Capital. With i served as the 100 fourth president of the club, and im standing in today for our 110th president , jeffrey bah lieu whos away on assignment because he still has to make a paycheck via his employer as opposed to this volunteer gig and probably submit his tax return as well. Id like to welcome our public radio and cspan audiences today and id like to remind you that you can follow the action on twitter using the hash tag pound mpc live. Now its time to pro tro deuce our head table guests and id ask each of you stand briefly as your name is anoinsd to the audience id ask that you please hold your aplows until ive finished announce the the the entire head table. From your right my left Charles Clark senior correspondent, government executive media group, mark wine know, Senior Associate Editor of kip linger personal finance and proud Buffalo Bills fan. Dell quinton wilbur reporter, los angeles times. Mark chef Senior Reporter investment news. Alley verse pill, federal tax reporter at bloomberg bna. Michael lynn digital strategist for the ira. And skipping over the podium, Lisa MatthewsVice President at hager sharp and npc cochair cho organized todays luncheon back at the associated press. Were grateful to be working with her back here today. Skipping over our guest for the moment, kelly herb, senior ed pit ittor at forbes. Karen taffer in, guest of our speaker. Lori russo president of stat ton communications also a Headliners Committee vip and thank you for helping out today, lori. Megan oneil news editor of the chronicle of fill lan throwpy. And carolyn block. Thank you and all a round of applause, please. [ applause ] in what has become a National PressClub Tradition ahead of the annual tax filing deadline, we are grateful that the commissioner has accepted our invitation to talk about all things associated with that five letter word taxes. As youll find out in a moment, his areas of expertise run the gamete from soccer to taxes to how computers react to once 1,000 year events. The budget blueprint unveiled last month by the administration called for 239 million cut to the irs budget. Additionally following the denies of the American Healthcare act in the house, lawmakers are said to be poised to tackle tax reform which, if approved, would present fresh challenges to the agency. John was sworn in. With some 77,000 employees which is about how many people would take to fill kansass Arrowhead Stadium to put that in perspective. He is no stranger to the inner workings of washington and that has developed something of of a reputation for him as mr. Fix it in both the private sector and the government. He served as the nonexecutive chairman of freddie mac during the troubled times beginning in 2008 as well as its acting chief executive officer. Our speaker served as president of the u. S. Soccer federation, deputy mayor and city administrator of d. C. As assistant to the president and chair of the president s kau council 2000 conversion, and Deputy Director for management at the office of management and budget. As a man of letters other than ir and s, he holds several degrees worth noting. A law degree from yale, a bachelors degree from duke and also studied at cambridge. Finally as the Washington Post noted just a month ago, one of the mementos in his office turns out to be a door knob from novgs comma dore hotel. As a Corporate Restructuring he sold the hotel as part of the bankruptcy of the old penn central company, a Holding Company best known for its railroad assets. The buyer of that hotel back in 1976 was the then 30yearold businessman whos now president of the United States. We are pleased to have our guest speaker with us here today, please give a warm National Press club welcome to the irs commissioner mr. John koskinen. Thank very much for that introduction and the worm welcome. I want to thank the National Press club for inviting me back for a forth time. I have to admit one of the reasons i keep coming back is for the unusual cookies which are terrific this year. This year mine was a dollar sign sort of money which is something we worry about, but i would like to announce those who got something that looks like a 1040 cookie, these are for eating, not for filing. I generally have started these talks as a duke guy with a reference to the ncaa basketball tournament, but after the first weekend my bracket was such a wreck it was more fun for me to watch nascar races so i have no idea how it all turned out. But now that march madness is over, were focusing on april madness otherwise known as the tax filing deadline which this year is on april 18th. So i cant resist starting with a Public Service reminder for anyone who hasnt filed their taxes, you have less than two weeks do so. Every year tax time rolls around like clock work and i admit before i was the commissioner i was like most people and i didnt give it much thought. I just assumed my tax return would be processed and the irs would send me a refund every year, and they did. But after nearly three and a half years as commissioner i dont take that process for granted anymore. Working for the agency has been an eye copper and has led to me conclude that everyone should know what i found out. That the tax Filing Season doesnt happen automatically or by accident. It happens because our employees spend months before hand preparing for it and then making sure it goes smoothly. This was a lesson i learned right away since i came to the irs just at the start of the 2014 Filing Season in i started in the end of 2013 as noted. So at that time i told the employees that as the new kid on the block, probably the best thing i could do was to stay out of the way. And it be turned out to be a very successful strategy, i stayed out of the way and the tax season went just fine. So while im more involved now than i was then, im pleased to report were about to complete our fourth successful Filing Season in a row while my term as commissioner. And so far this actually appears to be the smoothest Filing Season weve had during that time. One of the things that continues to amaze me is the sheer size of the numbers the irs deals with. Consider some of them, numbers that accountants sometimes dream of. So far this Filing Season weve received more than 93 million individual 1040s on the way to an expected 152 million. Weve issued more than 74 million refunds tote alg more than 213 billion. Thats right, thats billion, we actually collect 3. 