to extend that to contractors who are incorporated. payments for services to owners or rental real estate. there are cases where reporting is done now and where additional information can be provided. one example is reporting on mortgages. currently the 1098 forms do not include the address of the mortgage property. that creates problems for irs in sorting out suspicious returns from correct returns because it's not easy to tell even how many properties somebody owns. so there are both sorts of opportunities there. one other point i mentioned is there's been quite a bit of discussion about return on investment. this is something we've highlighted with irs the importance of doing more estimates of return on investment both for proposed initiatives which is service is now doing and then after the

fact, help trying to calculate, trying to measure the actual return from investment on compliance initiatives. so that the service learns what's been effective, what's been more effective than when he thought it would be. what's been less effective than we thought it would be. that raises the possibility of redirecting resources to areas to get the biggest bang for the buck. >> mr. jones, bigger ill dull jens to touch on what mr. white discussed. and throughout this session we've talked about the need for the irs to receive additional information third party information and how that would enhance revenue collection. but what is just as important is once the irs receives this information, what it does with it. that is a problem that we've reported on before. whether it's a 1099 or what have you. the irs will receive this

information from an employer and yet and then will receive a tax return, a return seeking a refund and it won't match the two in time to ensure that the information is accurate. so if someone wants to commit tax fraud, you know, they're able to claim more in a refund than they're entitled to because the irs didn't on a timely basis compare the information. and that is a major player. yes, it's a resource you don't derive in terms of their having fewer come computer systems or revenue officers or i differ to mr. miller to address how they handle that internally. but it is a significant problem. >> i agree with general georges it is a significant problem. it stems from a number of reasons. the key of which is timing. we don't have the 1099 or the w-2 often when the return comes

in for a refund. we do what we can. but, under the current systems, we don't have the information to match. we have recently started talking to the community about being more realtime, which would -- it has in mind exactly what general george is talking about. the most information we can have at the time of that refund, the better off we would all be. we should have the w-2. we should have the 1099s with respect to that person so we can validate that it is the person that should be getting the refund. and two that the amount is correct. >> why can't we get that? so we receive many 1099s are due march 30th. >> yeah. >> and we are already $70 million into the refund stream by that time. >> what changes -- this is why we're having this hear, you

know, to see in terms of what we can correct. that's the purpose. so what needs to be done. >> this is something that my office has proposed several years ago. and we did a study, looked at many different countries around the world. many countries and i eluded to this in my testimony a little bit, they don't start the filings -- they don't somebody refunds until they have the filing season is closed. and they have received all the returns and they've had a chance including information returns. and they've had a chance to run everything against due matching and then they issue the refunds. in the united states people are showing up the first week of january to file their returns to get a refund. and it would mean a major shock to the system. i do understand. i understand that some of the soft, the payroll processing companies have said that if all we needed was gross wages and

withholding, that they on the w 2s, they could provide us that information within the first couple of weeks of january. it's all the information classifying, you know, nontaxable health snrns and retirement plans, that's what takes a little bit longer for them to process. we're engaging in conversations now with the information reporting sector to see what we could get early. i can tell you that australia took a very interesting approach. sort of what, you know, the united states is doing. they sat down with many of their partners like the major banks and some of the major employers and they said what information can you get us very quickly? and people voluntarily came in and said we can get you this very quickly. and then they told the tax payers if you wait until this date filing season starts here, if you wait until this date you can go online and you can see the information that we have.

so you can bo sure about what you get. so they voluntarily asked tax payers to sort of wait in the filing season. and because they had a prefilled return so that tax payers could just sort of download that information and fill in the rest of the stuff, it was viewed as a very positive thing. now they're really getting about -- about 40% of their tax payers are actually waiting and using the information that the agency is getting voluntarily. and they're getting to the point where they might be able to say, okay, now we're changing deadlines because we're seeing people move to later in the filing season. that's the approach that we've recommended. use it voluntarily. make it as a dieshl thing, tax payers will wait because they want the certainty. negotiate with your partners like the irs is beginning to do. and rather than bringing a huge shock to the system, where tax payers are really desperately waiting for their refunds up

