I am delighted to im delighted tote welcome our esteemed panelist to discuss the Agencies Agency has implement solutions to all should have all full biography and to give a brief rundown joined by Fred Goldberg who had multiple irs treasury leadership roles and assistant secretary of treasury. And then to serve as irs commissioner through 2002 and a founder and director of shrink that tax gap and currently a Senior Advisor focus primarily on investments in the field of it and Business Services including leadership roles including cofounding American Management systems and finally serving as irs commissioner 2013 through 2017 is now retired previous work includes various positions at freddie mac omb as well aso the local dc government. Thank you to the panelists once again commissioner all of you were put through the ringer by lawmakers at multiple points my memories of your grilling are the freshest what advice would you give to the recently announced nominee for the commissioner as he starts to embark on this process . It is a unique experience over the last ten or 12 years then to spend time to be transparent and bring them along on the journey. And with the public is saying in response to that. So with that Taxpayers Service element to be the most interested in this long as danny is transparent about the goals and are realistic he will be fine. Is 80 billion to much or too little . Over half weref allocated to enforcement 4 percent for Customer Service. Is that the right breakdown . Is it mistake that it has attracted a lot of divisiveness. Its important to keep in mind over a tenure. Starting to the current base funding. I believe it is manageable and in terms of the allocation we use the words enforcement it is a means to compliance thinking about what the service does 70 percent of the correspondence audit and then process when it comes to a taxpayer and reach out to the irs. Ands the interaction should be slow and seamless and to a prompt resolution. Unfortunately with cbo the Current System does not score as classically referred to as service it has as much of an impact so i really believe to be properly accounted for. With the political rhetoric. You think the agency has the flexibility that it needs . Than it has the authority to make that work well. This is doable. I believe it will happen i believe the administration has the flexibility if the commissionerer is candid and open and brings congress along on the journey than it will work out. Commissioner what do you think . I think that i sign on to the point it is called service and enforcement but from the taxpayer point of view what frustrates taxpayers are things funded under the enforcement chain so if you send inct a return and maybe the irs has an error that you did not pay that you are supposed to then you have to call them up to communicator fix that. If it was done from a notice is funded by enforcement from the taxpayer point of view. In the sense that you need to interact with the irs to resolve the problem. By the way there is 175 million notices issued per year almost all are part of the enforcement chain they all have to be responded to and resolved by the taxpayer and the irs. Almost all are funded by the enforcementnt appropriation. So it has to be done but the bottom line is the irs has plenty of flexibility to do but it needs to do to make sure taxpayers are servedd properly. One other area of great flexibility it depends upon technologyni and the funding and modernization will make it much easier for taxpayers. And allowing them to interact with the irs on online. But yet you can do everything online and for all of that to happen is in the it budget not the service budget. What i hear is that they are concerned more enforcement many is that day in particular coming under audit not only for more art it audits that better targeted audits. And those who are not compliant are more likely to be flagged or audited. One proposal that you i were a proponent of doing more Financial Reporting requirements hasnt happened so what else could be done in your view different kinds of technology to make the auditing process better targeted to ease those fears . Thats one of the most important points of the whole program. I know people think of auditing that amount the irs does if you double it does not even make a a dent. So what really matters is the use of data where there is the underreporting of income or noncompliance. And when the irs uses data is effective and efficient and it does that with the matching program and you can match it up and what is really the opportunity is a goes much further along that road. Just to tell you how much data the irs has. It almost receives 2 billion Information Reports like banks that report 18 trillion. That is trillions of dollars of income that is information the irs has that it can use to determine who may or may not be underreporting. Unfortunatelyol and largely due to lack of funding and technology investment, the irs uses a tiny fraction of that. Over one. 2 trillion dollars of income through passthrough l businesses of partnerships and s corp. In the business doesnt pay tax and that comes in on the k1. The irs hasas no automated tsystem but has no systematic go on and on theres another report that the congress has authorized greaterr reporting on the 1099 k dealing with certain payments like rental income from airbnb. That is the enormous untapped opportunity. On the other side of the irs does not do that, it will result unfortunately into many audits that are not productive. Look at high income audits they were from 20 or 40 percent is no change. And thats an understatement because from our experience personally we know its much larger with very small changes. The irs is stuck with other methods which resulted in a large amount of audits that do not need to be done and it isnt using the data that it has. Doesnt mean there dont have to be audits and there has been a decline. But john hasas indicated how far down it has gone. You do need them adjust increasing auditing will not solve the problem. And with one statistic if you take the total amount of money the irs currently gets back from all audited ten. 5 billion per year which is less than 2 percent. If you double that immediately with its funding which they could not do that still only makes a minor intent not even as much as cbo would estimate. So it is clear if the irs wants to do investment serve but to shrink the tax cap come in has to use data and technology and thats the only way it can happen. But the auditing has to be leveraged in this will take some time while the out longterm nature is important and it cannot be done immediately. Picking up on that question this administration has said is targeting wealthy individuals and corporations for theem increased enforcement activity and secretary yellen has directed the irs not to use Additional Funding for those of less than 400,000 to historical levels. Is that a realistic restriction . How is that implemented if they dont know the real income without the audit how can that be done its another question from taxpayers. And those that the irs does teak keep track of the no change rate and then the audit rate. And that is there more agents and there were ten or 12 years ago. And in the increase of the rate of audits. And to be some increased to the back to where there were ten or 12 years ago. But the critical point if you can improve the technology with better Data Analytics its across the board and if you get the budget to understand and so back its not to audit then there is recognize theres nothing toog be gained by wasting taxpayer time with overtime to get better Data Analytics and Artificial Intelligence and what most people dont realize is be pick a partnership and today they have thousandsg of partners and those partnerships are of thousands it has been very limited so basically a lot are not audited at all so thats where we have better Data Analytics and what the cbo said if not more. I do not