big discount. we have the threat of them continuing to ask for somethinge every time they go to a nation but we ask nothing. >> i wish i had another five minutes but my time is running low. i yield. >> the gentleman yields back. we extend recess to immediately after casting the third vote in the series. c-span is a unfiltered view of the government and we are funded by these television

companies and more. including spark light. >> at spark light it is our home too and we are facing our greast challenge and that is why we are working around the clock to keep you connected. we are doing our part so you can do yours. >> sparklight supports c-span along with these other television providers giving you a front roe seat to democracy. >> irs commissioner testifies on child tax credit and the use of artificial intelligence in auditing tax returns. the topic of the earned income tax credit fraud was also discussed. [inaudible conversations] [inaudible conversations]

[inaudible conversations] >> the committee will come to order. before we began i now, i know the committee will come ft order. before we begin, i know i speak for everyone here when i wish our ranking member a happy birthday, yesterday. we are supposed to have some cake later so we need to celebrate. but, a late happy birthday and we appreciate serving with you. thank you commissioner for appearing before the ways and means committee earlier than usual. we have a lot to go over so i

appreciate you answering the request of members to come before the committee early this year. the first as it pertains to the current 2023 tax filing season. thank you to you and your team for the technical work to make sure that the quick and without delay implementations of provisions of the tax relief for american workers and families act. we appreciate the steps the agency is taking right now to be ready to immediately implement the legislation when the senate passes the bill and it is signed into law, especially with regard to adjustments to the child tax credit. we are largely aligned on the importance of rooting out fraud in the employee retention tax credit program. we look forward to your efforts eliminating fraud but also making sure that small businesses across america who

filed legitimate claims received their credit as soon as possible. i am grateful for your partnership in these efforts and it would not surprise you that i also have a number of concerns about the biden administration approach to the irs and about the irs handling of several important issues. last time you were before this committee the irs and chosen to delay a provision of a law crafted by the biden administration and congressional democrats that would send tax forms to 44 million americans just for engaging in transactions over $600 in one year. this includes transactions like selling a used couch or a concert ticket through a third party payment platform. the irs unilaterally chose to delay implementing the law or sending these forms.

this time, in an election year. republicans are united behind repealing this policy. i want to say thank you to representative carol miller for her leadership on the repeal effort but the way to fix this terrible law is to repeal it. not to use the irs to shield the biden administration from the consequences of its own policies. also, last time you were before this committee, you said that the irs would not retaliate against whistleblowers. one of the iris whistleblowers that has appeared before this committee has since alleged the irs retaliated against him for exposing the truth about the doj preferential treatment of hunter biden. i hope you will share what steps have been taken to protect whistleblowers. just a couple of weeks ago a

judge sentenced an irs contractor to five years in prison for the greatest theft of taxpayer information in american history. i think the department of justice woefully under charged this individual but i am pleased that the judge applied the maximum sentence available to her. this story does not end with that case. the irs must be accountable for allowing this theft to ever have happened. it must ensure that it fixes security vulnerabilities at the agency. a recent report from the inspector general describes alarming details about how current irs security flaws demonstrate the problem has not been resolved. i hope that you will commit today to address their findings quickly for the sake of

millions of taxpayers. we have serious questions about numerous other issues like the implementation of an irs direct file scheme that the american people did not ask for., how the irs is suspending fantasyland claims about how much revenue -- with increased audits. more of the irs time and resources should be directed towards improving its customer service for its existing duties and not spending money and resources on new systems no one has asked for. part of that focus should be on deploying new tech knowledge he to make the irs more efficient. proper use of technology can help avoid the need to hire thousands and thousands of new employees. thank you to representative -- for leading the charge to make

sure that the irs is taking advantage of new tech knowledge he to help taxpayers. clearly there is a lot the irs needs to answer for and i look forward to hearing how your agency plans to follow the law and protect taxpayers moving forward. i recognize the ranking member for his statement. >> we want to welcome the commissioner back to the committee on ways and means. it is delightful to have you with us in the middle of what promises to be a record- breaking filing system. the dedication of those that the irs is remarkable. for the swift implementation of the inflation reduction act. last filing season was the first impacted by the democrat multi year investment from historic -- taxpayer service was dramatically improved but it was the consequence of a well made and well funded program and the results have

been remarkable. in this era of service to american taxpayers the irs meets goals and delivered it in a quality level of service. 3 million more phone calls were answered and wait times were cut. over 140,000 additional taxpayers were served in person. the 2022 backlog was eliminated. a reminder to the republican colleagues, many of the recommendations that we entertain and discuss this morning came from a republican who worked with all of us to make sure is we had quality service. we know that expectations have been increased based on the success that the irs has had so far. it was just lester that we discussed the future of the iris ability to hold the top 1% of tax -- accountable.

over $500 million has been recovered from 1600 wealthy tax avoiders. another major victory. a reminder, if the revenue is not collected in a fair manner the rest of us pay more. the biggest threat to the irs right now is the extremism of some colleagues. from the government shut down in five days to the attempt to -- not only will this end up costing taxpayers money and adding to the deficit but how can you argue with the success. i find myself wondering out loud about who wins when the irs is starved for resources. perhaps a colleagues can answer that this morning. the audit rate on millionaires fell by more than 70% from 2002 through 2019 the audit rate of large corporations fell by more than 50%. that was a request from

commissioner reddick. workers and their families pay their fair share to make sure that wealthy and well-connected people are paying their fair share too. the promise of direct file draws nearer but i am disappointed it was not in time for the public to take advantage of it. you, to the commissioner for his diligence and being here today and we look forward to continue to work on behalf of the american people. with that i yelled back my time. spent the sole witness today is the commissioner of the --. commissioner danny werfel, you may begin. >> thank you for the opportunity to testify on the filing season and irs operations. i am pleased to report the 2024 filing season opened on

schedule on january 29 and has gone smoothly so far. along with filing season and other day to day operations we continue to make progress in efforts to transform our agency through implementation of the inflation reduction act. using ira funding, hard work is centered on three fundamental themes. first, ensuring taxpayers can easily contact the irs whether in person, on the phone, or online. we want them to get help navigating complex tax laws and accessing the credit they deserve. second, identifying the growing number of taxpayers with complex returns, including certain wealthy individuals, large corporations, and complex partnerships shielding income to evade tax responsibility. we want to collect from them what is owed. third, addressing the growing

risk of tax scams and schemes by protect thing honest taxpayers from them. we want to root out the nefarious actors that perpetrate them. these investments allow us to -- of irs -- i want people to know that the irs is on the side of taxpayers and we are working to reflect that in every aspect of our operations while administering tax law. the irs has been working hard to build on the accomplishments of last year and our transformation goals for this filing season include providing an 85% level of service on our main toll-free line during filing season. we continue to increase scrutiny on those that evade taxes. we are working to reverse the historically low audit rates for large corporations, complex partnerships and high wealth individuals.

the irs has taken dramatic steps to strengthen our internal systems, protocols, and procedures by putting in place numerous improvements to bolster how we protect key systems and information. recent steps enabled new funding and that has sharply reduced risk for taxpayers and the task system. taxpayers should be concerned about recent reports of the unauthorized access and disclosure that occurred in the 2017 13,021 timeframe and the data security environment at the irs has dramatically improved. we have worked tirelessly this past year to close gaps that allow this event to transpire however, there is always more work to do and we will continue our laser focus on strengthening data security. another important aspect of the mission that is implementing tax laws fairly and justly.

a key part of this involves making sure that everyone pays the taxes that they owe but we also have a responsibility to protect taxpayers from being overly burdened and fulfilling tax obligations. we work continuously to balance these sides of the mission. this is the issue that we faced implementing this $600 threshold for 1099 reporting that congress passed in 2021. it is important to have the information provided under the lower threshold and we must also consider the burden placed on taxpayers meeting this requirement. our administration of tax laws should be guided by what is best for taxpayers. in this situation we delayed imposing the lower threshold because we realized that immediate implementation posed a high risk of taxpayers being confused and even the complexities of the 1099 reporting, some potentially

paying taxes they did not actually owe and that is something we take seriously and we will do everything in our power to avoid so the irs is continuing to reduce that risk for imposing the $600 standard for this is transactions. we will continue to working this and getting feedback from key groups. i want to assure the committee that the irs is paying attention to the potential passage of the child credit talks. the irs is poised to work quickly to implement it building off of experience with economic impact payments during the pandemic we might be able to start implementation as early as 6-12 weeks after passage depending on the final language but taxpayers should not wait for people to file returns. we will get any additional refunds to taxpayers that have filed. they will not need to take

additional steps. members of the committee, that includes my statement. i am happy to take your questions. spectacle. we will now proceed to the question and answer session. commissioner werfel , -- it included adjustments to child tax credit that you briefly touched on. i want to ask some additional questions to make the record reflect appropriately but the bill passed through this committee by a vote of 40-3 and it received 357 votes on the house floor. i appreciate the work you and your team have done to help ensure that the bill can be implemented as quickly as possible. i want to confirm a few details with you. the overwhelming majority of american taxpayers are guaranteed to have no adjustment to their tax liability. that is due to the child tax

credit changes in this bill. can you confirm that only roughly 10% of households will be affected and will receive just modest adjustments to their tax refunds? >> yes. looking at the numbers, if you look at the same eligible population. the metric is in line with how it will impact taxpayers going forward. >> we worked with your team to make sure the bill did not place a new burden on taxpayers and can be implemented without delay. can you confirm taxpayers do not need to file amended returns to maintain the adjustments made, further speeding things up? >> yes. >> there is language in the legislation requiring the irs to process any additional returns without delay. that was language that we added

the during the markup in this room. it if the bill is passed by the senate and signed into law, how quickly can you make the child tax credit adjustments for this filing season. how long will it take after bill signage for the irs to sound out -- send out additional refunds. >> we gave you a range of 6-12 weeks from the point of enactment. we give a range because we need to see the final language but i am committed to work illegitimately to make sure we are closer to the six week range. >> i appreciate hearing that. just to be clear we have your commitment that the irs will move as quickly as possible? >> it will be a top priority to make sure that this gets done. >> thank you. in the past the irs has asked congress to make changes during

tax filing season. congress has asked the irs to make larger changes than this bill does like sending stimulus checks to hundreds of millions of taxpayers. or creating a monthly check sending system for the child tax credit on the flight. -- fly. the number of taxpayers affected here is a fraction of those affected in those other programs. given that, can you confirm the administrative adjustments needed to implement the tax will be for american and workers act are in much lighter lift for the irs than for those other programs? >>yes, and mr. chairman, the work that we did to implement the payments that you referred allowed us to build additional capacity to make us even more ready for this change. >> thank you, sir. commissioner werfel, the individuals who stole and disclose the tax information of thousands of americans has now been punished with a sentence

of five years in prison. while i'm glad the judge in the case sentenced him to the maximum available to her, i was surprised that the department of justice only charged the individual with one count, one count of unauthorized disclosure and no other crimes. did you make the recommendation to the department of justice on how to charge in this case? >> no. that's not the role of the irs commissioner. we allow and defer to the justice, department of justice on prosecutorial decisions. >> do you think one count of disclosure matches of the crime committed? >> i think that protecting taxpayer information from unauthorized access is an absolute solemn responsibility of the irs. and also believe this individual betrayed the trust, he betrayed his own commitments. he betrayed irs employs in place and he betrayed the american tax people. and based, and the type of the

should not be tolerated, and based on what's playing out in court it's not being tolerated isis persons being brought to justice. and as i understand it is going to spend years in prison. >> five years. do you think the penalty should have been hired for this individual? >> i don't, i don't have a on that, mr. chairman. i rely on the court and the judicial process to play out, and i trust that the judicial process will get the right answer. >> i was looking more of the legislative process of whether congress should change and increase the penalty for someone who abuses taxpayer information like this situation. i now recognize the ranking member for any questions you might have. thank you, chairman. commissioner, what's the irs done to restore element of fairness to the tax system? is a into compliance you are aware of two on high income earners or the corporation.

>> thank you for the question. what happened in the time before the inflation reduction act when i was funding was low and we were not making the appropriate investments, there's a friday different different areas we fell behind and one of the key areas we fell behind is the ability to assess complex returns. so in situations where taxpayers had the means to hire an army of warriors or accountants to create a lot of complexity in the return and potentially shield income, we weren't making the appropriate investments to track that, assess it, collective. and now we are doing just that with the inflation reduction act resources, we are focused building our capacity around how to deal with complex returns and how to make sure there's fairness. because if you're a taxpayer who can't afford to hire a lawyer and an accountant to help you create complexity and shield your income, then you would likely be very frustrated if those that did have the resources to do that and it --

and avoid what they owe. and we have to close that gap and we're making really important progress already in closing that gap. >> commission, let's talk about data security. i thought your answer in your introductory comments was on target. you want to talk about data security and prevents that have been made in your time estimate your? >> yeah. i mentioned how important in the answer to mr. chairman question data security is to the irs. it is fundamental to what we do in ensuring the public trust. when i got to the irs one of the first things i did in march of 2023 was told the team in together and ask what is the state of our data security environment? and what is learned is the were a lot of gaps. one of the primary causes of this gaps was lack of investment. the underfunding had occurred for many years at the irs i said decrease our capacity and of right of different ways and one of those ways is to keep pace with investing in the type of technology, process change, controls to make sure our

environment was secure. and we've spent the last year working diligently to close those gaps, and there is a long laundry list of steps we have taken to completely dramatically change our environment. and i'll point out one important one. the inspector general in evaluating our security environment pointed specifically to a lack of audit trails in our system so that we can see how data is moving throughout the organization, and we can track and see if it's moving in an inappropriate way. i required and it is now been implemented that every sensitive system in the irs has a very robust audit trails that the inspector general required. again, before the inflation reduction act we didn't have the resources to put in the work to close these gaps, and that's why it is so important that the irs be funded adequately for its operations.

not just so we can answer the phone when people call us, , not so we can keep pace with complex returns, but we need to invest in our infrastructure and invest in our data security so events like what happened in 2017-2020, that that doesn't happen again. >> i don't understand the logic sometimes it's offered that if we cut the irs, so we're going to prove compliance. the logic escapes me so let me give you some time here, i got one minute and 50 seconds to talk about some of the other additions to your testimony you might like to offer. >> absolutely. so i really want to amplify this point about what a funded irs means versus what it doesn't. and we have all the evidence we need in looking at the state of the irs before the inflation reduction act was passed versus where it is today. and before the inflation reduction act was passed, our walk-in centers around the

country were closed were understaffed with lines around the block. and now just a few years later we've opened 50 new walk-in centers that are fully staffed and we are extending hours to saturday for people can't get to us during the week and will implement what we call pop-up walk-in centers going toward populations, so people want to see us in person they now can. a second example is with the folks. we were understaffed by thousands of phone assistors because of underfunding. what did we do with that? we hired 5000 phone assistors and put them in the call center and between -- before the inflation reduction act and after the -- was a dramatic

change in our ability to answer the phone and help taxpayers with their questions. we have a whole generation of taxpayers that are going to expect, as they should, to be able to do everything ever wanted to do with the irs without calling us. and before we were funded, our technology tools were stagnant. they were not being updated in the way you would see either other jurisdictions around the world or in the financial services sector in the retail sector. that's all changing now. we have work to do but now every time taxpayers come to be with the irs infilling of the taxes or answering questions when they go to our website each filing season, they are going to see a new set of tools, new functionality, new things that they can do without ever calling us to walk into a walk-in center because we are investing and focusing our investments and how do we best serve taxpayers. >> mr. buchanan. >> thank you, mr. chairman. i want to thank the commission for being here today. i chose the florida chamber. we at 130 business, 30,000 this is in the federation across florida. one of the biggest issues that are making to you a little

earlier is dispute resolution and i'm talking about companies with 50 employees or less. the cost of hiring accounts and maybe get an attorney and go through the whole process is very time-consuming. many times it will put them out of business some of them. but it think it's got a little bit better but what's your mindset of where we're at in terms of, seemed like we want to get at their deal for the irs, for the country, but then resolve as many of these disputes as we can, some of them claim there out there a year, six months, eight months, ties of their energy, their time and their enterprise. you mentioned that, the big corporation is one thing. small business and individuals as well. i'm just focus right now on small business. >> yeah, i really appreciate the question, congressman. i haven't mentioned it yet one of the things that guides me in the job is the taxpayer bill of rights. i have it framed above my desk. i have with me today to get sky like some people carry around their pocket constitution. i carry around the taxpayer bill of rights because it so important in everything we do we are guided by it.

and one of those rights is the right to speedily resolve your issues. and i want to make the right investments so that we are doing that. and that's a multipronged set of solutions. it's, for example, having clear notices, clear guidance, so the law is complicated the irs is translating it clearly so we never get to a dispute. it's doing outreach to small businesses with training and webinars. we are investing. so what are your questions and how can we help you? and then it's hiring more people working to make sure there is no dispute resolution that's taking to look. -- too long. >> i've only got a few minutes. i've got a couple more want to get through. identity theft, a huge issue again it seems like it's organized groups and stuff are still out there. where are we at with identity theft now? i had a lot of people in our region in florida where their identity was stolen, tax returns were filed on behalf of of fake he or some organize group. what's your sense of where that's at?

