Transcripts For CSPAN2 IRS 20240703

You at cspanshop. Org discover books, apparel, home to core and accessories. Theres something for every cspan mom. Plus every purchase you make goes toward supporting the nonprofit operations for start shopping now my skin the code on the right or visiting us onlinee with cspanshop. Org. Cspan is your unfiltered view of government. We are funded by these Television Companies and more including a buckeye broadband. Buckeye broadband support cspan as a Public Service one with these other television providers. Giving you a front row seat to democracy. Irs commissioner testified the agencies focus is on high income individuals and businesses making more than 400,000 a year particularly those who have not paid their legally owed taxes for House Appropriations subcommittee hearing on the 2025 budget is about two hours. Close the door please. Think a sub command Financial Services and general government will come to order. I like to welcome irs commissioner first time you have appeared before the subcommittee discussingward to irs fiscal year 2025 budget submission. This is also fine as of the subcommittee forward to conducting this oversight with the agencies under the subcommittee jurisdiction Whose Mission impacts everyday lives of hardworking americans in my district and across the nation. My duty to ensure the agency including irs do not unfairly target americans and auditing their taxes overseeing participation in Financial Market and impacting their ability to owner operated Small Business. Okay, thank you fiscal year 2025 budget request for the irss 12. 3 billion. This is equal to the current fiscal year. We however irs is requesting additional 24 billion in mandatory funds to rebuild an army of irs agents carry out a direct file system that congress did not authorize among other enforcement priorities. The irs claims a decision as part of the fiscal response about the act undermining nations strength would in fact refer on top of additional 24 billion in mandatory funds does just that. While the irs deserves credit for successful Filing Season, it claims it cannot income close to achieving 80 Level Service without additional mandatory funds. Tspecifically commissioner werl without additional funds a level surface on the main foam i could drop at the 30 levels in 2026. Worth exploring all the error rss itcannot deliver successfulg season with the Discretionary Fund and subcommittee provides considering these a funds account from us half the subcommittees allocation. When you get back to hearing from the irs house effectively deploying discretionary resources to improve its modernization efforts and better secure taxpayer data. I would also like to hear from thee irs how the administration is complying with their pledge taxpayers income under 40000 are not experiencing an increase in audit activity by the irs. We have enough to worry about amidst higher grocery, rent, utility bills. It is our job is appropriate to be good stewards of the past taxpayer dollars to ensure the American People the agencies under our jurisdiction or not we see many by supporting bad policy and failed to achieve desired outcomes. Now ill commissioner werfel my friend Ranking Member for his openingg remarks. Thank you very much. Mr. Chairman. Welcome to thehe chairmanship of this committee. I look forward to working with you as i look forward to had a great relationship as you know, with your predecessor who is now a Ranking Member on the majority side. Talk to thank him for his leadership. I know you will bring the same kind of measured work to this committees very important efforts as he did. Want to start by saying it, you made unfortunately allocation historically to this committee is insufficient to meet the responsibilities of this committee. And because the objects of this committee are not necessarily of most interest to the public or to the members. However the work of this committee and for check with the Internal Revenue service is absent critical to all other objectives that are covered by the appropriations committee. We ought to keep that in mind. I want to thank commissioner for joining us for joining us on capitol hill i look forward to hearing more from you with the irs accomplish this year. I read your testimony its very impressive. The level of service and increase we have given to the american public. I am sure where they dont fully appreciate the ease with which you made this experience that none of us alike much better the agency made important progress to implement the Strategic Operating plan it laid out a year ago recently updated to enhance Taxpayer Services result it yield impressive results in the most recent tax Filing Season with the irs building 1 million more customer calls and it did during the 23 season on average calls only had to wait on hold for three minutes. I wish most of the private sector calls that i make were answered as quickly. It is eight minute short written last year otherwise known as 25 . Five minutes shorter than 2022 filing system before week secured additional funding for the Inflation Reduction Act. 2024 Filing Season also saw the irs make important technological advances to improve the Taxpayer Experience permit Paperless Processing Initiative to its new direct file Pilot Program. Onetime support of directg fie i was pleased to see the Pilot Program exceeded its target goal. With more than one of 40000 taxpayers across 12 states to participate. Thanks tiffany from the Inflation Reduction Act the irs also improve tax enforcement for higher earners successfully costing five or 20 million and legally owed back taxes from roughly 1000 billionaires and irmillionaires these are just a few of the irs achievements from the year. I am sure commissioner werfel will highlight many others i mentioned these accomplishments that demonstrate the irs is capable of when it receives their resources it needs to carry out its absolute critical work for the u. S. And government. For the American People and for our success. If congress withholds these resources it puts all of that progress at risk. Sadly that is exactly what many of my friends across the aisle continue to do. The antipathy directed irs and its employees is unfortunate. Demonstrates antipathy towards government. The appropriations for fiscal year 2024 they rescinded more than 20 billion inflationn reduction act funding for the agency. Lets be clear about what underfunding the irs means for the american taxpayer. Meets irs Customer Service hold times will climb right back up. It means initiatives like direct file will be delayed or put on hold. It means a more higher earners will be able to get out of paying the taxes that the ao under laws that are arty on the books nobody likes to payn tax. But all of us ought to pay the taxes legally owed under the laws that we passed. Americans are part singularly aggrieved when they think they are paying more than their fair share. Were Corporate Executives are paying less then the people who work for them in terms of percentage. En crucially cutting irs funding will add to our National Debt. You cannot be concerned with the National Debt if you are not concerned with collecting legally owed revenues to fund our Critical National defense and domestic security. Many of my republican colleagues care about fiscal responsibilities. If thats the case they ought to care about enforcing the law and collecting legally owed revenue. Ought to work with us to fulfill the administration request for irs funding but to secure Additional Resources to offset what was taken from the agency through the recent rescissions. Now i will not be putting forward what i used during the markup but the workload of irs has escalated geometrically and its resources to meet those needs have been reduced over tho decades. I look forward to hear from the conditioner commissioner about why this is crucially can illuminate with whats accomplish with the resources this past year asar well as the accomplishments and the consequences underfunding the agency would have on the nation. Mr. Chairman i think i think i went and minute 35 seconds over and i apologize for that. I think i needed to say all that i said. Thank you. Ill now turn to the Ranking Member for her comments. Thank youo so much mr. Shern to the Ranking Member i think thankyou both for holding this hearing. Commissioner werfel thank you for being here today. Welcome to the Financial Services and general Government Subcommittee prethank you so much for your Public Service. Really appreciate your work. A vitally important for our nations government for our National Security for every Service Provided to the American People that we have a strong, secure and well supported Internal Revenue service. Underfunded irs needs solar processing of american tax returns delays to crucial benefits like the Child Tax Credit for it take a second on the Child Tax Credit because there are folks who told us in 2020 that we could not have been improved expanded tax credit and secondly we could not get the irs to be able to deliver the checks on a monthly basis. That would never happen and the irs delivered the checks on a monthly basis starting that july it was 98 accuracy in getting the payments out to whom they were to go too. Thank you, thank you for that. And the family thanks you for that. Underfunding the irs those were the most resources like billionaires and powerful corporations and avoid paying taxes the irs cannot afford that they are meeting their obligation. 2821 at least 55 corporations in america they took in over 40 billion in pretax income paid no federal Corporate Income tax. Zero. Nothing. Corporations like nike, hewlettpackard, dish network paid zero federal income taxes. Profiting on the backs of honest American Families. Every dollar the irs been auditing the average account was just over 2 and notable return but for theth wealthiest of percentage audits produce nearly triple the return with each dollar yielding over 6 in revenue. His last years debate over funding we would hear some members of the majority improperly called this activity the irs collecting tax that is legally owed. A taxolta increase. Complete nonsense. We protect honest hardworking taxpaying americans by ensuring the wealthiest individuals and corporations are paying the taxes that they owe. This committee has made several investments annually and in the Inflation Reduction Act and the irs to ensure it has the resources to collect taxes owed to improve services. Indeed there is great progress in modernizing the irs for theg American People. With our investment irs has significantly improved Customer Service with cult wait times of just over three minutes 8 30 7 increase of tax payers served in person. Irs is piloting a direct file program allowing taxpayers in 12 states with simple returns to file for free, directly with the irs there simply no good reason american taxpayers are all but forced to use costly private services to be sure they are paying their taxes correctly. The government as a minimum should be able to tilt taxpayers if they are paying the amount they owe this is an important step forward in making government work better for people. Critically now that has the resources to audit the wealthiest individuals and corporations the irs has collected 520 million in back taxes from roughly 1000 delinquent millionaires and