country. . advocate iowa taxpayer on the senate finance subcommittee to discuss issues and irs operations. his is an hour and five minutes. reform you talk about irs today? i know my ranking member has before long.ement we're going to try to go through this quickly and when it comes time for questions we're going ask fer to him so he can first.ns

we know tax legislation to find implement. and we have had these tax administration issues that are hearing arrive so this is an opportunity to example tax nt issues related to administration. tax administration issues workers in the high e now in.omy we'r but is not just important it's timely.

again.'s time to do it calls being unanswered by the thousands and calls were being answered were incorrect. $3 billion and front lines, the department lost and in the institution we've created this commission. co-chair that to and so there are a lot of involved in that. an opportunityis

again.oot inputting forward solutions and i support those and what the ne.se has do we think there is more to do as well. we'll talk about that during the day. the management side to increase tax payer projections and mprove small business dministration better of serve ur income tax practices and first we can rethink the key provisions which is the irs

over sight board z we thought of the idea our intent was to for e a board of directors irs and so we want to get this work functioning again in a originally was intended. process, ppeals calling 98 reforms including the right to an independent appeal toward those in

taxpayer bill of rights. a 70% increase since 2000. continues the irs guidance and issues to make it harder to access appeals process. you can talk about that today. i'm sure and witnesses before us, i think for being here. >> thank you. nd senator you a i rden have been leaders and think if we have witnesses and if we are in und

timeroom at this moment in it's the front line of how americans intersect with the federal government. and the effectiveness of the omer section and cust important.think are and i want to thank them for having two topics that i hope over the lasts is ime looking spent t

at changing nature of work. an e movering into environment where classic w 2s is a thing of the past. part of that driven by economic circumstance and and we've seen mergence of a number of new platforms and a so called kick economy. at and we monitor th understand? .nd make a tax system that doesn't impede individuals more re trying to become entrepreneurial. there might be an

i.t.consultant, driving uber and partment on their a air bnb. the tax administration burden is challenging. 've called for two studies one from gao to try to look at the size of this work force. that study indicated there was frankly not much growth in this field. i'll accept that data. i don't think it was fully omplete enough but i've seen estimates from government and that is mental sources receiving some income from contingent work. how do we think about tax think about on and contractpt of a social

we've to the to have flexibility side tax administration as well. good faith effort, ended up those have no negative publicity and upgrades. it's been on patches of legacy systems and we can bet into questions of how could we create a technology enabled modern tax system and say, we need to jump our legacy systems have that stucks.

proud to call myself part of the administration nerd caucus as well >> you've always been a member of that caucus and your points and talk about is economy where people and that is conduit for the irs. it.re going to get into nelson, mr. john

staff, current chair of the advisory committee advising of the irs and there is rebecca theson, project director of taxpayer opportunity network. thank you for coming to testify. forward to it. and let start with you morning and thank you for the opportunity to testify professor on ax faculty american code of business and i'm often the managing director. we focus on tax and compliance shawl specific to businesses and entrepreneurs. shawl okused on those miss owners selling goods and ervices via business transactions coordinated by air bnb, uber,as

others. business small perators are driving on demand economy. and a population of self employed ed self taxpayers we wanted to faith what those would be. particularly those working in an d economy. one did not know whether or not they're required to file with the irs with respect to platform and and 43% didn't set aside any money. and almost 70% of our

no tax nts received guidance from platforms they worked with. and for tax administration purposes more than 60% operators surveyed did not receive any form of 1099 on their income. did not, either. and this other required more than 200 transactions and payments exceeding $0,000 thord to receive a form 1099. ow far, reality is that host less. earn earned fter rick ridge or $314 a month. this is is their secondary ome, as a result, reporting loophole that exists

$600 threshold fair run forthat's taxpayers working these platforms are more likely to misreport their income ing use they're not gett s.ink 1099 and our tiendings in 2015 number ed for rs penaliz improved up to 40% over the same period. since releasing our findings, a number of changes response. made in guidancevated a lack of for taxpayers as one of the problems ost serious and some not required to have

at $600 uing thresholds. s committee riation followed and included languages this ting irs consider problem and report back. more work that needs to be done. and by aligning these 9 which ds, the 109 1954, been updated since guaranteeing in massachusetts our informal conversations said reporting 100% and second and third quarter filing

deadlines to make those required after supporters end. guesspayers don't have to when taxes are due and has a irs that online services can provide to providers and sellers as part of the process. hese are common sense and will .e a real problem thank you. as happy to answer question --may have >> thank you for the opportunity o present improving tax i inistration and enabling ehalf of the national

improve all irs unctions our written testimony proposes major reform for work service, payer and is the and irs hat will bring t staff.esults to recruit

and irs had you provide a tax we suggest, one, grant tical s, stream lined, cri pay hiring authority and tipulating areas of expertise covered by the program. create and punned dedicating rsaining division within the i and ensures tax law and dministrative policies are incorporateupported and works into irs training practice.