>> it's critical and its a top priority. i mentioned top three things we want to do. one is prevent people from being victimized. this is a mixed story. i wish it was all good. we've made significant progress in preventing identity theft, working with private sector partners in what we call our security summit. we now prevent 98% of identity theft attacks, if you will. but in the case with is a victim, as recently pointed out by a taxpayer advocate report, we are not resolving those issues quick enough, and so it's a priority going forward. to not only continue our strong performance in preventing identity theft, but also, when it happens, to raise our game and make sure we are providing victim assistance in a robust way. >> let me ask you what of the

think in terms of customer service. i know you touched on that. just talk to accounts and things locally and do seem like one tequila credit seems a is a got a little better but still you're on the phone for over an hour, or aggravated. you want to take care of those folks as quickly as you can and get their questions answered. you touched on in your early testimony but where is your sense of where we can get to a point where we can answer the phone quicker and try to get a little more help from a quicker stance? >> so we are at an 85% level of service. but there's more to do. there are other phones lines that we need to continue to work on improve. one of the things that we have done work on and approved by the gig this year is we have instituted a callback option and what that means is, the way we are

engineering our call center now, if your wait time is going to be longer than 15 minutes, we will introduce into the phone, we can schedule a callback option so you can hang up. no longer listen to elevator music, and we will call you back. these are the types of improvements. i know this happens in your everyday life when you're on any of the call center in the retail industry and otherwise, banking industry, we have some catching up to do. but because we have funding we can make these investments. and these are really helpful to taxes because now if they have a baby crying for something they can hang up and get a callback option. >> thank you. i yelled back. >> mr. doggett is recognized. >> thank you very met.

commissioner, for the efforts that you and your team have made to address many problems that have been created over the last decade prior to the last congress by those who seem intent on ensuring that irs would fail by cutting the budget again and again and continuously attacking and storing public dissatisfaction. as i understand your testimony, we have gone from 50% satisfaction to 85 % satisfaction. is that right? >> that is correct. >> i remember having not only complaints from constituents before we provided these, but even from cpas and tax preparers and have special lies that were kept holding in the very way you said they are not today. and you could not have had the successes and your team could not get that success without additional funding you were provided in the last congress. is that correct? >> that is correct.

>> the other thing that's very important to me is enforcing our laws so that the many people that are out there that are paying their fair share are not abused by those who refuse to do so. and the data that i have seen suggests that audit rates for large corporations in the decade prior to the last congress were cut in half and that the audit rates for those who earned over $1 million per year were cut by 70%. the top 1% was getting away with not paying an estimated $160 billion in taxes each year. i know that you reported progress being made on tax enforcement earlier this year and the significant increase in revenue as a result. with the people that you're after, -- speeches that just

had honest mistakes and let all of the return, or with a true tax cheat and can you give us some examples. >> yes, i can't emphasize this enough, congressman. our focus, our priority and our agenda under the inflation reduction act is to increase scrutiny for complex filers, wealthy individuals, large corporations and complex partnerships that are invading the tax responsibility. it is not our intent to increase scrutiny and invest this money on a new wave of audits for middle and low income that's that can happen under my watch. and we will be able to publicly report that she can hold me accountable for that. with respect to high wealth, there's lots of different things we are doing to start to catch up and close the gap that's been there for too many years. and one of the things that we can report immediate results on, because often these enforcement actions take time, but there are some things we're doing that should give the american people covers where using this money smartly and in a way that is creating fairness, and that is going after millionaires and billionaires who are delinquent on owed taxes. this should frustrate people. these are millionaires and billionaires who had been assessed a tack and are

delinquent in paying it. we have so many honest americans up eight their taxes on time. these millionaires and billionaires are not. we have created this high risk list of 1600 of these individuals, and we started to go get the money back. and so far in the early stages of this effort we've already collected a half $1 billion. and that's just scratching the surface so that should give you a sense of how much inequity there is and how much if we stay on this path were going to be able to close that inequity gap. >> i understand tuesday on this path you need another $800 million this year? >> yes. that is an important point about our budget and outages, if could sit briefly. we have a base budget to fund our ongoing operations, keep the lights on and then we have inflation reduction act which is modernizing and helping us build capacity. our base budget is insufficient to run the daily train schedules. what that means is we have to borrow from the modernization fund just to keep the lights on.

and if we keep doing that we won't modernize. will keep the lights on but we won't build these capacities that are important to help taxpayers. >> and the treasury within the last few weeks estimated that as much as $561 billion can be collect did. unfortunately, a republican colleagues on this committee and elsewhere seem to have no higher priority as indicated by the first bill passed in congress and their efforts at every time we get to the brink of disaster here, they want to cut the funding that you are relying on to say that these corporate and high wealth tax cheats are treated the same way and pay their taxes the way most americans do. i want to thank you for your efforts and we will do all we can we to resist the efforts to undermine the progress that you are making. >> mr. smith is record iced. >> thank you, mr. chairman.

thank you, commissioner, for being here today. i want to write secure the fact that my office continues to receive input from constituents that they're not getting their the questions answered from the irs. i realized you were touting an 85% efficiency level and that everything is just amazing of the irs. i continue to have concerns that the $80 billion in ira funding is not giving us the results perhaps that were promised. also, certainly there's a lack of candor i believe from the administration about how the project actually being utilized. particularly troubled the administration can is to implement policies across numerous agencies regardless of whether it's legislated authority or not. student loan forgiveness critical mineral agreements in the recent changes to the 1099k requirement arpa r all requirements overreach. the development of the irs e- file system fits that description.

while ira the bill so-called inflation reduction act provide $15 million to conduct a study of direct e-file and enumerated the study premise that provided funding for only nine months, said nothing about implementing that system. the nine months authorized for this study have elapsed as i'm sure you're aware. can you tell me explicitly what authority i was relied on to create an entirely new government run system of filing taxes since the law only provided authority to conduct a study on direct e-file system? i'm not looking for other examples of the irs helping people file their taxes. i want specific language from the federal code authorizing the pilot. >> absolutely. i appreciate the question. so we do have a responsibility and an authority to offer taxpayers different approaches for how to meet the tax obligation. i can do the exact statutory site for that.

what's critical about the direct solution is that it is an option. there is no mandate for anyone to use this solution should they choose. >> but you are saying there is direct authority to do so? >> there is direct authority to implement the tax system in a way that provides tools and solutions for taxpayers to meet the tax responsibility. >> generically speaking. >> well, electronic. calling us on the telephone. not everything is delineated precisely in law. so, for example, if we create a version of the tax from that you can fill in online, we've done that. there is not a specific legal authority to do that but there is a legal description of the commissioners responsibilities. one of those responsibilities is to provide taxpayers with avenues for how they can meet their tax obligation and this is just one avenue. it is not a mandate.

it's an option. >> i understand that. there may not always be an authority to do so and i would argue that is the case right now. that specifically trouble., troubled by the claim that there's -- there's authority there when i don't believe that there is. but let's go back to the topic i discussed with you and secretary yellen previously on multiple occasions. and that's is targeting families earning less than $400,000. -- cannot and will not fulfill its promise about audit targets and also meet its claim to increase the revenue. -- questions for the record that the eris is committed to ensuring that none of the funds provided by the irs will be used to increase audit rates are small business -- current

audit rates. is that accurate? >> no, that is not accurate. i don't think. let me tell you what the current situation is. tax year 2018 will be the base year that we will utilize to make sure that the audit rate for those that are in less than $400,000 is not -- >> i'm reclaiming my time because time is of the essence. i would like to learn more and i would like to know if the irs can provide us with a distribution table for the $506- $1 billion and estimates of revenue generation and do you know when we could plan to see that? >> we have a public report on that. i would be happy to engage with your staff to understand the specific questions. >> why did you decide to use 2018 is the year to establish the historical levels of

audits? >> well, in large measure, because it is historically low rate and we wanted to wish a the taxpaying community that the inflation reduction act would not be used to increase the audit rate among middle and low income. so we chose 2018 as a historic low rate to provide additional assurances and we wanted to be specific so that we can be transparent and told me to account and they irs to account. each year we publish our audit rate in the data book so you can go into the data book and see what the rate is for 2018 and then when we finish with tax year 2018/2019 you can say, oh, did they meet their mandate ? and it should be public. >> you mentioned earlier that

you generated about $500 million. about half $1 billion, i think from targeted taxpayers and that is it just over $300,000 per taxpayer. how many resources and the dollar figure of the iris taxpayer dollars do you think it would take on average to reach that level? >> i would have to get back to you on the specific but it has a very positive roi, in general. and this is something that the congressional budget office has publicly reported. but in general would be turned six dollars for every one dollar invested so on average, you should expect about a one- six ratio. so we spend about 1/6 of the resources to get the job done on average. >> thank you mr. thompson. >> you, mr. chairman and commissioner, thank you for being here. first, congratulations for the work the irs has done over the past several months. as the ranking member, chairman

neil mentioned, democrats on this committee made a historic investment in the irs last year when we pass the inflation reduction act. it since then i can tell you i've heard from my staff and my district offices about how well they are working with the irs. they have contact with your office hundreds of times a year and they say the irs is significantly smoother than they have been before. you are responding faster in your responses are better. my staff find the taxpayer advocates to be reliable and helpful partners as we try and work with our constituents. i have personally worked with you and your team on specific issues and i want to thank you. i have always found you to be helpful and your to do preprofessional and very well prepared.

unfortunately, the majority seems to think that the irs budget is a slush fund to pay for every program that they want to pass and put into law. and, i have lost track how many times they have tried to use the irs budget to offset spending, despite reams of evidence proving that irs cuts actually increase the deficit. i believe the only reason to work to cut the irs budget is to either make consumer services worse, or to make cheating on your taxes easier. i understand people don't like paying taxes, but this is how we fund our civilized society and the many programs that our constituents care about. so while we can disagree about tax policy on the specifics, we ought to all agreed that on a bipartisan basis that people should follow the law and pay

the taxes that they owe. commissioner, when i was funding is cut what happens to our deficit? >> it goes up. in fact, for every $100 million taken from the irs, the deficit rose by six and a billion over ten years. and that's because -- >> $600 million? >> for every $100 million cut, $600 million increase. in our deficit. >>when the irs funding is cut, is it harder or is it easier for people to cheat on their taxes? >> it's easier. and let me just, if i can go through, $100 million, what that buys you at the irs, 700 audits of high income taxpayers, millionaires and billionaires. 200 audits of complex partnerships. 100 audits of large corporations.

32,000 collection cases of wealthy individuals. and on and on. and that's just from the 100 million. so, so clearly it has an impact. >> thank you. one thing that hopefully we can agree on on both sides of the dais is modernization. can you talk about bit more about how you have used inflation reduction act investments to modernize. >> absolutely. you know, one of the things that inspires me congressman is before the inflation reduction act there was a famous picture in the "washington post" of our cafeteria in austin, texas, filled with unreviewed returns in paper. that cafeteria is now clean. people are eating in it rather than as storing tax returns. that's because we are aggressively digitizing and scanning all of our paper as part of our initiative to go paperless. this is important not because it's more efficient and more secure but it means we're going to process more quickly.

one of the things that's going on due to our modernization is we have significantly reduced the ongoing backlog of returns and correspondences. >> thank you. i would like to take a moment to talk about the investment in climate change in the ira. this was the biggest investment in climate work in history, in our country. how would you describe the rollout so far? and how would you characterize the uptick on tax credits like ev or solar credits? as >> we've had a a successful launch. in january we launched our portal, our i.t. solution that allows those that are eligible for credits related to the manufacturing and transactions associated with

electronic vehicles. and like any new solution there are certain things that we could do to make it better and improve the customer experience, but overall it's been robust participation and the system has performed as expected. the questions revolve around this, we do telephone town halls and we did one one of the over a week ago and when we do irs town halls, it just seems like we can't e phone long enough and i was perplexed to the taxpayer advocate is a with the phone with us. i don't think there's more complicated than what we talk about to do what comes to the irs and the rules of how it works and who's paying fairly and who is taking advantage and goes back and forth i i wish e could just get to the situation of is complicated talking about today than when it comes to the irs and the rules and how it works and who is paying fairly into takes advantage, goes back and forth. i wish we could get to the situation, is this a program, is this an agency that runs in

the best interest of the people who fund it? and the same people that fund everything else with the government is a hard-working american taxpayers i have to type from the standpoint of formerly being in the private sector, while i was present, i was not in the operation of the time going through the early days of the pandemic. one of the things that came out, really good idea was the employee retention tax credit program, however, we continue to look at programs and holdups. my son runs our business, i ld talked to him on the phone quite a bit, i think the biggest thing would have been employers unable to get help or counsel on how that was working or supposed to work, how they could do that. we look back on it now, trying to find out what is going on with that program and while there is all kinds of different figures floating around about what it has cost, i would caution the people to say,

anytime we say it cost the government, we keep in mind actually gave taxpayers a break on what comes out of their wallet knowing that they provide every single penny, either with wages or cosigning a loan to fund this incredible operation. when it comes to the irs right now, ensuring that small businesses receive grtc's, what is the oversight, how can you help us with that? i have a number of friends, i met with former representative billy long who is concerned for a lot of the people he still works with is the fact there is confusion on what quarter is being funded and what is the timeline and what is ending and what is still operation and where she we should go from here. >> first of all, i appreciate the question and how you worded it because how you can help, one of the things i've learned early in my tenure at the irs is that we can't do this alone. implementing the tax system is

a partnership with the irs and tax professionals, taxpayers, congress. the erc is incredibly complicated program. h it was critical and played a critical role, we issued 3.6 million erc to date and it was a lifeline the people that needed it. the further we got away from eligibility, the demonstrated loss that you had to claim eligibility ended on december 31, 2021. the further we got away from it, the more aggressive promoters and marketers started, in my opinion, taking advantage of honest small businesses and getting them to believe they were eligible for credit they truly were not eligible for. 18 months, 19 months, 20 months after that period of eligibility, the number of erc credits coming into the irs was increasing 50,000 a week,

60,000 a week, 70,000 a week and we started to realize there were so many ineligible claims in what was coming in. it was getting harder to separate what is ineligible from eligible. that is why we issued the moratorium in september 2023 because we wanted to slow the flow of these credits coming in and make sure we were not paying out fraudulent claims. what we announced is we have to slow the process down to protect taxpayers, not just taxpayers, the financial bottom line, tax payers don't want to spend out fraudulent claims but to protect small businesses that may have been taken b advantage by aggressive promoters to >> i appreciate that, the guidance is key going through this and these are very d complicated issues. there are people about who believe this was taking care of, you are on hold and on hold

and you don't know, it makes it difficult for people to file their claims that the end of every year. one thing to cover quickly, the direct file program, we had people in the private sector running this and i think we had great success with it. why did the irs get involved in this and what is it we are trying to achieve? you are down to one second, i don't expect an answer that quickly, if you would get that to me because i think it is a legitimate question, we have these available through the private sector and talking about money being well spent, i think it is already there for people. i don't understand what role the irs would have in that. i don't question the fact you think you could help, it is already there. thank you. i yield back, sir. >> thank you. >> good morning, mr. chairman. it is a lovely day in the neighborhood. commissioner werfel , you have been breath of fresh air to me.

we had little problems with alaska who sat in your seat. welcome back. after years of chaos very new day at the irs. last month, you already talked about it, the irs announced it had recovered $485 million from only 1600 millionaires. the question of fairness with the tax system is at hand. we all have different opinions about it. what i believe, or else i would say, i believe you are there to oversee fairness. the guy next door to me, where i live in my house in new jersey , if he does not pay his

property taxes and the guy on the next block from us does not pay his property taxes, people understand now we have to pay higher property taxes unless some other kind of revenue is found. pay what you are supposed to rf pay and people will complain less. people believe, many times, mr. werfel, commissioner , that they are being shafted when it comes to figuring out tax policy. i think you and i have an obligation to address that day in and day out. the tip of the iceberg. last week, we learned we would recover $560 billion from rich

tax cheats after the next decade. you have been portrayed, a group the agency you work for has been portrayed as they are coming after you. create fear, you are the bad guys. lincoln dealt with that during the civil war, very honestly. this money was going to be used for the war, how would the towns throughout the americas build their roads, hospitals, schools, et cetera et cetera. that is why we have a big argument over salt. i hear from my own neighbors, you are now answering our calls. refund checks are going up faster. these successes are because of, i think, your leadership and because of stark funding passed

by democrats, mostly, to make the irs work for regular americans. wow. i remind everyone, every single republican in congress who voted against the inflation reduction act and against funding for the irs to do its job. the facts are the facts as tom swazi would say, the facts are the facts. members of the other side have made irs funding their white well -- whale to buy a harpoon did any cost. they clawed back one quarter of the stark funding like the shark in jaws, they want another bite . the congressional budget office has estimated that funding i believe republicans stalled away will cost american

people double nearly 400 billion , $40 billion, excuse me. i have a question for you, millionaires and billionaires need to pay their fair share, i think everybody will agree up here, i think, i'm not sure. what is the irs doing to audit high net wealth individuals and tax cheats? >> congressman, it is where we are focused and we are taking multiple different steps. first of all, we are hiring additional accountants, auditors, and where they are being deployed and where we are shifting the audit workforce is to make sure we are focusing efforts on high wealth individuals because that is si where we think we have a growing problem of tax evasion and we need to address it. we are deploying technology

differently. we are using analytics and a.i. to better understand how money moves in these very complicated arrangements. companies with subsidiaries and subsidiaries to those subsidiaries. moving money across international jurisdictions, understanding profits in the u.s. doing all of these things that are difficult to track and investing in subject matter expertise, people, technology, analytics, all so that we can catch up and make this prayer. we should be able to have equal ability to assess the guy down the street's taxes as your taxes. middle and low income, mostly your taxes are fairly simple. we have the means and capacity to assess it. where we have lost the capacity is for the complicated situations and when we are underfunded, that gap grows.