billionaires. Rolling these investment factsro really serve those who seek to escape paying the taxes they owe. Getting a free ride on the backs of hardworking and honest American Families. This committee must continue to ensure the irs has the resources to complete its mission. It would be foolish for a business to its accounts receivable department in order to save money the u. S. Government should not do so either. Thank you for being here and for your Public Service. I yield that the balance of my time. Thank you very much. Ms. Delauro mr. Werfel at welcome again your full test mill be entered into the record ask you ton mind i give us a summarization of your Opening Statement in five minutes, thank you. Chairman chen five Ranking Member hoyer and Ranking Member delauro members in the south may thank you for the opportunity to test on the filing citizen and the irs budget im pleased to report we saw a strong 2024 tax season for the nation. One of our best in history to the april filing deadline the irs receive more than 13,039,000,000 individual income tax returns and issued more than 86 million refunds for more than 245 billion. In place reduction act funding. Best Filing Season ever in terms of Customer Service. Taxpayers are seeing a difference. We have answered over 1 million more taxpayer calls than we did a year ago and 3 million more calls than we did in 2022. Wait times level of service on our main phone lines have improved with dramatically expanded Service Increasing hours and serving more taxpayers. New and expanded tools on irs. Gov are seeing heavy use. Begin making critical inroads in addressing tax evasion amongst the most complex and largest filers. This is the sharp turnaround by a lack of resources but compliance work focusing on tax delinquency non filing among high income individuals and tax evasion among the largest and most complex partnerships. We remain committed to phone the treasurys directive not to increase audit rates relative to historic levels for Small Businesses and households earning less than 400,000 per year. Historic levels will be defined by tax year 2018 rates for all cohorts were at historic lows. Notably audit rates from various groups are made public each year end our databook. Therefore when the final audit rate 2020 the first full tax year following the enactment of the ira is available the public will be able to compare the rate to historical levels and confirm the irs successfully met secretary yellens directive. In the meantime we are working to develop a methodology that gives us Additional Information on the technical aspects to determine which taxpayers all above or below the 40000 income threshold. We will of course keep lawmakers and members of the public updated on this work as appropriate. The irs anticipates increasing audits on the wealthiest taxpayer corporations, large and complex partnerships by sizable percentages for checks or 26. With assets tenfold on large complex partnerships with assets over 10 million increase audit rates by more than 50 middle and low income and a new wave of audits coming. We are laser focused on using ira dollars to increase scrutiny on the large and complex tax filers that are showing of red flags for potential tax evasion and all of our transformation work the irs has stilled much more work to do on many fronts. This includes closing gaps on phone service. Expanding digital options further strengthening updated security and supporting vulnerable populations by protecting them from scams and increasing access to refundable credits. We have an opportunity to build a 21st century tax agency to serve the American People in the manner they expect and at the level they deserve. Our ongoing success hinges on sustained investments to make sure we have the right size workforce with the right training and tools. We also need a modern Technology Infrastructure with web enabled tools foras taxpayers. These are needed to serve a nation today and in the future. Critical part of the effort is the Administration Fiscal year 25 budget proposal. It gives us the flexibility and increases irs transfer authority. Helping us use available resources efficiently and effectively. It will also help sustain a new irs baseline and resources avoid immediate funding cliffs that would dramatically degrade our ability in many different areas including Service Improvement taxpayers saw this tax Filing Season chairman joyce covet Ranking Members hoyer and delauroem members of the subcommittee that concludes my statement of be happy to your questions. Quite timely right there is five twentynine. Well start questions and take five minutes we see the light come on you for one minute left the questions and answers may be done in that part i recognize myself first commissioner werfel their flesh and induction act requires irs to study the feasibility of creating a free efiling tool for taxpayers to file their federal tax returns irs complete the study it may have 2023 shortly thereaftery created a pilot called direct about rolling out states for those making less than 75000 year. Theki ir asked feasibility of creating a free eval and system. Under what authority did the irs create the direct file system . Congressmen have two answers that. First, the smallscale pilot we believe isve part of a study of whether a solution like that could be deployed nationally. We went to not just study in the abstract we wanted to engage in taxpayers to see if the prototype could be built and could work. Part of the authority it was the ira requirement for study. The Second Authority section seven 0803 requires the commissioner and the irs to administer the tax code in a way that serves taxpayers meets the taxpayer bill of rights we believe provides options for how they file. Jutrust is a movement from paper filing to put for example pdf forms online with the fillable entries wheat did not believe we need authority then because wewe thinknk theres a General Authority for the irs to move and evolve along with technology in the digital age to meet taxpayers and not need for adjustments wee make to ask congress for specific authority for all these adjustments. What is distinguishes direct file from the prefile system . Its really just another option. Might want taxpayers when they have to felt reduce their stress to make the process easier. One of things weve heard from taxpayers in various members off congress is that an option or a taxpayer could file online for free direct with the irs versus work with the Software Provider is an option that should be available. We encourage taxpayers to work and figure out what is the best option for them. We know many taxpayers have enjoyed and arent satisfied with the commercial software they use they are free to continue to use that software. Their art taxpayers i have heard directly from then theyre looking for another option. What we are doing is testing with that we can provide such an option whether there is a demand for. We spent 24. 6 million increase in the direct file pilots only 140,000 direct file tax returns were successfully submitted. Promoting this success less than 1 of the 19 million taxpayers submitted a successful e return for the irs about one to 74 of dollars for return the free file systemsp exists. As chairman of the subcommittee commissioner why didnt they encourage taxpayers to use a free file instead of creating a duplicate of systems betting 24. 6 main dollars on it . Is the exact type of debate we are hoping to have one sweet one the pilot and reported our results is a lot of different ways i look at the demand in the one or 40000 taxpayers be opened up to the public in early march. We do not have the full Filing Season i believe if we are open for the full Filing Season numbers likely would have been higher because many of the eligible taxpayers to file filee he opened it to them. Also, we saw significant ramp in demand over the course of Filing Season so for the template to april 13 14 we are seeing exponential growth and i think that is because more people ordered focus on their taxes looked at this option favorably in terms of cost per return filed a lot of it was built this year if we were to go forward as already built we would expect of the cost per return will drop significantly in the future of direct file goes forward. We are glad people are having this debate we are glad there can be an analysis and cost information out there to analyze go forward. Iris includes and 5 million physically or 2012 budget request for direct file. We have heard you may not go forward. Can determineill if it continues . Be hope to make a decision fairly soon. We detailing the findings from the pilot last week. We are now doing a direct variety of Stakeholder Engagement taxpayers i hope over the next several weeks we will complete that and be able to announce a decision for. Thank you i recognize Ranking Member hoyer for any questions you may have. Christmas are the basic question. Ive been on the subcommittee for long i time. How much revenue not being paid because of lack of enforcement. Which is a direct loss and indirect loss and direct loss in the indirect cost by people who believe theyre not going to be checked anyway. They will go very close to the liner over the line. Congressmen we refer to that as a tax cap the difference in the balance owed versus the balance paid we estimate to be w at six and a 7 billion. Six and 87 billion . Yes. 7 per year . Per year. Does the current request of thee administration anticipates with the enforcement money that you have fromne ira that ar requested, will thatll make a significant dent in that gap . We believe it will. We had at the point of the inflation reduction of the day it was before enacted the most anemic audit rates that we have had essentially irs history. Now, what we are doing with these funds is increasing our ability to enforce in particular high wealth and complex filers. One reflection ive shared before is on the date the Inflation Reduction Act was passed, we had one auditor for every 150 of the top tier most wealthy taxpayers in the country im not talking about 10 million or more in income or asset 250 million, the topmost year. One auditor for each 250. Many of these tax returns or tens of thousands, hundreds of thousands of pages long. I tell people to picture that one auditor back in trucks and trucks full of tax returns and it is in them i guess all of that. What we need to do is not only hire more people but provide them technology, Data Analytics and subject matter expertise to unpacked all that complexity. We are leaving a lot of money on the table for quick seated statistic i have and i showed it last year was from 2010 until 2019 as her fiscal years, irs audits of billionaires plummeted from approximately 9 plus two less than half of a percentage, is that accurate . Yes. Again i will make it clear nobody wants people to pay more taxes than they owe. And neither does the irs. To the extent they do not pay, someone has to take up the slack or we create a debt. There is great concern about that debt when you tell me the 687 billion per year estimated to be uncollected as ode that is a significant problem. Heres a particular i have and want to answer very quickly. A lot of advertisements on the radio, some on tv up but mostly radio if you come to us and if not paid your taxes guess what, we will save you 1000, 10,000 dollars 50 of