>> c-span is your unfiltered view of government. we are funded by these television companies and more including cox. >> toxic is committed to providing eligible families access to affordable internet through the connect to compete program, bridging the digital divide one connected and engage student at a time. cox, bringing us closer. >> cox support c-span as a public service along with these other television providers giving you a front row seat to democracy. >> irs commissioner charles reddick says the agency should be done addressing its tax filing backlog before the end of the year. he made that commitment while testifying in front of the house ways and means subcommittee on oversight turkey spoke about funding and staffing shortages and tax assistance for small businesses hurt by the pandemic.

[inaudible conversations] [inaudible conversations] >> good morning, and welcome. i have called ordered the subcommittee on oversight. thank you, everyone for joining today. we are holding this hearing in a hybrid format in compliance with regulations for remote committee proceedings pursuant to house resolution eight. before we turn to today's important topic, i want to remind members of a few procedures to help you navigate this hybrid format. first, consistent with regulations, the committee will keep microphones muted to limit background noise. members joining virtually are responsible for unmuting themselves when they seek

recognition or when recognized for the five minutes. committee staff will mute members only ante event of inadvertent background noise. second, when members are present in the preceding via webex they must have cameras on. if you need to step away and attend another proceeding, please turn your camera and audio off rather than logging out of the platform. finally, we will dispense with the practice of observing the givens rule and instead go in order of seniority for questioning, alternating between majority and minority beginning with members ofeg the oversight committee. i thank you all for your continued patience as we navigate these procedures to continue serving our country together in this great time of need. and with that, i will now turn to the important topic of today's hearing with irs commissioner reddick on the 2022 filing season.

and now i should deliver my opening statement. welcome, everybody. the subcommittee on oversight meetss today to review the 2022 tax return filing season and the overall operations of the internal revenue service. i would now like to welcome our witness, irs commissioner charles reddick. chairman powell's correll regrets that he could not attend today and asked me to serve as chair this morning. he wanted the subcommittee to hold this hearing today because it is essential that we ensure the irs makes this a a succesl taxis and for all taxpayers. he has submitted a statement for the record, and without objection, it is introduced into that record. so mr. rettig, thank you so much for appearing today. we know that this is a very busy time for you and the irs employees, and where especially

appreciative that you are able to join us this morning. we are very grateful for the dedicated service of the irs employees. we are particularly interested ind receiving an update on the ongoing taxis and including any recommendations you have for taxpayers or practitioners as we near the april 18 filing deadline. .. be enormous challenges this filing season due to an unprecedented backlog of millions of unprocessed tax returns. each return represents an individual we look forward to hearing from the commissioner on what the irs has done so far this year to address the backlog and what additional tools the irsneeds from congress .

fortunately we must assist our constituents who have been waiting months for much-needed refunds including individuals claim for rebate recovery credit and small businesses claiming the employee retention credit. i recently held an event with our local taxpayer advocate and it has been one of the highest reviewed events of the pandemic with just which just goes to show how many people on the information and really through this filing season and it's not just credits and refunds. my constituents brent kennedy has been denied an increase on his sba increase disaster alone because irs has not corrected his business returns from 2019. it also took months to post his returns from 2020. and the irs has not corrected his business return. and this may not have

happened at all had the my office not intervened. now his business which is in its fire home construction is in danger of closing because of the backlog and anirs issue that keeps: returned from being posted so the sba can see them . as a former employee and member, actually as a former member of california's active state tax for dino the importance of timely accessible service and assistance in ensuring fair tax administration. we cannot be complacent with the level of service in which only one in 10 taxpayers calling the irs is able to reach an irs customer service representative for tax law and account answers. i recognize the irs received an unprecedented number of

phone calls last year, nearly 300 million and i would like to hear from the commissioner what lessons the irs learned in applying this filing season. that includes and expanding the use of callback technology and i look forward to hearing what is being done to expand theavailability of that feature . further, the tax laws provide the irs with an administrative authority to address certain situations that developed during the filing season which may be unfair to taxpayers. i have consistently advocated for penalty relief as a matter of fairness particularly as taxpayers continue to face covid-19 related challenges in filing their taxes. i look forward to hearing what administrative relief and actions are currently under consideration, why the rs in response to taxpayer

difficulties and the backlog. today's hearing is also an opportunity to learn how current funding levels are impacting irs staffing programs and most importantly taxpayers and tax administration. a decade of underfunding by those who do not value fair and full tax administration harmed the irs and countless taxpayers. these impacts include our tax gap of up to $1 trillion a year. our reliance on correspondence audits of low income taxpayers, the worst telephone services in the history of the agency. and antiquated technology that does not allow for the scanning of returns to secure email contract with taxpayers and aging fee preparedness