as long as i'm commissioner and the funding is available, where i'm going to focus is on the top where the tax returns are complicated and where the evasion is expanding. >> thank you, mr. commissioner. >> mr. commissioner, forgive me, i'm assembling some of the numbers right in front of me because as the chairman spoke, i have a fixation the adoption of technology is the ultimate solution or the solution for the left that once more tax receipts and for those of us who want a friendlier, more efficient and effective irs, you made the comment, it is six to one and this is even from the preliminary data from representative pascrell asked for that cbo report, press release you took in 520 million, i'm looking at your cost, i can see for every

dollar, it cost you $10.96. i accept there's capital expenditures there and overtime they will be advertised out but most of the i.r.a. funding looks like it has gone toward operations and consultants. the conversations you and i have had, my fixation is the only way you get that, that is completely opposite from our discussion before, right now costs are fairly high for those additional dollars, the adoption and purchase of technology, the use of commercial databases to ping off something should dramatically lower your cost of collections and make your collections much more efficient, fair, open, tell me the story, am i off base, we have to hire armies of people or is technology my nirvana? >> first of all, i can assure you investment in exam and audit has a positive return. >> mr. commissioner, i'm

looking at the cbos numbers with your own press release. i'm getting basic division i'm pretty good at -- >> unhappy to walk through the math with you. to answer your question on technology, it is essential. the whole effort underway is about modernization and it is at every level, technology will help us process quicker and more efficiently, more accurately and more securely, technology will help taxpayers have an easier time, it will take them less time to do their taxes and hopefully be less expensive. >> what can i do as the person on the panel who is fixated, what do i do to help you get there? >> first of all, we appreciate your peer review of our d technology plans, i know my team has briefed your team but we should regularly -- >> i can't believe i'm saying this, your team has been great to munich with me. >> that does not surprise me.

my point is, we have a lot of different opportunities to advance technology at every level. our website, the tools the taxpayers have. >> the chat function. at some point, i would love you to talk about your experiment last cycle and the expansion this tax season. >> we are adding chat functionality, whether it is automated chats or you're talking to a computer and it advances if the computer can't answer, it goes to live chat. these are standard activities in the private sector and many other public sector call centers. we are catching up and we are catching up because we have the funding to modernize versus keep the lights on. >> if i'm wrong, don't tell me, everybody else tells me i'm wrong but that adoption of technology should dramatically change your structure cost of

collections? >> correct. >> that is my hope, on my side, we fret over the 80 billion, hiring people or hiring efficiencies? for my democrat colleagues, it is going after wealthy people. i do look forward to your staff provide me because you've taken in your own press release, 520 million and i see a cost from la that press release and pascrell pulmonary cbo audit, 5.7 the last thing i will ask you, just because we get a lot of inbound on this, on the employer retention, i accept that is what it is. please guidance as fast as you can so whether it be the small business or the promoters, everyone knows what the rules

are, knows what the timing is and knows how to close this out . i know you have to run things by armies of lawyers and those things, buy them caffeine, get it done. >> if i could, we have a special section on irs.gov on erc but to look out for, do's and don'ts, why you may not be ineligible. we did a webinar on february 8th that had 8000 registered participants and we are running educational series all over the country we are doing a lot, we could obviously be doing more so we are willing to listen to ideas about how we get out there and talk to people about this program and make the entire process clearer. >> the question of the processing time, eligible, not eligible and when to get there? with that, mr. chairman, thank you. >> thank you, mr. erdavis to >> thank you, mr. chairman. first of all, commissioner, let

me welcome and thank you and the internal revenue services for its outstanding success ensuring a fair tax system in which the wealthy and well- connected pay their erfair shar i want to make you aware of the outstanding work of the chicago taxpayer advocate service. grateful for katrina britt, arlene merrick, and the rest of the chicago team who have used their expertise to help my constituents. i also thank robert chapman with that d.c. legislative affairs team for his assistance. as you may know, i have championed many of the key 2021 ertc enhancements like lowering

the ertc to 19 for all workers to 18 for foster, homeless youth and giving working parents up to $8000 for child care expenses. i would like to work with you to better understand the patterns and the use of those credits to inform efforts to restore them. for example, how many younger workers got the eitc in 2021 but are excluded under current law or foster youth use their provisions on how many more working parents benefited from the refundable it

cdctc not under current law. do you have any updates you can share with us about who benefited and how from the 2021 earned income tax credit and cdctc enhancements compared to other years? i'm proud i helped lead the p effort to make the davita program permanent. i know that the internal revenue services, i.r.a. strategic operating plan initiatives 1.9 includes the goal of expanding the coverage and scope of the free tax reparation programs. any specific strategies been identified for accomplishing that goal and how has the irs involved organizations developing those strategies?

>> thank you for those questions, congressman. on your data question, we have awareness of that question with research and analytics team working to get you an answer as quickly as possible. i will say, i will connect your first question to the second question, we know there are people eligible for earned income tax credit not claiming eligibility, they are not claiming that because they might not know about it, they may not claim it because they are intimidated by the complexity of the eligibility formula, they just need help. we can do more outreach and working with community partners to make sure that people are aware of this benefit and getting the help that they need. you mentioned volunteers for both underserved populations and the elderly. i would love to grow those programs, working with local communities on what we call taxpayer and experience days,

having more of those around the country with educational campaign around what you may be eligible for and with free help available to sit with you and walk you through, i have been to one of these volunteer sites in baltimore and it is an amazing experience to witness these volunteers with taxpayers who would not otherwise gotten the help they needed and are very appreciative and the volunteers are passionate about helping people get the benefits they are eligible for. >> thank you very much, i look forward to working with you. i yelled back, mr. chairman. >> thank you. >> i want to thank commissioner werfel for being here today , i'm the chair of the subcommittee on work and welfare that oversees a number of different federal programs, one of those is child support and i want to focus my support on child support enforcement.

as you know, cse program works with the irs on collecting child support for noncustodial parents to help children and families to get the money they deserve through your program which is the federal tax refund offset program. this is a vital source of income for millions of families across the country. in my home state of illinois, 44,000 families and children depend on and received $65 million to the federal tax refund offset program. to service these families, participate in the program, many states, 42 states in particular rely on the federal tax information through third- party contractors and that is the way it has been done since 2004. a year ago, without consultation to congress and without us an opportunity to work with you on that, the irs made the decision abruptly to change this policy and this has

caused a shift now all states and cse programs that use contractors will be in noncompliance as of october. we did a bipartisan hearing in november and across the board, people were frustrated, they were extremely, there was lots of questions on why the irs did this why there putting states in jeopardy on this. i will give you an example, illinois administrator of childhood services testified where you're at to our subcommittee this policy change by the irs will cost illinois hundreds of millions of dollars to implement new systems and hire employees. furthermore, if states are unable to come into compliance in time, by this october, their entire cse programs could be in jeopardy of losing federal matching funds resulting in millions of families and children losing child-support payments to what i'm trying to figure out

commissioner, i would love your explanation, why it was not done with exultation to congress to put equitable solution in place and possible legislation to remedy this, why was the sudden change done? by the way, the stress and anxiety it is putting these 42 states through his immense. >> i appreciate the question. this was an issue brought to my attention very early in my tenure in march '23, i, like you, had a lot of questions about the policy itself and why we had issued it. i immediately engage with the department of health and human services, who runs the child support program to understand what the irs could do to reset the expectation across states, contractors, and others. at this moment, that policy announcement is paused. we are not moving forward and

now we have the opportunity to do the very engagement you are suggesting. we have told hhs we are going to take more time to make sure we have heard from stakeholders appropriately before we finalize any such policy. >> just to clarify, the pause that you reference, does that affect the october 24 deadline? >> i believe it does but i want to get back to you with more specifics. >> that is obviously very important coming into compliance. you have an estimate how much this will cost states to come into compliance with the new policyed? >> i don't have it at my fingertips, this is why it is important to get this right. >> another issue part of the collateral damage, there are 60 federally recognized native american tribes that also fall into this category too. they are in a much more tougher position because of some of the

financial and economic issues there because of this irs policy. they are in jeopardy of losing access to critical child- support enforcement tool those tribes. i want to mention that to you it needs to be a priority for you and your department. >> i want to make this commitment, to the extent, i need to go back to the office and make sure that i have the details, we did pause the extent, intending to go back october 2024, i want to talk about the implications of that and i'm happy to revisit that with you to make sure we are getting the right data and feedback before we move forward. >> i look forward to it, thank you. >> ms. sanchez. >> thank you, mr. chairman and thank you, mr. werfel for testifying today. en i want to join my colleagues recognizing the hard work the irs employees, the taxpayer

advocate service, and other federal workers put in every day to help american workers, seniors, and families file tax returns and claim the federal benefits they have all earned. i also appreciate many members of congress share democratic tax writer commitment to specifically improving the child tax credit. most of us recognize the ctc is one of the most powerful tools for fighting poverty in this country. we can all agree the devil is in the details where that is concerned. my colleagues on the other side of the dais disagree with congressional democrats on how n generous relief for working families should be but as a mom and legislator, i will continue to fight to ensure that our nation's tax code benefits all households with children and that means even parents or caregivers who don't even earn enough to owe and pay federal income taxes. i believe they also deserve financial relief. i was disappointed when my republican tax-writing

colleagues killed the good faith amendment mr. davis and i offered on the white and smith tax bill a few weeks ago. our amendment would have strengthened the bill by the storm full refund ability for the child tax credit. we have seen data showing millions of children across the u.s. could benefit from a modest expansion of the child tax credit and i'm specifically looking out for those families who earn so little they can't claim this tax relief at all, even though they are raising children. commissioner, i want to thank you again for answering our questions today. i want to talk a little bit about something that was raised earlier about the deadbeat millionaires and beginners who are cheating on their taxes and evading the responsibility to pay their fair share, i would say i don't think anybody loves paying their taxes but i think people do it if they feel like the system is fair and everybody pays their fair share.

what would happen if middle income and low income americans didn't pay their taxes or cheating on their taxes at the same rate these millionaires and billionaires did, what would happen? >> the deficit would grow. the irs, you are right, paying your taxes isn't your favorite activity of the year, for sure. we fund virtually the entire government through those tax collections. in order to have a functioning government, whether you want the government big or small, the irs needs to function effectively and there needs to be equity in our tax system otherwise people will lose trust and trust is what the tax system is built on. >> you say the revenue, fund the government, defense, national defense, correct? >> it is everything the government does keeping our skies safe so air traffic

controllers, your food safe when you go to the restaurant and you have confidence that your children are eating food that will not make them sick, that is all government funding and made possible if we have a functioning tax system. >> if the irs could collect with these deadbeat millionaires and billionaires and huge corporations actually owe, might we be able to pay ab for the child tax credit to be expanded or perhaps fully refundable?s >> there's absolutely money left on the table in terms of what is owed versus what is paid. this is particularly an area of focus for high wealth taxpayers in complicated situations. as i mentioned, when i arrived at the irs, my question was, what are the gaps we need to close, where are the gaps most problematic? one of them was during the period of underfunding, we lost pace with keeping up with rp

complex returns and the risk of evasion had grown. >> if we could get these complex tax filers to pay their fair share, which i'm assuming are a lot of these big corporations with different subsidiaries and different companies and they move the money around, these millionaires and beginners that have sophisticated accountants and tax attorneys that can help them evade taxes if we could collect what they owe, we could potentially expand or even make the child tax credit fully refundable so that kids and babies who go to bed hungry every night in this country would be lifted out of that hunger and lifted out of that poverty? >> i leave it to the wisdom of congress to decide how to use the money. i just want to make sure tax returns are complete, accurate, what is owed is what is paid. >> i appreciate your testimony today and thank you for your answers. i yield back >> thank you for holding this

important hearing today. mr. werfel, last november, two democratic senators in press releases bragged about the pressure they put on you and irs to delay implementation of the new 1090 9k threshold that passed in the partisan american rescue plan. both of the senators previously voted in favor of the change, the democrat senators also brought about the irs decision to change the threshold to $5000, which would seem not to have the authority to do so. with all due respect, mr. werfel, i know you are in a tough job, it looks like you are blatantly not enforcing the law and unilaterally changing the law because senate democrats with the current administration are having second thoughts about how terrible this policy is that he has been enacted. it is my job to provide oversight on this and the american people do not trust this administration, why would they? this administration does not enforce the law that passed through a democrat controlled congress and was signed by a

democrat president. now we are in an election year, president biden's administration refuses to implement the law and unilaterally change the lot in favor because along the books is on -- politically unfavorable to the average american. my colleagues will touch on this, have touched on this view . i want to ask you a question regarding the direct e-file program recently implemented. isn't it true private sectors provide free return preparation services outside the government free file program? >> yes. what is that estimate of how many they have done based on your data? >> i don't know the exact number but the free file program has been one of the central staples of how we provide free help to taxpayers. >> when you say it is free, we are having tough fund that from your side? you don't have this

technology driven, it is not a.i. driven, it is driven with people in your office, offices that are actually administrating this? >> the free file program are the direct file program? >> the free file. >> we work with the free file alliance, commercial software providers that have signed on to help provide a path for eligible taxpayers to use their product for free to file their taxes. that is something, there are resources the irs does to ensure that partnership is successful as possible. >> the direct e- file program you're doing, you're competing directly with those corporations? i don't see it as competition, it is another option for taxpayers. >> these services are provided by corporations free? others doing business so we have it t there, you say it is free to the american people, you say you provide the services internally, it does not cost

you anything, there are no taxpayer dollars used from your organization with administered of cost to do this? >> no, there is a cost. we are public with the potential cost would be. the goal is to provide taxpayers with options and to he help the taxpayers pick the solution for filing taxes that is best for them. some will file on paper, we encourage to file electronically. some will hire an accountant, some to the commercial software and pay, some go to the commercial software and try to work it for free. what we heard from taxpayers, we heard it pretty loudly, there was interest having an option where they could file directly with the irs for free. we wanted to test whether that option was viable. >> with all due respect, isn't that the old phrase that ronald reagan used, from the government, we are just here to help. it is not free to listen, we have given you billions of dollars, this is not free for

you to provide this service to the american people. i know it might be shocking, from the data we have gone from commercial companies you describe, 29 million tax returns filed for the free file program they have out there. the direct e-file program, i want to make sure that everybody thinks the government does it it is free, it is not free if the government provides these services. it is costing taxpayer dollars to provide them. >> here's how i would answer that, i would change the president reagan statement a little bit, we are from the government, here is an option, if you don't want to use the option, you don't need to. we are just piloting it this year, small-scale pilot. what is going to happen, we will evaluate, what was the cost, what was the experience, is there a demand for taxpayers? the taxpayers want the irs to provide this option? >> mr. werfel, all due rs respect, i've been up here 5 1/2 years, the angel thought, long before you and i got into

government, everybody wants to talk about the federal government having money it really doesn't. it has taxpayer dollars that fund the government, i think we would agree with that. i think it should be described as not free, funded by other taxpayers and them as well if they are using the service they qualify, my guess is, i don't know what the criteria is, to qualify for that program is that probably not paying taxes and it is a refundable credit they are getting in many cases. i'm just saying it is not free and we should say it is paid for by taxpayer dollars. this misnomer week give government services for free is not true, it is disingenuous. i yield back. >> thank you, mr. chairman and thank you, commissioner for being here today to talk about the very important relationship between taxpayers and the irs. tax seasons can be very stressful for millions of ai american families and small businesses and i'm happy we are taking important steps today to highlight tax filing experiences that resulted in a

more sensible, fair, more efficient process. the road to this point has been a long one. the irs has had their work cut out for them with a very long list of major implementation issues over the last decade. today, i'm glad to hear the irs, through the passage of the inflation reduction act is improving its interactions with the public. last year at this very same setting, you and i were able to discuss the well-documented reports over the last few filing seasons that recipients of the earned income tax credit pay significantly higher audit rates than other taxpayers. these findings were discussed in detail and i appreciate our colloquy. the itc audits are more heavily concentrated in the southeast of the united states and include many of the counties i represent in alabama's rural and underserved black belt. green county, alabama in my