3 trillion a year. By the time were done well have issued more than 300 billion in refunds and thats more than the Gross Domestic Product of a large number of countries. As impressive as the numbers are, the most important one may be the average size of refunds which is running at about 2,900 this year. We all like getting refunds, but we recognize that for many households that refund is the biggest check theyll see all year. Thats especially true for people who qualify for refundable credits, particularly theyre earned income tax credit or eitc as its known. We call the eitc a refundable credit because you receive whatever amount you qualify for even if its more than the tax you owed. The eitc has been called one of our most important antipoverty programs for that reason. We provide about 67 billion every year in refunds to over 27 million beneficiaries. The numbers paint a picture that i think is often overlooked by the public. The irs in dealing with those numbers has to be a flexible, cando agency with a Remarkable Group of employees. The fact is not overlooked by congress. Whenever they pass a new program, the irs is often given the job of implementing the legislation with or without funding. These legislative mandates as we refer to them include not only the eitc and the Affordable Care act, but other recent programs like the able act, the Health Coverage act and the Debt Collection act. We certainly have areas where we can improve, but at the end of the day, Congress Knows when they give us a job, well get it done. And thats something weve seen throughout the years. A wonderful example of that cando spirit is sitting up here on the dayous with us. Carolyn taf fwhoer was introduced earlier. Shes been an irs employee for four decades and currently heads the ira office that are administers the tax related provisions of the Affordable Care act. The average taxpayer has probably never heard of people like carolyn but shes been involved in countless initiatives to improve them over the years. For example, anyone whos ever used the form 1040 ez or the short form to file their taxes has carolyn to thank. Back in the early 1980s she was part of a small team that was asked to find a way to make the tax filings simpler for taxpayers with a straightforward, uncomplicated tax situation. Carolyn and her team developed the 1040 ez. Its one page, fewer than 20 lines and you can fill it out in almost no time. You always hear a lot of talk around washington about tax simple pla fa occasion and thanks to carol lins and other at the ira is the 1040 es has made life simpler for millions of people. And through the the years its saved people millions and millions of hours because they dont have to work through the longer 1040 form. Sometimes we hoek joking that carolyn is the mother of the 1040 ez but shes done many things. Her long career also illustrates the nonpartisan alaska aspect we do. She had a leading role in implementing pores of the Tax Reform Act of 1986 which was passesed during a Republican Administration. Nearly 25 years later, she was one of those who helped implement the tax provision of the Affordable Care act under a democrat administration. And now once again under a Republican Administration she and others at the irs are closely watching any changes that maybe made to healthcare coverage laws. There are thousands of employees like carolyn across our agency with the same dedication to their jobs. While president ial administrations come and go, our employees are still here serving the american taxpayer and keeping our tax system running. For many of our employees, Public Service is practically in their dna. They went into government because they saw what a good experience it was for their parents, a great example is Margaret Johnson whos up here with us. She has been with the irs for 32 years. Margaret credits her mother, lil Willie Anna Smith with being here role model and showing her a career in Public Service. You may have seen willie anna portrayed on the big screen because she was one of several female mathematician whos worked for nasa in the 1960s. Their story was told in last years movie hidden figures. Willingly anna and her colleagues provided unheralded but critical support for our space mission, including john glens orbit historically around the earth in 1962. Margaret hes smierj wonderful role model for Public Service. When you step beyond the stereotypes of the irs, these people we flect the can reason do nature of the agency. Talking about the ez made me think about how taxes are different today than 20 wore 30 years ago or longer. Back then you knew it was time to start thinking about your taxes when you got a late gift in the mail from the irs just before christmas, a package of tax forms and instructions along with a very nice note from the commissioner. So you assembled all your tax documents, filled out your return and dropped it in the mailbox. On april 15th, there are always long lines at post offices and many of the post offices stayed open late to accommodate the procraft natetors. After everyone filed, they kept checking their mailbox waiting for their refund to arrive. There are also long lines of trucks like a military convoy you might have seen in one of those grainy black and white news reels in the 1950s delivering literally millions of paper returns to irs campuss round the country. Fast ford to this year, 2017. Now theres no package of forms in the mail that remind you to start fixing and finishing your taxes. Instead its tax seasons when you see those commercials from h r block and turbo tax. Those are more entertaining than the package from the commissioner and they got peoples attention. Seeing john ham in one of the commercials made me think that tax time has made mad men of many of us. See who saw the commercial, very good. Okay. And you have to admit, that on its challenging dpaays, the irs still isnt as scary as that house kathy baits moved into with those creepy kids. Now if youre like most tax preparers you prepare tugz software and file it electronically. We estimate that more than 87 of the people filing this year will file electronically. Plus, most people no longer need to wait six or eight weeks for a refund check to come in the mail. The vast majority of taxpayers choose direct