Taxpayers and corporations. [inaudible conversations] [inaudible conversations] are right. This joint hearing of the subcommittee on Government Operations and the federal workforce and healthcare and Financial Services committee will come to order. Welcome everyone. Without objection the chair may declare a recess at any time. Recognize myself for the purpose of making an opening statement. First and foremost thank youst l for being here in this crazy but at times were in. Nevertheless, what were talking about is extremely important. The irs has been played really with dysfunction for decades. The dysfunction is across the board from data breaches complex, and didnt except to slow audits, backlogs, and really Terrific Customer Service got at least for my constituents. Despite years of congressional oversight and government watchdog warnings, not much has changed. My colleagues on the other side of the aisle believe that more money and more power is thee solution. In fact, the last years Inflation Reduction ActCongressional Democrats to 80 billion into the irs. With this influx of cash, that rest plans wrapup audits on all americans. This funding spree prioritizes enforcement over improving Taxpayer Services. Taxpayers sources like processing taxpayer returns receive a 9 funding boost. With enforcement receiving asphyxiation 9 funding boost. The irs need stronger leadership, not more money and not more audits. The irs needs to work at getting the American People their money back in ar timely fashion, not auditing the lower and middle class americans. The irs in my opinion needs to invest in highly skilled experts, not simply hire more employees, but Higher Quality got not so much quantity. Put simply, the irs just needs to do a better job. There needs to be consequences for their in action. Ifif a private business did what the irs does on a daily basis, i it would quickly go out of business. If they private business repeatedly left you on hold for hours as my constituents and actually myself has evenn experienced god at a a timer didnt answer a phone call, it really would go out of business and customer clicks would go through the roof. If a private business repeatedly left sensitive Tax Information unsecured or lost itve entirely, it would face criminal penalties and go out of business. But since the government is involved, theres no accountability for yet any accountability that i have seen for its poor performance and thats one of the things i would like to talk about is who owns it, whats the accountability . But also what are we doing to improve it . Right . So even if we did get more money, what with the Solutions Look Like . Right . Because we consider and complain that we also have to focus on solutions. Why do we accept this . Hardworking americans accept this because they follow the law and they know they face consequences like penalties and fines if they dont, and those penalties and fines are their money. It comes out of their pockets. If we make a mistake on our tax returns, it costs us, right . In contrast, when the irs makes a mistake, there are really no consequences. Or if there are, i would like to talk about what those consequences are. Do people lose her job . Are the put in action plans . Do they get demoted . What are the consequences . And i really dont think its too much to ask to have the federal agencies play by the same rules as we expect American People to play by. I mean, the irs asked for more money to fund or mistakes got more data breaches, more ineptness. It shouldnt be acceptable and we have to hold our Government Agencies to at least the same standards that we hold the American People to with their tax dollars. Instead of doing the job, the irs are struggling to complete its basic functions. Instead of processing tax returns in a timely manner, americans are waiting months and sometimes years for money that is a rightly theirs. And the issue is yes, we pay them cost you know, interest on that money, but a lot of the business are going to go out of business by the time they get the rightly deserved money. The irs can do something as simple as answering the phone. Instead of being trustworthy to the irs carelessly leisure Sensitive Information unsecure and vulnerable to leaks, fraud and Identity Theft. Frankly, the irs is the perfet example of bureaucracy failure. And theres not been a lot of accountability, if any accountability for it. We talk about these issues today. Today. We need remember that these are real problems that impact real people with real money, their money. Since i entered congress, helps constituents have approached my Office Asking for help with the irs. I have constituents of file returns on time in april and have yet to receive the refund. When they seek help from the irs they can get hold of anyone on the phone even to get an update. Ill cover those later but often they wait hours t to reach Customer Service representatives only to get disconnected due to an overloaded switchboard. Which you can imagine incenses them and the frustration goes through the roof. I havein constituents or busines owners who have outstanding applications for the Employee Retention tax credit. One of these cases has been pending since february. They wait, these wait times are unacceptable really for Small Businesses because they depend on those dollars, especially to the pandemic. We are here this afternoon to demand answers and accountability on behalf of the American People. So mr. Werfel, thank you for being here too the subcommittee today. I look forward to your fruitful discussion. I now recognize Ranking Member mfume, for the purpose of making an opening statement. Thank you very much, madam c. Good morning is a