fornow for the future . thanks to the bipartisan omnibus that president biden signed into law this week the irs has received an increase in funding of nearly six percent. that is in addition to funding on pandemic related legislation for information technology. however, we all know this is not enough which is why the house passed reconciliation bill included long-term sustained funding of $80 billion. i look forward to discussing how we can this tax season successful and i now yield five minutes to the ranking member , mister rice for his opening statement >> vacuum medicare and i want to thank chairman pascalfor holding this hearing today . thank you to commissioner rettig for being so available to us and before i begin i want to say thank you to the

tens of thousands of irs employees that have worked very hard and have worked overtime in many cases during this pandemic. we've had many policy debates here have many concerns about managementdecisions at the irs . that's our job, oversight. but your work is important and is not easy. so we say thank you for it. now, this tax return backlog prices began with pandemic closures in march 2020 that impacted all ofsociety . the irs was closed or months due to the virus so some slowdown would be expected. while the electronically filed tax returns to be processed remotely, people returns and mail pile irs facilities with no one there to open them . i recognize that during the pandemic virus beside the irs new responsibilities such as sending economic impact

payments and advanced child tax credit payments to millions of americans. this is, there is no doubt the pandemic created a significant challenge for the irs just as it did for american families and businesses. the irs hascertainly had successes along the way . developing a process for sending out economic impact payments to millions of americans with almost no notice and executing those payments sold promptly was clearly one such success. but not all actions taken at the irs have been successful during the pandemic. republican members of this committee have been sounding an alarm about the backlog cross crisis for well over a year now and it truly is a crisis . tens of millions of unprocessed tax returns from last year awaits processing.

that represents refunds do to individuals and businesses and it significantly affects households and the operation of those businesses. when biden, president biden took office the return backlog and customer service at the irs were already at crisis levels . customer service levels have been low at the irs for decades but things got much worse as the pandemic dragged on. the agency was receiving millions more calls than in previous years and phone call answer rates fell to even lower levels. this information was known when price president biden took office. president biden then proposed a plan to resolve the backlog and face the customer service prices at the agency . instead he proposed doubling the size of the irs by hiring 87,000 new agents to conduct tax enforcement.

not process the backlog or provide customer service to taxpayers. as part of that plan, the biden administration also wanted local banks to report details of nearly every american bank account to the irs and a massive surveillance efforts. so far these bad ideas have been blocked from becoming law, thank goodness but unfortunately we know the administration is still pursuing them . when it comes to the irs the biden administration has his priorities misguided. the idea that we would double the size of the irs by focusing on enforcement not first taxing the agencies ability to provide basic services to everyday americans is laughable. it wasn't long ago that republicans and democrats on this committee came together to draft and pass the taxpayer first. part of the purpose of that bill was to reform the irs and to make it work better

for taxpayers. to put taxpayer service at the heart of the agency's mission. the biden administration plan would undo that work and turn the agency into an aggressive enforcement agency that is adverse to taxpayers rather than one that serves taxpayers. when it comes to long-term vision of the irs we need to come together in a bipartisan way to fix the customer service problems and modernize irs technology. as i've been on this committee for six years now, i consistently heard about the fact that we're using computers built in the 1980s, some running cobol programs that only one person knows how to operate and when that person retiresor passes on the irs is stuck . it is observed that it has

gone on for 40 years now with agent technology and we can't seem to get it modernized. we have thrown money at this problem before and if we had salt this problem, and modernizing technology i don't believe we would be facing the issues with the backlog that we have today. we can do it. there are members on both sides ofthe isle that are dedicated to working on it but first ,we need the irs help . they need to tell us what needs to be done and they need to convince us that they can actually do it because we funded it before and it didn't get done. so people have great doubts as to whether it will be done if we throw money at it again . so we need a cost estimate, we need to know what needs to be done and need to know how it's going to be done. let me transition to the short-term. that's a long-term solution. more technology is a long-term solution.

let's go back to the short-term problems we are facing . lastly the irs and treasury put out what they call an aggressive plan to end pandemic inventory backlog this year. that would be an aggressive plan. i'm not sure that it's possible that we can completely do away with the backlog this year. that plan highlights several initiatives we've heard about previouslycombined with a few new initiatives . commissioner redding why was this aggressive approach had been implemented the year ago i'm very happy to see the agency has put together a serious plan that matches the seriousness of the problem. i want to highlight a couple of key points from the plan and how we got here. in january of this year we learned the irs was sitting on over $1 billion that it received in early 2021 while at the same time arguing with needed additional funding to deal with the backlog.

