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[inaudible conversations] [inaudible conversations] [inaudible conversations] >> the committee will come to order. before we began i now, i know speak for anyone here when i wish our ranking member a belated happy birthday yesterday. and let's have some cake later so let's celebrate. but late happy birthday. we appreciate serving with you. thank you, commissioner werfel, for appearing before the ways and means committee a little earlier than usual this year.

we have a lot to go over with use appreciate you answering the request of our members to come before the committee early this year. first, as it pertains to the current 2023 tax filing season i want to thank you and your team for the technical work to ensure the quick and without delay implementation of provisions of the tax relief for american families and workers act. we particularly appreciate the steps the agency is taken right now to be ready to immediately implement the legislation once the senate passes the bill and it is signed into law, especially with regard to adjustments to the child tax credit. i think we're also largely aligned on the board's of rooting out fraud in the employee retention tax credit program. we look for different about your efforts not just in a limiting the fraud but also making sure that small businesses across

america who filed legitimate claims receive their credit as soon as possible. while i'm grateful for your partnership in these efforts, it won't surprise you that also have a number of concerns about the biden administration's approach to the irs and about the irs handling of several important issues. last time you were before this committee the irs had chosen to lay a provision of a law crafted of the biden administration and congressional democrats that would syntax forms the 44 million americans, just for engaging in transactions over $600 in a year. this includes this includes transactions like simply selling a used couch or a concert ticket through a third-party payment platform. once again, the irs unilaterally chose to delay implementing the

law for sending these forms. this time in an election year. to be clear, republicans are united behind repealing this terrible policy, and i want to thank 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 the irs would not retaliate against whistleblowers. one of the irs whistleblowers who has appeared before this committee has since alleged the irs retaliated against him for exposing the truth about the doj's preferential treatment of hunter biden. i hope you will share what steps have been taken to protect

whistleblowers. just a couple weeks ago a a je sends 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, woefully under charged this individual. but i'm pleased the judge applied the maximum sentence available to her. but this story doesn't end with that case. the irs must be accountable for allowing this that to have ever happened. and must ensure that it takes is security vulnerabilities at the agency. a recent report from the inspector general described along with details about how current irs security flaws that demonstrate the problem has not and has not been resolved here 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 such as the implementation of an irs direct file scheme that the american people didn't ask for, how the irs is spending its windfall of $80 billion in fantasy land claims about how much revenue the agency thinks it will generate from increased audits. frankly, more of the irs is time and resources should be directed toward improving its customer service for its existing duties, not spending money and resources on new systems no one has asked for. part of that focus should be on deploying new technology to make the irs more efficient. proper use of technology can help avoid the need to hire thousands and thousands of new employees. i want to thank mr. schweikert from leading the charge to ensure that the irs is taking

advantage of new technology 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 am pleased to recognize ranking member neal for his opening statements for thank you, chairman. we want to welcome the commissioner back to the committee on ways and means. as always, it's delightful to have you with us in the middle of what promises to be another record-breaking filing season if the dedication of employees of the internal revenue service is remarkable. we want to thank them for their commitment to our taxpayers and their tax administration, emphasis on the word fare. and for this recommendation of the inflation reduction act. last unless he was a first impact by the democrats will to your investment from this historic legislation. while taxpayers service was dramatically improve it was really the consequence of a well laid well-funded plan results

can be quite remarkable. in this era of service to america's taxpayers the irs delivered its goal 87% quality level of service. 3 million more phone calls were answered while wait times were cut from 2:40 minutes to three minutes, over 140,000 additional taxpayers were served in person. the backlog was a limited and many digital tools were introduced to make taxpayer experiences even easier. a reminder to our republican colleagues, many of the recommendations that we entertain and discussed this morning came from commissioner rettig, republic of the work with all of us to ensure quality service. we know that expectations have an increased based on the success of the irs has had so far. it was just less you that we discussed the future of the irs the ability to hold top 1% of tax cheats accountable and in a

matter of months over $500 million were recovered from 1600 wealthy tax avoiders. another major victory is taxpayer fairness and a victory for the irs. a reminder, if the revenue is not collected in a fair manner that meets the rest of us pay more. the biggest threat to the irs right now is extremism of some of our colleagues. from the government shut down the looms in just five legislative days tour colleagues to cut her investments every chance they have gone, that only with this end up costing taxpayers money and adding to the deficit, but how can you argue with the success? i find this a wondering out loud about who wins with the irs is stored for its resources. perhaps our colleagues love a chance to answer that this morning. under republican funding cuts the audit rate on millionaires fell by more than 70% from 2010-2019. those are numbers of commissioner rettig and automated large corporations

felt by more than 50%, i request an commissioner rettig. workers and families pay their fair share in the american people can count on us to ensure that wealthy and well-connected people are paying their fair share, too. while the promise of direct file here, i'm optimistic that some prospects, i'm disappointed it wasn't already time for the public to take advantage of it. i want to thank you, commissioner, for your diligence being here today we look for to continue work on the behalf of the american people. with that i give back the balance of my time, mr. chairman,. >> thank you, ranking member neal. today's so what is his commission of the internal revenue service danny werfel. the committee has received your written statement it will be made part of the formal hearing record. commissioner werfel, you may begin when you're ready. >> chairman smith, ranking member neal, and members of the committee, thank you for the opportunity to testify on the filing season and irs operations. i am pleased to report that the 2024 filing season opener on

schedule on january 29, and is gone smoothly so far. along with filing season and other day-to-day operations, we continue to make important progress in our efforts to transform our agency through implementation of the inflation reduction act. using ira funding 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 credits they deserve. second, identifying the growing number of taxpayers with complex returns, including certain wealthy individuals, large corporations, and complex partnerships your shielding income to evade their tax responsibility. we want to collect from them what is owed.

and third, addressing the growing risk of tax scams and schemes like protecting honest taxpayers from them. we want to root out the nefarious actors that perpetrate them. these investments allow us to strengthen the overall effectiveness of irs operations. as commissioner i want people to know that the irs is on the side of taxpayers, and we're working to reflect that in every aspect of our operations while administering the nation's tax laws. the irs has been working hard to build on the accomplishments of last year. our transformation goals for this filing season include providing an 85% level of service on our main toll te phone line during the filing season. on the compliance side we continue to increase scrutiny on those who evade taxes. we are working to reverse the historically low audit rates for large corporations, complex partnerships, and high wealth

individuals. during the past year 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 the systems and information. our recent steps enabled with new funding have sharply reduced risks for taxpayers and tax system. while taxpayers should rightfully be concerned about recent reports of the unauthorized access and disclosure that occurred in the 2017-2021 timeframe, the data security environment at the irs is dramatically improved today. we have worked tirelessly this past year to close gaps that allow this unfortunate event to transpire. however, there is always more to do in this area, and we'll continue our laser focus on strengthening data security. another important aspect of our mission is simple but in the tax fairly and justly.

a key part of this involves making sure everyone pays the taxes they owe. but we also have a responsibility to protect taxpayers from being overly burdened in fulfilling their tax obligations. we work continuously to balance these two backsides of the nation. this is an issue we face in implementing $600 threshold for 1090 9k reporting that congress passed from 2021. while its import first of information provided under the lower threshold, we must also consider the burden placed on taxpayers in 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 realize that he needed implementation pose a high risk of taxpayers being confused, and given the complexity of the 1099

reporting, some potentially paying taxes they didn't actually out. that's something we take very seriously and will do everything in our power to avoid pics of the irs is continuing to work to reduce that risk before imposing the $600 standard for business transactions. we will continue working this and getting feedback from key groups are also want to assure the committee that the irs is paying close attention to the potential passage of the child tax credit legislation. if congress acts, the irs is poised to quickly implement it, building off parts. with economic impact payments during the pandemic we may be able to start implementation as early as six to 12 weeks after passage dependent on the bills final language. but taxpayers should not wait for this legislation to file their returns. we will take care of getting any additional refunds to taxpayers who have already filed. it won't need to take additional

steps. chairman smith, ranking member neal and members of the committee, that concludes my statement. i'm happy to take your questions. >> thank you, commissioner. we will now proceed to the question and answer session. commissioner werfel, as you know the house passed the tax relief for american families and workers act, including adjustments of child tax credit which is recently touched on that. i want to ask some additional questions to make the record reflect appropriately. but the bill passed business committee by vote of 40-three and received 357 votes on the house floor. as i mentioned in my opening statement, i appreciate the work you and your team have done to help ensure that the bill can be implemented as quickly as possible. i just want to confirm a few details with you. the overwhelming majority of american taxpayers are guaranteed to have no adjustment to the tax liability due to the

child tax credit changes in this bill. in fact, can you confirm that only roughly 10% of households will be affected and will be received modest adjustments to the tax refund pgh yes. in fact, a look at the numbers come look at the same eligible population in fiscal year 22 and was about 22.5 2.5 million people. so that that you offered is in line with her understand is how it's going to impact taxpayers going forward. >> thank you. we work with your team to make sure the bill that the place a new burden on taxpayers and can be implemented without delay. can you confirm that taxpayers do not need to file amended returns to obtain the adjustments the bill makes further speeding things up? >> yes. >> thank you. there is language in the legislation requiring the irs to

process in a additional returns without delay. as a matter of fact, that was language we added during the market in this room. if the bill is passed by the senate and signed into law, how quickly will you be able to make the child tax credit adjustment for this filing season? in other words, how long will it take after bill signed up for the irs to send that y additional refund? >> we gave you a range of six to 12 weeks required for implementation from the point of enactment. the reason we give a range is because we need to see the final language, but uncommitted to work diligently to make sure we're closer to the six week end of that range than the 12 weeks. >> i appreciate hearing that, commissioner. so 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, sir. in the past, congress has asked the irs to make changes during

tax filing season. in fact, congress has asked the irs to make much larger changes than this bill does like sending stimulus checks to hundreds of millions of taxpayers, are creating a monthly checks and excessive for the child tax credit on the 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 a stephen moore 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 troops 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 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 lawyers or accounts 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 ain't 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 close were understaffed with lines around the block. and now just a few years later we've opened 60 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 vote 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 the sisters because of underfunding. what did we do with offending? we hired 5000 phone as sisters. 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. and the same is true for digital. we have a whole generation of taxpayers that's going to expect as they should to be able do everything ever wanted to do with the irs without calling us can without going into a walk-in center.

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. >> thank you. mr. began his regular. >> 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 him 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 corporations 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. if, 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. >> 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 and will 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. that battling to continue our strong performance in preventing identity theft, it also when it happens and is a victim, to raise our game and make sure we're providing that victim assistance any much more robust what. >> 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 the social as quick as you can come leaks in terms of answering the phone, get their questions answered. you touched on it in your early testimony but what is your sense of where that, we get to a point where we can answer the phone quicker and try to get a little more help from a quicker stance? >> so on our main foreign language were most of the volume comes come we're at 85% level of service. but there's more to do. there are other phones lines that we need to continue to work on and approved by the gig and a poor example of what we're doing that i don't ever want to hear about some waiting on the phone for an hour. that is heartbreaking, frustrating but also a a rallg cry for us. one of the things we've done this year is we've instituted a callback option. what that means is that the way

reengineering our call center doubt is if you wait time is going to be longer than 15 minutes, we will introduce into the phone, pay, we can schedule a callback option so you can hang up, the longer listen to elevator music, and we'll 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 investment, 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, and i yield back. >> mr. doggett is ruggedized. >> thank you very much, and thank you, commissioner for the efforts that you and your team have made to address many problems have been created over the last decade prior to the last congress by those who seem intent on insuring that irs

would fail by cutting the budget again and again and continually attacking and stirring public dissatisfaction with irs. as understand your testimony, we have gone from a of 15% satisfaction to 85% satisfaction. is that right? >> that's correct. >> i remember having not only complaints from constituents before we provided these signs, but even from cpa's and tax preparers and have specialized that were kept holding in the very way you said they are not today. and you could not have had these successes and your team could not get that the successes without the additional funding you were provided by the last congress, is that correct? >> that's correct. >> the other very that's very important to me is enforcing our tax 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 seen suggest 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 about 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 a significant increase in revenue as a result. with the people that you're after, where they that kind you about some of his campaign 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? >> yeah, , i can't emphasize ths 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 attacks do 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 to stand this path you indicate you need another $800 billion? >> 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. 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 will modernize. we'll keep the lights on but we won't build these capacities that are so important to help taxpayers. >> and afflict the treasury just within the last two weeks as estimated that as much as $561 billion can be billion dollars can be collected over the next decade from wealthy and corporate tax cheats that your focus on, and yet unfortunately our republican colleagues on this committee and elsewhere seem to have no higher priority as indicated by the first bill that passed in this congress and their efforts at every time we get up to the brink of disaster here, that they want to cut the very funny you're relying on to see that these corporate and high wealth tax cheats are treated the same way and pay their taxes the way most americans do. i just want to thank you for your efforts. we would all we can to resist the efforts to undermine the progress that you are making. >> mr. smith is recognized. >> 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 e 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 a legislative authority or not. student loan forgiveness critical mineral agreements in the recent changes to the 1099k requirement arpa r all requirements overreach. the government of the irs is to direct ethos is also appears to

fit that description. while ira the bill so-called inflation reduction act provide $15 million to conduct a study of direct e-file and enumerate 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 father taxes. i get that. i want specific language from the federal code authorizing the particular actions but 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. option. there is no mandate for anyone to use this solution should they choose. >> but your sink this direct authority to do so? >> this direct authority to estimate 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. the study 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.

