The threat that you face caused by the fear that youve identified and very often its not, particularly when it comes to issues of undocumented immigrants and their impact on the economy. You can watch this event tonight beginning at 8 00 eastern on cspan. Irs commissioner spoke recently about his agencys operations and the impact on taxpayers including stolen identity tax refund fraud, phone and Online Services and tax Assistance Centers. He gave these remarks before the committee. The committee will come to order. We are in a scheduled executive session to consider and hopefully report the nomination for the u. S. Trade representative. Unfortunately due to scheduling conflicts it is apparent we will not obtain a sufficient quorum to vote on this nomination today. This is a nominee who enjoys bipartisan support on this committee. I hope we can move on this matter after the Senate Returns from recess. The executive session will be in recess subject to the call of the chair. Can i make a brief comment with respect to the nomination . First, with respect to the nomination, i would like to thank you for your continued work with us to address our concerns and the priorities of democrats on this side of the d diaz. Ill wrap up by saying my sense this place cant have enough comedy and i thank you wito you efforts to work us. Its been a pleasure to work with you in the past and i look forward to working with you in the future. I think we make a good team. We will proceed with our regular hearing on tax related matters. Every year the committee holds a hearing on the tax Filing Season to discuss and examine the operations of the irs. The Agency Charged with administering our complicated tax code and collecting taxes from workers and employers across the country. With each passing year, taxpayers face new challenges as they file their tax returns, including, but not limited to protecting their private information. Today we will discuss the efforts to address these types of challenges as well as the plans for progress and modernization in the near future. The finance committee has taken its responsibility with the irs seriously and with good reason. The irs is the only federal agency that deals with every american citizen, everyone who does business here, every large employer, every mom and pop business and every community organization. Over recent decade as the tax code has grown more complex, we have given the irs more and more to do including implementing a number of rules, regulations and notices. I dont think many people are satisfied with the results. I know the people at the agency often point to limited funding, there are other matters that have contributed to the current level of dissatisfaction, including outdated collection practices and bureaucratic wrangling and a number of poor management decisions. This committee has conducted oversight on a number of those poor decisions, including the politicalization of Tax Administration, excessive spending on executive travel and improper contracting practices. Congress needs to look at the irs and work to modernize and stream line its operations. This should include changes to the bloated and poorly managed Technology Used by the agency and the elimination of bureaucratic waste. Hopefully, during the course of todays hearing we can get a better sense of the agencys plans to address these and other issues as well as suggestions for congressional action. Of course, looming over this conversation is the ongoing and hopefully bipartisan effort to reform our broken tax system. Tax reform, if done right, should simplify the tax code and make the irss job easier and allow the agency to focus on collecting revenue in the fairest and most efficient manner possible. Tax reform, if done right, should improve the way taxpayers interact with the irs, reducing the countless hours and billions of dollars spent every year to comply with the tax code and file accurate returns. The irs is probably the most feared of all government agencies. The irs yields immense power and authority over the lives of our citizens and for hard working taxpayers direct contact with the irs is rarely if ever desirable. We can take steps to improve this, but it will require us to make significant changes to the tax code and to the irs itself. Hopefully the leadership at the irs will be willing partners in this effort. Toward that end i appreciate the willingness to appear today and what will be a meaningful discussion of these important issues and i appreciate the work that hes done over the years. We have a good relationship. Hes worked well with me and i personally want to thank him and tell him i appreciate him and appreciate the service that hes given to this wonderful country. With that ill turn it over to the senator for his opening remarks. Thank you very much. I have a couple of comments about tax reform at the end as well. Now that americans are getting into crunch time with tax Filing Season, i want to begin todays hearing by discussing what usually happens when early april rolls around. Around this time of year, president s usually release their tax returns to the public. Its been a tradition for decades, but exaapparently that not going to happen in 2017. It looks like this president will choose to keep hiding his returns and ignoring this very low ethical bar, even though its clear his blind trust isnt blind at all and the separation he promised hed make from his businesses seems to be nonexistent. Second, around this time of year is when the whole executive branch gets on the same page to pitch its Budget Proposal to the public and congress. Not so this year. With this executive branch it seems like the one hand often doesnt know what the other hand is up to. On the one hand you have the treasury secretary who came before this committee as a nominee and said he was committed to making sure the irs had the resources to do this job. Mr. Ma mnuchnuchin was concerne. That conversation didnt happen or if it did the message didnt get through. When the public got its first glimpse of the budget, the irs didnt get the investment senator mnuchin talked about when he was here at the committee. It got another 239 million cut. That would mean that Customer Service would get worse and more taxpayers would fall victim to scams and the good times will roll again while honest taxpayers get fleeced. This is not an academic debate. Right now the online data retrieval tool that students and families use to fill out Financial Aid forms is down because of Cyber Security problems. Hackers were using stolen personal information like names, birth dates and Social Security numbers to steal taxpayer dollars. You would think that an administration that talks about running government like a business would want to go out and invest in Cyber Security when it finds a hack, but thats not whats happening here. Instead the administration is repeating the same old pattern. Cut after cut to irs