en for taxase the burd will not als and sufficient with you will be to an irs quick to serve the public. when taxpayers have a compliance ssue they have deserved to resolve it quickly without penalties and interest. om of irs in the ro technology. everything is possible. on the smart phone. world it we revert to a machines.res and fax

abilityayers expect the securely.emotely and facilitate se to and and two, fast track creating online accounts with secure and pro bust capabilities in both directions. audits should not entail mailing large quantities of materials and on account of ommunications will serve the

public, practitioners and service. and our profession time and risk re not typically passed to taxpayer. these changes will help us help service. one, provide statutory authority to established standards for preparersled prepared and should include a competency monitoring g up continuing education compliance s and strict ethical standards. and create a dedicated executive practitioner services unit anded ntralizes whoernizes service and leverages our reach.

again, i thank you for this opportunity and look forward to questions. you for your interest f examining the options of the invite me to going over the format. at the time i was director of a low income taxpayer clinic in richmond, virginia and invited experiencesbout the of low income taxpayers at house hearings. the world looks different today and irs needs congressional support and direction to help it do a better job of fulfilling

mission. oversight, containing two pro visions i believe were effectively lapsed. and i encourage you to ermanently reinstate joint hearings. second, ip challenges. formation le with in technology systems were and only t m one # 98 worse.

there is no engagement interest working the left hand knowing right hand is doing. and budget has been reduced by adjusting for

inflation. it ignores majority of calls to its auto mated response system taxpayers to without giving a choice to speak to a fifth, taxpayer service. private industry and experts say the number one driver of customer satisfaction is the first contact resolution rate. yet the irs does not measure this rate consistently or across every service channel and ignores significant data showing taxpayers prefer multiple channels for different types of interactions.

sixth, use of big data and automation. the irs regularly uses technology and big data to identify fraud and noncompliance, but fails to use technology to help taxpayers get to the right answer or prevent or minimize harm to taxpayers. the irs could use the data it has inhouse, for example, to identify taxpayers who are at risk of economic hardship and therefore are highly unlikely to be able to pay basic living expenses if the irs collects back tax debts. this approach could be applied when selecting cases for private debt collectors. seventh, local presence. research has shown personal contacts produce better response resolution and agreement rates than less personal contacts and also result in better educated taxpayers. yet 12 states do not have appeals or settlement officers within their borders and 14 states do not have employees to conduct outreach and education to small business and

self-employed taxpayers. of the 362 taxpayer assistance centers, 25 are not staffed and 84 have only one employee. moreover, a trained and professional workforce is paramount and the irs spent only $489 per employee on training in fiscal year 2017. a level that is about one-third of spending eight years ago. thank you for inviting me to participate today, and i would be happy to answer any questions you may have. >> chairman portman, ranking member warner, other members of the subcommittee, good afternoon. thank you for inviting me to testify at this hearing on improving tax administration today. my name is john sapp, pleased to represent e-tek. e-tek was created by congress in 1998. we had a diverse membership of individuals from the state department's revenue, private

industry, tax preparers, payroll companies and consumer groups. we hope to provide a diverse perspective on electronic tax administration and impact on taxpayers to the irs. while we were initially focused on achieving acceptance of electronic filing of tax returns and the impact that would have, e-tek's focus is making recommendations on improving efforts of the security summit. security summit is a tremendous success story of the irs where the states and the private sector to fight id theft and deal with security issues. as we evaluated electronic tax administrations, high-level issues have become evident. first, the need to supplement irs delivery channels in phone or in person is obvious. electronic services online would be increasingly expected, but everyone expects to be able to

talk or interact with a real person 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 secure, 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 services, we thought about four principles for the taxpayer facing systems. the first would be electronic services must be secure and as

