manner. it's an opportunity now to reboot again. congress, i think has an interest in doing this. senator wyden and chairman hatch have been involved already in putting for the solutions to some of the things that the irs is struggling with, and i support those and i support what the house has done, but we think there's more to do as well, and this is why today i introduce with senator carden the protecting taxpayer act, bipartisan legislation to make the irs more responsive and accountable to taxpayers. we'll talk about that a little today. goals are to revitalize the organizational structure to increase taxpayer protections, better serve low income taxpayers, overhaul the irs

appeals process and strengthen the irs i.t. infrastructure. critical to the agency but i'd like to get feedback from you all on a couple of things. first, we completely rethink one of the key provisions of the 98 reform bill, when we originally thought of the idea of the board back in 1998, our idea was to create a board of directors for the irs that would guide the direction and the long-term strategy of the agency, provide private sector expertise and expertise along with experience and every administration since then really has not supported the oversight board, including the current one and as a result fallen by the wayside and the board suspended operations a couple years ago and technically one member left out of nine. we want to get the board functioning again, but functioning in a way that is intended and a lot to offer in terms of areas like customer service, i.t. modernization, budgeting and so on. that's one thing i want input on. and irs appeals process, you

recall in the '98 reform bill, 50 new taxpayer rights, including right to independent appeal and three years later, took steps toward codfying some of those in the taxpayer bill rights, including appeal. in recent years, these independent appeals have declined as more cases are sent to tax court amounting to a 70% increase since 2000. that's not what was intended, i don't believe and further the irs continues to issue new guidance and procedures and makes it harder for taxpayers to appeal the appeals process. need to talk about that today. overall, i think it's clear and the witnesses today that congress needs to build on the progress we made in '98 and engage in the new set of reforms to the irs. interested from hearing from my colleagues and the witnesses before us. i thank you for being here and would like to hear from the ranking member. >> thank you, mr. chairman, and want to thank you for your long-term interest in the subject.

i know you and senator cardon have been leaders. i think if the witnesses and we in the panel would look around, i think we all qualify as tax nerds. if we are in this room at this moment in time. senator thune has been a nerd, we know, but the notion of tax administration, it doesn't sound necessarily exciting, but in many ways, this is the front line how americans intersect with the federal government, and the effectiveness of that intersection. the customer service components. i think are really important. let's face it, acknowledge, no one loves paying taxes. but if we can make that payment of taxes more effective, more user friendly, more fair, i think a process that we have to take on as obligations as

citizens, at least become less painful. i want to commend the chairman and senator cardon for having a long, long history in the field. two topics they hope that we can also address is over the last few years, i've spent a lot of time looking at the changing nature of work. i think we're moving into an environment where classic w-2 full-time employment where folks work for the same firm for 35 years is a thing of the past. part of that driven by economic circumstance, part of that choice amongst many millennials. seen the emergence of new platforms, the so-called gig economy. how do we monitor that? understand and make a tax system that doesn't indeed individuals who are trying to become more entrepreneurial and actually utilize these services, utilize the platforms. how do we make the tax administration smoother and an

easier process. i believe as well that the idea that people on a going forward basis may not have a single income stream but multiple income streams, may be i.t. consultant, driving uber and renting out their apartment on airbnb, and frankly, the tax administration burden in this new economy is enormously challenging. i've called for two studies, one from the gao, one from the treasury department to try to look at the size of this workforce. i frankly believe that blf recent study indicated there was not much growth in this field, i'll accept that data, i don't think it was fully complete enough because i just think i've seen estimates from government and nongovernmental sources that literally show close to a third of the american workforce is receiving some of their income from

contingent work. so how we think about tax administration, how we think about almost even to the concept of a social contract. i would argue that means we need to move to a portable benefit system, if we move to a portable benefit system we have to have security on the tax administration side as well. other item that i think is an ongoing challenge is technology updates. we've all seen the irs make good faith efforts. sometimes those good faith efforts have ended up with perhaps more negative publicity than upgrades. something is wrong in our overall federal government when we spend $88 billion a year on i.t. services and 75 billion of that 88 is spent on patches and upgrades of legacy systems. my hope is we can get into the question of how could we create

a technology enabled modern tax system and if the congress has to bite the bullet and say we really need to junk some of our legacy systems and fully upgrade. i think we ought to have that kind of discussion. again, i want to thank the chairman for hosting this and, again, proud to call myself now part of the tax administrative nerd caucus as well. thank you. >> have you always been a charter member of that caucus, whether you knew it or not. and your points are well taken, and it creates a challenge for the irs. how do we deal with -- talk about the gig economy but also the economy where people are moving around and frequently, much less likely a single corporate entity. we're going to get right into it, caroline is managing director of the tax policy center at american university.

ms. phyllis is here, a member of the national association of agents. nita olson, the national taxpayer advocate at the internal revenue service. mr. john sapp of the tax advisory committee advising the irs and ms. rebecca thompson, project director of the opportunity network within the organization of prosperity now. thank you all for coming to testify. we are looking forward to it and interest in time. ask you keep your comments to five minutes and can you submit your written comments in their entirety for the record. ms. bruckner, start with you. >> good morning and thank you for the opportunity to testify today. my name is caroline bruckner, i'm a tax professor on a faculty at american university school of business and managing director of the tax policy center where we focus research on tax and compliance issues specific to small businesses and entrepreneurs. since 2015, we've focused on the small business owners renting rooms, providing

ride-sharing services and selling goods and services via business transactions coordinated online and through apps such as airbnb, uber, lyft and others. we published findings in a report titled short changed. the tax compliance challenges driving an ondemand economy. particularly relevant to today's discussion. a population of experienced self-employed taxpayers. we wanted to gauge whether or not they understood what their tax compliance obligation would be, particularly those who were working in the on-demand economy. our results were dismal. one-third of respondents did not know whether they were required to file quarterly estimated payments with the irs with respect to platform income. 36% did not understand what

records were needed for tax businesses for business and income generated for working with sharing economy partner. 43% unaware what they would owe in taxes and didn't set aside any kind of money, and 70% of respondents received no tax guidance from the platforms they worked with. for tax administration purposes, more than 60% of the sharing economy operators we surveyed did not receive form 1099 on platform income. that means that the irs did not either. this is because under current law, the form that's used for reporting electronic payments requires that a taxpayer have more than 200 transactions and payments exceeding $20,000 in order to receive a form 1099 filing form. however, the reality is that most folks in the sharing economy earn substantially less and used platforms as a way to earn secondary income. they cycle in and out of the sharing economy and on average per month earn between 533 or