think getting audit coverage for low or middle income individuals or businesses is necessary or evenn appropriate. There is the raw underreporting but when you talk large complex partnerships and High Net Worth individuals theres a lot of things that happen with the complex partnerships structures and offshore structures. Part of it is in the critical importance for data and research is understanding the structures and then experience of those they are not equipped at all to understand what the structures are and what the techniques are those are permitted by statute. Research is important and with underreported income is the function are the result then you need to understand that. If you like it then go change the law. Dont try to climb the mountain if you can do it under the existing law. This is not hiring about is many agents as you can. There would be an utter and complete failure the irs understands that treasury understands that. Commissioner goldberg. I have been presenting these from honest taxpayers or not a lot of these arrangements are complex is more money allocated for compliance where do youax begin if the answer is no . Thats a y holy grail for 40 years. But its not moving in that direction. You have the chief counsel office. And those that have been eroding in certain respects the only way to deal with compliance is to do audits. That is a mistake treasury does policy. The chief counsel supports the commissioner to pursue whatever mission they believe should be pursued. Its also an important tool that is an increasing trend for another mistake the treasury got aak giant increase in funding it is an integrated effort. That will not work. That was sort of a rhetoricali question. It seems like the agency will always be outgunned. With tax policy and tax law the tax code was this high. Now you have thousands of regulations to go along with it what people dont understand the irs is a social Welfare Agency with 100 billion of refunds of tax credits beyond the stimulus payment. And those that dont like. It is exactly right. In the best thing for taxpayers would be the implication and then to pay your taxes i didnt take hours and hours and thousands of dollars there is a major move to go for some time. And with that complexity the answer is that more regulation but couldnt we get rid of some of thehe stuff . And the fact that there is complexity you have to take the tax code the way it is because if it is simplified you will not do your job. Increasing complexity and it only decreases the importance and to provide Reasonable Service with those who have a problem. But not toot provide assistance that they need to efficiently. That has to be the top compliance. But as a solution to compliance because to say i will hand a revenue agent with some type of agent it is a very efficient use of resources. And with no change and a lot of frustration so if we haveof this attack we have to find better ways to help taxpayers cope and help the irs cope to the use of the data and technology. Complexity is then unmitigated disaster. If you think about it that way i believe they have the ability to keep that coward. There has been previous times when congress appropriated money for upgrades i think the Business System is decades in progress. What is different about this time . Is it just the scale of the funding to make it more optimisticic but it does mean that the past efforts have been unsuccessful. But then i will get to why people think that way. But no question if they have been successful. If you look at the irs today there have been massive improvements the way it uses technology. In the best couple of examplespl that are obvious are the fact over 90 percent are up from none when i was commissioner. Second there is five or 600 million interactions per year taxpayers getting information from websites that did not exist a few years ago. Without that you couldve functioned and then on tope of that but even the gao recognizes that. So a key point is that gao which is the highest risk agency to the irs off that list about eight years ago. So although the perception is accurate it hasnt been a failure and it has been constrained by funding. How much . You will give you one data point. J. P. Morgan will spend 12 million on technology about the same as the entire irs budget. Not just the it part and j. P. Morgan doesnt have as many customers as the irs has taxpayers. And then to say that they depend on the master files. Ter x processing system. Which are very old. And yes they are. Its very, very slow to replace those. Over time they have to be replaced. But guess what, every Large Organization i know if that include all of the bank some of which have been on the board of how these old legacy systems. Every business has them. They have to be replaced very slowly because you cannot do them quickly. The irs is older it may be an worse but has that basic issue. But that did not stop the irs from doing the things i cited. Or does have to stop them in the future especially if they get more funding. What is the solution . The solution is the replacement of the old legacy system does have to be done and has to be done slowly because it cannot be done quickly. That has to go on in the background. That does not have to have proper funding for that does not have to impede more rapid progress on things that affect taxpayers that can improve service like selfservice accounts, started on that journey even with things like self service installment it goes much faster with Additional Funding. Quick something i would just add, supportive think charles said. They key part of the 1010 year funding is that it is ten years. Its not episodically because most the done by contract but you can only contract for a year end sometimes you dont even know it until five months into the event the end of year you have no idea what your money for the next year. One year the modernization budget was cut by 50 of the last minute. Which threw everything into chaos. Have the money over a longer period of time you not only can plan for ten years and incremental modules but being able to contract in that context is a lot better and more efficient than the annual stop and start, stop and start. We have the money for next are now we have to get the contractor or extend it. I think ten years has a significant positive impact on the bill to the irs to do these things have been talking about. One last point catherine which is that are there lessons, yes . The lessons and all the things i said its a very strong leadership from the top is necessary. Its not necessarily Technology Leadership it is Technology Leadership but its really the whole leadership of the agency. There are so many important crosscutting decisions that have to be made about how you allocate money for technology and how you reduce risk and i could keep going on. But the leadership has to be engaged in the issue of applying technology to improve the way the irs works. Its not something you can delegate to a bunch of it people. Catherine, part of this to me is storytelling. Like what is really going on. And picking up on the two points that charles made and jon made, real things are happening. Theres a guy named darren who is ahead of collection with the support of the commissioner with support of the tech folks. They put in place a system on collections where you can call and get general questions answered. That has resulted in a 70 and taxpayers can choose if they want to get a machine to answer my question or some person. It has three dues to phone calls to life people by 70 . The bigger deal is you can call, if you call the irs you can call in number its always going to be answered. You get to set the terms of your installment agreement. Up to six years. And if life happens and you want to defer more payments you can do that one 100 of the time. These are real, real things the taxpayer has had a very couple of blogs about the 70 plus on the audit. The something called taxpayer digital