0:00:28

for e e e e e e e

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e for for e e

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um close that door close the door please thank you the subcommittee on Financial Services uh and general government will come to order I'd like to welcome IRS commissioner worle it's the first time you've appeared before

0:07:03

the subcommittee and we look forward to discussing the irs's fiscal year 2025 budget submission this is also my first hearing as chairman of the subcommittee and I'm looking forward to conducting uh this oversight with the agencies under the

0:07:16

subcommittee's jurisdiction whose mission impacts the everyday lives of hardworking Americans in my district and Across the Nation it's my duty to ensure that the agencies including the IRS do not unfairly Target Americans in

0:07:27

auditing their taxes overseeing their particip ipation in financial markets and impacting uh their ability to own or operate a small business start okay thank you the fiscal year 2025 budget request for the IRS is 12.3 billion this is equal uh to this

0:07:48

current fiscal year however the IRS is requesting an additional $24 billion in mandatory funds to rebuild an army of IRS agents and carry out a direct file system that Congress did not authorize among other enforcement priorities the

0:08:02

IRS claims that the recisions enacted as part of the fiscal responsibility act undermine the nation's Financial strength when in fact requesting to reverse that cut on top of an additional $24 billion in mandatory funds does just

0:08:14

that and while the IRS deserves credit for a successful filing season it claims it can't even come close to achieving an 88% level of service without additional mandatory funds specifically commissioner worful has said without

0:08:26

additional funds the level of service on the IRS May phone line could drop back to 30% levels in 2026 it's worth exploring why the IRS says it cannot deliver a successful filing season with the discretionary funds this subcommittee provides

0:08:40

especially considering that these funds account for almost half the sub committee's allocation we need to get back to hearing from the IRS and how it is effectively deploying the discretionary resources to improve its

0:08:50

modernization efforts and better secure taxpayer data I'd also like to hear from the IRS on how the administration is complying with their pledge that taxpayers incomes under 400,000 are not experiencing an increase in audit

0:09:03

activity by the IRS they have enough to worry about with amidst higher grocery rent and utility bills it is our job as appropriators to be good stewards of the taxpayer dollars ensure that American people that the agencies under our

0:09:15

jurisdiction are not wasting money by supporting bad policies that fail to achieve desired outcomes now I'll turn to my friend and ranking member uh Mr Hoyer for his opening remarks thank you very much thank thank you very much Mr

0:09:30

chairman uh and welcome uh to the chair chairmanship of this committee uh I look forward to working with you as I uh looked forward to and had a great relationship as you know with your predecessor who is now our ranking uh

0:09:46

member on the majority side and I want to thank him for his leadership and I know that you will bring the same kind of measured uh work to this committee's very important effort as he did uh I want to want to start by saying that uh commenting on on

0:10:07

a comment you made unfortunately the allocation historically to this committee uh is insufficient to meet the responsibilities of this committee uh and because the objects of this committee are not necessarily most interest either to the public or to the

0:10:29

uh members however the uh work of this committee and particularly the Internal Revenue Service is absolutely critical to all other objectives uh that are covered by the Appropriations Committee uh and we ought to keep that in mind I

0:10:46

want to thank commissioner uh WL for joining us on Capitol Hill today I look forward to hearing more from you about all the IRS accomplished this year I read your testimony it is very impressive uh the level of service and

0:11:00

the increase that we have given to the American public and I'm sure why they don't fully appreciate the ease with which you've made this an experience that none of us like um much better the agency made important progress in its

0:11:17

efforts to implement the Strategic operating plan that it laid out a year ago and recently updated to enhance taxpayer Services we saw those initiative yield impressive results uh in the most recent tax filing season with the IRS feeling 1 million

0:11:32

more customers service calls than it did during the 23 season on average calls were only had to wait on hold for three minutes uh I wish most of the private sector calls that I make were answered as quickly uh that's a minute shorter than last year

0:11:54

otherwise known as 25% uh and uh five minutes shorter than the 2022 filing system the last season before we secured additional IRS funding for the inflation reduction act 2024 filing season also saw the IRS make important technological advances to

0:12:14

improve the taxpayer experience from its paperless processing initiative to its new direct file pilot program as a long time supporter of direct file I was pleased to see the pilot program exceeded its Target goal um with more

0:12:30

than 140,000 taxpayers across 12 States participating thanks to funding from the inflation reduction act the IRS also improved tax enforcement for higher earners successfully collecting $520 million in legally owned in Legally owed

0:12:47

back taxes from roughly 1,000 Millionaires and billionaires these are just a few of the irs's achievements from the year I'm sure commissioner worl will highlight many others I mentioned these accomplishments because they demonstrate

0:13:01

what the IRS is capable of when it receives the resources it needs to carry out its absolutely critical work for the US uh government for the American people uh and for our success if Congress withhold these resources it puts all

0:13:19

those prog all that progress at risk sadly that is exactly what many of my friends uh across the aisle continue to do the antipathy directed at IRS and its employees is unfortunate and it demonstrates an antipathy towards

0:13:42

government in the Appropriations for fiscal year 20124 they rescinded more than2 billion in inflation reduction act funding for the agency let's be clear about what underfunding the IRS means for the American taxpayer it means IRS customer service

0:13:59

hold times will climb right back up it means initiatives like direct file will be delayed or put on hold it means more High earners will be able to get out of paying the taxes that they owe under laws that are already on the books nobody likes to pay

0:14:16

taxes but all of us ought to pay the taxes that are legally owed under the laws that we pass and Americans are particularly AG grieved when they think they are paying more than their fair share where uh corporate executives are

0:14:37

paying less than the people who work for them in terms of percentage crucially cutting IRS funding will add to our national debt you cannot be concerned with the national debt if you're not concerned with collecting legally owed revenues to fund our

0:14:59

critical National Defense and domestic security many of my Republican colleagues claim they care about fiscal responsibility if that's the case then they ought to care about enforcing the law and collecting legally owed

0:15:14

Revenue they ought to work with us to not only fulfill the administration's request for IRS funding but to secure additional resources to offset what was taken from the agency through the recent recisions now I will not be putting

0:15:29

forward this graphs that I used during the markup but the workload of IRS has escalated geometrically and its resources to meet those needs have been dramatically reduced over the decades I look forward to hearing from the commissioner about

0:15:46

why this funding is so crucial he can illuminate all that the IRS has accomplished with these resources in the past year as well as the consequences the consequences that underfunding the agency would have on the nation Mr chairman I thank you I

0:16:01

think I W a minute and 35 seconds over I apologize for that but I think I needed to say all that I said uh thank you Mr Hoyer I will now turn to the ranking member deloro for her remarks thank you so much uh Mr chairman and to the ranking member I thank you

0:16:18

both for uh holding this hearing uh today and uh commissioner worful thank you for being here today uh welcome to the financial services and general government subcommittee thank you so much for your public service we really

0:16:32

appreciate your work and it is vitally important for our nation's governance for our national security for every program service provided to the American people that we have a strong secure and a well supported Internal Revenue

0:16:47

Service an underfunded IRS means slower processing of Americans tax returns and delays to crucial benefits like the child tax credit and I'll take second on the child tax credit because there were folks who who told us uh in in 2020 that

0:17:06

um uh one we could not have an improved and expanded child tax credit uh and then secondly that we couldn't get the IRS to be able to deliver the checks on a monthly basis that that would never happen and huzzah the IRS delivered the

0:17:22

checks on a monthly basis starting that July and with 98% accuracy in getting the payments out to whom they were to go to so I thank you thank you for that and the families thank you for that but uh underfunding the IRS means that those with the most

0:17:41

resources like billionaires and Powerful corporations can often Escape scrutiny and avoid paying taxes when the IRS cannot afford to ensure that they are meeting their obligations 2021 at least 55 of the largest corporations in

0:17:55

America uh in a year where they took in over40 billion dollars in pre-tax income paid no federal corporate income taxes zero nada nothing corporations like Nike ulet Packard the Dish Network paid zero federal income taxes profiting on the

0:18:18

backs of honest American families every dollar the IRS spends on auditing the average account yields just over $2 a notable return on investment but for the wealthy 10th of 1% audits produced nearly triple the return with each

0:18:33

dollar yielding over $6 in Revenue through last year's debate over IRS funding we would hear some members of the majority improperly call this activity the IRS collecting tax that is legally owed a tax increase complete

0:18:50

nonsense we protect honest hardworking taxpaying Americans by ensuring that the wealthiest individuals and corporations are paying the taxes that they owe this committee has made several Investments uh annually and in the inflation

0:19:06

reduction act in the IRS to ensure it has the resources to collect taxes owed to improve services and indeed there has been great progress in modernizing the IRS for the American people with our investments the IRS has significantly

0:19:22

improved customer service with call weit times of just over three minutes and a 37% increase of taxpayers served in person the IRS is also piloting a direct file program allowing taxpayers in 12 states with simple returns to file for

0:19:39

free directly with the IRS there is simply no good reason that American taxpayers are all but forced to use costly private services to be sure they are paying their taxes correctly the government at a minimum should be able

0:19:54

to tell taxpayers if they are paying the amounts they owe this is an important step forward in making government work better for people and critically now that it has the resources to audit the wealthiest individuals and corporations the IRS has collected

0:20:11

$520 million in back taxes from roughly 1,000 delinquent Millionaires and billionaires rolling these Investments back would only serve those who seek to escape paying the taxes that they owe getting a free ride on the backs of hard

0:20:28

working and honest American families this committee must continue to ensure the IRS has the resources to complete its Mission it would be foolish for a business to slash its accounts receivable Department in an effort to

0:20:43

save money the US government should not do so either thank you for being here and for your public service to our country I yield back the ballots in my time well thank you very much uh Mr Loro commissioner warful welcome again

0:21:00

without objection your full written testimony is going to be entered into the record with that in mind we ask you to give us uh summarization of your opening statement in five minutes thank you chairman Joyce ranking member Hoyer

0:21:13

ranking member deloro members of the subcommittee thank you for the opportunity to testify on the filing season and the IRS budget I'm pleased to report that we saw a strong 2024 tax season for the nation one of our best in history through the April filing

0:21:30

deadline the IRS received more than 139 million individual income tax returns and issued more than 86 million refunds for more than $245 billion the inflation reduction act funding has enabled the IRS to have one it one of its best

0:21:48

filing seasons ever in terms of customer service taxpayers are seeing a difference we've answered over 1 million more taxpayer calls we did a year ago and three million more calls than we did in 2022 weight times and level of

