irs commissioner charles reddick says the agency should be done addressing its tax filing backlog before the end of the year. and that commitment while testifying in front of the house ways and means subcommittee on oversight he also spoke about funding and staffing shortages and tax assistance for small businesses hurt by the pandemic.

>> good morning. and welcome it. i've called to order the subcommittee on oversight, thank you everyone for joining today. we are holding this hearing and a hybrid format and compliance with regulations for remote committee proceedings pursuant to house resolution eight. before we turn to today's important topic, i want to remind members of a few procedures to help you navigate the hybrid formats. first, consistent with the regulations the committee will keep microphones muted to limit background noise. members joining virtually are responsible for un- muting themselves when they seek recognition or when it recognized for their five minutes break committee staff will mute members only in the event at inadvertent background noise. a second when members are present in the preceding fate must have their cameras on.

if you need to step away and attend another proceeding please turn your camera and audio off rather than logging out of the platform. finally, we will dispense with our practice of observing the givens rule instead go in order of seniority for questioning. alternating between majority and minority beginning with members of the oversight committee. i thank you all for your continued patience as we navigate these procedures to continue serving our country to gather in this great time of need. and with that i will now turn to the important topic of today's hearing with irs commissioner reddick on the 2022 filing season. and now i shall deliver my opening statement. welcome everybody. the subcommittee on oversight meets today to review the 2022

tax return filing season and the overall operations of the internal revenue service. i would now like to welcome our witness irs commissioner charles reddick. chairman, regrets he could not attend today and asked me too serve as chair this morning. he wanted the subcommittee to hold the hearing today because it is essential that we make sure this makes it a successful tax season without objections. it's introduced into that record. so thank you so much for appearing today. we know this is a very busy time for you and the irs employees. we are especially appreciative you are able to join us this morning. and we are very grateful for the dedicated service of the irs employees. we are particularly interested in receiving an update on the

ongoing tax season including any recommendations you have for taxpayers or practitioners as we near the filing deadline. the irs has warned there would be enormous challenges this filing season due to an unprecedented backlog of millions of unprocessed tax returns. each return represents an individual, a family, a business, desperately awaiting needed refunds from last year. we look forward to hearing from the commissioner i what the irs has done so far this year to address the backlog and what additional tools the irs needs from congress. importantly, repost assist our constituents have been waiting for months for much needed refunds including individuals claiming the rebate recovery credit and small businesses claiming the employee retention

credit. i recently held an event with local taxpayer advocate. that's when the highest reviewed events of the pandemic which just goes to show how many people are looking for information and belief during this filing season. and it is not just credits and refunds. my constituents like kennedy economic injury disaster loan because irs has not corrected his business return from 2019. it also took months to post his returns from 2020. in the irs is not corrected his business return. and this may not have happened at all had my office not intervened. now, his business which inspired home construction is in danger

of closing because of a backlog in it irs issue which keeps returns are being posted so they can see you then. the elected state tax board. i know the importance of timely assessable service and ensuring their tax administration. it cannot be complacent with the level of service and which one and ten taxpayers calling the irs is able to reach an irs customer service representative unprecedented number of phone calls last year. nearly 300 million. and i would like to hear from the commissioner, what lessons the irs learned in applying this filing sees it.

that includes an expanding the use of callback technology and i look forward to hearing what is being done to expand the availability of that feature. further, the tax laws provide the irs with administrative authority to address certain situations that developed during the filing season, which may be unfair to taxpayers. i have consistently advocated for various tax penalty relief as a matter of fairness particulate taxpayers continue to face covid related challenges in filing their taxes. i look forward to hearing what administrative relief actions are currently under with taxpayer difficulties in the backlog. today's hearing is also an opportunity to learn how current funding levels are impacting irs

staffing, programs and most importantly tax payers and tax administration. a decade of underfunding by those who do not value fair and full tax administration harm the irs and countless taxpayers. these impacts include eight tax gap of up to $1 trillion a year. a reliance on correspondence, audits of low income taxpayers, the worst telephone services in the history of the agency and antiquated technology that does not allow the scanning of returns secure e-mail and agency preparedness thanks to the bipartisan omnibus president biden signed into law this week the irs has received an increase in funding of nearly 6%.