$314 a month. this is typically a source of secondary income is not their primary source of income. as a result, the reporting loophole that exists between the 1099 miscellaneous $600 threshold and the 1099k, $29,000 threshold they are more likely to misreport income because they're not getting 1099. irs taxpayer data that in 2015, the number of filers penalized for underpayment estimated taxes rose nearly 40% from 2010 to 2015. up to 10 million taxpayers. this rise in underpayments corresponds to the rise in the sharing economy over this same period. however, since we released our groundbreaking findings and short changed, there have been a number of changes made in response. in august 016, the irs launched economy sharing tax center on

irs.gov. the national taxpayer advocate elevated as one of the most serious problems facing taxpayers and some industry platforms unprompted and though not required to have begun issuing 1099k's at $600 thresholds. house appropriations committee followed recommendations from my team and the financial services bill mandating the irs consider this problem and report back to congress. however, there is more work that needs to be done. congress needs to consider immediately a lining the 1099 miscellaneous and 1099k reporting thresholds for service providers and sellers earning incomes. the 1099 miscellaneous threshold which hadn't been updated since instituted since 1994 is just that simple. states have started to experiment with this last year and in massachusetts our informal conversations with 1099 preparers said that reporting catapulted over 100%

in just this most recent tax filing period. congress did update the due dates for the second and third quarter filing deadlines to make those required after the quarters end, not in the middle of the second and third quarter, so taxpayers don't have to guesstimate when taxes are due. finally the national taxpayer advocate has suggestion that the irs develop a publication that online providers can provide to platform service providers and sellers as part of the on boarding process. these are common sense changes that will impact the 2.5 million americans working for these platforms every month and in addition a very real problem that they've quantified to be a $2.63 billion problem. thank you, and happy to answer any questions you may have. >> thank you, chairman portman,

senator warner and senator cardon on improving tax administration and enabling the internal revenue service to fulfill mission effectively. i speak on behalf of the national association of enrolled agents. ea's are tax experts, licensed by the department of treasury, i might say we're also tax nerds. we are partners who work closely with irs personnel at all levels of the tax administration system. in the past decade, we've observed a decline in the level of irs service. superior customer service and tax practitioners are customers too will improve all irs functions. our written testimony proposes major reforms for oversight, governance, budget, workforce, taxpayer service, technology and irs's relationship with tax

professionals. an integrated approach will bring real measurable results. irs needs direction and resources to recruit high-level executives and staff. irs must attract, train and retain staff to administer the tax law while providing an outstanding customer experience. we suggest, one, grant irs a reformed stream lined, critical pay hiring authority, stip lath the areas of expertise covered by the program. two, create and fund a dedicated training division within the irs that streamlines the education process and ensures the tax law and administrative policies are taught and supported consistently. as part of this centralized division, research state of the art tax administration

techniques at the state, local and international level and incorporate what works into irs training and practice. irs training focusing on early, fast and fair resolution of tax disputes will ease the burden for taxpayers and for the tax professionals who serve them enforcement will not suffer but will be enhanced by an irs equipped to serve the public. no one is well served by delayed or protracted tax compliance. when taxpayers have a compliance issue, they deserve to discover and resolve it quickly without the hardship of additional penalties and interest. we offer several proposed changes in written testimony including many offered by the national taxpayer advocate. irs technology, we live in a world where everything is possible on a smartphone.

when we submit authorizations for our clients, we revert to a world of inked signatures and fax machines. taxpayers expect electronic solutions and the ability to work with us and the irs remotely and securely. our e-tek colleagues in recent 2018 report present extensively on secure technology solutions. we propose to facilitate earlier and more efficient dispute resolution. one, require irs to provide guidance on which private sector electronic signature options are acceptable for forms 2848 and 8821. two, fast track creating tax practitioner online accounts with secure and robust communication capability in both directions.

correspondents audit should not entail faxing large amounts of materials. delayed resolutions and potential increased penalty and interest. electronic communication will serve the public, the practitioners and the service. tax preparers have over the last years taken on an adjunct compliance off their roll. there is due diligence requirements are intrusive and frequently unreasonable. in our profession, time and risk are money, typically passed to the taxpayer. these changes will help us help the service. one, provide statutory authority to establish minimum standards for unenrolled return preparers. standards should include a one-time competency exam, required tax compliance background checks, setting and monitoring continuing education requirements and compliance

with strict ethical standards. two, create a dedicated executive level practitioner services unit that centralizes and modernizes practitioner service and leverages our reach. once again, i thank you for this opportunity and i look forward to your questions. >> chairman portman, ranking member warner and members of the subcommittee. thank you for your interest in know whiching the operations of the internal revenue service and for inviting me to discuss improving the agency. as you know, the irs restructuring and reform act of 1998 was signed into law 20 years ago this week. at the time, i was director of a low-income taxpayer clinic in richmond, virginia and invied vited to testify about the experiences of low income taxpayers at senate hearings. brought about many taxpayer protections, nonetheless, the

world of tax administration looks very different today than at time ra98 was passed. the irs desperately needs congressional support and direction to do a better job of fulfilling vital mission. in my written statement, i discussed the core challenges they believe congress and the irs should focus on to improve tax administration. i will quickly highlight the following points. first, irs oversight. ra98 contained two provisions that i believe were helpful to tax administration and have effectively lapsed. first, the irs oversight board and second joint congressional irs oversight hearings. i encourage you to strengthen the board's appointment process and permanently reinstate the joint hearings. second i.t. challenges. significant in 1998 and they have only grown worse. the irs reportedly has the two oldest databases in the federal

government, dating to the 1960s which it stores taxpayer data. it has more than 60 case management systems that house different kinds of data and those systems generally cannot talk to each other. there is no one system or repository of data that contains a 360 review of the taxpayer's activity and engagement with the tax system so often the left hand doesn't know what the right hand is doing. one recurring problem is the irs receives work that requires it to make significant i.t. updates in the short term and limits ability to pursue long-term modernization efforts. i believe the irs needs a separate stream of funding dedicated to long-term improvements, particularly involving i.t. systems. third, funding. as the irs's workload increased from fiscal year 2010 to 18, it's appropriated budget has been reduced by 9% in straight dollar terms and by 20% after adjusting for inflation.