what you et cetera et cetera. It seems to me a disincentive for people to pay their taxes are you concerned about this advertisements . Whats i am concerned about this advertisements. Many of them are exploiting the complexity of the taxes. To victimize these individuals in here is why. We have a variety of tools that are very accessible for you to create an installment agreement or do a compromise. We have designed them so that you shouldd not need help they are very fluid to be able to get and then you dont have to pay or give any financial risk to anyone who is claiming they can get the irs debt to go away and thereality is we have programs n place they are very accessible at work working on making them more accessible. To take advantage of these programs are giving somethingiv away. Thats white businesses have the money to afford and exist. What we have learned over and anover from testimonials and talking to taxpayers is the end of this process they are left with a mess on their hands. We urge people to get educated. If yourele going to work with someone reputable to come to the irs a search free help at irs. G. There is a lot there that said navigable might not need to hele help marketers are saying any. Thank you, thank you,vi mr. Chairman. Would not recognize former chairman of this Committee Current chairman and transportation housing and urban development. Thank you. Commissioner, thank you for being here today. In my previous role chairman of the subcommittee always enjoy the fact youre very f responsie to the questions we had of this the first hearing before the subcommittee quick question or advocate service and would pick up on what mr. Myers talked about a minute ago. You are away or make Taxpayer Advocate service is an Important Organization the irs to assist american taxpayers are expressing financial difficulty need help solving tax problems or believe the irs may not be performing as it shows my Understanding Service which my constituents heavily rely on a struggling to keep up with demand fiscal 25 request is 236 million. 24 and activist 271 million. Does the budget request address the need . Help me understand the difference between an act of 24 versus the requester 25 . There are choices that we need to make in terms of how we maximize the effect of the discretionary we have 12. 3 billion. We can also provide supplemental resources to the Taxpayer Advocate using inflation nfreduction dollars to close ga. Using Inflation Reduction Act to try to meet the demand we dont always get all the way there. We will work with the Taxpayer Advocate to help them manage demand typically the better job that we do with service the less their phone rings. We can try to reduce the demand by improving our Customer Service our ability to resolve taxpayer issues will also work the Taxpayer Advocate to make we sure they are accessing other nondiscretionary resources specially hardship cases get addressed. The ira funds will run out. Wothey do. So where we stand today as for example we have requested 2. 8 billion per Taxpayer Service dollars coming up in 25. That will get you 25000 fte. We need 38000 to manage the tax system. Thats just a number of phone calls tens of millions of phone calls. Hundreds of thousands of people who come into our walk and centers all of the paper that comes in that needs to be managed. So we are using ira resources to close that gap. Toto get to the 38000 ftes that we cant meet the taxpayer demand the ira money runs out. Runs out in 26 and then we will have to shrink our customerhr aservice. You will see those start to emerge again at the walk and centers in on the funds. Six and 87 billion tax gap first of all im not sure how you calculate that. Im sure you have highspeed computers and experts, the saw a round number. That 687 billion. How much of that is owed by people say making less than 40000 a year . Which would account for the majority of tax filers would be fimy guess. I do not have that number at my fingertips. As you can imagine across the 687 billiondollar portfolio you have distributions of income. We have people that are not paying that balance due at the low income of thehe register. And those atlo the high income. What we have set out as a plan is to increase our capacity and scrutiny on that as a resell the most during the lean years prior to the Inflation Reduction Act. We did not lose as much capacity for simple filers. But we lost a ton of capacity large corporations are operating in more taxin jurisdictions. They are using alternative currencies they are using more sophisticated methods in some cases not in all cfos and ceos doing the right thing. Too often ceos and cfos that are not in our using sophisticated methods to shield their income. The idea or on the Inflation Reduction Act is to make sure we are investing where we needed them most. Where we needed the most is where we fell behind the most and where we fell behind the most is complex filers. I know im out of time. Want to pick up on something mrt for the record im not going to pick on optima p necessarily although their marketing is pretty good because thats the one i remember. I too am concerned and i voice thiss concern in the subcommite before when youre driving down thee road missing two exports abroad guess you hear someone come on and says hey a few of the irs your good luck call us i dont owe the irs because they paid my taxes the last think this is for a Quick Response in recent years have seen a lot of indications of Identity Theft is that tamped down somewhat real quickly because amount of time more effective job yearoveryear avoiding Identity Theft situations something or focused on progress thank the gentleman i yield back. Thank you chairman. Ranking member, would love to hear questions reports thank you very, very much, thank you for a couple of points about this recent conversation. Here. Throughout the appropriation process republicans of trajans just read the funding for the irs. More than 21. 6 billion in cuts irs funding over the past year. We have heard about eight tax gap 687 billion. Were able to click five and 20 million in back taxes estimated billionaires. Which is collecting revenue i want to repeat for the record collecting oral revenue legally owed. Now, again with my cogs on the other side of the aisle they frame our debt is a problem of investment in the American People. Problem whichnue i think we have demonstrated here this morning. And there is a refusal to let the irs collect legally owed taxes from billionaires, corporate folks in order to address the problem. Just very, very quickly were going into a new budget year. If more funding is cut from your budget what would that mean . What are the consequences . The consequences is we will not be able to meet the demand the taxpayers present. People will call the irs and not get through. That wille. Happen to poor peope people will show up at her walk in centers they will find long lines and not be able to get in. And we will be limited in our ability to hold people accountable who are not playing by the rules thats why this is so important. If you are a cfo of eight Large Company and playing by the rules you want an irs at first but leaves you alone does not select you for audit because we have invested and have the precision to see where the invasion is moreke likely. Once he pulled the return of a rethink the invasion is more likely cfo doing the rightdo thg was to make sure were Holding Holding the cfonot by the rules. All of that degrades if we do not meet the resources that we need. Those consequences need to be telegraphed a loud and clear and from home are we trying to get the owed taxes from. Fiftyfive corporations they were in federal taxes and other 39 will pay only a portion of their taxes. Let me know to the Child Tax Credit. What an amazing success at put you in the irs at the center of making this program an enormous success you have distributed nearly 93 billion in monthly Child Tax Credit payments to families and as i mentioned earlier treasury Inspector General for Tax Administration from the irs accurately sent 98 of monthly Child Tax Credit payments. Note fraud, waste, abuse, people not going to work people buying drugs with Child Tax Credit. All of that dissipated with the success that you and the staff have had a make and that possibly also might add at this juncture distributed nearly 93 billion i have folks who tell me we cannot afford a Child Tax Credit to lift almost half the kids in the country out of poverty lowered the hunger it we ratewe cannot afford it but by d we certainly can afford 687 billion tax gap . We could give the Child Tax Credit over and over again. Should the monthly Child Tax Credit beat reinstate how quickly with the irs be able to restart the program and how can congress assist in this effort . Can you briefly discuss the Lessons Learned Child Tax Credit implementation how it has impacted other irs . Congressman first of all i really appreciate you expressing your appreciation the irs workforce lifeline economic payments and credits to my predecessor and others who led the irs through that. What is also a important what a huge Lesson Learned we are starting to make advances and updating our core technology. I have heard for a long time a lot of money has been spent as the irs technology improved is starting to show it meaningful meaningfulimprovement it is fort reason they Child Tax Credit program was enacted we could reengineer and begin within weeks not months. That is because weve done it before. We have the playbook we haveav paid out all the advances we have a long wayay to go in technology. Changes have started to happen. We are starting to see the technological changes generate efficiencies like weeks not months to move forward on a new Child Tax Credit program for. Get ready because we are going to be. Thank you, i yield back. Thank you. We now recognize correct thank i havent toldTax Collections ot year ivan told Tax Collections over the last year or couple years at record levels. Do i have Accurate Information or what can you tell me about elections in general over the last couple tax seasons . The size of the tax base has grown. We are seeing the population grow and theres more taxpayers. Just in the general rhythm of collecting taxes the receipts can ebb and flow as the population grows and as the economy grows we can see higher overall receipts inc. Overall collections. Its the audits in my testimony i outlined plans to increase the audit rates. I get that is the answer to my question heartened dollars up the last couple cycles . I would have to double check i do believe overall receipts are increasing as a population grows progressively heard you right as birthrates. More people are attaining adult status and filing. Over the 2010 we saw a 7 increase the number of tax filers. So just to give you a rough benchmark and the 10 years between 2010 and roughly 2020 but a seven for that growth. Would to be attribute that to . Whats population growth. Next weve also heard talk about technology and funding for technology and stuff like that. Could you briefly tell us what those Technology Advances have done, if anything to affect the workforce you need to prosecute your Core Missions . Absolutely. When i was answering congresswoman delauro i left out not just their phone lines and walking sinners but digital solutions. We have an emerging generation