that is in addition to funding from pandemic related legislation for information technology. however, we all know this is not enough which is why the house passed reconciliation bill included long-term sustained funding of $80 billion. i look forward to discussing how we can make this tax season successful. i now yield five minutes to the ranking member for his opening statement. >> thank you madam chair. i also want to thank chairman for holding this hearing today. thank you to commissioner reddick for being here and being available to us. and before i begin i want to say thank you to the tens of thousands of irs employees have worked very hard in overtime during this pandemic. we have had many policy debates

here and many concerns about management decisions at the irs. that is our job, oversight. but your work is important and it is not easy. so we say thank you for it. this tax return back on prices began with pandemic closures in march 2020 that impacted all of society. the irs was closed for months due to the virus. some slowdown would be expected. while the electronic file tax returns can be processed remotely, paper returns filed up at the facilities with no one there to open them. i recognize directly pandemic pandemic congress assign the irs significant new responsibilities such as sending economic and advanced child tax payment credits to millions of americans. there is no doubt the pandemic create a significant challenge

just as it did for american families and businesses. the irs certainly has had successes along the way. sending out economic impact payments over millions of americans with almost no notice, executing those payments so promptly was clearly one such success. not all actions have been successful during the pandemic printer public and members of this committee have been sounding an alarm about the backlog crisis for well over a year now. and it truly is a crisis. tens of millions of unprocessed tax returns from last year await processing. that represents refunds due to individuals and to businesses. and it significantly affects households and the operation of those businesses.

when president biden took office the return backlog in customer service at the irs were already at crisis levels. customer service levels have been low at the irs for decades. things got much worse as the pandemic dragged on. the agency was receiving and millions more calls than in previous years and phone call answer rates failed to even lower levels. this information was known when president biden took office. president biden did not propose a plan to resolve the backlog and fix the customer service process at the agency. going to the irs by hiring 87000 new agents to conduct tax enforcement. not process the backlog or provide customer service to taxpayers. as part of that plan the biden administration also wanted local

banks to report details of nearly every americans bank account to the irs in a massive surveillance efforts. so far, these bad ideas have been blocked from becoming law, thank goodness. but unfortunately we know the administration is still pursuing them. the biden administration has its priorities misguided. the idea that we would double the size of the irs by focusing on enforcement without first fixing the agency's ability to provide basic services to everyday americans is laughable. it was not long ago that republicans and democrats on this committee came together to draft and pass the first act. part of the purpose of that boat was to reform the irs and to make it work better for taxpayers. to put tax payer service at the heart of the agency's mission. the biden administration plan would undo that work and turn

the agency into an aggressive enforcement agency that is adverse to taxpayers rather than one that serves taxpayers. when it comes to long-term vision of the irs we need to come together in a bipartisan way to fix the customer service problems and modernize irs technology. since i've been on this committee for six years now, i have consistently heard about the fact that we are using computers that were built in the 1980s. some running cobol programs that only one person in the irs knows how to operate and to program but when that person retires or passes on, the irs is stuck. it is absurd and we cannot seem to get it modernize. we had solved this problem and

modernizing technology i don't believe we would be facing the issues with the backlog we have today. we can do it, their members on both side of the aisle that are dedicated to working on it. but first we need the irs help. they need to tell us what needs to be done. they need to convince us they can actually do it because we funded it before and it did not get done. and so people have great doubts as to whether it will be done if we throw money at it again. so we need a cost estimate. we need to know what needs to be done and we need to know how it's going to be done. let's transition back to the short term more technology is a long term solution. let's go back to the short term problems we are facing for just last week the irs and treasury put out what they call an aggressive plan to end pandemic inventory backlog this year.

that would be an aggressive plan. i am not sure it is possible we can completely do away with the backlog this year. that plan highlights several initiatives we have heard about previously combined with a few new initiatives. commissioner while i wish this aggressive approach have been implemented a year ago, i'm very happy to see the agency has put together a serious plan that matches the seriousness of the problem. i want to highlight a couple key points of the plan and how we got here. in january of this year with on the irs was sitting on over a billion dollars it received early 2021. while at the same time arguing it needed additional funding to deal with the backlog. i urge the irs multiple times in january and february to use those funds to address the backlog. it appears the agency may now be choosing to use those dollars to hire 5000 workers dedicated to work into the backlog this year.