because of these reductions, the irs doesn't have enough employees to answer the phones, to conduct outreach and education or to provide basic taxpayer service. the compliance enforcement side of the house have been cut by even more. irs needs advocate funding to do its job effectively. fourth, performance measures. there is an old adage that you get what you measure. during the 2018 filing season, the irs's benchmark level of service was reported to be 80%, but that measure only reflected the minority of calls directed to employees. it ignores the majority of calls to automated response system which the irs routes taxpayers to without giving taxpayers a choice to speak to a live assister. overall irs employees answered only 29% of the telephone calls it received. fifth, taxpayer service. private industry and experts

say the number one driver of customer satisfaction is the first contact resolution rate. yet the irs does not measure this rate consistently or across every service channel and ignores significant data showing taxpayers prefer multiple channels for different types of interactions. sixth, use of big data and automation. the irs regularly uses technology and big data to identify fraud and noncompliance, but fails to use technology to help taxpayers get to the right answer or prevent or minimize harm to taxpayers. the irs could use the data it has inhouse, for example, to identify taxpayers who are at risk of economic hardship and therefore are highly unlikely to be able to pay basic living expenses if the irs collects back tax debts. this approach could be applied when selecting cases for private debt collectors. seventh, local presence. research has shown personal contacts produce better

response resolution and agreement rates than less personal contacts and also result in better educated taxpayers. yet 12 states do not have appeals or settlement officers within their borders and 14 states do not have employees to conduct outreach and education to small business and self-employed taxpayers. of the 362 taxpayer assistance centers, 25 are not staffed and 84 have only one employee. moreover, a trained and professional workforce is paramount and the irs spent only $489 per employee on training in fiscal year 2017. a level that is about one-third of spending eight years ago. thank you for inviting me to participate today, and i would be happy to answer any questions you may have. >> chairman portman, ranking member warner, other members of the subcommittee, good afternoon. thank you for inviting me to testify at this hearing on

improving tax administration today. my name is john sapp, pleased to represent e-tek. e-tek was created by congress in 1998. we had a diverse membership of individuals from the state department's revenue, private industry, tax preparers, payroll companies and consumer groups. we hope to provide a diverse perspective on electronic tax administration and impact on taxpayers to the irs. while we were initially focused on achieving acceptance of electronic filing of tax returns and the is backed that would have. etax focus is making recommendations on improving efforts of the security summit. security summit is a tremendous story of the irs where the states and the private sector to fight id theft and deal with security issues. as we evaluated electronic tax

administrations, high-level issues have become evident. first the need to supplement irs delivery channels in phone or in person is obvious. electronic services would be expected by individuals and businesses but everyone expects to be able to talk or interact with a real person when that's necessary and second electronic services operate in a high-threat environment. fight against those bad actors will never end, as we closed one door on security, criminals look to find another. third in order to be adopted, electronic services must be secured, easy to use and integrated into existing workplace. a good example of this is electronic filing which has been integrated into tax software solutions and leverage tax professionals by taxpayers and tax professionals. another example is if a taxpayer uses enrolled agent integrating features into that

channel, that has worked very well for taxpayers. number four, electronic services, we thought about four principles for the taxpayer facing systems. the first would be electronic services must be secure and as such the irs should have the authority to set and enforce minimum security requirements for the tax system. in our 2018 report, we identify potential gaps in the application of the ftc safeguards rule, the most prevalent security standard for the tax system. it is unclear if the irs has the authority to set the standards for tax preparers, particularly because of the loving case and others which specify limitations to regulate tax preparers. second electronic services must be accessible or usable for tax preparers or professionals. certain segments as i'm sure you know may not validate themselves digitally using the

secure access channel because they don't have a credit card or the right home mortgage or the inability to complete cell phone validation. those inefficiencies create cumbersome for taxpayers. consider the options to expand in person identity-proofing opportunities. irs may be able to leverage existing physical locations for this purpose and speaking to authenticate who the taxpayers are who they say they are before they interact with the irs. they could leverage government agencies with the larger physical presence such as the social security administration or more dramatic idea that we thought of was to utilize authorized tax professionals through a trusted third party methodology similar to the current acceptance agent program used to validate taxpayers in need of itn. those who don't have a social security number but have tax filing obligation. the filing of powers of attorney on behalf of taxpayers which now is a manual process

and should be electronic. solving the signature on the 2848 and other forms is a key component of that. third, we support the issuance of an identity protection p.i.n. for all taxpayers that would ask for it and the account lock and unlock features so taxpayers, third, electronic services, taxpayers should be able to control their taxpayer account and access to that account. and finally we recommended the irs take a collaborative approach it develop the online and mobile services. security summit and electronic filing success a great example of the benefits of the collaborative approach where id theft and electronic filing is the norm. thank you for the opportunity to provide my thoughts and i would say i would like to answer any questions but i'll be available to answer any questions. [ laughter ] >> chairman portman, ranking member warner and members of the subcommittee.

thank you for the opportunity to testify before you today. on improving tax administration, it is a great privilege and honor to speak with you about the vita program. i'm the project director of prosperity now opportunity network and in my role i lead a national network of more than 2500 stockholders, volunteers, community, corporate and philanthropic partners and others. a network is a convening body for them providing a way for them to connect to one another, we provide tools, resources, information and capacity building support to strengthen vita programs, ensure quality return preparation and help to extend the reach of the vita program to more low income americans. however, the views i express today are reflective of personal experiences as a vita volunteer and program manager. i'm proud to stand among the ranks of the 55,000 tax nerds who volunteer and give our time

to help low income americans. for the last two years, i've served as vita volunteer, co site coordinator with the northern virginia cash club campaign in prince william county. every saturday morning throughout the tax season, i rise from bed earlier than i would like to and make my way down to the prince william county building joining alongside 10 to is 12 volunteers, and 55,000 vita volunteers nationwide to help low income hard working americans meet civic obligation by filing a tax return.