i heard the irs multiple times in january and february eto use those funds to address the backlog. and it appears the agency may now be choosing to use those dollars to hire 5000 workers that it is working through the backlog this year. after our calls for drastic action the irs announced it would create a search team to address the backlog. i understand this involves temporarily moving irs employees from other parts of the agency over to submissions processing to help get through the backlog. that strikes me as a good idea given the problem and i'd like to hear more from you icommissioner rettig about how that process will work. i noticed in your plan for evaluating options for pursuing additionalcontractor assistance . i'd like to hear more from you on that as well. finally, you have a number of items in the plan guarding communication with taxpayers. i'm almost through mrs. chairman.

i want to know from you what you're going to do in the short term to help taxpayers contacting the irs get the answers they need. this problem is massive and the and the inability to contact the agency fees the ongoing problem. thank you for your aggressive plan missionary rettig and i lookforward to your testimony .or >> thank you mister right. without objection all members opening statements will be made out of the record. without objection i would like to answer a statement from mister bradley schneider was unable to attend this hearing . now we will turn to our witness, commissioner rettig please join us here in person to discuss this very important issue. your statement will be made a part of the record in its entirety. i would ask that you summarize your testimony in five minutes or less to help

you with that kind please keep an eye on the clock if you go over your time i will notify you with my gavel. missionary rettig, you may begin . >> thank you chairwoman chu and members of the subcommittee. thank you for the opportunity to discussthe filing season . before i continue with my openingstatement , i need to address something personal which is this may be my last time testifying in front of this committee. my statutory term expires november 12 of this year but s every time i testify on the hill i have had the extreme privilege teof being accompanied by the same person who is sitting behind me. diane grant has been with the irs more than 50 years. that time with diane every single day that if folks

think a commissioner comes in and makes decisions i want you to know how much i value this diane grant both as a person, as a friend, as a tax expert and an irs experienced expert and i think in many ways, diane minimizes the irs employee. she is all that. she's also extremely humble and i'm going to hear about this on the way back but thank you for affording me the opportunity because we have some truly spectacular employees. as you know the fiscal 21 gross receipts for the internal revenue service were vi $4.1 trillion which represents about 96 elpercent of the gross revenue of the united states of america. a successful fully functioning irs is important to the continued success of the country. the government does not bridges, address education it

thanks and a military context those are built with funds, 96 percent which flow through the internal revenue service . funding the internal revenue rservice is critical to the success of the country. questions you're going to ask me today i'm fully aware in large part ulyou're going to hear me talk about funding shortfalls in many different parts of the agency. i came on board almost 4 years ago, october 1, 2018. new a lot about the internal revenue service and have learned about about a lot about the service and i'm encourage you to invite me back when i'm no longer wearing the colorado commissioner for an additional discussion whether that's one-on-one or in a committee hearing. i'm not the shyest person on the world i am representing an agency that i care deeply about that's why i came to this agency which is really with the people of the internal revenue service, members of congress to try to make it better and as similar to some of you at 36 years

practice interacting with the irs on the outside and i could not be more proud of my term ascommissioner . the irs and when i say irs i'm saying the irs employees have been at the forefront of every issue during the pandemic in the last 2+ years. his employees have performed really well. delivering over $1.5 trillion during a pandemic, three rounds of economic impact., two rounds of 1040 refunds and an additional six and in some cases seven advanced child tax credit payments during the last half of last year totaling an additional $93 billion. this is for people who i sent home in march 2020 concerned about their health and safety and i think i'm correct in saying we shut down the internal revenue service at the front and bmaybe before any other adult agency was fully aware that in march and april 2020 one of our primary

responsibilities is the people in this country and the issue of refundable credits which are the difference between a food bank and food on the table. the difference between rent and no rent. so we took that responsibility seriously. we had to get back into operation as quickly as possible. our processing centers came back in in june 6, eight and 11. our great principal processing centers to process those returns. but chairwoman chu, as you indicated the electronically filed returns were continuing for eligible taxpayers filing an accurate return continue to receive their refunds by deposit in about 21 days. that issue has always been for the internal revenue service pre-pandemic during the pandemic. in fiscal 21 we received 17 million tax returns and paper. congress led us into changing and encouraging an electronic

filing area that we are currently for fiscal 22 about 97 percent electronically filed returns.that is critically important. one thing harrison do to help us is how people continue to file returns electronically. accurate returns and when i say accurate i'm talking about advanced child tax credit because the returns are not accurate fallout and end up needing a manual processing. from last filing season we had more than 10 million returns and the return recovery we make contacts. 13.2 million returns where people have reported something to do with their unemployment insurance and as you know the legislation change during the filing season to exclude $10,200 of unemployment compensation. we were already processing returns we got 10 million return recovery rebate, 13 million on unemployment