after all, calls for drastic action creates a surge team to address the backlog. i understand this involves temporarily moving irs employees from other parts of the agency over to submissions, processing to help get through the backlog. that strikes me as a good idea given the scope of the problem i would like to hear more from you about how that process will work. i also noticed in your plan you are evaluating options for pursuing additional contractor assistance. i like to hear more from you on that as well. finally, you have a number of items in the plan guarding communication with taxpayers. i'm almost through. i want to know from you what you are going to do in the short term to help taxpayers who are contacting the irs actually get the answers they need.

fifty ongoing problem. and i look forward to your testimony. >> thank you. without objection, all members opening statements will be made part of the record. without objection i would like to enter a statement for mr. bradley schneider who is unable to attend this hearing. now, we will turn to our witness commissioner or reddick who is joined us here in person to discuss this very important issue. your statement will be made a part of the record in its entirety. i would ask that you summarize your testimony in five minutes or less. to help with that time please keep your eye on the clock if you go over your time i will notify you with the top of my gavel. commissioner reddick you may begin.

looks of german, ranking member rice and others of the subcommittee paid thank you for the opportunity to discuss the filing season and irs operation. before i continue with my opening statement, i need to address something personal which this may be my last time testifying in front of this committee my statutory term expires november 12 of this year. but every single time i have testified up on the hill i have had the extreme privilege of being accompanied by the same person who is sitting behind me, diane grant has been with the irs more than 50 years. i am with diane every single day and if folks think a commissioner comes in and makes decisions, i want you to know how much i value as a person, as a colleague, as a friend, as a tax expert, and it irs experience expert.

i think in many ways, diane epitomizes the irs employee. she is all about. [applause] she is also extremely humble and i'm going to hear about this on the way back. thank you for affording me the opportunity because we have some truly spectacular employees. as you know the fiscal 21 gross receipts for the internal revenue service were approximately $4.1 trillion which represents about 96% of the gross revenue of the united states of america. a successful fully functioning irs to the continued success of the country. they get education and things in the military 96% flow through the internal revenue service. funding the internal revenue service appropriately is critical to the success of the country, the questions you're going to ask me today i am fully

aware in large part you're going to hear me talk about funding shortfalls in many, many different parts of the agency. i came on board almost four years ago as october 1, 2018. knew a lot about the internal revenue service have obviously learned a lot about the internal revenue service but it might encourage you to invite me back when i no longer wearing a collar of a commissioner for an additional discussion in a committee hearing. not the shyest person on the world but i am representing an agency i care deeply about that is why i came to this agency which is really for the people of the internal revenue service. the people of this country, members of congress to try to make it better and is similar to some of you i have years practicing on the outside could not be more proud of my term as commissioner. the irs and when i say irs saying the irs employees are at

the forefront of every issue during the pandemic of the last two plus years. three rounds of economic impact payments additional six and seven child tax credits and last year totaling an additional $93 billion this is people i sent home in march of 2020 concerned about their health and safety. i think i am correct in saying we shut down the internal revenue service at the front end, it may be before any other federal agency, fully aware in march and april of 2021 of our primary responsibilities is the people in this country to issue refundable credits which is a difference between a food bank and food on the table. the difference between rent and no rents. so we took that responsibility

seriously. we had to get back into operation as quickly as possible. our processing centers came back in in june 6, 8, 11 or 3 processing centers to process those returns it. but chairwoman as you indicated, the electronically filed returns throughout this period of time were continuing for eligible taxpayers filing an accurate return requesting a direct deposit continued to receive their refunds by deposit in about 21 days. the issue has always been for the internal revenue paper pre-pandemic and pandemic in fiscal 20 when we received over 17 million tax returns in paper. congress led us into changing and encouraging electronic filing scenario that we are currently for fiscal 22, about 97% electronically filed

returns. as to how people continue to file returns electronically. accurate returns when i say accurate i am talk about the advanced child tax credit because the returns that are not accurate fall out and need a manual processing. last filing season give 10 million returns and the recovery rebate context. thirteen-point to million legislation change already processing returns we have 13 million on unemployment compensation and we got millions with respect to the earned income tax credit. as you know congress change the law so individuals could user 2019 instead of 2020 per.