this is just one avenue. it's not a mandate. it's an option. >> i understand that which may not be a mandate, it's not always mean there's the authority to do so and i would argue that is the case right now. i'm specifically troubled, troubled by the claim that there's that authorities e when i don't believe that there is. but let's go back to the topic i've discussed with you and secretary yellen previously on multiple occasions, and that's odd is targeting families earning less than $400,000. i can to death concerns despite the claims and secretary yellen and others the administration cannot and will not fulfill its promise about audit targets and also meet its claim to increase revenue. last use it in response to question for the record that the irs is committed to ensuring that none of the funds provided by the irish will be used to increase audit rates are small businesses a council to make it less hundred thousand dollars and julie relative to historical levels, and that's a quote. the phrase historical levels

means something higher than the current audit rates, is that accurate? >> no. it's not accurate. we have been public, i don't think. let me, let me tell you what the current situation is. tax year 2018 will be the face here that we would utilize to make sure that the audit rate for those who earn less than 400,000 speedy reclaimed by time because times of the essence here. i would like to learn more about that but i would also like to know if the irs can provide us with the distribution of table for the $561 billion, and other estimates of revenue, generation and did you know when we could claim to sit. >> we have a public report on that. so i would be happy to engage with your staff to understand what are the specific questions are different layers speedy how did you decide to use 2018 as the year to establish the

historical rate, levels of audit. >> well, in large measure because it is a historically low rate and we wanted to assure the taxpaying community that inflation reduction act would not be used to increase the audit rate among middle and low income. and so we chose 2018 as a historic low rate to provide additional assurances. who wanted to be specific so that we can be transparent and hold me to account and the irs to account. because feature we publish our audit rate in our data book. seek to enter data book data book might not see exactly what the audit rate is for 2018 and then we would finish with tax or 23 and the audit rates are complete you will say oh, let me see. did they meet the mandate? it should be a a public. >> okay. you mentioned earlier that you generated about $500 million,

half 1 billion i think in your words, of revenue from about 1600 targeted taxpayers. that would be an on average t over $300,000 per taxpayer. how many resources the dollar figure of the irs taxpayer dollars to think would take on average to reach that level? >> i would have to get back to on the specific, but it certainly has a very positive roi. in general. and this is something that the congressional budget office has publicly reported. but in general we return six dollars for every one dollar invested. so on average you should expect about a one to six ratio. so we spend 16 of those resources to get the job done. on average. >> thank you. thank you mr. thompson. >> thank you, mr. chairman. commissioner, thank you for being you. first, congratulations for the work the irs has done over the past several months.

as the ranking member, chairman neal minchin, democrats on this committee made and historic investment in the irs last year when we passed pass infln act. since then i can tell you i've heard from my staff and altered my district offices how well they're working with the irs. they have contact with your office hundreds if not thousands of times a year, and they tell me that the irs is noticeably significantly smoother than they've ever been before. you are responding faster, your responses are bitter, people answer the phones. 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 with your team on specific issues, and a want to thank you. i've always found you to be helpful and your team to be professional 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 -- i was funding? >> 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 million dollars 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 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 effect. >> 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. >> was yeah, 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 effort your 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 easy or so the credit? >> 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 transaction associate 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. >> thank you. yield back. >> mr. kelly. >> thank you, mr. chairman. thank you for contacting him today. mr. werfel, good to see you again. >> good to see you. >> i think some of 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 this a program, is this an

agency that runs the best interest of the people who find it? and the same people who find everything else in our government and is hard-working taxpayers. i've got to say from the standpoint of four would be in the private sector and have, i was present i was not in the operation of the time of going through the early days of the pandemic and when the things they came out which was really good idea was the employee retention tax credit program. however, however, we continue to look at programs and when we look at holdups in it, my son runs our business and the talk to him on the phone about a quite a bit picky set the biggest thing what event had a a place been able to get some help or some counsel on how that was working out who's supposed to work, how they could do that. but we look back on it out and we're trying to find out what is going on with that program? and while there's all kinds of different figures floating around about what it is cost, i would just caution people to

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

partnership with irs and tax professionals, taxpayer, congress. the erc is an incredibly complicated program. it was critical and played a critical role we issued 3.6 million prc's to date and it was economic lifeline for people that need it. what happened is that the further we got away from eligibility, because the demonstrated loss that you have in order to claim eligibility ended on december 31, 2021. the. 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 that the eligible for a credit actually were not eligible for. so 18 months, 19 months, 20 months after that period of eligibility under the numr secret is coming in to the irs was actually increasing the 2000

a week, 60,003, 70,000 the week. and we started to realize that were so many ineligible claims in what was coming in, it was getting harder and harder to separate what ineligible from eligible. and that's why we issued the moratorium in september of 2023. because we want to slow the flow of these credits coming in and to make sure that we were not paying out fraudulent claims. so what we announced his we're going to have to slow the process down to protect taxpayers, not just taxpayers financial bottom line. taxpayers don't want us spending on fraudulent claims that also protect small businesses who may been taken advantage by these. >> guidance is key and these are very competent issues but there are people who bowed believe this would be taken care of and you are on hold, you are on hold and you don't know pick it makes

it difficult for people to file their claims at the interview. one thing to cover quickly. the direct file program. so we the people in the private sector and the think we've had great success with it. why did the irs get involved? what is it that you were trying to achieve? listen, you're down to one second i don't expect an answer that? but he did to get back to me it is a legitimate question, if we have all these available i will test our time but being, money being well spent. i think it's already there for people. i don't understand what role the irs would have it that, and i, i don't question, i don't question the fact that you think you could help. it's already there. thank you. i yield back. >> thank you. mr. pascrell. >> good morning, mr. chairman. a lovely day in the neighborhood. commissioner werfel, you have

been a breath of fresh air. we had a little problems with alaska who sat in your seat. welcome back. -- with the last guy -- after years of chaos, very new day at the irs. last month you aubrey talk about it, the irs announced had recovered $485 million from only 1600 billionaires. the question -- millionaires. the question of fairness in the texas and is at hand. we all have different opinions about it. but i believe, or else i wouldn't say, i believe that you were there to live in my house in new jersey,

if he doesn't pay his property taxes, the guy on the next block from us doesn't pay his property taxes, people understand now that we are going to have to pay higher property taxes and less some of the kind of revenue is found. it's tax fairness. pay what you are supposed to pay. and people will complain less. people believe many times, mr. werfel, commissioner, that they are being shafted when it comes to figure out tax policy. and the figure and and i have an obligation to address that, day in and day out. the tip of the iceberg. last week we learned that we will recover at least

$560 billion from rich tax cheats after the next decade. so you have been portrayed, the agency you work for has been betrayed as ought to be coming after you. see, create fear, that you are the bad guys. lincoln dealt with that during the civil war, very honestly. if money was going to be used for the war, how would the towns throughout america, you know, build their roads, hospitals, their schools, et cetera, et cetera? that's why we have a big argument over it. i feared for my own neighbors. you are now answering our calls. refund checks are going out faster. these successes are because of, i think, your leadership, and

because of a 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. i mean, the facts are the facts. as tom would say, the facts are the facts. members of the other side have made irs funding their white whale. to be harpoon at any cost, have clawed back one quarter of the historic funding. like the shark in jobs. they want another bite. the congressional budget office has estimated that that funding,

it will cost american people double nearly $400 billion, nearly $40 billion dollars, 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, is where we are focused and were taking multiple different steps. first of all, we are hiring additional accountants, auditors, and where they are being deployed and where we are shifting our audit work force is to make sure that we're focusing efforts on high wealth individuals because that's what 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 ai to better understand how money moves in these very complicated arrangements. .. we have the means and capacity for we have lost capacity is the complicated situation where we are undercutting gross alarms on

commissioner and funding is available, you focus on the cap were discomfited to give me because i'm crumbling the numbers in front of me because as the chairman spoke, the adoption of technology solution left that warns tax receipts and want a friendlier more efficient effective way. i'm looking this is preliminary data with ppo reports in your press release but took 520 million, i see for every dollar

across $10 these operations will, only way that, it's completely opposite them before. the adoption of the purchase of technology and use of databases dramatically lower costs of collection and make sure the collection much more efficient fair, open. fire armies of the ethnology minor i can assure you investment in examiner audit -- >> i'm looking at cbo's in your

own press release. >> i'm getting basic division pretty good at. >> to your question on technology, is essential, the whole effort is about modernization and it's at every level, technology will help us process more accurately and securely, technology will help taxpayers at an easier time it will take less time to pay their taxes and hopefully be less expensive. >> what can i do to fix it, what i do to help you? we appreciate your review and i know my team has already briefed your team should regularly. >> your team has actually been great at communicating direct

that doesn't surprise me but we have a lot of different opportunities to advance technology at every level, our website, tools taxpayers have. >> i love you to talk about expansion. >> there adding whether automated chat computer and it advances in a goes to live chat, these are standard activities in the private sector and other private sector call centers, we just catching up and we are because funding to modernize versus just keep the lights on the the adoption of technology

should dramatically change the structural. >> is a going to hire? going after wealthy people and i do look forward to your staff providing taken in your own press release 520 million icy a cost, a preliminary audit. last thing, just because we get a lot of on this, i expect that just what it is will. please god assesses you can so whether it's small business or

promoters, everyone knows the rules and timing and knows how to close this out. i know you have to run it by armies the players and those things, get it done. >> we have a special section on what to look out for an why you might not be eligible, we did a webinar a thousand registered participants and running educational series all over the country and we are doing a lot, we need to be doing more so we are willing to listen to ideas how we get out there and talk to people. >> the processing time of what's eligible and what's not and with that, thank you.