of taxpayers used to drink everything from their smart phone and tablets. And we need to get there but one wanted things that has happened in the last few years as we made dramaticdr increases to a digitl solutions you can now that an individual online accounts, a Business Online account. There are functionalities in those accounts are increasing. Or them or you dont have to walk and you do not have the college of business with the irs you can do it from your smart phone, your tablet or laptop. We have made more changes in the last two years than in the previous 20 years combined with thought marjorie. The gap between your online bank what they can do is significant. The plan to use their operating an art world they never have to call or walk into an irs center. Technology advances have affected how. Absolutely have we have seen efficiency. Every family move a form from paper to digital we have seen a lot more digital upload of documents but we are up to the. 94 of americans can send the stuff to us r electronically rather than have to use a paper the reduction of paper reduces cost. The issue is the tax system grows at a faster rate than we can drive efficiency ill give you a good example of that. Congress passed a law requiring irs to build a new technology to do information reporting for Digital Currency. As a whole new program out there because of Digital Currency we have to create new infrastructure. Re sobe we have a new cost becausee have to build a new system because there is new currencies that system has to be built and maintained. Even though we may be driving efficiencies in these legacy systems that are in place making them more efficient when Congress Changes the code and adds new requirements for over a Resource Base gross. Members have referred to specific numbers of corporations, ex members of corporations pay what ever. Exit number can you tell me what if anything you are doing if its finite what you doing to prioritize going and getting those 55 . . Or what ever with your existing assets. I would assume if that information is out there and they are not paying their fair share that you have got a top 10 list or something we are going after a, b, c, and d because they are the top of the list. Absolutely do we have a top 1600 list 1600 millionaires and billionaires that owe back taxes we have 125 we are collecting from them they have heard from us we have collected 500 million so far and more to go. We have sent letters to wonder 25000 wealthy individuals who have not filed since 2017. They quickly set Data Available Public Information . Thank you my time has expired i yield back. Thank you. Thank you, mr. Chairman thank you commissioner. How much was it again to create the direct file system . 26. 4 million of irs funds. Im sorry 24. 6. Do you know how much is made by the tax preparation industry annually . Was i dont have that number by notes in the billions of. Looked up at one company at 14. 3 billion the other 13 increase h and r35000000000. Big money. There a lot being alone was 93 milliong which is almost fr times what it costs completely to create the direct file system. That would save taxpayers an enormous amount of money for provide access to direct file isnt that correct . It could and we want free file to expand. One of things about the free fileen program is not enough people are taking advantage of it. This past Filing Season with salt 11 increase in free felt some of it direct file, some of it free file with Software Providers we are happy about that. What can we do to do that . Ive heard a couple today im not sure if this is correct 70 of people who qualify for direct file was like 3 use what can we do to get more people to have that information . Is just like wein are talking early about people getting scammed fight too good to be true advertising we have to do morere outreach we plan on doina lot more outreach. One of the questions earlier, are you getting more efficient question what we are what we want to do with new capacity . There is more help needed and underserved populations. We had 7 million taxpayers last year eligible did not claim it. We need to close that gap. And working at underserved and distressed communities can share more information about tax scams, what to be on the lookout for order free options for you to file. We want them to have choice. We want them to be educated i can file for free the irs direct or i canrc use commercial softwe let me try both and see what works for me. The idea around a direct file is really another option with the overall objective of serving people that cannot afford an accountant any more help. We require people to pay taxes the fact would provide something for them to do that only it makes complete sense to me and to that you talk about the money that is not gethi to low income families inc. 12 billion in tax credits are left on the table. Is there a way to auto file some of the information within this psystem so when people do to rectify out some of that could be included since you receive thelectronically . Theres a lot of study that we need to do to understand the future of tax filing. Right now, where we stand today it is up to you to enter your information. You are the final arbiter of what your tax return is for those other countries, other nations that do it differently youre still the final berkshire but they present to a completed return and thumbs up or thumbs down but whether that th. Goes in that direction is a valuable conversation to have. My commitment is to be transparent if we are going to move to provide information to react to verses them putting it in themselves im going to share the information publicly before we go forward percolate looking at doing that part of the pilot . We should have conversation with stakeholders if we move forward with direct file next filingng season. What should we do to adjust for their taxpayer stress . What can we learn from that . Also the private companies multiple bills to fight tiktok we see this industry sharing data in a very disturbing weight we do not share data with anyone, do we . Lexus is whats interesting about taxpayers have different preferences. And different experiences one of the notable things we learned in the direct filedi pilot was more than 85 of taxpayers said increase their trust of the irs. There are taxpayers out there who do not want to use direct file have a different trust relationship withh us they can use commercial software. The issue is taxpayer choice. I will end with we would love to have the taxpayer taurus in wisconsin. If you are looking at expanding the only midwestern state you have is south dakota which is a relatively small sample per upper midwest would love to be conclude or i will speak for wisconsin. If you could do that would really appreciate i would love to save my constituents of money. Elthank you. Thank you yelled back. Thank you we recognize. Thank you, mr. Chairman, commissioner werfel just left freddie treasury issued a final rule on the 30d tax credit. Which included relaxing restrictions on sourcing graphite from china. As you may know the peoples republic of china passed new paw critical mineral export controls last october which allowed the prc to restrict graphite exports to any country fort suppose it National Security reasons. There is clear evidence these restrictions are already happening. Last june european Battery Manufacturers were unable to source graphite from the prc cosseting a negative repercussion for battery production in europe. That is according to the european commission. Commissioner, do you believe tax dollars of hardworking americans should be given to foreign entities of concern are there u. S. Es subsidies . We have a responsibility at the irs to work to find the right outcome. Treasury ultimately has the final discretion on what noticed our final rule will indicate. I know, just based on the fact we get a lot of Public Comment and a lot of differing opinions how we construct eight rig what kind of outcomes it will have the healthy dialogue to have. Ultimately what our response responsibility is that the irss mixer caring out the laws on evidencebased thus we try to do. If i understand what you are saying is you feel that is treasurys responsibility to determine whether hardworking taxpayer dollars should be given to foreign entities of concern for their u. S. Subsidiaries at the irs precook sort know with respect to a clean Vehicle Credit and other provisions in the Inflation Reduction Act related to energy, eight rig writing process has generated a multitude of different perspectives and opinions vary healthy dialogue on policy and operational tensions involved in the final rig ultimately it is up to treasury to calibrate all of those tensions and come up with an outcome that best serves the intent of the law. You do not want to share an opinion on whether we should be giving american taxpayer dollars to entities from china, iran, north korea . The intent of thehe law is to cb any financial benefits of foreign entities of concern. I am all about supporting the intent of that law ultimately there is a variety of different paths you can take to meet that objective treasury has the final say in what path we take. Okay. Can you tell me what Statutory Authority you believe gives you the ability to create and impractical to trace safe harbor category of constituent material or a category of battery material . Absolutely none of which are remotely contemplated in a 30d statute amended by the ira. A question im going to have to get back to you on to understand from treasury general counsel in the tax policy what legislative authorities they relied on or reaching any conclusions are that regulation. I would welcome a letter or some communication from your generalco counsel to establish e likelihood these provisions would withstand legal challenge by taxpayer. I can commit to that thank you are there any restrictions under current law that would prevent a subsidiary of a foreign entity of concern that receives irs tax credits from sending those payments back to its Apparent Company in a hostel for nation . Again i will have to get back to you on the steps that are being taken to mitigate the risks you describe. But again i am not familiar with the exact details of that ill have to get back to you. Okay, thank you. Are there any measures that you intend to implement to ensure taxpayer funds are not directed to such entities considering the broader implications for National Security and economic independence . Independence . Mr. Werfel now youve hit on the responsibility the i. R. S. Has. Once the digs are made in terms of program terse, guardrails, whats legal and what is not from a regulatory standpoint, the i. R. S. Has to stand up, the infrastructure, including the fraud detection, the Program Integrity issues, and therefore we will build what i therefore we will build a rich registered to understand what are the top issues that would grade the integrity of the program and the law and regulation. We will use data science and other elements to try to make sure that we have leading indicators to see where behavior is going in d a direction. In the future as we move forward to implement final rags id be happy to brief you on the Program Integrity. You have any idea on timing on that . Not at my fingertips but i can get back to you. Thank you i you back mr. Chairman. Thank