we gave as volunteers more than 60,000 hours in training and tax preparation, and we brought back almost 35 million dollars in federal refunds to our state for free of charge. but virginia's special, but it's not unique. the same things happened in ohio and in delaware and in rhode island and in maryland. every year thousands of volunteers who are giving their time. in addition to preparing and filing returns, many connect the families that we serve to public benefits, financial education and other financial capability services like financial coaching and credit building providing strength and support to family's

financial future. as volunteers, we endure rigorous training that can sometimes go as long as 24 classroom hours. we pass a certification test every year so that we are well equipped to translate what can be a daunting and complex tax code for our clients, into a meaningful representation of their lives. we follow irs prescribed intake interview and quality review process for every return that has consistently yielded unparalleled results with accuracy rates above 90% for the last several years and 93% for this filing season. but for all the great work that we do, and all the people that we serve, two things remain lacking: first, after nearly 50 years in operation, the program has never formally been authorized by congress. formal congressional authorization will put the program on sure footing, demonstrating that you recognize the value we bring to the american people we serve and

acknowledging that we should keep up the good work. second, the program lacks adequate funding. since it's beginning -- since its beginning in 08, it has grown. as i go about my daily routine, everywhere i look i see potential clients. they help me to get to work on the commuter train. they drive the metro. they are in the grocery store helping me make purchases for my family. every week when i went on vacation, they were in the hotels, airports, all around me, helping me to achieve my goal. some of them draw social security and still work like the cafeteria worker i helped who works at my son's cafeteria at my son's school who used her refund to sustain her household over the summer because she doesn't work then. there are millions like her and the others that we help every year. the low income elderly disabled

rural underserved limited english speaking populations who could benefit from our services, but we're at capacity and lack current sustainable funding. by making the program permanent, with 30 million dollars in funding, it's the least thing i think that we can do for all of them. thank you chairman portman and rak ranking member warner for providing me this opportunity and i'm happy to answer any questions you may have at this time. >> thank you, ms. thompson. as you may know in the legislation we introduced today, we authorized for the first time. so senator warner has got another commitment. so i'm going to ask him to start on the questioning. i will postpone mine. again, i'm happy at so many colleagues who came. we come and go in this place. we all have different hearings. don't take offense, but senator warner, would like you to start with the questioning. >> mr. chairman, thank you for that courtesy. i do appreciate it. i want to try to get in three

questions so i'd ask for relatively rapid responses. as we look to the economy, as we looked at the new on demand type services, in the past, there's been a fence that companies, platforms, have been unwilling to provide any benefits, perhaps even tax planning benefit because of the concern about so 1099, versus w 2 and labor classify case issues. -- classification issues. have you found that in your research, perhaps sliding from independent contractor into traditional employee has restrained the companies and platforms from helping their workers get their tax planning assistance? >> anecdotally i found that to be true. after we released short change, i had an opportunity to talk to several different platforms, lyft in particular and convince them and chat with them how

about how the 1099 k filing rules did a disservice to their service providers. they took it. they took my research on, internally reviewed it and then made an executive decision that they were going to provide 1099 k's at the $600 threshold rather than the $20,000 threshold because it was the right thing to do to give the taxpayers the forms they need >> have you seen the same with uber, air bnb, any of the other platforms? >> i have had informal conversations at several industry conference events that i speak at and what have you. and it would be -- i think the general consensus is it is not required by law. we are consistent with the law. they are right, they are acting with the law. it is the law that needs to change in order to get the tax pairs the tax forms they need. -- taxpayers the tax forms they need. >> i look forward working with you on changing that. as somebody who spent the last few years digging pretty deep into this area, would welcome the opportunity to work with you to see if we could force more of

the platforms -- or urge more of the platforms to participate even before we get to the whole question of how we create a new social contract around a portable benefit system. i commend your work and look forward to working with you more. >> ms. thompson, ms. olson, you have also done some of this work in virginia, and ms. thompson i appreciate the 121 different sites in virginia that you are doing. i saw that number 60,000 hours, i applaud senator portman's legislation that actually authorizes, long overdue. as a budget nerd and tax nerd, is there an ability to almost give you a formula that for every hour worked or for every individual helped, we increase tax compliance by y? is there a formula here that you can almost break down to an individual or an hourly basis? either of you? >> i don't think i've seen any research on that, but i just

made a note about that to take a look at that myself in my own organization. if i may make a point about the program, you know, i think going to the sharing economy, few are available to do simple schedule fee preparation, so in particular if you have people who are workers with w2's, but then they have small schedule fees, that becomes important, and so the legislation authorizing it should clearly say that one of the tasks that they can do are simple schedule c's within that income level or schedule f's for that matter, there are many small farmers that are just doing family home stead things. >> ms. thompson, do we get schedule c, schedule f training at this point within the program? >> there is currently limited training for schedule c's for programs to be able to provide some limited services. for schedule c's. but there is additional work that's needed. and with regard to your first question, i don't have an

estimate, like ms. olson stated, that's something that we haven't looked into, but the number that i do have is for every dollar federal dollar that's invested in the program, it costs about $14.74 per tax return for the federal government. >> i guess what i would hope, you know, under senator portman, senator cardin's leadership, if there was a way that we could get that down to say for every federal dollar spent, actually federal tax compliance goes up. if we spend x, it goes up y, that would be i think a helpful argument to convince our other colleagues. last couple of seconds, i would love to see a day where we felt the irs was ahead of the game on its technology upgrades. i feel like we're always chasing. one of the concerns i have and looking at this from the banking provision is when we have enterprises like equifax and others where we don't have a customer relationship, yet they have ability to look at all of our personal information, that increases the ability for tax fraud if there's violations

there. have you thought about what kind of liability regime or other incentives we ought to put in place for those enterprises that have access to our personal financial information? that would be my last question. i appreciate the courtesy, mr. chairman. >> senator, i haven't actually the considered the liability aspects of that. i will say it is a liability for the government in general, whenever a tax refund is misappropriated and sent, you know, to a criminal or to an inappropriate party, one of the advantages that the irs has is they do diversify the entry points to include the in-person and on-line authentication. one of the challenges with authentication obviously is we have a very diverse population. as long as the united states has a diverse population, as we have, you know, the weight that they want to interact with the irs -- the way they want to interact with the irs.