district among the 10 most audited counties in the country for eitc recipients. . i venture to guess the median income for a family of four in green county is less than $30,000 a year. since our conversation last year, you penned a letter to congress in september of 2023 mentioning the administration of additional steps and initial round of changes made regarding the audit process for eitc. i do believe accountability is a direct result of transparency and with that, the opportunity to ask you whether or not this initial round of changes that you highlighted in the letter to congress has resulted in less audits on underserved communities. >> it will, i want to start by saying, there are certain solemn response abilities the irs has that we have to meet our mission. we have to meet our mission in

a way that avoids disparate impact. in this case, there was evidence that our audits and earned income tax credit was having disparaged impact on black taxpayers we have to first acknowledge it and now we have v to fix it. one of the significant things that independent study reported was driving the disparity was the volume of the eitc audits. one of the key things we announced was a significant and dramatic reduction in the number of eitc audits planned for this upcoming tax year as a way to address it. we are also testing changes with the audit selection algorithm that we have a hypothesis will remediate the disparate impact that has been occurring. it will take a little time to validate that, we hope to update that may be in the fall

where we have more data, to make sure we are reporting publicly the steps we took have the impact we wanted it to have. >> i will definitely be awaiting such a report. i think it is really important we don't target certain populations, especially those underserved populations and for something as important but not often claimed like the earned income tax credit so i look forward to working with you in any way that i can to help address this issue as you rightfully said, it is disproportionately affecting african american taxpayers and really unacceptable this day and age. i thank you for your candor and look forward to working with you to reduce those numbers. >> thank you, congresswoman. >> thank you, mr. cameron, good morning, mr. werfel , commissioner i'm okay with audits, we want people to pay

their taxes and there should be a random way of selecting some tax returns to ensure there is incentive for people to comply. i do want to, however, get your thinking about statements you made this morning. you have multiple times talked about high income earners, millionaires and billionaires, talked about complex tax returns in the same sentence as tax avoidance and tax evasion. do you believe millionaires and billionaires are all tax cheats? >> i do not. >> do you believe there is a reason for complex returns other than to avoid taxes? >> absolutely, there is. >> what would be some of the reasons? >> here is my understanding,

cfos of major companies have a responsibility to their board and shareholders to find the most tax advantaged status and they should. >> it would be a problem for you if they took a legitimate tax deduction? >> never. if their return is accurate and complete and legitimate, great. but that is not the concern that we have, that is not the issue. the issue was because the irs was not auditing, audit rates were anemic, we are not investing in keeping pace, these efforts in certain cases got to aggressive avoidance andr evasion, i can give you examples of where it is more prolific and that is where we want to focus. >> it is troubling to me when you keep using those terms in the same sentence as if all high income earners, by the way, pay most of our taxes, are all looking to avoid taxes

because that is not my experience with business owners, with corporate leaders. they want to do what is right. it concerns me going into an audit, everyone is innocent until proven guilty. if your entire organization is taking the approach you are taking today, you are fielding people guilty before the audit is done. >> that is not my intention. my intention is we are increasing scrutiny on complex returns where there is high risk of evasion. >> do you have any information on what percentage of returns on high income earners result in no change? >> i can get that information for you, i don't have that at my fingertips >> you have any information regarding the exchange rate after audits in all income earners levels? for instance, we know there has been fraud and those that receive the child tax credit, what percentage of individuals who have filed for the child

tax credit have done so fraudulently compared to high income earners? do you have that information? >> i believe we have that and could get that to you area >> could you share that with all of us? i want to caution you, i have a lot of people who do very well and are proud to be part of america and proud to pay their taxes and they don't to hear from the irs commissioner he thinks all of them are cheats. i would caution you into the language. >> i would love to go on the record to say i do not believe all of them are cheats. i did get bothered when we see evidence of evasion. >> in your testimony, you characterize partnerships in the same way that is deeply disturbing. you have said increased audits of partnerships is important because apparently in your mind, partnerships for some nd reason are a category cheating more than others. >> congressman, what we are trained to do is to bring the audit rate back to historical

norms. it has been anemic. i do believe went when we are not doing requisite amount of audits, not willing to enforce, it does increase the risk of evasion. >> congressman sewell mentioned targeting specific populations, i think that should go across the board . i don't want the irs to target any population that i think in all categories, most people want to pay their taxes and doing their best to comply with the law. >> i agree with that. >> i hope what you're doing is randomized targeting, randomized looking at audits or returns to ensure everyone is s complying to the best of your ability. >> we are looking for spaces we think evasion is proliferating and trying to hold people accountable for what they owe. a lot of, too many of these organizations are shielding their income, it does not mean they all are. it just means

there's more work to do for the irs to make sure people pay what they owe. >> thank you, i'm out of time. >> thank you, mr. ferguson. >> thank you, mr. chairman and mr. werfel for being here today. i want to start with something we don't do a lot on the side, i want to thank you for your help. when you were here last time, you gave me your word if we sent some tough cases that had no movement, that you would help with those and thank you for doing that. i have another long list i may send your way because when you speak, the rank and file auditor, you seem to move. i want to say thank you for the help on those other cases. two things i want to touch on, number one, the problems in the employee retention tax credit have been well documented and well discussed here today. this committee and bipartisan weight along with the house past pretty significant piece of legislation the other day and at the heart of it was dealing with the employee retention tax

credit. can you speak to how important that legislation was preventing the fraud and helping the irs work through the legitimate claims on that? can you speak to that please? >> the legislation under consideration, for example, that would prohibit erc claims coming in after a date certain, one of the things that impacts our ability to make sure we are getting to the eligible claims among that ineligible is the size of the inventory. the more the inventory is flooded with ineligible claims and right now, once we issued the moratorium, the influx of claims dropped in half but it is still, i think we got 17,000 to 20,000 last week so that inventory is ha growing and it is great with a lot of ineligibility. helping us pause the incoming at this point so we can find

those that have submitted and are eligible, we need that help. >> citing the legislation we passed could provide significant savings to the american taxpayer? ed >> absolutely, i believe that >> thank you. next item, my colleague from pennsylvania mr. smucker touched on this, he looked over here at my notes, we talk an awful lot on this committee about, we debate going back and forth with these complex corporate tax returns and high income earners, we know there is a tremendous amount of fraud in the earned income tax credit space, child tax credit space. if you had to look at what you think the corporate fraud is versus the total dollar amount on the earned income tax credit and child tax credit either through improper

payments or fraud, how did those numbers compare? >> i think they're both important, i don't have the side-by-side ledger in front of me. >> you are both important. >> both material. >> you said you need money to beef up audits for partnerships, complex tax cases where evasion is more likely, right? >> right. >> how much effort reporting into, would you recommend we look at reforming the tax preparer space and going after the folks that actually are committing fraud at the lower end of that income spectrum? if they are both there, i have not heard my colleagues on the other side of the aisle, i have been railing against corporate and high income earners that they lack the same religion when it comes to going after people that cheat the system with the earned income tax credit space. >> i will tell you, congressman, what is very

motivating and i mentioned it with my opening remarks, protecting honest taxpayers victimized t and the tax system using them to victimize. the example that drives me crazy and i want to make sure that we address that, is a nefarious preparer who coaxes an innocent taxpayer and promises them earned income tax credit quickly as they could get it just as quickly from us and ripped them off in some way, shape, or form. >> the predatory lending practices that go along with this are pretty grotesque. i would love to work with our colleagues on the other side of the aisle on a really meaningful piece of bipartisan legislation that goes after the folks that really are committing the fraud at the lower end of the spectrum. it is important. i'm sort of like my friend from pennsylvania here, we want the irs to do its job, we believe

that audits are important but they should be fair and nondiscriminatory. and they should be at both ends of the spectrum. >> that is the first rentable we have, we want, just like with a high income, there is nefarious activity for sure, where there is blatant disregard and purposeful evasion, for sure. at the lower end of the income bracket, when we have nefarious actors like the one i just described, that is what i would like to focus rather than an audit program that impacts too many honest taxpayers. i will go back to this, with the right investments, we can be more surgical to >> what you just said, excuse me, mr. chairman, i know i'm over my time, you've got to have a program fair for everybody, talking about going after the preparers. you have to also go after the individuals knowingly defrauding the system. with that, mr. chairman, my time has

expired, thank you for the indulgence. >> thank you, mr. chairman and commissioner for being with us today. after years of neglect through decreased appropriations, the irs finally received the influx of resources it needed to improve and update its operations. in the year and have since that inflation reduction act was signed into law, we have seen the impact of the resources. some of the successes include cotton responses decreasing from 20 minutes to three minutes, the backlog of 2022, individual returns now cleared and launching new digital tools to help taxpayers yet unfortunately, taxpayers -- republicans want to get the agency funding. we should ensure the irs has multi-year sustained funding to continue building on these successes. mr. commissioner, i wanted to know if you could speak to the irs enhanced enforcement efforts and specifically how the use of a.i. is helping to identify noncompliant taxpayers.

>> thank you for the question, we have to make investments to make sure we are precisely finding where the evasion is most problematic. these complex situations, for example with money moving across international jurisdictions, money moving and a wholly-owned subsidiary, it can be tough to find where the evasion is. and we can invest in a high- powered analytics to better es understand and increase the likelihood that we are seeing the evasion and selecting the right cases for audit. that is where the investments are going, making more sophisticated models to make sure we are selecting the right cases and finding the evasion where it is. >> thank you. one of the issues i heard from my constituents is about the lack of clarity on irs notices that are sent to taxpayers,

often the notices are very complex where they are from the irs so people are very concerned about them, they leave taxpayers concerned about how to resolve the issue so what are some of the changes the irs is implementing to the notices and letters sent to taxpayers, how can these changes benefit taxpayers and how has i.r.a. funding facilitated funding reforms, if it has? >> such an important piece of the puzzle, we launched what we call the simple notice initiative. we send about 170 million letters or notices to taxpayers each year and if you look at them, they need a lot of improvement in terms of clarity and we have run a program, in the last year, we took 31 high- volume notices, the design them and they are significantly better and we are getting positive results on these. now

heading into 2025, we are scaling. by the next filing season, when i'm sitting here next year, if we are successful, 90% of the total volume of notices will have gone through this effort and be redesigned and simplified we anticipate that will be verya beneficial for taxpayers. some of the early results we are seeing, taxpayers are going to the online tools and using the more than calling into the call center which means they're getting faster responses. very positive results just from clarifying what we are asking taxpayers to do with the notices. >> hugely important so thank you for that. also, federal and state laws require professionals like doctors and lawyers to not only obtain licenses or certifications, also the past competency tests. some tax return preparers must meet licensing requirements, many tax return preparers do not have minimum competency

requirements and therefore are i not credentialed. i was wondering how taxpayers who use non-credentialed preparers are formed by doing so and how would establishing minimum competency standards help protect taxpayers? >> this has come up a few times in the hearing. we do have a risk with preparers that are not serving their clients well or their customers well. in some cases, not providing appropriate and suitable tax advice and in some cases, stealing from them or in some cases, leaving them with a financial mess on their hands so more can be done. the administration put into the president's budget previously, changes that allow us to require more credentialing of these preparers before they would be able to provide tax advice or preparation services.

i think it is an important thing because people are being victimized. as i said earlier, one step the irs can take with partnership with congress to show we are on the side of taxpayers is disrupting those moments of victimization. this is an idea and initiative that could do that. >> thank you, my time expired. i yield back. >> thank you, mr. chairman and mr. werfel for joining us today. we are 60 days out from tax day 2024, the kansans i represent are working through the taxis and tasks whether preparing to file individual tax returns or filing business forms. the fact is, everybody has to interact with the irs. the agency should have customer focused prerogative that puts american people first and not their own interest within the agency. i'm concerned about, like my colleagues here, about inflammatory accusations that certain groups of americans are automatically considered to be tax cheats my career prior to run for office was looking at

how to provide good customer service, how do we make business operations more efficient? unfortunately, it seems like a lot of the d.c. bureaucracies focus more on how to make things easier to push paper or work from johnny's desk to sally's desk instead of focusing on how to be more efficient and meet the needs of american taxpayers and any constituents and provide that quality timely service. i'm sure this is not surprise you, my office from wichita receives calls from constituents with issues with the irs. this month i received a letter from a small car dealership in cheney, kansas.the irs. just this month i received a letter from a small car dealership in kansas that faced issues e-filing their 1099 by the january 1st deadline. mr. chairman, i would like to submit this letter for the record. >> without objection. >> the controller told my office that while they started

in the middle of the month, the e-filing and i.r.i.s. portal continued to crash, causing major delays and pushing them right up to the deadline. the situation was not unique to them who assured me they had the talk of the line high-speed internet, the restart to the association and informed them it was a widespread issue. they tried to portal at multiple times during the day and evening with no avail. the cpa indicated they were receiving calls as well. around 6:00 a.m. on generally 31st, the deadline, they successfully were able to submit the required 1099 necs. are you aware of these issues with the irs portal and what are you doing to make sure this critical tool is ready for the upcoming heavy usage as more small businesses file, now that you have this money ? >> absolutely, it is a great question. it is definitely on my radar screen. it was concerning while it was going on.

we have a lot of different portals, tools, technology out there and anyone who is involved in learning the systems will let you know that they don't always perform perfectly. the key is, what your reaction time, your speed, your troubleshooting is, and when it happens, do you learn from it so that you prevent that type of mistake from happening in the future? that is what i am trying to instill in the irs. so we were working the problem, are working the problem, made the necessary adjustments to allow these information returns to be submitted or successfully. we are monitoring it very closely because of what he said and cautiously optimistic that the changes and the updates we made will allow for a much more stable platform as we get to the busy season. >> the members controller called thehelpdesk times and could not get through. you said earlier you hired 5000 new colleagues to help with that so this letter is just less than two weeks ago.

and so, have all irs agencies employees returned to the office for 5 day work weeks since covid? i know the g.a.o. issued a report that many had not returned to the office. what are you going to do or what are you doing to help make sure taxpayers who are trying to do the right thing can get through to work with your agents and other employees? >> first to clarify, all irs ea employees are working. the objective is to make sure that we are getting the mission done and when you tell me that someone did not get through on the phone line i want to learn more about that and figure out what we need to do. there is a governmentwide standard out there in terms of where we stand today, what should be the percentage of in office work versus remote work. the irs is generally consistent with that standard but we are constantly evaluating any steps

that we can take -- >> sorry to interrupt, but before i run out of time, what is the governmental standard for the irs for the number of employees? >> 50% is a governmentwide standard. everyone is working, it is 50% on site versus 50% working at some remote location. >> how can somebody in a remotet location be handling these tax returns? it seems to me it is not doing the job that needs to be done ri to help service american constituents. >> i am happy to walk you through, in greater detail, but we have many employees on site doing the exact work that you described. in our campuses, where a lot of our processing of taxes goes, that is where we have heavy presence of irs employees. >> thank you, my time has run out. mr. chairman. >> mr. miller. >> thank you, german smith and ranking member neil. thank you commissioner for agreeing to appear here today, t i have been looking forward to discussing the irs's actions with you for some time. i am externally concerned that

the irs has been just a little too focused on following political directions of the biden administration, instead of fulfilling its congressionally mandated duties. the continued delay of the 1090 9k threshold, and announcement of a new threshold is an illegal overreach that is not found anywhere in law. unfortunately, this is just another step in a long string of illegal and questionably legal action, taken by the irs in the apartment of treasury to either misinterpret the laws that have been passed by congress. why would the irs, unable to them the $600 to 90 9k threshold passed in the american rescue act? >> i am really glad i have an opportunity to answer this ns question. i believe the irs commissioner has the authority to implement laws in a manner that ensures taxpayer rights. this means that

at times, implementation is delayed or ramped up overtime in order to make sure we are achieving that balance. that we are lamenting the law that was enacted by congress but also abiding by another responsibility we have under the law and that is to protect taxpayer rights. in this situation, the outcome of delay or in mentation was strongly recommended by a diverse set of stakeholders across tax industry, commercial industry, from every direction, we were hearing calls that there was risk. >> well, i can understand why. given the three year extended delay, does the irs believe it will ever be able to comply with this law? >> we are working with stakeholders on a task that will get it done and in particular, that is why we are intending to begin implementation next year.