such the irs should have the authority to set and enforce minimum security requirements for the tax system. in our 2018 report, we identify potential gaps in the application of the ftc safeguards rule, the most prevalent security standard for the tax system. it is unclear if the irs has the authority to set the standards for tax preparers, particularly because of the loving case and others which specify limitations on the irs ability to regulate tax preparers. second, electronic services must be accessible or usable for tax preparers or professionals. certain segments as i'm sure you know may not validate themselves digitally using the secure access channel, because they don't have a credit card or the right home mortgage or the inability to complete cell phone validation. those inefficiencies 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 i-10.f an those who don't have a social security number but have tax filing obligation. the filing of powers of attorney on behalf of taxpayers which now is a manual process and should be electronic. solving the signature on the 2848 and other forms is a key component of that. third, we support the issuance of an identity protection p.i.n. for all taxpayers that would ask for it and the account lock and unlock features so taxpayers,

third, electronic services, taxpayers should be able to control their taxpayer account and access to that account. and finally, we recommended the irs take a collaborative approach 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. [laughter] >> chairman portman, ranking member warner and members of the subcommittee. thank you for the opportunity to testify before you today. on improving tax administration, it is a great privilege and honor to speak with you about the vita program. i'm the project director of prosperity now opportunity network and in my role i lead a

national network of more than 2500 stakeholders, including volunteers, community, corporate and philanthropic partners and others. a network is a convening body for them providing a way for them to connect to one another, we provide tools, resources, information and capacity building support to strengthen vita programs, ensure quality return preparation and help to extend the reach of the vita program to more low income americans. however, the views i express today are reflective of personal experiences as a vita volunteer and program manager. i'm proud to stand among the ranks of the 55,000 tax nerds who volunteer and give our time to help low income americans. for the last two years, i've served as vita volunteer, co site coordinator with the northern virginia cash club campaign in prince william county. every saturday morning throughout the tax season, i rise from bed earlier than i

would like to and make my way down to the prince william county building joining alongside 10 to 12 other volunteers, 1200 volunteers -- across genia and 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. 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 had gone to a paid preparer and got an estimate of $382 for his return. it was a simple return. it only took me 30 minutes to complete. he was so grateful for the help i provided for him and the $400 i saved him. 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. in addition to preparing and filing returns, many connect the families that we serve to public benefits, financial education and other financial capability services like financial coaching and credit building providing strength and support to family's financial future. as volunteers, we endure rigorous training that can sometimes go as long as 24 classroom hours. we pass a certification test every year so that we are well equipped to translate what can be a daunting and complex tax

code for our clients, into a meaningful representation of their lives. we follow irs prescribed intake interview and quality review process for every return that has consistently yielded unparalleled results with accuracy rates above 90% for the last several years and 93% for this filing season. but for all the great work that we do, and all the people that we serve, two things remain lacking. first, after nearly 50 years in operation, the program has never formally been authorized by congress. formal congressional authorization will put the program on sure footing, demonstrating that you recognize the value we bring to the american people we serve and acknowledging that we should keep up the good work. second, the program lacks adequate funding. since 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.

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 time. >> 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 relatively rapid responses. as we look to the economy, as we looked at the new on demand type

services, in the past, there's been a 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 assistance? >> anecdotally, i found that to be true. after we released short change, i had an opportunity to talk to several different platforms, lyft in particular and convince them and chat with them how about how the 1099 k filing rules did a disservice to their service providers. they took it. they took my research on, internally reviewed it and then made an executive decision that they were going to provide 1099 k's at the $600 threshold rather than the $20,000 threshold

because it was the right thing to do to give the taxpayers the forms they need. >> have you seen the same with uber, air bnb, any of the other platforms? >> i have had informal conversations at several industry conference events that i speak at and what have you. 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 taxpayers the tax forms they need. >> i look forward working with you on changing that. as somebody who spent the last few years digging pretty deep into this area, would welcome the opportunity to work with you to see if we could force more of the platforms -- or urge more of the platforms to participate even before we get to the whole question of how we create a new social contract around a portable benefit system. i commend your work and look forward to working with you more. ms. thompson, ms. olson, you have also done some of this work

