happened to the irs budget between 2011 and 2019 . Overall, the budget was decreased. Can you be a little more specific . By a dollar . It has gone went down significantly during that time. I dont have the numbers in front of me. Commissioner werfel, perhaps you have that number . Yeah, in real terms, it went down roughly 20 to 25 . 20 to 25 . Did that have any relationship at all in terms of the Operational Performance and capability of the irs in that eightyear time period . It had a significant impact. Like in auditing . Every dimension of our operation suffered from the lack of resource. Customer service . Yes. Processing of refunds . Yes. So, miss lucasjudy, it seems to me if gao wants to come here and testify about recommendations and compliance by the irs, you ought to take cognizance and be more specific in your awareness of what happened in an eightyear period and by the way, all of it generated by this congress. The very people who are here complaining about Customer Service dont want to mention that many of them or their predecessors voted for stringent cuts in the irs, including their ability to replace legacy systems and i. T. Including and ignoring audit in fact, welcoming the fact there were fewer audits because their friends werent audited. I mean, it seems to me we cant be here and pretend that history began with this administration or this irs commissioner. Mr. Werfel, weve had testimony from your predecessors about money left on the table, money owed the federal government in legitimate taxes, but not collected because of this Capability Program youve described. We have usually used the figure that its as high as 450 billion a year. Your immediate predecessor appointed by then President Trump actually said it could be as high as a trillion. What is the number you operate with in terms of money owed the federal government, but not collected every year . Yeah, so the latest information we have is the gap that youre describing is about 540 billion dollars. Okay, lets take that figure. Okay. Now, help me with math. You must be good at math because youre the irs commissioner. 540 billion a year. Lets say lets take that out as we often do times 10, 10 years. Whats that number . 5. 4 trillion. Could that reduce the deficit significantly . Yes. Oh, so youd think that people that are deficit hawks might want to, before they before we talk about raising taxes, just make sure everyone who owes money to the irs pays it and therefore we need the irs to have that capability. Would that be a sensible proposition miss lucas . , miss lucasjudy, excuse me. New. The recommendations are hoping the irs can work them into the Strategic Operating plan because its important to have additional funding and the opportunity to address longstanding challenges in Customer Service and modernization. Gao does a great job presenting every year high risk categories to congress and one is legacy systems and i. T. Operations and i took up and work closely with the head of gao to try to address that and i think weve got pretty high marks for doing that although irs remains a case in point where we have lots of progress to make. Shouldnt the fact the irs itself now estimates over half a trillion dollars a year, less left on the tape table and be a high priority for you . A high priority. Commissioner werfel, i want to work with you and i hope the committee wants to work with you. We can talk about tax cheats, but every american, if were going to have voluntary compliance at the high rate we continue to have in america, its got to be perceived as a fair system. That whats asked of me is also asked of him or her and we have got to come up with concrete plans to bring that number down as close to zero as possible. Im a democrat willing to even say, every one of those 540 billion dollars ought to be first used for deficit reduction because its money we dont have anyhow, so its not a its not a zero sum game, but we have got to do something about this and the reason we havent been able to is because of the deterioration we consciously allowed and voted for. Final question, speaking much resources, was your budget reduced in the debt ceiling agreement that was achieved a few months ago . Yeah the modernization budget was reduced by 21 billion. Im sorry, what did you say . 21 billion dollar reduction. So here we are talking about your ability and inability and foibles and flaws and mistakes, and we cut your budgets again by 21 billion. Is that your testimony . That is. I thank the chair. The gentleman yields back his time and the gentle woman is recognized for five minutes. Thank you so much. Im going to pick up where representative connolly left off. Out of curiosity, do either one of you know the definition of insanity. I think youre referring to doing the same thing over and over again and expecting a different result . Oh, okay, thats exactly what i was referring to and it sounds like what this party is good at, but i want to talk about the theme of the day. Commissioner, you have said over and over and over the word complicated. I was not keeping a tally, but you said it a lot. So, i want to work with this word a little bit. I have a list of items, i would like for you to let me know if you believe they are complicated or not, tax returns. Complicated. Operating the irs without proper investment. Complicated. Recruiting workers in this antagonistic environment. Complicated. Auditing millionaires and billionaires. Complicated. Okay. So, it sounds like youve got a complicated job. I do. And it also sounds like you have to know something about math. My colleague brought that up as well. It sounds like you need to be at least somewhat decent at counting to be with irs. Yes. Yes. Youd agree . I agree. Its so weird because my colleagues on the other side of the aisle wanted to call this hearing, this is not our first, its not our second, ive actually lost count myself how many irs hearings were having and they seemingly feel like they can fix very complicated issues, but somehow they arent good at simple math, simple math to get them to speaker, you know, so like weve been three weeks without one. Let me ask you another question that may be another one