>> thank you so much mr. reddick. i know there will be much more content to be discussed with all of our questions. and so, at this time i will open the hearing for questions without objection, each member will be recognized to question the witness. as mentioned earlier we will not observe the role the hybrid section. for seniority alternating between the majority and minority beginning with members of the oversight subcommittee. i'm recognized for minutes i will begin by recognizing myself for questions? the irs has announced the use of surgeon teams to address the tenth of a millions of returns in the backlog, in a sentence or

two can you tell me when will the backlog be eliminated before december? >> and november absolutely before december. with all due respect i would add my clock up here should be i had a minute before. i did not mean for you to have to gavel is was watching my clock. we have 800 members of a search team which experienced employees have come onto account management we have 700 coming into submission processing. as of today barring any unforeseen circumstances covid, et cetera et cetera of the world stays as it is today we will beat what we call it healthy by the end of calendar year 22 and into the 23 filing season with normal inventory healthy is through the eyes of a taxpayer per. >> thank you, that is very, very encouraging news to hear that definitive statement the backlog will be cleared. commissioner reddick art i'm also pleased opium and congress have recognized the needs to

address the historical backlog and to ensure taxpayer returns are processed in a timely manner. and in fact provide the agency with direct hiring authority. i'm concerned were not making the most of found in the last fiscal year not only to the irs struggle to meet its hiring search goals for return to processing, but the employees had an attrition rate of 17%, more than double the agency average. can you talk about with the agency's doing and attrition rates to maximize the effectiveness of the direct hiring search? >> work more than two years we've been wheat compete with a private sector who can bring somebody on board next weekend for us us it has been a six --

eight month process. when you get into the submission process those people have a lot of options i have amazon, walmart, the respirator walmart announced last night they're hiring 50000 people, target analysis on boarding a $20 an hour. up until the president's recent executive order we were $14.57. you can only encourage people so much to come on board for the good of the country. at those levels the difference between $15.20 is whether or not they're going to have a lunch or a dinner and what it is going to be. so we need assistance. we need to provide what we are doing as we have tuition reimbursement, we have childcare credits have for a whole host of things work at the reunion and i would not even go out on a limb and say we are close and regular conversations with the president of the union. we have done that since i have been on board. we have a great working relationship.

and i as i have said from tony who is the president, your members are our employees pretty want our employees to be here during 2022 i want them to be here during 2023 as well for the employees are the strength of the agency. everything else is important but the employees their pride and privilege are very important per. >> thank you for that. i also like to discuss the issue of audit fairness especially in the context of a tax gap as high as $1 trillion a year. a recent report from syracuse university found that in the last fiscal year the irs audited low income wage earners with less then $25000 in total gross receipts at a rate five times higher than for everyone else. these taxpayers are less likely to professional tax advice and likely to face barriers like limited english proficiency. even a correspondence audit has a major burden. not only are the audits unfair but they are ineffective

yielding little revenue. how is the irs using hiring search to address its capacity to audit complex returns of high earners? what steps are you taking to ensure the most vulnerable taxpayers are not bearing the brunt of tax enforcement just to keep overall audit numbers study? >> let me first address that report and draw your attention to a data book 2020 databook page 23 table 17. also draw your attention to 2019 databook page 34. for 20 twentieths page 33 pay for 2019 its page 34. for 2020 is table 17 for 2019 its table 17a. that report by syracuse university is absolutely one 100% false. i am tired of having to deal with this issue. we audit high income taxpayers more than any other category the internal revenue service. taxpayers reflecting over