early. >> just to add a little bit to this. a few other considerations in addition to the burden on the third party's changing the filing date for the information returns, their does need to be enough time allowed for them to ensure that the information returns are accurate. if they're not accurate, if they have errors in them they're much less useful for irs it means they're finding false positives and at that point contacting tax payers about a mismatch when there may not be a true mismatch. one other point about the value of this kind of information return matching early on before refunds are issued is that it would to some extent be a long-term solution or at least a partial solution to the i.d. theft problem. irs would be able to do more verification before issuing refunds and to detect

illegitimate claims. >> you mentioned, mr. chairman, you mentioned the term statute of limitation. there's no statute of limitation on fraud. >> that is correct. >> but proving the fraud, which comes first. it's many the queue. if it's there for five years, i believe that's the statute of limitations for it, for someone having to pay their tax obligation, if the irs hasn't gotten to that, it's out of the queue. that's my understanding. you can correct me if i'm wrong, commissioner. so if they haven't proven it by then, how do they know it was fraudulent? >> much of the tax gap is not in that queue.

one of the issues here is a significant portion to have tax gap is in very small amounts of money spread over millions of tax payers. there are lots of small businesses that have reporting problems both intentional and unintentional. they're small by definition the tax liabilities there are small. it raises a question of whether it's worth going after them because to find the unpaid taxes in many cases you'd have to audit them. and then another question is how intrusive you want the tax system to be to find those relatively small amounts spread over again millions of tax payers. >> there's a ten-year statute for us to collect the money. the older and colder the debt, the less likely it is we're

going to collect it. we do have offsets that occur constantly and other tools. something that mr. white said, there are some things other than direct enforcement that are very valuable tools. the refund offsets. a large percentage of collection occurs because a taxpayer has a debt with us, but they're also getting a refund in a future year. that's the computer seeing the refund and grabbing it and it goes into the public treasury. but another thing that the irs is doing this year is some behavior modification. we had recommended several years ago on the sole proprioritiship return that you break out the lines for reporting income where you say here's income from 1099s that's reported on 1099s paid filed and here's other income.

i just know as a former return preparer that my clients would come in and show me their 1099 income. clearly, i'm not going to audit your books. clearly you have more money than this that you brought in. they go, oh, yeah. $100 or something. well, if you force tax payers to have to articulate, they're going to look at they've put all their money under the 1099 and think the irs is going to audit me if i don't report some money on the other line, the non1099 income. suddenly you ace di peer. if people were reporting $100 and $1,000. that's $900 per taxpayer and that's a lot of money. we've used that in the past little behavorial modifications that drive people to a little more compliant behavior because they think we're looking at that. that's a very important tool. that's really the policy behind information reporting. you just don't need it for third party. you can do it on what they have

to report on their returns. >> thank you, mr. chairman, for your generosity. >> i want to turn attention to identity theft and commend the irs for increased focus on this issue. it's a necessity as we see the numbers going up each year as those seeking to defraud the american people to identity theft related to tax refunds. i know one of the issues is the taxpayer protection unit that have been established as somebody who's been, you know, a victim of identity theft or believes they have to have a designated unit. i think that's an important step. i will tell you one of the things that jumped out to me and it was in the tax for advocates

testimony that is just unacceptable is how i'd say it is the level of service numbers. in general this year it was about 60 plus per cent level of service. when the taxpayer protection level of unit service in mid march was under 12%. and even in this past week and the heaviest time was only at 35%. and i look at that as saying we're going to create a special unit for those who have been victimized and i emphasize victimized by criminals because of identity theft. and wet set up a special unit for them to call and we're only helping not even 2/3 when we have the highest level of assistance dedicated. and those who do get through to get assistance according to the advocate's testimony, the

average wait on hold was one hour and six minutes. that is not how we should be treating victims. we need to recognize this for what it is. it's a crime and there is a victim of the crime. we set up a special unit is a good thing. if the unit can't deliver to help the victims that's not a good thing. dropping to 60% level of service overall is a big concern. but dropping to 12% for those who are supposed to help those who have been victimized and those who got help had to wait over an hour on hold. anybody in this room enjoy being on hold for over an hour? i don't think so. i'm amazed that anybody stayed on hold for over an hour, quite frankly. that is just not acceptable. you know, that is not how you treat a victim of a crime.