compensation and we got millions with respect to the earned income tax credit and as you know congress came to the law so individuals could use the 2019 instead of 2020 thank you mister rettig. i know there will be much more content to be discussed with all our questions. so at this time i will open the hearing for questions. with objects in each member will be recognized for five minutes to question our witness. as mentioned earlier we will not observe the indians role in this setting and will instead go in order of seniority for questioning alternating between the majority and minority getting with numbers of the oversight subcommittee. members. virtually all reminded you on you yourself when you are recognized .for your five minutes. i will begin by recognizing myself for questions. mister rettig the irs has

announced the use of search teams to address the tens of millions of returns in the back lawn. in a sentence or two can you tell me when will the backlog be eliminated before december? >> i term ends in november, absolutely before december and with all due respect i would add my clock appears shows i have met for. i didn't mean for you to have to gavel, i was watchingmy clock but yes . we have 100 members of the search team which are experienced employees who come onto accounts management . 700 coming into submission processing. as of today barring any unforeseen circumstances, if the world stays as it is today we will be what we call out the by the end of calendar year 22 enter the 23 filing season with normal inventory, healthiest through the eyes of the taxpayer.

>> that is very encouraging news to hear that definitive statement that the backlog will be cleared this year. commissioner, and also please that both opm and congress he have recognized the urgency s of hiring needs in order to address this is backlog and to ensure taxpayer returns are processed in a timely manner. and in fact provided the agency with direct hiring authority. but i'm concerned we're not making the most of this opportunity due to employee retention challenges particularly in people's returns processing. gao report published last month found in last fiscal year only to the irs penalty the entire research goals for returns processing, but these employees attrition rate of 17 percent, more than double the agencies average. and you talk about what the agency is doing to improve retention and attrition rates

tomaximize the effectiveness of the direct hiring search ? >> for more than two years we've been requesting direct hiring immediately the private sector can bring something on board next week and for us it's been a 6 to 8 month process aand when you get into the admission process and accounts management most people have a lot of options. amazon, walmart, walmart announced last night hiring 80,000 people. target announces on boarding at $20 per hour. up till the present executive order we were at $14.57. i can only encourage people so much to come on board for the good of the country. those levels the difference between $15 and av$20 is whether or not they're going to have lunch or adinner and when it's going to be so we need assistance . we need to provide what we're doing because we have tuition reimbursement, a whole host of things and we worked with our union, national treasury

and i would not even go out on a limb and say we are close. i have regular conversations the presidentof the union . we've done pthat since i've been on board. we have great working relationship and as i said to tony who is the president, your members are employees, i want our employees to be here during 22. i want them to be here during 23 as well. theemployees on the strength of the agency . everything is important that the employees and their pride and privilege are very important. >> i'd like to discuss the issue of audit fairness especially in the context of the tax as high as 1 trillion a year. a recent report found from syracuse university found in the last fiscal year the i rs audited low income wage earners with less than $25,000 in total gross receipts at the rate five

times higher than for everyone else. these taxpayers are less likely to have professional taxes by and more likely to face barriers like limited english proficiency so even correspondence on present a major burden. not only are these audits unfair that they are ineffective yielding little revenue. how is the irs using this hiring search to address its capacity to audit complex returns of hikers and what steps are you taking in this tax year to ensure the most vulnerable taxpayers are not bearing the brunt of tax enforcement just to keep overall audit numbers steady ? >> let me address that report and draw your attention to our data book page 33 table 17 and i would draw your attention to our 2019 book page 34. 20/20 page 33 april 20, 2019 is page 34, april 20, 2020 its table 17 and april 20, 2019 table 17 a. that report by syracuse university is absolutely 100

percent false and i'm tired of having to go with this issue. we audit high income taxpayers more than any other category of the internal revenue service. taxpayers reflected $10 million of income are audited at a rate exceeding seven percent. taxpayers at the 25,000 level which is primarily the earned income ritaxpayer would be the only people we would look at are audited at 1.5 percent. those are correspondence on its get rid of the appearance so we don't have to file payment rates because we are forced to look at low income taxpayers what the improper payment rates earned income tax credit world. we must audit a percentage of those so that our research folks can come up with what the improper payment rate is. there's a 25 percent error rate in earned income tax credits is over $17 billion each year. the secretary signs off on that but in the high income

if you drop between five and 10 million going to see a 4.2 percent rate and if you drop me 1,000,005 percent you'll see a 2.2 percent. between 1 million and 200,000 , drops off considerably leave because in that range you have information reporting under 1 million or around 1 million executives who have 1099s and you get over 1 million you're running to entrepreneurs pass-through entities in such. we are putting every experience agent on the most complex tax returns. if i'll give you one example and chairman chu you heard me say it before. last year we received 4.2 million partnership returns which areflow-through returns . many of those are complex, multitier and info on blockers and an entity that comes into the chain essentially locks certain tax effects. 4.2 million, i have 6500 experience frontline revenue