0:22:05

service on our main phone lines have improved we've dramatically expanded service in our walk-in sites increasing hours and serving more taxpayers and new and expanded tools on irs.gov are seeing heavy use at the same time inflation

0:22:22

reduction act funding has enabled us to begin making critical inroads in addressing tax evasion among the most complex and largest filers this is a sharp turnaround from the past decade when we were hindered by a lack of

0:22:37

resources our compliance work includes focusing on tax delinquency and non-filing among High income individuals and tax evasion among the largest and most complex Partnerships and corporations as I have previously noted we remain committed to following the

0:22:56

treasury's directive not to increase inre audit rates relative to Historic levels for small businesses and households earning less than $400,000 per year historic levels will be defined by tax year 2018 where rates for all

0:23:12

cohorts were at historic lows notably audit rates for various groups are made public each year in our data book therefore when the final audit rate for tax year 23 the First full tax year following the enactment of the IRA is

0:23:28

available the public will be able to compare the rates to historical levels and confirm that the IRS successfully met secretary yellen's directive in the meantime we are working to develop a methodology that gives us additional

0:23:44

information on the technical aspects to determine which taxpayers fall above or below the $400,000 income threshold we will of course keep lawmakers and members of the public updated on this work as appropriate the IRS anticipates

0:23:59

increasing Audi audits on the wealthiest taxpayers largest corporations large and complex Partnerships by sizable percentages for tax year 26 for example the IRS will nearly triple audit rates on large corporations with assets over

0:24:17

$250 million in tax year 26 increased audit rates by nearly 10-fold on large complex Partnerships with assets over $10 million and increase audit rates by more than 50% on Wealthy individual taxpayers with total positive income

0:24:34

over $10 million that's where our Focus will be again I want to be clear middle and lowincome taxpayers should know that there's no new wave of audits coming we are laser focused on using new Ira dollars to increase scrutiny on those

0:24:50

large and complex tax filers that are showing red flags for potential tax evasion in all our transformation work the IRS has still much more work to do on many fronts this includes closing remaining gaps on phone service expanding digital options further

0:25:11

strengthening data security and supporting vulnerable populations by protecting them from scams and increasing access to refundable credits we have an opportunity to build a 21st century tax agency to serve the American

0:25:28

people in the manner they expect and at the level they deserve our ongoing success hinges on sustained Investments to make sure that we have the right size Workforce with the right training and tools we also need a modern technology

0:25:44

infrastructure with web enabled tools for taxpayers these are needed to serve the nation today and in the future a critical part of the effort is the administration's fiscal year 25 budget proposal it gives us flexibility and

0:25:59

increases IRS transfer Authority helping us use available resources efficiently and effectively it will also help sustain a new IRS Baseline of resources and avoid immediate funding Cliffs that would dramatically degrade our ability

0:26:16

in many different areas including the service improvements taxpayers saw this filing season chairman Joyce ranking members Hoyer and deloro and members of the subcommittee that concludes my stat I would be happy to take your

0:26:33

questions thank you very much uh in quite timely right there just at 5:29 so um we'll starting questions we'll take five minutes uh when you see the yellow light come on you'll have one minute left so the answers questions and

0:26:48

answers need to be done within that I'll recognize myself first uh commissioner waro the inflation reduction act required the IRS to study the feasibility of creating a free free efiling tool for taxpayers to file their

0:27:01

Federal Tax Returns the IRS completed the study in May 2023 and shortly thereafter created a pilot called direct file rolling it out in 12 States for those making less than $75,000 a year the IRA mandated that the IRS study the

0:27:16

phib feasibility of creating a free E filing system under what Authority did the uh IRS create the direct file system uh Congressman I have two answers to that first uh the smallscale Pilot We believe is part of a study of whether a

0:27:35

solution like that could be deployed nationally so we wanted to not just study in the abstract we wanted to actually engage in taxpayers see if the Prototype uh could be built and could work so part of the authority was the

0:27:51

IRA requirement for a study but the second Authority is under the uh under uh section 7803 of of the code which requires uh the commissioner and the IRS to administer the tax code in a way that serves taxpayers uh meets the taxpayer

0:28:09

Bill of Rights and we believe provides options for how they file just as when we went from paper filing to uh put for example uh uh PDF uh forms online with fillable uh uh uh entries uh we didn't believe we needed Authority then because

0:28:27

we think there's a General Authority for the IRS to move and evolve along with technology in the digital age to meet taxpayers and not need for any adjustments that we make uh to uh to ask Congress for specific Authority for all

0:28:42

of these adjustments what distinguishes direct file from the existing free file system it's really just another option we want taxpayers uh when they have to file we want to reduce their stress and make the process easier and one of the

0:28:56

things that we've heard from taxpayers and and various members of Congress is that an option where a taxpayer could file online for free direct with the IRS versus working with a software provider is an option that should be available we

0:29:12

encourage taxpayers to work to figure out what is the best option for them and we know that many taxpayers have uh have enjoyed and are satisfied with the commercial software they use and they are free to continue to use that

0:29:25

software but there are taxpayers and I've heard irly from them that we looking for another option and what we're doing is testing whether we could provide such an option and whether there was a demand for it the iris spent over $24.6 million on

0:29:39

creating the direct file pilot and only 140,000 direct file tax returns were successfully submitted you're promoting this as a success but less than one% of the 19 million taxpayers eligible for direct fil submitted a successful return

0:29:54

the IRS spent $174 per return When the the free file system exists as chairman subcommittee I don't I look at wasteful spending sir commissioner warful why didn't the IRS encourage taxpayers to use existing free file system instead of

0:30:09

creating a duplicative system and spending $24.6 million on it well this is the exact type of debate we were hoping to have uh once we run the pilot and reported our results there's a lot of different ways to look at the the

0:30:22

demand in the 140,000 taxpayers we opened it up to the public uh in early March so we didn't have the full filing season I believe that if we were open for the full filing season the numbers likely would have been higher because

0:30:35

many of the eligible taxpayers filed before we opened it to them also uh we saw a significant ramp in demand over the course of filing season so by the time we got to April 13 14th we were seeing exponential growth and I think

0:30:52

that's because more people as they started to focus on their taxes looked at this option favorably and in terms of the cost per uh return filed a lot of what was built this year if we were to go forward has already been built so we

0:31:05

would expect that the cost per return will drop significantly in the future if direct file goes forward but we're glad that people are having this debate we're glad that there can be an analysis and cost information out there to analyze

0:31:19

the go forward the iris included $75 million in our fiscal year 2025 budget request for direct file but we've heard that you may may not go forward correct who the IRS will determine if direct file continues yeah we hope to make a

0:31:33

decision uh fairly soon uh we released a uh a 40 to 50 page uh report detailing all of the findings from the pilot uh last week we're now doing a variety of stakeholder engagement with uh with all kinds of uh taxpayers and taxpayer

0:31:52

intermediaries um I hope that over the next several weeks we will complete that and be able to make announce uh decision thank you and I recognize ranking member Hoyer for any questions he may have thank you very much let me start with a basic

0:32:11

question let me start with a basic question I've been on this subcommittee for a long time um and that is how much revenue that is owed to the federal government under the laws that we have passed uh not being paid because of a lack of

0:32:32

enforcement which is both a direct loss and an indirect loss a direct loss by the money we don't and indirect cost by uh people who believe that they're not going to be checked anyway so uh they will either go very close to the line or

0:32:49

over the line Congressman we refer to that as the tax Gap it's the difference between the balance owed versus the balance paid and we estimate it to be 600 87 billion a year $687 billion yes per year per year does the current request of the administration

0:33:19

anticipate with the enforcement money that you have from IRA and that are requested uh make will that make a significant dent in that Gap uh we believe it will uh you know we had at the uh point of uh the inflation reduction Act Right the day before it

0:33:38

was enacted the most anemic audit rates uh that we've had essentially in IRS history uh now what we're doing with these funds is uh increasing our ability to enforce in particular on high wealth and complex uh filers um one one uh

0:33:58

reflection that I've shared before is uh on the day the uh inflation reduction Act was passed we had uh one uh auditor for every 150 of the top tier most wealthy taxpayers in the country I'm not talking about just like 10 million or

0:34:16

more in income or assets I'm talking about 250 million the topmost here so one auditor for each 250 many of these tax returns are tens of thousands hundreds of thousands thousands of pages long so I told people to picture that

0:34:30

one auditor like backing in trucks and trucks full of of tax returns and it's them against against that all of that and what we need to do is not only hire more people but provide them uh technology data analytics and subject M

0:34:46

uh subject matter expertise to unpack all that complexity we are leaving a lot of money on the table the uh statistic I have and I showed last year was that from 2010 to 20 19 those fiscal years uh IRS audits of millionaires plummeted

0:35:04

from approximately 9% plus to less than a half a percent is that accurate yes uh again I make it clear nobody wants people to pay more taxes than they owe and we we the IRS but to the extent that they do not pay somebody has to

0:35:28

take up the slack or we create a debt uh and there is great concern about that debt but when you tell me that there are $687 billion doll per year estimated to be uncollected that's owed that is a significant problem here's a particular

0:35:48

peeve I have I want you to answer very quickly I hear a lot of advertisements about uh uh on the radio uh some on TV but mostly radio if you come to us you haven't paid your taxes uh guess what we'll save you $1,000 $10,000 50% of

0:36:05

what you owe etc etc that seems to me a great uh disincentive for people to pay their taxes are you concerned about those advertisements I am concerned about those advertisements many of them are uh are exploiting the complexity of

0:36:20

the tax system and stress over taxes to uh to victimize these individuals and here's why uh we have a variety of tools uh that are very accessible for you to uh either create an installment agreement or do an offer and compromise we've designed them

0:36:38

so that you shouldn't need help uh they're very fluid to be able to get and then you don't have to pay or give any Financial Risk to anyone who's claiming that they can get the IRS debt to go away the reality is that we have

0:36:53

programs in place uh they're they're very accessible we're working on making them more accessible and those that believe they have to work with someone in order to take advantage of these programs are giving something away

0:37:06

that's why these businesses have the money to afford to advertise and to exist and what we've learned over and over again from testimonials and from talking to taxpayers is at the end of this process they are left with a mess

0:37:18

on their hands so we urge people to uh to get educated you're going to work with someone work with someone reputable but really come to the IRS search free help at irs.gov there's a lot there that's navigable and you might not need

0:37:32

the help that the marketers are saying you need thank you thank you Mr chairman thank you Mr w we now recognize former chairman of this committee but current chairman of Transportation Housing and Urban Development Steve wman go ahead