how an individual may act with an equifax, they can choose to do to a different credit reporting agency. like i can choose to go to a different bank. i can't choose to go to a different irs. the challenge with the authentication, it has to be secured and also diverse. >> i'm not sure you get to choose your credit reporting agency. that's not a relation we can choose. again, i thank the chairman for the courtesy. >> thank you. senator cardin, what's your timing? >> to proceed? >> i was asking you about your timing. >> my timing is always perfect. >> are you rushing? i won't disagree with that. in that case, let me make a couple comments and ask a question, and then we'll move on to our others. i appreciate all my colleagues who came today. they all have other places to be. great testimony.

in your oral and written testimony, you both talked about the oversight board. i want to get some input on that today. if we could start maybe with you, in your written testimony, you recommend a lot of changes designed to revitalize the irs oversight board as it's called now. we call it the management board in the legislation, senator cardin and i put forward today, to make that distinction, because there is a lot of oversight -- might be viewed as overlapping. you mentioned the board should have the power to both review and approve all operational plans. the board currently only has approval pow over long-term strategic plans -- approval power over long-term strategic plans. in our legislation we sought to be more explicit in the type of plans that they would be permitted to that you approve including the annual performance report, which i think is really important and the plan that's submitted is part of the budget request. what do you think the value is of giving the board more direct approval power over a wider range of operational and strategic plans, and then ms. olson, really the same question to you, you were there

at the outset, as we tried to establish, you know, what the priorities were for the oversight board, but if you could respond to that, what is the value of giving the board more direct approval power over this wider array of operational and strategic plans? >> well, i echo what you say that the irs has plenty of oversight, and i applaud the change of language to a management function. i see the alignment of the higher level management function the operations and if you will rewards for successful outcomes to be highly correlated and, you know, i don't think you would want to have oversight or management function without having the power to also monitor operational functions because you could conceivably have one

point of view from the top and then if operationally the service is going off and doing something else, you would never have that level of implementation that you want. and then the other end of that would be assuming that we do have sound management, good operational function, and we have high level executives who are in charge of making those successful outcomes that they would then be rewarded. and the board would have opportunities. >> that's why i saw in your written testimony you suggested that the board be able to approve bonuses as an example to high level executives. >> correct. >> due to a line of performance measure, the board's responsibilities. >> uh-huh. >> ms. olson? >> as you referenced, i've been subject to the oversight of the board as the office of the

national of the taxpayer advocate. and i found the board in 2001 to be composed of very, you know, very engaged individuals with a variety of experiences so there was a professor from a law school that was very interested in training and other methods and produced the best report that i've seen on irs training in the 17 years i have been as a national taxpayer advocate. there was a representative of small businesses from a rural -- from iowa, you know, with agriculture, and he was a very strong advocate of what was the irs doing about small businesses. and you had people skilled in technology. you had this really good mix of talent. the battle came when i believe the irs leadership and treasury did not support the board and viewed it as intrusive, and that battle really came to a head when the board a few years in tried to weigh in on irs

performance measures, and i think that's vital for the board if it's a management board with experience and expertise from outside the irs to have a voice in those measures and even approval of those measures. and the irs really fought that and that became really the part of the demise in my opinion of the board. so as i look forward to what it should do, i think looking at performance measures, holding the senior leadership accountable to delivering on those measures, but also are we measuring the right thing? and comparing it to private sector measures, etc. that's vital for the board. >> yeah. well, i think those are very helpful points. and you're right. i mean, initially we talked about expertise, and that's why we had those individuals included, everything from service providers to technology to small business people. you mentioned some of the really dedicated people who are on it. and then we also want to

experience just because the irs sometimes lives in its own bubble as many federal agencies and departments might, and so to have that experience to be able to come in and help the irs to be able to do its job better particularly in the light of the fast-changing economy we have now, as has been talked about. the final one which was very important was continuity, accountability, but also continuity because every deputy secretary, every new irs commissioner, every sometimes secretary comes in with a big new reform plan and sometimes you mentioned the right hand doesn't know what the left hand is doing. sometimes we don't have that experience and continuity. that's why we did staggered terms. i'm not telling you something you don't know, ms. olson, but maybe trying to reiterate that this is an important opportunity for us i think with reform to look at the oversight board, why it is not working, how it could work better and to provide what i think is still needed which is all those things, the expertise, the accountability, the experience, and the --

continuity -- and the continuity of time. we will get into this deeper. our legislation doesn't go as far as some of the suggestions you are making your testimony here today but for your help in trying to help us improve the administration of the internal revenue code. i think i want to thank senator portman for 20 years plus inviting me to join him on his irs crusade to reform, inviting me to join the administration on the tax nerd caucus, i thank you for that. [laughter] >> it's been a challenge and it is interesting because ms. olson, we have talked about

this, but one of the chief problems is resources. it is hard to get consistent attention by congress to give the internal revenue service the resources they need, and historically it's been the ways and means committee, and the senate finance committee that has taken up that cause with the appropriators and omb to make sure these funds are available. now i know this budget year is a little bit better. that's because of a new tax law, not so much of a found religion for giving the irs the type of resources that they need. so i think part of it is to make sure we have the resources. and i think the chairman, ranking member bringing up the challenges that we have today with the changing of our economy. i think senator warner's point there is absolutely on target. we have also the challenges of technology and how we use technology that's a constant

change, and the irs has never caught up, and as many of you pointed out, they are trying to deal with current problems, rather than to deal with the underlining capacity to use technology, and then i would add a third, and that is congress changed the law. i'm not saying whether it's good, bad or indifferent, when you change the law, it is going to add a challenge to the irs. they are going to have to deal with that as they are dealing with all these other issues. so i invite you to -- and your testimony covered a lot of the points that are included in senator hatch and widen's legislation, in legislation that i have joined senator portman following and the bills that have come over to us from the house, but i invite you to do more granular, please take a look at these provisions and give us the input beyond just today's hearing. i want to talk first about training. thank you for mentioning that.