$10 million of income are audited at a rate exceeding 7%. taxpayers of the 25000 level which is primarily the earned income taxpayer will be the only people we would look at our audited 1.1% for those are corresponded audits get rid of appearance we do not have to file improper payment rates. we are forced to look at low income taxpayers with the improper payment rate the earned income tax credit real-world, we must audit a percentage of those sore research folks can come up with what the improper payment rate is. there is a 25% error rate in earned income tax credit. it is over $17 billion each year the secretary signs off on that but in the high income for drop between five and 10 million ocs four-point to percent rate for draw between a million and a 5% five-point to%. between a million and 200,000 it

drops off considerably because in that range we have information reporting under a million or around a million are executives of w-2s of 1099s. when you get over a million you run into entrepreneurs we are putting every experienced agents on the most complex tax returns. give you one example charm and you've heard me say before and ranking member, last year we received four-point to million partnership returns which are flow-through returns. many of those are complex multitier. they involve foreign blockers and entity that comes into a chain of entities to essentially block certain tax effects. four-point to million i have 6500 these are the most capable technical people. they are entirely devoted to higher income taxpayer or abusive transactions. we are putting every effort on that. i do not believe people ought to

be gained the system. you've heard me say before we are outgunned. the hiring authorities are needed. he also may have seen recently are irs chief counsel looking for 200 experienced tax attorneys. i am pleased to say we put up that announcement and we received multiples of that from folks who are coming on board. were not only going to bring them in council but other areas of the internal revenue service. >> thank you. >> i could go on. >> as you can imagine it is fairness that is the issue. and i heard the statistics. >> we need to change the earned income tax credit to family law credit. we do not have the ability to determine from the filed return what a qualifying child is. but we need to issue those refunds immediately. we do so 95% refund that is a refundable credit, go out by april 15. and that is important. that is important to money for important people who tend to get

lost in society per. >> thank you for that. now i would like to recognize mr. rice for five minutes to ask us questions. >> mr. commissioner, i had not planned on asking this question but you have peaked my interest. what single factor, i don't have about five minutes i have to keep it really short on your answers, what single factor would help the most in solving the 25% fraud rate on the earned income tax credit? >> the definition of a qualifying child it's in the earned income tax credit word proposed when i came on board i will call out diane grant behind his own work and the issue since 1975. that put me on my heels when i came on board. family law credit a family credit, merge all these credits into something that an agency can administer without getting into somebody's life.

>> what about income verification? >> the earned income tax credit we don't try to verify the income we try to verify as a qualifying child. >> i have such limited time. i'm glad the irs have put out a plan to resolve a backlog and i am very pleasantly surprised you say it can be done this year. i would've thought it would've taken longer than that. why did it take so long to come up with a plan? >> it didn't. we have had this plan since we entered the pandemic. officer there is no pandemic playbook. in july of 2020, we had over 23 million pieces of unopened mail. we had the capability to staffing to omit student one and one half million pieces of mail a year. a month. week, excuse me for if you do the math one to one half million a week, 23 million backlog we needed to fight to the backlog. we did not have direct hiring authority which meant to onboard

people making 14 -- $15 an hour was a six -- eight month period. >> real briefly. if you did not have direct hiring authority how did you do a higher? you did not do the hiring yourself, right? who did it? work right frankly i have not given a presentation without telling people we are hiring and i will meet them in the hallway and bring him down to the irs. every irs employee that an irs ambassador rate every irs employee as a recruiter. we actually have a referral payment system where employees pay. >> before you head direct payment authority, who did your hiring? who had direct hiring authority who did your hiring for your question requesting we got direct hiring authority two days ago. we have a human capitol per. >> before that he did it. >> human capitol office i member from 2000 -- there a federal agency, right? >> it's irs agent. >> and how long did it take before you had direct hiring

authority to get somebody on board? >> eight months the best example we spent three months looking for 5000 people and submission processing. >> eight months before? how long will it take? >> 45 days which build on board. >> thank you, thank you. as we have discussed here in this hearing, and hearing before and for five years now, privately yesterday, i think the real long-term solution to most of these problems is to modernize the information technology of the irs. and i believe everybody republicans and democrats want to see that done. i think there is a hurdle the irs is got to overcome. we feel we have funded we haven't seen the results. the hurdle we have to jump is convincing us and maybe all republicans i don't know.

