t 7:00 a.m. eastern on c-span. here's what's live on friday. xt irs taxpayer advocate around other officials testify.

senator robert portman of ohio chairs this hearing. >> just to start, this is a really important topic to me and other members. important policy is and we have an historic new tax legislation the i.r.s. is trying to complement. but we have these taxpayer service issues and administration issues that are going to arise and so this is

an opportunity to examine current issues related to tax administration. particular focus on customer service and information technology interaction with practitioners. loik taxpayers and tax administration issues related to workers in the high-tech economy we're now in. senator hatch and ranking member widen gave us the opportunity to hold this import and we have hearing. i appreciate that. ranking member warner i appreciate your being here today. is is not just important but timely. this week marks 20 years since the last time we went through any major reform at the i.r.s. and it is time to go through it again. there was a clear need for i.r.s. reform. calls were being unanswered by the thousands. answered were being

were often incorrect. spent $3 billion on it systems that weren't working. the american people lost faith in the institution. senator carden was spent $3 bil it systems that weren't working. the an original author along with me and senator hatch and ortsdz members on the committee now after sustained improvement we are back to some of the very same issues again. once again the agency tasked with helping americans carry out one of the most basic duties is failing to serve in an effective manner. so it's an opportunity to reboot again. congress i think has an this. t in doing senator widen and chairman hatch have been involved in

putting forward solutions to some of the thing that is the i.r.s. is this. senator struggling with. i support those and i support what the house has done. but we think there is more to do as well. this is why today i introduced with senator carden the protecting taxpayer act. its goals are to revitalize the structure, proincrease taxpayer protections, better serve lo income taxpayers, overhaul and strengthen the infrastructure. the office is critical but i would like to get feedback from you on a couple of things. first we completely rethink one of the key provisions of the reform bill which is the i.r.s. oversight board. when we originally thought of the board our intent was to create sort of a board of guide rs that would help

the direction of the agency, provide expertise along with experience guide the direction of the. every administration has not pport it had oversight board including the current one. as a result it has fallen by the wayside. there's technically only one member left out of nine. we want to get this funking but functioning the way originally intended. so that is one thing i want to input. also input. also process you recall in the 98 reform we created taxpayer rights including to an independent appeal. three years later it took steps toward codifying some of those in the bill of rights. but these have declined amounting to a 07% increase since 2000. that was not what was intended.

it makes it harder for all taxpayers to access this appeals process. i think it is clear and we'll hear from witnesses that congress needs to build on the progress we made back in 98 and engage this new set of reforms. i am interested to hear from my colleagues. 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, 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 member left in many ways, this is the front

line of 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 ully complete enough because i just think i've seen estimates rom 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 rs 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 ia business transactions coordinated online and through apps such as airbnb, uber, lyftand others. we published findings in a report titled coordinated online and through 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 ind 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. they cycle in and out of the as a result, the reporting loophole that exists between the 1099 miscellaneous $600 threshold and the 1099k, $20,000 threshold they are more likely to misreport income because they're not getting 099. 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 2016, the irs launched economy sharing tax center on irs.gov. the national taxpayer advocate levated 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 y team and included language in a 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 ervice providers and sellers

earning incomes. by aligning the threshold, the 1099 miscellaneous threshold which hadn't been updated since instituted since 1954, 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 should 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 he 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 that online providers can these platforms every month and in addition a very real problem that they've quantified to be a $3.6 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, stipulating the areas of

expertise covered by the program. two, create and fund a dedicated training division within the irs that streamlines he education process and nsures 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 administrative policies are taught and supported consistently. 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 hem. 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. the elephant in the room is the 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. axpayers expect electronic solutions and the ability to work with us and the irs 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. 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 2018 report present extensively 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. furious and increasing -- various and increasing due diligence requirements are intrusive and frequently nreasonable.