in virginia, and ms. thompson, i appreciate the 121 different sites in virginia that you are doing. i saw that number 60,000 hours, i applaud senator portman's legislation that actually authorizes, long overdue. as a budget nerd and tax nerd, is there an ability to almost give you a formula that for every hour worked or for every individual helped, we increase tax compliance by y? is there a formula here that you can almost break down to an individual or an hourly basis? either of you? >> i don't think i've seen any research on that, but i just made a note about that to take a look at that myself in my own organization. if i may make a point about the 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, but then they have small schedule c's, that becomes important, and so the legislation authorizing it should clearly say that one of the tasks that they can do are simple schedule c's within that income level or schedule f's for that matter, there are many small farmers that are just doing family home stead things. >> ms. thompson, do we get schedule c, schedule f training at this point within the program? >> there is currently limited training for schedule c's for programs to be able to provide some limited services. for schedule c's. but there is additional work that's needed. and with regard to your first question, i don't have an estimate, like ms. olson stated, that's something that we haven't looked into, but the number that i do have is for every dollar federal dollar that's invested in the program, it costs about $14.74 per tax return for the federal government. >> i guess what i would hope,

you know, under senator portman, senator cardin's leadership, if there was a way that we could get that down to say for every federal dollar spent, actually federal tax compliance goes up. if we spend x, it goes up y, that would be i think a helpful argument to convince our other colleagues. last couple of seconds, i would love to see a day where we felt the irs was ahead of the game on its technology upgrades. i feel like we're always chasing. one of the concerns i have and looking at this from the banking provision is when we have enterprises like equifax and others where we don't have a customer relationship, yet they have ability to look at all of our personal information, that increases the ability for tax fraud if there's violations there. have you thought about what kind of liability regime or other incentives we ought to put in place for those enterprises that have access to our personal financial information? that would be my last question. i appreciate the courtesy, mr. chairman.

>> senator, i haven't actually 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, 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. [laughter] >> are you rushing? >> i won't disagree with that. in that case, let me make a couple comments and ask a question, and then we'll move on to our others. i appreciate all my colleagues who came today. they all have other places to be. great testimony. in your oral and written testimony, you both talked about the oversight board. i want to get some input on that today. if we could start maybe with

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

>> well, i echo what you say that the irs has plenty of oversight, and i applaud the change of language to a management function. i see the alignment of the higher level management function the operations and if you will, rewards for successful outcomes to be highly correlated and, you know, i don't think you would want to have oversight or management function without having the power to also monitor operational functions because you could conceivably have one point of view from the top and then if operationally the service is going off and doing something else, you would never have that level of implementation that you want.

and then the other end of that would be assuming that we do have sound management, good operational function, and we have high level executives who are in charge of making those successful outcomes that they would then be rewarded. and the board would have opportunities. >> that's why i saw in your written testimony you suggested that the board be able to approve bonuses as an example to high level executives. >> correct. >> due to a line of performance measure, the board's responsibilities. ms. olson? >> as you referenced, i've been subject to the oversight of the board as the office of the national of the taxpayer advocate. and i found the board in 2001 to be composed of very, you know, very engaged individuals with a variety of experiences so there was a professor from a law

school that was very interested in training and other methods and produced the best report that i've seen on irs training in the 17 years i have been as a national taxpayer advocate. there was a representative of small businesses from a rural -- from iowa, you know, with agriculture, and he was a very strong advocate of what was the irs doing about small businesses. and you had people skilled in technology. you had this really good mix of talent. the battle came when i believe the irs leadership and treasury did not support the board and viewed it as intrusive, and that battle really came to a head when the board a few years in tried to weigh in on irs performance measures, and i think that's vital for the board if it's a management board with experience and expertise from outside the irs to have a voice in those measures and even approval of those measures. and the irs really fought that

and that became really the part of the demise in my opinion of the board. so as i look forward to what it should do, i think looking at performance measures, holding the senior leadership accountable to delivering on those measures, but also are we measuring the right thing? and comparing it to private sector measures, etc. that's vital for the board. >> yeah. well, i think those are very helpful points. and you're right. i mean, initially we talked about expertise, and that's why we had those individuals included, everything from service providers to technology to small business people. you mentioned some of the really dedicated people who are on it. and then we also want to experience just because the irs sometimes lives in its own bubble as many federal agencies and departments might, and so to have that experience to be able to come in and help the irs to be able to do its job better particularly in the light of the fast-changing economy we have now, as has been talked about.