a still . Good afternoon. Im living in that other universe i see. Welcome, everyone, and thank you very much, madam chair. Pain once theirir share is an important obligation in whats known as the American Social contract. With an estimated 168 billion individual taxpayers filed returns this year alone, processing high volumes oflo returns requires sufficient personnel, modernized technology, and streamlined systems. A little over a year ago, President Biden signed the Inflation Reduction Act, or the ira, into law. As most of you know this groundbreaking legislation reached the irs at a critical time, right before the twin 23 tax Filing Season, and delivered 80 billion to the irs over the next ten i years. The funds allowed the irs to hire new staff, modernize technology, and audit wealthy tax cheats. Who had been getting away with murder. The poster board behind me illustrates that this is a win, a win for low and middle class americans. S. These ira back improvements achieved as you can see, achieved 87 peak levels of performance and Service Success as a result of their implementation. 87 , higher than at any of the time. Ig it was a dramatic increase from the previous tax filingg your alone. Irs answered 6. 5 million more calls than last year, cut wait times by 86 , which i think is phenomenal. It certainly the 140,000 additional taxpayers, and cleared the backlog of unprocessed 2222 individual tax returns immediate results that show investment in the irs improves with no errors. Now you got to be doing something right to have those kind of numbers that are certifiable and verifiable. So these are real and tangible and immediate results that show that investment in the irs improves Taxpayer Services. Dont take my word for it. The irs pointed out in a sweeping release that by the way i would ask unanimous consent he entered into the record, showing that the agency will continue to prioritize efforts of high income individuals and companies without running away, turning a blind eye, or refusing to do what they should in fact, do. So these are real as i said before they are tangible, their immediate results that show that investments in the irs improves Taxpayer Services. Unfortunately, after this years tax Filing Season, and the budget negotiations the nation was forced to heed republicans persistent call for rescinding the irs funding. There were a lot of bogeyman stories that took place all over the floor of the congress about what was going to happen to almost virtually scared the american taxpayer into believing something that was not true. Reality is thehe agency kept its promise and commitment to the nation and its stated goal of cracking down on delinquent tax evading millionaires. Who had been getting way, as i said before, with robbery. The agency kept its commitment, and so despite cuts to its funding and the persistent and dangerous mischaracterizations of irs agents as sort of an army of bogeyman waiting to kick in your door and lock you up, weve got tock stop playing games like that and we have to make that middleclass americans know with the facts are, what the intentions were, and more important, whate the goals have been and the conclusions that bear those goals out in this. To the extent that irs has collected nearly 160 million in back taxes from individuals earning over 1 million speaks volumes about who theyre trying to help and who are they trying to keep us from being takeel advantage by. These millions of dollars in missing tax payments were not an accident. It was not manna from heaven. It was a clearcut delivered effort to make sure that enforcement was a weight should be by the agency and to make sure that tax cheats got particularly the wealthy, wealthy, wealthy ones did not have a safe haven. For example, the irs identified one individual who just last month was ordered to pay 15 million in restitution for falsifying personal expenses as deductible business expenses. I dont know what kind of neighborhood that person lives in, when you can get that kind of find it suggests you been getting away with some serious crime, and was caught. These efforts to defraud the federal government included financing of the 51,000 square foot manchin. Im glad whoever the hell it was got caught. I really am. Thats the affront and thats the tragedy here, and thats what weve got to find a way to make the irs protect middle income people by going after the high income abusers. These sorts of greedy tax cheats exacerbate the 688 billion tax gap highlighting the stark contrast between the amount of money owed in the amount of collected by the irs on time period in other words, the more millionaires and billionaires who scored around and play around with paying theirki fair share, the larger the burden that falls on hard working Everyday Americans who pay their fair share every year on time period the irs reports that even small declines in taxpayer compliance can cause the nation billions of dollars in lost revenue, underscoring the need for simplicity and efficiency during the tax Filing Season. Thats why i coled with my colleague here ms. Porter and with mr. Connolly of virginia the trust in Government Act which directs the department of the treasury to expand electronic tax filing and other Customer Support via email. Also led the streamlining irs operation act which requires the tax returns filed on paper can be readily digitized. The irs heeded that task and that request by expanding, not reducing, by expanding it its digital scanning efforts this tax season. So Congress Must continue to ensure that the irs has the funding and the resources necessary to maintain its remarkable progress since ira became law. Progress that is unheralded in many