so i want to -- i want to recognize that you're trying to do the right thing here, but we are far from where we need to be. >> chairman plats, just to make a clarification, the unit that that number went to is different from the unit where taxpayers think they've been identity theft victims calls the irs out of the blue. the unit that those statistics go to is the unit where the irs has sent tax payers letter and we think there's a question about your return and we're not going to hold it. i wanted to make that distinction. >> absolutely. if i didn't make it clear, where there's a belief there's an identity theft here and so we set up a special unit for them to respond, and then we put them on hold for an hour, if they get through. as the numbers show, the majority do not.

>> i agree. i thought we had resolved that. i know we have added more staffing and maybe we have not added enough. >> not only do they not have adequate staffing and extended wait times. if someone calls back to find out what the status is of the case, they're assigned to someone who may not have seen the case before. they're not handed to the same person who has the institutional knowledge of their case. in addition the tax following deadline people who are assigned to those types of cases are re-assigned to answering regular tax concerns from other tax payers who dial the 800 number or who walk into taxpayer assistance centers. there is a way that the irs could certainly run this system a lot better than it is.

>> you set up the special unit is certainly at a fraction of the numbers here. if someone calls in and this person they're working with is not in, a member of my staff can see if there's anything that's been updated. there is a dedicated staff person that they're working with. that does make a huge difference than having to start over and so i don't know if that's anything that irs has looked at doing.

you're not having to start over every time you call in. is that considered? >> i don't know. we don't necessarily have the resources to say this is your person. who we ought to be doing is ensure whoever gets on the phone with you has all the information in front of them and that's what we try to do. >> is that done through the case files electronically whoever helps you they're well documenting. >> that's our opportunity. our attempt is to have. this is a micro chasm of the way we're doing business on the phone generally where we can't necessarily our systems do not permit a single person. we don't belief it's a single way to do it. in a perfect world there's an individual who's assigned to my account. and we've not been able to get

there in terms of resources or systems to date. >> all i know is not just in identity theft, but in corresponds exam and automated collection. some of the most frequent complaints we get are taxpayers saying i've talked to four different people. i've had to explain my situation over and over again. i've looked personally at the notes that people take. you cannot read, you cannot build a story from the notes. you don't know what the person before you did. by saving pennies by having anybody answer the phone whoever's the next available person are you saving money downstream where you get the wrong result and the taxpayer keeps calling back and you have two employees working the case mine and the irs employer. you go to appeals the higher graded employer, you go to tax court where you've got the

lawyers and pair legals and the tax court personnel, can we do a good return on investment? you're not saving money. >> the person who's calling in is trying to figure out what's up. i would use the example of the victim calling in because they had been frauded or victimized. for everybody calling in, it's a good thing. they're trying to resolve the case. we want to get them the assistance they need and the data shows that. that goes to what issue of taxpayer services the return on investment versus enforcement. i think it is a penny saved and a pound lost.

i want to acknowledge a positive theft. that is so many files were returned fraudulently. the legitimate taxpayer submits their return and finds out somebody filed and it's going to take a wile whoo for us to work through. even when that happens and we're working on shortening the time frame, that in the past the victim couldn't get any information about the fraudulent conduct even though it was submitted in their name and their social security number. general council has issued an opinion to say the legitimate taxpayer has a right to that information of the fraudulent material that was submitted and can authorize, i want that information and i want to be able to share it with law

enforcement. i'll use the example of a couple of the citizens who testified last year. i guarantee you, if they have been given a year ago the information, they probably would have gone to new york with the information, gone to the nypd and said, listen, here's where the check went. here's the bank. let's go get the photos from the bank that show who came in and, you know, collected that money if they had that information. >> itz is correct, mr. chairman, that we have the opinion of counsel that we can share that information. it will require and what we're doing as we speak, we're rolling out a pilot with some local law enforcement. the real issue is we cannot share this information with local law enforcement. >> but the taxpayer can authorize it to be shared. >> the taxpayer can authorize through a waiver for it to be shared and we're rolling that