the final one, which was very important, was continuity, accountability, but also continuity because every deputy secretary, every new irs commissioner, every sometimes secretary comes in with a big new reform plan and sometimes you mentioned the right hand doesn't know what the left hand is doing. sometimes we don't have that experience and continuity. that's why we did staggered terms. i'm not telling you something you don't know, ms. olson, but maybe trying to reiterate that this is an important opportunity for us i think with reform to look at the oversight board, why it is not working, how it could work better and to provide what i think is still needed, which is all those things, the expertise, the accountability, the experience, and the -- 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, that it does revitalize the board.

and there was a conversation about this recently in public hearing and we talked about this a lot with the irs commission. >> i want to thank you for not only your testimony here today but for your help in trying to help us improve the administration of the internal revenue code. i think i want to thank senator portman for 20 years plus inviting me to join him on his irs crusade to reform, inviting me to join the administration on the tax nerd caucus, i thank you for that. it's been a challenge and it is interesting because, ms. olson, we have talked about this, but one of the chief problems is resources. it is hard to get consistent attention by congress to give the internal revenue service the resources they need, and historically it's been the ways and means committee, and the

senate finance committee that has taken up that cause with the appropriators and omb to make sure these funds are available. now i know this budget year is a little bit better. that's because of a new tax law, not so much of a found religion for giving the irs the type of resources that they need. so i think part of it is to make sure we have the resources. and i think the chairman, ranking member bringing up the challenges that we have today with the changing of our economy. i think senator warner's point there is absolutely on target. we have also the challenges of technology and how we use technology that's a constant change, and the irs has never caught up, and as many of you pointed out, they are trying to deal with current problems, rather than to deal with the underlining capacity to use technology, and then i would add

a third, and that is congress changed the law. i'm not saying whether it's good, bad or indifferent, when you change the law, it is going to add a challenge to the irs. they are going to have to deal with that as they are dealing with all these other issues. so i invite you to -- and your testimony covered a lot of the points that are included in senator hatch and widen's legislation, in legislation that i have joined senator portman following and the bills that have come over to us from the house, but i invite you to do more granular, please take a look at these provisions and give us the input beyond just today's hearing. i want to talk first about training. thank you for mentioning that. we do try to help with more permanent commitment by irs to training the personnel to deal with these challenges. but let me ask all of you a question, on two points that are

in the portman cardin bill that there are different views on. so i would like to get your thoughts. one, to reinstate the authority of the irs to regulate paid providers. and the other, to deal with private debt collection. our legislation takes a similar approach as to what the house did in limiting the private debt collectors to those -- not using private debt collectors for those that are of modest income. if you would care to comment about either one of those two provisions because there's been some different views in congress on these points. ms. olson? >> well, as you know, we recommended back in 2002, you know, to create some kind of regulatory minimum competency regime around the unenrolled return preparers which i had been one for 16 years. so i knew what i was talking about.

and i really think that that's vital to the future of the irs. we have, you know -- partly because we have a -- we are running so much through the internal revenue code in terms of refundable credits and very complicated provisions so we have unsophisticated taxpayers going to preparers who don't have any kind of training, no accountability, who would never lose a license, etc., 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 our area in 1998. 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 collectors. they should not even go over there. >> ms. thompson, 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 see overwhelmingly and we spend a lot of time and energy amending returns and correcting the mistakes and errors of paid preparers, and particularly low income families are the ones that are subjected to those errors. we spend a lot of time correcting the mistakes and helping people to come into compliance for preparers that aren't even regulated for something even though something as simple as a barber or a nail tech are. >> thank you. appreciate it. thank you, mr. chairman. >> let me first thank ms. thompson for -- you make a terrific advocate just to begin

with, and the program is so important. i can't tell you how many families in rhode island depend on the program and depend on the earned income tax credit and the whole state's economy is lifted when those returns come in. so i just want to appreciate you. my question goes, however, more to the end of the income spectrum that you do not represent. and primarily i think probably asking the others. what i'm interested in, is if you look at for instance the corporate income tax generally, you see corporate income tax revenues declining steadily as a proportion of our national federal tax revenues. when i was young, it was about, you know, steadily about 30% of federal tax revenues. now it is down around 10%. so as a share of, you know,

everybody's contribution to funding our government, corporations seem to have managed to evade a lot of their responsibility, and now only provide 10% of our revenues. relatedly perhaps, the irs publishes information on its highest income earners, the highest income that they report on, the top .001%, which amounts to a total of 1400 individuals who earn on average across the 1400 tax returns 152 million dollars in a year. most people don't dream of getting 152 million dollars if they win the lottery. these are people who earn it in a year. yet when you look at what the irs reports about their contribution to revenues, they are paying a 24% on average tax rate.