of these when the math aint math in situations. There was a looming Government Shutdown a few weeks ago and interestingly enough when i do the math, approximately a little bit more than 60 of the people that sit on this committee actually voted to shut us down. Now, out of curiosity for everyone that claims to care about their constituents, do you think its easier or more difficult to operate as the irs when, say, theres a shutdown. It is very disruptive to our operation. Very disruptive. Let me give you another number thats very concerning to me. The number is 24, 24 represents the number of days that we have before the continuing resolution that 60 of when i say my colleagues, im talking about across the aisle, not on this side we were at about 100 , actually 100 on this committee voted to make sure that the government did not shut down, but if in 24 days we dont have a speaker because they cant figure out their math, and we shut down, is that going to help you answer more phone calls or less phone calls . A lot less. Oh, okay. All right. So, sounds like we have a lot of performative politics making place. And this number, you brought up, 540 billion and talked about appropriations and talked about the fact. I want to be clear about this 540 billion. This 540 billion is a net number, correct . This is not a net zero, like its going to cost 540 to go get it and thats how much were going to get. Were talking about netting 540 billion. Correct . 540 billion. Would i say were on track under current course and speed to get about 70 back, so our hope is that well be at 470. Yes, 470 billion, which is whats owed versus whats paid. Okay, very good. How is it that the American People should believe that the Majority Party has the ability to solve your complex issues when, number one, they dont Pay Attention to history, which was defunding this organization has not helped their constituents, but hurt their constituents, and let me add to that. The last time i checked, america is growing. So you were defunding your organization as we were ending up with more people, which means that you have more work, correct . Correct. More population, more filers, more changes to the tax code, and more complexity in how the economy operates. 2010 when our Budget Reduction started, we never heard of paypal, venmo, the platforms. The gig economy changes and thats great, but we have to invest and be ready to be effective tax administrators as the world changes. Thats why its important to keep our funding at pace. I agree. And as the child of an irs worker, i absolutely want to thank you for what you do, and obviously, i always must send love. I thank her for what she does for the American People as well. Ill yield back. Well. I wheeled back. A gentleman feels that general from South Carolinas recognize for five minutes per. Thank you, mr. Chairman. It has been over a month since the House Oversight and to the Domestic International business dealings to determine whether they compromise national security. More importantly pre and more importantly, President Bidens ability to lead. We have document over 20 million in fees from ukraine, from china, the list goes on. There have also been many whistleblowers alleging improprieties. What seems to be a twotiered system of justice. This committees investigation is doing the job the doj, irs and fbi were supposedly doing. Were told there was no communication between President Biden and hunter biden about his business dealings. That was false. Were told President Biden never communicated with his associates. That was determined to be false. They were told President Biden did communicate with Hunter Biden Business Associates but only about the weather. That was by my favorite one. Later determined to be false. We were told President Biden if communicated with hunter biden, his associates and discuss business on multiple occasions but President Biden never received a benefit. He said show me the money. We recently have direct evidence of a 200,000 payment from jim to his brother joe but this is a new one. Thats a loan Repayment Period as white as six to continue feeding the American People and their did the president has done the thing wrong perhaps a little advice. Did this committee the loan documents and shows the Interest Rates and provide evidence that 200,000 was transferred from President Biden to jim biden into preceding four years. Document this alleged offense. If you can do that then help us understand how it is applicable, legal or at all appropriate for the president brother to leverage the president s influence to get hundreds of thousands from a distress companyny while dangling a possible bailout from middle eastern investors. As the white house tries to show the American People the president did nothing wrong do not forget Oversight Committee of pagesved thousands of bank records and fully expect thousands more as we encumber more nefarious activities. This payment is a first of what anticipate will be millions of dollars to the president. Now to commissioner werfel, i simply have one question for you. Do you promise to act in a nonpartisan manner, pursue justice no matter where it take you . I do. Thank you. Between the lowest lunar scandal and multiple whistleblowers of the i rest it seems we have a we need to restore the American People stay in institutions. The Oversight Committee is doing the job the gidget doj id to do as relates to hunter and jim biden and possibly President Biden activities. We will continue to move forward but we need your help to restore faith in our institutions. And with that mr. Chairman i yield back. Thank you very much. The gentleman from california cmr. Garcia is recognized for five minutes. Thank thank you, mr. Cha. Thank you to our witnesses. Administrator were full i want to pass along my thanks to everyone at the agency. Especially the Taxpayer Advocate service. My tobacco is impressed with working with the team and really dedicated surface by no set an easy job. Just recently a constituentnt of mine reached out front in the theft issues, had not received tax returns in 2021 or 2022. We worked with her office and attacks Advocacy Service and able to get over 