deposit for their refund which ooh usually takes 21 days or less from the day they file the return. In fact the number of people with the reception before hand regailed me with stories of how quickly they got their quickly they got their return processed and depos sitd into their accounts. Through the years, all the changes in the way we file our taxes theres one thing at the irs that has stayed around. Though some have wondered how much longer it will survive in the current form. Let me stop there for a minute, leave new suspension and tell everybody i want to you open the envelope that was left on your chair. All right. All right. If you look inside, take out, what you should have is your very own personal copy of a 1040 form, the basic return. Wow, okay. Now, take a look at the top of the form. Since i couldnt send you a note with a tax return forms that you get in the mail, this one has a note from me, are those watching or listening at home, it says, thanks for filing. Theres no check, though. And is signed by none others than yours truly and the head table has already noted this does not come with a check. [ applause ] now rirl admit we cant personally thank all 152 Million People who file every year. We didnt even send oprah a know the when she mangsd few years ago that no one thanked her for filing her return. I would like to note i was not commissioner then. But in all seriousness, we do appreciate the millions and millions of people who do their civic duty and file their taxes. Without their voluntary cooperation our tax system couldnt function properly and we also appreciate the work of the private sector Tax Community which helps people file their taxes. Let me plain why i wanted everyone to have their own copy of a 1040 as a souvenir. Since 1913, you couldnt file your taxes without using the 1040 or later on one of its shorter versions like the 1040 ez i mentioned earlier or the 1040 a. Years ago seeing these forms every april was a little like seeing flags on the forth of july. But not anymore. Think about the last time other than today you saw a blank 1040. Its probably been a while. At this point, i should stop for another Public Service announcement to remind everyone youre supposed to hold on to either a printed or an electronic copy of your completed return for your records. Its an important financial record and you ought to keep it in a safe and secure place. So, anyone over a certain age, which includes me, knows that filing your taxes used to mean grabbing a pen and filling out one of these blank forms line by line, signing it and mailing it in. In some cases along with a check if you owed money. And just like those days in school where lots of people made mistakes filling out the paper performs either transposing numbers or not having people add up. My crack research tells me that today only a little more than 3,001,040s are completed by hand each year. That may sound like a lot but its less than 2 of the returns we actually get. Most taxpayers or the professionals they hire use tax software to prepare their taxes and the vast majority file them electronically so they wouldnt work from a 1040 at all. If you think about it there are probably some millennials that have never seen a 1040. The form itself is no longer sent patrol to the average persons tax filing experience as it was in days gone by. So im not here toll you i know whats going to happen, but i do know that the space crunch on the 1040 has got tone a critical point. Over the years as the tax code has been changed numerous times weve added lines and kept shrinking the font size so everything could still fit on two pages. But theres a limitations on to what we can squeeze into two pages. Let me be clear and id like all my friends in the press to nooet we dont have a plan do away well, the 1040 yet, and unlike kra yoela hes dandy lion crayon, the 1040 wont be retiring anytime soon. I think the folks at kra yoela would agree that find a replacement color was a lot simpler than determining how would you replace the 1040. Im just making the point that the irs has to keep evolving long after im gone from the agency and keep innope vating on how it provides services to taxpayers. What happened to the 1040 semibol lick of all the changes to the tax filing experience weve seen as people have increasingly embraced electronic filing. More changes to the tax filing experience will inevitably occur in the years ahead. What do we do besides tax Filing Season . We spend quite a bit of time helping taxpayers. One area where weve been trying tacoma prove is on the Online Services we provide in response to the changing needs of taxpayers. Our research has shown that many people want to interact with the irs through digital challenges just as they already do with their Financial Institutions, mortgage firmds, or investment companies. The irs has been working very hard to give people the types of things they need online because, believe it or not, many people would prefer to avoid talk together irs at all if they could. Now, taxpayers can go to our website, irs. Gov to find a wealth of tax information. Last year there were over 500 million visits to irs. Gov. For example, you can pam your taxes on line using direct pay or maybe you need to set up a payment plan, you can do that on our website using our Online Installment agreement tool. Or, lets say youre applying for a mortgage and you need a copy of last years tax return. You can use our get transcript april bah occasion to download it again from irs dofl. And if you ever get an unexpected call from someone claiming to be from the irs saying you owe money, you can even check that out online too. Weve added these and other services because thats what people have told us they want. Speaking of irs. Gov, you might be surprised to know its one of the most widely used federal agency web sites as measured by google analytics. At one point earlier this year we had more than 25 million page views and over 6 million unique visitors, and that was just on one day. Over a recent 30day period, we were the number one government website. We even had more visitors than the National Weather service. The irs more popular than the Weather Forecast . True, but perhaps hard to believe. For some time now weve been working toward the development of an online account at the irs where a taxpayer or their Tax Professional