we do try to help with more permanent commitment by irs to training the personnel to deal with these challenges. but let me ask all of you a question, on two points that are in the portman cardin bill that there are different views on. so i would like to get your thoughts. one, to reinstate the authority of the irs to regulate paid providers. and the other, to deal with private debt collection. our legislation takes a similar approach as to what the house did in limiting the private debt collectors to those -- not using private debt collectors for those that are of modest income. if you would care to comment about either one of those two provisions because there's been some different views in congress on these points. ms. olson? >> well, as you know, we recommended back in 2002, you

know, to create some kind of regulatory minimum competency regime around the unenrolled return preparers which i had been one for 16 years. so i knew what i was talking about. and i really think that that's vital to the future of the irs. we have, you know -- partly because we have a -- we are running so much through the internal revenue code in terms of refundable credits and very complicated provisions so we have unsophisticated taxpayer going to preparers who do sven any kind of training -- you don't have any kind of training, no accountability, won't lose a license, whatever, establishing competency standards for them and requiring them to come into the irs and declare themselves is vitally important for identity theft, for refund fraud, for accuracy of returns, etc. on private debt collection, you know, my focus has been that

congress has already spoken about how it wants the irs to treat taxpayers in the collection context, by saying that if you are levying on someone, with an economic hardship, you have to stop levying on that person. an economic hardship is defined as not being able to pay your basic living expenses. congress has mandated that the irs create guidelines for offers and compromise. that came into in 98. those guidelines are based on basic living expense. what i have said to the irs is try to proactive screen out these tax pair -- taxpayers not just in private debt collectors, but certainly in private debt collectors. >> i was thinking about those who are subjected to the $400 fee and there's really no ability of the irs today to regulate, although you are very

much subject to that training. >> absolutely. our volunteers go through extensive training. there is annual certification. we have two opportunities to take the certification test and pass it. after that we suggest other volunteer opportunities for them. and like i mentioned, they are volunteers. what i will say is when i go to get my nails done, my technician has a license. when i take my children to get their hair cut, their barber has a license. that's an interaction between myself and an individual, but yet, paid preparers and i can tell you that we as volunteers see overwhelmingly and we spend a lot of time and energy amending returns and correcting the mistakes and errors of paid preparers, and particularly low income families are the ones that are subjected to those errors. we spend a lot of time correcting the mistakes and helping people to come into compliance for preparers that aren't even regulated for

something even though something as simple as a barber or a nail tech are. >> thank you. appreciate it. thank you, mr. chairman. >> let me first thank ms. thompson for -- you make a terrific advocate just to begin with, and the program is so important. i can't tell you how many families in rhode island depend on the program and depend on the earned income tax credit and the whole state's economy is lifted when those returns come in. so i just want to appreciate you. my question goes, however, more to the end of the income spectrum that you do not represent. and primarily i think probably asking the others. what i'm interested if you look at for instance the corporate income tax generally, you see corporate income tax revenues

declining steadily as a proportion of our national federal tax revenues. when i was young, it was about, you know, steadily about 30% of federal tax revenues. now it is down around 10%. so as a share of, you know, everybody's contribution to funding our government, corporations seem to have managed to evade a lot of their responsibility, and now only provide 10% of our revenues. relatedly perhaps, the irs publishes information on its highest income earners, the highest income that they report on, the top .001%, which amounts to a total of 1400 individuals who earn on average across the 1400 tax returns 152 million dollars in a year. most people don't dream of getting 152 million dollars if

they win the lottery. these are people who earn it in a year. yet when you look at what the irs reports about their contribution to revenues, they are paying a 24% on average tax rate. when you go back to the normal people and look at who pays a 24% tax rate, you get to people earning $78,000 a year. so a nurse, an occupational therapist, people like that. my concern is how much the essentially free riding of big corporations, many of whom pay no taxes at all, and the relative free riding of these super high income taxpayers is a function of the irs's capability to deal with them. obviously they have the ability as very high income, very wealthy interests to come to

congress and get favorable tax treatment passed legislatively. and there's not -- you can't blame the irs for that. we're to blame for that. but to the extent these people or these organizations have enormous clout to manipulate the irs, to apply political pressure to the irs, to simply outgun the irs, i'm interested in the extent to which you think that that latter problem is a factor in the relatively low contributions of these very high income entities. i'd be happy to take that as a question for the record and let you just write something into us so you have a chance to reflect on it and get your thoughts. one particular sub aspect of that is the question of false statements. there's a weird wrinkle in irs false statements in which the

department of justice won't prosecute a plain vanilla false statement case that relates to tax returns unless the irs has made a referral, which gives the irs a choke hold over those false statements, and i'm looking separately into how often the i rsrs actually makes those referrals. i believe with respect to 501-c-4's, the referral number is exactly 0 despite evident discrepancy between what they report to the irs and what they report to the federal election commission, for instance. that would be a specific place in which i would be interested in your thoughts as whether the irs as an institution has been disabled or outgunned in its enforcement efforts and what effect that would have on our overall revenues were that not the case. those are kind of big questions.

i know that my time has expired, but if you would get back to me with a response for the record, i would be very helpful. i will let mr. sapp and ms. thompson be excused from that. i don't think your taxpayers have that problem, ms. thompson. i don't see this as a electronic or technical thing, mr. sapp. thank you, mr. chairman. >> thank you, senator whitehouse. senator? >> thank you mr. chairman. thanks for holding this hearing. i wanted to ask ms. thompson about how we continue to do simplification and the volunteer income tax assistance, vita tax counsels for elderly are grants to local communities. i think there are a lot of people in our state that have used that, you know, focusing on underserved communities, rural communities where they may not be able to get larger

assistancefassistance ful -- assistance. they helped prepare a lot of returns and very helpful. i wanted to say, though, that i feel like the forms for particularly these areas where people are looking for education and the earned income tax credit, child tax credit, american opportunity tax credit, all those things are good for simplicity purposes. let's just say they should be more simplified. my colleagues senator brown and heller have a bipartisan amendment to increase funding for programs which would help support more simplification on the tax forms. do you think that's a good idea? >> simplification of the tax forms >> information to make it easier on these deductions. >> absolutely. thank you for your question, senator cantwell. we have tremendous partners across the country, particularly i'm thinking of partners in

seattle, washington, one of our largest partners. one of the things that taxpayers get when they come to vita sites is education. referring back to your question earlier, senator cardin, our volunteers go through extensive training and certification to be able to deliver education. sometimes it comes in the form of a financial education. but at the end of every return, there is a quality review process that those -- the taxpayer actually gets an education about how their life translated into that tax return this year. of course if the forms are simplified and the process is a little bit simpler, yes, it makes it easier for everyone. notwithstanding the 2017 complexity and the prior year complexities and whatever the complexity looks like in the coming years, with the restructuring of the irs and the tax forms for 2018 and beyond,