you mr. Mueller, we now recognize mr. Bishop. Thank you, mr. Chairman, i thank you for your testimony for being here and let me thank you and your team with hard work and limited resources, we had a discussion this morning about a gap and is my understanding between 22 with the number of examining revenue and handle conflict fell about 40 in the fee collection of offices had a difficult collection case that drop by 54 , you tell me how a loss of so many staff and vital to ensuring integrity of the tax code how has that prevented from the tax gap and generating the muchneeded revenue to reduce the deficit and pay for the priorities and i have two other questions that are relatively short if you take short answers, one is what the irs is doing and with regard to Artificial Intelligencein into crackdown on tax evasion and whether or not you are developing Artificial Intelligence tools inhouse and are you collaborating with outside experts or contractors in the final aying by the rules and expect the i. R. S. To hold people account to believe play by the rules. Your second question just bridging on the a. I. , how are we using a. I. In enforcement . The analogy ill use is a chess game. When we are looking to select audit amongst some of the largest corporations in the world, those that arent playing by the rules are shielding their income in very sophisticated ways. An example might be, theyre operating in multiple tax jurisdictions. Theyre doing a significant amount in the u. S. But theyre moving all of that economic activity, theyre presenting it to a better tax rate jurisdiction. When the reality is that activity is happening in the u. S. How do we detect that . This is a chess move by them. What were deciding to do is rather than just having the human there playing that ches game, were getting the computer to advice us. Still the humans decision, the i. R. S. Employees decision on what the next move should be, but were having the computer help us calculate all the permutations of the moves so that were better at the chess board and can catch the evasion. We have important partnerships with the private sector but ultimately decisions on audit selection is inherently governmental and only i. R. S. Employees make those decisions. Mr. Bishop and the rule . Mr. Werfel we have to we have done significant improvements in managing our paper backlog. They were significantly outsized during covid and now theyre back all within what i call tolerance. With the exception of the Employee Retention credit which is a different thing. And a different challenge. But more work is needed and what we really want to see is increased access to high Speed Internet all over the country so that those taxpayers than avail themselves but we will meet them where they are. And if they have to fail on paper we will do better on paper and also we will set up and weve been doing this more and more, Walkin Centers, we call them popup walk in centers where were going to Rural Communities that are more than 100 miles from a city center and setting up shop with a Walkin Center so they can get help if they need it. Mr. Bishop thank you, sir. Mr. Joyce thank you, mr. Bishop. Recognize mrs. Hinson for any questions she has. Mrs. Hinson thank you for being here to discuss your budget request. Im sure you agree federal agencies including the i. R. S. Are in the business of Customer Service, so its important that our taxpayer get that high level of support. Millions of americans are interacting with you through the annual Filing Season. It is critical that theyre able to receive timely responses and get the feedback and returns that are rightfully owed to them. Its their money, note governments money. My team has been hearing from constituents who are concerned they cannot go to their local i. R. S. Office in person to pick up forms and filing instructions. I think a lot of that is due to inperson work challenges. You mentioned roughly 50 of i. R. S. Employees are in the office at any time. Is this still the case, its about half . And how are you tracking how many are in the office to do those services . Mr. Werfel theres tens ofs how to of i. R. S. Employees that are always on site. And these are people that are, for example, managing the paper thats coming in and doing submission processing. But tls our employees in our Walkin Centers. There is no remote work in any of our Walkin Centers around the country. We have since the start of the Inflation Reduction Act reopened or opened more than 50 Walkin Centers around the country. Mr. Hinson are those being staffed every day . Mr. Werfel fully stafd, every day. Heres the challenge that we see. We moved to an Appointment Schedule during the week. And we have taxpayers, more taxpayers coming than we can handle in a lot of cases because everyone else has an appointment. So we started Opening Saturday hours. And that is not by appointment. Sometimes a given Walkin Center can serve about 300 people a day on a saturday without appointments. But sometimes 400 or 500 people show up. This is why its so important that we continue to make sure that were rightsizing our footprint to meet the demand so if we can serve 300 people in, you know, in a city center in iowa. And 500 people are showing up. That tells me theres more people that are needed and we need to improve our digital sheutions as well. But in the Walkin Centers, those are no one works from home and they are fully staffed right now. Mrs. Hinson i urge you to continue to keep and eye on that. If theres that dhand we need to meet that. I get a district report every single week from my case work team, its never less than 21 in terms of agency interactions. Inch r. S. Is number one that our Casework Team has to deal with when i look at reports out from j. O. , 51 of responses were considered late. So i guess what are you doing on the staff front when you mention tens of thousands of employees in the office, what are you doing to speed up correspondence to make sure its timely . Mr. Werfel if you look at the Filing Season, there were places where we exceeded our goals and did terrific, for example our 18001040 line. We exceeded almost all our goals. But there are other part os they have inch r. S. Operations where we were below goal and we have more work to do. One of them i mentioned earlier sour response to those that have been victimized by Identity Theft. The line is too long. People are waiting too long to get issues resolved. There are certain correspondences or activities that are not going in the right direction in terms of timeliness. So what well do, what we are doing now that failing system is were looking at that balance scorecard. Im requiring the team to incrementally improve all the metrics where we fell behind. Im always going to be transparent. We had a great Filing Season but it wasnt perfect. When its not perfect thats impacting a taxpayer. That means a taxpayer couldnt get through, got something late and that matters to us. I dont know that we can ever be perfect that would be unrealistic but were going to continue to perfect our process and not rest. Id like to say theres no victory laps here. We had a good Filing Season, a strong Filing Season, we can build on it. We have to close gaps. Mrs. Hinson i understand that. Closing gap you mentioned your phone wait times are down significantly but were still hearing reports of people waiting for 45 minutes if youre calculating that average by including people who hang up of course that number will be lower. 45 minutes is way too long. Mr. Werfel i agree and i can explain that. Our main line, almost 90 of every call the i. R. S. Gets comes through that. We focus on that. That is the line that has a threeminute wait. Thats the line that we had the best level of service weve ever had this year in terms of us successfully answering those calls and though questions. The remain 10g is are the other call lines that we have. We have to do better. If you hear someone that had a 45minute wait, guaranteed that is in one of those other call lines in the remaining 10 . We got to close those gaps. Mrs. Hinson i look forward to following up with you on that. I yield back. Mr. Joyce thank you. Former president trump, 2017 tax scam was the biggest tax increase to middle class Property Owners through the use of salt. Mrs. Torres how salt works for folks that may not know how it works, Property Owners agree to taxes to pay for public bonds, to build libraries, plailingses, bridge, local infrastructure. In an exchange they would be able to use that money and to take a reduction on their taxes based on that. It has had a Significant Impact on california Property Owners. Its had a Significant Impact on Property Owners where this was practiced. It was not a free difficult to gsh fre gieft to the Property Owners. It was an investment they made in the communities. Most of those community, the federal government has failed to provide, you know, proper funding for housing and for all of those things that they chose to tax themselves on. Im interested in hearing what you are hearing from our taxpayers, how they have been impacted by this. And is there anything that you can help with to remediate salt. Mr. Werfel the role i have as i. R. S. Commissioner is to make sure that i understand what the experience tax payers are having with the law on the books. In terms of getting the questions answered from the i. R. S. , getting the forms they need. Mrs. Torres part of that experience includes how theyre experiencing changes in laws. Thats what im interested in. Mr. Werfel thats more in secretary yellen and her teams wheelhouse. Any concern, the concern that congressman moolenaar raised on the clean Vehicle Credit and these concerns, i will bring back to the Treasury Department and make sure that we provide let me go to thehe irs auditf theor working course which has been covered by so many of my colleagues already, its really unsettling to see the audit numbers and i know stated here that you are working to improve those numbers, how is that going to be a realistic approach that and my community who is often first on the block priority, i want to make sure that youre focusing on tax change in yout, not focusing on the people that are doing everything that they can to pay their taxes. When i arrived in the irs of margin 23, we began as a team to look at the audit rates in particular and lowincome communities, there is a lot of inequity that has existed in terms of how audits are decided upon and we are working to acknowledge the inequity and change it. How did that involve assuring that you have a Diverse Workforce so they have some encultural competency and income competency and theyre not simply going after the lowest easy picking. Absolutely in response to these concerns on the equity concerns have worked with groups that are involved in the equityy issues, external stakeholders treasure has committees, we have created a separate working group just to work at equity issues and Tax Administration and liberty takeni steps for a dramatic reduction in the number of audits related to the earned income tax credit, we believe that that will address inequity by substantially reducing the volume of those audits and put the audit resource to better use and move it to areas of the tax cut that are more concerning. Let me go to another issue that is critically important, the nonprofit tax compliance, Nonprofit