0:37:51

Mr thank you um commissioner thank you for being here today um and in my previous role as chairman of the subcommittee I always U enjoyed the fact that uh you're very responsive to um you know to the questions that we had

0:38:08

though this is your first hearing before this subcommittee um I got a quick question about U taxpayer Advocate service and then I want to pick up on what Mr Hoyer was talking about just a minute ago um as you're aware the uh the taxpayer

0:38:25

Advocate service is an important organization than the IRS that assists American taxpayers who are experiencing financial difficulty need help solving tax problems or believe the IRS may not be performing as it should it's my

0:38:38

understanding that taxpayer Advocate service which my constituents heavily rely on is struggling to keep up with demand the fiscal 25 request for TAS is 236 million but the 24 enacted was 271 million so does the budget request uh

0:38:56

address the need um helped me understand the the difference between the enacted 24 versus the request in 25 yeah there are uh choices that that we need to make in terms of how we uh maximize the effect of the discretionary request we have of

0:39:18

12.3 billion dollar uh we can also uh provide uh supplemental resources to uh to the taxpayer Advocate uh using uh inflation reduction act dollars to help close gaps any uh anything that you see in the 25 budget uh we are using

0:39:39

inflation reduction act to try to meet the demand we don't always get all the way there uh so we will work with the taxpayer Advocate to help them manage demand I mean the typically the better job we do with service the less their

0:39:52

phone rings uh and so we can try to uh reduce some of the demand by improving our customer service our ability to resolve taxpayer issues and we'll also work with the taxpayer Advocate to make sure that they are accessing other

0:40:06

non-discretionary resources to make sure that specially hardship cases get addressed those IRA funds will run out they do 26 correct they do so so where we stand today is for example we have uh we've requested $2.8 billion for uh for

0:40:25

just for taxpayer service dollars coming up in 25 that would get you 25,000 FTE but we actually need 38,000 FTE to manage the tax system and that's just the number of phone calls tens of millions of phone calls the the hundreds

0:40:40

of thousands of people that come into our walk-in centers the all the paper that comes in that needs to be managed so so we are using Ira resources to close that Gap to get to that 38,000 FTE so that we can meet the taxpayer demand

0:40:58

but that Ira money runs out it runs out in 26 and then we will have to shrink our customer service and you'll see those lines start to emerge again at our walk-in centers and on the phones yeah and the 687 billion dollar tax Gap um

0:41:16

first of all I'm not sure how you calculate that I'm sure you've got high-speed computers and experts that can I mean that's not a round number that's 687 billion yeah how much of that is owed by people say making less than

0:41:33

$400,000 a year which would account for the majority of tax filers would be my guess yeah no there is a um and I I don't have that number at my fingertips but as you can imagine across that $687 billion portfolio you have uh

0:41:52

distributions of of income we have people that aren't paying their balance to at the low income end of the register and and those at the high income what we have uh set out as a plan is to increase our capacity and our scrutiny on high

0:42:10

wealth filers because that's where we fell the most behind during the lean years prior to the inflation reduction act we didn't lose as much capacity to assess balance due for simple filers but we lost a ton of capacity because large

0:42:26

corporations are operating in more tax jurisdictions they're using alternative currencies they're using more sophisticated methods in some cases not in all we have CFOs and CEOs that are doing the right thing but too often CEOs

0:42:39

and CFOs that are not and they are using sophisticated methods to Shield their income so the idea around the inflation reduction act spend is to make sure we're investing where we need it the most and where we need it the most is

0:42:52

where we fell behind the most and where we fell behind the most is complex filers and I know I'm out of time I want to pick up on something that Mr Hoyer said a minute ago just as a statement for the record and that is and I don't

0:43:04

want I'm not I'm not going to pick on Optima necessarily although their marketing is pretty good because that's the one I remember uh but I too am am concerned and I voed this concern in this subcommittee before that when you

0:43:16

are driving down the road listening to a sports broadcast and you hear somebody come on and says hey if you owe the IRS you're in good luck call us and and we're going to we're going to give you all this relief and and I just scratched

0:43:29

my head thinking wait a minute I I I don't owe the IRS because I paid my taxes uh and so why should somebody else get off the hook so I've always had a little bit of concern about that um and and then the last thing and this would just be for a quick

0:43:44

response you know in recent years we've seen a lot of indications of of identity theft stolen numbers those kinds of things people stealing and and filing false claims and what you uh in your modernization effort has that taed down

0:44:02

somewhat real quickly because I'm out of time yes it has we are doing a a more effective job year-over-year in avoiding identity theft situations where we have work to do is once you've been victimized the line is too long to get

0:44:18

help from the IRS and that's something we're focused on fixing I think the gentlemen I'll you back thank you uh chairman wck ranking member deloro love to hear your question thank you very very much thank you um just a couple of points about the just

0:44:34

uh uh recent conversation here um throughout the appropriation process um House Republicans have sought to destroy the funding for the IRS it's been more than 21.6 billion dollar in cuts to IRS funding over the past year we've heard about the tax Gap

0:44:53

687 billion dollars you have been able to to collect 520 million in back taxes estimated a th000 millionaires billionaires um which is collecting Revenue I just wanted to repeat for the record collecting Revenue legally owed

0:45:11

um now uh and again with my colleagues on the other side of the they frame our debt as a problem of investments in the American people um we have a revenue problem which I think that we have demonstrated here this morning and uh

0:45:29

there is a refusal to let the IRS collect legally owed taxes from billionaires corporate of of of folks in order to address the problem so it's um just very very quickly we're going into a new budget year if more funding is cut

0:45:48

from your budget what would that mean well what it'll mean what are the consequences the consequences is we will not be able to meet uh the demand that taxpayers present uh we won't people will call the IRS and not get through

0:46:04

that'll happen to more people people will show up at our walk-in centers uh they'll find long lines and not be able uh to get in and we will have we will be limited in our ability to hold people accountable that aren't playing by the

0:46:18

rules and this is why this is so important if you are a CFO of a large company and you're playing by the rules you want an IRS that first of all leaves you alone doesn't select you for audit because we've invested and now have the

0:46:31

Precision to see where the evasion is more likely and once we pull the return of where we think the evasion is more likely the CFO that's doing the right thing wants to make sure we're holding the CFO that's not playing by the rules

0:46:43

accountable all of that degrades if we don't meet uh the resources that we need yeah and th those consequences need to be telegraphed loud and clear and about who uh from whom are we trying to get the the the O taxes from 55 corporations

0:47:01

zero in federal taxes another 39 who pay only a portion of their taxes let me move to the child tax credit um what an amazing success and I put you at the IRS at the center of making this program uh an enormous success you

0:47:20

distributed nearly 93 billion in monthly child tax credit payments to families and as I mentioned earlier the treasury Inspector General for tax administration found the IRS accurately sent 98% of monthly child tax credit uh payments um

0:47:40

uh there no fraud waste abuse uh people not going to work people buying drugs with a child taxit all of that nay saying dissipated with the success that you and the staff have had in making that possible I also might add at this

0:48:00

juncture that distributed nearly 993 billion I have folks who tell me my God we really can't afford a child tax credit that lift you know uh almost half the kids in this country out of poverty lower the hunger rate we can't afford it

0:48:16

but by God we certainly can afford a $687 billion tax Gap we could deal with the child tax credit over and over again should the monthly child tax credit be reinstated how quickly would the IRS be able to restart the program and how can

0:48:32

the Congress assist um in in this effort and um can you just briefly discuss the lessons learned from the child tax credit implementation have H how has impacted other IRS programs yeah Congressman first of all I really appreciate you um

0:48:48

expressing your appreciation uh the IRS Workforce uh often does uh rise to the challenge and in particular during covid uh uh really uh were uh did a lot of heroic efforts to uh to send out uh Lifeline economic payments to uh to to

0:49:07

so many uh hundreds of millions of Americans um and and credit to uh to to my predecessor and others who led the IRS through that period what's also important and what a huge lesson learned is is that we are starting to make

0:49:22

advances in updating our core technology and I've heard from for a long time that a lot of money has been spent but has the IRS technology improved I can report that it is starting to show meaningful Improvement and it's for that reason

0:49:36

that if a child tax credit uh new program was uh was enacted we could uh re-engineer and and begin within weeks uh not months and that is because a we've done it before and so now we have the Playbook but B we've made not all

0:49:53

the advances we need we have a long way to go on technology but but changes have started to happen and we are starting to see those technological changes generate efficiency like weeks not months to move forward on a new child tax credit

0:50:06

program well get ready because we are going to reinstate the child tax credit thank you I yield back uh thank you Mr Loro we now recognize uh chairman amaday thank you Mr chairman good morning commissioner good morning yeah I've been told that

0:50:25

tax collections are over the last year couple years are at record levels am I been do I have accurate information or what can you tell me about collections in general over the last couple of tax Seasons I'd say that the size of the tax

0:50:41

base has grown so we're seeing the population grow and there's more taxpayers so just in the general rhythm of collecting taxes the receipts uh can EB and flow but as the population grows and as the economy grows uh we can see

0:50:56

higher overall receipts and higher overall collections but it's the audits that haven't grown uh in the way they should and that's why in my testimony I outlined plans to increase the audit rates I get that but but is the answer

0:51:09

to my question are dollars up the last couple Cycles I would have to double check but I do believe overall receipts are increasing as the population grows as the economy grows and and if I heard you right part of a function of that in your

0:51:26

view is birth rates because what more people are attaining adult status and filing or not over the 2010s we saw 7% increase in the number of tax filers so just to give you a kind of a a a rough Benchmark uh in the 10 years

0:51:48

between 2010 and roughly 2020 about a 7% growth in filings but what do we attribute that to population growth okay um also we've heard talk about technology and and funding for technology and stuff like that can you kind of briefly tell us what those

0:52:08

technology advances have done if anything yeah to affect the workforce that you need to prosecute your core missions oh absolutely you one I in when I was answering uh congresswoman Doro I left out the important of not just our

0:52:26

phone lines and our walk-in centers but our digital Solutions and you know we have a future an emerging generation of taxpayers that are used to doing everything from their smartphone and tablets and we need to get there so one

0:52:37

of the things that has happened in the last few years is we've made dramatic increases to our digital Solutions you can now get an individual online account a business online account their functionalities in those accounts are

0:52:49

increasing so that more and more you don't have to walk in you don't have to call us but if you have business with the IR s you can do it from your smartphone or your tablet or your laptop we've made more changes to irs.gov in