communications, leave it to the irs to use those initials. This permits email interactions with a Single Person who is responsible for your case. They are going to be launching something about document upload tool. And aaron has written about this. What this does in his correspondence audits by definition are handled by passing things back and forth. This allows the taxpayer to upload documents on his cell phone from computer and get it to the irs. These are really big deals. Ci is the head of the pack in using technology to materially improve how you develop and how you identify criminal cases which improves compliance because if theyre out there doing their job right height has an impact. All of these things are happening now. And they have been before the 80 billion. The point is the irs has incredibly talented folks who know how to do this. But is it jon said its been feast or famine every year. And his charles said theres not enough time how to plan how to do this. Taking the collections of technology can be applied to taxpayer assistance. It can be applied to these kinds of audits. But there are a couple of lessons here. One, these kinds of initiatives dont all succeed. Progress in risk are joint at the hip. Not all of this is going to work. And none of it is going to be perfect out of the box. It is going to need to improve it. I think one of the big challenges that all of us have his support these efforts to do this differently. But they are not all going to work. Its like i think you are the best there is catherine but it goes to the press. How do you deal with the inevitable stakes it goes back to johns point. This is what we are going to try to do. And if it doesnt work raise your hand and say it didnt work. And the oversight function congress is complicated. Gao and cbo art gems. They do a fair and balanced. That is whats going to happen over the next ten years. Im off my podium thank you. One thing i have heard i think all of you mentioned so far is the importance of the reliability of this ten year funding you can make longterm contracts you dont have to erupt the appropriators from yeartoyear. One concern people have raised is congress did not actually constructing a guard rails between the 80 billiondollar whats to prevent how should the agency think about those kinds of risks . This funding stream was supposed to be reliable but there is still there is still some Political Risk attached to it. Are always is. I think it goes back to what weve been talking about in terms of having Congress Come along on the journey. But the congress has to understand if they cut it back or they losing . There are improvements going on and improvements that could happen and the next six, 12, 18, 24 months you dont want to take five years to get done. People have to know about them, they have to expect them, they have to be told about them when they are accomplished. When youre saying i want to cut back your 15 milliondollar budget by 5 billion congress has to understand the impact on their constituents. There is no democratic or republican way to run the irs. Youre trying to make it efficient and effective. And the people affected when it doesnt work well are republicans as well as democrats and independents. Its the taxpayers of the country and their every bite is constituent. So i think often Times Congress sometimes republicans who are anxious to cut the irs that they dont assemble they may be helping tax cheats but theyre making life much more difficult for their constituents are missing great opportunities for the constituents to have a better experience with the irs. For a lot of people the only interaction of the government is when they file their taxes. And if congress has ability to make that relationship get better, but Congress Needs to understand and their constituency to understand it. Are there things you think that irs can get done quickly to show progress to taxpayers and build more support for sustaining funding and potentially insulate the agency against calls for more future funding cuts . These are longterm projects. There things in the near term that would build more allies . Whats the first thing you can do and theyre already doing it is higher for people to answer the phones. The fact that only 11 of calls on through last year obviously it is abysmal. Terrible for the taxpayers poor for that poor people simply having more people to answer the phone believe the Taxpayer Service much better but that funding is coming right now the Taxpayer Service. Had a number of good examples to the extent that you can do individual projects like that and charles is right we spent a lot of time improving refund issues prescribed 800,000 taxpayers a year who no longer have their returns are frozen because someone else filed a return before them. The technology and the work has been done for some it looks like theyre filing your return it is stopped in the irs contact you and says is that your return . So again it goes back to transparency. I think there are a significant number of incremental steps the taxpayer will find willing to make life much easier for them but i love the story being able to upload documents rather than mailing them and hope they get through. Congress needs to see those. Nice understand the impact and needs to understand not everything is going to work. But when they work their wonderful steps forward and made possible. But it is still true theres nothing to keep appropriators from saying lets just cut their budget and spend the money somewhere else they can take it out of the 80 billion per they do that very often they undermine the ability of the irs to improve service and undermine the ability. Let me just say it not only all agree that but i can pinpoint it this way. This is why it is so important for congress to act on a hearing in a confirmation of the new commissioner. Really the commissioner is the person has to do two things along these lines but one to set the priorities internally so theres hundreds of things the irs could be doing. No matter how much money you have you cannot do them all. Setting the priorities that can be done with a Reasonable Risk and will have the impact is an internal job. But externally as fred has said building the relationships of congress and communicating this is what is going to happen over the next six months, the next year and bringing that message home, those stories home and the public can appreciate what progress is being made. So really theres no substitute for confirmed commissioner that can do those two things progressive and audience question thats relevant to this discussion but how can the irs improve Public Perception of trust in the agency especially in an age of misinformation and conspiracy . How can the average taxpayer better understand like giving the irs 80 billion is necessary and important to them . Is there anything any of you want to add to address that question . I think fred touched on it. Its the stories, the information sharing. Most people can express a lot and congress to mention Information Technology their eyes glaze over. What you need to do for the public as well as the congress is how people understand this is what we are trying to do this is how its getting better. And remind them of all the changes that of already been done. 90 the taxpayers online is stunning. They used to be ten Processing Centers that process 90 the paper returns we are down headed to two of those in for taxpayers its just a lot easier to have it happen that way. I do think there will always be the stories slip people in Congress Talk about the irs coming after you with an ar15. What needs to happen is you need that people understand the good things that are going on. I used to travel around the country and see irs employees but i understand people ask you where you work you see the government and they say where in the government you work . You say work in the Treasury Department they say where in the treasury work . While i work on the irs. At that time