when you go back to the normal people and look at who pays a 24% tax rate, you get to people earning $78,000 a year. so a nurse, an occupational therapist, people like that. my concern is how much the essentially free riding of big corporations, many of whom pay no taxes at all, and the relative free riding of these super high income taxpayers is a function of the irs's capability to deal with them. obviously they have the ability as very high income, very wealthy interests to come to congress and get favorable tax treatment passed legislatively. and there's not -- you can't blame the irs for that. we're to blame for that. but to the extent these people or these organizations have

enormous clout to manipulate the irs, to apply political pressure to the irs, to simply outgun the irs, i'm interested in the extent to which you think that that latter problem is a factor in the relatively low contributions of these very high income entities. i'd be happy to take that as a question for the record and let you just write something into us so you have a chance to reflect on it and get your thoughts. one particular sub aspect of that is the question of false statements. there's a weird wrinkle in irs false statements in which the department of justice won't prosecute a plain vanilla false statement case that relates to tax returns unless the irs has made a referral, which gives the irs a choke hold over those

false statements, and i'm looking separately into how often the irs actually makes those referrals. i believe with respect to 501-c-4's, the referral number is exactly 0, despite evident discrepancies between what they report to the irs and what they report to the federal election commission, for instance. that would be a specific place in which i would be interested in your thoughts as whether the irs as an institution has been disabled or outgunned in its enforcement efforts and what effect that would have on our overall revenues were that not the case. those are kind of big questions. i know that my time has expired, but if you would get back to me with a response for the record, i would be very helpful. i will let mr. sapp and ms. thompson be excused from that. i don't think your taxpayers have that problem, ms. thompson.

i don't see this as a electronic or technical thing, mr. sapp. thank you, mr. chairman. >> thank you, senator whitehouse. senator? >> thank you mr. chairman. thanks for holding this hearing. i wanted to ask ms. thompson about how we continue to do simplification and the volunteer income tax assistance, vita tax counsels for elderly are grants to local communities. i think there are a lot of people in our state that have used that, you know, focusing on underserved communities, rural communities where they may not be able to get larger assistance. during the 2004 tax season, they helped repair 3.2 million returns. that is a lot of returns and very helpful. i wanted to say, though, that i feel like the forms for

particularly these areas where people are looking for education and the earned income tax credit, child tax credit, american opportunity tax credit, all those things are good for simplicity purposes. let's just say they should be more simplified. my colleagues senator brown and heller have a bipartisan amendment to increase funding for programs which would help support more simplification on the tax forms. do you think that's a good idea? >> simplification of the tax forms? >> information to make it easier on these deductions. >> absolutely. thank you for your question, senator cantwell. we have tremendous partners across the country, particularly i'm thinking of partners in seattle, washington, one of our largest partners. one of the things that taxpayers get when they come to vita sites is education. referring back to your question earlier, senator cardin, our

volunteers go through extensive training and certification to be able to deliver education. sometimes it comes in the form of a financial education. but at the end of every return, there is a quality review process that those -- the taxpayer actually gets an education about how their life translated into that tax return this year. of course, if the forms are simplified and the process is a little bit simpler, yes, it makes it easier for everyone. notwithstanding the 2017 complexity and the prior year complexities and whatever the complexity looks like in the coming years, with the restructuring of the irs and the tax forms for 2018 and beyond, our volunteers stand ready. we are the tax nerds. and we gladly give our time and stand ready to learn and undergo the training that's necessary. i think it's important that they

have the training and that information is available timely so that we can get that information so whatever it is that we are able to communicate that to the low income and elderly, disabled, rural and underserved communities, as we have done for almost the last 50 years and we're able to continue to do so. >> we like nerds where i come from. [laughter] but i do think we need to continue to communicate and amplify, think of ways to just generally make the public aware of those deductions, and so that's the -- i think the key point. but thank you for those grants to those communities because we think it is very very helpful to them. thank you, mr. chairman. >> senator, could i just comment on that? >> go ahead. >> one of the challenges and i think one of my colleagues brought it up before, that paid preparers experienced is they have a due diligence checklist they have to go through with the taxpayer and a lot of times that can seem antagonistic to the taxpayer and discourage them from reclaiming some of the

fundable credits. one of the recommendations in general is the irs clarify what those due diligence requirements are for the paid preparers, that would include the vita folks, what is the documentation requirement for the paid preparer to meet those requirements. educated both on the paid preparer side and the consumer side. >> if i might add, you know, my office has made legislative recommendation about how to reform the earned income credit and the family status, family status provisions because frankly the irs struggles with making an incredibly complex law simple and understandable, and any time you deal with family, families are not simple or understandable. and so we've tried to look at provisions from around the world as well as irs data to come up with ways that you could come up with a few more safe harbors so you wouldn't necessarily have to go through intrusive inquiries that would require legislation