again, the focus i have and we have with the irs is, how do we do this in the best interest of taxpayers? we do not want taxpayers over paying the taxes, we don't want them confused, we don't want them bombarded with forms and paper they should not be receiving. if we go forward with implementation without being able to adequately protect against that risk, then i am not needing my legal response abilities, commissioner, to help taxpayers and to help them protect their rights. >> in november of 2023, you announced plans for a threshold of $5000 in 2024. who specifically made that decision to set this new threshold? or >> that was a strong recommendation from the stakeholders we reached out to across a variety of stakeholders. textures, these companies that are third-party payment platforms. the reason why there seems to be consensus on $5000 was because that, if you look at the analysis in the model, $5000 would ensure the most revenue would be impacted while

also protecting the most taxpayers from unnecessary paperwork and sending them things they can actually need. >> i have to reclaim my time because, what authority does the irs have to set the new threshold? the authority. >> we have an authority under the code to administer laws consistent with taxpayer rights. and so, this happens from time to time, our goal and objective is to implement the laws on day one. if there are many -- >> congress writes the law, you don't. >> there are a variety of examples throughout history for the irs, in order to protect taxpayers from undue burden or from potentially being overtaxed , where we have either delayed implementation or ramped implementation. this is not the first time and i am not the first commissioner that has confronted this

tension. >> it is still illegal. your actions are still illegal. >> it is not illegal to take a step to protect taxpayer rights. >> well, anyway. i will move on from this. another concerning action i have that the irs has taken is the mentation of the so-called free file program and you have got to be kidding me, nothing is free. everything, the u.s. government does is paid by taxpayer dollars. so, nothing is ever free and i don't think you should be wasting your millions of dollars when the private industry is doing a good job. but i do want to give you credit where credit is due. i commend the irs for the er tc plans, for processing them. i understand the system was devastated by fraud and abuse which is why the committee and the house recently passed the tax relief for american families and workers act in an overwhelmingly bipartisan manner. i also want to urge my senate colleagues to similarly follow suit so that the irs can focus

on credible ertc claims so that good americans, small businesses, can socially access the benefits that have been promised by congress. thank you, sir. >> thank you, congresswoman. >> gentle lady yields back, i yield to mrs. moore from wisconsin. >> think is much mr. chairman and thank you commissioner for joining us today. we have heard a lot of discussion today about the earned income tax credit and the audits and the perhaps fraud that has been committed. urine unable to sort of monetize the amount of fraud that that was as compared to corporate fraud. and, loss of revenue. i guess we have had estimates that there is, at minimum, close to maybe 600 billion to $1 trillion worth of lost

income from corporations. even though you cannot nail it down, is that anything close to what you are experiencing with the earned income tax credit? just sort of a back of the envelope sort of assessment? >> we have a tax gap analysis where we can evaluate where the differences are between what is paid versus what is owed. the last estimate we provided estimated roughly $650 billion a year in this gap. >> are you guessing that maybe the earned income tax credit, fraud or whatever, i'm sure you can recover all of it. it is not very complicated to t' catch earned income tax. you put don't even need a person probably, the machine will find that. am i right or wrong? >> congresswoman, for me it is

about priority. and what are our priorities within the earned income tax program integrity and what are our priorities in terms of text regional instability? -- amongst the wealthy? >> let me go back, my colleagues have raised it. what would you say the fraud rate for the earned income tax credit is as compared to the low uptake of it? the numbers of people who deserve it, who could use it and do not apply for it. what is that number? >> yeah, and again i do not have the specific fraud rate. it is not something that we measure. >> not fraud, i am talking about the people who do not keep it. >> exactly, this is part of the challenge. we believe there is a material gap. >> there are millions of dollars left on the table that families and kids need, particularly since we have failed tax credit, we have harsh requirements and people are leaving money on the table

with the earned income tax credit. you know, i think -- i believe it was my good colleague that asked you a question about child support. and i think that in the absence of an adequate child tax credit and earned income tax credit, low upticks, that it is really important that we do child support tax collections. i understand that these contractors have to be 1603 compliant but we saw this problem even with states that administer the child tax credit. so i am wondering, if they are subject to the audits and i am wondering how long it is going to go on. it has really hurt tribal communities, not getting these monies.

can you quickly comment? >> i want to work with tribal communities directly. i know that tribal communities face unique challenges in terms of meeting their tax response abilities are getting access to tax benefits so if i can learn more about the specific issue -- >> that's right, learn about sovereignty and that will help you figure it out. let me ask you some questions before my time expires, very quick questions. i am not asking you to talk about policy, i'm just asking you to confirm some things i think i already know. this essential government function test, is that tribal nations use of government bonds? yes or no? >> it is something that is more in a policy shop. >> i am just saying. >> this is what we heard from several communities and that is why it is important to engage with them on solutions. >> so same thing, they're going

to cut it, i guarantee you put the new market tax credits set aside for tribes, the low income housing tax credit and, you know, setting aside a housing tax credit program. would that increase the effectiveness and administer ability of these programs from the perspective of the irs? >> that is something that i want to work with and coordinate with treasury and the tribal outreach programs that they do and get back to you on that. >> commissioner, just let me join the chairman, the ranking member, all of my colleagues, thanking you for being here and being very patient. as you can see we are all coming back and forth from lunch and bathroom breaks and everything so you have been very good and i appreciate you. >> congresswoman, i do now know that 20% of eligible taxpayers do not claim the earned income tax credit. that means one and five and that is something we have to assess.

>> that is a lot of money that is left on the table. versus how many frauds that you find. and of course you can collect every dime of that money because it is not hard to audit an eitc recipient versus someone who has 500 corporations and billions of dollars. thank you for your indulgence, mr. chairman. >> i get an extra 53 seconds, you just remember that. >> i'm going to remember that. the gentle lady yields back. mr. murphy from north carolina, you are recognized for 5 minutes. >> thank you for coming today, i was just looking at your cv, i saw you went to duke and unc. if you can answer one question today, doucoure unc? >> duke. >> i have no more to say to you. all right, let's get down, actually. questions, california and north carolina, excuse me, new york, have the most billionaires. you are saying that it is a high rate of cheating. have you ever correlated any of them -- are they paying california taxes and the new york taxes? >> i do not have that analysis

at my fingertips. nt we are focusing -- >> what i am saying, we are talking about a lot of folks not paying their taxes. look, i am 100%, people need to pay their taxes. back. i don't care what income bracket you are in. but if we are talking about millionaires and billionaires not paying their fair share which is what we hear the president say a lot, those are the two biggest states in california and new york, it would be nice to know, you don't have to answer this but it would be nice to know, are they doing that for new york and california and are there particular revenue department going after them? your question. >> it is a question, and i would want to coordinate a response to that after talking to those states. we are not necessarily focused regionally, we are focused on the types of evasions that corporations are engaged in. many of them are maybe operating california, incorporated in delaware. the reality is that the underlying behavior is a question.

>> wear your where the biden administration has said that tiktok is not to be allowed on government devices? >> i am aware that, he has. >> this is just very troubling to me. the issued guidance, february 27, 2023, agencies on how to implement this law. they found that 23 devices used by irs still had access to tiktok and this is still troubling. it took the irs -- this thing was issued, tig a -- they issued the irs in may. the irs did not take action until august of 2023. why? >> i am not sure of the fact that that but that does seem on acceptable and i will get to the bottom of it. >> do you personally believe -- i think many members of se congress especially over in the senate, democratic senators, senator warner believes that

tiktok is a security risk to this country. i am just saying, lkit is generally considered a risk. for the life of me i don't understand why these are still on devices. what really bothers me, we are talking about folks working from home, is that the bring your own device policy for the irs is still not enforcing this ban on tiktok. can you speak to that? >> i want to make sure i understand the recommendation and where we are in closing it out. but i absolutely agree, whethers people are working remotely or working on site, we have to abide by these security standards and any lapse cannot be tolerated. we need to be -- >> it took eight months for the irs to really update this policy. that is not acceptable. it would not be excitable in business, it should not be acceptable in any government agency. let me ask you about the criminal investigation unit and their access to tiktok. because it seems that they are

kind of trying to get a waiver for this. are you aware of any of that? >> i am aware of the fact that in certain cases come when our investigative, our law enforcement division is working to impede, disrupt and hold accountable, criminal enterprises, sometimes they have to use tools to understand and solve those crimes. so, it is not -- it is kind of an apple and an orange versus an irs employee who should not have tiktok on their device versus a law enforcement official who is using -- >> are you aware of that record is it? of that asking for this, for the criminal investigation unit to have a waiver? >> i would want to get -- before i got into more detail, i would want to go back and get more detail but i am aware of that. >> would you mind getting back

to my office about that? mr. murphy from north carolyn, who is a big tar heel fan. by the way -- >> i really am going to regret that answer. i just was at unc speaking and n i feel affinity there but -- >> i am messing with you. one last question, artificial intelligence. this is a goldrush for this country and the world, for that matter. absolute bias will be a thing we are going to have to fight. and i hope that given some of the vices that have been stated by the department, some individuals, that i have your commitment to do your very best , that the irs does not have any biases when using artificial intelligence and looking at who to audit and to not to audit because we saw that going after republicans before, we saw some real problems with who were audited and artificial intelligence is a tool but it should not be used as a political weapon in

the irs. >> you have my commitment. >> thank you, mr. chairman. i yield back. >> next, you are recognized for five minutes. >> thank you, mr. chairman. thank you commissioner for appearing today. i would like to go back, if i can, please, to the gao report that congressman estes was asking about, this is the one to dated july 13th, 2023. the title of it is preliminary results show federal buildings remain underutilized due to long-standing challenges and increased telework. let me read maybe two sentences. 17 of the 24 federal agencies reviewed used an estimated average 25% or less of their headquarters building capacity in a three-week sample period across generally, february and march of 2023. on the higher range, agencies used an estimated 39 to 49% of

the capacity of their headquarters on average. do you know on an average day, commissioner, how much of your headquarters building is being used? >> in washington, i don't have that number at my fingertips. >> would you say it is less than 50%? >> it may be because as i mentioned earlier, overall, the irs is roughly in line with the governmentwide standard of 50%. so because it is an average, it may be under. we heard different things and questions today to you from members, anecdotally, objectively what i hear from my staff and from cpas and practitioners that have to reach the irs, is that it is a real struggle to get a hold of somebody. and you talked about earlier,

some of the challenges with the phone, the callbacks, which i appreciate. >> yes, i would contend, respectfully, that not having employees in the office and having them work remotely, presents challenges. not only to your agency, but to the people that have to interact with them. would you agree with that? >> i would agree that it depends on what the function is . there are moments, for example, whether it is a weather event, streets are shut down, we don't want to lose productivity. so we set people up to be able to work remotely where they can. i would also -- >> if there is a weather situation, but if we are talking about a day where the weather is fine, wouldn't it make more sense from a productivity standpoint, to have employees physically present at the irs and working

remotely? >> in some cases, yes. in other cases, it is less relevant. i can give you examples of where it is highly relevant. our taxpayer assistance centers, those are walking centers that are fully staffed, five days a week, everyone is there at all times. also if you visited and you are all invited to come to one of our campus locations, you will see those campuses teeming with employees that are opening envelopes and doing other things to manage the tax system , and those individuals have to be on site and they are on site. to me what i look at -- >> there are a number of questions here about security. we are all concerned about it, i know you are concerned about it whether it is littlejohn or whatever is a really stupid taxpayer information. from a security standpoint, wouldn't it be safer and more secure to have taxpayer information access at an irs office versus an irs employee's home?

>> there are steps that you can take to ensure appropriate security, whether the employee is in a gift, a nonskid or remote. we have to make sure that we are secure because there may be situations whether it is a weather event or otherwise or a pandemic, where we have to ensure the right level of security regardless of where the employee is. >> it is a true statement that irs employees, when they are working remotely from home, can access taxpayer information. right? >> reporter: certain employees, depending on the need, yes. >> nothing to prevent the employee's 19-year-old son walking behind the screen from taking the screenshot of whatever is on the screen, correct? >> that would be a violation of that employee's response ability to protect information. there would be significant consequences for that and therefore, virtually all irs employees are very rigid in how

taxpayer information is handled, whether it is handled on their computer screen, in a remote location or on an irs site. >> but it is true that that situation when occurred, the employee was in the office, right? >> i don't want to engage in hypotheticals, but yeah -- >> that employee's 19-year-old son would not be -- >> they could be a visitor in the building, that is why it is so important that whether you are on site or at home, that you are extraordinarily careful about who has visibility to information, you're the only person who -- >> i can find other examples like i did about the 19-year- old son in the home. there is no doubt, though, that situation would not occur if that employee were in the office. in the irs office, correct? >> i don't want to engage in

hypotheticals. i feel like it is dangerous to go into hypotheticals because then someone can turn around and ask me, what if someone has a take your daughter to work day and they are walking to the office? so there are all these situations. my common denominator the bottom line is that ioeach employee must rigidly and relentlessly protect that information from unauthorized access from any 19-year-old, whether they are visiting their parents in the office or whether they are at home. >> reporter: let the record show that you are not responsive. think you. >> fair enough. >> gentleman yields back, mr. schneider is recognized for 5 minutes. >> thank you for joining us today. i want to start by saying i have appreciated working with you and your staff who have been very helpful with us in dealing with our constituent questions. before i go to a question, let me touch briefly on casework, we have been in touch with your team on a handful of irs cases o that we have been unable to make headway as we are hoping. can i get a commitment that we will continue to work on these?

>> absolutely. >> i will go back to the previous. my kids are now 29 and 30, but, and i worked before coming to congress with a lot of confidential client information , whether my kids are visiting me in the office as they often did or i was working at home as i often did, it was imperative that i kept that information confidential. i think what i heard you saying is that that is the excitation of irs employees that some information is kept confidential, irrespective of where they are, who might be visiting. >> one of the reasons why i was struggling with the question and the hypothetical is i do not want to signal to any irs employee that they can let their guard down no matter where they are. whether they are at home, whether they are at the office, it is absolutely critical that we have rigid policies and procedures in place to prevent unauthorized access. and that is what i really want

to emphasize. >> think you. i just wanted to make that clear. we talked about the ira and the impact it has had to me touch on some of the things that the handful of things, i will let you reiterate them, that the he progress made, there has been discussion saying it is not quite perfect. i'm going to focus on progress, not perfection. where is the progress we have made? >> things are trending in the right direction, i don't think c there is any way that i will rest and come up to this table and say we are done. we are not done. i want to hear about the taxpayer concerns. but i also want to recognize the before and after of a funded tax agency versus a non-funded tax agency and the before and after is stark in terms of what we are able to deliver in terms of taxpayer service. and that means if we are funded , our walk in centers are open. we can have saturday hours, we can have special events where we are training people about how to use -- how to get free assistance, webinars are in place, all these different

resources, we can invest in reaching out to taxpayers and helping them meet their tax response ability. >> 85% of calls are going unanswered and 85% of calls now being answered. >> exactly, the other vething i have not had a chance to emphasize as much as i would like to is a before and after of being funded in terms of what we can do to protect honest taxpayers from scams and the perpetrators that are involved. if we are not funded, we are on our heels. the tax system remains collocated, it remains a playground for scam artists to exploit honest taxpayers, scare them, call up someone who is elderly. pretend they are the irs, convince him to take out their credit card and pay a phantom debt. an underfunded agency, an underfunded irs means that can be exploited more and more. it means we can work to disrupt those types of scams. we can increase our education, we can work with local partners

and we can put tools on the web so you can either help your elderly parent or the elderly. can have access to figure out, is this really the irs? these are tools other tax jurisdictions are putting in place and we absolutely have to, in order to protect taxpayers from these risks, put these tools in place and if we don't have the funding, we can't do it. these are the choices we have. g >> if we find that we can protect those taxpayers there at the short end of the stick. at the same time he has said there is a 650 billion, estimated, $650 billion per year tax gap. taxes not being paid. who really suffers when the people cheat on their taxes do not pay what they owe? >> it is the people who pay their taxes, because they are shouldering the broader load for funding the government and its critical operations. that is why it is so important to have equity. and that is why it is important to prioritize our enforcement efforts from where we think evasion is most problematic.