that one third thousand people. We need one third thousand investors for the Internal Revenue service. All of you are on school boards. You are all parents, you are soccer coaches youre out in the Community People know you and respect you. And if they understand that you work for the irs and their good people may be the agencys staff by really good people. Its easy for me too say we need to have wondered thousand ambassadors. My bet is a lot of people do not to their neighbors, friends, colleagues work for the Internal Revenue service its got a big part of the story. It is a very big job for the commissioner though. I dont just for myself i traveled almost every week out to different parts of the country talking to local people. I will say there are a lot of other constituencies that can help with this. You have many taxpayers use practitioners. Probably 70 or 60 probably some sort of a practitioner to help them file for the lawyers, the accountants, many people like that are involved with the irs. They can be helpful if you work with them and make them partners. Kathryn theres a very interesting report on this kind of thing with this group of taxpayers a couple of years ago. And part of this is the irs open the windows, open up doors, let the drawbridge down. Because the accounting profession is a really big deal. These programs are launching. If you are private sector business obviously sales tell you something. The private sector businesses asked their customers hows it going . Its done independently the irs can do all of that. I believe they are starting to do it. I believe with the new leadership i believe in the new commissioner. We are all doing this together. And the proof that it is working is what the people say. [inaudible] one thing i think has been implicit in all three of your comments is the importance of having the right talent at the agency. Whether as ambassadors to the world or otherwise. And i am wondering if any of you want to talk about the challenges of attracting auditors and tax lawyers who can go toe to toe with those in the private sector . Or competing with private for programmers and experts in ai Customer Account challenging is at the higher people given the wages the agency pays as well as some of these Public Perception of what it means to be the tax man . If you dont know one from your local school board or otherwise. I dont know commissioner few more most recently. It is the talent. But i was surprised when i was there we lost 20000 employees when i was there and we did not hire a lot of people. Occasionally wed reach out and have an opening at one point were going to hire 500. I was delighted and gratified by the number of applicants we had. These were not technical positions even for technologists there are a lot of people were interested in Public Service and interested in understand the mission of the irs. It touches virtually every american family. So i think, especially in Cyber Security in the High Technology areas everybody, every companies out there trying to find the best people they can you cannot underestimate the challenge. My hope is streamline critical pay will be installed so the irs can hire people quickly rather than saying youre a terrific way for three or four months and will get back to you. They could pay incrementally more than the highest government salary just to show to technology position. But ultimately the agency itself is staffed with people who joined it because they believe about Public Service in the mission of the agency. I continue to be pleased and delighted especially with younger people who are committed to Public Service and want to make a contribution. As commissioner you want to make a contribution and see a real change the irs is going to be a great place for you. I think i had the same experience the one year that we were able to attract very qualified people. We have to sell the mission. Why do people join the military . They dont get paid a lot they have a very demanding situation, they get deployed. They have a personal risk that can be deployed in very dangerous places. In the joint and large part because of the mission and the commitment. An absolute from my experience that is possible the irs. I think the fact congress has provided some funding longterm show support for that mission. Now the commissioner and his team is going to have to convey that to people get that across and provide the right support. What has to be done in the right way its not automatic. But the opportunity is there. Yes, pay is important and you have to be reasonable in your pay. Thats what some of the authorities are important. No one is going to join the irs of the military to get the highest pay they have to get adequate pay they have to believe in the mission. And i believe thats entirely possible to do for my own practical experience during some of the period on as of the irs and i did have some hiring authority. I agree with what both are saying. But there is another dimension to this. Particularly on the Technology Side is contracting out. And charles you know, that is done frequently. There are folks in the private sector who know how to do this stuff. Have done this stuff and that avoids issues of internal hiring. Technologies benefield a bit and most of my life. Almost the entire federal government does almost all of its contract. That doesnt mean you dont need internal people you do pretty neat leadership and you need a cadre. But as far as the large portion of the work it is almost always done by contract rate thats true in the private sector to most private Sector Companies do a lot of their Technology Work by contract. Thats just the most efficient way to do it. So thats another option you have. Getting back to the question of budgeting. Weve been talking a lot about outlays. One of the big debates but has been held over this infusion of money into the agency has been what will the payoff be . Theres been some debate how long it would actually take to realize some of that additional enforcement revenue given how long it takes to higher up, to revamp some of the processes invest in the technology and et cetera. Do any of you have thoughts on that timeframe . I think as jon said there are very specific things that could be done to improve the way the agency works with taxpayers. In quarterly increments in the first year or two years some of that will have an impact on compliance. That will take a few years. Some of that requires hire people take a while to deploy it will be first larger impact and lets call traditional enforcement dollars would be later. Charles is right, when you cut the audit rate by 50 some of the audience were no change. But significantly large corporations even though youre not auditing everybody by a long shot. Youre down in some places by 60 or 70 simply getting back to the Historic Office audit rate restore some significant amounts. Push back to the planning issue and the leadership issue you need to lay all this out. This is what we expect its done over three or four years. And according against it. Is not something you going to spend all at once. And so they understand that as long as you are making progress and as long as youre being candid about it and people can see what you are accomplishing and investing along the way. They can understand if they take the money away youre not going to college and the negative impact that will have on taxpayers. And our last a few minutes and wondering if all of you like to give some concluding thoughts about the plan the agency is supposed to be developing right now, and Operational Plan. Secretary yellen has directed the irs to report back to her some sort of Operational Plan by february. What would you like to see in it . What are you looking for and how much detail you expecting . What would be a good start in your review . What are sort of the core elements that you think need to be included . I will say numbers. I think if you produce a plan and i love the agencys got a great