our volunteers stand ready. we are the tax nerds. and we gladly give our time and stand ready to learn and undergo the training that's necessary. i think it's important that they have the training and that information is available timely so that we can get that information so whatever it is that we are able to communicate that to the low income and elderly, disabled, rural and underserved communities, as we have done for almost the last 50 years and we're able to continue to do so. >> we like nerds where i come from. [laughter] >> but i do think we need to continue to communicate and amplify, think of ways to just generally make the public aware of those deductions, and so that's the -- i think the key point. but thank you for those grants to those communities because we think it is very very helpful to them. thank you, mr. chairman. >> senator, could i just comment on that? >> go ahead. >> one of the challenges and i

think one of my colleagues brought it up before, that paid preparers experienced is they have a due diligence checklist they have to go through with the taxpayer and a lot of times that can seem antagonistic to the taxpayer and discourage them from reclaiming some of the fundable credits. one of the recommendations in general is the irs clarify what those due diligence requirements are for the paid preparers, that would include the vita folks, what is the documentation requirement for the paid preparer to meet those requirements. educated both on the paid preparer side and the consumer side. >> if i might add, you know, my office has made legislative recommendation about how to reform the earned income credit and the family status, family status provisions because frankly the irs struggles with making an incredibly complex law simple and understandable, and any time you deal with family, families are not simple or understandable.

and so we've tried to look at provisions from around the world as well as irs data to come up with ways that you could come up with a few more safe harbors so you wouldn't necessarily have to go through intrusive inquiries that would require legislation but i think there are ways to make it a little bit better without increasing errors and things like that. >> i would like to see those recommendations >> if i may add one thing, senator cantwell, preparers, we have all sorts of varying practices, and many of us have walk-in practices. some of us are taking clients by appointment. so it's sort of all over the map. and often we're put in the position with these new due diligence requirements where we are asking questions of clients that we've known from before their children were born, about their children simply so that we

can check all the boxes and say that we've asked the questions that were required to ask. i do agree with what mr. sapp said. it's tremendously burdensome and it creates a little bit of anxiety with the taxpayers who are coming to us for help. so, you know, we've -- i know it's a tricky thing, but if there were some way of mitigating, you know, balancing the requirement for knowing our taxpayers with, you know, some kind of nod to people who have known their clients for 20 years or more, it would be helpful, and i think it would aid efficient tax administration. >> definitely believe that on this end of the tax code, that helping people understand and qualify for these things so they can make the right decisions is very important. so thank you, mr. chairman. >> thank you. good question. and with regard to the forms and

simplification, you know, so much of that doesn't require legislation. it requires the irs focusing more on simplification, and i think the taxpayer advocate has made some recommendations along those lines. but again, looking to the board and customer service, which is one of the top priorities that would seem to be a natural thing that a real management board would look at and say, you know, how do we simplify and ensure taxpayers understand this across the board, which i think is always, always helpful and congress has not made it simpler as senator cardin said because there's now a transition going on for things like closely held corporations trying to figure out how those new tax revisions work and those regulations are coming up. so there's an opportunity as well. on electronic filing, let me just make a point, we have talked about a lot of negative aspects of taxpayer service, including your extraordinary

comments this morning ms. olson about the number of phone calls that actually get through. you said really it is only 29% of calls received are answered by an individual. 29%. one place where we have made great progress since senator cardin came up with this brilliant idea 20 years ago, i will give him credit because he was complaining about having been dragged into this process, which he was, no, but seriously, electronic filing has really been successful, and i remember at the time, our goal was 80%. >> uh-huh. >> we got to 80% by 20007 probably. -- 2007 probably. i think we're close to 90% electronic filing. that's a huge success because not only is it helpful to the taxpayers, it is obviously helpful to the system. we found when it was done manually, there were so many errors that ended up cost to the taxpayer and to the system. that is far less likely to happen with electronic filing. so that's a good thing.

and mr. sapp, you talked earlier about some of the difficulties of managing that balance between, you know, e-services providing taxpayers ease of access but also security and authentication in particular. recent reports showed that only 30% of taxpayers had tried to set up an on-line account at the irs were successful in doing so because of the tough authentication procedure. i'm not sure how that balance is going, with only 30% of folks who are able to set up that on-line account. how can the irs strike that right balance between customer service and protection between security and authentication and what way would the irs incorporate comments, ideas more effectively from stake holders? how can we get them to work more with the outside stake holders who are very engaged in

electronic means of communicating, either with the irs or otherwise? how do you feel about adopting uniform standards on the use of private sector electronic signature options as an example? would that help this problem? >> we have evaluated several different options for how the irs could authenticate -- because that's the big challenge is how do you authenticate someone electronically. as i mentioned before, with the diverse population in the united states, with differing access to internet, with different access to phones, you know, it is very difficult solution to provide. 30% may not be a bad number for that particular type of authentication. however we need to get to 100% of taxpayers controlling that account and having access to it. and so i agree with you, that the irs 100% has to solve that issue. one of the things that i would consider is the electronic filing program, where the irs has taken that collaborative approach, where they brought in stake holders from the private sector to help be that front end

for the taxpayer. so one of the things that we discussed, and i mentioned it in my testimony, was trying to leverage for those folks that may not be able to authenticate through standard channels, and not everyone today can authenticate at a particular bank or authenticate at a particular vendor relationship they may have, so they may need to do it in person. so we did recommend that they consider leveraging tax preparers and have those preparers go through a vetting process so that could become trained in how to authenticate a taxpayer and allow that taxpayer to leverage that authentication to access their secure services, similar to what happens today with that certified acceptance agent, and that in person when over half the taxpayers in the united states today are choosing to pay preparer, that in person appointment could allow them to authenticate with their tax preparer and have access to their services that way. again, one of the things with that is the irs should have the ability to regulate preparers to

ensure interaction is secure with the paid preparer. >> senator portman, i traveled around the world meeting with other tax administrations and looking at their on-line accounts, united king dom, one way to sign into your taxpayer account is you are directed to amazon or your bank, somewhere else that you already have an on-line account and you sign on through them, and that message is sent back to hmrc, that you are who you say you are, through their verification process. and that seems to work very well, that they have a much higher ability to get their taxpayers into accounts. australia has put into effect voice recognition. and it's in its infancy, but i think that's very important. that's very interesting. gao just published a report in june that looked at different authentication methods, and some of those methods are discussed there. the other thing that i've seen, and i've just raised this with senior leadership of the irs is

they have the same level of security for pulling -- if you are trying to get into an account to pull information out, as they do sending information in. so, you know, tax payers who just want to send an e-mail with a picture of a document, that's necessary in exam, has to be able to in a pilot sign on to an on-line account and go through this high authentication even though they are not pulling any information or accessing their particular account. and i've tried to say to the irs, why don't we think about another level for people just sending us information, rather than that they get into our systems? >> yeah, good points. i'm going to ask senator cardin if he has some closing comments or questions because i know he has another -- >> thank you, mr. chairman. i thank all the witnesses. i think i will ask this for the record. if you could let us know -- i'm also ranking on small business.