0:53:03

the last two years than in the previous 20 years combined and that's part and but we have a lot more to do because the gap between for example your favorite online bank and what they can do and what we can do is significant and we

0:53:16

plan to use the inflation reduction act funds to close the gap so that your children and grandchildren are operating in a world where they never have to call or walk into an IRS Center so connect the dots for me if you will

0:53:29

in whatever context is appropriate the technology advances have affected what it costs us to operate the company how have we gotten any efficiencies and cost reductions in operating the company from the technology or absolutely have yeah we

0:53:48

absolutely have seen efficiency every time we move a form from paper to digital we've seen a lot more digital upload of documents we're up to the point now where 94% of Americans can send stuff to us electronically rather

0:54:03

than have to use paper the reduction of paper reduces costs the issue is that the tax system grows at a faster rate than we can drive efficiency I'll give you a good example of that the the Congress passed a law requiring the IRS

0:54:20

to build a new technology to do information reporting for digital currency so there's a whole new program out there because of digital currency that we now have to create new infrastructure so one so we have a new cost because we have to build a new

0:54:35

system because there's new currencies that system has to be both built and maintained so even though we may be driving efficiencies in these Legacy systems that are in place making them more efficient when Congress changes the

0:54:49

code and adds new requirements our overall resource base growth last question some members have referred to with specific numbers corporations X number corporations pay whatever X number can you tell me what if anything

0:55:05

you're doing if it's finite what are you doing to prioritize going and getting those 55 or whatever with your existing assets I would assume that if that information's out there and they're not paying their fair share that you've got

0:55:20

a top 10 list or something where it's like we're going after a b c and d they're at the top of the list or absolutely do in fact we have a top 1600 list 1600 uh Millionaires and billionaires that uh that owe uh back taxes we have 125 so are they tell me

0:55:39

yeah we're collecting from them they've heard from us we're starting we've we've collected 500 million so far and more to go we've sent letters to 125,000 wealthy individuals who haven't filed since 2017 and they're hearing from us we've

0:55:53

launched is that data available from you is that public information public information good thank you my time is expired so I yield back thank you Mr poken y thank you Mr chairman uh thank you commissioner so U how much was it

0:56:08

again to create the direct file system it was uh 26.4 million of IRS funds 26 I'm sorry 24.6 24.6 okay and you know how much um is made by the tax preparation industry annually I don't have that number but I know it's in the

0:56:24

billions well I I looked up one company into it 14.3 billion they had a 133% increase H&R uh 35 billion it's big money um their lobbing alone was $93 million which is almost four times what it cost completely to create the direct

0:56:42

file system that would save taxpayers an enormous amount of money if more people would have access to direct file isn't that correct it it could uh and and we want free file to expand we think one of the things about the free file program

0:56:58

is not enough people are taking advantage of it and this past filing season we saw an 11% increase in free file some of it direct file some of it free file with the with the software providers we're happy about that and

0:57:10

what can we do to do that because I know one stat and I've heard a couple today so I'm not sure if this is correct but 70% of people would qualify for the direct file but like 3% use what can we do to get more people to be able to have

0:57:22

that information you know it's just like when we were talking earlier about people getting get uh scammed by too good to be true advertising we have to do more Outreach uh and we plan on doing a lot more Outreach one of the questions

0:57:35

earlier was what you know are you getting more efficient and we are what do we want to do with new capacity there's more help that's needed in underserved populations we had 7 million taxpayers last year eligible for eitc

0:57:48

that didn't claim it we need to close that Gap and in working in underserved and distressed communities we can share more information about tax scams what to be on the lookout for and what are free options for you to file and we want them

0:58:01

to have choice we want them to be educated to know well I can file for free with the IRS direct or I can use a commercial software let me try both and see what works for me the idea around direct file is really another option

0:58:13

with the overall objective of serving people that can't afford an accountant and and need more help and we require people to pay taxes so the fact that we would provide something for them to do that only makes complete sense to me and

0:58:27

and to that you talked about the money that doesn't get to low-income families I think 12 billion in tax credits they think are left on the table is there a way to autofile some of that information um with this system so that when people

0:58:41

if they do direct files some of that could be included since you receive it electronically there is a lot of of study that we need to do to understand the future of tax filing uh right now where we stand today it is up to you to

0:58:58

enter your information and you are the final Arbiter of of what your tax return is there are other countries other nations that do it very different they present you're still the final albiter but they present to you a completed tax

0:59:12

return and you thumbs up and thumbs down whether the US goes in that direction I think it's a valuable conversation to have my commitment is to be transparent so that if we're going to move in a direction where we're providing more uh

0:59:26

information to the taxpayer to react to versus them putting it in themselves I'm going to share that information publicly before we go forward are you looking at maybe doing that with part of this pilot I think we should have conversations

0:59:38

with stakeholders if we move forward with direct file next filing season what should we adjust to further reduce taxpayers stress what should and and and what what can we learn from that yeah also uh on the private companies there

0:59:52

was all the information about data got shared with meta which I don't think you know know here we are multiple bills to fight Tik Tock and and other companies who are doing things with privacy and data and we see this industry sharing

1:00:05

data in a very disturbing way we don't share data with anyone do we we don't and and this is what's interesting about about taxpayers they have different preferences right and and different experiences one of the notable things

1:00:18

that we learned in the direct file pilot was more than 85% of taxpayers that use direct file said it increased their trust of the IRS there are taxpayers out there who are not going to want to use direct file who have a different trust

1:00:31

relationship with us and they can use uh commercial uh software the issue is taxpayer Choice yeah and I I guess I would just end with you know we would love to have that taxpayer choice in Wisconsin so uh if you are looking at

1:00:46

expanding um I noticed the only Midwestern State you had is South Dakota which is relatively small sample uh Upper Midwest would certainly love to be included or at least Wisconsin I'll speak for wiconsin um and if you could

1:00:57

do that uh we would really appreciate it because I'd love to save my constituents money um thank you thank you yield back thank you Mr poan we recognize uh Mr molar thank you Mr chairman uh commissioner worel uh just last Friday

1:01:13

treasury issued a final rule on the 30d tax credit which included relaxing restrictions on sourcing graphite from China and as you may know the People's Republic of China passed new critical mineral export controls last October

1:01:31

which allow the PRC to restrict graphite exports to any country for supposed national security reasons there is clear evidence that these restrictions are already happening last June European battery manufacturers were unable to Source graphite from the

1:01:49

PRC causing negative repercussions for battery production in Europe that's according to the European commission commissioner do you believe the tax dollars of hardworking Americans should be given to foreign entities of concern or their us

1:02:07

subsidies I we have a responsibility uh at the IRS to uh to work to find the right outcome treasury ultimately has the final discretion on what uh a notice or a final rule will indicate I know just based on the fact that we get a lot

1:02:25

of public comment and a lot of differing opinions on whether how we construct a reg well what kind of outcomes it will have I think it's a healthy dialogue to have I think ultimately what our responsibility is at the IRS is to make

1:02:39

sure that we're carrying out the laws dispassionately and on an Evidence base and that's what we try to do so if I understand what you're saying is you feel that that's treasury's responsibility to determine whether um you know hardworking taxpayer dollars

1:02:54

should be given to foreign entity these of concern or their us subsidiaries not the irs's what I know is that with respect to the clean vehicle credit and other Provisions uh in the inflation reduction act related to uh energy uh

1:03:08

the reg writing process has generated a a multitude of different perspectives and opinions a very healthy Dialogue on the policy and operational tensions involved in the final regag ultimately it's up to treasury to to calibrate all

1:03:25

those itions and come up with an outcome that best serves the intent of the law so you don't want to share an opinion on whether uh you know we should be giving American taxpayer dollars to entities from Russia uh China Iran North Korea I

1:03:42

think the intent of the law is to curb uh any Financial benefit of uh foreign entities of concern and I am all about uh supporting the intent of that law I think ultimately there's a variety of different paths you can take to meet

1:03:57

that objective and treasury has the final say on what path we take can you tell me what statutory Authority you believe gives you the ability to create an impractical to trace Safe Harbor a category of constituent material or a

1:04:13

category of battery material absolutely none of which are remotely contemplated in the 30d statute as amended by the IRA that question I'm going to have to get back to you on for uh to understand from uh treasury general counsel and office

1:04:28

of tax policy what uh legislative authorities they've relied on for reaching any conclusions under that regulation okay and I would welcome any a letter or some communication from your general councel to just establish the

1:04:43

likelihood that these Provisions would even withstand legal challenge by a taxpayer I can commit to that thank you uh are there any restrictions under current law that would prevent a subsidi of a foreign entity of concern that

1:04:57

receives Ira tax credits from sending those payments back to its parent company in a hostile forign Nation again I will have to get back to you on on the steps that are being taken to mitigate the type of risk that you describe uh

1:05:14

but um but again I'm not familiar with the exact details of that so I'll have to get back to you okay thank you um are there any measures that you intend to implement to ensure that taxpayer funds are not directed to such entities

1:05:29

considering the broader implications for National Security and economic independence yes I mean that now you've hit on the responsibility that the IRS has is once the decisions are made in terms of the the parameters the guard

1:05:44

rails the the what what is legal and what is not from a regulatory standpoint then the IRS has to stand up uh the infrastructure including the the fraud detection the program Integrity issues and therefore we will build uh what I

1:05:59

call a risk register uh to understand uh what are the top issues that will degrade the Integrity of the program and the intent of the law and the regulation and we'll use data science and other uh elements to try to make sure that we

1:06:14

have leading indicators to see where behavior is going in a direction that we need to step in and prevent it and so in the future as we move forward to implement final Rags I'd be happy to brief you on some of the prr Integrity

1:06:26

uh things that we're doing to address do you have any idea on timing on that I not not not at my fingertips but I can get back to you on proposed time okay thank you I act Mr chairman thank you Mr mner we'll now recognize Mr Bishop for

1:06:39

any questions he may thank you Mr chairman uh commissioner worfield thank you for your testimony for being here and let me thank you and your team for your hard work and doing so much uh with uh limited resources uh there's been a lot of discussion this

1:06:58

morning about uh the tax Gap and it's my understanding that between 2010 and 2022 uh the number of examining Revenue agents who handle complex Enforcement cases fell by 40% uh that the field collection Revenue officers who manage the difficult

1:07:17

collection cases Dro by 54% uh can you tell me how the loss of so many highly trained train enforcement staff are vital to that are vital to ensuring the Integrity of the tax code how has that prevented RS from addressing the tax Gap uh and generating