workforce. As a Strategic Plan that has almost no numbers in it. I think if this is going to work youre going to have to have this is what were going to accomplish with some specifically. Whether its raising a couple years ago some 11 to one 100 or 90 and people get through on an average of two or three hours. In the short run got to have things out there people can see where they are making progress or not maybe dont make all the goal but 80 they will still know where you are. The longerterm challenges some of this is going be hard to project youre going to have to say this is where we are going. Corporations have fiveyear Strategic Plans the budget for the next year. Congress needs to understand. I want you to answer last. I checked out. Com. [laughter] thanks for the commercial. Practice document you want to look at the Business Case for transformation. My only comment before we turn it over to the guy whos been on this for 20 years and has done this and jon has to, is set priorities, set measurable goals and report on how you did it. Its all yours charles. Of course i agree with that especially the commercial for shrink the text. This is to me the single thing i want to leave with. That is very, very unfortunate if that happens. If the commissioners confirmed in this session of congress and gets in before the end of the calendar year, that will give that person time maybe it will take longer than february but it will give the person time to really put their stamp on this plan and stand behind it and be accountable for it with the metrics and the longer term longertermgoals and all of tha. If not, then we have an odd situation where Congress Passed a provided a bigger luck but they dont put the engineer and the caveat. Thats not good. So i hope they will take actionr comments i will turn back over to janet. Thank you for providing your insights and your knowledge. The second panel is going to consist of three experts that are top in the agencies that will have an independent role in evaluating the outcomes of the 80 billiondollar investments. Since march 2020, the National Taxpayer advocate has more than 35 Years Experience in the tax law spanning 15 years in the office at the irs and 20 years in the Accounting Firm of kpmg where she retired in 2019 is a tax managing director in charge of the tax controversy practice in the region. John is the director of tax analysis at the Congressional Budget Office where he is responsible for managing the work of the analysis division. John came to cbo in 2016 following 18 years at the department of treasurys office tax analysis. At the agency he most recently was special assistant to the director and before that a director of revenue estimating. Jerry is a director at the Government Accountability office in the Strategic Issues team. He joined in 1991 and there for the past decade has been overseeing the audits and a range of issues related to the Tax Administration and tax policy. In the last panel we ended on a note of what they hope for in terms of the plan. You are on the inside. Whats been going on now in terms of mobilizing and developing the plan that is due to the secretary of treasury in february, what is happening over there . You are muted. Can you hear me now . So theres been a lot of activity going on within the building and actually treasury and a number of executives began having these meetings and discussions long before the Inflation Reduction Act was passed. The thought process was we were hopeful that there would be Additional Funding but also the treasury wanted to look forward on transformational issues. The focus has been transformational issues so needless to say as they focus its lien in improving the Tax Administration, improving service with a focus on fair and equitable system while also protecting taxpayer rights. So my opinion is technology is going to be to improving the service the taxpayers as well as practitioners and there isnt a lot of discussion. There are daily meetings, weekly briefings. Irs is trying to see how to think outside the box. We are going from the era of the flintstones and going into the jetsons. We are going to try to skip the basics and go to what is going to be transformational in the next couple of years, where do we see the irs as what i would refer to as the Tax Administration utopia, what is the goal and how can we get there. Towards that end what will you be looking for in this plan, what kind of information would you find in that career . We will be looking for a shortterm plan to address the immediate needs particularly in the area of the Taxpayer Service. And measures and plans to reduce all the processing backlogs that we have heard so much about. More specifically gao is looking at steps that they are taking or could take to address the recommendations in the area of Taxpayer Service but more broadly if the commission has noted service has helped during the Filing Season to compliance and enforcement activities and as we sit here today revealing 200 actionable recommendations that gao has made that remain open and many of those recommendations irs fully agrees with our higher priorities were that prevented them from taking the action that we recommended to sort of help out the agency back in june we issued a letter designating 255200 recommendations as high priority the top leadership should be focused on and its for the data recommendations focused on improving the Taxpayer Service including key basic functions improving the communication with taxpayers whether digitally or correspondence backlogs and enhancing Digital Services so that is the first and the more immediate. Second, as many in the Previous Panel talked about, we will be looking for a longerterm vision for the future of the Tax Administration that will address not only the gaps in the Technology Upgrades but also how the mission to transform in the future and given the funding provided this is a unique opportunity to transform the Tax Administration. The irs has been prolific the last decade or so putting forward different plans and i think many listening today will remember the blueprint back in the early 2,000 how it was replaced by service on demand and the commissioner came in and was the future. We have the Taxpayer First act in 2021 which was an enormous effort they put forth and comprehensive in terms of the reorganization as well as the focus on training and Customer Service. The key difference this time around is the irs has the funding to make or bring these plans to fruition. And with that said they arent going about reinventing the wheel. Hopefully it is leveraging the ideas and of the analysis that went to the different plans that i mentioned. But finally i would say when the department of security was viewed and we gathered outside experts and focused on what makes the transformation successful and the number one criteria or factors that was brought up was ensuring the top leadership guides the transformation and the discussion that we just heard about and the commission confirmed quickly so he is on board and he can set the direction and the pace and the tone for the rationale that brings all the various stakeholders in particular the congress together but also the employees into the industry stakeholders. I will stop here but there are a number of key practices that should be focused on and many of them were brought out by the commissioners and the prior discussion but that is what we are looking for. We have a lot of work to do and we will be working closely with our clients and oversight committees to ensure the proper oversight of the funding. Theres a rather unique and Important Role in the Agency Responsible for estimating the revenues that were associated. We saw in the course of the summer that the estimate to change as the legislation changed. Now going into. When it comes to estimating the budget baseline probably that will be done after the february plan is released. What kind of things would be included or might affect the