if we throw money likely done it before it did not get pulled off complete work on establishing made with outside experts a credible plan and how much it will cost, and give us some confidence that it will actually occur. >> i call your attention to the fact this is the agency of the distributed $1.5 trillion. when at risk three times three different payments in record time to ask 48 hours and 24 hours. i would also call your attention to our business systems modernization plan we provided april 16, 2019. that plan was reviewed by mckenzie before we provided it. and we adjusted based on some comments in consultation with mckenzie. as i have indicated every time i've been up here, myself and

the agency we welcome oversight. oversight is an important part of tax administration. the important part of tax operations may think that only myself but anybody who follows in my place would welcome the opportunities to work with you. we take all ideas from all sources. at the end of the day i said in a different hearing recently, i am not republican, i'm not democrat california has undeclared but i am in america my very proud american for you are all proud americans. help us help others. that is my entire time, thank you for. >> thank you i yield back. >> the gentleman's time has expired. the chair now recognizes for five minutes. >> thank you very much madam chair for the opportunity. thank you for your service and your willingness to come in this

very busy time the irs has to speak with us. i wanted to ask a couple of questions i'm grateful to my colleagues who have discussed the backlog and some of the other issues. one issue that is a little more closer to home for me, i just want to share with you in 2004 i decided to move to the virgin islands which is where my ancestral family is from paris born and raised in new york city and was living in washington when i moved there. part of the reason i was able to move is the virgin islands has a specific tax incentive program that brings businesses and industries to the territory that has helped us to reverse our brain train. when i move back home so many people in my same age bracket and professional experiences for moving to the territory, bringing with them their expertise and law, accounting, engineers, architects et cetera. all coming back home and doing great work.

there are several individuals who are abusing that tax incentive program. changes were made. i know individuals of the irs is willing to meet with us and have discussions with us about that this is a long time the american jobs act was made and nothing has been done. i want to understand how we are going to correct this residency issue. if i live in the virgin islands i can only be considered a virgin islands resident for tax purposes if i lived there 183 days. everywhere else in the united states is 122. fight moved to connecticut i am considered a resident there for tax purposes after 122 days i have to remain there.

being in the virgin islands it creates a higher bar which also bars individuals who can really support our economy to be able to reside there. no one in this global economy lives anywhere if they are doing a real business for 183 days except during the pandemic when we were all forced to be at home with our husbands, wives, children and dogs. so i want to know what support you may be able to provide and is the irs looking at this? >> i would suggest we meet britt and very filling with virgin islands residency issues i'm with california is 183 days is a presumption event in california more than nine months but also on the federal site you have a three-year rolling average. may be working out some kind of thing with that. ultimately you have to say from a tax administrator treasury does policy. >> you do have the ability through treasury because you are

the implementers to influence how treasury is going to enact this. >> you talk to the people it treasury? >> i have have you talked to trish about this? >> i do not have the authority. >> i think you do because you are the implementer of this and you are the one who trigger that they're going to be audits of individuals with this. this is not a laughing matter. we have lost a lot of economic development, a lot of tax base because of this rule. >> i am very familiar and i have offered to sit with you anytime after this hearing i will make the afternoon available i will cancel meetings i will bring in our people. we do not influence the treasury and tax policy but that is the exclusive arena of treasury heard this tax administration agency that follows the law. as i think i said here, non- commissioner help because i can make comments as a non- commissioner. i cannot make those comments as a commissioner pretty think you

do understand. i think everybody should be treated fairly. and at the core of any residency issue is a bona fide of the residency. i am familiar with people who abused that relationship. similar situations going on with respect to puerto rico. a similar situations between states. from california like charwoman she is familiar with people who argue they live in las vegas. some nontext statement and family with the residency issues. more than willing to sit with you and give you my 36 year private practice experience. i may be an approach but the approach ultimately has to be treasure i don't have the authority too. >> i understand who has authority over it. i would pose to you you do have more influence than you think. but thank you very much i'll take up on the offer. >> thank you i yield back. >> the gentle latest time has expired. the chair now recognizes

mr. murphy for five minutes. >> thank you madam chairman. thank you madam chairman thank you commissioner roddick for coming out today. it is obvious this is been a herculean effort to get a handle over during the pandemic. obviously some factors that have occurred long before the pandemic of systemic inefficiencies and bureaucracies that have handcuffed not only up at the american people and dealing with the so much. the irs obviously is a point of great stress for the american people. no one likes to deal with the irs. i would just ask a few questions because of the difficulty we have now and getting a hole of this. did you guys ever use an outside agency to ever come in, everyone is asking for money, money, money to do these things but is anyone come in tried to give the irs.