1:07:37

the much needed Revenue to uh reduce the deficit and pay for other priorities that's my first question and I have two other questions that are relatively short to can take short answers our one is what the IRS is doing and what

1:07:53

efforts you're deploying uh with regard to artificial intelligence or to crack down on tax evasion and whether or not you're developing uh artificial intelligence tools inhouse or are you collaborating with outside experts or

1:08:09

contractors and the final question is uh relative to rural taxpayers uh many of my constituents live in rural areas and they don't have access to high-speed internet so when they file their returns they do so by paper rather than online and U what is

1:08:30

IRS doing to speed up the processing of the paper returns thank you Congressman let me start with your first question which is uh underfunding h means two things it means we don't have the right number of people we're not right sized so there

1:08:47

therefore uh we don't have the scope and the reach that are necessary to uh to address uh tax evasion where it's happening and the second thing is we're not making the right investments in subject matter expertise and in analytics including AI

1:09:03

to make sure that we are unpacking the complexity we are finding the right taxpayers uh to audit and leaving the taxpayers that are playing by the rules Alone um it just it degrades both our scale and our depth of knowledge and it

1:09:20

means that uh that more evasion will occur uh and that will create uncertainty in in in markets uh and uh and be very challenging for those uh companies and Partnerships that are uh playing by the rules and expects the IRS

1:09:36

to hold people accountable to play by the rules um your uh your second question just bridging on the AI H how are we using AI in enforcement you know the the analogy that I'll use is is is a chess game um when we are uh looking to

1:09:53

select audit amongst some of the largest corporations in the world uh they're sh those that aren't playing by the rules are shielding their income in very sophisticated ways an example might be they're operating in multiple tax

1:10:06

jurisdictions they're doing a a significant amount in the US but they're moving all of that economic activity as they're presenting it to A Better Tax Rate jurisdiction when the reality is is that that activities happening in the US

1:10:20

how do we detect that that's a chess move by them and what we're deciding to do is rather than just have the human there uh playing that chess game we're getting the computer to advise us it's still the human decision it's the IRS

1:10:34

employees decision on what the next move should be but we're having the computer help us calculate all the permutations of the moves so that we're better at the chess board and can catch the evasion more effec and how's how's

1:10:48

that both and we we we have important Partnerships with the private sector uh but ultimately decisions on audit selection is inherently governmental and only IRS employees make those decisions and the rule Ru yeah I mean this is a really important

1:11:05

Point yeah we we have to we have done significant improvements in managing our paper backlogs they were significantly outsized during covid and now they're back all within what I call tolerance with the exception of the employee

1:11:22

retention credit which is a different uh uh thing so uh and a different challenge uh but more work is needed and what we really want to see is uh increased access to uh to high-speed internet uh all over the country so that those taxpayers can

1:11:39

Avail themselves but we will meet them where they are and if they have to file in paper we will do better on paper and also we will set up and we've been doing this more and more walk-in centers we call them popup walk-in centers where we

1:11:53

are going to rule communities that are more than 100 100 miles from a city center and setting up shop with a walk-in Center so they can get help if they need it thank you sir thank you Mr Mr Bishop recognize Mrs Hinson now for any questions she may

1:12:09

have thank you Mr chairman um thank you commissioner for being before us today to discuss your budget request um as I'm sure you'd agree based on your testimony uh federal agencies including the IRS are in the business of customer service

1:12:20

uh which is crucial that our taxpayers get that high level of support it should be the top priority and as you mentioned um millions of Americans are interacting with you through the annual filing season um so it is critical that they

1:12:31

are able to receive those timely responses and get um the feedback and returns that are rightfully owed to them as I say to Iowans it's their money not the government's money right um so throughout the past filing season my team has been hearing from um

1:12:44

constituents who are concerned they cannot go to their local IRS office in person to pick up their tax forms or filing instructions and um I think a lot of that is due to inperson work um challenges and um noted in a house Ways

1:12:56

and Means hearing earlier this year roughly 50% of IRS Personnel are in the office at any given time um so do you believe that this is still the case um that it's about half and how are you tracking how many employees are

1:13:09

currently in their offices um to do those services like you mentioned pop up uh offices as well yeah so there's a tens of thousands of Iris employees that that that are always on site uh and and uh these are people that are for example

1:13:24

uh manag managing the paper that's coming in and doing submission processing but it's also our employees in our walk-in centers there is no uh remote work in any of our walk-in centers around the country um we have since the start of the inflation

1:13:39

reduction act uh reopened or opened more than 50 walk-in centers around the country uh they're virtually those being staffed every day though fly staffed every day here's the challenge um that we see uh we moved to an appointment

1:13:53

schedule uh during uh the week um and we have tax pay more taxpayers coming uh than we can handle in a lot of cases because everyone else has an appointment so we started opening Saturday hours and that's not by appointment and sometime

1:14:09

and and a given walk-in Center can serve about 300 people a day uh on a Saturday without appointment but sometimes four or 500 people show up and this is why it's so important that we continue to make sure that we're right sizing our

1:14:23

footprint to meet the demands so if we can serve 300 people in you know in a in a city center in Iowa uh and 500 people are showing up that tells me there's more people that are needed and we need to improve our digital Solutions as well

1:14:38

but in the walk-in centers uh those are are no one works from home and they are uh fully staffed right now well I would I just urge you to continue to keep an eye on that because if that demand exists we need to be responsive to that

1:14:51

number one absolutely um because I look at I get a disre report every single week from my casework team and um it's it's never less than two to one in terms of agency interactions IRS is number one that uh our casework team has to deal

1:15:04

with so um when I look at uh reports out from GAO um 61% of IRS responses to mailed taxpayer inquiries were considered late I'd like to see that number improve that's up from 55% in the previous filing season um so I guess uh

1:15:18

what are you doing on the staff front when you mentioned these tens of thousands of employees that are in the office what are you doing to speed up that correspondence and make sure that's time yeah so if you look at our filing season

1:15:27

I look at it as a balance scorecard there were places where we exceeded our goals and did terrific for example our 81040 line uh we exceeded almost all of our goals uh but there are other parts of the IRS operations where we were

1:15:42

bogal and we have more work to do uh one of them I mentioned earlier is our response to those that have been victimized by identity theft the line is too long people are waiting too long to get their issues resolved and there are certain

1:15:55

correspondences or activities that are not going in the right direction in terms of timeliness so what we'll do and what we're doing now that filing season is done is we're looking at that balance scorecard and I'm requiring the team to

1:16:10

incrementally improve all the metrics where we fell behind so I'm always going to be transparent like we had a great filing season but it wasn't perfect and when it's not perfect that is impacting a taxpayer that means a taxpayer

1:16:22

couldn't get through or got something late and that matters to us I don't know that we can ever be perfect that that that would be uh uh unrealistic but we're going to continue to perfect our process and not rest I like to say

1:16:34

there's no Victory lapse here we had a good filing season a strong filing we need to build on it but we also have to close gaps yeah no I certainly understand that and um closing gaps you know you mentioned your phone wait times

1:16:45

are down significantly but we're still hearing reports from people who are waiting for 45 minutes and so if you're calculating that average by including people who hang up of course that number is going to be low explain that actually

1:16:55

45 minutes is way too long to wait nobody that much time and I can explain that which is our main line our 1040 line almost 90% of every call the IRS gets comes through that phone line so we really focused on that that is the line

1:17:09

that has a three minute wait that is a line that we had the best level of service we've ever had this year in terms of uh us uh successfully answering those calls and those questions the remaining 10% is are the the are the

1:17:22

other call lines that we have we have have to do better when you if you hear someone that had a 45 minute wait guaranteed that is in one of those other call lines in the remaining 10% we got to close those gaps absolutely well I

1:17:36

look forward to following up with you on that thank you very much commissioner I yield back thank you thank you Miss Henson now recognize Miss Torres for any questions she may have um thank you um chairman and thank you commissioner for

1:17:46

being here uh former president uh Trump's uh 2017 tax scam uh was the biggest tax increase to Middle Class Property Owners um through the use of salt um salt how salt worked for you know folks that may not know how it

1:18:05

worked um Property Owners agreed to tax themselves or to pay for um public bonds to build libraries police stations maybe a bridge and um local infrastructure um and in exchange they would be able to um use that money and and and to take a deduction

1:18:25

on their taxes based on that um I it has had a significant impact on California uh Property Owners has has had a significant impact on property owners um in states where you know this was practice it was not a free gift um to this property owners it was an

1:18:44

investment that they made in the communities uh most of those communities the federal government has failed um to provide you know proper um funding for housing for all of those things that they chose to uh tax themselves on um

1:18:59

I'm interested in hearing what you are um hearing uh from our taxpayers how they have been impacted by this and is there um anything that you um can help with um to alleviate salt so the the the role that I have as IRS commissioner is to make

1:19:19

sure that I understand what the experienced taxpayers are having with the law on the books uh in terms of getting the questions answered from the IRS getting the forms they need part of that experience includes um how they are

1:19:33

experiencing changes in laws and that's what I'm interested in and that is that is actually something that's more in Secretary Yellen and her team's wheelhouse um so I you know any concern uh the concern that that uh Congressman

1:19:46

molar raised on on on the uh on the clean vehicle credit and these concerns I will bring back to the treasury Department and make sure that we provide fome answers so let me go to the IRS audit of the Working Poor yes um you

1:20:02

know which has been covered by so many of my colleagues already um it is really unsettling um to see the audit numbers and I know that um you have stated here uh that you are working to improve those numbers so how how is that um going to

1:20:19

be a realistic uh approach that my community uh who is often you know first on the Block priority um I want to make sure that you're focusing on tax cheats and that you're not focusing on the people that you know are doing

1:20:36

everything that they can to pay their taxes yeah when I arrived in the IRS in in March of 23 uh we began as a team to look at the audit rates uh in particular in lowincome communities uh there is a lot of inequity uh that has existed in terms

1:20:54

of how how audits are uh decided upon and we are working to both acknowledge that inequity and change it so part of that um involves uh ensuring that you have a diverse um Workforce yes um so that they are you know have some cultural competency and income

1:21:12

competency and that are not simply going after the lowest um the easy picking oh absolutely in fact we have uh the we have in in response to these concerns on these Equity concerns have uh worked with uh uh groups that are

1:21:30

involved in these Equity issues external stakeholders treasury has committees we have committees we've created uh separate uh working groups just to look at Equity issues in Tax Administration and and we've already taken steps for example I've announced a