>> thank you, mr. chairman. personal, let me welcome and thank you and internal revenue services on outstanding success ensuring a fair tax system in which the well connected pay their fair share. i want to make you aware of the outstanding work of chicago taxpayer advocate service. i'm grateful for katrina britt, arlene, and the rest of the chicago team using the expertise to help my constituents. i also think robert chapman with the legislative affairs team. as you may know, i have championed many of the 2021 bic

enhancements, all workers, 18 or foster. given working parents up to $8000 on childcare expenses. i like to work with you to better understand patterns in the use of those two inform to restore them. how many younger workers got it in 2021 who are excluded under current law? foster almost these provisions are working parents benefited from their refundable not on the current law.

do you have any update you can share about who benefited and how the 2021 earned income tax credit? and proud i helped lead the effort of making the program permanent. i know internal revenue services are strategic operating plan, 1.9 including the goal of expanding coverage in scope. in specific strategies is for accomplishing a goal and how the irs has involved organizations and develop in those strategies

to give us questions. we have an awareness of question in our research analytics team is working up as quickly as possible. i will say we know there are people eligible for earned income tax credit governor claiming eligibility. they may not know about it, they may not because they are intimidated by the perplexity of the eligibility formula, they just need help so we can do more outreach and working with community partners to make sure people are aware and getting the help they need. you mentioned volunteers for the elderly. i look those programs working with communities own taxpayers,

having more and more around the country is an educational campaign around what you may be eligible for and free help available to walk you through, often to one of these volunteer sites and it's an amazing experience to witness volunteers are, taxpayers who would not otherwise have gotten help they needed and very appreciated and volunteers are passionate about helping people get the benefits they are eligible for. >> thank you very much and i look forward to working with you. i yield back. >> thank you, mr. chairman. want to thank you for being here today and your service. a number of federal programs and one is child support. over the focus my questions on child support enforcement and as

you know it works with the irs and collecting child support for noncustodial parents to help children and families get the money they deserve through your program the federal tax refund program. this is a vital source of income for millions of families across the country. in illinois, 44000 families and children depend on and receive $65 million offset program. rely on federal tax information third-party contractors and that's been done 2004 a year ago without consultation to congress and without an opportunity to work, the irs made the decision

abruptly to change the policies and this caused a shift and not all states and programs will be noncompliant as of october. across the board people were frustrated and extremely, a lot of questions by the irs that this. he testified ready policy change calls hundreds of millions of dollars to implement new systems and hire employees. they come into compliance by october and the matching funds resulting in millions of families and children losing child support.

these 42 states. >> i appreciate the question and this was an issue brought to my attention early in march of 23. i had a lot of questions about the policy itself and why we issued it and i engage with the department of human services to understand what the irs could do to reset the expectation, states contracts and others and at this moment that policy announcement is pause. we are not moving forward and we

have the opportunity to do the engagement you are suggesting so we have hhs, we are going to take more time to make sure we've heard from stakeholders appropriately before we finalize any such policy. >> the policy referenced is 2024 decline? >> i believe it does but i want to talk to you collateral damage is 60 federally recognized tribes and they are in a tougher

position because of the policy they are in jeopardy losing access to this enforcement will so wanted to mention that to you and it needs to be a priority for you and your department. >> i need to go back to the office and make sure i have that. in october of 24 as you mentioned, i want to talk about the implications, i'm happy to revisit that to make sure we get the right data and feedback. >> thank you for testifying, i want to join my colleagues recognizing the hard work irs employees put in every day to

help american workers, seniors and families how tax returns and the federal benefits they've all earned. revisit congress sure the commitment to specifically improve the child tax credit. most powerful tool for fighting poverty but we can agree the devil is in the details. my colleagues on the other side disagree with congressional democrats on how generous family should be but as a mom and a legislature, i'm going to continue to fight to ensure our nations tax codes benefits and all households with children that means even parents or caregivers who don't even earn enough to owe and pay federal income taxes. i was disappointed when i

colleagues killed the good for him offered him a textiles a few weeks ago. our amendment would have strengthened the bill we've all seen data showing the benefit from a modest expansion of the child tax credit and am specifically looking out for families who earned so little they can't claim this tax relief at all even though they are raising children. want to thank you again for answering questions today and i want to talk about something raised earlier about the millionaires and billionaires invading their responsibility to pay their fair share and i don't think anybody left paying their taxes but i think will do it and

everybody pays their fair share. >> what middle and low income americans didn't pay the taxes are cheating on their taxes at the same rate millionaires and billionaires did? >> the deficit would grow, the irs and you are right, and your taxes is in your overactivity of the year for sure but we found virtually the entire government to those tax collections and in order to have a functioning government, big or small, the irs needs to function effectively in their needs to be equity our tax system otherwise people's trusts and trust is what our tax system is built on. >> that means our national defense? >> it's everything the government does keeping skies

safe so air traffic controllers and go to the restaurant and you have confidence your children are eating food that will make them sick, it's all government funding and all 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 among nightly able to pay for the child tax credit to be expanded or perhaps fully refundable? >> there's absolutely money left on the table in terms of what is owed versus what is paid and is particularly an area of focus for taxpayers and complicated situations. as i mentioned when i arrived at the irs, my question was one of the caps we need to close? where are caps most problematic? we lost keeping up with complex

returns and the risk of invasion had grown. >> if we could get complex tax filers to pay their fair share which i'm assuming a lot of corporations with different subsidiaries and companies in millionaires and billionaires with sophisticated accountants and tax attorneys that could help them, if we could collect, we could potentially expand or even make it refundable so kids and babies go to bed hungry every night in the country will be lifted out of that hunger and poverty. >> i leave it to the wisdom and congress to decide how to use the money, or to make sure tax returns are complete, accurate and what is owed and what is paid. >> i yield back.

>> thank you for holding this important hearing today. last november 2 democrat senators press releases brag about the pressure they put on you and the irs to delay implementation and the partisan american rescue plan. previously voting in favor of the change, democrat senators brag about the irs decision to change the threshold to $5000 which seems to not have the authority to do so. i know you are in a tough job but this looks like your not enforcing the law and changing the law because democrats in the current administration are having second thoughts how terrible this policy is spent in active. it is my job to provide oversight and the american people do not trust this administration and why would they when this administration does not enforce the law passed through democrat-controlled

congress signed by democrat president. president biden's administration refuses to implement the law and change the law because a lot in the books is politically unfavorable to the average american demographic touched on this but i want to ask a question regarding this program, isn't it true private sectors provide returns as that of the government free file program? >> auto the exact number program has been essential stable howie provide free help to taxpayers. >> when you say it's free, we have to find that from your side, right?

is not a.i. driven, is driven with people in your office, offices that are administering this. >> work with the alliance, they have signed on to provide a path or eligible taxpayers and use their product re- to file taxes. there's a reason the irs ensures partnership is successful as possible. >> so the program you're doing in these corporations. >> i see it option for taxpayers. >> if you say the services provided by corporations and others doing business so we have a deck so when you say it free to the american people what you're saying your providing

services, it doesn't cost anything, no taxpayer dollars used to do this? the mark there is a cost and we have in public about the potential costs. the goal is to provide taxpayers with options and help taxpayers pick the solution for taxes best for them. some while on paper, we encouraged to file electronically. some will go to the commercial software and pay and some will go to commercial software free and but we have heard from taxpayers and reported loudly was there is an option where they could file directly with the irs free and we want to test whether that option is liable. >> the phrase ronald reagan used, not free. nobody is giving billions, it's not free to provide services, i

know it might be shocking but what we have gotten from these commercial companies, some work 29 million the prefiled program so i want to make sure free, it's not free, it is costing taxpayer dollars to provide them. >> here is how i would answer that, a change the president reagan statement. we are from the government and here's an option and if you don't want to use option, you don't have to. we're just piloting it will evaluate, what was the experience, is there a demand for taxpayers? >> you got into government and

everybody was to talk about the federal government having money and taxpayer dollars to fund the government, i think you would agree so i think it ought to be described as not free, it's funded by other taxpayers and that if they use the service to qualify, my guess is auto the criteria but my guess is they qualify, they are probably not paying taxes, it's a refundable credit they are getting from saying it's not free and we should say is paid for by taxpayer dollars. we had government services free is not true. i yield back. >> thank you for being here so we can talk about the relationship between taxpayers and the irs. tax season can be stressful for millions of american families and small businesses and am happy we are taking steps today to highlight exiling experiences

that resulted in a more sensible, fair and efficient process. the road has been long. irs had their work cut out for them a long list of major implementation issues over the last decade but i'm glad to hear the irs to the passage of the inflation reduction act improving interactions with the public. last year and this same setting you and i were able to discuss well-documented reports over the last few filing seasons recipients of the earned income tax credit based higher audit rates than other taxpayers. these findings were assessed in detail. audits are more heavily concentrated in the southeast of the united states including the county several present in alabama's rules and underserved areas.

my district was among the ten most audited counties in the country reit seek recipients and venture to guess the median income for a family of four is less than 30,000 dollars a year. since our conversation, you sent a letter to congress in september of 2023 mentioning the administration of an initial round of changes made regarding the audit process for the itc and i believe accountability is a direct result in the changes you highlighted in the letter to congress is resulted in less audits on underserved communities.

>> we have to our mission, we have to our mission in a way that avoids the impact and in this case there was evidence earned income tax credit had an impact on taxpayers. we have to first acknowledge it and we had to fix it. one of the significant things that study reported he was driving in the volume of the itc audit. it is a dramatic reduction in the number of audits for this coming tax year as a way to address it. we are also testing changes in the algorithm and hypothesis will remediate the impact occurring. it will take a little bit of time to validate that may be in

the fall we have more data to make sure we report publicly the impact we wanted it to have. >> i will be awaiting a report, it's really important we don't target certain populations, especially those underserved populations and for somebody is important but not often claimed like the earned income tax credit, i look forward to working with you in any way i can to address this issue as you rightly said, it is disproportionally affecting american taxpayers and it's unacceptable in this day and age so i thank you for forward to working with you to reduce those numbers. >> i am okay with audits.

we want people to pay their taxes and there should be a random way of selecting tax returns to ensure there's incentive for people to comply. i do want to get your thinking about statements you made this morning, multiple times you've talked about high income earners and millionaires and billionaires and complex? returned and in the same sentence of tax evasion. do you believe millionaires and billionaires are all tax codes? do you believe there's a reason for complex returns other than to avoid taxes? >> absolutely. >> would be some of those reasons? the mark here's my

understanding, cfos of major companies have a responsibility to their shareholders to find the most tax advantage. >> so it would be a problem for you if they took illegitimate tax deduction. >> if their return is accurate and complete and legitimate, great but that is not the concern about that not the issue. the issue was that because the irs was not auditing, because we weren't investing, these efforts to aggressive avoidance and i can get examples of where it is more prolific and that's where we want to focus. >> is troubling to me when you those terms in the same sentence as if all high income earners who by the lake are paying most of our taxes are all looking to

avoid taxes because that's not my experience with corporate leaders, they want to do what's right so it concerns me going into an audit, everyone is innocent until proven guilty and if you're in the organization taking the approach you are taking today before the audit is even done. >> increasing scrutiny and complex returns. >> you have any information on what percentage of returns on high income earners? >> i don't have that information. >> you have information regarding the change rate after audits and zero income earners levels? we know there is fraud for those who received the child tax

credit, what percentage of individuals who file for the child tax credit compared to high income earners? >> i believe we have a and can get that to you. >> could you share that? 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 taxes and they want to hear from the irs commissioner that he thinks they are all cheap so i would caution you the language. >> i do not believe they are all cheap but i am bothered we see evidence. >> in your testimony you have characterized partnerships in the same way as deeply disturbing, increased partnerships is important because in your mind partnerships are a category more than others. >> what we are trying to do is

are audit rates back to historical norms and i do believe when we are not doing and showing we are ready to enforce, it does increase the risk and that -- >> targeting specific populations, that should go across the board. i don't irs to target any population. most people want to pay the taxes and are doing their best to comply with the law. >> randomized looking at audit and returns to ensure everyone is complying to the best of your ability. >> we are looking for spaces where they are proliferating and holding people accountable for what they owe that doesn't mean

they all are, it means there's more work to do to make sure people are paying what they owe. >> thank you for being here today, i want to start by thanking you for your help mike you were here last time, you gave me your word if we said tough cases that had no movement, he would help with those and thank you for doing that. i have another long list i like to send your way because the rank and file to move, i want to say thank you for those cases. problems and employee retention tax credit have been well discussed here today. this committee along with the house pass for significant piece of legislation the other day and

at the heart of it was dealing with employee tax, can you speak to how important the legislation was preventing fraud and helping the irs work through legitimate claims, could you speak to that? >> the legislation under consideration that would prohibit claims from coming in, one thing that impacts our ability to make sure we get to eligible claims is the size of the inventory. the more it's flooded with an eligible claims and right now once we issue the moratorium, it drops and have. the inventory is growing and growing with an eligibility so helping us pause so we can find

those that have submitted and are eligible, we need the help. >> citing the legislation we passed could provide significant savings to the american taxpayer. >> next item, i think you've looked at my notes, we talk a lot on this committee about and we debate going back and forth with these complex corporate tax returns and high income earners but 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 corporate fraud is versus total dollar amount on earned income tax credit, improper

payments of fraud, how do the numbers compare? >> i think they are both important, i don't have the side-by-side ledger in front of me. >> but they are both. >> both material. >> you said you made money to beef up audit for tax cases where evasion is more likely, right? how much effort are you putting in an would you recommend we look at reforming the tax preparer space going after folks committing fraud at the lower end of the income spectrum? if they are both there, i haven't heard my colleagues on the other side, they've been railing against corporate america and high income earners but they lack the same religion when it comes to crafting people to cheat the system in earned income tax credit space. >> i will tell you what is

motivating and i mentioned in my opening remarks to taxpayers victimized in the tax system using them to victimize so the example that drives me crazy and i want to make sure we address is a nefarious prepare coaxes innocent taxpayers, promises them earned income quickly where they could get it just as quickly from us and rips them off in some way, shape or form. >> the predatory lending practices that go along with this are pretty grotesque and i would love to work with our colleagues on the other side of the aisle on a meaningful piece of bipartisan legislation that goes after folks committing fraud at the lower income.