i find that irs questions are now becoming one of the top questions being asked by small businesses. in your prepared statements, and in your testimony, you've mentioned issues that would help small businesses. i would hope you would identify for me perhaps the top 1, 2, or 3 -- one, two, or three changes you think in an administration would be the most valuable for a small business community. if you could put a priority on the small business community own those recommendations, i would appreciate it. thank you again for your testimony. >> thank you, as senator cardin is leaving, thank him for joining me in this effort but really for 20 years of being part of this enterprise of, you know, figuring out how to make taxpayers and the irs work better together. it's something that most members of congress don't spend a lot of time on, and yet incredibly important to people we represent. i have so many more questions for you all, but i guess i would like to end with this, we do

have a new legislative initiative out there now, among other things, mr. sapp it has the uniform standards on the use of private sector electronic signature options. we want to hear from you on these things, to the extent we didn't get to those questions today. so if i could ask you as a favor to take a closer look at the legislation, many of you at this table maybe all of you gave us input already into the legislation. that's one reason i think it's a pretty good bill, but there are things we heard today that would i think improve it further. and in the case particularly the oversight board, the management board as we're calling it that would be a little bit different and take it to an even more of a management function with accountability, with the performance measures and so on. and with regard to what people might see as a number of different efforts, let me just say again, what the house did and what the committee did back

in 2016, which has been reintroduced essentially in the last couple weeks, i think is entirely complementary with what we are talking about. these are not competing proposals. instead i think these are additive, and at the end of the day, it may not be as ambitious a project as it was 20 years ago, but frankly it is time once again to look at this broad range of issues, in the context of a new economy, as has been said and mr. sapp has said in terms of the reality of how people interact, and the reality of how people use platforms, sometimes increasingly, the platform is them as independent contractors or sole proprietors. we have a number of challenges in front of us, want to get something done. we are hopeful we can work with the house and the senate and have a product by the end of this year so that, you know, that's urgent by congressional standards, you know, getting

something done that quickly is not easy. so we really appreciate your coming today and your continued interaction with us. robert is here. i know beth is here. and others who have been working with us. please interact with our staff and with us and let's be sure we can get this across the finish line before the end of the year and improve the experience all our taxpayers have and ensure that the irs is viewed again i said earlier people had lost faith in the irs 20 years ago, many people have lost faith again and we need to get back to a point where people have more faith and trust in government, in particularly the one that collects their taxes. thank you all for being here.

[inaudible conversation]

>> in the virginia u.s. senate race, incumbent senator debated republican challenger. the debate was hosted by the virginia bar association. and moderated by judy woodruff of pbs news hour. watch that debate tonight starting at 8:00 eastern here on c-span 2. retiring supreme court justice kennedy discusses his legacy and the court at the annual 9th circuit judicial conference in anaheim, california. you can watch that conversation tomorrow night starting at 8:00 eastern on c-span. >> sunday night on after words, former white house press secretary sean spicer discusses his book the briefing politics

the press and the president. he is interviewed by michael steele. >> ronald reagan and donald trump are about 180 degrees apart from each other and yet here we are in this space. how did you navigate that because we're both reagan conservatives in that regard. was it a little bit of, you know, dance every once in a while? how did you do it? >> with respect to the president himself, look there's no question he is not traditional in terms of how he speaks. he has his own venacular but also connects to people in a way most politicians never have. he talks very bluntly in his style. i don't think he would have won the presidency or the nomination if it wasn't for that style. i think there's always this balance with elected officials; right? which is they say all the right things, but they don't necessarily get anything done, and then in the case of trump, there's a lot of he's getting all these things done and people

are saying i didn't like this tweet or how he interacted, i'm a results oriented person. i look at how is the country doing, are people doing better, making more money, is the country safer? i think net, net, i think most people generally would agree if we can get the right things done for the country, then that is a better place than someone just talking about the right things to get done. >> watch after words, sunday night at 9:00 eastern, on c-span 2's book tv. >> this weekend on oral histories the first of our eight part series on women in congress, sunday at 10:00 a.m. eastern, former republican congresswoman susan molinari. >> also made me a fighter, made me -- i was forced to be tougher. you know, isn't that just sort of the secret? at least it was back then. we were constantly being underestimated as females.

so sometimes being underestimated is a good thing because you can always -- you have the element of surprise. i remember a lot of my debates where the people i was debating didn't take me seriously until i got out there and then it was too late. i think the same thing happens when, you know, you're negotiating. >> in the weeks ahead, we will hear from pat schroder -- >> watch oral histories sunday at 10:00 a.m. eastern on american history tv on c-span 3. >> i don't want my kid to read stories that are sad, distu disturbing, down beat, whatever, right? that's not a totally legitimate thing to say i want to choose as a parent when my kid understands stuff that might bring them grief, but there's also certain point beyond which it is like well, they are 14 now. like when are you going to

introduce them to the idea that in the everything is perfect outside of your all white suburb? right? and so all of those factors i think swirled together to create the perfect dumpster fire of censorship of books by marginalized people. >> science fiction author will be our guest on in depth fiction edition live sunday august 5th at noon eastern. discussing his latest book walk away. interact with him by phone, twitter or facebook. our special series in depth fiction edition with science fiction author, sunday august 5th, live from noon to 3:00 p.m. eastern on book tv on c-span 2. the group christians united for israel met with washington, d.c. for their annual summit and reflected in 2018 on the 70th anniversary of israel's