agents. these are our most capable technical people. they're entirely devoted to higher income taxpayers to abusive transactions. where putting every effort on that . i cannot believe people ought to be able to game the system . you heard me say we are out the hiring authorities are needed and you may have seen recently our irs chief counsel announced looking for 200 experienced tax attorneys. i'm pleased to say we put out that announcement and received multiples from folks coming on board. we're not only going to bring them in counsel but other areas . >> ci could go on. >> if you can imagine it is fairness that is the issue and i heard ythe statistics. >> we need to change the .arned income tax credit we do not have the ability to determine from a file return what a qualifying child is

but we need to issue those refunds immediately. we do so 95 percent of the itc refunds, a refundable credit . go out by april 15 and that's important. that's important money for important people who tend to get lost in society . >> you for that. now i would like to recognize mister rice for five minutes to ask his questions. >> mister commissioner, i hadn't planned on asking this question but you my interest. what single factor and i don't have to five minutes so i have to keep it short on your answers. what single factor would help the most in solving this 25 percent fraud rate on the earned income tax rates? >> the hurdle is the definition of a qualifying child . and what chuck rettig

proposed from what i've seen, i will call outdiane grant behind me who's been working on the issue since 1975. that put me on my heels . merge all these credits into something an agency can administer without getting into somebody's life. >> what about income verification? >> for the earned income we don't try to verify. wetried to verify a qualifying child . >> i'm going to go back to my question. i mentioned in my opening statement i'm glad that the irs and biden treasury department have put out a plan to resolve the backlog and i'm very pleasantly surprised that you say it can be done this year. i would have hthought it would take longer than that . why did it take so so long to come up with a plan? >> it didn't.

obviously there was no candidate playbook but in july 2020 we had over 23 million pieces of unopened mail. we have the capability to open between one and one and a half pieces of mail ayear, . a week, excuse me if you do the math 1 to 1 and a half million a week, 23 million backlog . we did not have direct hiring authority which meant onboard people making 14, $15 an hour with a 6 to 8 month. >> just real briefly, if you didn't have direct hiring authority how did you do a higher? you didn't do the hiring yourself, who did it? >> frankly i'm not giving a presentation without telling people we're hiring and i'll meet them in the hallway and bring them down to the irs . every irs employee you were doing an irs ambassador. every employee is a recruiter . we have a referral system where employees have ... >> but before you had payment authority you did your hiring authority? >> we only got direct hiring authority two days ago. >> before that, who did your

hiring? >> human capital office. >> there a federal agency, right? >> it's an irs function. >> how long did it take before you had direct hiring authority to get somebody on or board. >> eight months, we spent three months looking for 5000 0 people in submission processing. >> eight months before, how long would it take. >> 4 to 5 days. >> as we discussed here in the searing and hearing before for five years now, and privately yesterday, i think the real long-term solution to most of these problems is to modernize the information technology of the irs. and i believe that everybody,

republicans and democrats want to see that done. ithink there's a hurdle though that the irs has got to overcome because we feel like we have funded this before and hadn't seen the results .so i think that's the hurdle the irs has to jump is convincing us and maybe it's mostly or maybe even all republicans, i don't know. if we throw money at the problem that it will increase efficiency and be that the irs can actually pull it off because we feel like we've done it before and it didn't get pulled off so mister commissioner, can we work on establishing maybe with outside experts a runnable plan and how much it will cost, and give us some confidence that it will actually occur. >> i call your attention to the fact this is the agency that distributed $1.5 trillion. we went at risk read different payments in record time. and i would also call your attention to our business

systems modernization plan that we provided april 16, 2019. that plan was reviewed by mckinsey before we provided it to be adjusted based on some comments and consultation with onmckinsey and as i've indicated i think every time i've been up here, myself and the agency we welcome oversight oversight is an important part of tax administration, important part of irs operations and not only myself anybody who follows in my place would welcome the opportunities to work with you. we take all ideas from all ak sources. at the end of the day, i send it for hearing yesterday i'm not republican. i'm not democrat. california has an undeclared. i'm a proud american, you'reall proud americans . we can help us help others that's been my entire time. >> high-yield back. >> the gentlemen's time has expired. the chair now recognizes miss

plaskett for five minutes. >> thank you very much madame chair for the e opportunity and thank you mister rettig for your service and willingness to come in this time that the irs has to speak with us. i wanted to ask a couple of questions and i'm igrateful to my colleagues have discussed the backlog in some of the other issues. one issue that is a little closer to home for me, i just want to share with you. in 2004 i decided to move to the virgin islands which is where my isancestral family is from. i was born and raised in new york city and was living in washington when i moved there and part of the reason i was able to move is at the virgin islands as a specific tax incentive program that brings businesses and industries to the territory it has really helped us review reverse our brain drain. when i moved back home so many people in my age bracket