estimates you give the legislation . The 80 billion the question is how would that be spread out so the projections we did with the legislation from what we heard from the services with treasury was largely who they want to hire and the challenge and the need to invest in the legislation and out of the legislation. So that is the first piece that we will be looking at again so getting feedback and having a plan will be helpful but as the economy evolves that is the removal of the authorities that makes it more difficult within the earlier legislation but more importantly what are you going to emphasize first or how do you balance the Different Things for the operations or the idea assessments so we will be looking at that again. Once we get that piece then we turn to the revenue and we estimate it will be a multiple of the spending but the revenues follow. Its not going to happen spontaneous but i think we heard but we want to hear more they answer the phone and do those kind of things and then have people not to get their questions answered but that may have the consequence of the revenue that will follow for years after folks are hired. We want to get a sense of what type of activities there are and what will be the focus and theres more information we can get on that that would be very helpful for the revenue projection. Let me followup and segue to the next question but i will get to your portion of the question which is, and i admit i use to do those, so im not trying to give away anything here, but back in the day the estimates were largely based on changes in the enforcement budget. Do you or will you take into account the impact on compliance and indirectly on revenues of increases . We thought hard about this in the legislation over the past two years the different allocations among the different activities. We recognized this isnt just the enforcement account that matters. If youre going to higher hire enforcement personnel you need to make sure that you have the it support for them and then also additional calls on the ine call center that they get answered and that it gets to all the parties in the service that need it. Really tracing i think we have tried to make sure when we thought about it, is answering the phone going to be the bottleneck, it support, or the front page enforcement thats going to be the bottleneck so to that extent i think we do recognize the service. We are cognizant that there is working together and we are looking at further legislation to make sure people understand cutting things from Customer Service operation support would have similar effects this would be super helpful to us but we are trying to make sure that we reflect that. For the job of the revenue estimated and also i think that i would join you in a plea to any students out there looking for topics to consider this as a topic for your dissertation. But talking about Customer Service, the allocation of the funds over half of it goes into the enforcement account. 40 of it goes into operation support and technology modernization. Over the next decade 3 billion was allocated to the account called Customer Service. In the last session the commissioners were making the point that the borders between these accounts are not fixed and there are some things they would think of as a service such as you get a letter from the irs saying youre under audit and someone calls into the phone isnt answered that is a form of Customer Service but theres other kind that i dont think interact with enforcement. Do you think the 3 billion is sufficient to cover what you think is necessary for improvements in Customer Service . Can we hear her . Yes. I always think service should get a larger allocation and a similar to the former commissioners, i think it is how you define the word service and the Taxpayer Advocate service. A lot of people look at us as a service that we are the downstream consequence of an enforcement where people are having a challenge and they reach out to our office for assistance and that is under the bucket of service so it really depends on how you define service as to whether the amounts are appropriate. I do think that its a large sum of money and thank you for that, so i think it gets down to the irs prioritizing what we need to do and similar, our office says organizations throughout the years, a lot has agreed with and a lot of them are itbased and a lot of them are Service Based but funding was a problem, so the challenge the irs is going to have now is taking all of those priorities with respect to the surface modernization and let them figure out the enforcement piece and then trying to prioritize what absolutely has to get done and what do we need to get done quicker. We are all painfully aware that its been a challenge for the taxpayers and practitioners and i think this sort of vicious cycle but until we get the paper process to get the correspondence done, it will continue to ring so weve got to focus, the irs has to put their focus on getting the paper behind them because otherwise the calls are going to continue to come in and we are going to have to continue that is cycle. Irs has picked up the pace of the return. They are still not where we would like them to be that theyve moved a lot of resources over and so they are moving quicker than they were last year, so fingers crossed but im not as optimistic that we are going to start compared to the pre covid years we will have to carry over in this upcoming Filing Season which unfortunately that is technically Service Getting that done so again its sort of a vicious cycle. We need to get that fixed so we can focus on where we see the future going. We really look at the 1040. As of today the latest reports are down to 2. 3 million which is great, but we still have about 4 million of the business returns and then an additional 6 million returns. Within a couple million of the 941s and then another four or 5 million of correspondence so when you start adding it up the number is built larger than it needs to be as carrying over to the next fiscal year so they have to continue to get those numbers down. It could be paper or Electronic Filing so for example, identity theft. Theres about 2. 7 or 2. 8 million returns that fail the filter that kicked them out of the potential fraud and the irs needs to reach out to verify is this your return or not. The challenge is because the resources it is taking about a year to resolve the cases. And that is just if you are one of the 2. 8 million, it is way too long. We need to speed up the process. Informations most of them are coming in electronically but still its also causing issues for the irs. I think any paper at this point im sorry, are you asking jim . We reported on this a couple of years back and at the time it was 3. 5 billion and information returns and we noted about 1 was coming which sounds small but 1 of the three or 4 billion was 30 or 40 million pieces of paper plus or minus a couple million. Definitely its kryptonite both on the tax return side as well as on the information reporting side. We talk about the pieces of paper or the millions or billions of forms. To the extent it isnt fully utilizing getting the value out of that information, its why people have to call and getting back into the information, some of that is transcribed but can be introduced in the transcription process, so that will generate flags and notices so to the extent they can move away from information returns and cant improve the quality of the information to the extent that it has all that information in the format it can also extract more value for the compliance purposes and also i think this is very important reducing the burden on the compliance or good taxpayers so the irs isnt holding up the tax return or sending them notices simply because they are not fully utilizing data or introducing the stakes once they have the information. Let me follow up on that because a lot of the focus on the paper flailing has been on how difficult it