>> they have contracts with consultants who do exactly that. i have made visits of various parts around the country, trying to encourage others to participate with us as i did on behalf of the country. i think the high end tech companies for example in california could do better contributing. we have a lot of different abilities appear to came aboard to make things better for these tech companies at their big powerful posture because they are raised in a country that has a rule of law they can rely upon. that is every american to judy quite frankly to help support the agency that is accountable for 96% of the gross revenue per touches more americans and anyone on the planet. >> it does without a doubt it does. but as most americans believe, less government is better. this is just a perfect example that we don't need more and more government because of the bureaucracy and inefficiency that we have. let me ask a question, probably

outstanding taxpayer filings that have been made, these are monies that have been paid to the government but not been refunded or filed for jem and estimate of how much the united states government owes the american people because of filings that have not been dealt with? >> i do not. would have to try to figure how to get that. i can say the inventories are down significantly. i know most of you have staff who participate every friday 2:00 p.m. >> if we have 10 million filings that have not been done the average filing is how much? >> the average refund rather is how much? >> currently it is running around 3400. >> those were not all be refund returns. >> the average of the of hundreds of millions of dollars owed to the american taxpayers sitting in government coffers.

the change in the law for ei tc in 2019 stated 2020 pride. we had to manually look at more than 30 million returns. that was under 5000 people to do that. but in terms of technology and what we have been doing during the pandemic there are many. i will give you one. we did what is known as the fixers and your staff are aware of this. fixers took a position automated the processing of the return recovery rebate process four-point to million ripped imbalance phones and other technology. we are trending to the point of the charwoman and the ranking member. we are trending in a really good

direction. >> let me ask this then, what percentage of your workers are back in place and person working? >> like the rest of the world, we have a blend between teleworker. >> what percentage are back in place? percentage of people required to back in the office they are all back in the office. the processing folks were back in the office in june of 2020. socially distance, multiple shifts, mandatory overtime as well as a voluntary overtime throughout the workforce and account management and submission processing for. >> okay thank you. do you know this is a difficult job. i'm not saying it's not at all by. >> i appreciate that. >> actually do. but i do think just as with anything we can do a lot better with the irs had to pay out a tremendous amount of money and interest because of the delays in processing without a doubt that was money that should never have had to been spent by the american taxpayer. i appreciate the work that you do. i hope that you your retirement

is a good wet and hopefully your replacement will come in to be even more efficient and better steward of our taxpayer dollars, thank you you'll back. >> the gentleman's time has expired. the chair now recognizes mr. doggett for five minutes. >> thank you so much thank you commissioner for your testimony this morning. i am very pleased he responded favorably to the request made by the chair, myself and some senators to keep open the submission process one of just three irs facilities across the country that process these paper returns. we are all for my earthy, and other national taxpayer advocate that paper is the irs's kryptonite. i know often irs employees are working hard to handle it. [inaudible] keeping replacing new staff.

[inaudible] >> your audio is cutting out. >> i am sorry, thank you. concerned there would not be a facility there. i hope you will continue to affirm your commitment to the facility and its dedicated team. [inaudible] i believe we face today with the internal revenue service are the result of a previous budget decisions design delivery to ensure the irs fails for the public would grow dissatisfied, frustrated, with the irs. and eventually replace it system but over the last decade as you know funding went down 20%. staffing went down 17% spray the number of returns that you

expect to process went up 19%. the result of the process returns my republican colleague was just talking about, unanswered calls in general unhappiness to rescue america's slashing funding in half. >> can you hear me now xes may. >> the question is, if you are a budget were cut by 50% that has been proposed by some of my republican colleagues, what impact without having your ability to answer calls, get refunds back, and generally

conduct and fulfill your lawful responsibilities? >> if the irs budget was cut by 50% you might be better off and save more money by shutting it down completely. you know, we account for 96% the gross revenue in the united states of america but how are you going to find what we need to fund? and what every american deserves. efficiency yes. but cutting our budget is not the right answer. >> perhaps shutting it down is exactly those who make this proposal have in mind. let me ask you also for. >> by the way sir i am not proposing to shut it down. i'm just responding to the question be. >> i understand. some people would like to infect the budget decisions over the last decade have been designed to shut it down slowly. now abruptly. let me ask you by your comments earlier about the tax gap. you have estimated the difference between taxes owed in