and professional experiences were moving to the territory, bringing with them their expertise and the law, accounting, engineers, architects, etc. were all coming back home and doing great work. unfortunately there were several individuals who treasury and congress felt were abusing back tax incentive program and so rightly congress looked at it and some changeswere made . i believe they were over corrections that were done and one of those have been in the area of residency. now, i know individuals that the irs have said they're willing to meet with us and half discussions with us about that but this is a long time since the american jobs act was made and nothing has been done. i want to understand how we are going to correct this residency issue. if i live in the virgin islands i can only be considered virgin islands resident for tax purposes if i left there 183 days.

everywhere else in the united states is 122. if i moved to connecticut i am considered a resident for tax purposes after 122 days i have to remain there but being in the virgin anislands it creates a higher bar which also bars individuals who can really support our economy to be able to reside there. no one in this global economy was anywhere if they're doing real business for 183 days except during the pandemic when we were all forced to be at home with our husbands and wives and children and dogs. so i want to know what support you may be able to provide is the irs looking at this ? >> i would suggest you we meet. i'm familiar with virgin islands residency issues and also with california is 183 days but it's a presumption if you been in california more than nine months but also on the federal side you have the three-year rolling average.

maybe working out some kind of thing with that but ultimately i have to say i'm a tax administrator. treasury does policy. >> you do have the ability through treasury because you're the implementers to influence how treasury is going to end this . i have talked had discussions, have you talk to treasury about this? >> i think you do. you're the wimplementer of this andyou're the ones who triggerwhether they're going to be audits of individuals with this . this is not a laughing matter . we have locked in a lot of economic development. a lot of tax base because of this rule. >> i am very familiar and i have offered to sit with you anytime after this hearing. i will make the afternoon available and canceled meetings, i'll bringing our people . we don't influence treasury and tax policy. that is the exclusive arena of treasury tax

administrative agency that follows the law. you will get my as i think we said here non-commissioner help because i can make comments as the non-commissioner . i cannot make those comments as commissioner. i think you do understand. i think everybody should be treated fairly and that the core of any residency issue is the bona fides of the residency and i'm familiar with people who abuse that relationship. we have similar situations going on with respect to puerto rico. similar situations between states from california like chairwoman chu she's familiar with people who argue that they live in las vegas. some nontax states salon familiar with the residency issues and would be more than once as you and you my 36 your private practice experience and maybethe approach ultimately asked the treasury .e >> i understand who has authority over it and i would pose to you that you have more influence than you think

thank you very much and i'll take you up on the offer . >> i think you have my cell phone. >> the dental ladies time has expired. the chairrecognizes mister murphy for five minutes . >> thank you madam chairman and thank you commissioner for coming out today. it's obvious that there's a herculean effort to get a handle over during the pandemic but obviously factors that have occurred long before the pandemic are systemic inefficiencies and bureaucracies that have to handcuff not only you but the american people. the irs obviously is the point of great stress or the american people. no one wants to deal with the irs. i'll just ask a few questions . irjust because of the difficulty that we have now e, and getting hold of this you guys ever use an outside agency to ever come in and everybody's asking for money

to do these things. does anybody ever come in tand try to get the irs a lesson in efficiency? he tried to do more with what you have? >> treasury and the irs have contacts with consultants on the outside who do exactly that. i have made visits at various parts around the country trying to encourage others to participate with us as i did on behalf of the country. i think that the high-end tech companies in california do better in shooting. we have a lot of different ability. i came on board to make things better these tech companies. powerful posture as they are raised in a country that has a wall we can rely on. i think it's every american's duty frankly to help support the agency accountable for 96 percent of gross revenue and touches more americans than anyone on the planet. >> without that does what

most americans believe less government is better. this is the perfect example that we don't need more and more government because of the inefficiency we have. for all the outstanding taxpayer filings that have been made, these are monies that have obeen paid to the government but have not been either refunded or filed. you have an estimate of how much the government owesthe american people because of the filings that have not been filled with ? >> i do not. we have to try to figure out the area i can tell you the inventory, most of you have staff who participate in every friday. >> so if we have 10 million filings that have been done, the average refund is so much ? >> currently it's running around 3400. those would not only refund returns.