16,000 to her. This is the story we are over and over again in her office and so that would not be possible without the team of workers you happens i want to thank you and remind folks that yes, this is a hard business but theres people were given hard to get folks there earned dollars back so thank you for that. Im glad were having this hearing and any of the irs oftentimes faces a difficult task. We all know the work you do is necessary and we should all want every Government Agency to be as efficient as possible work as effectively as possible. Better irs means better Customer Service, means better refunds, better economy. Everyone recognizes this and when Congress Passes a law we should be enforcing it. Enforcement is so important. Its something i was her focus on windows mayor of long beach before i got here. Fo and enforcing matters in the irs. Im Glad Congress and President Biden came together to fund the irs enforcement division, specially to go after the very wealthy tax cheats that are very regular and very regularly not paying their fair share in this country. The very rich should pay their fair share. If the do we can reduce the deficit. Its very unfair for the very rich billionaires and millionaires cheat on their taxes and get away with it. I want to point this out here in this poster at a think women discussing this throughout the hearing. This goes to show the irs enforcement how depleted we have become just between 20102018 in the enforcement budget, enforcement personnel, the overall audit rate. Can have on an agency. Can you confirm between 20102020 irs enforcement funding was cut by 24 in inflationadjusted terms . That sound right. I know the majority have made a lot of comments today but this has also been a House Majority that decided to actively work against the irs and work against additional funding. This chart shows the impact this has had. The audit rate for the Largest Corporation and millionaires has plummeted. This is who the majority i believe is working overtime to protect, is to protect billionaires and millionaires are cheating on their taxes and not workingclass people and middle class folks. This chart should be a concern to the agency but it certainly should be a concern to the american public. Administrator, is it correct the tax gap which is not a taxes owed but not paid comes to nearly 7 trillion over the last decade . Yes. And more than a quarter of that come from the top 1 bracket, isnt that right . I have very specific numbers on that. Forr example, in what i just mentioned, individuals to earn more i than 500,000 associate wh 40 billion of the tax gap. And then thats just from underreporting. And when you add underpayments thats another 150 billion. You will roughly at about 200 billion for just those individuals who earn more than 500,000. Thank you. Investments are expected rates 124 billion because irs couldnt hire tax experts to catch wealthy tax cheats but now of course they can and we can do more. President biden is promised grow the economy from the and the b bottom up, not the top down. We need to take on tax cheats especially those at the very top. Lowering the deficit is good. Taxing the very wealthy and the rich is good. People pay their fair share what they owe the government for the basic services that we all depend on as account is also very important. I a want to thank all my colleagues for having this hearing. I want to thank both of you for your work atwo a look for to continuing and ensuring the very wealthy in the country pay their fair share. I yield back. Gentleman just back his time period commissioner, there was a conversation with. A number abot how the irs looked at, perhaps identified, but treated people who may be of color. You gain information about people and their ethnicity or their race . We do not collect that information. And why would you have responded that you look at that and made decisions from the . Thats notha my testimony. What is your testimony . My testimony is that our Research Group from Stanford University usingnf whats called imputed identifiers of race no race data in terms of taxpayers. Identified not disparate treatment but a disparate impact. Basically saying that on average are audit algorithms or having the unintended consequences of havingen black families at a higher rate. This is an analysis where youre not using actual race data, you using whats called imputed race of data. So we dont collect race data and we dont plan to. So you have made changes as a result of this from speedy the goal is to adjust the approach and then working in entering a with external stakeholders, again using an imputed race methodology, ensure any efforts that the irs is undertaking an audit are fair across all demographics not use race. So fair, if youre applying the law as it were and you didnt know whether someone, their ethnicity, the race, you changed how you look at the law based upon some consideration . I i think we have a responsibility to do all of our operations in an unbiased way. There should be no disparate impact or treatment based on but you are following the law. Right. And so when following the law, i think our responsibility under the law is to make sure that i was operations are carried out without disparate impact on any particular minority population or political group. And so the type of study that stanford it is helpful. It basically gives us an outside perspective h and says we have studied it, we dont have the race information but were able to impute race. I think the congresswoman entered the report into evidence and so the methodology of how the imputed race is in the report. We look at it and we said yes based on this analysis we agree that the way we are selecting cases for audit is having a disparate impact that would not be consistent with what we believe our responsibilities under the law are, which is to implement the tax code as soon as possible across all demographics. So were making changes in the hopes thee next time this is tested that the disparate impact no longer exists. I find it very interesting. I will look at that because it seems like its a threshold by which you would look at people. Is that more generally