we want the irs to do his job, we believe it's important but they should be fair and nondiscriminatory and they should be at both ends of the spectrum. >> that's the first principle we have. just like with high income where there is purposeful evasion for. we have various actors like i described, rather than an audit program that impacts too many, but the right investment, we can be -- >> what you just said, i know i'm over my time but you got to have a program for everybody, you have to go after individuals knowingly defrauding the system and with that, my time has

expired. >> thank you for being with us today. after years of neglect through decreased appropriations, the irs received influx of resources to improve and update of operate here and since it was signed into law, have seen the impact 28 minutes to 30 minutes, the backlog of politically returned and republicans want to continue funding so we should the irs sustained funding to continue building on these successes. want to know if you to the irs enhanced enforcement effort and specifically the use of a.i. helping identify noncompliant

taxpayers. >> thank you for the question and we have to make investments to make sure we are precisely finding where it is most dramatic and these complex situations with money moving across international jurisdictions and money moving into on subsidiaries, it can be tough to find where evasion is and we can invest in a i howard analytics to better understand and increase the likelihood and we see the evasion and select the right cases for audit so that's where investments are going, making more sophisticated models to make sure we select the right cases and finding the evasion where it is. >> one of the issues i've heard is about lack of clarity sent to

taxpayers they are very complex from the irs of people are concerned and leave taxpayers concerned about how to resolve the issue so what are the changes irs is implemented to notices and letters sent to taxpayers, how can these changes benefit taxpayers and how has ira funding facilitated these? >> this is such an important piece of the puzzle, we have launched a simple notice initiative. we send about 170 million letters or notices to taxpayers each year and if you look at them, they audit improvement in terms of clarity and in the last year we took 31 high-volume notices and redesigned them and they are significantly better

and we are getting positive results and now heading into 2025 we are scaling so by next filing season, 90% of the total volume of notices what i've gone through this effort and be redesigned and simplified. it's going to be beneficial for taxpayers and early results we are seeing, taxpayers are going to online tools and using them more and they are getting faster responses to positive results from clarifying what we are doing in these notices. >> given that. federal and state laws require professionals like doctors and lawyers that not only obtain licenses look past and while they must meet licensing prepares, they do not have

minimum requirements and are not credentialed. i was wondering how taxpayers who use non- are harmed by doing so into establishing minimum standards protect taxpayers. >> this is, a few times in the hearing. we do have a risk with prepares not serving clients well or customers well. in some cases not providing appropriate suitable advice and in some cases stealing from them or in some cases leaving them with the financial muscle in her hand so mark can be done and we have the administration putting the budget previously changes that would allow us to require more credentialing of these prepares for they would be able to provide tax advice or

preparation services. it's important because people are victimized, one step the irs can take to show we are on the side of taxpayers is disrupting moments of victimization is an idea and an initiative to get back. >> thank you. >> thank you for joining us today. we are 60 days out from texting 2024 and working through others preparing to file individual tax returns and everybody has to interact with the irs states the agency should have a customer focus prerogative that puts american people first concerned like my colleagues here accusations certain groups of americans are automatically considered tax cheats.

my priority was looking at providing good customer service and make business operations more efficient. it seems like a decent theocracy focus on how to make it to push work from johnny's desk to tally the focus is on how to be more efficient and meet the needs of the american taxpayers in any faith into it can provide that family service. i'm sure it doesn't surprise you my office seems calls each year from constituents who have issues with the irs. i received a letter from a dealership in kansas the face issues he filing the 1099 by the 31st deadline 30 intake system. i would like to submit this letter for the record make that objection will while they

started in the middle of the month, continues to crash causing major delays pushing them up to the deadline, they the high-speed internet the association and informed them is a widespread issue. they tried it multiple times in around 6:00 a.m. january 31, the device successfully they were able to submit the required 1099. as you know, the next deadline is march 31 is critical to file, he got the money -- >> is a great question and it is definitely on my radar screen,

it was concerning while it was going on. we have a lot of technology out there and anyone involved in running let you know you are always perfectly. the key is your reaction time, speed troubleshooting is and what happens, you learn from it prevent that from happening in the future and that is what i'm trying to instill in the irs so we were working the problem and are working the problem from made necessary adjustments to be submitted successfully. we are monitoring because of what was said and i'm optimistic the changes and updates made will allow for much more stable platforms. >> you said you hired 5000 new colleagues to help so this letter was two weeks ago, cap

all irs agencies and employees returned to the office for five day work weeks since covid? high percentages across all agencies have not returned to the office. what are you doing make sure taxpayers tried to do the right thing can get through to work with employees? >> first to clarify, they are working, the objective is to make sure you're getting the mission done and when you tell me someone didn't get through on the phone line, i want to learn more about that and figure out what we need to do. there's a standard out there in terms of where we stand today and what the percentage should be of in office versus remote work, the irs is consistent with that standard. we are evaluating steps we can

take. >> what is that standard? >> 50%. everyone is working, it's 50% on-site versus 50% in remote locations. >> helping somebody key handling this? it seems it's not doing the job that needs to be done. >> i'm happy to walk you through in greater we have many employees on site as you described in campuses or law texting goes and we have heavy presence first. >> thank you for agreeing to appear here today.

>> a little too focused on political directions in the biden administration and set of fulfilling congressionally mandated duties. the continued delay of the threshold and announcement of a new threshold is overreached not found anywhere in law. this is just another step in a long string of illegal questionably legal actions taken by the irs and department of treasury to willfully ignore the change or misinterpret laws passed by congress. why was the irs unable to implement the $600.1099 threshold the american rescue act? >> i'm glad i have an opportunity to respond to this question. i believe the irs commission had the authority to implement laws in a manner that ensures

taxpayer rights which means at times implementations ramped up over time in order to make sure we achieve that balance, influencing the law enacted by congress but also another responsibility under the law and that is protecting taxpayer rights. in this situation, this outcome of delay was strongly recommended by stakeholders across tax industry, commercial industry from every direction we were hearing calls that there was risk. >> i can understand why given a three year extended delay, didn't ever be able to comply. >> working with stakeholders on a path that will get it done and that's why we are intending to

begin implementation next year. the focus i have the irs do this we want taxpayers over paying taxes, we want them confused or bombarded with forms and papers they shouldn't be receiving. it was good old without being able to adequately protect against risk that i'm not giving my legal response ability to help taxpayers and protect their rights. >> a member of 2023 you announced plans for threshold of $5000 in 2024, this specifically made that decision, set this new threshold? >> a strong recommendation from the stakeholders we reached out to across a variety of stakeholders, taxpayers, companies that are third-party payment platforms and the reason they have consensus on $5000 was because they look at the analysis and model, $5000 would

ensure the most revenue would be impacted while protecting the most taxpayers from unnecessary paperwork and sending them things they didn't need. >> i have to reclaim my time because what authority does the irs have set the new threshold? >> we have an authority under the code to administer laws consistent with taxpayer rights so this happens time to time in our goal and objective is to implement laws on day one. >> congress writes the law. >> there are a variety of examples throughout history but the irs to protect taxpayers from undue burden or potentially being overtaxed we have delayed implementation or rampant and this is not the first time in are not the first commissioner confronted this pension.

>> your actions are still illegal. >> it's not illegal to take a step to protect taxpayer rights. >> i'll move on from this. another concerning action i have is the implementation of the so-called prefiled program and you've got to be kidding me, nothing is free, everything the u.s. government does is paid by taxpayer dollars so nothing is ever free. i don't think you should be wasting your millions when the private industry is doing that job but i do want to give you credit where credit is due, i commend the irs with the er tc claims, i understand the system was devastated by fraud and abuse just by the committee in the house pass the tax relief for american families in an overwhelmingly bipartisan manner. i want to urge my senate

colleagues to follow suit so the irs can focus on credible er tc claims show good americans can access benefits promised by congress, thank you, sir. >> titillating goes back. >> thank you commissioner for joining us today. we have heard a lot of discussion today about earned income tax credit and audits and perhaps fraud committed and you are unable to monetize the amount of fraud compared to corporate fraud and loss of revenue. ...

we have tax gap analysis will begin evaluate where the differences are between what is paid versus what is owed. and the last estimate that we provided estimated roughly $650 billion a year in this gap. >> are you guessing may be the earned income tax credit, fraud or whatever, i'm sure you can recover all of it since it's not very complicated to catch it, earned income tax problems or you don't even need a person, probably a machine will find that. i'm a wrong or right? >> for me it's about priorities

and what our priorities with the earned income tax credit program integrity of what our priorities in terms of tax evasion amongst the wealthy? that's what i'm seeking to establish. >> so let me go on because i didn't really plan to talk about this, just that my colleagues have raised it. what would you say the fraud rate for the earned income tax credit is compared to the low uptake have, , the numbers of people who deserve it and could use it and don't, don't apply for it? what is at number? >> and again i don't have specific fraud rate. it's not something that we measure speed is not fraud, the people who don't claim it. >> this is part of the challenge. we believe there is a material gap -- >> i mean, there's millions of dollars left on the table that families and kids in need, particularly since with such a stingy child 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, that has your question about child support. and i think that in the absence of an adequate child income tax credit and a low uptake and it's really important that we do child support tax collections. and i understand that these contractors have to be compliant. but we found this problem even with states, that administered the child tax credit for tribes. and so i am wondering, you know, if they're subject to these audits and them am wonderiw that's going to go on. it's really hurting tribal communities, of not getting these monies.

can you quickly comment? >> i want to work with tribal communities directly. i know tribal communities face unique challenges in terms of beating the tax responsibilities or getting access to tax benefits. so if i can learn more about the specific issue i -- >> it's learn about sovereignty and that will help you figure it out. let me ask you some questions before my time expires, very quick questions. a asking you to opine on policy, okay? i'm just asking you to affirm some things that i think already know. this is essential government function test, is at an impediment to tribal nations use of government? yes or no? >> it's something that is more in a policy shop but i do believe -- >> i'm just saying -- >> this is what we heard from tribal communities and that's what it's important to engage with them on solutions.

>> they're going to come off, i guarantee you. a new market tax credit set aside for tribes the low housing tax credit and setting aside a housing tax credit program, with that increase the effectiveness and administer ability of these programs from the perspective of the irs? >> it something i want to work with and coordinate with the treasury and the tribal outreach programs that they do and get back to you on that. >> well, commissioner, let me join the chairman, ranked member, all of my colleagues in thank you for being here, being very patient. as you can see where i'll come back and forth from lunch and bathroom breaks and everything. so you've been very good at a appreciative. >> congresswoman, i do know that 20% of eligible taxpayers don't clinton earned income tax credit. that means one in five and something we have to -- >> that's a lot of money that's left on the table. >> absolutely. >> versus how many frauds that

you find there can of course you can click every dime of that money because it's not hard to audit and eitc recipient versus someone with 500 corporations and billions of dollars. thank you for your indulgence, tragic. >> i gave you an extra 53 seconds. remember that. >> i will remember that. >> helping you out. the gentlelady yields back. mr. murphy from north carolina you are reckless or five months. >> thank you, mr. chairman, and thank you, commissioner for coming today. i was using a two cd. i saw you went to duke and unc. >> i did. >> so do corey unc? >> duke. >> i got no more to say to you. [laughing] all right, all right. let's get down to -- questions, california and north carolina, excuse the new york have the most billionaires. you are saying its high rate of cheating. have you ever correlated any of them with daschle are the pain

california taxes and new york taxis broke i don't have that analysis at my fingertips. we're focusing -- >> what i'm saying is we're talking about a lot of folks not paying the taxes. look, i'm 100% people need to pay the taxes, i don't care what income tax bracket trader if watauga millionaires and billionaires not paying their fair share, which is what we hear the president say a lot, those of the two biggest dates are in california and new york. so it would be nice to know you have to enter this but it would be nice to be doing that for new york and california and are there particular departments going after them? >> it is a fair question. i would want to court a response to that after talking to the states. we are not necessarily focused regionally or where focus on the types of the evasions -- >> i did. >> -- that corporations are engaging. many of them are maybe operating california, and corporate in delaware. the rally is the question is handling behavior.