1:21:46

dramatic reduction in the number of audits related to the Earned Income Tax Credit uh because we believe that that will do two things address inequity by substantially reducing the volume of those audits but actually put that audit

1:22:00

resource to better use and move it to areas of the tax cap that are more concerning let me go to another issue that is U critically important and that is the tax nonprofit tax um compliance um with nonprofit agencies um I have seen in my own home

1:22:16

City Pomona um the Fairplex abuse of uh its tax exempt status uh the report by the California state auditor revealed that the executive director uh or the three top Executives were making over $10 million um a year um at that time I

1:22:35

had requested an audit from the IRS you did your due diligence instead of um you know giving them you know a large fine um you force them to make some changes um how is how are are we making sure now that nonprofit uh agents gencies are are

1:22:57

exercising um some you know uh good models in how they pay um their executive team versus um the services that they are providing in the community yeah and and obviously without commenting on any specific case um we take our review of of exempt

1:23:16

organizations uh very seriously over the last 15 years I would say um dating back to uh well the 10 or 11 years there have been significant efforts to increase the robustness the transparency uh of our approach we've had our Inspector General the Tiga uh

1:23:37

review our uh our approach on review of exempt organizations and and for the most part uh we've gotten uh good and passing grades from them that doesn't mean the work is done uh we have the ability to continue to understand from

1:23:53

uh uh Congress people like you and others uh where are there activities going on in our EO review process that are leading to bad results either someone uh is not found to be exempt that should have been or someone is found to be exempt that should not be

1:24:09

exempt an ongoing activities and we're open to that feed my time has expired and I'd love to continue this conversation with you at another time I apologize to you no problem Mr Tes uh now recognize Mr Cloud for any questions

1:24:21

he may have thank you chairman and thank you commissioner for spending some time with with us today um one of the many grievances in the Declaration of Independence against the King of Great Britain was that he has erected multitude of new offices and

1:24:35

sent hither the Swarms of officers to harass our people and eat their substance um a lot of the American people feel that way about our government right now and a lot of that's on Congress obviously because no matter

1:24:46

how much money we bring in we spend more and we don't do it in necessarily the most efficient and effective way some of that is on the IRS and its long history of weaponization whether targeting conservative groups um bringing extra

1:25:00

scrutiny against them silencing whistleblowers who spoke up about corrupt efforts to to Shield Hunter Biden from prosecution many other activities uh along those lines and I'm wondering what the IRS is doing to uh clean up the culture that has long

1:25:18

existed that needs to be directed I I'll just give you an example there's a letter to Christians engaged uh couple years ago in which it was said this was part of the part of the letter that the IRS WR wrote to them denying their 501c3

1:25:31

status it said you educate Believers on National issues that are Central to their belief in the Bible as inherent word of God specifically you Ed educate Christians on what the Bible says in areas where they can be instrumental

1:25:43

including areas of sanctity of Life the definition of marriage biblical Justice freedom of speech defense borders and immigration us and Israel relations these Bible teachings are typ typically affiliate with Republican party and

1:25:55

candidates this disqualifies you from exemption under the IRS Section 501c3 and while part of me is Republican wants to give them a medal for their cander and honesty about our our policy Set uh the other part of it is very concerned

1:26:08

that this kind of culture existed now the IRS after Congress pushed back on this number of members pushed back on this ended up resending this and they ended up getting their 501c3 status but uh the person for example the signature

1:26:20

line was Steven Martin is he still work at the IRS Congress uh Congressman I'm not going to comment on any specific matter or on the status of of any employee in a public setting was was there any disciplinary action taken toward this I would have to

1:26:37

look into that specific matter and get back to you okay um the rules of the Internal Revenue Service explicitly prohibit 501c3 and 501c4 nonprofits from engaging in planned activities that violate law or induce the commission of

1:26:51

a crime uh that goes on the IRS s uh rule revised rule 75 384 States explicitly that even anti-war Pro uh protest organizations committed to World Peace if their primary activity de is demonstrations in which demonstrations

1:27:08

are demonstrators are urged to commit violations of local ordinances and breaches of public order that they would not qualify for tax exempt status right now we have a number of protests going across our college campuses uh that are

1:27:20

being sponsored by a number of organizations have any letters been sent to these organizations to let them know that their 501c3 status could be in Jeopardy so uh let me respond in a couple different ways uh first of all um as as a as as a person versus a

1:27:38

commissioner you know I see uh activities going on uh anytime there's there's violence there's hate it it's heartbreaking uh I have to divorce from that as the commissioner uh I have to do the job as commissioner in a way that um

1:27:54

following all required procedures and while I can comment on specific cases I will tell you that has the IRS sent any letters to let them know that their 501c3 status may be in Jeopardy that's again that would be a a specific uh I'm any any organization in

1:28:15

general I'm not I have not named the any organizations I'll be happy to because we can but uh in a letter but uh have any letters been sent have any investigation will go back I will go back and out of an abundance of caution

1:28:28

determine whether I can answer that question on the record without violating a 6103 uh concern okay uh along along the lines of Miss Henson had asked uh right now you are telling us basically that if we don't up the IRS budget that we will see

1:28:45

a degradation in Services um but yet just recently uh you made the goal of sending 50% Workforce back back to work basically to stop telea workking um to me and to most Americans who are footing the bill for this the seems U pretty

1:29:03

unacceptable um I I would urge you to get people back to work my time's almost expired so we'll have to get to that if questions for the record but uh uh please work on the culture can you tell us what you're doing to work on the

1:29:17

culture of the IRS yeah we want the IRS to be uh an amazing place for people to come and have impact and the impact is to help people to reduce the stress they have in following their talking about the partisanship it's also essential

1:29:32

that there's no place for politics in the IRS and we take numerous steps in our controls and our training and we work with oversight entities like our Inspector General to constantly evaluate moments where uh where there's even the

1:29:47

perception of politics in the IRS and if there is we work to correct it and make sure it never happens again but I believe fundamentally across the IRS there is a common understanding that if politics enters what we do then we are not meeting our mission

1:30:02

effectively I I would agree with that uh assessment but I I think we have a number of high-profile instances where that has not been the case so I would I would love to see specific examples uh perhaps in writing where you have made

1:30:17

some some efforts to bring accountability thank you thank you Mr Cloud now recognize Mr Carl for any questions he may have thank you uh Mr chairman and thank you commissioner for joining us today I know you look forward to this every year

1:30:32

right I do okay good good as you know the tax cuts and jobs act which was passed in 2017 set to expire at the end of 2025 with small businesses making up 99.4% of Alabama's businesses and as a former business owner myself what impact

1:30:52

will this have to my con consents the small businesses the expiration of the of the tcja is that your question I I have not done a kind of an economic assessment uh of of the tcga that falls more uh with the treasury Department um in terms of whether the

1:31:16

expiration of the tcga leads to administrative implications for small businesses I'll have to assess that and get back to you so you're you're saying you don't know that if it's going to raise small businesses taxes or not is

1:31:30

that what you're saying well I'm not prepar to provide an analysis of that that is something that uh if I was to provide an analysis of it I would have to do it in concert in consultation with the treasury Department and I have not

1:31:41

run that analysis well keep in mind this Administration is quote unquote focused on not raising taxes on anyone making less than 400,000 that is my understand and I'll promise you out of this 994 for point 4% there probably 90% of that is

1:31:57

under 400,000 range that's going to raise taxes and and and I think we both review that as as a tax increase um does the IRS have any plans on provided this 2025 uh date expires and we have done nothing does IRS have a plan to educate

1:32:19

give guidance to these small businesses across the country is that already got put into place as I said I based on this question I will go back and make sure that we understand what implications not from a tax rate standpoint that's more

1:32:36

for Treasury and I'm happy to work with Treasury and get an answer to your question there but in terms of the day-today interactions that a small business might have with the IRS in filing their taxes and paying an estimated payment and getting a refund

1:32:50

to the extent the expiration of tcja has an impact on that I'm asking for your Indulgence to go back and review that and then report back to clearly if there's an impact on small businesses that's material from an administrative

1:33:02

standpoint I want to be on top of that and I want to be supportive all due respect sir I've sat through many of these meetings and and told that I would get the response back and never get a response I'll get you your response I would

1:33:14

appreci well I like that I like being different IRS uh hired up excuse me oh okay I do like being a little different it's okay uh the IRS hired up for tax services to help U uh Americans with smoother filing and even walkin in

1:33:34

centers I know you spoke on that briefly how do you plan to sustain your level of service with the IRS funding expiring for tax services at the end of the year yeah so as I mentioned we are confronting what what we're calling a

1:33:51

funding Cliff uh we can make it right now with the 25 budget as proposed uh through 26 through 2026 and maintain the strong level of service that we've had and work to close some of the gaps where where we have some gaps to close after

1:34:10

20126 we no longer have the funding to maintain the customer service Workforce that we have grown to meet this extraordinary demand that we see and so I will be up here uh making the case like I am now that there are some what I

1:34:26

believe to be relatively modest adjustments on a year-over-year basis in terms of funding and transfer authority to help make sure that we can continue to serve taxpayers and one last thing on the way out the door one of my uh staff

1:34:42

members told me to see if he could get his tax return back he's been waiting on it so uh all well I I know he's one of many because we get a lot of those phone calls but but thank you for your refund on his refund yes he is I appreciate

1:34:55

that thank you I yeld back Mr chairman thank you thank you very much Mr Carl now recognize Mr Edwards for any questions he may have thank you Mr chair uh Mr warle thank you we uh probably look as much forward to this as uh as as you do

1:35:15

um of the initial 80 billion pay raise to the IRS your agency allocated 45.6 6 billion towards enforcement and you claim that taxpayers under $400,000 would not experience the effects of that increased enforcement nonetheless according to the IRS Data

1:35:37

Book for 2023 uh it was reported that U the IRS proceeded with 45,700 some odd examinations of individuals making less than $500,000 and I'd love to get more granular and U share the exact amount for the 400,000 Mark uh and less but the

1:36:07

data book doesn't include that level of specific data it's using 500,000 as the um the the the maximum in the in the range that I'm referring to and that's compared to just 21,000 455 examinations of taxpayers making more than

1:36:28

$500,000 uh resulting in just over 36 billion in additional tax clearly American families and individuals earning 400,000 or less are experiencing the brunt of IRS enforcement actions uh would you agree with that I would not congressman and your basis in

1:36:51

disagreeing would be uh because uh what I've said uh and what I'm committed to is that taxpayers who earn less than 400,000 there's no change in their likelihood of being audited the day before the inflation reduction Act