and specifically correct . I dont think so. . The first big step that we took was to just reduce the volume of audits for refundable credits. Not related to any demographic. Just a a specific cut in volu. Because the researchers and in that Stanford Report does that when evidence what withit that they do be then . You went from this to what . I can get to that date it. I am interested in that because i want, i want to be realistic data think you are entitled to set thresholds. And i want to be realistic about what these, what the numbers are. I dont want us to find a way to where we might be discriminating or discriminatory. But i would be interested in numbersse threshold were and whater you have changed into. On behalf of the subcommittee, as a chairman and the Ranking Member mfume, we want to thank both of you for taking time tog be with us today. I want to thank you for taking time to speak with me the other day. I told you that we would try and be fair. I told you we would be probably the prompt. I did not know that were going to get off like this, but i just want you to know that i appreciate what you have done in taking the time here. And also from the gao. Does the distinguished Ranking Member have any comments he would like to make . The distinguished gentleman is ruggedized. Thank you very much, mr. Cha. I want to thank you for your guidance on this y issue as we spent a lot of time talking and figure out figure out a bipartisan method to get us to this hearing so that so we can receive this testimony and have an opportunity to go over it. As we both want to i think without a doubt make sure that Going Forward irs is more effective, not less effective. And while all members here have an opinion, its really up to this committee to set the example. And t mr. Commissioner, i said before, youve got a tough job. You really, really do. There are no silver linings, no magical bullets, nothing else thats going to set this were all wanted to be on the right track, except hard work and dogged oversight. Vewe do in our oversight year ad we expect thatve you would do dogged oversight in your role. I can tell you at the last seven months youve been there have been very, very encouraging, and we hope that the information provided by gao, which are not touch points but guideposts, will be taken seriously. Not only that but reviewed periodically with gao to find out if, in fact, things are indeed working. Its a tough row to hoe but somebodys got to do it. Looks like you are it, sir, because we recognize we cant be without the irs in this country, yet we all know we wanted to be better each and every year. One of the ways to do is to make sure that it is properly funded to be able to do this sort of things. Its been on the record for some time now that irs has improved Customer Service to our constituents. We all know its not perfect. We still get those phone calls in our offices. Our staffs still havees worked r months and months to work at trying to mildly satisfy and bring about resolution in cases. But im glad to report that its getting better. Irs is opening both permanent and popup Taxpayer Assistance Centers to help communities. And trust me, sir, those are very, very needed. A lot of people dont know where to turn 50 want to do the right thing by compliance, complying with the law but the just need in this instance a helping hand. So i look forward to talking more with the chair about this. Weoh really believe as the oversight body here its our function but more importantly our duty to try to find a way to get answers and to provide a larger americande public with se sense theres continuity here, but thatth theres also cooperation here as we try to move forward. Mr. Chairman, i have a couple on unanimous consent requests that i would like to read into the record here i would ask unanimous consent to enter into the record this letter that is dated july 19, 2023, from a from a coalition of more than 200 national, state, and local organizations and Research Organizations including texas area, united o way, raise taxes, unitarian universal fellowship of Hidalgo County texas, and the Michigan League for Public Policy to the irs commission in support of the irs free file program. Without objections but i wouldpr also ask to get into the record press release entitled Filing Season 2003, a report card. Irs delivered significantly to improve Customer Service and the irs Strategic Operating plan for 20232031, which outlines the organizations plan for which outlines the organizations plan for and limiting the 80 billion coming from the Inflation Reduction Act. Without objection. And finally mr. Chairman, i would ask unanimous consent to enter into the record a statement from former Taxpayer Advocate nina olson any company letterco to june 21 of this year from the executive director of the center for taxpayeror right. Nina olson to the Treasury Department and irs commissioner werfel regarding the above mentation of irss 20232031 Strategic Operating plan. Without objection. Thank you, mr. Chairman plan. Without objection. Thank you, mr. Chairman. I yield back. Much. Nk you very he for right end of this i to say that mr. Mfume and i attempt to run this with an understanding about working with each other in in a fair mannt only to our members but also to the witnesses that we asked to come and appear. We do expect them to appear. We do t expect them to follow or guidance of working withur each other, but when we end this hearing we want to come to an shake your head and thank you for being here. With that and without objection all members have five legislative days within which te submit material and additional written questions for the witnesses, which will be forwarded to the witnesses. If theres no for the business, without objection the subcommittee stands adjourned. Lets go down and thank them. [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] cspan is your unfiltered view of government. We are funded by the Television Companies and more including cox. Koolende vries syndrome is extremely rare. Hi. But friends dont have to be. This is joe. When you are connected you are not
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