can log in securely, get information about their account, and interact with the irs as needed. We have many, many people across the irs involved in this initiative and one of them is here with us, mike lynn a manager of our Online Services division. Mike and his team have been supporting the effort to bring you all of those wonderful new tools on the irs. Gov that i just mentioned. They also are looking at how we can provide a better experience across all of our service channels. To do that theyve been soliciting feedback from fe taxpayers and professionals. Mikes been with us only a few years and hes got an interesting story about what convinced him to leave the private firm where he was to work with the irs. When someone he newspaper at the irs asked him if hed be interested in joining us, mike noted that he was happy where he was. But then this person asked mike to imagine the impact he could have working on just one our products such as our Smartphone Application irs to go which has been downloaded more than 40 million times. At that point mike said he was sold. So where are we exactly with online accounts . Although weve been talk about this for a while and certainly ive been talking about it in my speechds here since i started, im delighted to report that were putting some of the Building Blocks in place. At the end of last year we took the first step toward establishing new online accounts for individual taxpayers by introducing the first feature that lets you check how much, if any, taxes you actually owe. We recently lost a second feature that allows you to view your payment history as well. Going online to check your balance at your Financial Institution as been around so long that people take it for granted but for the irs this is a major step forward. Over time well be adding other features as it permits. We will allow secure online messaging between taxpayers and the irs to communicate about issues that will come up on their return. This will help us resolve the issues much faster than the current way we deal with most people which is to send a letter to the taxpayer and wait patiently for a response through the mail. As interesting and exciting as these developments are for us, we are just as committed to making sure all taxpayers get the help they need no matter what way they communicate with us. Last year we received more than 63 million calls and answered nearly 8 million letters from taxpayers needing assistance. And we provided help in person to more than 4 Million People who visited one of our walkin sites called taxpayer assistance centers. These centers air great example of how were working to improve for all taxpayers other services not just those who go on line. Over the last few years, the demand for service at our walkin sites during the Filing Season had been growing tree mend debs dusly. In some locations people were lining up hours before the center opened, sometimes before dawn just to try to make sure they could get in the door. It was a terrible situation with taxpayers and truss straighting for our employees who are dedicated to providing good Taxpayer Service. Two years ago, after a conversation i had with a canadian tax commissioner about how they handled the situation, we began testing the idea that canada had implemented of letting people make appointments to visit a taxpayer assisted center. When they tried this in 2015, it was so successful weve now expand today to all of our walkin sites for this year. And guess what . This year weve had no report of lines out the door, a major improvement over the experience in years gone by. So well leave the long lines for apples roll out of the next generation of the iphone this fall. We discovered other benefits from the appointment process as well. First, when a person calls for an appointment, we can tell them what documents they need to bring with them. That way we can avoid and they can i void the aggravation of a second trip to the irs. Secondly, the irs employee making the appointment can often help the taxpayer resolve their issue over the phone eliminating altogether the need for a visit to us. We have found that about half the taxpayers who call for an appointment resolve their issues during the initial phone contact and dont have to show up in person. So thats our vision for the future of Taxpayer Services and im often asked bhie we cant move faster to develop online accounts. Its something that will take time because it has to be done carefully and the big challenge is making sure these accounts are secure and protected. The irs needs to know whether the person trying to access our system is legitimate. Anyone whos ever gotten a call from a spammer i suspect everyones had at least one, knows krrlz out there trying to steal personal identification and more. To stop identity thieves, the irs has been working to improve methods for identity of all taxpayers using our Online Services. Before we offer a fully nungsing online account we must have a strong authenticated process built in to protect taxpayers from Identity Theft. This may mean some extra time and steps for people but its worth it to keep those accounts secure. At the irs theres no argument about how to balance convenience and security because kurt is now our highest priority and thats how it has to be. Experience has also shown that we cant take security for granted and cant let up in our efforts on the battle against the online criminals, especially the criminal end indicates around the world that were battling every day. We have to continuously work to protect our main Computer Systems from psycher attacks. They currently withstand more that 1 million attempts every day to maliciously attack and access the system. Were also waging an ongoing battle to protect taxpayers with their personal information. Storyline on to this has proved has improved dramatically over just a few years back. The problem of stolen personal data being used to file fraudulent returns increased significantly from 2010 to 2012. And for a time overwhelmed the irs and local and other law enforcement. Since then, weve been make steady progress against identity thieves and the progress accelerated in 2015 thanks to the collaborative efforts of what we call the Security Summit group. The summit group is a unique partnership, involve irs, the states, and private sector Tax Community. Its been a