the point i have been making today is when i arrived at the irs after years of underfunding , i asked the team, where are we most exposed? where are the risks the highest? where has this underfunding cause the most damage and one of the key areas with our n ability to keep pace with complex pack situations where evasion was a risk. there are complex text situations where evasion is not a risk and that is not a place that we will not focus on. but it is a place where there is a risk. >> i am at the end of the my at time so i will ask the question, actually i would appreciate an answer in writing, is what is it that makes a complex return and why does that convexity increase the likelihood or the ability of people to avoid paying taxes that are owed? i would like to be able to share that. >> just a quick example would be if you are operating in multiple countries. they have different tax laws dn and your children your profit in the u.s. to get a lower tax when the reality is, your

economic activity is in the u.s. and you actually owe and you should not be moving and making it look like to the irs, that your activities elsewhere are in a more tax-advantaged jurisdiction. that means those that are >> accurately reporting their profits, the companies that are, are paying a larger share than those that are cheating the system. >> is about the individuals. >> exactly, that is what we are trying to do. >> i yelled myself, five minutes. commissioner werfel. >> sorry about that. >> i am up here, i am normally down there. >> is a chairman, got it. >> an irs consultant named charles littlejohn stole a trove of tax return data. they release them to multiple media outlets in 2020 and 2021. last month i was pleased to see mr. littlejohn received the maximum sentence of five years in federal prison for his

crime. in addition to criticizing the biden administration wendy doj for only bringing one criminal count against mr. littlejohn, the judge told mr. littlejohn at his sentencing his crusade to violate president trump's right was an attack on our constitutional democracy and i cannot agree more. what troubles me even more is that the irs has taken far too long to permit the corrective actions necessary to ensure other american taxpayers do not become victims of a rogue irs employee like mr. littlejohn. the treasury inspector general recently reported that the irs failed to ensure that all its sensitive systems provide accurate audit trail logs to monitor and identify unauthorized access. essentially, tigta is saying you do not know insensitive taxpayer information was illegally accessed. >> i understand mr. neal ask you about this and you said you guys have taken corrective action is that report came out last week, february 6. what specific actions have you taken and have you taken all three of the recommendations the tigta

made in their report? >> yes, we have taken a bunch of actions, i will be very quick to give you a flavor of them. we have reduce the number of users, we put more robust encryption in place, we have strengthened our oversight . we have improved our access logs, we have eliminated more removable media. we put in place tighter email controls, new printer controls. on and on. on this point, this is such a critical point, the audit trails in our system, had identified, i think it was somewhere between three and 400 systems in the irs that had sensitive data that did not have the appropriate audit trails. i required the team, i think it was my third or fourth day at the irs, i said i want audit trails in every one of those e systems consistent with requirements. those have now been done. we shared that with tigta but

tigta did not have sufficient time to validate that we did everything we said we did. >> when was all that completed? >> that was completed by the end of the fiscal year, so w around september 30th. >> all of the three recommendations that tigta does -- >> they are evaluating -- we have said we agree, we are making the changes, we have made the changes. here they are. tigta says thank you, we are going to evaluate and see if you have done it exactly the way we want you to do it. they are re-examining weather for example, our audit trails are as robust as we believe they are now. >> they are re-examining. i'm just trying to understand, the report just came out. so, you have been there a year. when did you -- this goes back, the returns were leaked in 2019, it was published in 2020. mr. littlejohn liked a second batch in 2022 propublica published in 2021, obviously you weren't there so i am not asking you to vie for what happened during that prey of time. is it your testimony today that since you have been there, this

is obviously happened, you havet started taking corrective actions on these audit trails? >> s. >> what has that been complete? your testimony before the committee today, that is done? >> it is complete. we were getting a peer review, n an oversight review from tigta. we handed in our assignment, we put in all the audit trails to the systems you have identified need them and they are reviewing that to ensure that we did not miss any. >> i want to make it clear to at the american people today, the three recommendations in the report last week that they made, you are stating under oath today that those have been made by the irs? all of the recommendations in the report? >> we have agreed with all of the recommendations, i am stating for the record that theb audit trails recommendation has been done. i want to trouble confirm that we are completed with the other recommendations but they are all underway. >> and you let the committee know? >> absolutely. >> when can we expect that information? >> reporter: i can probably get back to you by tomorrow or tuesday. >> if you can give that to the chair, they can disseminate to

the committee. 30 seconds i have left. in my district, was estimated by hurricane ian, in the tax package we just sent to the senate which obviously isn't going to pass by today, the extension deadline, all of the people in my district for 2022 tax year are now going to be forced to, by today, file their extension and then have to do an amended return. my understanding that it is taking about 20 weeks to process amended returns. what assurances can you give all of the americans in 45 states who have been affected by a natural disaster who are now going to have to file an amended return that is not going to take 20 weeks to get their money back from the irs? >> this is a challenging issue.m the reason it is challenging, it is not about making excuses, it is about sharing the fact, is that our systems, while we are more modern and effective with original returns, we are still on outdated systems on

amended returns and it is more manual. that is why if you file an original return, electrically, and select direct deposit, we can get refunds in under 21 days but if you file an amended return, that is a paper manual process, it takes a lot longer eric >> i will take a little bit of extra time. what are you guys doing to remediate that? why does it require a paper return? are there efforts in place -- >> absolutely. we are doing a bunch of different things, looking at leaning out our process to see if we can close the gap almost 20 weeks. and also taking the steps to automate our entire infrastructure. this is one of the reasons why the monetization effort is so important. we are doing a lot more scanning of all of these paper forms. in a machine readable format we can move more quickly. >> my time has expired, i would

like to recognize mr. fitzpatrick for five minutes. >> commissioner, thank you for being here today. as you are aware, the irs placed a moratorium, a processing of new employee retention credit claims for the years and to allow the irs to add more safeguards to prevent future abuse and to protect businesses from predatory tactics. in my district, i have many businesses that are impacted by this and are reliant on the erc. we have businesses that say they could not meet their payroll because they are erc had not been processed. specifically , my offices constituent inquiries where businesses rent in excess of $1 million. my understanding is that in october of 2023, the irs issued a taxpayer assistant order on hundreds of current cases involving erc claims but that was months ago. could you just give us an update on where that stands?

>> we are working hard to make sure that we can separate eligible from ineligible claims in the inventory that we have. as i mentioned earlier, it is challenging because we have a lot of inventory and a lot of ineligibility and we have to figure out what is eligible and what is ineligible. we are making progress, in fact since we issued the moratorium in september, we are averaging between the thousand and 2000 processing a week so we are getting the eligible ones out the door. i think since the moratorium, we are nearing $1 billion of erc issued. i think we are meeting our promise to make sure the moratorium did not stop us from processing claims that were received before the moratorium but it is challenging because it is a very collocated program, eligibility is tough to weed out from ineligible. but it is a focus point for f sure. >> i want to go to the direct

file system the drs has put in place. we have asked many times before with the cost of that program would be. as far as i'm aware, it is still unknown at this point. first, why did the irs and treasury feel it was necessary to create a direct system when industry already provides many of these options for free to taxpayers? and secondly, could you explain how you concluded and how the irs concluded that they were authorized to do this? to create, maintain and update a direct file tax-preparation platform? >> yeah, so we have -- we believe a response ability and authority under the law to make the tax filing process easier and more beneficial for taxpayers. as an example, i mentioned earlier, we provide a callback option now. you call in, that took some technology. it wasn't rocket science technology but we had to implement technology. we did not have to go to the

code and determine the specific language in the tax code that said irs commissioner, you have the authority to offer a callback option in the call- center. there is a whole different set of things that we can do for taxpayers to give them more options. not a mandate. i think it is a much different bar, if i were up you're saying i as irs commissioner am mandating something. what we are saying it is it is a another option on the menu. when we look at all the things we have offered to taxpayers over the years, as the world has changed, at one point it was file you are returns on the telephone. now it is file electronically. there has always been this desire to evolve and understand how to meet taxpayers where they are and give them as many options as possible. that is what this is, it is just an option. >> do we know what the cost of developing and maintaining this platform is? >> in our public report that were required under the inflation reduction act, we included a chart that explained

the cost with different assumptions. of 5 million taxpayers were to use it, 10 million taxpayers, but this year, this is really just a pilot. we are still studying it and it is available in 13 states. it is going to be a relatively small pilot to assess whether this is something that actually should be added to the menu. >> reporter: thank you, i yelled back. >> mr. larson. >> thank you, mr. chairman. thank you, commissioner. thank you so much for your candor. it is always refreshing given the enormous responsibility that you have and just how important revenue is for the functioning of our government. that is why of course we were very much alarmed when this committee voted to cut 80 billion out of funding to the irs. what kind of an impact would a cut like that have, especially

at this time when we are concerned about the federal deficit. what kind of a cut with that have, especially you have articulated very well trying to keep pace with all the technological changes you're going to, while at the same time humanizing the irs through your call centers and the ability for people to have direct contact with a human being? >> our budget was cut year-over- year between 2010 and 2022. if you add all that up it is a 25% cut. our staffing site shrunk to the same size it was in the 1970s, but over those same 12 years, the tax system grew and got a lot more collocated and we have a lot more to do. thousands of changes to the tax code, new programs, new activities. and a very different world.

a gig economy where we used to not have a gig economy and more globalization movement of money, new currencies. it is a dramatically different world. when you take those two together and you underinvest over a period of 12 years while at the same time, the job to manage the tax system grows, it is not a good formula. it leads to underperformance. what i am trying to emphasize here is the people that suffer are taxpayers. they suffer because the tax law still exists, they still have these response abilities and it is a stressful experience. when a problem emerges, if they cannot get clarity from the irs, if they can't get through r to us, if they can't get their tax issue resolved, it weighs on them. it is burdensome for them and it is stressful for them. that is what is so heartbreaking about an underfunded tax agency. it means you're not answering the phone, our walk-in centers are shuttered and our digital tools are stagnating. that is what it means when you

describe, let's hold back the irs funding. it means that the irs will not be able to function and help you. you're not pulling back the tax laws and the tax response abilities but you are pulling back the ability for the irs to serve taxpayers, then the ultimate harm is to the taxpayers themselves and that is my impassioned plea to make sure that we do not armed taxpayers by making it harder for the irs to help them. >> i think you have articulate at that very well. what i'm interested in as well is, because of the sophistication as we go forward, what does the irs -- what is the irs up against when you're dealing with major corporations or people with great wealth, what does it look like inside the irs when you are dealing with a battery of attorneys, accountants, consultants, that are going up against government employees?

>> i start with the volume, right? when you look at the number of audit personnel we had, the data inflation reduction act was passed, versus the number of the highest wealth filers in the united states. and i am not talking about just about 400,000, i'm talking about the millionaires, the corporations, $250 million in assets, we break it into cohorts. and at the moment the inflation reduction act was passed, we had one auditor for every 150 of the wealthiest taxpayers in the u.s. these tax returns are long and complicated. thousands of pages, sometimes hundreds of thousands of pages. so i like people to picture that one irs auditor or examiner, backing in 150 truckloads of paper saying i will review all that, that is my job. it is a real volume challenge. we had to hire more personal to evaluate these returns. but also, the complicated financial structures, the introduction of new currencies,

more movement of money into international tax s jurisdictions, the proliferation of tax havens. all of it, we have to keep up with it. it is an oinvestment that we have to make in our subject matter expertise, it is investment we have to make in our analytics and predictive modeling because here is the other issue. if we do not invest smartly, we just start pulling audits, we are going to end up pulling audits from people that are following the laws more regularly and then adding burden to them when they are doing what they're supposed to do. precision is actually very important here and you have to invest to get that precision. >> chairman, i think we should do a hearing at some point too on the -- what artificial intelligence means and what it will mean to our agencies, especially those that are regarding our privacy issues as well. but, thank you. thank you for your integrity and your candor. >> sarah larson, that is a great idea.

mr. harrington. >> thank you, mr. chairman. commissioner, thanks for being here. a couple things. one, i would like to have a conversation, we don't have to do it now, with your team, was k it responsible for the donor advisory fund regulations? i want to understand them better. dy they may be right, they may not be, i have concerns about what you all would think your conflicts of interest that i think the market would -- has already considered and already manages, if you will. so, it is something i would like to -- >> you have my commitment on i that. >> thank you. so, i am sure you have been briefed about the question i have, which is the question i asked you a year ago. you have got a lot to keep up with. you did respond in a letter. i referenced in our conversation , a new york post article that talked about the number of firearms and munitions that you

all have at the irs and the number of armed agents, and it went through specific numbers, 3832 handguns. 600 shotguns. 439 rifles. 15 fully automatic weapons. so it is very detailed. i don't know where they got their information, and i think an appropriate oversight role for us is to, as a check and balance, and for the purpose of transparency to the taxpayers and to the people that we report to in the people's house, that they ought to have some confirmation of whether or not those numbers are right or if they are different. you responded with a letter and said the inventory of guns and ammunition is consistent with other law enforcement agencies. i find that an inadequate response. i think if the american people, who we all work for, ask as a

check and as a point of accountability on agencies with tremendous power and with tremendous power comes, i think, great response ability, and oversight and accountability, they deserve a specific answer. what is in the inventory? how many armed irs agents? i am not suggesting that there might not be some level of appropriateness. but, just saying we keep up with the same standards. the same standards of who, the fbi? the atf? water patrol? i so, i'm going to ask you again, do you have the specifics of firearms, the number of armed irs agents, and the inventory of munitions? i think the american people ought to know that. and then we can discuss why you have it and why they exist and for what purpose. and again, there may be an

appropriate need. >> i would love to answer this? first of all i do recall the letter. i believe the letter we sent you had a link to a public report that has the information you requested. if it did not, then we will get you that public link. i added the point that it was consistent with other law enforcement after providing the data. if i could, though, i think it is so important, if you can allow me to just address some myths about irs. >> please. >> first, the vast majority of irs employees are unarmed and will never be armed. i like to say they are armed only with headsets, phone headsets, and most of our accountants, all of our accountants, armed only with those. >> 50% of them are home doing it instead in their offices but that is a different issue. >> second, the only people in the irs that would ever be armed are federal law enforcement officials who investigate crimes in the na context of very dangerous scenarios. organized crimes, criminals

operating on the dark web, narcotics trafficking, human trafficking, terror financing, money laundering. the idea of sending these law- enforcement officials to go execute a search warrant or an arrest warrant without being armed along with our other law enforcement colleagues, is not something that would ever be a smart or prudent thing to do. third, and this is about our inventory, i think it is an important context. the actual discharge of any weapon by an irs law enforcement official is extremely rare. but under federal regulations, to maintain a d minimum amount of ammunition for training purposes, in order for them to be able to hold a firearm when they are executing a search warrant on a dangerous criminal. and so when you see the ammunition numbers in that public site, don't assume that that is ammunition that is used by the irs, ever. it is really just for training

pick >> i have five seconds left, i appreciate all that. i will look at that link. i may have missed it. if it is not in their -- >> i will get you the data. >> you will get me the specifics we can share with the american people. that is good, that is all. thank you. >> thank you. >> thank you, mr. chairman. i see the ranking member is up there too. thank you for holding this hearing, thank you commissioner. i know this is a long morning and afternoon for you. i want to jump into a couple quick things. commissioner werfel, as israel continues to fight the war hamas started, which includes the efforts to recover hostages that continue to be held underground in gaza, disturbing demonstrations have swept through our college campuses and around our nation and here at home. any of these demonstrations have been explicitly anti- semitic and some have called -e for the death of the jewish people. this committee held a hearing in november where we heard from witnesses that! how certain groups behind many

of the events calling for violence against the jewish people are funded through tax- exempt organizations. multiple witnesses raised concerns that tax-exempt groups in the united states have ties to and maybe providing material support to hamas, a terrorist organization. do you share my concern about the shocking rise of anti- semitism on college campuses, particularly, and across our society? >> first, thank you for this question. it is a tough question and a tough issue. and i do share concerns, i find calls for hate, i find anti- semitism, i find islamophobia, a a port, reprehensible heartbreaking thing. as i put on my commissioner hat and run the process of determining whether an organization is exempt or whether an organization should be revoked of their exempt n. status, we have a process that

we run and when i want to make sureue is that we run that process robustly and effectively to make sure the right outcome happens. >> i understand that. also along with my other ways and means colleagues, we sent you a letter along with secretary ellen, as you know, asking for a briefing on what the irs and treasury are doing regarding the funding of anti- semitism, and particularly the funding of calls for violence against jewish people and using tax-exempt organizations. i understand you are in the process of doing that and putting a briefing which we greatly appreciate. but do you share our concern that there could be money flowing, particularly potentially international money that we can't track, flowing to tax-free for these horrific purposes? >> i want to make sure that exempt organizations are meeting their responsibility to operate for exempt purposes. and there are certain activities that could mean

their exempt purpose or exempt activities are -- should be revoked. those typically oriented around illegal activities, and what i want to make sure is that we have a very robust process in place. we get a lot of referrals, i want to make sure we are running those referrals down and having a good assessment and a good process to figure out what the right outcome is. >> can you share with us any information about what the irs and treasury are doing about considering penalties for example, revoking their tax- exempt status? for these groups engaged in ibay this kind of violent contact, obviously many of these organization and many of these so-called grassroots efforts are very astroturf. they have assets well beyond what they should have or could have possibly in a spontaneous way. what can we see in terms of re taking the status away? >> this is an important moment in time, congressman, for the irs, treasury and other federal agencies to come to this committee and others and lay

out exactly what today's process is, what the current law and regulation say, and to determine whether we have both a sufficient framework and is it being implemented effectively? that is a conversation that absolutely needs to happen right now. >> thank you, we appreciate that. i want to jump on one other topic my colleague, mr. fitzpatrick touched on. i have serious concerns about the direct file program. constituents fear the irs being the judge, jury and executioner of their personal finances. additionally this program presents a clear conflict of interest, i believe, for the irs who should not be in charge of preparing taxes while performing other duties simultaneously, such tas audit as you know, in this program and ranother concern of mine, new york taxpayers could struggle to navigate between the two and neglect to file in the state or the federal. i want to know what are you doing -- i what are we doing to address this issue and this potential problem as we are

seeing issues in new york state? >> we are certainly not preparing taxes. this is, i want, let your constituents know. they are around no obligation to use this solution if they don't want to. we will determine through the pilot the pros and cons. i will be back before this commit tow report on that. >> thank you. we just want to the make sure it does not become a mandate. >> thank you for the response and your actions on this issue with hamas and israel. thank you. >> thank you. thank you, mr. chairman for recognizing me and you and the ranking member for holding the hearing. thank you, commissioner. for your testimony. i just want to start out by thanking you, and convey to your staff gratitude. not just the senior team that we often interact with but every one of the irs employees

and field offices across the country who do a really tough job in a difficult circumstance. i was the county treasurer, tax collector for my county and i know typically when we are interacting with customers who are paying their taxes they are not always having their best day. and i know it is a difficult job. i just want you to convey my gratitude to them for the difficult work that they do. the fact that in some cases they have to face, i think, unfair characterizations with some people that work here in this building. i want tto express to you that appreciate their work. i would like to thank you for the difficult work that you did during the pandemic. your ugteam. >> absolutely. my constituent in michigan needed help getting in contact with the irs just to deal with simple issues. i know we had struggles there.