>> but the average ones so we have hundreds of millions of dollars owed to american taxpayers fitting in government coffers that are owed to those people. >> but the majority of those are ones that fall out in the system. that and ability of folks to reconcile economic income payments. the change in the law for eitc, we had to look at more than 30 million returns that was under 5000 people to do that. but in terms of technology, and what we've been doing during the pandemic, there are many but i'll give you one. we did what's known asfix and your staff is aware of this . fixed earnings to a processing of the recovery rebate and through february 28 process 4.2 million of 10.3 million that fell out and that operating in a very fast pace. so we have the balance in

person funds and other types of services with technology but we are trending to the point of the chairwoman and ranking member, we are trending in a reallygood direction . >> let me ask this then, what percentage of your workersare back in place in person working ? >> like the rest of the world we have a blend between telework. >> but what percentage are back in place. >> percentage of people required to be back in the office are all back in the office and the processing folks are back in the office in june 2020. socially distance, multiple shifts, mandatory overtime as well as voluntary overtime throughout the workforce and accounts management and submission processing. >> i do know this is a difficult job, i'm not saying it's not. i truly do but i do think as with anything, we can do a lot better. the irs had to pay off tremendous amount of money

and interest because of the delays in processing. without a doubt that was money that should never have had to be spent by american taxpayers so i appreciate the work that you do. i hope that your retirement is a good one and hopefully your replacement will come in and be more efficient and a better steward of our taxpayer dollars. i yelled back. >> the gentlemen's time has expired. the chair recognizes mister doggett or five minutes. >> thank you commissioner for your testimony thismorning . i am very pleased that we responded favorably to the requests made by chair pascal to people in the submission process. i want to just reiterate our facilities around the country that processed these people returns, we're all familiar with the comment of the

national taxpayer advocate that paper is the irs kryptonite and i know that our austin irs employees are working hard to handle it . >> this replacing staff, >> your audio is coming out. >> i'm sorry, thank you. >> concern there would be a facility there. i hope fayou'll continue to affirm your commitment to the office of the facility and its dedicated teams so that we have done. so many things we face today with the internal revenue service are the previous budget decisions designed deliberately to ensure that the irs fails. that the public would grow dissatisfied and frustrated with the irs and eventually

replace it with a less progressive system. over the last decade as you know hunting went down 20 percent, staffing went down 17 percent but the number of returns your expected process went up by 19 percent. the results are the very unprocessed returns that my colleague was just talking about. unanswered calls and general unhappiness with the irs. esnow some other republican colleagues have come out with an 11 point plan to rescue america by slashing your funding in half . [inaudible] >> mister doggett, your sound is off. >> let me just repeat the question, can you hear me now western mark. >> yes. >> the question is if your budget were cut by 50 percent

as is been proposed by some of my colleagues what impact would it have on your ability to answer calls , get refunds back and generally conduct and fulfill your responsibilities. >> if the irs but it was by 50 percent you might be better off and save more money by just yshutting down completely. we account for 96 percent of gross revenue in the united states of america. are you going to fund whatwe need to find and what every american deserves ? putting our budget is not the right answer. >> perhaps shutting down is exactly what those who make this proposal have in mind. maybe so you have to also. >> i'm not proposing to shut it down. i'm just responding to the question. >> some other people would like to and in fact their budget decisions over the

last decade have been proposing to shut down slowly . let me ask you about your comments earlier about the task. we estimated the difference between taxes actually paid i believe were an astounding trillion dollars per year. another estimate is that 70 percent of that gap is with the top one percent. what resources do you need in order to close back tax gap? >> we need a visible, robust enforcement mechanism. where down 17,000 enforcement personnel and that doesn't th mean everybody on the street. it means you get . that means experienced people . you cannot complain that we conduct audits. can complain if we conduct audits that go on too long or in certain areas where we should be moving on that we do not have the ability to do what we need to do and i

continued today to stand by the trillion dollars that we are about to issue our tax gap estimates for the period that was 2011 to 13. we're going to do 14 to 16 and you're going to see them track but i would like to draw your attention because i assume that would be a lot of press you're going to see us project but we think the tax gap is for 2019 but no last year was over $14 trillion in transactions in virtual currency with a market cap over $2 trillion, somewhere between 13 and 14 percent of that market is us people, some us reporting and they need to report. >> the gentlemen's time has expired. the chair now recognizes this or evidence for five minutes. >> thank you medicare. pirates recently enacted appropriation that would increase irs funding by

nearly six percent. i understand this is nearly not enough to reverse more than a decadeof severe underfunding . i recognize that irs need more resources to these adequate technologies. still commissioner how does the agency plan to use the increase in funding to improve service delivery, provide timely response to our constituents particularly those who do not typically file a tax return but who earn the child tax credit for the eitc. >> it's 655 million increase but it's more than 500 million less than what treasury and omb requested for the internal revenue 6 service and of that 600 million 300 million was cost of living adjustments so it about $375 million adjustment for an agency package call

upon time after time for new responsibilities and performance. our people perform, our people are spectacular.in terms of earned income tax credits, filed tax credit and numerous others, we need to educate people. we need to help people get it right. i am incredibly proud that during my term i don't take credit for it by being a public school kid from a opened eyes and storms about certain parts of the community and for the first time in history on number 49 estimate form 1040 is in a language other than english. it's in spanish and i'll accelerate through the languages you may have noticed last week we launched , braille for our returns and i will call out also that last year we had over 2 million hits on irs.gov. more than 90 million or on our non-englishspeaking pages . we are in the communities in person providing services.