Agency ive seen in my own home city pomona the fairplex abuse of its taxexempt status, the report by the california state auditor revealed the executive director for the three top executives making over 10 million a year, at that time i requested an audit on the irs to do your Due Diligence instead of giving them a large fine you force them to make some changes, how are we making sure now that nonprofit agencies are exercising good models and how they pay and their executive team versus the services that they are providing in the community. Obviously without commenting on any specific case we take our review of exempt organizations very seriously over the last 15 years i would say getting back to the last ten or 11 years there have been significant efforts to increase the robust transparency of our approach, we had Inspector General review our approach in the organizations and for the most part we have gotten good and passing grades and that does not mean the work is done we have the ability to continue to understand from congresspeople like you and others where are the activities going on in the review process and leading to bad results either so what is taught how to be exempted and should of been or someone should not be exempt and is exempt with ongoing activities. My time is expired and i love to continue the conversation at another time i apologize to you. I now recognize for any questions that you have. Thank you, chairman and thank you commissioner for spending time with us today. One of the many grievances in the declaration of independence against the king of Great Britain elected multitude and sent two of the officers to harass our people in either. Substance. In the American People feel that way about our governmentme right now and a lot of that is on congress because no matter how much money we bring in we are spending more and we dont do it necessarily in the most efficient and effective way, some of that is on the irs in the long history of weaponization whether targeting conservative groups, bringing extra scrutiny against them silencing whistleblowers who spoke up about corrupt efforts to shield hunter biden from prosecution in many other activities alongti those lines. Im wondering what the irs is doing to clean up the culture that has long existed that needs to be directed. Ill give you an example there is a letter christians engaged a couple of years ago and it was said this is part of the letter that the irs wrote to them denying the 501 c 3 status, you educate believers on National Issues that are central to the belief in the bible as the inherent word of god to educate christians with what the bible says b in areas where they can be instrumental including areas of the definition of marriage, typical justice, speech, defense, orders, u. S. And israel relations, bible teachings are typically affiliated with the Republican Party and candidates, this disqualifies you for irs section 501 c 3 and part of me is republican, wants to give them a metal for their candor and honesty about our policies but the other part is very concerned that this existed in the irs after congress pushed back in a number push back on this end up resending this and ended up getting the 501 c 3 status revoked. The person in the signature line was stephen martin, does he still work at the irs . Grossman im not going to comment on any. Specific matter or on the status of any employee in a public setting. Actionany disciplinary taken. I would have to look into that specific matter and get back to you. The rules of the Internal Revenue service prohibit 501 c 3 and 5o1c4 nonprofit from engaging in planned activities and violate law or the commission of a crime, it goes on the irs 75384 states explicitly that even antiwar protest organizations committed to world peace and the primary activity is demonstration which demonstrations are urged to commit violation of local ordinances and breaches of public order that they would have qualified protection status, right now we have a number protest going across the College Campuses that ares beig sponsored by a number of organizations, have any letters been sent to the organizations to let them know that the 501 c 3 status can be ae jeopardy . Let me respond a couple different ways, first of all, as a person versus the commissioner, i see activities going on, anytime there is violence, hate it is heartbreaking, i have to divorce from that of the commissioner, i have to do the job as commissioneray and away followig all the required procedures and while i can comment on specifications. Has irs sent any letters to let them know that the 501 c 3 and their status may be in jeopardy . Again that would be a specific action. Any organization in general, i have not named them any organization, ill be happy too because we can but in the letter, have any letterser been sent. I will go back and out of an abundance of caution determine whether i can answer that question on the record without violating the one through concern. Okay. Along the lines, right now you are telling ison basically f we dont update the irs budget that we will see a degradation of services but yet just recently you madead the goal of sending 50 back to work basically to stop teleworking, to me and most americans this seems pretty unacceptable, i would urge you to get people back to work, my time is a must expired, we will have to get to that question into the record. Please work on the culture can you tell us what youre doing to work on the culture of the irs. We want the irs to be an amazing place for people to come and have impact and the impact is to help people to reduce the stress they have. Im talking about the partisanship. Is also essential theres no place for politics andwe the irs and we take numerous steps in our controls and our training and we work with older site entities like our Inspector General to constantly evaluate moments where theres even a perception of politics in the irs in if there is we work to correct it and make sure it never happens again but i believe fundamentally across the irs there is a common understanding that if politics enters what we do then we are not meeting our mission effectively. I would agree with the assessment but i think we have a number of highprofile instances where that is often theas case. I would love to see specific examples perhaps in writing where you have made some efforts to bring accountability. Thank you. Thank you mr. Cloud i recognize mr. Cardinal for any questions you may have. Thank you, mr. Chairman and thank you commissioner for joining us today, i know you look forward to this every year. I do. As you know the tax cut and jobs act which was passed in 2017 set to expire at the end of 2025 was Small Businesses make it 99. 4 of alabama businesses, is a former Business Owner myself, when impact will this have my constituents . And Small Businesses. The expiration of the tc ja, is that your question . I have not done an Economic Assessment of the tc ja, that falls more with the Treasury Department. In terms of whether the expiration of the tc ja leads to administrative obligation for Small Businesses i will have to assess that and get back to you. You are saying you dont know if its going to raise Small Businesses taxes or not . Is that what you are saying. Im not prepared to provide an analysis of that, that is something if i was to provide an analysis i would have to do it in consultation with theme Treasury Department and i have not run that analysis. Keep in mind thismi administration is focused on not raising taxes on anyone making less than 400,000, i will promiserf you out of. 4 theres probably 90 under 400,000 range to raise taxes. I think we both review that as a tax increase, does the irs have any plans on providing its 2025 day that expires and we have done nothing, does the irs educate and give guidance to the Small Businesses across the country . Has laterally got put into place . As i said based on this question i will go back and make sure that we understand what implications, not from a taxfree standpoint that is more for treasury and im happy to work with treasury and get an answer to your question there but in terms of the daytoday interaction that it might have with irs and filing their taxes and paying an estimated payment and getting a refund to the extent that the expiration of ja has an impact and asking for you to go back and review the and report back and clearly if there is an impact on Small Businesses material from in a ministry to standpoint i want to be on top of the and i want to be supportive. Ive sat through many of these meetings and told i would get the response back and never get a response. I will get you your response. I like the i like being different. The irs hired up. Excuse me. I like being a little different, it is okay, the irs hired overtaxed services to help americans with smoother Walkin Centers, i know you spoke on the briefly, how do you plan to sustain your level of service with irs funding expiring for tax services at the end of the year . As i mentioned, we are confronting a funding class, we can make it right now with a 25 budget as proposed through 2026 and maintain a strong level of service that we had and to close some of the gaps we have gaps to close after 2026 we no longer have the funding to maintain the Customer Service workforce that wewe have grown to meet this extraordinary demand that we see, i will be appear making the case like i am now and there are some modestes adjustments on a yearoveryear basis in terms of funding and transfer party to make sure that we can continue to serve taxpayers. One last thing on the way out the door minimize Staff Members told me to see if he could get his tax return back hes been waiting on it. I know hes one of many we get a lot of the phone calls, thank you for your time. I appreciate that i yield back mr. Chairman. Thank you very much mr. Colonel we recognize mr. Edwards for any questions. Thank you, mr. Church, thank you, we probably look as much forward to this as you do. Of the initial 80 billiondollar pay raise to the irs, your agency allocated 45. 6 billion towards enforcement and you claim that taxpayers under 400,000 would not experience the effects of that increase enforcement, nonetheless according to the irs databook for 2023, it was reported that the irs proceeded with 495,700 ursome odd examinations of individuals making less than 500,000. I would love to get more granular and share the exact amount for the 400,000 mark unless the databook doesnt include that level of specific data of choosing 500,000 as the maximum in the range that im referring to. That is compared to 21455 examinations of taxpayers making more than 500,000. Resulted in over 3. 