resources, meaning Taxpayer Service and Data Security can get worse and worse. I want to close with a couple of comments as it relates to this whole discussion of tax reform that the chairman mentioned. Usually around this time, taxpayers are collecting all their forms and receipts, theyre sitting down to file taxes and theyre saying will congress ever manage to simplify this mess we call the tax code and help the middle class . They might be hopeful this year theyve heard the president and members of Congress Take tax reform is right at the top of the agenda, but so far when you parse the details it looks like some republican members of congress and the administration are locked in competition to see who can propose the biggest tax cut for the fortunate few. For the typical working family there isnt a lot in the trump plan that helps that working class family get ahead and in some respects it looks like theyre getting a tax increase. So ill close, mr. Chairman, by way of saying that to me right at the heart of bipartisan tax reform is recognizing that we really today have two tax codes. Theres one system for the cop and the nurse and its compulsory. Every time they get a paycheck, that tax is taken right out of it. No special deals for them in the kaymen islands. Then theres the system for those who are fortunate who can hire the lawyers and accountants and take advantage of these murky rules and that system with the right advice from the tax experts you can sort of pay what you want when you want to and sometimes you pay nothing at all. Its grossly unfair to just sit by when you have these two tax systems in america, one of which is stacked against the working family. That has to be a key part of bipartisan tax reform. Nobody is going to tell me that its not possible to do it. My time on this committee ive been involved with a number of thoughtful members on the other side of the aisle. Greg and i sat together every week for two years to present a bipartisan tax plan and danny coats did the same thing. What we have to do is get away from this partisan reconciliation only kind of approach and say from the get go democrats and republicans, you and i do so often, sit down at the outset and we try to make sure that weve got a system that works for everybody and that the working person gets a fair shake and i want to renew that i think there are a lot of members on our side of the aisle who would like to work in that kind of vein and i look forward to our discussions. Thank you, senator. I appreciate your comments. Todays witness the honorable john coskinin. He was confirmed to this position in december 2013. Before coming to the irs, the commissioner served for four years as a nonexecutive chair cameraman of freddie mac including a period where he as acting ceo and he was president of the u. S. Soccer foundation, deputy mayor of the district of columbia. The commissioner spent more than two decades in the private Sector Holding various leadership positions at the polmary company, including Vice President , ceo and chairman. This came after his work for several years in federal and municipal government and a number of years practicing law. The commissioner has a law degree from the Yale University school of law and a bachelors degree from duke university. We want to welcome you back to the finance committee, mr. Commissioner, and i want to thank you again for being here today. Wed like to have you please begin with your opening remarks and i ask that you limit your Opening Statement to around five minutes, if you can. Thank you, mr. Chairman. Thank you for the opportunity to appear before you today and mr. Chairman i appreciate your kind and thoughtful words of support. Im pleased to report that the 2017 Filing Season has gone well so far. Through march 31st the irs has received more than 93 million individual returns on a way to a total of about 152 million. Weve issued over 74 million refunds for more than 213 billion with an average refund totaling 2,900. The irs is required to hold tax returns until february 15th each year if the claim if they claim the earned income tax credit or the additional Child Tax Credit. This change slowed the overall pace of refunds early in the Filing Season, but that pace accelerated with the release of more than 50 billion in eitc refunds after february 15th. The new requirement to hold earned income tax credit and Child Tax Credit returns and another change to accelerate the filing date of forms w2 have helped the irs spot fraudulent returns. Receiving w2s allows for unnecessary delays. Im pleased to report we are seeing an improved level of service on our toll free lines. Our level of service is running above 76 and we anticipate the average for the Filing Season overall will be about 75 . The improvement is the direct result of additional funding granted by the congress in 2016 to improve service to taxpayers and strengthen Cyber Security and expand efforts against Identity Theft and freed up resource to reduce correspondence inventory. The inventory included more than 50,000 pieces of correspondence and thats done to 660,000. We continue to Strong Demand for our Online Services. Taxpayers have visited our website, irs. Gov more than 76 times this year. Track my refund has been used more than 228 million times. Other tools which allows taxpayers to make payments online has been used more than 4. 6 million times this year. The balance due feature lets taxpayers view their irs account balance online including the amount they owe for tax, penalties and interest. This tool has been used about 546,000 times since it was launched in november. The new balance due feature is important because it represents the first step toward a fully functional irs online account for taxpayers. Were developing this as part of our efforts to enhance and expand Important Services for all taxpayers no matter what their circumstances. Service at our Taxpayer Assistance Centers has improved this year. In recent years many Assistance Centers saw such heavy demand during the Filing Season that taxpayers were lining up for hours before the centers opened. In 2015, we tested the idea of letting people make appointments in advance. This worked so well that we extended the appointment process to our Assistance Centers this Filing Season. As a result we have no reports of long lines so far anywhere in the united states. Another important area is the growing problem of stolen identity refund fraud. Over the past few years weve made steady progress in protecting against this crime and that progress has accelerated since 2015 thanks to the efforts of the Security Summit group, the Strong Partnership between the public and private sectors has produced real results. In fact, the number of people who reported to us that they were victims of Identity Theft declined from 698,000 in calendar year 2015 to 376,000 in 2016, a drop of 46 . Even with this progress the fraud filters in our systems are still catching a large number of false returns. Last year our system stopped more than 6. 