is to get the information manually in printed into the master file and so forth and the impact that that has had but not as you mentioned there can be errors introduced and theres also the case of paper filing the paper returns and information returns not all the mission can be transcribed because of the work that weve imposed. What are the consequences then if the irs isnt even able to use all of the information that its getting because of a very small fraction of paper returns . To what extent, it is hard to know. Irs can be effective in terms of where to put their enforcement dollars or 4 billion in the regular appropriations, so that is information the irs collects and it can be to more targeted and precise what they are looking for. One of the functions right now is very laborintensive. That is a function that could be improved tremendously to highlight areas of noncompliance. Why dont they scan the paper . Weve made recommendations in that area and in the past its come down to resource constraints, but again i think that should go a long way to improving the system to allow irs to capture the information whether it is optical character recognition or requiring more information to be encoded on tax returns to the barcoding or what is now vendor provided tax returns, so i think a lot can be done with of the technology and enforcement money that we see under the Inflation Reduction Act. The double challenges with the information return and in addition to the paper issued, one is the sheer volume. It blows my mind the irs receives over 4 billion and information returns a year. That number is growing because the requirement reforms the Credit Card Companies and paypal above the transactions. Thats going down to every corner to 600 transaction. To be have any projections of how many more information returns the irs is going to be processing in the next couple of years as a consequence . They are thinking that is going to double. Although the requirements dropping it down to the 600 will have an impact into the Digital Currency is going to be substantially larger. I wouldnt be surprised if you find yourself six, seven, 8 billion going forward. Its not just a matter of matching. You have to look at what comes out of the computers, so all of that information is coming in. Its not just sitting at the computers being matched to returns. Someone is going to have to look at these mismatches so we are often talking about a number having to look at this stuff. One other point that we made in the report is that the irs lacks a strategy in terms of information reporting and in terms of how they want to or how they can use the information coming into the agency. They developed a plan to kind of modernize and oversee all the information that is coming in. However that was kind of put on hold because first resource constraints but also the reorganization plan of the Taxpayer First act but what is critical is in terms of managing the volumes of information, there are some information returns that have dollar thresholds of a dollar or ten dollars. The irs could manage the volume by reassessing the various thresholds and that could go a long way and that would take resources so i just want to put that out there but it is critical that they look across the board in terms of all of the information coming in and how it can best utilize that information. One more challenge there is a lot of variations. It contains most of the information they need for the first line on the 1040. You take the relatively new 1099k and its got information on the income, so we have seen some studies that have demonstrated when they get this information and its got the income, they have to respond by potentially overstating their losses. Going forward in the variation with of the amount of information that is even available, what does the irs do for enforcement the commission talked about the technology such as machine learning. Is that going to be a viable solution in the short term or the long term . Have you had an opportunity to look at the program that was cited in the last panel . Is that a guide to the future . Weve looked at the return review program. That is a very Successful Program that the irs implemented. It does use cuttingedge Information Technology and it is now primary fraud detection system and we have recommendations that they expand the use of the program. Right now it is used to stream the refund is going out but we think it could be expanded to other types of taxpayers or the taxpayers who are not getting a refund but may have overstated. Does that answer your question . Do you have any ideas as a way of identifying the audits . I think it has pros and cons and it could limit and create a better model for picking the potential audit or enforcement. If im always putting up my credit card and your reimbursing me, you may not indicate its personal so all of a sudden i get a 1099 for all of our lunches and what do i do with it so i think part of this you will be education for taxpayers because some of them might be personal expenses versus income. The challenge of Virtual Currency i think people are not familiar how to report that so that is going to cause all sorts of challenges. We have to make sure that we do it in a fair way so that we are not causing issues for taxpayers. The administration targeted three groups. The legislation is directed to the irs that the Additional Fund shall not be used to increase the audit rate above the levels for taxpayers with income below 400,000. John, i expect that this may be a question that you receive in some way or another from your bosses on the hill. We had to wrestle with what that meant and how to deal with it in the time of the bill getting named in the senate. The way we thought about it is going back to this question of what type of activity is the irs going to undertake or do they need to hire. We thought it had more meaning but nevertheless, there are a lot of activities that have relatively more straightforward returns. Theres financial planning. We need to hire to engage in a lot of those designs so the 400,000dollar question intersects what type of people are you trying to hire and what is your success in hiring them so we had that but particularly in the short run like you need a more developed a strategy and you will be training to get people up to speed. That was going to alter the revenue that came in and althouh that may be differing to slow the hiring process and the period of time if you were going to push most of the resources away from the individual taxpayers. I cant imagine someone asking the gao to do a report that will look at did we meet that goal. Did they keep their promise not to audit and use the Additional Funds at the 400,000. Im sure gao would be happy to write very effective. [inaudible] you may have already received that letter. [laughter] people that are hired up to make the decision for the 400,000, and i think the reason they pick is about 98 of the people below 400,000 and below but my concern is how this is being portrayed in the press and the messages going out. I am concerned. People believe youre not going to be audited. I do think thats going to have a negative impact on the compliance, so again in the technical discussion of what funds are used for what purpose i think we just have to be careful the general message going out to the taxpayers practitioners are is going to be a normal audit, however you want to define that and the Additional Funds are the entities or whatever its going to be. But i am concerned and when you read articles in the press with the Additional Funds its down three sentences later. We have to make sure that message goes out to taxpayers. From the recent historical levels, it opens up the possibility that they will increase for people under 400. Without the specification and what that level means. Do you want to say anything . You raised a very good point relative to the audit rates they are at about a third of what they used to be