>> thanks. were you aware that the biden administration has said tiktok is not to be allowed on government devices? >> i i am aware of that. >> so this is very troubling to me. the omb issued guidance februarr twitter on how to government this law. 22 devices used by irs still have access to tiktok, and this is to troubling. it took the irs, dissing was issued, t iga -- tigta issued this to the irs in may. the irs did that take action to august 2023. why? >> i'm not sure of the facts of that at the dissing unacceptable and i will get to the bottom of it. >> do you personally i think many members of congress especially over in the senate democratic senator intelligence senator warner believes that tiktok is a a security risk to this country.

i'm just saying this is generally considered a risk and adjust to the b don't understand why these are still in devices. what really bothers me, watauga folks working from home is that to bring own device policy for the irs is still not enforcing this panel tiktok. can you speak to that? >> well, i want to make i understand the united states recommendation and we are enclosing it out. but happily agree, with the people working remotely or working on site we have to abide by these security standards and any lapse cannot be tolerated so we need to be -- >> it took eight months for the irs to would update this policy. that's not acceptable. wouldn't be acceptable in business. it shouldn't be acceptable in any government agency. let me ask you about the criminal investigation unit and the access to tiktok. because it seems that they are

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

to my office about that? its murphy from north carolina. who's a big tar heel fan. and by the speed of i really am going to address that at the come right? just unc speaking and i feel affinity there, but -- >> i messing with you. just one last question. artificial intelligence. this is the gold rush for this country in the world for that matter. bias, absolute bias would be a thing we're going to have to fight. and hope that given some of the biases that have been stated by the department's and some individuals that i have your commitment to do your very, very best the irs does not have any vices, using artificial intelligence in looking at who to audit and him not to audit. because we saw that going after republicans before we saw some real problems with who were audited. artificial intelligence is a tool but it's not be used as a

political weapon in the irs. >> you have my commitment. >> thank you, mr. chairman. i yield back. >> the gentleman yields back. next, mr. kustoff your record us are five metals. >> thank you, mr. chairman, and thank you, commissioner for appearing today. i would like to go back if i can please to the gao report that you were asked about, the d july 13, 2023. the title of it is preliminary results show federal buildings remain underutilized to the long-standing challenges in increased telework. let me read maybe two sentences. 17 of the 24 federal agencies ngos review hewson estimated average 25% or less of their headquarter building capacity in a three-week sample across january, february march of 2023.

on the higher range, , agencies use an estimated 39-49% of the capacity of their headquarters on average. do you know on an average today, commissioner, how much of your headquarters building is been you. >> was in washington, i don't have that number at my fingertips. >> would you say it is less than 50%? >> it may be because smh and earlier, over all the irs is roughly in line with the governmentwide standard of 50%. so because it's an average and may be under. >> we heard a a different this and questions today to you from members, anecdotally, technically what i hear from my staff and cpa's and practitioners that have to reached the irs is that it's a real struggle to get hold of somebody. you talked about earlier some of

the challenges with the phone, the callback, 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. would you agree with that? >> i would agree that it, it depends on what the function is. there are moments, for example, when whether it's a weather event come straight are shut down, we don't want to lose productivity suite set people up to be able to work remotely where they can. i would also -- >> if there's a weather situation, but if or talk about a a day where the weather is fine, wouldn't it make more sense from a productivity standpoint have employees physically present at the irs and working remotely?

>> in some cases yet. in other cases it's less relevant. i can give examples worked highly relevant. in our taxpayer assistance centers, walk-in centers, and those are fully staffed five days a week, everyone is there at all times. also if you visited and you're all invited to come to one of our campus locations and you'll 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 are on site. the way i look at -- >> i have a number of questions are about security. we are all concerned i know you are concerned about it. >> i am. >> littlejohn would've as relates to 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 employees

home? >> there are steps that you can take to ensure appropriate security, whether the employee is in a skiff, in a non-skiff, or remote. and we have to make sure that we're secure because there may be situations whether it's a 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's a true statement that ii was employees when they are working remotely from home have access taxpayer information, right? >> certain employees dependent on the need, yes. >> nothing to prevent the employees making your son walking on the screen taking screenshot of whatever is on the screen, click? >> that would be a violation of that employs responsibility to protect information. there would be significant consequences for that, and, therefore, virtually all irs

employees are very rigid in our taxpayer information is handled, whether it's had on the computer screen in a remote location or on an irs site. >> but it's true that situation would occur if that employee when the office, right? >> that daschle i don't engage in hypotheticals but that -- >> that employs c19 and would not be physically speedy they could be visited in the building. that's why, that's why it's so important that whether you are on site or you are at home that you are extraordinarily careful about who has visibility information that you're the only person -- >> i can find other examples is like did about the 19-year-old son in the home. there's no doubt about that situation wouldn't occur that employee were in the office in the irs office, correct? >> what i'm suggesting -- >> answer yes or no and then

i'll allow you to send. >> i feel like it's dangerous to go in a hypothetical because then one summer can turn around and asking what a summit has a take your daughter to work today and they're walking to the office? so there are all these situations. bottom line is each employee must rigidly and religiously protect that information from unauthorized access to any 19-year-old, whether they're visiting their period in the office or whether they are at home. >> let the record show you were not responsive. thank you. >> fair enough. >> gentleman yields back. mr. schneider is recognized for five is. >> thank you, mr. chairman. and thank you, commissioner werfel, for joining us today. i want to start by saying i appreciate working with you and your staff who is been very helpful in dealing with our constituent questions. before i go to a question let me touch with the on case work. we've been in touch with your team on a handful of irs cases that we've been unable to make headway as we are hoping.

can i just get a commitment will continue to work on the? >> absolutely. >> i will go back to the previous cup my kids are not 29, and 30. and it worked before coming to congress with a lot of confidential client information. whether my kids were visiting in the office as they often did or i was working at home as i often did come it was imperative that i kept that information confidential. i think what i heard you saying is that that's the expectation of irs employees, that information is kept confidential irrespective of where the are, who might be visiting. >> one of the reasons why i was struggled with the question and the hypothetical is i do want to signal to any irs employees that they can let the car down a matter where they are. whether they're at home, whether they are at the office, it's absolutely critical that we have rigid policies and procedures in place to prevent unauthorized access.

and that's what it really want to emphasize. >> i just want to make that clear. let me, i'll take another minute or we talked about the ira and impact. you touch on some things but a handful of things, i'll let you reiterated them, but the progress made, , that the discussion saying is that quite perfect but i'm going to focus on progress, not speeded things are turning in the right direction. i don't think there's any way that i will rest and come up to the table and say we are done. we are not done. at the want you about the taxpayer concerns but i also want to recognize the before and after of a hundred tax agency versus a non-funded tax agency. the before and after his start 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 and placed

her on exhibit resources we can invest in reaching out to taxpayers and helping to meet the tax responsibility. >> is the difference of 85% of calls went unanswered and a 5% now being being added. >> exactly. the other thing i haven't had a chance to emphasize as much i'd like to is the before and after of being funded in terms of what he what you can do to protect honest taxpayers from scans and perpetrators that are involved with them. if we are not funded we are on our heels. the tax system remains complicated. it remains a playground for scam artists to exploit honest taxpayers, scare them, call up someone who's elderly, pretend they are the irs. convince him to take out their credit card and pay a debt. an underfunded agency, and underfunded irs means that can be exploited more and more. i find it irs means we can work to disrupt those types of scams. we can increase our education, work with local partners and we

can put tools on the web see you can help your elderly parent or that elderly parent can have access to think it is this really the irs? these are tools of the tax jurisdictions are putting in place, and the absolute have to in order to protect taxpayers from these risks, but these tools in place. if we don't have the funding we can't do it. these are the choices. >> if we don't find we can't protect those taxpayers. there at the short end of this deck. at the same time you said there's a 650 billion acid, $650 billion per year tax gap. taxes at being paid. who really suffers when the people cheat on their taxes don't pay what they owe? >> it's the people to pay their taxes because they are shouldering the broader road for funding the government and its critical operations. that's why it's so important to equity, and that's why it's important to prioritize our enforcement effort to where we

think there's probably after the point up and they could it is what i write at the irs fau's of underfunding, i asked were only most exposed, where are the risks the highest, where has this underfunding caused the most damage? what is the key areas was our ability to keep pace with complex tax situations where invasion was a risk. there are complex tax situations where innovation is not a risk, and that that is not a place that we will not focus on but it's the place where there's -- >> up at the end of my time so ask the question and actually would appreciate an answer in writing. what is it that makes a complex return and why does at complexity increase the likelihood or the ability of people to avoid paying taxes that are owed? >> just a quick example would be if you're operating in multiple countries and they have different tax laws and your shielding your profits in the u.s. to get a lower tax when the

reality is that your economic activity is in the u.s. and you actually know and you shouldn't be moving and make it look like to the irs that your activity in cells were any more tax advantage jurisdiction. that means those that i could do reporting the prophets, companies that are, are paying a larger share than those that are cheating the set. >> it's not just companies, it's wealthy individuals. >> exactly. >> thank you and i give expert i yield myself five minutes. commissioner werfel, i'm up here. i am normally down there. >> okay. it's the chairman, got it. >> and i was consultant named charles littlejohn stole that including returns for donald trump at host of other palm american taxpayers and listen to multiple media outlets in 2020 and 21. last but i was pleased to see mr. littlejohn was in the maxima sentence of five years in federal prison for his crimes.

addition to criticizing the by administration doj for only bring one criminal count against mr. littlejohn the judge told mr. littlejohn at the sensing that his crusade to pilot president trump's rice was an attack on our constitutional democracy and i cannot agree more. what troubles me even more is the irs has taken far too long to limit the corrective actions necessary to ensure other american taxpayers should not become victims of a rogue irs employee like mr. littlejohn. the treasury inspector general for tax administration recently reported the irs failed to ensure all since assistance brought accurate audit trail logs to monitor and identify unauthorized access. essentially tigta is saying you did not know when sense of taxpayer information was illegally accessed. i understand mr. neal asked you about this and you said you guys have taken corrective action since a report came out was last week that were six. what specific actions have you taken and have you taken all three of the recommendations

that take the made in the report? >> yes. we have taken a bunch of actions. every quick just to give you a flavor of them. we reduce the number of users. we put more robust encryption in place. we have strengthened our oversight. we have improved our access logs. we've eliminated more movable, removable media. we put a place tighter email controls, new printer controls and on and on and on. and on this point become such a critical point, on the audit trails intersystems. tigta had identified i think it was summer between three and 400 systems in the irs had sensitive data that didn't have the appropriate audit trails. i required the team i think like on my 34th day of the irs, i thought i would audit trails and every one of the systems consistent with tigta requirements. those have now been done. we shared that with tigta but tigta didn't have sufficient

time to validate that we did everything we said -- >> when was all that completed? >> that was completed by the end of the fiscal year so around september 30. >> all of the three recommendations that -- >> yes. they are evaluating. we said we are making the changes. we've made the changes. to the are and tigta that thank you we will evaluate and see if you've done it exactly the way we want to do. so they are re-examining whether, for example, our auditors are as robust as we believe they are now. >> so the re-examining. understand understand because report just came out. you have been there a year. >> yes. >> this goes back to the returns were leaked in 2019, publish and 2020. then mr. littlejohn leaked a second batch in 2022 propublica which is published in 21. you were not there some asking you to buy for what happened during that time but you been there a year. so is it your testimony today that since you have been there