model of colob operation between the public and private sectors. Some of our Security Summit partners are here in the room today and i want to take the opportunity to thank them for their great work in helping protect the nakss taxpayers. Working together were able to put if place many new safeguards for last years tax Filing Season that produced real results for taxpayers. One example is in 2016 the number of people who identified themselves to us as victims of Identity Theft was down by 46 from the year before. Thats a stunning number and shows weve improved our ability to stop criminals from filing fraudulent returns using someone elses personal information. Theres a flip side to the progress, though. While were keeping more identity thieves out, theyre working harder and harder to get in. The fraud filters in our Processing System are still watching a large number of false returns. That shows that Identity Theft continues to be a major threat. Last year in fact our system stopped 6. 5 billion in fraudulent returns on nearly 1 million tax returns confirming what we knew is that identity thieves are still out there actively. That number of 6. 5 billion we stopped is more than half of the entire budget of the irs. Because we cant let up against this threat, we made an important decision last year to make the Security Summit group permanent. With their help, we added more taxpayer protections for the current tax season and well season working on new ways to safeguard taxpayers in the coming years. Its important to understand that everyone has a stake in stopping identity thieves. The irs cant do it alone. We need everybody to keep their personal and Financial Information secure and out of the hands of identity thieves. People need to be actively safeguarding that data, whether on their personal devices or in their personal interactions. This is so important, in fact, that we developed with the Security Summit partners a Public Awareness campaign called taxes, security together. That was to let taxpayers know they have a Critical Role to play in making sure the tax filing process is as safe as possible. Ive asked id ask all of you watching and listening to take a moment to review a set of basic security steps that you can find on irs. Gov, our home page. Many of these are simple common sense things like using Security Software on your laptop or knowing how to spot a suspicious email message. Id also ask that you make sure your loved ones are aware as well. We all know someone who may be technologially challenged or behind the curve many someway. There may be some in this room. Take me, for example. Heres my cell phone. [ laughter ] now you laugh, its actually actually relatively new. When i replaced my last one, i just asked the Customer Service rep where do you keep the model ts. They pointed in the far corner. So regardless of where you stand on smartphones, everyone should encourage friends and family to check that their passwords and Security Software are up to date. The more people we can get to protect their information, the harder we make it for criminals who are trying to steal this data. Ensuring the security of taxpayers and their date is only one challenge that we face. Another is obviously our resource situation. We are gratified for the additional 290 Million Congress gave us for fiscal year 2016. We used this to strengthen cybersecurity, increase our efforts against Identity Theft and improve Taxpayer Service. For the average person the improvement in service was especially noticeable on the phones. If you called us for help during the 2015 Filing Season, ive consistently described that adds an abysmal experience. Wait times were extremely long and the majority of people couldnt even get through. But the additional funds provided by the Congress Allowed us to hire an extra 1,000 people during the Filing Season to answer the phones and, as a result, our level of service leaped up and we cut wait times on the phones significantly. This is especially important because each with the additional funding we received in 2016, the irs remains under Significant Resource constraints. In fact, were still under an Agency Hiring freeze that began in 2011. For the last six years weve been unable to replace most of the employees we have lost when they retired or left to take another position. As a result, our fulltime workforce has shrunk by more than 17,000 people since 2010. That works out to a loss, net loss of around 50 employees every week, a pace that has continued for 350 weeks or seven years. While our workforce has been declining the irss workload has increased. The number of individual rurnds filed grew by 10 million between 2010 and 2015, and the tax code keeps growing too. That well over 10,000 pages, the tax code is now the most complicated its ever been. Even our nisty 1040 ez is no match for it. For the system to function properly, the irs needs to be able to fulfill its mission not only 10 to force the tax laws but to help taxpayers meet their obligations. There are three types of taxpayers, those who comply, those who are trying to comply, and those who are actively trying not to comply. Its our responsibility to make sure everyone in those first two groups, those trying to comply, have everything they need to file their taxes as quickly and easily as possible. Its also our responsibility to pursue those taxpayers who have decided not to comply. We know many people have difficulties fulfilling their Tax Obligations and we want to work with them if theyre trying to become compliant. As ive often said, if you have a problem but are trying to comply, you dont have to hire someone off late night tv to contact us. Were here to help you become compliant whether its through an installment agreement or an offer on compromise. Along with Taxpayer Service, our compliant programs have suffered as a result of the constrained hiring. Included in the more than 17,000 employees we lost since 2010, our 7,000 key enforcement they are the people who audit returns, collect taxes, and investigate taxrelated crimes. Take just one group within our enforcement ranks, revenue officers. These are the people who go door to door collecting back taxes. These frontline employees go out into the community, bring in taxes owed, represent one of the core parts of our mission. So you would think we would add more of them over time as the number of returns has increased. We did for a while. In 1956 we had about 700 revenue officers the number grew steadily to 7,400 in 1996 but 20 years later we have only about 3,500 revenue officers. Thats over a fist decline from where we were 20 years ago and 38 below where we were in 1956. 