1:37:06

was passed versus the day after however if you're high income if you earn more than 400,000 and the reality is we're really laser focused on much higher levels of income for those individuals the audit rate will increase and I've

1:37:21

announced uh in my testimony to you today the various cohorts millionaires billionaires large corporations complex Partnerships we intend to significantly ramp the audit rates uh between now and 2026 but if you earn less than 400,000

1:37:37

we Peg your audit rate back to 2018 which was a historic low 3% year-over-year my goal and my intention is that those taxpayers will not see an increase in that 2018 rate so maybe you can help me understand the difference in

1:37:55

the chart that uh I've got here uh that was taken straight from the data uh book that I referenced while ago uh and I pulled this data directly from your agency's own book the inflation reduction act seems to have uh a concentration of audits against the

1:38:18

lower and middle class American people in fact it looks like it's about 95.5% of the audit audits have been conducted on folks making less than $500,000 and so can can you tell us what what is what is the difference between your claim that folks making

1:38:39

less than $400,000 are not being targeted and my calculation of the table that I've referenced here yeah I can explain this um the what your table is reflecting is audits that were closed that were started 2017 2018 2019 it

1:38:57

takes sometimes months but often years for an audit to close and so what you have for example is uh for large corporations the audit rate that and that I'm $250 million or more in assets the audit rate was 88.8% in 2019 and we plan to get it to

1:39:17

22.6% that won't be reflected in our Data Book for a few years so the the bars you are demonstrating are reflecting a pre-inflation reduction act set of audit activity that is kind of closing up now what has been started

1:39:33

since the inflation reduction act and what will play out in future data books is the bar chart will shift dramatically to the right as we ramp up as I mentioned from 8.8% to 22.6% for our largest corporations and from uh 11% to

1:39:51

16.5% on wealth individuals and on and on and so are you claiming that the audits prior to 2018 were targeting 95.5% of the uh uh returns for folks less than $500,000 but we expect to see that lower after the inflation thing I

1:40:15

think I think also your your data is raw data versus percent audited so that would be another clarification to make what I'm what I'm suggesting and I'm happy to to brief you separately and get in the details and by the way the data

1:40:29

book in the future will be listed at 400,000 rather than 500,000 to help with the transparency what I'm suggesting is that on a probability you're a you're a small business you're a a middle or low-income individual your probability

1:40:44

of audit has not changed it'll be the same probability that it was in 2018 and it'll be that way for years and by the way 2018 is a historically low audit rate so there should be some degree of comfort in the fact that I am

1:41:00

publicly committing to and there'll be transparency in future data books that we are not intending to and I've ordered the team not to raise that audit rate above that 2018 level the opposite is true for our higher wealth filers

1:41:14

whereas I've stated publicly the uh the intention the marching order is to raise those AIT rates now this will all be tested in public data that will be available in the future the issue is is that it takes time for these audits to

1:41:28

to unfold an audit of a large complex Corporation can take a long time before it's closed out we will announce consistent with what we can do under the law when we send new waves of audits for example we announced uh recently that uh

1:41:41

we sent audit letters to 76 of the largest Partnerships in the world but in terms of when those close out that'll take some years before they close out and so I I I think I hear you saying don't trust the data that's reported now

1:41:58

it's it's different you can trust it it just Cali it back to the Sweet Spot of when these audits were issued is pre-inflation reduction act that's what I'm all saying it's trustworthy data I'm saying the timing to assess whether we

1:42:12

met the commitment not to increase audit rates on people over 400,000 is happening in real time it's actually as I said in my testimony tax year 23 which we just completed is the First full tax year post inflation reduction act the

1:42:27

audits of tax year 23 taxpayers those people that's that's you know kind of in in more in the future than in the past in terms of the schedule for those audits I I've gone well beyond my time Mr chair I apologize but I I would

1:42:41

appreciate the opportunity to uh engage with your office further to get a B better understanding because the data that's available to us now yes says something materially different than what we're hearing uh would be the uh

1:42:55

implications for folks making less than 400,000 I will be responsive to Congressman Carl and I will be responsive to you and and get you what you need um it's been recognized by the ranking member of myself that we have

1:43:11

time for round two I know you're having so much fun here you want to continue this I'm ready and I'll start with myself again uh the IRS advisory Council public report that was published in November of of 23 recommended that the reporting threshold for form

1:43:27

w2g be increased to $5,000 as you know the threshold of $1,200 has been a static amount since 1977 in February 2024 I co-signed a letter with several of my Appropriations colleagues on this issue what consideration uh commissioner have you

1:43:43

been given the update the w2g threshold in accordance with the recommendation of the IRS advisory committee yeah I am aware of this issue congressman uh I think it's very valuable when we get input from the taxpaying community

1:43:58

uh and from our advisory Council on when uh thresholds may be out of date uh as I've mentioned throughout this hearing uh the determination uh of of something like that is of of a regulatory nature and therefore uh the while they would

1:44:15

consult with me the decision rests with uh with treasury the office of tax policy in consultation with the secretary uh I know that this particular recommendation is under serious consideration and uh I can certainly provide you a more detailed update uh

1:44:31

following this hearing that' be great sir um another interest I have is in the Cannabis yes in trying to set some regulatory guidelines and fairness there and when treasury secretary Yellen and om director young testified before the

1:44:46

subcommittee March we discuss access for cannabis Banking and just last week this Administration announced his planed to recommend reclassifying cannabis from a schedule one to a schedule three substance today legal cannabis business

1:44:59

are unable to utilize the banking system and are barred from certain tax exemption forcing businesses to hire armored vehicles to transport their cash to make tax payments to the IRS as well as local offices creating both

1:45:12

logistical and security issues for all involved um commissioner War have have you have you seen or you have you thought about any improvements to the process how these legal cannabis businesses pay their taxes and what are

1:45:24

your recommendations to create a safer and less burdensome payment process for these businesses yeah Congressman the the the announcement on the on the on the change in status for uh for cannabis is is recent and uh what we need to do

1:45:39

in A Moment Like This is understand the implications that this change will have on a whole variety of different uh elements of this uh part of the economy as you mentioned uh what will their stat B with respect to financial institutions

1:45:55

will they remain mostly a cash-based uh industry or will they move into something other than cash uh all of these things are important moving pieces uh for the IRS to determine uh how this emerging and changing industry is uh

1:46:12

assessed at the right level and uh and paying what they owe uh and so there's more work to do uh I think uh based on my my reading of some of your comments uh you're asking all the right questions uh in terms of uh What uh what do we

1:46:27

need to anticipate uh given this change uh we shouldn't just sit on our hands we should be active and looking at uh what steps we need to take and we need to interact with this community and make sure we understand and talk to them I

1:46:41

mean typically when we engage with Industries uh we find that they're very uh amenable to discussing and getting a better understanding of clarity of what they're going to be expected to do certain tax certainty is one of the taxpayer

1:46:55

Bill of Rights it's it's not a good thing if you're operating in ambiguity it's a stressful enough situation to pay your taxes and but if you have ambiguity so my commitment is to work with you and uh and this community uh to understand

1:47:09

how this change evolves the industry and make sure we set up the right tax structures for them to operate in and wouldn't it be fair to say that if given the opportunity to have banking system involved in this process would make life

1:47:21

a little bit easier for you because you'd be able to have a third party in which you could judge the finances yeah I mean I think history has demonstrated that when we get third party information 1099 reporting um it uh it drives a lot of integrity and

1:47:37

quality control into the system it reduces the number of uncertainties and variables and often is helpful for the taxpayer because they're aware of what the IRS has been informed of in terms of income so in general yes with anything

1:47:51

I'm sure there are are tensions paperwork burden privacy all these other issues that will surface and uh my job will be to be at the table and explain what the various tradeoffs are from a tax administration standpoint and I've

1:48:05

heard you discuss this with others about trying to make the office as user friendly as possible do you know what if any resources are available to Legal cannabis business to help navigate their payment uh in reporting compliance uh

1:48:19

typically what happens uh when we have an issue like this or an emerging change in an industry for example you know new currencies uh new uh new uh tax credits uh where people that previously didn't have eligibility now have like car

1:48:35

dealerships in the case the inflation reduction act we build a a collaboration an engagement sometimes we can do FAQs sometimes we can hold webinars or roundtables um it seems like uh this is a material change and uh that that's

1:48:52

going to imp this industry and and likely will warrant that we start building that type of stakeholder engagement thank you I've exceeded my time uh now I would refer to ranking member Hoyer be glad to he the chairman as much time as he want to

1:49:14

conse first of all uh Mr commissioner you were appointed by Donald Trump is that accurate no pardon no I was not appointed by Don Donald Trump I was appointed by President Biden okay excuse me um I got misinformation in any event I'm

1:49:33

going to make my point anyway Mr redig uh one of your predecessors and you essentially have represented a nonpartisan bipartisan um view of the revenue flow of the IRS and the impact on its ability to do the job that has been given to it

1:49:52

by the con of the United States would that be an accurate statement yeah I uh my my predecessor uh commissioner reig was a significant Champion for the IRS Workforce and for the dollars to get to that we needed to get the job done

1:50:07

now let me unfortunately Mr Edward left because I wanted to refer to his chart and did you you went up and look at couldn't see what was the time per period for that chart did anybody recognize it did you see anybody it it

1:50:24

it talked about um the start the close of audits in 2023 if I recall and uh and the reality is that because of the some audits take months but many audits especially conflicts take years so the close out date is very different than

1:50:40

the Inception date yeah my point is uh I like that chart and that chart reflects a reality that under $400,000 if if you have an audit essentially on average it's a one: one you spend $5 to do the and you save $5 you find $5 in uh fraud or

1:51:08

underpayment if you order the millionaires you get 12 times the expense so you have a 12 to one now it is interesting that in the years in the last 10 years we have audited many many many more people uh under 400,000 why it's

1:51:31

easy so you can conduct audits you don't get much money because the payments are relatively uh small and because probably 90% of those I'm just taking that off the top of my head don't have a f have every week every every by

1:51:53

week every month we collect their taxes it's the corporations it's the passrs it's the Partnerships etc etc that you don't do that with which are much larger which is why you have four five 6 12 to one return on the audit so I want

1:52:15

to see his because he makes our point to the extent you underfund enforcement and enforcement has been reduced 22% from 2010 to 2019 hopefully we have more relevant uh more recent statistics than that but has been reduced 22% returns are up

1:52:39

7% That's a 39% difference there or 29% excuse me uh so it is not surprising that we have that $687 billion under payment why not just because uh just the cheats or strike that people who don't pay what they're supposed to pay but it is also because uh