this is obviously happened, you started taking corrective actions on these audit trail? >> yes. >> when had that been completed or your testimony before the committee did is that is done? >> it is complete. we are getting a peer review or oversight review from tigta. we said, we headed in our assignment. we put in all the audit trails to the systems that you've identified and they are revealing that to ensure the we did miss any spot i want to make it clear to the american people today. so 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've agreed with all the recommendation to i'm steady for the record the audit trails for recommendations has been done. i want to double, triple come from we are completed with the other recommendations but they are all underway. >> can you let the camino? >> absolutely. >> when can we expect that information? >> i can probably get back to you i tomorrow or monday is a holiday, tuesday. >> if you can give that to the

chair speed is absolutely. >> in a 30 seconds i have left, we have in my district is decimated by hurricane ian. in the tax package which assent to the sin which i was isn't going to pass today, the extension deadline, all of the people in my district for 2020 to attach your now are going to be forced to buy today filed their extension and then had to do an amended return. it's my understanding that is taking about 20 weeks to process amended returns. what assurances can you give all the americans and 45 states have been affected by a natural disaster for now going to file an amended return that is not going to take 20 weeks to get the money back from the irs? >> this is a challenging issue, mr. , mr. chairman. the reason it's challenging, and is not about making excuses. this is about sharing the facts, is that our systems, while we are more modern and effective with the original returns, we

still are on outdated system on amended returns and it's more manual. and that's why if you filed an original return electronically and select direct deposit we can get your refund in the under 21 days. but he filed an amended return, that the paper manual process it takes a lot longer and it is unfortunate. >> since i gave this more exciton i'll take a look extra time. what are you guys doing to remediate that? like, why does of our paper return? is her efforts in place -- >> absolutely. when doing a bunch of different things. first a look at her weaning out our process to see if we can close the gap of those 20 weeks also taking the steps to automate our entire infrastructure. this is one of the reasons why the modernization effort is so important we are doing a lot more scanning of all of these paper forms because in a machine readable format we can move more quickly. >> thank you for being here today. now i would like to does mr. fitzpatrick for five and a.

>> thank you, mr. chairman. commissioner thank you for being here today. as your where the irs placed a moratorium on processing of new employee retention credits claims to the use 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 relied of the erc. in fact, we have businesses the say they cannot meet their payroll because they are erc has not been process, specifically my office has inquiries were businesses -- an excess $1 million. my understanding in october 2023 the irs issued an assistant order on hundreds of current cases involving erc claims. but that was months ago. so could you just give us an update on where that stands? >> we are working hard to make

sure that we could separate eligible from ineligible claims in the inventory that we have. as i mentioned earlier it's challenging because we have a lot of inventory and a lot of ineligibility and went to figure out what's eligible and what is ineligible. we are making progress. in fact, since we issued the moratorium in september we are averaging between 1000-2000 processing a week. so we're getting the eligible ones out the door anything since the moratorium we are nearing $1 billion of erc issued. i think we meeting our promise to make sure the moratorium didn't stop us from processing claims before the moratorium. but it's challenging because it's a very complicated program eligibility is tough to weed out from ineligible but it's a focus point for sure. >> i want, talk about the direct phosphorus and the irs is put in

place. this committee has asked the content for what the cost of the program would be. as far as i more is still unknown at this point. first, why did the irs and treasury feel it was necessary to create a direct filesystem when industry already provides many of these options for free? the taxpayers and secondly could you explain how you concluded and how the irs concluded their authorized to do this come to create, maintain and update a direct file tax-preparation platform? >> yeah. so we have come we believe our responsibility and an 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. if you call in, attacks and technology. it wasn't rocket science, technology but hadn't the implement technology we did have

to go to the code and determine which are specifically in tax code that says irs commissioner your the authority to offer a a callback option in the call center. there's a whole set of different things we can do for taxpayers to give them options. not a mandate. it's a much different bar if i'm up here say i as irs commissioner and mandating something. what we're saying it's another option on the menu. when you look at all the things we offer to taxpayers over the years as the world has changed, at one point it was telephone, file your return on the telephone. now it's file electronically there's always this desire to evolve and understand how to be taxpayers where they are and give them as many options as possible. that's what this is, it just an option. >> do we know what the cost is? >> we do. we have in our public report that we were required under the inflation reduction act, we included a cost chart that explain the cost and with different assumptions, if

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

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

world, you know, i gig economy were used out have a gig economy and more global, globalization, movement of money, new currencies. it's just a dramatically different world. so when you take those two together and you underinvested over 12 years while at the same time the job to manage the tax system grows, it's not a good formula. it leads to underperformance. what i'm trying to emphasize here is the people who suffer are taxpayers. they suffer because the tax was still exist. they still have these responsibilities and is a stressful experience. when a problem emerges if they can't get clarity from the irs come if they can't get through to us, if they can't get the tax issue resolved, it weighs on then. it's burdensome for them and it's stressful for them. that's what's heartbreaking about it and under contact agency. it means for not answering the phones the image of walk-in centers are shuttered enemies are digital tools are

stagnating. and that's what it means when you describe let's pull back the rs funding. it means the irs will give the function and help you. if not pulling back the tax laws and tax responsibilities but pulled back the ability to serve tax there's been all but harvest of the tax prison cells and that's my impassioned plea to make sure that we don't harm taxpayers by making it harder for the irs to help them. >> i think you are taken at that very well an interest in as well, because of the sophistication as we go forward, what does the irs up against when you're dealing with major corporations or people with great wealth? what is it look like inside the irs when you're dealing with a battery of attorneys, accountants, consultants that are going up against government

employees? >> i start with a faulty. when you look at the number of audit personnel, the day the inflection -- ira was passed versus number of highest wealth filers in the united unid the talk about just about 400,000. talk about millionaires, corporations and she wanted $59 in assets. we. we break it into cohorts. 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 if sometimes hundreds of thousands of pages. i like people to picture like picture that one irs auditor or examiner back in 150 truckloads of paper saying i review all that that's my job. it's a real volume challenge. we had to hire more personnel, you know, to evaluate these returns it. but also the complicated financial structures, the

introduction of new currencies, the more movement of money into international tax jurisdictions. the proliferation of tax havens. all of it we have to keep up with it. it's an investment that we have to make in a subject matter expertise. its investment went to make it our analytics at our predictive modeling. because use of the issue. if we don't invest smartly, just our public audits we will end up pulling audits for people that are following the laws more regularly and then adding burden to them when they're doing what they're supposed to do. so precision is very important and yet invest to get that precision. >> i think we should do a hearing at some point on what artificial intelligence means and what it will bring to our agency especially those that are guarding our privacy issues as well. thank you. >> thank you. >> thank you for integrity and your candor. >> mr. larson, that's a great

idea. mr. arrington. >> thank you, mr. chairman. commissioner, thanks for being here. a couple things. one, i would like to have a conversation, we've had to do it now, with your team responsible for the donor advised refund regulations. i want to understand. they may be right, they may not be. i have concerns about what y'all would think a conference if it is that think the market has already considered an already manages, if you will. so something i would like -- >> you have a commitment on that. >> thank you. so i'm sure you have been briefed about the question i have, which is a question i asked you a year ago. you have a lot to keep up with. you did respond in the 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 shotgun come 439 rifles, 39 rifles, 15 fold automatic weapons. so it's very detailed. i don't know where they got their information. and i think an appropriate oversight role for us is, 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 and an adequate 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 responsibility and oversight and accountability, they deserve a specific answer. what's in the inventory? how many armed irs agents? and thus 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? batf? border patrol? so i'm going to ask you again, do you have the specifics of firearms, the number of armed irs ages and 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 question. first off i do recall the letter. i believe the letter that we sent you had a link to a public report that has information you requested. if it did not then will get you that public link. i added the point it was consistent with other species okay. >> if i i could i think it's o important if you would allow me to just address some myths about irs. >> please. >> first the vast majority of i was employees are unarmed and will never be armed. most irs employs a customer service representative i like to say the armed only with phone headsets and most of our accounts armed all of our against armed only with -- >> 50% of them are home doing it instead of the offices but that's a different issue. >> second, the only people in the irs the wood of the armed our federal law enforcement officials who investigate crimes in the 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 for an arrest warrant without being armed along with our other law enforcement colleagues is that something that would ever be a smart or prudent thing to do. third, this is not our inventory, i think it's important context. the actual discharge of any weapon by a irs law enforcement official is extremely rare but under federal regulations we are required to maintain a minimum amount of ammunition for training purposes in order for them to be able to hold a firearm when they're executing 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.

>> ifi second semester i appreciate all that. i will look at that link if it's in there, and it may have missed it. if it's not in dispute is i will get you to did. >> give me the specifics and we can show with the american people so we can, you know okay. that's good. appreciate. >> thank you. >> thank you. >> thank you, mr. chairman. i see the ranking of his upper and thank you both for holding fishing a commission. i know it's a long morning and afternoon for you. i want to jump into a couple quick things. commissioner werfel, as visual continues to fight the hamas start with a vicious attack on civilians october 7, 2023, which includes which includes efforts to recover hostages, digital beheld undergrad in gaza and disturbing demonstrations have swept through a throus and around our nation and here at home. many of these demonstrations have been explicitly anti-semitic and some of call for the death of the jewish people. this committee held a hearing in november where we heard from

witnesses that explained how certain groups behind the of 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, the 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 call for hate. i find anti-semitism. i find the islamophobia aboard, referenceable, heartbreaking -- abhorrent -- as as a put on y commission had and along the process of determining whether an organization is exempt or whether an organization should

be revoked of their exempt status, we had a process that we run. what i want to make sure is we run that process robustly and effectively to make sure the right outcome happen. >> i understand that and also along with my other ways and means colleagues we sent you a letter along with secretary yellen as you note asking for a briefing on what the irs and the treasurer are doing regarding the funny about the semitism and the fund of calls for violence against jewish people. and using tax-exempt organizations and understand you are in the process of doing that, putting speedy that's happening. >> would really appreciate that 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 that their exempt purpose or the exempt activities should be revoked. so it's typically orient around illegal activity and what want to make sure is we have a very robust process in place. we get a lot of referrals probably make sure we are running those down and having a good assessment at a good process to figure what the right outcome is. >> can you share with us information about what i was in treasure are doing about considering penalties come for example, exempting tax-exempt status for these groups that engage in this kind of file a contact? organizations and many of these so-called grassroots efforts live a very astroturf. have assets will be on what they should have or could have possibly spontaneous way. what can we see in terms of taking that status away. >> this is an important moment in time, congresswoman, for the irs treasure and other federal agencies to come to this

committee and others and layout exactly what today's process is come what the current law and regulations say and to determine whether we have both a sufficient framework and is a being implement effectively. that's the conversation that absolutely needs to happen right now. >> thank you. we appreciate that i want to jump on one of the top with my colleague mr. fitzpatrick touched on, that is a serious concerns about the director hall program and my constituents fear and i think rightly so the irs being the judge jury and execution of its own finances additional this program presents a clear comp with the ventures i believe to the irs who should not be charged with preparing taxes while performing other duty simultaneously such as audits. as you know my home state of new york has only participant in this program and in the vacancy the might is new york taxpayers can struggle to navigate between the two just excessive and ultimately failed to file the state or federal and i don't know, want to know what are you doing i don't only a few seconds

but what are we doing to address this potential, , special nursig issues in new york state? >> we are certainly not preparing tax codes. you should let your constituents and no, they are under no obligation to use this solution if you don't want use the solution. we will determine through this pilot the pros and cons of such a solution and it will be back before this committee to report on that. >> thank you. we want to make sure it doesn't become amended. thanks much. i appreciate your time today and thank you so much for the response and also action on this really important measure issue with israel and hamas. thank you. >> thank you. >> mr. kildee. >> thank you, mr. chairman, recognize any and you and the ranking member for holding this hearing. thank you, commissioner werfel, for your testily. i too want to start out by thanking you and if you would mind conveying to step my gratitude and when i mentioned your staff i don't just mean your senior team that we most