38 below where we were 30 years ago. Its a stunning number given the sizans complexity of our economy and the tax system today. Consider the number of audits were doing now. Last year we add autd about a Million People. That may sound like a lot but its less than 1 of the individual returns filed. Its also the lowest number of audits in more than a decade. For some people that might sound like good news, but a big part of the reason we do compliance activities is to make sure those folks who are trying to comply can be confident that the system is fair and that everyone is paying their taxes. If someone paying their fair share of taxes sees othersing who dont and those others get away with it, that taxpayer may be a lot less motivated to be tax compliant the next time around. If the situation continues the risk is the nations overall kplooirchts compliance rate. Well have a real problem if the irs doesnt have enough employees to help people figure out what they or to fairly enforce the tax code. The impact will be on the ability of the government to fund itself. A 1 drop yes, a 1 drop translates into more than 30 billion a year in lost revenues. Think about what a loss of 300 billion over ten years would mean to the federal deficit and if the notion takes hold that the tax system is unfair, reversing that notion and the decline in the compliance rate wont be easy to do. So, as we move forward were i think its important for to us understand that the high hiring freeze has a negative impact on our ability to build a workforce for the future. We talked about the baby bust a couple years ago. We have 120 people under age five purchase so five to ten years for now when we look for the next group of managers and leaders of the agency, were going to have a void. So, given all the challenges that ive ascribed i find it all the more remarkable our employees continuetor energetic, enthusiastic and innovative. A great example comes from our i. T. Division. To me this doe a heroic job year in and year out given that were rung ant ta kuwaited technology systems. We estimate that 60 of irs hardware is out of date and needs an upgrade. Would you be satisfied running 50yearold applications in your home or at your office . Since we have to rely on Outdated Software programs and on our systems, were still using very old programming language more outdated than cole ball or for tran. Its presented a problem because were losing people who understand those lang wamgz. So last year two employees were part of a team in our i. T. Engineering function found a nearly innovative way to meet this challenge. The employees, mark view and gee an wang developed a contract for translating the programming language used in our legacy tax systems into the java language, had is the current standard. It was a big enough break through and so unique that weve applied for the patent for the methodology. Marc and gee wran are a grit illustration of the fact that we havent gotten in fact, the irs workforce, as ive said on numerous occasions, is as good a group of employees as ive ever had the privilege of dealing with in had the 50 plus years ive spent in the public and private sectors. I hope ive given you an idea of where the irs is and where were going. Next year at this time with any luck there will abe new commissioner who can give you the annual tax system update. Although i still have several months go as commission, he, ive encouraged the administration to begin the search for a candidate to follow me as soon as possible. That way he or she can be confirmed by the time my term ends in nofrp and ill be happy to advise my successor that the press club is a pesk group and the cook i kds are great. But i should warn you that although that is my last visit to the press club as irs commissioner dont assume youve seen the last of me. While i plan to retire in november, i could come back in some other position one of these days because after all ive already failed retirement twice. And since i still have the floor, one more Public Service reminder, make sure you file your taxes if you havent done so, remember, april 18th is just around the corner. Thanks very much. [ applause ] thank you, commissioner. And obviously we like to get to some questions so we appreciate the opportunity to do that. So i felt as if in your speech you were using the carrot and stick approach on the budgetary question to some degree, having a positive message. But there is this proposed dpugt budget which im disappearing. Yes. Which would have dramatic implication dollars. If you had to live with that budget, what would that mean for taxpayers and the mission that you have . Well, as i say, look forward to continued discussions with the administration as treasury secretary has been very supportive and the budget process has a way to go and we will have discussions with appropriators in the house and senate. But i do think in light of the it should be obvious in light of the cuts weve absorbed over the last seven seven years, any further cuts are not going to be helpful. Our funding comes from Taxpayer Service, enforcement, information, technology. So when we have to take a cut, its got to come from somewhere. We cant make it up out of whole cloth. So one of the things were looking at is how would you be able to adjust responsibly and reasonably to that cut which is according to oecds by annual study of Tax Administrations around the world, we are by far the most efficient tax system in the world around the country. Germany, france, canada, australia spent e spend 50 to 100 more than we do to collect a dollar of revenue. So the idea that somehow we can squeeze a lot more out of the system after seven years of cuts isnt going to work. What have those communication bnz like between you and the treasury secretary . Treasury secretary and ive told him everybody at the irs appreciates that from the time of his confirmation hearing has noetded that he was surprised at the cuts the irs had take and he his position and his confirmation hearing and since then has been that we need more resources