respects and unnoticed by others who hide behind the fake characterizations. Take no mistake, further cuts will hamper the irss ability to execute transformative change. And so i urge my colleagues on both sides of the aisle to reserve irs funding as we move f forward from our current stalemate and get back to the business of funding the Government Operations. I want to thank our witnesses, commissioner werfel and director lucasjudy for your participation in todays hearing. I am particularly looking forward to hearing fromcu commissioner werfel about the status of the irss upcoming tax Filing Program known ass direct file. We have the duty and obligation inin this committee to ensure tt the government operates at a top tier level for all americans. And ian look forward to discussg as members of congress how we can work to support those efforts. Ideally back, madamo chair. Thank you. I now recognize chairman sessions for the purpose of making an opening statement. Chairwoman mcclain, thank you very much. Im sorry to each of you for being late. Weve had business in another part of the complex. Commissioner werfel, thank you so much for being here. And ms. Judy, thank you very much. The opportunity for us to meet today that we spoke about yesterday, commissioner, is one of natural inquiry that this committee has. Its about the effectiveness of Internal Revenue service as a relates to the ongoing business, that the subcommittee believes is very important. But perhaps it goes into much deeper points, and that is why we are also here today. We need to make sure that the irs in its performance does do its job as mr. Mfume saint says. We need to make sure theyre properly and funded. We need to make sure that they treat all people fairly, not just some that they which used to. We believe that there have been reasons why youou were brought n board the first time mr. Commissioner, acting commissioner. Ve we believe there are reasons why there today, perhaps second year at the irs. Theres a lot of things that we will want to get into, but perhaps its most important for me to say this, that i believe confidence in the irs is what we are after. I spoke to you about this yesterday, about the sizing models, about the professionalism, about the ability to attention to detail for the American People, to be able to get it not just a good answer but to be able to get through on the phone without having to wait for hours. The effectiveness of the irs ability to get the job done is important. We know that the irs is going to cooperate with us because you told me that yesterday on sensitive matters take you and i spoke about that you actually did not want to get into actual information today, and i concurred. But were going to talk today to get an idea that you will cooperate and you will cooperate fully with us, that you will make sure that the. Questions thatu we ask while you do not have to go into the specifics about those, certainly not names, certainly not times, certain not about the investigation, but about your agreement that you will cooperate with this committee and with congress in those regards. So we know that you have been given some extra 80 billion. We are going to want to talk about that, and the deployment of that and how thats going to aid in do the things that would be necessary. I think its important that you know that the irs touches almost every single american. And so the information we get back, the things we hear back, comes at a time that you got to defend a lot of ground. I want to thank you for being here today. I wantan to thank mr. Mfume at a want to thank chairwoman mcclain for allowing us to start this hearing without me. Madam chairman, i yield back the time so we can cut opening statements. I now recognize Ranking Member carper for the purposes of making an opening statement. Have you heard of death by a thousand paper cuts . Its how to get rid of something by subtly attacking it over and over until it is finally gone. Death by 1000 a thousand c. For too many years washington politicians have worked to get the Internal Revenue service and they found creative ways to cut the irs time and time again. How did he do that . Phase one, they start by attacking its credibility. Look, i know that the agency that collects our taxes isnt easy to love. Believe me, opportunistic politicians know that, too, so they go on tv and they give the irs of verbal slash often suggesting that the irs is spying on us, targeting us for our political beliefs are going after us today more money than we owe. What a bunch of bs. But even though those claims lack any evidence, we might be inclined to believe negative things about an agency that collects taxes. Look up even the bible isnt that kindev to Tax Collectors. These politicians easily succeed in creating and spreading hostility, making it even easier to slash the irs again. Q phase two, full on partisan investigations and the tax on the hardworking employees of the irs. Look no further than the last time the Committee Republicans went hard after the irs. Under the Obama Administration republicans falselys claimed the irs was unfairly targeting conservative organizations more than progressive organizations applying for taxexempt status. The irs spent 20 million and produced 1 million pages of documents in response. Ultimately, republicans it didnt prove anything. They instead used itca to justiy diverting resources from irs Customer Service, i. T. , and enforcement. But thats what produces politicians wanted, to turn people against the irs. Tos divert resources so the agency cant do its job and think to take one last slash. That brings us to phase three. Budget cuts. When politicians tell us our Tax Collector