out as we speak. that's great using the cases of tampa and local law enforcement in florida. if the legitimate tax payers say, hey, i want to work with the local police give them everything you have, i think that's going to be an important step i understand where you're talking about the average of i think $3500 or $4,000 is the fraudulent return refund. the local guys, that's what they do every day. that's what my local police are helping citizens every day with smaller types of crimes or fraudulent conduct. that's a positive step. i'm displeased with the level of service on the taxpayer protection unit, i do want to recognize that's a very important step in the right direction.

the issue of the social security dit massachusettser list and that's open game for those who want to commit fuj lent conduct. i know the irs i believe the position is to restrict access to that to -- is that correct that you will like action to restrict who can access that information? >> i think we are working with the social security administration and the administration we're generally on legislation that would do that. >> so that's an ongoing effort, but not ready yet to say here's what we think is the right approach within the administration. >> i think that's right. i think your question would be very well answered to have that discussion. i think they are actively engaged in talking to people about it as we speak. >> something we want to look at how to do that. to me the fact that this information is too freely shared, sometimes for legitimate

purposes shared, is just too big a target for those committing the identity theft. the final issue is more of a broad issue. that iif any of the four of you like to comment. when it comes to the fraudulent. this goes to the issue of the timing of matching documentation with returns, i know, it's a balance between a quick refund, which those who are entitled to refunds want it to be quick they can, although, i also say that most tax payers don't have to wait for refund if they wanted to adjust their filings and get the money in their paycheck. they could get an instantaneous refund every paycheck rather than one lump sum. you're talking about human nature and behavorial management. i'll admit i'm one that it's kind of a foresavings.

i'd rather get $1,000 back than write a check for $1,000. i think a mental psyche of how you look at it. but it is a choice that every taxpayer has. if they want, they can owe money and come out ahead and write a lump sum check. but given that, how do we balance that quick refund against the risk? and that we're not able to match. as the use of the electronic filings more and more the norm, more and more the norm is also the ability for that typical home individual, but they have a printer that's a scanner. that's the norm with printers today. if you buy a printer today, it can scan, fax and print. have you looked at saying if you want to file electronically and

maybe it's not all refunds, maybe it's a pilot to look at, you have to scan in your w-2s. rather than waiting for anything to be mailed in or match up from the third party, if you want electronic return you scan in your w-2s. is it 64% or higher that use paid -- >> it's about 60. >> 60 plus. for those it was especially be, i kbarnt you if you're a provider your ability to scan a document is a given. is that something that we should consider? >> if i could start out, a couple of things, i think two separate points altogether, if for savings i think it's true for you and i, i think it's less true as you go down the income scale where you have the earned income tax credit.

>> agreed. it's a changing circumstances. >> i agree. we need to get better at our screening. we need to get as much information to apply it to refunds as they come in. on the scanning item, we should look at it. i think at this point to be honest with you, we still get a lot of paper fraud in. and they have dumbied up w-2s. so i'm not sure that that in and of itself, it may be a piece of a larger strategy and is absolutely worth looking at. i'm not sure if and of itself that will be a game changer for us. >> mr. white? >> i agree. i have the same concern about the scanning that the i.d. thieves are making up w-2s. so getting one from the taxpayer

doesn't mean it's legitimate. that's where technology may help that a lot of the deadlines that mr. miller mentioned earlier for due dates for those information returns for set many years ago and with more modern technology it may be possible for third parties for at least certain kinds of information returns to submit them much earlier in the filing season so they could be matched to returns. there's some other things that need to be in place to make this work as well. irs is modernizing itsz information systems. obviously you need systems in place that can handsel massive amounts of data. irs getting billions of information returns each year. your talking about a lot of information so you are not making tax payers wait for refunds. >> i wouldn'