and more people. We are the revenue arm of the government and his experience in the private sector as mine and that is when youre running an operation you dont take the revenue arm and say i think ill starve it of funds and see how it does. Im given word of a tweet which did not come from the white house. Needless to say i am not tweeting. Senator widen said within the last couple of hours that irs resources should be restored. Is this an issue that breaks down on one side of the aisle . In other words, are republicans more hostile toward enforcement than democrats . I think everyone understand thats why ive been spending time here understanding that compliance say twosided coin. On one side is Taxpayer Service. We need to help taxpayers figure out what they owe and how to pay it. Aughtther side is oversight because if the systems not fair everythings going to drop. And as i noted, the congress on a bipartisan basis provided us an increase in 60 of 290 million for Taxpayer Service identity left northwest cybersecurity. And i think we dem month desperated we spentd those funds carefully and wisely and they had a positive impact on our ability to provide Taxpayer Service but also on our ability to deal with cyber attacks. Youre talk bgtd legacy of those who have dedicated their lives toward government service. Apparently among the legacies that continue at the irs is legacy Computer Systems, including computer main tramz if the michael tells me as he works on these apps there are still these virtually obsolete Computer Systems. Te tell us about the state of technology at the irs and how do you continue to work with Technology Like that . Its a challenge. Again, thanks to my Wonderful Group of people in i. T. , we have been modernizing the system as quickly as we could and weve gotten support over the time in a Business Systems modernization appropriation. So a significant part of our system is now modern eyesed. Part of our problem is we put in new application to support those those come out of our standard applications an Maintenance Fund and that never seems go up. So we keep load be on more systems to be supported. But we are running applications that were running when j. F. Kennedy was and to some extent what weve got is were kind of driving he wanted me to call it a chevrolet rather than a mode he will t, but chevrolet and its got a great sound system and gps system but its got an ant ta kuwaited drive tran and draf system the so a lot of ways we worry every filing system that some the system is held together with baling wire and there are more challenges every year and our concern is if we cant complete the upgrades ant modernization of is it the systems going to stop. From the audience we had a question. With all the great technical advances that youre implementing, including those online, is there still any benefit to filing forms by paper, including perhaps some that have your ought graph or maybe we should knock those out of the pool . We are intrigued by the number of people who actually use software to prepare their return and then print out the return and mail the paper to us. It takes you longer to get your refund if you do that. And i think there must be some of you that youre more secure, but we have identity thieves, if they and the identity thieves are generally filing the electronically. By the time your paper process gets filed youre inkreetsed the window of opportunity for someone to file before you so that even if you think its a great way to have a record, you can print out the record and still file electronically. So were not quite sure why people do that. But i would sprtress there are some people who are not comfortable with the Digital Economy and service dollars. Weve got 80 filing electronically which means we have close toe 20 Million People filing on paper. Our view is if thats the way you want to communicate with us thats fine we have an obligation that we willingly accept to deal with all 252 million taxpayers in however they want to come to us. We have this note that congress will be moving into tax reform efforts. What are your observations about that . I know that youre ago mostic in policy at least, as you look at the challenge of simple fa occasion, quote unquote, is that every bit as complicated if not more so than healthcare . I think it is as someone noted healthcare reform as people discovered is complicated but youre dealing way segment of the rerk the Insurance Companies and Companies Providing healthcare. When youre talking about tax reform youre dealing with everybody in the economy. And so it is complicated, you havent done significant tax reform as Everybody Knows in over 30 years. And as you note, we dont have, as i said, a dog in the fight in healthcare, we dont have a dog in the fight of what goes on with tax policy. We have a great interest in Tax Administration and ive tried to make it clear with the hill, with the new leadership at treasury that we are delighted to provide support, once you decide what the policy is in terms of how to implement it most effectively and simply for taxpayers as well as for us. And so we look forward to cooperating with them. I do use tax simple if i occasion is a once in a lifetime aktd to do tax reform and i hope we do lose the opportunity to do tax simple pla fa occasion over time. Ive asked people where you could just streamline the code, not poly wise just streamline and get rid of the some of the complexity and we provided that into the system and we stand ready both for the hill and the administration to provide whatever Technical Support question to try to make sure that as we reform the tax code we do it in a way that simple fiez it rather than complicates it. Its a very difficult problem or challenge to tackle so perhaps we dont want to bet our own homes on whether that will aib com plishd or not. But lets just say rhetorically speaking that some sort of major tax reform is there a scenario out there where in theory the irs could do with fewer resource, less personnel if, indeed, sufficient whether its 3,005,000. If we can hold our own and quit losing people. Our i. T. Groups are understaffed. Well have fewer enforcement issues. In light of all the discussions going on, theres not a scenario, i see, that is going to drk marketedly lower the burden we have, of course at the front end well have a significant challenge