5 billion in fraudulent refunds on 969,000 returns filed by identity thieves. It shows that Identity Theft is still a major threat and we need to is keep up the fight. We recognize that the congress is considering tax reform. The irs doesnt take a position on policy questions in tax reform or any other area, but we have an interest in working with congress to make sure whatever policies are adopted are easy to administer and easy for taxpayers to understand. We also hope that congress will make any tax changes prospective and build in lead time so we can prepare taxpayers and our systems for the changes. Chairman hatch, Ranking Member and members of the committee, i look forward to your questions. Thank you. We appreciate you being here and we appreciate your comments. Let me begin the questioning with this question. Last month the irs and the department of education took down the data retrieval tool for student aid applicants. You took this action after it became apparent that data thieves may have used stolen information to access the system and obtain additional sensitive Tax Information. Now, i appreciate the confidential briefing the irs provided to Committee Staff last week and i wont go into more details given the ongoing criminal investigation, but this is not the first time thieves have used stolen information to obtain sensitive taxpayer information and likely wont be the last. Commissioner, is it true that the Inspector General warned your agency of this threat last year and if so what actions did the irs take following that warning . Number two, has the irs notified the taxpayers effected by this incident . If not, when does it expect to do so . After our problem with the get transcript two years ago, i asked the agency to take a look at every way anyone gets either money or information out of our systems. I thought there might be 30 or 40. It turns out there were over 200 different ways we provide tax data to mortgage companies, finance companies, the department of education. So we have begun an agency wide process over the last two years to look at each of those avenues of approach, see where the risks are and solve those risks. One of the things we did a year ago was it used to be you could file your return by going online and getting whats called an efile pin. All you needed was your Social Security name and address. Social security numbers can be bought online for 10 by criminals. Last year we discovered in addition to legitimate taxpayers, criminals were filing fraudulent returns so we shut that down and any criminal filing of tax return had to actually have last years adjusted gross income. Last summer, working with the Inspector General, we got some preliminary indications that when mortgage companies, through consolidators were asking us to confirm income for people applying for a loan ormortgage, that data was coming through a system that did not necessarily make us comfortable that the consolidators knew their customers. We shut that system down for two weeks while we developed a program in the short run and the long run to ensure they know with whom theyre dealing before they pass those requests on to us. As we moved through the early fall we focused on the student loan application process through the department of education. He had an early indication in september that it was possible with relatively little stolen information to pretend you were a student, go online, start to fill out an application, give permission for us to populate that application with tax data, the adjusted gross income and complete the application. We started working with education in october telling them we were very concerned that that system could be utilized by criminals, but on the other hand we recognize that 12 million to 15 million applicants use what we call the convenience app of populating their application with their tax return. Education and we worked together and they developed a longterm solution that will mask that data, but they cant execute and implement that until next october. We agreed with them, since we did not have at that time, any volume of criminal activity that rather than shutting it downened a add to the burden of people applying for Financial Aid we would then monitor that system as we move through the tax system, but i told them as soon as there was any indication of criminal activity we would have to take that application down and that occurred as we monit monitored through february it became clear there was a pattern of activity that i wont go into detail that was clearly not consistent with people going on and actually applying for student loans. As we tracked that pattern down, we discovered in fact it was clear that some of that activity was legitimate students, some of it wascriminals. So we shuthe system down and spent the last three or four weeks working to see was there any interim solution we could use before they finished their work in october to bring the system back up and it turned out there was no way we would satisfy ourselves that opening that avenue again would be free from risk, that criminals would get in. Our highest priority is to make sure we protect taxpayers and their identity and as well as against fraudulent refunds. Whats going on is at this point you can still file a student loan application. You just have to put in the Tax Information yourself. If you dont have it, you can go online with our new system and get it online or well mail to your last address of record the Tax Information you need. What you wont be able to do until probably october is go in and have the data automatically populated. Fortunately, we caught this at the front end. We think at this time we estimate fewer than 8,000 fraudulent returns were filed, processed and refunds issues. So again we were at the front end of the problem, but weve been monitoring it. We have other areas were monitoring. Were trying to anticipate where will the criminals attack next. Were working closely, the chairman and i to get on top of this because this isnt complicated. Cyber thieves have been ripping off students and parents and i heard you give a number that i thought commissioner was for february. Did you go back earlier, give us your best estimate of how many taxpayers will end up having their data stolen because i think what people want to know and you work with us and we appreciate it, is this the tip of the iceberg. Is there going to be more. Go back briefly and give us a sense of how much more is still out there . Originally we were kesconcer about the Filing Season, but have gone back as far as last september that there are no indication at this point of any illegal activity in september through december. As you can track the changes, theres a spike in activity that begins in the latter part of january. As we work through the pool of people in the suspicious area of activity