years ago across the board. They fall more on the higher income individuals, high income and high wealth individuals. We talk about the 400,000 income. We could get very technical. Its that net positive income. You know this well, all money is green. So unless irs tracks the funding very carefully with some sort of accounting code, it will be near impossible to change with the dollars went where. The irs in the budget has a lot of flexibility to move money around. They collect at least half a billion annually in the user fees that often go where there theresthe greatest need for adl resources. So i think it will be very difficult to attract any great accuracy or extent of what money is going toward what type of audits, but we will certainly be watching very carefully. So another, johnny you are the coauthor of the question of who owns u. S. Businesses and how much taxes do they pay. What lessons from that paper are there for what its going to mean to try to increase the enforcement on partners and partnerships . I have great appreciation for the challenges. The project that janet eludes to use to sort of take all of the administrative records provided from the sort of business that was undertaking the activity all the way through to the individual taxpayer partnerships that would eventually pay taxes related to that activity. It was daunting in the sense that how many times one partnership would be sort of to another partnership to another and as a result to have this linkage to make sure the reporting of all of the Economic Activities they first audit the partners and in those returns and activities let me go back and look at the partnership, but its not just one step. Its going to be multiple steps, and i think that makes it, i think the irs is going to think hard in a way that is both manageable and doesnt make sure that youre sort of looking in the right places. You dont have a lot of audits. Nobody wants a long change audit but we fall into the fold of one partnership. Its easy to see how you throw up your hands like additional hours into the audit maybe i should walk away. I think its very, very challenging there in the way the law works and Additional Information returned in the more sophisticated processing will help. But it will not be easy and i think it will take a fair amount of Additional Research and trial and error to develop the strategy that is effective and efficient given the complexities in that area. That means in the short term some are caught in the audit and that isnt going to make this investment any more popular. That goes back to a longrun plan. I would fear if that were the strategy. Back to the point of no one getting a pass thats true there should be audits and they are being clear about how they are going to use the information returns in effective ways. There is Great Potential but it will be challenging. They spoke necessary and sufficient condition so the money was necessary but are there other things the irs needs that money cant buy that they need in order to use the 80 billion effectively . I will go back to the first principles. Certainly the irs is not creating tax policies. They are taking the policies that are there and they have the task to apply the law as it is written. In the pandemic it shows they had to use existing tools and resources it may not be the nefarious intent. So to call for that is certainly not my position took over that but in observation of interplay between the complexity and the resources available. Are there changes to the authority and how they do audits . That would help facilitate the more effective use of the 80 billion. Other statutory changes. Theres recommendations to congress that would simplify the burden on taxpayers as well as improve compliance and enforcement. We have long advocated with the authority to set standards that would help protect lower income filers as well as protect them from mistakes and the burdens of the irs audit we call for the expanded authority or corrective authority where the irs we talk about all the data the irs has and what other Government Agencies may have so we think the irs with safety valves around that could better utilize that information if given the authority to correct the tax return and say these numbers didnt match. Whats going on here. So taking the first step as opposed to sending a notice and the taxpayer has to respond so it would cut down on some of the burden but still protect taxpayers and theres a number of other areas that we think could help. For more clarity in the tax code, the congress has put a huge burden on the irs and that has created situations in the past where the irs has gotten in trouble if you will in terms of its interpretation of the tax law. I want to turn to perhaps the last question of the day but this is the question that you are in unique positions to answer which is what are the metrics determining the that employs something quantitative and that isnt necessarily a quantitative metric . The change in a taxcut . I think youre on mute. A large percentage need terms people can understand. We focus on the 400,000 mark because that is a substantial number that we deal with so it is the day to day dealings with the irs. Im hopeful the service and modernization piece can get it done in the next 12 to 36 months. I think a lot of people are going to be looking at two parameters in particular. They will be looking at the tax gap and the audit. Of those, what is said that it e measures are going to tell us and are they going to be misleading or are they going to be sufficient to explain how it was used the tax cap could provide a kind of motivational goal. The problem with the tax gap is that it is so broad and the measurement is very difficult and its not a timely even with a ten year horizon and the Inflation Reduction Act we would get one tax gap estimates in the framework that would reflect what was going on. I do think we have more outcomes or output focus measures such as level of service, wait times on the Customer Service aside i think we can look at audit rates and on the enforcement aside no change rates. I think those are pretty good metrics to guide us for the broad effort as the commissioner talked about i think it is key that the leadership is very transparent about what the agency hopes to accomplish, what it is accomplishing and how that measures up against what they set forth at the beginning so a lot of transparency i think is the key talking about specific actions and those metrics i think would help. Looking at the return on investments . Having a particular detailed plan like here is what decided to expand with Additional Resources and then for those activities what are the resources you undertook, how many audits did you start with and then the questions that have come out of that, but is the return on investment, how much of a direct enforcement revenue do you receive and i think that will be instructive. There will be a lot of things. Islam will end up more effective than others but if they are clear about what they are doing and give commentary as they go along, that will give the confidence they are attempting to learn from their activity and they are improving but they will need to be clear about heres the plan consistently providing that feedback but maybe they wont uncover anything extraordinarily effective. It would probably grow a lot of confidence that the service is on the right track. In the law of metrics there had to be the recognition that many metrics wouldnt be perfect. The tax cut for example, improvements in identifying noncompliance with the spillover into the studies of the tax gap. So, broadminded sand metrics. And on that note, i want to thank the panelists john and jay for participating and i would like to thank the audience for paying attention, staying here most of the two hours. Thank you and the event people, we want to remind you to please take a moment to fill out to the event survey. There is a link in the chat so thank you very m