1:53:05

those who know that there's 687 billion dollar owed they may not ever be caught so not only our our tax system one of the great things about it is it is a largely voluntary system one of the most voluntary in the world I think

1:53:22

we're now at 87% or something like that 80 yeah is that correct just north of 85% 85% uh in that ballpark but frankly to the extent we reduce enforcement with all due respect to all of us if we think well maybe it's due and maybe it's not I'm not going to

1:53:43

pay it and if they catch me they catch me and I pay it that's why this enforcement system is so critically important it's also not unusual that those who make the most are audited the less the least my my my Isn't it nice that we

1:54:06

don't for all those people who give us all these big contributions and all that sort of stuff ah we won't look at you so much we're going to look at the little guy a lot which is what that chart showed now I hadn't seen that chart

1:54:19

before and I don't know the basis so I have to analyze it but um the eitc I thought I was glad to hear you say they don't make anything hardly they're scraping by they have it tough and we want to really look at them is there fraud in the E eitc there

1:54:41

absolutely is why is there fraud in the eitc because human beings are participating in it and human beings want to try to pay as little as they have me included but some people cheat and they claim they are who not you don't collect much from them because

1:55:00

they don't have much but that's why so much time was spent at because we want to see that little old lady who's driving the cat like coming and doing the food stamps at the grocery store so Mr chairman it it concerns me

1:55:18

that when people who are making a lot of money and very frankly I don't know the statistics on Mr Del's corporations but if 41 corporations are paying no taxes my presumption is they're probably doing that legally and we make the rules but we

1:55:34

complain about it but if we make the rules and they're following the rules they don't pay taxes God bless them they got smart accountants smart lawyers God I don't I hear that my colleagues say that all the time say okay uh did they

1:55:49

go to jail no well then they're obeying the law our law and if you don't like the fact they're not playing any don't let them have the deductions or the look backs or whatever that they're taking I know I've taken a longer time but this

1:56:02

is a critical issue for defense for National Security because that's how we pay for National Security for domestic security because that's how we pay for it that's how we pay for the administration of all the government through Mr worles and his colleagues

1:56:23

efforts and we need to come to grips with establishing a system where we don't have forget about what the figure is let's say it's only 400 billion let's say we're over strapoli $250 billion dollar we have a deficit we need to be

1:56:45

collecting everything that is owing not a nickel more and on the 400,000 uh people on the taxes on the property tax very frankly I come from a high property tax state Maryland's a rich state but very frankly on property taxes

1:57:07

you buy a $2 million home and somebody down the road can't afford a $50,000 home you want them to subsidize your real estate now that wouldn't be popular in my district Mr chairman I know that it's not popular but I take that

1:57:24

position because they want the federal government to subsidize what M torus said they voted for for their schools or whatever God bless them but don't then look around at the Maryland taxpayer or the or the Kansas or Iowa taxpayer uh or even the Ohio

1:57:43

taxpayer to subsidize what they decided to spend money on through their property taxes that won't be popular in my district but that's the way it is is uh Mr warle thank you very much uh you got a tough job uh we're going to have a

1:57:57

markup and I'm going to work very hard to get the money that we need As Americans not you not the IRS employee we need As Americans to fund a tax system that is fair which means that everybody pays their fair share thank

1:58:13

you very much Mr chairman you're welcome um ranking member Hoyer and now we'd recognize uh Mrs Henson thank you Mr chairman uh just a brief question um commissioner uh obviously the ERC tax credit in your testimony you say that uh

1:58:29

there is still a moratorium on processing those claims um because of the fraud the high amount of fraud with that and I I certainly appreciate the efforts there to combat that fraud um but I am working with a lot of concerned

1:58:42

business owners who have those claims pending um and those are refunds that they are rightfully owed some of them um some of these pending cases are worth hundreds of thousands of dollars so you can imagine when things tight it's the

1:58:53

difference between what they were planning to do and grow their business and maybe add some jobs or wait on those dollars so uh what is the agency's expected timeline commissioner to continue uh processing those ERC claims

1:59:05

well for all we're still processing claims received before September uh 14th uh 2023 when the moratorium started um since the moratorium we've we've processed more than $2 billion in claims it's those that received after uh

1:59:22

September 14th that we are not currently processing um do you have a timeline for when you might begin processing those I don't have a timeline what what I had stated earlier was uh after filing season uh we were going to uh conduct a

1:59:38

uh or during filing season and leading to after filing season conducting an assessment of our inventory to figure out the best way to proceed um unfortunately uh congresswoman there is a lot of ineligible claims in our

1:59:52

inventory and who is suffering for that the eligible claims that are small numbers but hard to find uh one of the things that we are doing and I urge your constituents that uh that may be waiting uh we are working with our taxpayer

2:00:06

Advocate to move to the frontof the line hardship cases anything that that has become more urgent if you believe you're you're truly eligible but we've been also urging a lot of taxpayers who uh who may know they're ineligible to to withdraw

2:00:22

and um we've had uh almost $400 million in uh in withdrawals since we announced the moratorium uh and then we've had uh voluntary disclosures for those that received the payments and that they knew they were received an error and that we

2:00:40

have 777 million and people who have voluntarily come close come to us and returned the uh ineligible credit right and some of those issues were with outside companies I know that were also involved in to get to your question I

2:00:53

want to work to make sure that those that have the most urgent need while we're continuing to sort through what is a a very challenging situation that we address those quickly are you paying interest out on those claims then we're

2:01:05

required to yes okay and do you know what the expected cost is because obviously when I when we look about giving you more money you know we want to make sure that um you're as efficient as possible and driving those cost of

2:01:16

the cost of the interest yeah it is largely offset by the the cost that we save by by holding on to the claim longer so it ends up being budget neutral the the uh the interest cost I can give you more data on that well

2:01:31

certainly would encourage you not to you know hold back as as many of these claims as possible that's not the intention intention is to find the eligible ones and process them as quickly as possible all right thank you I yield back Mr chair thank you Mr

2:01:43

senson Mr Cloud thank you once again and I have I think what is a little more technical uh some questions in January IRS announced that the total amount of recoveries from wealthy individuals as a result of the IRA funding was 520

2:01:58

million uh and uh that's about 5% of the 10 billion increase of Revenue that CBO projected for FY 23 and 24 now part of that I think has a huge part to do with cbo's pinching to over over inflate the benefits and under uh inflate the cost of anything we're

2:02:19

evaluating um you would I would guess a you know if we had more help more people and more time we could probably get that done uh but going back to the issue on the teleworking that we touched on brief briefly I wanted to ask you very

2:02:33

specifically uh earlier this year you set a goal for employees to be in the office back to just 50% of the time in May um how many days per pay period do you require your uh your DC based managers employers covered by collective

2:02:49

bargaining agreements to be physically in the office uh well it's half so if there's uh 10 days in a pay period it would be five days uh um and so it's they and let me also offer that uh what what we are requiring is consistency with the

2:03:08

government-wide standard issued by the Office of Management and budget uh part of what we have to evaluate with respect to telework is a couple of things are we achieving our productivity goals and we had a very strong filing season so in

2:03:21

many ways a lot of our productivity goals were achieved we have to stay competitive in the labor market and we want to make sure that we're providing good flexibility versus what other employers might provide and we want to

2:03:33

meet the government wide standard so there's a lot to balance here yeah well I mean we're we're talking with om about the government-wide standard because of course these teleworking practices were put in under Co meant to be temporary

2:03:44

and coming out of covid they've been made permanent um now from a business perspective you know when you're making this decision you're thinking okay I'm going to take a probably a short hit somewhat of a hit in productivity from

2:03:57

working at home but hey we we don't have the facility usage so there's savings there can you submit to us what savings we've been able to gather I mean are there offices you've been able to to close down maintenance believe it or not

2:04:12

it's it's it's mixed in some locations we have space issues uh because because people are uh shifting to smaller tare work Footprints uh over time uh and and working on site in some cases we have excess real estate and we're working to uh to offload that

2:04:32

that real estate um it's not always the case that you lose productivity when people are working off site it just depends on the situation a lot of it depends on the individual right and the situation yeah um the IRS has committed

2:04:46

significant resources to ensure taxpayers who navigate the 7,000 page tax code pay their proper amount which should uh that's the job uh but uh we were talking about the uh uh the wh uh FY 23 treasury reported a staggering 33% of improper payments for

2:05:08

the uh Earned Income Tax Credit so we were just talking about that uh what are you doing to reduce those improper payments yeah this is a really important point because it is that uh that high improper payment rate that uh that I believe led to the

2:05:25

the large number of audits uh in this program we have to balance there is a part of that error rate that is more concerning than another part of that error rate so part of that error rate is direct fraud or a uh or a um a nefarious

2:05:43

preparer who steals the eitc from the eligible applicant um and part of that error rate is uh the dependent child lived with the parent for four months out of the Year rather than six months out of the year and that's the eligibility issue in a constrained

2:06:00

resource environment we have to make choices and you break that down for us maybe like that 33% I mean 33% yeah what yes we can get you more information on that I would say that a large part of the error is kind of more of this

2:06:13

technical error where it's the number of months you've lived with your dependent child what my commitment is is on eitc and proper payments is to go after and correct the errors that are more nefarious that are uh more uh likely to

2:06:29

compromise trust in the tax system I wish we could get all the error but we have to prioritize I just a couple seconds I I don't have any reason to think anything about these questions except uh you mentioned that uh the IRS does not sell data was happy

2:06:45

to hear that but that sparked a couple questions for me do you purchase data do we purchase data I don't believe we purchase data I I mean maybe we purchase a benchmark information on real EST on individuals on people do on citizens we do not do

2:07:02

you share data with other agencies or do other agencies have access to your data without a warrant or subpena yes under section 6103 of the code there are statutorily established um data sharing uh environments uh where like for example we share data with

2:07:22

HHS uh to help uh with their child support enforcement we share data with the education department is around uh aligning with student a eligibility so there are these buckets of areas but otherwise Beyond if it's not prescribed

2:07:38

in Statute in section 6103 we do not share it thank you very much I you thank you Mr Cloud commissioner worful all good things must come to an end [Laughter] there may be some members that would also like to submit questions for the

2:07:55

record absolutely please submit any questions for the record within the next seven days and I'd ask you as I have other people in the past to try to respond to those as you said you would uh within 15 business days after the

2:08:07

receipt to them again I'd like to thank you for being here today and uh the opportunity to have this uh discourse with you and uh this meeting is now concluded

2:08:50

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