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 examining 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 i was invited 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 the time ra98 was passed. the irs desperately needs congressional support and irection to do a better job of fulfilling vital mission. in my written statement, i discussed the core challenges i believe congress and the irs fulfilling vital mission. 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. the irs struggles with internet technology systems were 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. here is no one system or repository of data that contains a 360 review of the repository of data that contains a 360 review of the taxpayer's -- contains a 360 degree view 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 dedicated to long-term improvements, particularly involving i.t. systems. third, funding. as the irs's workload increased from fiscal year 2010 to 18, its 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. the irs needs adequate 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 axpayers to without giving taxpayers a choice to speak to a live assister. verall, irs employees answered only 29% of the telephone calls it received. fifth, taxpayer service. private industry and experts only 29% of the telephone calls 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 say the number one driver of multiple channels for different types of interactions. sixth, use of big data and automation. showing taxpayers prefer 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 impact that

would have, e-tek's 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. irst, the need to supplement irs delivery channels in phone or in person is obvious. electronic services online would be increasingly expected, irs delivery channels in phone but everyone expects to be able to talk or interact with a real person when that's necessary and -- when that is necessary. 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 chooses to file taxes using an enrolled agent integrating features into that channel, that has worked very well for taxpayers. number four, electronic ervices, we thought about four principles for the taxpayer facing systems. he 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 such the irs should have the authority to set and enforce 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 safeguards rule, the most prevalent security standard for 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 for tax preparers or 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 created are very 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 and i can -- i-10. those who don't have a social security number but have tax filing obligation. the filing of powers of attorney on behalf of taxpayers hich 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 to 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 has been reduced 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. >> 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 olunteer 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 12 other volunteers and 55,000 vita volunteers nationwide to help low income hard working americans meet civic obligation

by filing a tax return. i remember the first person i helped. i'm proud to stand among the ranks of the 55,000 tax nerds who volunteer and give our time he was a single father raising three children. he had been unemployed and had three w-2s showing he was trying to piece together an income to support his family. he gone to a paid preparer and got an estimate of $382 for his return. it was a simple return. t only took me 30 minutes to complete. he was so grateful for the help i provided for him and the $400 i saved him. he coalitions across for enia, we serve over 33,000 complete. e was so grateful for the help customers last year. -- the coalitions across virginia, we served over 33,000 customers last year. 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. n addition to preparing and customers last year. -- the coalitions across 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 its beginning in 2008, it has grown from 8 million to 12 million to 15 million. i understand it might be slated to 20 million this year. demonstrating that you recognize the value we bring to 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 in funding, it's the least thing i think that we can do for all of them. thank you, chairman portman and ranking member warner for providing me this opportunity and i'm happy to answer any questions you may have at this ime.

>> thank you, ms. thompson. as you may know in the legislation we introduced today, we authorizedvita 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 elatively 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 sense 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 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 ssistance? > 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. be true. after we released short change, i had an opportunity to talk to several different platforms, lyft in particular and convince 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.

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 -- 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 egislation 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 look at that myself in my own organization. organization. if i may make a point about the vita, i think going to the sharing economy, few are available to do simple schedule c preparation, so in particular if you have people who are workers with w2's, butthen 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, authorizes, long overdue.

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 he 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 that would be i think a helpful

all of our personal information, that increases the ability for tax fraud if there's violations there. have you thought about what information? that would be my last question. all of our personal

i appreciate the courtesy, mr. hairman. >> senator, i haven't actually the considered the liability aspects of that. i will say it is a liability >> 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 has a diverse population, as we have, you know, the weight that -- the way they want to interact with the irs. if you take a third party such as equifax, 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 electronic 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,

ecause 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 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 hange of language to a

oversight -- might be viewed as overlapping. management function. management function. i see the alignment of the higher level management unction the operations and if highly correlated and, you know, i don't think you would want to have oversight or 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 op 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. written testimony you suggested that the board be able to pprove bonuses as an example 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 ms. olson? 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 -- 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 evenue code. i think i want to thank senator portman for 20 years plus inviting me to join him on his

rs crusade to reform, inviting e to join the administration on the tax nerd caucus, i thank you for that. 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. a little bit better. 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 ortman 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 n. 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. so i would like to get your

thoughts. one, to reinstate the authority 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 -- who don't have any kind of training, no accountability, who would never lose a license, tc., so 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 proactively screen out these taxpayers, not just in private debt collectors, but certainly in private debt ollectors. they should not even go over there. >> missiles and, i was impressed by the training you have to go through in the program and thinking about those who are subjected to the $400 fee and there is no ability of the irs 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 ee 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 a lot of time and energy that are subjected to those rrors. we spend a lot of time correcting the mistakes and helping people to come into compliance for preparers that aren't even regulated for we spend a lot of time 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. hat 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. individuals who earn on average 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 hat.