, but i think there are ways to make it a little bit better without increasing errors and things like that. >> i would like to see those recommendations. >> if i may add one thing, senator cantwell, preparers, we have all sorts of varying practices, and many of us have walk-in practices. some of us are taking clients by appointment. so it's sort of all over the map. and often we're put in the position with these new due diligence requirements where we are asking questions of clients that we've known from before their children were born, about their children simply so that we can check all the boxes and say that we've asked the questions that were required to ask. i do agree with what mr. sapp said. it's tremendously burdensome and

it creates a little bit of anxiety with the taxpayers who are coming to us for help. so, you know, we've -- i know it's a tricky thing, but if there were some way of mitigating, you know, balancing the requirement for knowing our taxpayers with, you know, some kind of nod to people who have known their clients for 20 years or more, it would be helpful, and i think it would aid efficient tax administration. >> definitely believe that on this end of the tax code, that helping people understand and qualify for these things so they can make the right decisions is very important. so thank you, mr. chairman. >> thank you. good question. and with regard to the forms and simplification, you know, so much of that doesn't require legislation. it requires the irs focusing more on simplification, and i think the taxpayer advocate has made some recommendations along those lines. but again, looking to the board

and customer service, which is one of the top priorities that would seem to be a natural thing that a real management board would look at and say, you know, how do we simplify and ensure taxpayers understand this across the board, which i think is always, always helpful and congress has not made it simpler as senator cardin said because there's now a transition going on for things like closely held corporations trying to figure out how those new tax revisions work and those regulations are coming up. so there's an opportunity as well. on electronic filing, let me just make a point, we have talked about a lot of negative aspects of taxpayer service, including your extraordinary comments this morning ms. olson about the number of phone calls that actually get through. you said really it is only 29% of calls received are answered by an individual. 29%. one place where we have made great progress since senator cardin came up with this

brilliant idea 20 years ago, i will give him credit because he was complaining about having been dragged into this process, which he was, no, but seriously, electronic filing has really been successful, and i remember at the time, our goal was 80%. 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 were successful in doing so because of the tough authentication procedure. i'm not sure how that balance is going, with only 30% of folks who are able to set up that online account. how can the irs strike that right balance between customer service and protection between security and authentication and what way would the irs incorporate comments, ideas more effectively from stake holders? how can we get them to work more with the outside stake holders who are very engaged in electronic means of communicating, either with the irs or otherwise? how do you feel about adopting uniform standards on the use of private sector electronic signature options, as an

example? would that help this problem? >> we have evaluated several different options for how the irs could authenticate -- because that's the big challenge is how do you authenticate someone electronically. as i mentioned before, with the diverse population in the united states, with differing access to internet, with different access to phones, you know, it is very difficult solution to provide. 30% may not be a bad number for that particular type of authentication. however we need to get to 100% of taxpayers controlling that account and having access to it. and so i agree with you, that the irs 100% has to solve that issue. one of the things that i would consider is the electronic filing program, where the irs has taken that collaborative approach, where they brought in stakeholders from the private sector to help be that front end for the taxpayer. so one of the things that we discussed, and i mentioned it in my testimony, was trying to leverage for those folks that may not be able to authenticate through standard channels, and not everyone today can authenticate at a particular bank or authenticate at a

particular vendor relationship they may have, so they may need to do it in person. so we did recommend that they consider leveraging tax preparers and have those preparers go through a vetting process so that could become trained in how to authenticate a taxpayer and allow that taxpayer to leverage that authentication to access their secure services, similar to what happens today with that certified acceptance agent, and that in person when over half the taxpayers in the united states today are choosing to pay preparer, that in person appointment could allow them to authenticate with their tax preparer and have access to their services that way. again, one of the things with that is the irs should have the ability to regulate preparers to ensure interaction is secure with the paid preparer. >> senator portman, i traveled around the world meeting with other tax administrations and looking at their online accounts, united kingdom, one way to sign into your taxpayer account is you are directed to