we have all way of taxpayer services. it's not just t the phone, it's online. it's our assistance centers. one of the first things i pray funding for his left its staff of our agreement 58 taxpayer assistance centers, that's our frontline retail operations . we have 39 on staff that we pull people in. similarly taxpayer advocate service they got a little bump this year. that's the safety net for many taxpayers caseload three normal all es impossible for any individual to do. and we also know we lost this year taxpayer experience office which is to operate and look and get comments and questions through the eyes of the taxpayer . we routinely hold hear me interactions with our frontline employees whether it's on the phone or the taxpayer assistance centers .

what are you hearing in terms of filing and you'll see that's when you see us alerts, announcements, letters, reached out to congress so we can work with your local offices and what not to relay. we also interact with the transmitters because they won't all on mirrored operation to us during filing season. he went in through a transmitter that person they tend to call so we share information with them as well . >> when constituents cannot reach the irs and cannot get help on the taxpayer advocates they contact their member of congress. so your response to that aspect, the aspect of it. >> pandemic has been very difficult for all of you for. the frontline and it's been difficult for us as well. i have almost never somebody with congress 535+ did not

have my personal cell phone who does not have a personal cell phone of our deputy commissioner for operations support. we are available taxpayer advocate service is available . articles are available and i will hold a one-on-one conversation with you or without you with your staff e, bring in ken corbett who is our taxpayer experience officer and for constituents having difficulty wanting to knowwhere their matter is , get us a waiver so we can talk toyou . get us taxpayer information. i've been on call opens up there 70 and ken corbett will go 14 are here, these 13 we issued a response to the idea when we talk about many returns we have, it's not like they're sitting in a closet somewhere. we have or million returns that, the returns to process the rest of the inventory if you will are they thinking about for an error in the return. take out for matching,

identity theft. there's a whole is reasons. keeping inmind we are the gatekeeper for fraud . we're the gatekeeper for cyber we get 1.6 billion cyber attacks per year with recent world events. you want us to be that the, you want us to be ever vigilant and you absolutely must find us to keep those dates close for the benefit of every american. we get hit, it's emotional. >> thank you medicare. >> the gentlemen's time has expired. the chair recognizes lisa miller forfive minutes . >> and you medicare and rankingmember . thank you mister rettig for being here today. the irs has struggled over the recent years and the challenges from covid-19 have onlyexacerbated the challenges at your agency is facing . and i appreciate the genuine efforts that you have made to try to rectify these issues

but many questions still remain on how the irs continues to function and i want to focus my questions on the employee retention tax credit which wasn't overwhelmingly popular emergency program to help small businesses and nonprofit organizations weather the storm of the and government mandated lockdown. ber tc was unfairly cut short for the fourth quarter of 2021 and many other small businesses and nonprofits are still waiting on relief from the third, second and even the first quarter of last year while processing delay 8 to 10 months. congress authorizes a program that was dedicated to the emergency relief, receiving the advance payment of this to me life or death for small businesses and nonprofits in every district.

so mister rettig, what the irs created successful processes to ensure individual to receive these payments , explain why the irs handles eitc processing like a normal piece of correspondence andthat you do not have the procedure to prioritize these credits . >> we do have procedures in place but we did not have the ability to automate our systems. that's one of the differences, to automate our systems in order to process it but i would encourage that we remain on call with your staff. >> i do not have your personal phone number by the way . make sure i get it. >> i was going to say, probably not my best move. although it's my irs phone. >> can you commit the irs prioritize the eitc processing including a dedicated mailbox, phone line and updated timeline to when to expectthese refunds ?

this typically for the small businesses and nonprofits attempting to claim the credit. >> i come from a small business environment personally and my dad had the truck and very committed to helpingsmall business. all taxpayers small business taxpayers in many sent to the backbone of the country . and obviously ones during the pandemic most of these didn't have the challenges that the pandemic presentedto them . >> but you know anytime any business opens at store whether it's a truck, glass door or any, they are putting themselves at risk. they're taking a gamble by being in business and speculation the ertc was eliminated in... >> you can watch the rest of this hearing if you go to our website,