who did not complete their application is about 100,000 people, but some of are legitimate people who just didnt complete the application. Our position has been as weve been working with education is we cant confidently distinguish the smaller part of that pool or the part of the pool that had their data stolen from those that may have had their data stolen. Were going to notify all 100,000, 35,000 letters are on the way, because we know the highest risk was our filter stopped 52,000 returns out of that 100,000 and out of those 52,000 we know 14,000 were Identity Theft refund illegal returns that didnt get out the door, but were there. So we marked all 100,000 accounts so whenever a return is filed theyll be protected, but while a number of them again we dont want to unnecessarily worry people, we will advise everyone there are some indication that they may be the a risk. Are you confident that the pool of possible students and parents who got ripped off is not greater than 100,000 . These numbers always have a way of growing. We are actually now starting to look through all of last year, although last year you didnt need this information. If you were a criminal, you could get an efile pin to file. They need adjusted gross income because thats the key we have this year for taxpayers. The number may grow, although weve continued to look at it and analyze it. At this point all of the an lat ticks with the department of education shows that the pool is about 100,000 people. If you could continue, commissioner, as you have to inform chairman hatch and i about it, were working together on this. Let me ask you about the tax returns the president s tax returns. As you know since watergate its been routine for president ial nominees and sitting president s to release their returns. It seems to me Public Disclosure is all the more important today, stories practically every few hours about conflicts of interest and ties to foreign governments, all of these issues being debated in the press and leaks and hanging over President Trump and his administration. If irs agents found ties to russia in the president s tax returns, would they now be able to share that information with National Security agencies . I cant talk about anyones individual tax this is just a question. Would they be able to . As a general matter, Tax Information and tax audits are highly protected. We think every taxpayer needs to be confident when they deal with us that theyre going to be dealing with us and were not sharing that information with anyone else. As a general matter, if we find evidence of criminal activity in an audit, our criminal investigators work with the department of justice on that matter. But for the vast overwhelming majority of taxpayers, that information about the return, the information about the audit, is highly secretive and since no irs employee for instance can look at anyones tax return unless they have a good reason to and we monitor that. At this point i think the more important we have for taxpayers is if youre dealing with the irs, we view that information as important to protect, important to keep within the bounds of the activities of the irs. I think what were interested in knowing is just how because this is a very unique situation. In effect, irs agents may be looking at information that involve the boss, involves the president. And i was pondering for a second your relationship with the justice department. If an agent now found matters that could be criminal on tax returns of the president as it relates to the president and russia under current irs rules and procedures, that information would go to the justice department, is that right . Were not in a position to talk about anybodys situation or any hypothetical. All i can tell you is we treat taxpayer data confidentially and we protect it to the maximum extent we can and every taxpayer gets treated the same. All right. Can i ask one other question because chairman grassleys gone. Sure. We have introduced legislation to strengthen incentives for whistle blowers under the tax code and enhances protections. The chairman cant be here. Hes on the floor. You cant endorse legislation obviously, commissioner, but id be interested in just one quick question. Do you believe there is a need for additional whistleblower protections and set aside the bill senator grassley and i have, but do you believe theres a need for more whistleblower protection . I do. Im a big supporter of the whistleblower program, but i think whistleblowers ought to be protected against retaliation. We need to encourage people if they think there is a problem going on, wherever it is, to be able to raise their hand, make that problem known without having retaliation against them. Thank you. Senator roberts. Thank you, mr. Chairman. The former chairman of the committee, my good friend, said at your confirmation vote one of the essential tasks you had was to rebuild public trust in the irs after the political targeting scandal. I note with interest let me back up and see if i can make sense out of this. This really gives me no pleasure and with some degree of sadness that i want to ask you this question. The house ways and Means Committee chairman kevin brady and 14 members of his committee have called for you to step down immediately. I have their letter and i would like to insert it in the record at this point. Ask consent for that. Without objection. Thank you. This has always been about the First Amendment and protecting those rights and preventing the government from restricting them. I want to go back to when you first came to my office. I was very pleased to see you. You told me confidently that you would focus on implementing the Affordable Care act, that you would use your business expertise to make the agency run as smoothly as possible and would keep the irs free from any political interference. These are all wonderful goals. You seemed like you just would be the man for the job. Again, it gives me no pleasure and with sadness that with all due respect i have been disappointed in your record in the agency. Im not going to go over all of the things listed in this letter and im sure youre familiar with them and would have quite a rebuttal. This has been about the First Amendment and protecting those rights. Seven years after the irs commenced its campaign against conservative groups in close to four years after the public apology for what was going on, i do not believe we have meaningfully addressed the issues that political targeting raises whether it be conservative, liberal or whomever. I dont think anybody has been held accountable. In fact, in checking these organizations are still experiencing delays and i think this is really unacceptable. Now, the advent of a new administration and new leadership at the treasury does give us a chance for a clean break and basically my question to you is that do you intend to serve out your full term or will you submit