6 billion in additional taxes. Clearly American Families and individuals earning 400,000 or less are experiencing the brunt of the irs enforcement actions, would you agree with that . I would not congressman. And your basis and disagreeing would be . What ive said and what imm committed to is taxpayers who earn less than four to 50000, there is no change in the likelihood of being audited the day before the Inflation Reduction Act was passed versus the day after, however, if you are high income more than 400,000 in the reality were really laser focus on higher levels of income and for those individuals the audit rate will increase and i announced to my testimony today the various cohorts millionaires, billionaires, large corporation, Public Partnership we intend to significantly run thees audit re between now and 2026. If you are less important or thousand we tag your audit rate back to 2018 which was a historical point at 3 yearoveryear, my goal and my intention that those taxpayers will not see an increase in the 201818 rate. Maybe you can help me understand the difference in the chart that i have here and that was taken straight from the data book that i referenced a while ago. I pulled the data directly from your agencys b own book, the Inflation Reduction Act seems to have a concentration of audit against lower and middle class American People and in fact it looks about 95. 5 of the audits that have been conducted on folks making less than 500,000. Can you tell us what is the difference between your claim of the folks massie under making less than 400,000 on being targeted in my calculation that i referenced. I can explain this. What your table is reflecting is audits that were closed and andted in 2017 and 2018 2019. It takesears for an auditos to close and what you have for large corporations, the audit rate of 250 million or more in assets, the audit rate was 8. 8 in 2019 and we plan to get it to 22. 6 that will be reflected in our databook for a few years, the bars that you are demonstrating are reflecting a preinflation reduction or of audit activity that is come close up now what is been started since the Inflation Reduction Act and what will play out in future databooks is the bar chart will shift dramatically to the right as we ramp up as i mentioned from 8. 8 to 22. 6 for the largest corporations and from 11 to 15. 5 on wealthy individuals. Are you claiming that the audits prior to 2018 were targeting 95. 5 of the returns for folks less than 500,000 but we expect to see the lower. I think also your data is raw data versus percent audited so that would be another clarification to make, what im suggesting and im happy to brief you separately and get details in the databook in the future will be listed at 400,000 rather than 500,000 to help with the transparency, what im suggesting on a probability you are a Small Business your middle lowincome individual, your probability of audit has not changed is only the same probability that it was in 2018 and it will be that way for years and by the way 2018 is a historically low audit rate so there should be some degree of comfort in the fact that i am publicly committing to and transparentin through databook that we are not intending to or the team not to raise the audit rate above the 2018 level, the opposite is true for the higher filers rose stated publicly the intention the marching order is to raise the rates and this will be tested in public data in the future, the issue its going to take time for the audits in a large complex corporation take a long time before closeout. Wewe will announce with what we can do under the law we sent audit letters to 76 of the largest partnerships in the world but in terms of windows closeout, that will take some years before the closeout. I think i hear you say dont trust the data that is reported now and calibrated back to the sweet spot when the audits were issued in preInflation Reduction Act is trustworthy data ihe am saying the timing to assess whether we met the commitment not to increase audit rates over 400,000 is happening in real time, as i said in my testimony, tax year 23 that we just completed his first full tax year post Inflation Reduction Act. The audit of 23 taxpayers, that is more in the future than in the past in terms of the scheduled audits. Ive gone well beyond my time, i apologize. I would appreciate an opportunity to engage withth the office, better understanding. The data that is available now . It says something materially different than what we are hearing and would be the implication for folks making less than 400,000. I will be responsive to congressman carl and to you and get you what you need. Recognized by them Ranking Member myself that we have time for round two i know youre having so much fun that you want to continue this. Ill start with myself again, the irs advisory public report that was published in november of 23 recommended the reporting threshold of form w2 g be increased to 5000, as you know the threshold of 1200 has been a static amounts since 1977. In february 2024th i signed the letter with my appropriation colleagues on this issue with consideration commissioner, have you given update to w2 g threshold and according to the recommendation of the irs advisory committee. I am aware of this issue congressman i think is very valuable when we get and put from the taxpaying community and from our Advisory Council on when threshold may be out of date. As i mentioned throughout this hearing the determination of Something Like that of a regulatory nature and therefore the law would consult with me that the decision rests with treasurys office of tax policy in consultation with the secretary i know that this particular recommendation is under serious consideration and i can certainly provide you more widetail and update following ts hearing. Very great service. Another interesting half is in cannabis and trying to set the regulatory guidelines and when treasury secretary janet yellen and omb director young and margo discussed last week this a administration announce the plan to buy cannabis for the schedule one to schedule three, Legal Cannabis are unable to utilize the Banking System and are barred from certain taxes and forcing businesses to hire Armored Vehicles to transport the cash to make tax payments. The irs as well as local office, creating logistical insecurity issues forse all involved, commissioner have you seen or any improvements to the process with the Legal Cannabis pay their taxes and what are you recommendation for a safer and less burdensome for businesses. Congressman the announcement on the change in status for cannabis is recent and what we need to do in a moment like this is understand the implications this change will have on a whole variety of different elements of the part of the economy. As you mentioned what will their status be with respect to financial institutions, will they remain mostly a cashbased industry or will they move into something other than cash, all of these things are important moving pieces for the irs to determine how the submerging and changing industry is assessed at the right level and paying what the ao. There is more work to do, i think based on my reading of some ofmm your comments, youre asking all the right questions in terms of what do we need to anticipate given this change, we shouldnt just sit on our hands, we should be active and looking at what steps we need to take and we need to interact with athis community and make sure e understand and talkm. To them, typically when we engage with industriesri we find that their very amenable to discussing and getting a better understanding of clarity of what the going to be expected to do, certainty, tax certainty is one of the taxpayer bill of rights it is not a gooder thing if youre operating in ambiguity and stressful enough situation to pay her taxes but if you have ambiguity. My commitment is to work with you in this community to understand how this change of the industry make sure we have the right tax structure for them to operate in. Given the opportunity to havb Banking System involved in this process would make life a little oreasier for you because you wod be able to have a third party. I think history has demonstrated the thirdparty information and reporting it drives a lot of integrity and Quality Control into the system and it reduces the number of uncertainties and variables is often helpful to the taxpayer because theyre aware of what the irs was informed of an terms of income, in general, yes with anything im sure there are tensions, paperwork, burdens, privacy all these other issues that will surface and my job will be at the table to explain what the various tradeoffs from Tax Administration. Im urgent to discuss this with others and to make as fairly as possible, do you know what if any are available to cannabis business to navigate their payment and reporting compliance. Typically what happens when we have an issue like this or an emerging change in an industry, for example new currencies, new tax credits were people that previously did have eligibility now have on Car Dealerships in case of the Inflation Reduction Act, we build a collaboration and engagement, sometimes we can do faqs, sometimes webinars or roundtables. It seems like there has been a Material Change thats going to impact the industry and likely will warrant that we build the Stakeholder Engagement. Thank you, ive exceeded my timee. Now i refer to Ranking Member blair. Five minutes mr. Sherman. First of all mr. Commissioner you are appointed by donald trump, is accurate . No i was not appointed by donald trump, i was appointed by president biden. Excuse me. In any event im getting make my point anyway, when your predecessors and you essentially have represented a nonpartisan, bipartisan view of the revenue flow of the irs and the impact on his ability to do the job that has been given to it by the county recipient of the united states, without the inaccurate statement. My predecessor commissioner read it was a significant champion for the workforce in the dollars and that we needed to get the job done. Unfortunately mr. Edwards left because i wanted to refer to his chart. What was the time period for the chart, did anybody recognize it . Did you see anybody. You talk about the close of audits in 2023 as i recall and the reality because some audits take months but many especially take years, the closeout date is very different than the inception date. My point is i like that chart, that chart reflects the reality that under 400,000 if you have an audit, essentially on average its a 1 1, you spend 5 to do it and you say 5 in fraud or underpayment. If you audit millionaires you get 12 times expense so you have a 12 1. It is interesting that in the years in the last ten years, we have audited many, many, many more people under 400,000, why . It seems easy. You can conduct audits, you dont get a bunch of money, the payments are relatively small and because 90 of those, im just taking alumni end. Have every week, every biweekly every month we collected taxes, it is a corporation since the passthroughs come as a partnership, et cetera, et cetera that you dont do that with which are much larger which is why you have four, five, six, 12 1 return on the audit. I want to see, it makes our point to the extent you enunderfund enforcement and enforcement has been reduced 22 from 2010 2019. Hopefully we have more relevant recent statistics than that. Its been reduced 22 , returns are up 7 , that is a 39 difference there were 29 , it is not surprising that we have the 687 billion underpayment, why, not just because the cheats were people who dont pay what theyre supposed to pay. It is also because those who know that their 687 billion owed, they may never be caught. So not only are taxes somewhat of the great things about it is largely voluntary system one of the most voluntary in the world, i think were now at 87 or Something Like that, is that correct. North of 85 in the ballpark. Frankly to the extent we reduced enforcement with all due respect