implementing whatever the changes are. In the world of things that probably would never have, if there were a flat tax, would you not require fewer people. Now if we can get well by a flat tax, you mean a simple one page form. Exactly. Some time ago it was suggested you can do the one page form and get rid of the irs. You have to understand with a one page 1040 ez somebody has to make sure the numbers are right. Thats okay with me. But, it is clear that somebody asked in transition if were real simplification, is there anybody that the irs would be opposed. The answer is everyone would be delighted if you could make the tax code simpler. You cant make it too simple for us. Ultimately our goal is to try to make it as easy as possible to know what they owe and file it. If we ended up with the one pager and everyone could fill it out, we have tax expenditures of a trillion dollars or more a year, so you get lower rates a lot and get rid of all of that and have a much simpler process for taxpayers. At that point we would be able to deal with fewer people. The likelihood of that probably is not great. If all these deductions went away, it probably would not be that important in the future for politicians to release their tax returns. On that subject, one of the waiters in the club asked me to ask you this question and that is those are always the tough questions. Yes. Does is the equivalent of top secret security clearance to see Donald Trumps tax returns or who in the agency, for example, would have a view of those. General matter, i think whats important for everybody to understand, taxpayers, no irs employee can go look at anybodys tax return. You have a reason to look at that return, otherwise youre subject to dismissal and we monitor that. So its not just the president statute, its any taxpayers return is the only employees allowed are people who have some need to actually see that particular return. We take that very seriously. The employees understand that. And as a result, we have very few, in fact most of what we have the violations are employees looking at their own return, which is not allowed or looking at relatives return, which is not allowed. Fortunately im not allowed to look at anybodys tax return, so if you have filed any time in the last four years, i have no idea what you sent. Leaving the personalities out of the question, do you think it would be a good idea for the bligss bli politicians to release their tax return . Our view is, whatever the policy decisions are, well administer them. We really dont have a view, its really a political judgment as to candidates ought to or not to be revealing their tax returns. You deal on a daytoday basis with Cyber Security issues, but they have become prevalent, really. I remember a few years ago, the defense secretary talked about the equivalent risk of Pearl Harbour event occurring in our daily lives. Are you worried about that, are we winning this battle or losing it, broadly speaking . Any time you think of Cyber Security, youre winning the battle youre probably losing it. You need to do what you can to catch up with it. One of the advantages of putting together private sector partnerships, not only the United States but we did it around the world, it was clear then, this was in 1998, 99, 2000. All you had to do was hack into the system and turn the grid off that way then. So i think ive been concerned about it some time. There was a group four or five years after that, chemical plants are a problem in Cyber Security, took you an awful long time to find that out. If you look at the critical infrastructure, finance, energy, all of them, increasingly, rely on and run on technology and all of that technology increasingly is under attack. When i say were under attack a million times a day, thats not under exaggeration, the actual number is three to four times that. It is a real battle. We are dealing, no longer, with individuals sitting in miami beach with an ipad trying to figure out how to hack into our systems to get a refund. Were dealing with organized crime around the world. When people are talking about who is hacking into who, people were dealing with are working on occasion with state governments and oftentimes just on their own collecting billions of dollars that goes to fund drug runners, goes to fund people trying to attack democracy around the world. So it is, i think, a critical problem now and will continue to be. Well, before i ask the final question a few quick reminders, the National Press club, is, of course, the leader professional organization for journalists fighting for a free press worldwide. For more information on that club, you can check our web site at press. Org. Reminder of upcoming events, april 17 is newspaper breakfast misty copeland. April 22nd is lunch man with the chairman of the joint chiefs. And now before i get to that last question, i would like to present our guest with press club mug and as elegant as important as it is it would never be confused with actual income, so this makes a set, so thank you so much mr. Commissioner. Thank you. [ applause ] so we did a survey that found that 47 of taxpayers anticipated a tax refund this year. 34 planned to save or invest, 29 were going to spend that on necessities. 27 paying down debt and 6 splurging, vacation or shopping spree. Do you get a refund yourself and if so what would you do with it or what would you advise others to do with it . Actually i do get a refund myself. And whey usually is figure how much i can do is start paying miest stated taxes for next year. Im just like everybody else. Confused a little by the tax code, i do not do my own tax return even though i went to law school, but the code compared to when i was in law school is fe no, ma im relatively simple economic being. But the annual return is still much more complicated than it needs to be. Well, i mentioned a moment ago about the press clubs mission in promoting press freedom and transparency. Your continued presence here over these number of years has not gone on unnoticed. On behalf of the club, our members, our board, all of our officers we want to thank you for making yourself available during your term and wish you all the best what it sounds like to be retirement from the irs. How about a warm round of applause from the irs. Thank you, sir. Thank you. And we are adjourned. Thank you. [ applause ]