often interact with, but with everyone of those irs employees and all the field offices around the country who do a really tough job under difficult circumstances. in what am i past careers i was a county treasurer, tax collector accounting and i know that strictly when we're interacting with customers who are paying their taxes, they're not always having their best day. i know it's a difficult job at a just want you to convey my gratitude to them for the difficult work that they do. in fact, some cases they have to face i think unfair characterizations than some of the people that i work with your in this building. i just want to express to you that i appreciate their work. i would also like to thank you for the difficult work that you did during the pandemic, your team speed is absolutely. >> my constituents in michigan needed help getting in contact

with the irs just to do with very simple issue and a note we had some struggles and to think thankfully because if the investments that we been able to make the leadership of president biden and congressional democrats, the irs is in a better position, much better prepared to provide the level of customer service the american people deserve. i know you're continue to work to improve that and appreciate that very much. i would also like to acknowledge the steps you have taken to make this tax filing season easier for the people of represent by delaying the lower 1099k reporting requirement. this delay will cut red tape for many taxpayers and about the irs to focus on ensuring that the wealthiest individuals that refer to a few times in this hearing and the largest corporations the longer avoid paying the taxes that though. the investments that president

biden and democrats made under the inflation reduction act also helping expand access to funding and you addressed this. i knew it is been raised by a number of members, but as has been mentioned, this includes expanding the volunteer income tax assistance and the tax counseling for the elderly programs which for years have helped to working families that i represent getting their taxes filed without having to pay a fee. i understand the point my colleague makes but 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 tax-free dollars but not out-of-pocket fee in the moment when that need is make those programs are operate locally by united way back home for me. so these programs are really important to me and i wonder, particularly as helping people access to the benefits they become eitc, child tax credit, i wonder if you could discover the irs plan to expand these

programs and what effect you think this will left for ti represent? >> yeah, appreciate the question i think there is a concerted effort under our modernization plan become our a strategic operating plan, to me taxpayers where they are and in particular to the get how we can connect with vulnerable populations to provide them assistance. often volunteer assistance so that they have a better a better understanding of their tax obligations but also what credits they may be eligible for that you are not receiving. how do we do that? personal i think it's absolutely important we are on the ground. so we're using new funding to open more walk-in centers to extend the hours of those walk-in centers, to have saturday hours, to special events taxpayer experience of days. in this moment we can really promote with other local leaders the presence of this opportunity

to have a volunteer. and to let taxpayers know they can volunteer and be a part of our card of volunteers for doing such important work. i mentioned earlier in the hearing i participated in one such local event in baltimore, maryland, where u.s. local leaders, taxpayers, volunteers all talking about the role of these eitc individuals in ant organization and, in fact, that's having. we have taxpayers end up tell their stories and held by changing it was -- standup - to get the help. we need to do more of that local news was their company. that means we're getting more visibility into the services. simple things we can do like just, for example, we recently created a new page on a website called free help, where we're trying to highlight and make it as easy as possible for

taxpayers to learn more about these clinics in these volunteers. so there's a big investment and push to reach out to communities and make sure the irs is fair. i also mention protecting from scams because typically what so heartbreaking about these scams and schemes is it's very often the vulnerable population that are exploited. those that get the phone call from some of britain's be the irs and didn't have an account to call to look into it. they are scared and i want an they can be there for them to help them understand that this is a scam and you need to be protected from it and we want to be there to do that. >> thank you commission. i appreciate your testimony. i appreciate the chairman is indulgent you have a tough job. we have a difficult job, to correct in that they would all work the same people and continue to collaborate always to improve our service to you i think we're all better off.

>> i got to get doing enough credit in this hearing to the amazing workforce, the irs and you mention it, the work they did during the pandemic was, i would say for them they would say it's all in the brochure of being there when taxpayers need them. i think there's a lot of myths about the irs. one that is in essence i got there, irs employees care deeply about serving taxpayers. they are passionate about and it inspires me every day. >> thank you. i really appreciate the indulgence. i yield back. >> ms. fischbach. >> thank you, mr. chair. commissioner, thank you for being here today. just wanted to talk a little bit about the report and according to a recently released report from the treasury inspector general for tax administration, that's a long title, , and quarterly staff shot with irs, ira spinning through september 30, 20 ranking member neal. but according to that the irs has spent 3.5 billion of the ira

funds. of the 3.5 billion of ira funds extended and fy 2023, approximately 1.6 billion occurred in the fourth quarter of fy 2023. this includes approximate $464,000 extended and fy '23 for the direct e-file. i know that's been mentioned before but the e-file return system. now maybe say don't have to look up everything, but whatever you want to know is how the irs is deciding what to spend the money on, and why has only 4.5% of funds been spent, yet the irs keeps asking for more money? >> i'm quite comfortable here's an update. we are 4.7. in spent to date. we are spending it in particular early on an taxpayer services, hiring more phone assisters,

hiring more like assisters in our walk-in centers. we are updating our technology in our call center, adding more voice box and automated solutions to our call center. we are purchasing more scanning, modern scanning equipment so we are moving paperless. i mentioned we are so fight all of our notices, and we're doing outreach to taxpayers in underserved population. >> commissioner, that's all covered in the 4.5%? >> 4.5 billion come yes. as of the things going on in particular and spent a fair amount of time industry investigator infrastructure. >> are you planning on spending the ira funds on that? you keep asking for money yet only -- >> here's the issued and why were asking for money. i minted early but it's really important. our base budget, there's two parts of the irs budget to where the base budget to run our day-to-day train schedules i

like to say and then the ira money which all about modernization, closing gaps, putting taxpayer services. .. help us keep the lights on so we can use the funds to build tools taxpayers want. they want a call center with a callback center, they want a call center voicebox technology get things done quickly. they want web functionality that works like their only bank account to they can do transactions without having to call the in response to the

question, baby as you go on about those things you're doing, maybe you can help me understand the spending with the plan. >> with the operating plan? that lays out what i call a look and there's numerous items in their by various' objectives to modernize taxpayer experience to improve equity and enforcement in particular to make sure we close the gap on complex tax situations and invested modern technology so we avoid unauthorized access in the future. >> i will follow the questions but i do have one must question. last year you responded to a question i submitted on the record regarding your agency's ability to use the funds

congress is transitioning in this technology. your response noted progress irs was making with paperless process initiative, however i've recently heard repeatedly from a company trying to find a solution that would allow them to submit thousands of forms electronically instead of submitting these forms in paper copy. after a year of trying to work with your agency, they have continued to go to make meaningful progress on this issue. how is the irs using funds to proactively transition to a more efficient technologically advanced system for processing information? >> 102nd answer, this filing season with committed to making every correspondent response a potable and we've achieved that by next filing season we are losing to the returns and forms

your taxpayer is struggling with making investments to make it a reality. >> we may end up following up because given that they've been trying to work with the irs to make things happen, it's difficult so we may follow up. with that, i yield back. >> thank you for being here today, appreciate it. i like to focus on an issue brought to me by constituents, encountering issues with employer tax retention credit. i do want to say over the years my irs advocates in my office and i want to applaud that.

the funds they applied for while they applied in the ah rtc created it results in this claim trapped in limbo and he sees no end in sight trying as hard as he can process intent to levy taxes you can understand the conundrum there so it is hard for the irs to tempt constituent taxes in the balance.

what they can do to solve the issue for my constituents and what steps congress can take to be helpful as well the moratorium and how many claims are in the pipeline and timeline for claims filed may i appreciate you raising this, it's important we understand whether is constituent taxpayer and potential hardship waiting on an eligible claim in their facing an emerging hardship and that's why we were with

advocates to bump up to the front of the line those in a crisis situation and we have had some success, i think there is reference to that lesson want to learn about these situations because taxpayers me experience these solutions that we can do. i mentioned earlier we are making slow steady progress. which are eligible and ineligible. i would expect by the spring who would have finished work necessary to separate into the right buckets and list the moratorium. >> if there's anything congress can do or in particular a lot of

unique challenges in terms of the inventory and eligibility, incentives provided to certain promoters clogging the systems in the bill passed by this committee and house addresses a lot of that and we are appreciative. >> feel free to reach out to members of congress within our district office. >> thank you, mr. chairman. thanks for being here, it almost seems like you are enjoying answering questions which demonstrate you're pretty good

at your job so thank you very much, appreciate it. as you know, we provided irs with historic funding. the hundreds of billions of taxes owed but not paid and provide billings to modernize the irs and improve customer service is reduced call time systems and help more taxpayers and professionals settle tax issues. thanks to the funding the irs collected half a billion dollars in overdue taxes for delinquent taxpayers. i want to remind my colleagues tax collection a tax hike, it's about enforcing the law. the vast majority of the middle class family constituents w-2s and simple incomes pay what they owe and so should everyone else at all levels. thank you and we are encouraged by efforts to recoup unpaid taxes and improve taxpayer service, appreciate your work and leadership on this.

i want to narrow down to prepare regulations and let me delve more into it. the purple look which i'm sure you are aware of, stated over half of returns are done by paid preparers who don't have any financials to do so. i have a bipartisan bill taxpayer production prepared proficiency act, try saying that fast cash would ensure preparers meet minimum competency standards that would exempt credentialed professionals like cpas and agents or preparers that meet minimum standards from state education councils in a new standard and that is the focus of the bill. no the irs will be given full legal authority to regulate preparers, would you support the compromise that gives goodman competency standards?

whether it credentialing, the harm taxpayers and the president's budget each year included an array of different legislative changes that will enhance our ability to crackdown actors doing these things and taxpayer service and we would love to work with you on the right side of legislation. >> appreciate that, thank you. the authority to revoke tax

identification when there is misconduct. preparing each revocation. >> legislative proposals i've mentioned earlier within the president's budget last year have new penalties for when there is an appropriation and tackles the issue, whether that budget proposal aligned with your, not sure without details but it's a great start to have a conversation with mike okay, moving on tax credits, this committee passed legislation that would reduce our carbon

footprint. however, some of the edits expire at the end of this year and unfortunately we are still waiting for guidance on those edits and that is leading to some taxpayers and constituents reluctant to make investments. myself and claudia have been pushing to extend these credits so they encourage, not discourage resilient energy system deployment. in an effort to garner evidence of support from a bipartisan legislation, does the irs greater utilization in tax credits when they've had clear guidance for a longer period of time? >> absolutely. >> thank you, i yield back. >> thank you, commissioner for being here. you can answering all these questions. the united states system irs, i know california because i came

from california they are different than justice because when taxpayers audit starts, they have to prove they are not guilty. 13% of those making 100 to $2000, 25% of those making between 1 million to $5 million resulted in no changes. 15% of audit and tens of millions of dollars change and one of your first priority is millions and billions making

wealthy individuals, 1600 people connect millionaires and billionaires. >> two things, no change. >> is an imbalance and they are not paying unless enforce that they must pay. >> i'm glad they are not targeting that so thank you. >> the increased audits for evasion and that's good, what

steps are you taking to reduce these audits? costing time and money with no result in will want to the taxpayers alone. they should continue to do what they are doing this is about making investments in subject matter expertise to make sure we select the right cases and when we select them, we return in front of us we can identify where there might be pockets for systemic invasion. we have to get better and become more precise.

technology, analytics, some a.i. solutions have been put in place. >> the irs must have taxpayer information, a recent letter on employees and contractors so february of 2024 notes the irs is the only pain contractors the investigations were not favorable, especially 19 contractors in this investigation were not transferable, 2023 get they retained access to one or more because the irs did not take

action or disabled the systems so why should the fact that the irs conducts employees and contractors irs does not take action for the access of the failed area next. >> it's absolutely critical only those employees with contractors who require or eligible for access in respect to 19 contractors, we have resolved issues with those 19 contractors and stay physically there's no evidence the contractors have information of any kind. network access promoters no more

access for the data and we have been able to eliminate those. sometimes they still appear on a registry like for timekeeping so it is confusing. if the individual can't access that data and there is some kind of wisdom, they rightfully call us out but they don't have network access. we have to be as diligent as possible to make sure only employees with applicable timely access can have access. >> i have one more question but my time has expired so like to submit in writing. >> thank you.