your resignation to secretary mnuchin as soon as possible . Well, i appreciate the inqui inquiry. I regret your disappointed in the performance. I think the record will demonstrate and a number of members did not sign that letter, but i think our letter will demonstrate have implemented every recommendation by this committee, including the majority and minority report recommendations to ensure that a situation that should never have occurred never occurs again. The ig has reviewed those activities and verified that weve implemented those rules and those regulations. The ig has reviewed our production of information and documents and found that no one has done anything purposely at any level in the organization to interfere with any congressional investigation. Weve produced over 1,300,000 pages of documents to everyone. There is no indication, the ig has responded to every indication and question about whether anyone has been targeted unfairly for an audit since this unfolded. They looked into over 100 cases and not found a single one and my concern as i made public as my term ends in early november. Ive talked with the Transition Team for the administration. Ive said publicly i think it is important for there to be continuity in leadership for this organization. You have received anything back from the administration . I have not received feedback. My position has been ive edge couraged them to find someone in the next month or two to nominate for this position because as you know the confirmation process appropriately for the irs commissioner is lengthy, thorough and detailed. Any confirmation process at this time the senate has proven to be lengthy. I wont go into that right now. I understand that youre doing a very good job at summarizing at what you believe you have accomplished at the agency. I note the letter from the ways and mean folks. I simply do not agree with your summation in terms of whats been done with regards to the First Amendment rights of many americans. So i take it your answer is no. I was going to say let me respond to that. My plan i signed up for a term that ends in november. Where i come from if i sign up for a commit, i complete that commitment. There wont be a commissioner ready to take charge when i leave and running an organization without a permanent head is not a good idea in the private or public sector. Ive talked to secretary mnuchin about it. We need to find someone to occupy this space and its going to be vacant come november. I plan to complete my term. I appreciate that. Thank you. Senator scott. Thank you. Good to see you again. Good to see you. The treasury ig for Tax Administration issued a report just last week detailing how irs criminal investigators mainly pursued law abiding citizens and businesses when seizing assets related to antistructuring rules. The irs seized 18 million in assets from innocent businesses. The report found the rights of some individuals and businesses were compromised during the investigations. Im pleased that the irs has undertaken some policy changes to deal with civil Asset Forfeiture in alleged cases. But the management response and the report from the irs noted that the irs never violated structuring laws and the relevant laws do not differentiate between legal or illegal sources and since what you have enacted is only a policy change, i believe the legislation introduced on the house side and i have introduced with senator brown on this side which would limit the irss ability to seize peoples money without first charging them with a crime is absolutely necessary to ensure we do not read about and our citizens do not undergo any further nightmare scenarios like these seizures. Tell me you agree. I agree. I have to leave. I apologize for interrupting you. When you give such a clear answer, you can take all the time you want to. Let me elaborate a little bit. We changed the policy almost a year and a half ago and have since then one seizure and it has been in a criminal matter. We are mindful of this. It is a policy change that is now fully implemented, but if the legislation were passed to make clear that that policy change was a legislative change we would be supportive of that. Right now, again, the act provides if you structure payments to avoid taxes or convenience, its a violation of the law. A legislative change making clear that unless the funding is from an illegal source, there wont be a seizure would be fine with us. Perfect. Thank you, sir. In 2012 irs employees spent about 573,319 hours of official work time on Union Activity. That is about 72,000 days worth of official work being done by irs employees not helping u. S. Taxpayers. If you have these hours back, what Better Service and efficiency could you provide to the americans suffering through long wait times and disconnects and process delays . Clearly if we had our position has been the more resources we have the Better Service well have. The wait times have been cut and service is up. The 573,000 hours is down by 100,000. We have a program as part of our contract with the union to Work Together to try to limit official time hours wherever we can, but official time is provided to employees in the union by statute. We dont have an ability to tell them they cant do it. We do have an ability to try to work with them to contain it and to make sure its used for official purposes. Theres never been any investigation showing that the union has misused those times and the employees under the law have a right to be represented by Union Representatives and thats what the official time is used for. No question that theres been a suggestion that theres been a violation of law. Were talking about 21. 21. 6 million, 576,000 hours that could help taxpayers with their taxes as opposed to Union Activity activities. They can do those activities off the clock. Thank you. Thank you commissioner for appearing this morning. We appreciate your update and testimony on the irss progress with the 17 Filing Season. There are a couple of issues id like to ask about with tax reform on the immediate horizon. I think this is a once in a Generation Opportunity to simplify the tax code which is critical to taxpayers and also ought to help the irs when it comes to administering the tax law. I hope youll redouble your efforts to help put the irs back on the right path, especially in terms of improving tCustomer Service and preventing Identity Theft. I would say its probably one of the biggest issues under your jurisdiction thats facing south dakotans when it comes to taxes and thats the problem of tax related Identity Theft. It effects those who have their identity stolen and those who find their refund delayed while the irs verifies their identity. I want to ask if you could talk about the steps and you probably perhaps touched on this already, but the steps that the irs is taking to improve its defenses and to help taxpayers fight id theft and are there any statutory changes