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. bviously 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 tatements. there's a weird wrinkle in irs alse 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 department of justice won't the irs a choke hold over those false statements, and i'm looking separately into how often the irs 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 counseling 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 assistance. during the 2004 tax season, they helped prepare 3.2 million 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%.

we got to 80% by 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 website and were successful at doing so because of the other the vacation procedures.

i'm not sure how that balance is going. how can the irs strike the right balance between customer service and taxpayer protection through security and what ways with the irs incorporated comments and good ideas more effectively from state quarters. how can we get them to perform more with the outside state quarters engage in electronic means of communicating with the how do you feel about adopting inform standards on these of private sector electronics. with that health? -- -- would that help

differencing access to internet, it is very difficult solution to provide. 30% may not be a bad number for that time of authentication but we need to get to 100% of taxpayers controlling that account and having access. i agree with you that the irs 100% has to solve that issue. one of the things i was considered is the electronic ram -- program. stakeholders from the private sector to help the that front end for the taxpayer. on the things that we discussed was tried to leverage for those folks who may not be up to authenticate through authentic channels and that everyone can authenticate any vendor relationship they might have so they need to do it in person. we did recommend they consider leveraging taxpayers and considering having those preparers go through a vetting process so they can become

similar to what happens today with the certified acceptance agency. in person went over to have to taxpayers that they are choosing to pay the claimant and allow them to authenticate with the text compare and have access. again, one of the highlights is the irs should have -- to ensure that interaction is secure. >> sen. portman: i've traveled around the world and looking at their online accounts. united kingdom one way to sign into your account is that your erotic -- direct to amazon or your bank. have ane you already online account and you sign on to them and that message is sent --hmrc.hmr see

they have a much higher ability to get their taxpayers into account. australia has put into effect with recognition and in this -- it is in its infancy but that is very interesting. the report looked at different authentication methods and some of those methods are discussed. the other thing that i have seen and i raised this with senior leadership of the irs is they have the same level of security for if you are trying to get into account, pull information out as they send information in. taxpayers who just want to send in email just send in email with a picture of a document have to be able to in a pilot sign onto an online account and go through this authentication.

they are not pulling in information or accessing their account. why don't we think about another level for people just sending us information rather than 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, can get this across the finish line before the end of the year 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. [indiscernible] >> join washington journal this morning live from baltimore maryland as a spotlight the opioid epidemic. during the program we look at how agencies work with residents who are addicted to opioids. on the program, commissioner of health and on the challenges of cities by baltimore face. maryland opioid operational command center director on efforts the state is making to counter abuse. maryland democratic elijah

cummings talks about his efforts along with senator elizabeth moran to direct $100 billion in funds to curb addiction. and baltimore's acting commissioner discusses the oprah crisis under first responders -- the mobile crisis under first responders. starting at 7:00 a.m. eastern on c-span. >> on c-span next week in prime time, monday, former presidents george w. bush and bill clinton on lessons from a life in politics. tuesday, jim bridenstine on president trump's proposal to create a military space force. wednesday, the 2018 masto governors association -- national governors association meeting.

-- new jersey senator cory booker and pennsylvania lieutenant gubernatorial candidate. friday, more from the conference with elizabeth warren,, harris --kamala harris. c-span.orgn c-span, and the free c-span radio app. >> supreme court justice anthony kennedy talks about his retiring which he announced in june. he spoke at the ninth circuit judicial conference in anaheim, california. >> thank you all very much and what a great privilege it is for all of us to be here and in particular for us to be appear on this stage with justice kennedy. as i mentioned monday, this is a very unique conference, justice kennedy is our representative.