amazon or your bank, somewhere else that you already have an online account and you sign on through them, and that message is sent back to hmrc, that you are who you say you are, through their verification process. and that seems to work very well, that they have a much higher ability to get their taxpayers into accounts. australia has put into effect voice recognition. and it's in its infancy, but i think that's very important. that's very interesting. gao just published a report in june that looked at different authentication methods, and some of those methods are discussed there. the other thing that i've seen, and i've just raised this with senior leadership of the irs is they have the same level of security for pulling -- if you are trying to get into an account to pull information out, as they do sending information in. so, you know, tax payers who

just want to send an email with a picture of a document, that's necessary in exam, has to be able to in a pilot sign on to an online account and go through this high authentication, even though they are not pulling any information or accessing their particular account. and i've tried to say to the irs, why don't we think about another level for people just sending us information, rather than that they get into our systems? >> yeah, good points. i'm going to ask senator cardin if he has some closing comments or questions because i know he has another -- >> thank you, mr. chairman. i thank all the witnesses. i think i will ask this for the record. if you could let us know -- i'm also ranking on small business. i find that irs questions are now becoming one of the top questions being asked by small businesses. in your prepared statements, and in your testimony, you've mentioned issues that would help small businesses. i would hope you would identify

for me perhaps the top 1, 2, or 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 -- on those recommendations, i would appreciate it. thank you again for your testimony. >> thank you, as senator cardin is leaving, thank him for joining me in this effort but really for 20 years of being part of this enterprise of, you know, figuring out how to make taxpayers and the irs work better together. it's something that most members of congress don't spend a lot of time on, and yet incredibly important to people we represent. i have so many more questions for you all, but i guess i would like to end with this, we do have a new legislative initiative out there now, among other things, mr. sapp it has the uniform standards on the use of private sector electronic signature options. we want to hear from you on these things, to the extent we didn't get to those questions today. so, if i could ask you as a

favor to take a closer look at the legislation, many of you at this table maybe all of you gave us input already into the legislation. that's one reason i think it's a pretty good bill, but there are things we heard today that would i think improve it further. and in the case particularly the oversight board, the management board as we're calling it that would be a little bit different and take it to an even more of a management function with accountability, with the performance measures and so on. and, with regard to what people might see as a number of different efforts, let me just say again, what the house did and what the committee did back in 2016, which has been reintroduced essentially in the last couple weeks, i think is entirely complementary with what we are talking about. these are not competing proposals. instead, i think these are additive, and at the end of the

day, it may not be as ambitious a project as it was 20 years ago, but frankly it is time once again to look at this broad range of issues, in the context of a new economy, as has been said and mr. sapp has said in terms of the reality of how people interact, and the reality of how people use platforms, sometimes increasingly, the platform is them as independent contractors or sole proprietors. we have a number of challenges in front of us, want to get something done. we are hopeful we can work with the house and the senate and have a product by the end of this year so that, you know, that's urgent by congressional standards, you know, getting something done that quickly is not easy. so, we really appreciate your coming today and your continued interaction with us. robert is here. i know beth is here. and, others who have been working with us. please interact with our staff and with us and let's be sure we can get this across the finish line before the end of the year

and improve the experience all our taxpayers have and ensure that the irs is viewed, again, i said earlier, people had lost faith in the irs 20 years ago, many people have lost faith again and we need to get back to a point where people have more faith and trust in government, in particularly the one that collects their taxes. thank you all for being here. [inaudible conversation]

>> on c-span next week in primetime, monday, former presidents george w. bush and bill clinton on lessons from a life in politics. on tuesday, a nasa administrator on president trump's proposal to create a military race force. the nga summer meeting on the transformation of the workforce by inner -- artificial intelligence. thursday, the netroots conference from new orleans. friday, more from the netroots conference with senators kamala harris and elizabeth warren. ont week on prime time c-span and c-span.org. >> next, q&a with author david stewart talking about his book

on the impeachment of president andrew johnson. then, the bbc parliament review. after that, a preview of some of the house and senate races in some of the 2018 elections. >> this week on q&a, author and constitutional lawyer david stewart. --discusses his book caller: "impeached: the trial of president andrew johnson and the fight for lincoln's legacy." brian: david stewart, what was andrew johnson, our 17th president like? david: he was a hard man. he was intelligent. he pulled himself up from nothing. he never attended