>> an op-ed piece i like to enter to the record. >> in this fund, there is legislation and there appears to be a lack in the irs funding credit process. constituents the irs delays processing claims for audits for each lane. the tax credit claims the irs denied the credit with no credit offset assessing provider even though there's a credit. the irs released march 21 of last year get regulations to this day have not been finalized. when will the rule be made and

what we need to do to rectify this problem? >> i appreciate the question, if you will allow, i'd like to go back -- >> i don't need a history, just when are you going to be able to finalize the rule? >> i will get back to you as a response. >> the subcommittee chairman wrote a letter july of 2023 requesting copies detailing recommendations of 30 billing unprocessed paper filter information in march of 2021. these raise the question whether information reporting should be scaled back to reduce the burden site on taxpayers recording information the irs is not keeping you. the original response was requested by august 8, 2023, that's 192 days in review.

for the irs provide this documentation voluntarily or consider other means? >> i apologize. it's important responses to all congressional requests for documents or information from this committee -- >> 192 days, we have issues? >> i will go back and make sure it's forthcoming. >> i will get back to you with a firm date. >> sarcoma earlier the chairman's question on sentencing of the irs employees thousands of americans multiply the individual is before a short period of time than they should, how many individuals have had their information stolen?

>> i want to quote an exact figure, it's too many but it's in the tens of thousands. >> do you know for entities and individuals? >> sharing information we have the response ability reach out to impact taxpayers they've noted's the situation. >> can you look up the information? >> have you asked to return the stolen information? >> i believe the justice department has done that. i'll have up-to-date information on the. >> for some sensitive assistance with adequate control removal of data by users, how is it possible the irs does not know the data systems? >> i was the system and 2017 when this incident occurred. that's no longer the case. >> we have invested significant

time, energy and resources and dramatically changing data security profile. we have hardened security posture including introducing and implementing all necessary audit trails so this activity happened today from of the risk of succeeding is much lower. the probability of succeeding is lower. >> all those would be not just talked about but implement it. >> we made our way through most of it but it keeps growing because of the risk below it's a is always risk and we have to focus on training and control.

>> thank you, mr. chairman, thank you for being here today and we had a great discussion about modernization of the computer system and this is sniffing challenges and your applications are still in the wisdom and great policy, it's very obligated so i want to update a little bit, the irs living systems of how to allow user access data, i'm wondering, where are we at moving through the system, can you extrapolate on that? >> there's two main systems that underlie the irs infrastructure. individual master fire and that's where all the returns when they come in, that the transaction record.

we are close on the individual master fire, we are months away, probably april, may, june timeline but moving it into a fully modern environment, a vital step before he would go the club so to do list to get to the cloud, one more step that will make it clouds ready. >> when cloud -based? >> i know the next key milestone is in the april may timeline. how long from their to a cloud environment, i would have to get back. >> our data in going paperless. to file on paper if they choose but we want to convert that into

machine book before it leaves our mailroom and that's purchasing the equipment and process to make sure we don't have paper anymore. >> you mentioned a, b -- we are trying to beat these metrics as we move forward. >> critical path with our milestone. can you commit to the committee get the information about this is the first time we are hearing this, i would love to know again accountability, this is where we are at office quarter and next quarter. >> not only what tax funds but also what does it mean for

taxpayers? is a lot of benefits when we get there. >> a lot of education, all of these online tax companies as we speak right now it is online, so much more efficient and so much more and that's why i am pressing the issue. i look up customer service in today's world when you're on the clock, there's so many benefits and we see it in the data center and that's why i push this. once we get to a cloud -based system, we can do more a.i., talking about earlier, can you discuss how you use a.i. for enforcement and how can we look forward to that when we get to a cloud system? >> we are being very careful

with deployment of a.i. making sure we follow the right ethics and ensuring as mentioned earlier in this hearing no bias would be introduced. we are doing it exactly. there are key places we are introducing a i pray first in our call center so we are using checkbox so when you ask a question before you get to live, they are using language information to get through and you resolve the question and they are done and done more quickly so that's one more example. going back to this making sure we select the right cases for audit, there is sophisticated modeling that uses advanced math and data science, it means we are more likely to pull a case, the honest taxpayer doesn't get burned into dishonest taxpayer gets accountability.

>> again, pressuring as much as possible to modernize data should be 20 years, hopefully we can get done, thank you and i yield back. >> thanks for being here we are getting down to lower, this is where the real work gets done. just getting. wonderfully strong workforce for the irs, i have many colleagues and friends and everybody, i look at my time before congress knows a management consultant and i wish i could be working on this project instead of in a congressional role because to me

it would be simple. you have a bipartisan strong agreement modernization and my colleagues spoke a lot to it so i won't rehash but there is commitment there and should double down and triple effort to make this happen. we then assess the workforce needs so i opposed democrats built ira the huge expansion but when we pulled back we want to keep a focus on the modernization and we reassess and go about figuring out whether workforce needs and that's the way i hope we continue forward realizing heirs of common ground and we can't get anything done in the common ground and remove in the right direction. my constituents, it's painful your offices, we state share the same federal building and we have an excellent relationship

so thank you for that. i'll echo what my friend from georgia tech, is an area we can improve on and double down on the efforts. thank you for the comments on modernization and digitized, members of this committee, i've raised important., can you discuss how the agency is prioritizing these initiatives, what is immediately working on, something accomplished down the road but we could make it happen quicker if you get more collaboration from us concerned about the level of the direct program, could you share some thoughts on that? >> we want to have a big impact for taxpayers that benefit them so i start with the call center. this is a place where there is

historic attention, i think a lot of taxpayers end up coming to the call center hoping for smooth and better experience. the changes we can make not about hiring additional ones, it's about modernizing. you look at call centers and industries around the public sector organization, there are both a.i. and technology solutions that make it operate more smoothly. i go to web tools, we have online accounts where individuals and businesses and register and have their own personal account with the irs so think about what that is today versus your experience with the online bank account and we have

a gap. there are certain things you can do with the online account and your favorite bank online account and it is to close that cap. it's not just about fixing the website, it is entire technology infrastructure underneath the house to enable modern experience for taxpayers, that's where the focus should be. i think there should be bipartisan agreement we want julian the taxpaying process. regarding the tax credit, that come together in overwhelming fashion, can you give a sense, i've heard from businesses anxiously awaiting further claims to be processed, how is the irs working with tax preparers in the text community to ensure payments continue to process the legitimate one?

the taxpayer advocate if you have a hardship, we working to prioritize the biggest hardship. most of that is working with the taxpayer advocate in congress and others to prioritize those that are most because of hardship cases. that doesn't mean they won't be approved. sometimes you realize you're not eligible but we are focused on sure to get restitution.

>> i may be calling myself. thank you very much. >> i believe the top guys would agree with your statement earlier. >> the lower part closest to the peak and am proud we are all here. by increasing the credit authorizing monthly payments monthly of the tax codes deliver relief to american families. middle-class americans more money in the politics, in their pockets and claim circle, every republican congress with these provisions expire.

we did see progress from republicans last month we passed a bipartisan package. ensuring kids and families that need to credit the most. the overlooked provision the maid is so effective. monthly checks. they have monthly payments and we boosted monthly incomes to put their money back in their pockets. making payments monthly instead of annual power to change the

lives of working people all over the country and it sounds like something republican should support and if you listen to what they want from the tax code. given the progress made and lessons learned in 2021 the irs has much of the infrastructure acknowledged to rule out fast payments of the child tax credit if congress acts? remark about official moment for us to reengineer our systems and update our processes and go through the effort and resulted successfully. we now have the muscle memory should be able to implement that easier than the first time. >> one of the things i was informed about his it wouldn't cost that much so something i know would make a difference, some people say it's only 250500 or $700 a month, working people that is a lot of money to make a

difference to make ends meet. another aspect making the child tax credit effective is ensuring taxpayers claim the credit are treated actively. last year i wrote a letter requesting irs to further analyze and report listing data by race and gender can help us better understand how historically marginalized winners are impacted by racial disparities in audit selection. any information about the case of practices writing disparities and be taken to address disparities i mentioned.

>> di tc audits because audit volume was in the report is one of the main drivers. eliminating the disparities and further make sure we are constantly evaluating and stakeholders is this whole issue by independent report to partnering stakeholders operations along with this is article strengthening those partnerships in part of the

plan. >> when establishing a racial economic equity working group and the majority, some issues we feel is important because if americans feel the tax system is fair, they are more likely to comply. >> my colleagues have a wide range of question some concerns and i want to talk about the casework in my office. george has worked closely with my district office, a fantastic job. my understanding the new york delegations a total of 1688 open cases with the irs, anyone from my office. the number one issue is stolen returns.

i believe we have 14 current case with the irs with over $1 million in stolen returns for criminals removed and replaced the name on the check. it is obvious inside. it does not allow individuals or direct deposit towards issued and we are in this and the cycle. with one of my constituents having to check replaced three times. the irs does not allow direct deposit over 20000 or 25000. i understand these are not fully compliant to irs the department of treasury, a few questions and how we can work together to rectify this issue, you know the

cost, but it's costing the taxpayers. >> i don't have a mentor, i do think you've identified the rights of people to come together mocha head of the fiscal service and treasury that operates payments and platforms send the checks for direct deposit. i do have a lot of renovation around open cases. i've referenced it a few times, the taxpayer bill of rights and a quick resolution. they are having to receive a check three times and we are not eating that possibility. >> are you working with the postal service to address this issue? >> not aware that we are but i will get back to you on that. since all treasury issues school

i want to with leadership on the remark what options do you think are available for this tax return theft other than getting into reissued paper check and revisiting direct deposit issues, can you do that? >> i want to look into why that is reasonable. >> it should be an option if they want to move to direct deposit, but should be an option and there is truly a cut off a 25000 which i've not heard about prior so i want to work with you on this issue, i hope you will follow up so we can get to the bottom of this and maybe there's a follow-up meeting we can have with somebody from treasury to discuss this. million dollars stolen from constituents in my district, 435 members so it's a lot of money.

there are bad people in the world trying to take advantage of our constituents and american taxpayer and we got to modernize our system and keep up with this. >> that's where the government steps in and prevents be helpful. >> i do appreciate the readership behind me. i want to say that because i'm number 25 on this. i do want to talk a couple of issues and i will start, i think what is important to the future of our country, as a broker's and i want to talk about preserving the history of our

country, the conversation you and i had which is historic tax credits and preservation. to give you a minute to think about this, i would like to echo comments from my colleague from illinois relating to child support because that deadline is looming. i will probably revisit you with that. i trust you are familiar with the recent released will regarding requirements for digital asset. >> you know the rule is finally proposed, the iris by their own admissions oversee 8 billion in returns for justice one. to put it in perspective, the

2022, the irs received 5.45 information returns and with this proposed rule, the irs will receive 150%. we are talking about the amount of employees. as the irs equipped to handle this increase? >> it is a lot of moving pieces on these issues, we've issued the proposed regulations with hundreds of thousands of comments we are working to. i feel we are at an inflection in terms of digital currency and how to approach it with different perspectives of government. we have to be prepared for whatever the outcome of the regulatory process to have the technology and process to execute those regulations so we

will only propose is we have confidence on. >> thank you and i report amending the rule between traditional finances. i understand these roles go beyond what finance requires integrals reading more level playing field and the transactions increase irs time to focus on current admission and not shifting through unnecessary data. probably looks like i won't get to this one but we will follow-up. what is the timeline and permitting the rule regarding textual requirements, do think this is a realistic timeframe? >> the child to have, it is my counterpart treasury that i co- lead with so i want to make sure

we're on the timeframe. i think we got 100,000 comments under regulation so figuring out the conjugated issue and we don't want to get out in front given fair vetting so i don't have a specific date but i will work with treasury to get that. >> it is my understanding there is a short window for clients and traditional finance and to comply when implementing this role, the tradition being five years and as it changes 16 months, is there any reason for that? >> at my fingertips, i will have a full explanation but we will give you the underlying basis for the. >> i appreciate again given this new industry and new technologies and innovation, i would recommend you reevaluate the timeline to give enough time

to comply just as traditional financial market did. i will get back with you on the tax credits and preservation, it is very important to me but i appreciate your time. >> thank you, commissioner for hearing before us today and we look forward to the follow-up answers from the request of our members. please be advised members have a few weeks to submit written questions. those questions and answers will be made part of the formal hearing record today. with that, the committee stands adjourned. discharge. [inaudible]

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