that Congress Needs to make to help you in those efforts to protect americas tax data and minimize the risk of related Identity Theft and if you could, in the context of talking about that, also just weve had some reports of people in south dakota who when theyve had an Identity Theft issue its taking up to a year to resolve and if you can talk about how you might be able to get am some of these cases resolved faster . Working backwards, we have that time down to 103 days so we are sensitive to that and are working hard so as a general matter we think we can process faster. One of the reasons we can process faster is because last year for the first time the number of taxpayers identifying themselves as victims dropped by almost 50 . That drop is a result of not only improved filters on our part and the chairman had asked and we are providing tomorrow more details about our return review program, but were now able to stop and we have over 200 filters, but more importantly or equally importantly two years ago we brought in or i brought in the ceos of h r block and turbo tax to create a partnership where we could in real time during the tax Filing Season share information about suspicious patterns of activity and where we think there are problems and we could jointly Work Together to improve the level of security from the time a taxpayer signs on to their software to the time they file with us and the states. We have included Financial Sector participates who can help us if an illegal refund get outs to recapture those funds. A big part of the decline in the victims is a result of this partnership. As the number declines, thats where we can deal with victims more quickly. If you cut the number by half you can more effective. So for a number of years we made steady but slow progress. I think together with the technology, a lot of the software that we bought with the Money Congress gave us, i think were in a better position with Identity Theft. Were dealing with organized crime syndicates around the world and when you think youre done you have lost. So we continue to have to upgrade our systems, continue to expand our partnerships with the private sector and were reaching out to individuals, individuals have a role to play making sure they protect their data, ensuring they have security on their systems and its a joint effort and i think thats why weve made the progress we have. In addition to the funds you appropriated by congress you have other sources of revenue you collect. Could you share with the committee how you allocate those user fees and the extent to which theyve been dedicated to Customer Service this Filing Season . We file a plan with the Congress Every year how were allocating those funds. Historically weve allocated a significant portion to Taxpayer Service, but we also have significant needs in Cyber Security and Information Technology and enforcement. Each year we make a decision as to where the funding is. Our funding comes in those buckets where we need to support that funding. Initially user fees were meant to allow us to respond to Unfunded Mandates or other activities coming up during the year. Our hope is one day we will fund Taxpayer Service and Cyber Security so user fees are an appropriate ability to respond to changes. Right now we virtually use all of them fill those gaps. This year our level of Taxpayer Service with user fees and the Funding Congress provided is over 75 so it means that we are reaching our goal would be in the low 80s. It takes a little more funding to do that, but were at a much double the rate we were in 2015 when we had just an unacceptable level. So isince the combination of usr fees and support from congress has allowed us on the call centers be able to raise the level of service, but equally important its allowed us in our communications in writing with taxpayers to significantly lower the inventory so we can actually respond in a more timely way to those letters. Thank you. One of the things he used to say is quitters never win and winners never quit. I would urge you to stay on the job until your term expires in november and i know you have some critics. We all do. When we take on tough jobs, people are critical of us. Its hard to imagine. Thank you for all you do and the leadership you provide in a very very difficult job. One of the things id like to do that i do as a senator i do customer calls. I visited businesses in delaware large and small. Businesses outside of delaware that have operations in delaware large and small. Businesses outside of america that have operations in delaware large and small and i ask them three questions. How are you doing . I ask them how are we doing . We, state of delaware, we the federal government. I ask a third question, what can we do to help you. Youve done a lot to in the time youve been our commissioner to lead a team to do a better job, even though we have reduced your resources, your funding by 20 in rural numbers i believe since the time you were confirmed, a reduction of about 20 . We passed changes in the tax code. We didnt give you plenty of time to adjust and train your employees to respond to questions and to prepare the programs and paperwork to allow folks to file their taxes. We pass it right before christmas before people start to file their taxes. We dont make the tax code easier. We make it more complex and we say do a good job. In spite of that i think the irs is doing in a number of respects, despite the hacks and cyber attacks, i think youre doing a better job and its because of your leadership. Three areas i think that we might be able to help the irs do a better job is one, to fund the irs. Were looking at another request to reduce funding from the irs in this administration and i understand that for every dollar we invest in the irs not only do we get Better Service for taxpayers as they prepare their taxes, but we find we get for every dollar we invest we increase revenues by 4, maybe more. Obviously there might be something we can do on the budget side here. Thats one thing ive heard about. The issue the paid tax return prepares, youve been asking for years to make sure that the folks who are returning these helping folks prepare tax returns are qualified to do that. It turns out 60 of the tax preparers that are not cpas, but 60 help submit tax returns that are erroneous. You asked us to do something about that. I think we should. The funding. The last thing i wanted to mention and then just ask you to comment. Stream line Critical Pay Authority. We have over 1,000 vacancies at the department of homeland security. They are cyber warriors. They have the money to pay them. Theyre having a hard time finding them. I think one of the things you asked for is stream line Critical Pay Authority that expired a couple of years ago. That would seem to me maybe another we can help. Would you respond to those three and say in the past or are they still needs and requests you have . On funding we are still in absolute terms 900 million below where we were ten years ago. Down 900 million compared to how many years ago . If were looking at the 18. 