thankfully because of the investments that we have been able to make. leadership of president biden and congressional democrats the irs iin a better position, better prepared to provide the level of customer service that the american people deserve. i know you are continuing to work to improve that. i appreciate that tvery much. i would like to acknowledge the steps that you have taken to make this tax filing season easier for the people that i represent. and the lower 1099k. reporting requirement. this delay will cut red tape for many taxpayers and allow the irs to focus on ensuring the wealthiest individuals that you referred to a few times in this hearing, the largest corporations can no longer afford paying the taxes that they owe. the investments that president biden and the democrats made

are helping expand access to filing. i know you address thursday and raised by a number of members. as it was mentioned this includes expanding the volunteer income tax assistancet and the tax counseling for the elderly programs. for years helped the working families that i represent get their taxes filed without having to pay a fee. i understand the point my colleague makes. i think the point that you make is that we don't ask people to pay a fee for access to those. they are supported by taxpayer dollars but not an out-of- pocket fee in the moment the need is made. those programs are operated by united way, back home for me. >> yep. >> so, the programs are really important to me. and i wonder, particularly as helping people access the benefits that they deserve, the child tax credit, i wonder if you can describe the irs plan to expand vita and tce and what effect this will have for the

people that i represent. >> i appreciate the question. i think there is a concerted effort under our modernization plan. strategic operation plan tto meet taxpayers where they are. in particular how we can connect with vulnerable populations to provide them assistance. often volunteer assistance so that they have a better understanding of their tax obligations. but also what acredits they ma be eligible for that they are not receiving. how do we do that? first of all i think it is absolutely important that we are on the ground. so, we are using new funding to open more walk in centers to extend the hours of those walk in centers, to have saturday hours to have special events and taxpayer experience days. in those moments we can really promote with other local leaders the presence of this

opportunity to have volunteer. and then other tax preparers to know they can volunteer and be a part of our volunteers that are doing important work. i mentioned earlier in the hearing i participated in one such local event in baltimore, maryland where you had local leaders, taxpayers, volunteers, all talking about the role of these vita and ntce individuals and that organization and the impact it is having. taxpayers stand up and tell their stories. and how life changing it was to get the help. and, we need to do more of that. local news was there covering it. that means we are getting more visibility into these services. simple things that we can do just like for example we created a new page on our website called free help. where we are trying to highlight and make it as easy as possible for taxpayers to learn more about these clinics

and these volunteers. so, there is a big investment and push to reach out to communities and make sure that the irs there. i mentioned protecting from scams. it is typically, hawhat is heartbreaking about the scams and schemes is it is often the vulnerable population that are exploited. those that get that phone call from someone pretending to be the irs and they don't have an accountant to call to look into it. they are scared. i want an irs to be there for them to help them understand that this is, this is a scam, and you need to be protected from it. we want to be there to do that. >> thank you, commissioner. i appreciate your testimony and chairman's indulgence. you have a tough job. we have a difficult job, too, but at the end of the day we all work for the same people. if we can continue to collaborate on ways to improve our service to them we are better off. >> and i don't think i have given enough credit to the

amazing workforce the irs and you mentioned it the work they did during the pandemic was, it was, you know, i would say it is all in the brochure of being there when taxpayers need them. i think there is a lot of myths about the irs. one that i learned as soon as i got there. irs employees care deeply about serving taxpayers, they are passionate about it and it inspires me every day. >> thank you. appreciate it. i yield back. >> mrs. rfishbock. >> thank you mr. chair. commissioner thank you for being here today. i just wanted to talk a little bit about a report. according to a report from the treasure inspector general for tax administration, lots of long titles, quarterly snap shop with irs, ira spending through september 30th, 2023. the irs spent $3.5 billion of the ira funds.

of the $3.5 billion of the 23 funds expended in fy, 2023, $1.6 billion occurred in the fourth quarter. this includes $464,000 expended in fy-23 for the direct e file. i know that has been mentioned before. the e-file return system. now, maybe, so you don't have to look up everything but what i really want to know is how the irs deciding what to spend the money on, and why has only $4.5% -- 4.5% of the funds spent and the irs keeps asking for more money. >> yes. we are spending it in particular early on for taxpayer service, hiring more phone assisters, hiring more live assisters in the walk in

centers. we are updating our technology in our call center. adding more voice spots and automated solutions to our call center. we oiare purchasing more scanne equipment, moving paperless. i mentioned we are simplifying all of our notices and we are om doing out reach to taxpayers and under served populations >> so that is all covered in that 4.5%. >> yes. >> and sother things going on particular and i spent in this hearing investing in our infrastructure. >> are you planning on expending the funds on that? you keep asking for money but yet 4.7 what you said. >> here is the issue and why we are asking money t is really important for you to allow. our base budget, there are two parts of the irs budget. a base budget to run our day to day train schedule as i like to say. and then the ira money that is

all about modernization, closing gaps, improving services, that base budget is under funding the cost that it is to run the nation's tax system on a day to day basis but we have to keep the lights on. so we borrow from the modernization fund in order to pay when we borrow from the fund to keep our lights on it means we are not modernizing, keeping the lights on, so when i am asking for more money, what i am asking is fund our base budget. help us keep the lights on so we can use those modernization funds to build the tools that the taxpayers want. they want a call center with a call back option, they want more voice bot technology to get things done quickly. web function that works like their favorite online bank account to do all of their transactions with us without having to call. >> commissioner? >> just wanted -- in response to the question i believe you

mentioned the strategic operating plan. maybe, as you go on and on about all of those things you are doing you can help me understand how it fits in there and the spends fits in with the operating plan. >> i am sorry with the operating plan? >> you mentioned the strategic operating plan. that lays out our public to do list. numerous items in there, with various objectives to modernize, improve equity and enforce. to make sure we are closing the gap of invasion and modern technology to avoid unauthorized accesses in the future. >> all right. thank you, commissioner. let me follow up with some other questions in writing. but one last question. last year you responded to a question that i submitted on the record regarding your agency's ability to use the funds that congress has given

you to transition for new technology. your response noted that the progress that the irs was making with the paperless processing initiative. however i recently heard reportedly from a company that has been trying to find a solution that would allow them to submit thousands of forms electrically instead of submitting these forms in paper copies. yet after r a year of trying to work with your agency they continued to struggle to make meaningful progress on this issue. how is the irs using its funds to proactively transition to a more efficient and technologically advanced system for processing taxpayer information? that is not showing there. >> i will give you the 10 second answer, by this filing season we committed to making every correspondence response digitally uploadable. next one we are moving to the types of returns and forms that your taxpayer is struggling

with. we are making the investments to make it a reality. >> okay. we may end up following up with that. you know, given they have been trying to work with the irs to make things happen and it has been difficult for them. so we may follow up with another letter. with that i yield back mr. chair. >> thank you. thank you for being here today. i would like to focus my time on an issue brought to me by constituents who are encountering issues with the employer retention tax credit. i do want to say over the years my irs advocate to my office they have been outstanding. i do want to applaud that. always responsive and helpful. i wish we did not have to call as often but this is what we are talking about these issues. but recently i was contacted by a constituent that tells me

their business is really in jeopardy and will close and go out of business if they don't receive the funds they applied for. and while this constituent applied for the ertc before the irs moratorium, the backlog, i understand of the ertc returns is that has been created results in this claim being trapped in limbo and for him he sees no end in sight for trying as hard as he can. another waiting two years. while the irs will not process his $14 million ertc claim, they will process an intent to levy taxes on his business. you can understand that. it is hard for the irs to attempt to collect on the taxes when the balance would have been wiped out already if their ertc claims were processed in a timely manner. >> yeah.

>> one thing is holding the other. i understand this program is ripe with fraud and abuse and i agree that enforcement action must be taken against bad actors and i sympathize with you there. but i like to ask a couple questions about what the irs doing, can do to solve the issue for the constied wents. bundle these three questions if you will. what is the status of the irs and the ertc moratorium. how many claims are in the pipeline. and do you ehave a time line fo those claims filed before the moratorium? they are waiting on a claim and facing a hardship. that is why we try to bump up

to the front of the line those that are in more of a crisis situation. we have had some success with that. i think there is reference to that here. plus, i want to learn more about these types of situations because other taxpayers may be experiencing it, and scaled solutions we can do. as i mentioned earlier, we are making slow steady progress since the moratorium has been issued we have approved nearly $1 billion in aercs. the challenge that we have is that there is a lot more in the inventory. i would expect by this spring we would have finished the work necessary to really kind of separate into the right buckets and we will be able to lift the moratorium in that time frame. >> if there is anything that

congress can do, we would appreciate that. i am wondering if passing the american families and job's act would alleviate this. >> it absolutely would for a variety of different reasons. the situation that we have has a lot of unique challenges in terms of pthe inventory, ineligibility, incentives that are being provided to certain promoters that are clogging the system and harming honest taxpayers. the bill that has been passed by this committee and the house addresses a lot of that and we are appreciative. >> thank you, i yield back and again, feel free to reach out to members of congress if there are things to do on our end or district officers. >> appreciate. >> yield back. >> thank you. >> mr. chairman, commissioner, thanks for being here. it almost seems like you are enjoying answering the questions which i think demonstrates you are pretty good at your job. thank you very much. i appreciate it. as you know we in congress

provided the irs with historic funding to close that tax gap, hundreds of billions of taxes that are owed, not paid. billions to modernize the irs and improve the customer service that reduced call times as we talked about today and as we talked about today and professionals settle tax issues. now, thanks to this funding the irs collected half a billion in overdue taxes from taxpayers, tax collection is not a tax hike it is about enforcing the law. now, the vast majority of middle class family constituents with w-2 and simple incomes pay what they ow experks so should everybody else at all levels, so, thank you, we are encouraged by the irs efforts to get unpaid taxes and improve taxpayer service, appreciate your work and leadership at this point mr. commissioner. i want to narrow down my line

of questioning to paid preparer regulations. it was hit on this but piwant to go a little more into it. the purple book, i am sure you are aware of stated over half pr of all of the returns are done by paid preparers that do not have credentials to do so. i have a bill, taxpayer protection act would ensure paid preparers meet minimum competency standards. exempt agencies or preparers that meet minimum from state education counsels from new standards. that is the focus of the bill is so the worst actors as you know. while i know the irs would be given full legal authority to regulate all preparers would you support a compromise that mandated minimum competency standards targeted at those with no credentials at all? >> i don't have the authority

sitting up here to support a legislative provision. i have to get with my treasure colleagueses to do that. as a general principal we lack authorities today to hold preparers accountable if it is credential, if it is when they harm taxpayers, and the president's budget each year has included an array of different legislative changes that would enhance our ability to crack down on the actors that are doing these things or to improve the overall quality of taxpayer service that people get from private tax professionals. so, yes, we would love to work with you on the right set of legislation. >> i appreciate that, thank you. one of the i you will call it penalties as a former prosecutor one of the penalties that i think the irs should

have is revoke a preparer identification number when there is wrong conduct. do you think, you, you can, if the irs support a system of the process for preparers who are facing it? >> the legislative proposals i mentioned earlier that were in the president's budget last year have new penalties for when there is san appropriation of a peten and tackles the issue if that president's budget proposal aligns directly with yours i am not sure but i think it say great starting find have that conversation. >> thank you. okay, moving on to tax credits. obviously we in this committee pats legislation that would reduce our carbon output by 40% by 2030.

some of the credits including grids, cells, generators expire at the end of this year. we are still waiting for final guidance on the credits. that is leaving for some taxpayers and constituents of mine reluctant to make investments. we have been pushing to extend the new energy credits to encourage not discourage more clean energy and energy system deployment. so, in an effort to get evidence in support for my bipartisan legislation does the irs see tax credits when they have had guidance for a longer period of time. >> absolutely. yep. >> thank you, i yield back. thank you, commissioner for being here. i appreciate it that you have boon here answering all of these questions. the united states tax system, irs and i know california because i came from california tax agency and plus all other

states, i know there systems are really different than justice department when taxpayers as soon as audits start taxpayers are guilty and they have to prove that they are not guilty. but you know, the report from 2023 found that no change audits were 13% of the audits for those making between $100 to $200,000, 25% of those making between $1 million to $5 million, resulted no changes. and then 50% of audits making over $10 million result no change. and then you just mentioned one of the questions that one of your first priorities is, you are going after millions and billions, you know, and wealthy

individuals and your mention about 1600 people -- i just want to know you are targeting those people or they are assessed and they are not paying taxes. >> they are assessed a balance due that is late. >> so those are millionaires and billionaires that you are talking about. >> so those are -- not included the no results no changes when after they did the audit. >> no, these are individuals that have, they do have a balance. it might not have been after an audit but there is a balance due that is now late and they are not paying unless we go and enforce that they must pay. >> i am glad you are not targeting certain people out there, so, thank you. >> yep >> and we spoken extensively about your drive to increase the number of audits searching for evasion. >> yes. >> that is good. people have to pay taxes if

they owe. but what steps are you taking to reduce these fishing expedition, no change audits that burden taxpayers and cost the irs time and money for no result? >> that is a concern. we want to, we don't want to have a situation in which we are selecting cases for audits where we should not have because the tax -- we want to leave those taxpayers alone. they should continue to do what they are doing which is filing complete and accurate taxes. this is about making investments in subject matter expertise and analytics to make sure we are selecting the right cases and then when we select them, the return in front of us we can identify where there might be pockets or systemic evasion and we have to get better at it. we have to become more precise. to ido that it is aboutip vesting in subject matter

expertise, technology, analytics some, ai solutions that we put in place. >> so, then let's go back. irs must safe guard taxpayer information. a recent letter that you sent chairman smith notes irs conducts background checks on employees and contractors. >> correct. >> but the february 2024 treasure inspector general for tax administration report notes that the irs did not always remove contractors access to sensitive systems when background investigations were not favorable. especially 19 contractors most recent background investigations were not favorable as of july 13th, 2023. yet, they still retain their access to one or more sensitive systems because of the irs did not take an action to suspend or disable the contractor's

from the irs systems as required. so, why should the fact that irs conduct background checks on employees and contractors serve as comfort if irs does not take necessary actions to limit the access of those who failed background checks. >> yeah, i really appreciate the question. it is absolutely critical that only those employees or contractors that are eligible for access have access. we are, first of all with respect to the 19 contractors we resolved the issues with those 19 contractors. issues came up during their routine background investigations. i can state that there is no evidence that those 19 contractors comprise sensitive information of any kind. the other key point is that when we eliminate network access there is no more access to sensitive data.

and systemically we have been able to fueliminate network access. the issue is sometimes these employees still appear on a registry, like a time, like for time keeping. so it gets confusing. that individual can not access sensitive data but theyor a list somewhere. when they saw it, they rightfully called us out. they should not be in the list but they don't have network access. that does hnot mean i am resti on any of this. we have to be as diligent as possible that only employees with timely access will have the aces and we are working that right now. >> mr. chairman i have one more question but my time is up so i will submit it in writing. thank you. >> thank you. . >> thank you very much, chairman, i want do conquer with all of the comments about the ertc and for the sake of argument, or for time i don't want to be repetitive.

i published an op-ed piece that i would ask to enter into the snrookd without objection. >> one of the new taxes that is included in the new tax on chemicals is it to fund a new super fund. i introduced legislation to repeal this. last imposed and collected in 1995 and appears to be a lack of historic knowledge within the treasure and the irs for the refund and credit process. i heard from constituents that the irs delays processing refund claims and initiated audits for each claim. for tax credit claims we understand the irs eadenying credit and asking for the full amount and failure to pay even though an offset or credit is is alowed by law. irs released it last year to this day regulations have not been finalized. when will the ruling be made and when will the agency

rectify the problems >> congresswoman, i appreciate the question. if you would allow . >> i don't -- i don't need a history. i just want to know when you will be able to finalize the law. >> i will get back to you on a response. i don't have a date. >> it has been over a year, right? >> okay. >> right. >> i want to get back with you with a specific time frame. >> okay. chairman smith wrote a letter on july 25th, 2023, requesting a decision detailing to detroy 30 million paper-filled informational returns in march of 2021. destruction of the returns raises the questions in information reporting should be scaled back to reduce the burden on taxpayers and reporting information that the irs does not use. we have not received response from you. it was requested august 8th, 2023.

that is 192 days over due. >> will the irs give it voluntarily or consider other means to obtain it. >> i apologize. it is important we are responsive to all requests for documents or information from this committee. >> it has been 192 days >> tell come, will we be seeing that? do we have to issue a subpoena >> i will make sure it is. >> yes. >> do you have a date to expect to have a response. >> i will get back to you with a firm date. >> okay. >> on -- earlier the chairman's questions it seemed you dodged some of them on sentencing of the irs employee that stole the tax information of thousands of americans, thankfully that individual is going to jail but for a shorter period of time than they should. how many individuals and entities had their information stolen? >> i indon't want to quote an exact figure it is way too

plane but it is in the tens of thousands >> do we know each? >> we have all of the detail. yes. shared us the information because we have a responsibility to reach out to the impacted taxpayers so they have notice on the situation. >> so can you give us that information? >> yes. >> have you ever asked for publica to return the information? >> i believe the justice system has, i don't have updated information on that. >> according to inspector general, irs does not have controls to protect the unauthorized data by users. how is it possible that irs did not know? >> that was the situation in 2017 when this unfortunate incident occurred. that is no longer the case. >> what steps have been made to rectify that. >> we have invested significant

time, energy and resources and dramatically changing our data security profile. we hardened basically our security posture including introducing and implementing all of the necessary audit trails so that if this type of activity happened today the risk of it success is much, much, much lower, probability of it succeeding is lower. >> at this point we can expect all of those safe guards have been put in, not just talked about but implemented >> there is a long to do list. we made our way through it. the to do list keeps growing but the risks evolve. >> working with their own devices and working from home? >> as i mentioned earlier i think the risk is both in the office, at home, always risk and that is why we have to focus on training. >> all right. thank you. >> controls and et cetera. >> thank you.