to all of us if we think maybe its due and maybe its not, im not good to pay it and if they catch me they catch me i pay it. Thats why this enforcement system is so critically important. It is also not unusual that those who make the most are audited in the least. My my my, isnt it nice that all those people that give us the big contributions and all that sort of stuff they wont look at you as much, they only look at the little guy a lot which is what that charge shows. I havent seen thatn chart befe but they have to analyze it, e itc, they dont make anything hardly, they are scraping by, they have it tough and we look at them, is there fried in thed itc, there absolutely is, why is there fraud in the itc because human beings are participating in in human beings want to try to play as little, me included but some people cheat, you dont collect much because they dont have much. But that is why so much time was spent because we want to see the little old lady driving the cadillac doing the food stamps at the grocery store. Mr. Chairman it concerns me that when people who are making a lot of money and i dont know the statistics on the corporations but 41 corporations are pay no taxes, my presumption theyre probably doing a illegally and we make the rules and we complain about it. If we make the rules in the following the rules, they dont pay taxes, god bless them, they got smart counts, smart lawyers, i hear that my colleagues say that all the time, did they go to jail . , no then they are obeying the law. If you dont like the fact that there is not playing any deal the laws have the deductions and what facts or whatever that they are taking. I know ive taken a longer time but this is a critical issue for defense for National Security, that is how we pay for National Security, for domestic security because thats how we pay for. Thats how we pay foror the administration of all ofrn the government and for his and his efforts. We need to come to grips with establishing a system where we dont have forget about the figures, lets say its only 400 billion, lets say were over strap related by 250 billion. We have a deficit, we need to be collecting everything that is owed, not a nickel more. 400,000 people on our property tax, very frankly, and i come from a high property tax state, maryland is a rich state. Very frankly on property taxes if you buybo a 2 milliondollar home and somebody down the road that can afford a 50000 home, you want them to subsidize your real estate. That would need to be popular in my district, i know that. Its not popular but i take that position because they want the federal government to subsidize what she says they voted for their schools, whatever, god bless them, dont look around the maryland taxpayer for the kansas or iowa taxpayer or even ohio taxpayer to subsidize what they decided to spend money on for their property taxes. That will be popular in my district but that is the way it is. Thank you very much. You have a tough job, work and have a markup and im going to work hard to get the money that we need as americans, not you, not the irs employee, we need as americans to fund a tax system that is fair which means everybody pays their fair share, thank you very much, mr. Chairman. You are welcome Ranking Member, now we recognize mrs. Hinson. Thank you, mr. Chairman a brief question obviously the erc tax cut in your testimony you say there is a moratorium processing the claims because of the fraud with that and i certainly appreciate the effort to combat the fraud but i am working with a lot of concern Business Owners that have the claims pending and those are refunds that those are rightfully owed. Some of the findings are worth hundreds of thousands of dollars so you can imagine when things e are tight at the difference between what they were planning to do and grow their business and add some jobs or wait on the dollars. So what is the agencys expected timeline to continue processing the erc claims. We are still processing claims receivedd before septembe moratorium started and since the moratorium we process more than 2 billion in claims, its those that were received after september 14 that we are not currently processing. To the timeline for when you might be processing. I dont have the timeline. What i stated earlier was after Filing Season we were going to conduct or during Filing Season and not forngdu Filing Season conducting an assessment of our inventory to figure out the best way to proceed. Unfortunately, congresswoman, there is a lotr of ineligible claims and our inventory and who is suffering through that, the eligible claims, they are small numbers byut hardtofind, one f the things that were doing and i urge her constituents that may be waiting we are working with our Taxpayer Advocate to move to the front of the line, hardship cases and anything that is become more urgent if you believe your truly eligible but weve been urging a lot of taxpayers who may know their ineligible to withdraw and weve had a was 400 million in withdrawals since we announce theat moratorium and then weve had voluntary disclosures for those that receive the payments and they knew that they were received in error and we have 777 million and people who voluntarily comey to us and return the ineligible credit. Some of those were without the companies it may know that theyie were involved. To get t to your question the most urgent need while were continuing to sort through a very challenging situation that we address those quickly. Are you paying interest on elthe claims. We areir required to. To know what the cost is when we look at giving you more money we want to make sure youre as efficient as possible. The cost of the interest. It iss largely offset by the cost that we save by holding onto the claim longer so it ends up being budget neutral, the interest cost, i can give you more data on that. I would encourage you not to hold back as many of the claims aswe possible. The tented is defined eligible want to process them as quickly as possible. I yield back mr. Chair. Thank you once again i have a little more technical questions. January the irs announced the total amount of recovery from wealthy individuals as a result of the ira funding was 520 million and thats about 5 of the 10 billion increase in revenue that c. B. O. Protected for fy23r and 24 and part of tht has a huge part to do with the c. B. O. s pension to over inflate benefits and under inflate the cost of anything we are evaluating, i would guess if we had more help and more people and more time we can probably get that done but going back to the issue on the telework that we touched on briefly i wanted to ask you specifically earlier this year you set a goal for employees to be in the office back to 50 of the time in may. How many days per pay period do you require the dcbased managers by collective bargaining to be physically inal the office. It is half so if its ten days in ald pay period it woulde five days, let me also offer what we are requiring is consistency with the governmentwide standard issued by the management and budget. Part of what we evaluate with respect to telework is a couple of things, are we achieving our productivity goals, we had a strong Filing Season so would many ways our productivity goals were achieved we have to stay competitive in the labor market and we want to make sure we are providing good flexibility versus what other employers might provide and we want to meet the governmentwide standards, there is a lot to volunteer. Were talking about the wimpy governmentwide standards and the practices put in under code to be temporary and coming out of covid and they have been made permanent. Productivity from working at home, but, hey, we dont have the facility usage so theres saves there. Can you submit to us what savings weve been able to gather . Are there offices youve been able to close down, maintenance mr. Werfel believe it or not, its mixed. In some locations we have space issues. Because people are shifting to smaller telework footprints over time. And working onsite. In some cases we have excess real estate and were working to offload that real estate. Its not always the case that you lose productivity when it is not always a goose to lose her productivity and people working offsite. A lot of it depends on the individual. On the situation. Irs has committed Significant Resource to ensuring taxpayers to navigate the 7000 page tax code pays the proper amount which is should. We are talking about the treasury report is staggering 33 of proper payments earned income tax credit. What are you doing to reduce those improper payments . This is a really important point. Its the high improper payment rate that ith believe led it to the large number of audits in this program. We have to balance it. There is a part of the error rate thats more concerning that another part. Direct fraud direct fraud part of that is the dependent child lives with the parent rather than six months out of the year thats the eligibility c issue. Constrained resource environment we have to make choices. The 33 . We can get more information on that. A large part of the t error is more of this technicaler error t that number of months he lived with your dependent child. My commitment is his go after and correct the errors that are more nefarious. That are more likely to compromise trust in the tax system. I wish we could get all of the error but we have to prioritize. I dont have any reason to think anything about these questions except you mentioned the irs does not sell the data. Happy to hear that that sparked a couple questions for me. You purchasee data too. Pickwick to be purchase data . I dontt believe the purchase data. Maybe we purchase a benchmark information . Whats on individuals, people. We do not pickwick suit share data with other agencies or do other agencies. Yes underct section 6103 of e code there are statutorily established data sharing environments. For example we share data with hhs. We sure the Education Department aligning with eligibility. But otherwise not prescribed in section 610 through do not yshare. Thank you very much i yield back. Thank you. All good things must come to an end. [laughter] and it members like to submit questions for the record please submit any questions for the record the next seven days. I would ask you as i have from other people in the past to try to respond to those as you would within 15 Business Days after then, receipt. Again i like to thank you for being here today the opportunity to have this discourse with you in this meeting is now concluded. [inaudible conversations] [inaudible conversations] [background noises] [background noises] [inaudible conversations] book to become every sunday on cspan2 leading authors discussin their latest nonfictin books. At 9 15 p. M. Eastern Mike Gonzalez are arguing the American House embrace radical marxism that threatens the future of the united states. Their book nexgen marxism. At 10 00 p. 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Giving you a front receipt to democracy. Next discussion on report for the National Academy on reducing intergenerational poverty topics include the drivers and root causes of poverty, Racial Disparities access to hasnt labored income challenges academics and policy advocates will touch upon low income communities can improve quality of life for families experiencing poverty