2010. Thats out of a budget of 12 million . Budget was 12. 3 close to 10 . And not corrected for inflation . Closer to 20 , 23 there. Were down over 17,000 people that impacts not only Taxpayer Service. It impacts enforcement and i. T. On streamlined critical pay it was used primarily for technical positions like cybersecurity, our chief cybersecurity person, all streamlined critical pay. The last of those people are rolling off. It allows us when were competing with the private sector and others, when we find someone, we can say we want to hire you for cybersecurity purposes. If we go through the normal process, its four to six months. Asking one of these people in high demand to hang around four to six months generally doesnt work very well. We have great people in the irs, wonderful people working in i. T. , but without streamlined critical pay, its a challenge to upgrade those folks. Otherwise, as you say with prepared preparers, the saying goes the barber has more qualifications to cut your hair than it is to prepare a tax proposal. We ran the program for about a year and a half so everybody could see what it looks like. Its not a threat to regulate. Its really a requirement of minimum standards of competence, and i think that would be important. It wont drive criminals out of business, but it will give tax preparers some confidence they know something about the tax code. I have been your wingman. I sign up again. Hopefully, it wont be a long mission. We need to get this done. This is crazy. Thank you. Thank you in a bipartisan way. Senator bennet. Im going to go 45 minutes. No, just kidding. My answer will be long. Just kidding. Commissioner, this may be the last time you testify before this committee, and i want to take a second to thank you for your willingness to serve as our irs commissioner at what has been an enormously difficult time in the countrys history through budget cuts and sometimes pathetic actions by some that inappropriately turn the irs into a political football. You have taken on the difficult task of leading this agency. You have not been perfect. None of us in Public Service is perfect. Im sure you, like me, would have things you do differently in hindsight. The irs is an easy target in washington, and you have taken on more incoming than most in your role. So much of what you have endured has not been a reflection on you and your work but a symptom of the dysfunctional moment in our countrys politics. With that as a backdrop and in this last hearing that you have, id like to offer you the opportunity to tell anyone whos watching, who may not understand, why did you take this job in the first place . What have you achieved in the job . And roughly 40 months into the experience and far longer than that in your Public Service, what would you have to say to other americans who are contemplating Public Service . I took the job. Took me about 15 seconds to agree to do it because i knew having been around washington the Critical Role the irs plays both in funding the government. We collect 3. 3 trillion a year, but also because we virtually touch every american. So to the extent we could make the system work more efficiently, more effectively, we could improve that situation for 142 million taxpayers filing. We have talked about the gains in Identity Theft. Wea weve talked about the gains in the ability to access information at the irs for taxpayers who deal with Financial Institutions online and never call. Theres no reason we shouldnt be able to provide a secure way for taxpayers to deal with us without having to call. Weve managed to get through the last three and a half years with i think a reasonable amount of employee morale. While we havent been able to replace most people leaving, i think we have demonstrated we can do the job and do it well. Its not a time for irony these days, but one of the ironies is while the irs is under attack, when theres a new program, people say lets give it to the irs because theyll get it done. Sometimes were our own worst enemies because we do so well that people think they can cut the resources and it wont make a difference. But it will make a difference. So what i would like taxpayers to know is that we take Taxpayer Service very seriously. We also take treating every taxpayer the same and fairly very seriously, which is why whats been called the targeting of conservative groups gauged solely on the basis of their name for further review is unacceptable, should never have happened. I personally apologize for anybody who was stuck in that queue. You should be able to get an answer from the irs quickly, not have to wait a year or two long for that answer. There are people who go to church, people who dont go to church. It doesnt make any difference to us. If you get a letter from us, if you get an examination by us, its because of something in your tax return. Anyone else that had that issue on their tax return would hear from us as well. Were involved in Tax Administration. Theres not a republican or democratic way to administer the tax code. Theres a professional way to do that. We have a group of employees dedicated to service to taxpayers, to service to the country. Thank you. I thank you for your service. Thank you, senator. We now have three senators here and the vote is going to start in ten minutes. Senator cassidy. Mr. Commissioner, again thank you for your service. As you know, one of the things before us right now are proposals to replace obamacare, repeal obamacare, or to repair obamacare, whatever the semantics are. One of the criticisms of the approaches that would use an advanceable refundable tax credit is the etc has an overpayment rate. I guess my issue, my question and this is a conversation. Its not a got you is what do you think of the irs capability of administering an advanceable refundable tax credit using as a context the eitc and the subsidies that were paid out to Insurance Companies under the Affordable Care act . I would start off by saying we dont have a policy view of what should happen to health care. Right. Its mechanics. One of the areas we have struggled with improper payments in the eitc. Anytime you have a tax credit that is refundable, it is a magnet. Its a target for identity thieves, a target tfor preparer who are fraudulent. The advanced premium tax credit in the present system has not presented that problem because the money doesnt go to the taxpayer. The money goes to the insurance let me interrupt. The proposal that susan i put forward would have an account created that would be used for health care or health insurance. It is subject to irs regulations visavis thoughts . Anything that causes the money not to disappear is a significant advantage in terms of dealing with the risks of improper payments. The concern