>> thank you, mr. chairman. thank you commissioner for being in here today. in april we had a discussion of modernization of the computer system at the irs. we know these are challenges, 33% of your applications are still on a legacy system. and, you know, we continue to look at our policy, book tax and stuff like that they are very complicated. so i just want to update a little bits. the e irs and removing sensitiv systems to a cloud environment will allow the irs to better monitor and have user access data. i am wondering where are we at to moving to a cloud system? >> so, there is two fundamental -- or two main systems that under lie the irs infrastructure. the individual master file and the business master file. so, that is where all of the returns when they come in, that is our transaction record. we are close on the individual master file. we are months away i would say,

problemly, april, may, june time frame of moving it into a final environment. that is the final step before it would go to the cloud. on the to do list to get it to the cloud. we have one more step. that will make it cloud ready and then it will move to the cloud. >> so you are -- when could we be cloudbased. >> i want to get back on that. i know the next key milestone is april, may time frame. how long from that point to the cloud environment i have to get back to you. >> i am thinking about going paperless, once we go to cloud can we go paper less? >> we are going paperless in concert. we have to still allow taxpayers to file on paper if they choose. we want it to go to machine

readable before it leaves our mailroom. that is purchasing the scanning equipment and updating our processes to make sure we don't have paper anymore throughout the tirs. >> gotcha >> do you have metrics we are starting to file? going, a, b, i mean, we are trying to meet these metrics as we move forward. >> yes. we have a critical path with our milestones, absolutely. >> would you, can you commit to me and the committee that you can get us that information, maybe quarterly statistics on the various it. this is the first time we are hearing where it is going and i would love to know, all right, just, again, accountability. hey, this is where we are at. this is where we are at this quarter and next quarter. >> i eawould love to do that. not only what path we are on to get wto the cloud but as important if not more important what does it mean for taxpayers >> yes. >> what does it mean that we are on the cloud. a lot of benefits coming when

we get there. >> and there will be a lot of education. when i think of all of the online tax companies that are doing taxes as we speak right now. if it is all on line, i think we can be so much more efficient. that is why y i am pressing thi issue. i just look at customer service in today's world when you are on the cloud there is so many benefits. we see it in the private sector. that is why i really push this. and finally with that. what goes along with this, right, once we get to a cloudbased system we can do more with ai. we talked about that, many of us talking about that earlier. can you discuss how you are using more ai for assistance and enforcement and what does that look -- how can we look forward to using that when we get to a cloud system. >> i will start by saying we are being very careful with deployment of ai, making sure we are following the right

ethics and ensuring as was mentioned earlier in this hearing no bias introduced. here is a couple of the key places where we are introducing ai. first, in our call center. so we are using chat box before you get to a live assister. and then you resolve the question and they are done and they are done more quickly. that is one example. also, in going back to this point of making sure we are collecting the moright cases fo audit >> gotch noorksha. >> there is an advance so we are more likely to pull a case with evasion that means the honest taxpayer does not get burden and the dishonest gets accountability. >> that isounds great.

i am just pressuring to modernize. it should be 20 years in the coming that it all happens hopefully we can get it done in the next 12 months. thank you, and i yield back. >> thank you. >> thank you, chairman. commissioner, thanks for getting here. we are getting down to the lower, the last little bit. this is where the real work gets done. >> it is. this is where we solve problems >> just getting started. >> just getting started. now, sincerely. -- i represent utah. >> i know >> wonderfully strong workforce for the irs. it has been -- i have known it my whole life and plane colleagues and friends and everybody that have been there. visited there as a member of congress. i look at my time before congress when i was a management consultant and if i -- i actually wish i could be working on this prog neglect that sphere instead of in a congressional role. to me it would be very simple.

you have, you have bipartisan strong agreement about modernization and my colleague from iowa just spoke a lot to it so i will not rehash too much of it. there is commitment there. we should be doubling down, tripling our efforts to make this happen. at that point, we then assess what workforce needs are. so i opposed democrats bill irs that would have been a huge expansion but when ewe pull today back we wanted to keep the focus on the modernization n piece. we reassess and try to figure out the workforce. that is how i hope we can continue forward, realizing, finding the areas of dicommon ground because that is the only time you get anything done common ground and make moves in the right direction. my constituents this is a pain point for them. your offices, we share the same federal building. when we reach out we do have an excellent relationship. thank you for that and i echo

what my friend from georgia said, but this is an area we can improve on and need to double down on the efforts. thanks for the comments you made about modernization and dig tieing and get us to the point. members of the committee raised many important points on that. can you discuss how the agency is truly. something that you want to get accomplished that might be a few months to years down the road. we can make it happen quicker if you get collaboration from us. concern about the level of attention that irs placed on the e direct program. can you share your thoughts on that? >> we want to have big impact for taxpayers that benefit them. so, you know, i start with the call center. this is a place where there has been .historic attention.

i think a lot of taxpayers end up coming to the call center and hoping for a smooth and better experience and i think we faltered in the 2022 tax season and the changes we can make is not just hiring phone assisters it is about modernizing the call center. you look at call centers and industries in the public sector organization there are both ai and technology solutions that can make the whole operation operate smoothly. then i go to our web tools. we have online accounts now, individuals and businesses can register and have their own personal account with the irs. so, think about it in terms of what that account functionality is today versus your experience with your online bank account. we have a gap. there are certain things you can do with the irs online

account but not nearly as you can do with your favorite bank t online account. the goal is to close that gap. now, that is not just about fixing the website. there is the entire technology infrastructure. it has to enable it. that is where the focus should be. i think there should be bipartisan agreement that we want to lean in to give taxpayers the tools to make this entire tax paying process easier. >> and i believe that motivation is there. we need to double those efforts. >> regarding the commity that was passed in a fashion. can you give me the sense, i heard from a lot of small businesses that are awaiting for their ertc claims to be processed. how is the irs working with regular tax preparers ensure the payments continue to be processed, the legitimate ones.

>> there is. there is more work here >> there is. >> and, i get this question a lot. work with your taxpayer advocate. if you have a hardship, we are working with the taxpayer advocate to prioritize our significant inventory to those that face the biggest hard ships. it is an unfortunate situation. the promoters and marketers that essentially tricked a lot of small businesses that were not eligible into applying clogged the system and we are working through it. i mentioned we are coming up on nearly $1 billion in erc issues that occurred since we announced the moratorium. most of that is working with advocate and congress and others they are hardship cases. that does not mean they are going to get approved. we work on it and realize you are not eligible. we are focused on it to make sure we get resolution. >> i got a request earlier

today so i may be calling in myself. >> thank you very much. >> i don't believe the top diace would agree with your statements [ laughter ] . >> thank you for being here today. i call the lower part of that is closest to the people. i am proud that we are all here fighting for our constituents. i want to talk about the child tax credit. in on2021, we saw child poverty cut by nearly half in a single year thanks to the child tax credit. increasing the credit, making it fully refundable and authorizing monthly payments we used the tax code to have relief directly to american families. three million children were lifted out of poverty. despite giving more americans more money in their pockets that all of my republican colleagues claim is their goal, every republican congress let them expire. we did see some progress from

republicans last month when we passed a bipartisan package to strengthen the ctc. ultimately republicans refuse to support the provisions that have been proven to dramatically reduce child poverty. like increasing the maximum credit and ensuring full refundability to help kids and families that need the credit the most. i want to focus on an equally important but overlooked provision that made the ctc so effective. monthly checks. parents know kids need diapers, formula, food, clothes, they need it not once a year they need it every single day, every single week and every single month. you can not pay down your child's hunger at the end of the year. by giving families the money they are entitled to in monthly paymented we boosted their monthly income and put their money back in their pockets, making payments monthly has the power to change the lives of working people all over the

country. that sounds like something that republicans should support if you listen to what they want from the tax code. commissioner, given the progress made and lessons learned in 2021. does the irs have much of the infrastructure and knowledge to roll out advance payments if congress acts? >> certainly was a beneficial moment for us to reengineer our systems, update our processes and go through the effort and resolve it successful. i like to say we now have the muscle memory and should be able to implement something like that easier than if we were trying it for the first time. >> i appreciate that. one of the things that i was informed about is that it also would not cost that much. it is something that i know would make a difference. you know, in people say it is dlonl 250 or $500 or $700 a month. to working people that is a lot of money that can make a difference when it comes to

making basic ends meet. another aspect of making the child class effort effective is making sure those that claim it are treateed equitably. i appreciate your leadership in announcing that the irs taking meaningful steps to address these disparities, especially for refundables like the eitce and tec, can you update us on this work including information on the case solution practices driving the disparities and the steps being taken to address the disparities that i just mentioned? >> yes, the big takeaways you should have are the following, one, we are significantly reducing the number of eitce audits, audit volume was one of

the drivers of dispaired impact; second, we changed the case selection algorithm with a reduction to the disparities in the case selection, we will be able to report in the fall of '24 time frame if the changes we made are having the intended impact of eliminating the disparity. furthermore we want to work to constantly evaluating despaired impact. we are working on the best way to do that. in particular, it is important to work with stakeholders, this whole issue surfaced because of a report. partnering with stakeholder that can evaluate the impact of irs operations along with us is critical. strengthening those partnerships are part of the

plan >> thank you, commissioner. when chairman neil established the racial economic equity working group when we were in the majority, it is was an issue that is important. if americans feel like the tax system is fair they are more likely to comply. with that, i yield back >> thank you. thank you chairman, commissioner thank you for your time here today. my colleagues asked a wide range of questions and concerns. today i want to talk about the casework in my district office. we are faced with on a regular basis. first, commend your team of tax advocates in particular george agite worked closely with my district office. tremendous asset, does a fantastic job. my understanding the new york delegation has a total of 1,688 open cases with the irs. 81 of those being from my office. the number one issue my office deals with is stolen returns. i believe that we have 14

current cases with the irs totaling over $1 million in stolen returns. criminals removed and replaced the name and address on the check. and theft is made easy by the envelopes that the department of treasure uses making it obvious that there is a check inside. the issue worsens when the irs does not allow the individuals to opt for direct deposit. a new check gets issued and we are in this kind of endless cycle. one of my constituents having a check needing to be replaced three times. the irs does not allow direct deposits for amounts over $20,000 or $25,000? so, i understand the thefts are not confined to irs checks but every check issued by the department of treasure. i have a few questions how we can work together to rectify this issue and what is the theft -- first, do you know the cost of what it is costing the

united states taxpayers the fact that these checks are being stolen? >> i don't have a metric on that. i do think you identified the right set of people to come together. me, the head of the fiscal service at treasure that operates our payment platforms, sends the checks or executes the direct deposit. and i do have a lot of motivation around these open cases. i mean i referenced it a few times, the taxpayer bill of rights affording them quick resolution. if they are waiting and having to receive ala check three time we are not meeting that responsibility. >> and the issue of tackling the theft itself are you working with the postal service to try to address this issue? >> i am not aware that we are but i want to get back to you on that. >> okay. >> and since the issue is for all treasure issued checks has anyone discussed changing the envelope so it is not so obvious. >> as you are sitting here is

aing this, i do want to check with the fiscal leadership on this. >> what options do you think are available to constituents other than getting reissued paper check. and is, revisiting the direct deposit issue, can you do that? >> yes. i want to look into why that is not feasible be >> it should be an option certainly if the first check is stolen and want to move to it. that should be an option and thresholds if there is truly a cut off at $20,000 or $25,000 which i had not heard about prior. look i really want to work with you on this issue. i really hope that you will follow up, your staff with my team to get to the bottom of this and maybe there is a follow up 4meeting we can have with somebody from treasure to really discuss this. if it is $1 million that is stolen in my district there are 435 members, right? that is a lot of money. >> that is a lot of money. we want to try to get to the

bottom of there. and there are bad people in the world that are trying to take advantage sof our constituents and the american taxpayer and we got to modernize our system to keep up with this type of fraud >> it is a smart place to make investments where people are being victimized is the exact place where the government needs to step in and prevent and be helpful. >> thank you very much for your time. >> thank you. thank you chairman, i am reminded of the phrase, where you are now, i was once then. i appreciate the comments in the leadership that is behind me. just want to say that because i am number 25 on this. [ laughter ] >> yes. >> i want to talk a couple of issues i want to start with a couple because one is important to the future of the country. digital asset brokers and i want to talk about what i think is preserving the history of our country. the conversation that you and i had the last time you were here

commissioner uewhich is histori tax credits and preservation eavesment. to give you a minute to think about those things i would like to echo the comments from my colleague from illinois as it relates to child support. because that, that october 24th deadline is, it is looming. and, our office will work with you on that and follow up with -- i heard my colleague from georgia say you were helpful in some constituent cases that he had. i will revisit you with that. with that commissioner i trust you are familiar with the recent release proposed rule regarding tax reporting for digital asset brokers >> yes, i am. >> so, then you know that the rules finalized that is currently proposed. the irs by their own emissions will receive 8 billion from just this one rule. to put it in perspective.

for 2022. the irs receive 5.5 billion total w. this new proposed rule, the amount of the reports will increase by 150%. we are talking about the amount of employees that you have. is the irs equipped to handle this significant increase in the data? >> there is a lot of moving pieces on these issues. we issued the proposed regulations. regulations. of comments that we are working through. i feel like we are at an inflection point in terms of digital currency and how to approach it along a lot of different perspectives of government but in particular tax. we have to be prepared to, whatever the outcome of that regulatory process is to have the technology and the process to execute those regulations. so, we will only propose in

final regulations thing that we have confidence that we can execute on. >> thank you for that. personally i support amending the rule to ensure there is parody between the traditional finance industry. i understand the rules go beyond what traditional finance requires. if there is a a reporting field between the two they would decrease freeing up irs time to focus their current mission and not shifting all of the way through the unnecessary data. probably looks like not going to get to historic preservation but we will follow up with written testimony on that. what time line of implementing the recently released proposed rule regarding tax requirements for brokers do you think that is a realistic time frame? >> the challenge that i have is that it is really my counterparts at treasure that i co-lead this with. i would want to make sure we are aligned on the time frame.

i think, i think we have over 400,000 comments on the regulation. so, figuring out, you know, this is a complicated issue. we certainly don't want to get out in front before we given those comments fair vetting. i don't have a specific date for you but i can work with treasury to get you one. >> i appreciate that. it is my understanding there is a shorter window for compliance than traditional finance brokers. to comply when they were implementing this rule. traditional being five years and the digital asset exchanges only got 16 months. is there any reason for that? >> i don't at my fingertips have the full explanation and basis for it. we will give you the underlying basis for that. >> and i appreciate that again. commissioner. given it, new industry and new technology innovation and i would recommend you reevaluate the timeline to give the stakeholders enough time to comply just as the traditional

market did appear we are voting and i will get back with you on the historic tax credits and preservation and easements because they are important to me but i appreciate your time and it is good to see you again . with that, i yield back. mi >> thank you, commissioner for being with us today. please be advised that members have two weeks to submit written questions to be answered later in writing. those questions and your answers will be made part of the formal hearing records today. with that, the committee stands adjourned.from south dakota

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