at the eitc is the kind of paradigm in which we should view these advanceable tax credits. It doesnt go directly to the individual. Rather it is somebody who has fiduciary responsibility. Right. Let me ask you Something Else because i have limited time and the chair is kind of wrapping me. Another concern has been i have a Health Savings account. Or at least i did before obamacare took it away from me. I had a card. I would swipe it. It would tell me automatically if it was an allowable expense. Its been suggested the Health Savings account law and the ability to monitor how the expenditure works is lacking. Is there fraud there or do you think it works pretty well . Thus far we have not seen any major indications when someone says they have seen folks go to the pharmacy counter with a bag of potato chips and swipe their hsa card, is that a myth . We dont know of that at this point. Could you ask your staff to let me know that . I would be delighted to do that. Lastly, let me tell you ive been a victim of Identity Theft. Let me revisit that because its rather personal. I remember the way it happened is that somebody filed on behalf. Somehow they got my social, but it was pretty evident from you know, i was in the campaign, either it was my opponent probably not, but it was somebody that could just look at news reports and knew a lot about me and somehow got my social. When i looked at it though, you could have easily and when your folks came to talk to me, you could have easily have got information about me. You could have coordinated those and seen that the filing was not correct, and they told me that these databases, yes, they should be done, but the databases did not communicate with each other. Either historically it doesnt match or it doesnt match for whats been filed current ly an it didnt happen. I see your data systems may not come online until 20 or 22. We have put in place our return review program that has 200 filters looking for those just anomalies. This was a year and a half ago this occurred. In a year and a half this has transpi transpired . It was part of the way Identity Theft victims dropped last year. The filters are even better this year. We have information coming from states and preparers, so we are significantly more capable of stopping that. Thank you very much. Senator cantwell. The vote starts in three minutes. I was heartened to hear the senator say that the irs was understaffed and we needed to make sure we moved beyond the punitive budget cuts, so has the irs been exempted from the president s hiring freeze . We have not been. Do you know of any steps the secretary is taking to advocate for the irs exemption . The secretary has been very supportive of the staff working with us in identifying the areas where we should make hires in the areas that are critical to the operation of the agency. So theyre pursuing some exemptions . Theyre working on a list. How is that affecting the agency not having the staff . What would you say the effects of that are . Were kind of poster child for a hiring freeze. We havent hired very many people for the past six years. Were talking about a relatively small number of positions. There are leadership positions in i. T. Or critical areas, and those are hampering us a little bit. The secretary in the Treasury Department couldnt be more supportive working through this. Well, we definitely want to see those exemptions. And i guess i would be the wing woman on the wing man team on this issue of streamlined Critical Pay Authority because the notion that you say that hiring freeze does effect i. T. And we then need to find other people, to me, this whole issue of cybersecurity and information and securing the irs database is so important. So i hope that i hope that we can do if you need anything from us to help push that awareness or advocacy, let us know. Thank you. Well wrap up and well go vote. Thank you, mr. Chairman. I want to raise the issue of private debt collection. I understand its law, and in addition to receiving other information, taxpayers are now receiving a notice that they may be contacted by private debt collectors with all of the risk factors that go along with that. I regret that were at this point, but i understand the law and i understand your responsibilities to carry out the law. My concern is that the last time we tried this between 2006 and 2009 the treasury ended up receiving 63. 4 million in revenues but paying out 67. 8 million for a net loss of 4 million. Can you share with us and perhaps youll do it for the record with a written response because of the time we dont have time today, h how your taking steps to protect the public against the abuses of private debt collectors and secondly how youre going to ensure we dont lose money by using private debt collectors . Weve had good sessions with private debt collectors in terms of training. What are the consequences . Ultimately we can terminate the contract if they do not follow the normal instructions. And thats clear in the contract . The companies have been very cooperati cooperative. When i get a complaint, youll follow up on it . And if accurate, youll fire the collector . Yes, if theres a pattern of activity obviously, nobody is perfect. Its hard for me to find a pattern. I get individual complaints. Well collect those and be delighted to have those. And to make sure we dont lose money. One of the arguments made in the past is we overloaded the system with a lot of overhead and activities. This time around we dont have the resources to do that. We have streamlined the program. My commitment has been that we will do everything we can to make sure this program is effective both in terms of protecting taxpayers but also collecting revenue because if it works, that would be fine. If it doesnt work, i dont want anyone saying we sent that somewhere. Well monitor the resources that are returned to the government, and we think well have a very good database. Will you make Information Available to my office about how this process is moving forward including the accountability issues youve talked about . Id be delighted to do that. Thank you, mr. Chairman. Thank you, senator cardin. Weve got this vote on. Chairman hatch want ed ed me to thank you very much for appearing today. Well be working with you all on trying to improve the tax system, and i would ask that members who have written questions submit them by 6 00 p. M. On thursday, april 13th. Those are all comments from chairman hatch who has to be on the floor. I would just like to add one last, you know, thought, and that is, mr. Commissioner, i think everybody understands that nobody likes the irs. And the irs will always be a punching bag. And my view is you have been accessible and you have been honorable in your service, and we will look forward to talking with you further undoubtedly on a variety of issues. With that, the finance committee is adjourned. Thank you. [ indiscernible chatter ]