taxes actually paid, i believe were an astounding trillion dollars for a year. another estimate is 70% of that gap is with the top 1%. what resources do you need in order to close that tax gap? >> we need a visible, robust, enforcement mechanism we are down 17000 enforcement personnel. that does not mean everybody on the street. it means strategic comment means experience people who know -- you cannot complain we conduct audits but you complain if we conduct audits that go on too long or in certain arenas where we should be moving on. but we do not have the ability to do what we need to do but i continue today to stand by the trillion dollars that we are about to issue our tax gap for the period that was 2011 -- 13 going to do 14 -- 16.

going to see them track i'd like to draw your attention because i assume is going to be a lot of impressed you are going to cs projectile we think the tax gap is in 2019 bear but no last year there is over $14 trillion in transactions in virtual currency with the market gap over $2 trillion. somewhere between 30 and 43% of that market is u.s. people. some u.s. reporting and they need to report. >> a gentleman's time has expired. the chair now recognizes mr. evans for five minutes but. >> thank you madam chair. recently enacted legislation that would increase the irs funding on nearly 6%. i understand this is nearly not enough to reverse a more a decade of severe underfunding.

and i recognize the irs needs more resources to updated these antiquated technologies. still commissioner, how do they plan to use the increase in fy 22 funding to improve service delivery via timely response to our constituent hair particularly those who do not file a tax return but who have earned child tax credit? >> note it is 675 million increased over enacted 21. it's more than 500 million or less what treasury and omb requested. and of that 600 million over 300 million cost-of-living adjustments if you net that it's about 375 million-dollar adjustment for an agency that gets called upon time after time after time for new responsibility and performs our people perform art people are spectacular in terms of earned income tax credits child tax

credit and numerous others, we need to educate people we need to help people got it right. i am incredibly proud during my term i don't take credit for but the public school kid from l.a. i open some eyes indoors about certain parts of the community. for the first time in the history of the irs i am number 49 as commissioner of form 1040 is in a language other than english. it is in spanish i will accelerate through the language is pretty have noticed last week he also launched spanish briella for our returns. i will call out also last year we had over 2 billion hits on irs.gov. more than 98 million were on our non- english speaking pages. we are in the communities in person. we are providing services we have a whole array of taxpayer services that are not just phones its online comments are taxpayer systems center were the first things i would encourage funding for, from congress is to let us staff up our 3258

taxpayer assistance centers by that is our front line retail if you will operation. we have 39 unstaffed we pull people in similarly taxpayer advocate service they got a little bump this year. that is the safety net for many taxpayers on the outside. so to have them have a caseload that three or four times a normal almost impossible for any individual to do but they give their best pretty also note we launch this year taxpayer experienced office which is to operate and look and get comments and questions of the eyes of the taxpayer if we can add one thing we routinely hold hear me interactions with her front line employees whether it's on the phone or in the tax basis what are you hearing in terms of filing in terms of this on this? you will see that's when ucs issue alerts, announcements, letters, reach out to congress so we can work with your local offices and whatnot. we also interact with the

transmitters because they run almost eight mirrored operation to us during filing season. if you want enter an electronic transmitter that is the person attend a call. we share information with them as well. >> commissioner, when constituents cannot reach the irs they cannot get help from the taxpayer advocate service they contact their member of congress. the response to that aspect? >> absolutely. the pandemic has been very difficult for all of you, for your folks on the front lines and it has been difficult for us as well. i have almost never interacted with a member of congress 535 plus who does not have my personal cell phone, who does not have the personal cell phone number deputy commissioner for operations support. we are available, taxpayer advocate service is available. our legislative affairs are

eligible but i'll hold a one-on-one conversation with you or without you with your staff bringing ken korb and his or taxpayer experience office and for constituents are having a difficulty wanting to know where their matter is, get us a waiver so we can talk to you. get is the taxpayers information. i have been on calls where it opens up their 70 kim corbin will go 14 are here, this 13 we are waiting we issued a response to them. the idea we talk about how many returns we have it's not like they are sitting in a closet somewhere. we have 4 million returns, paper returns to process. the rest of the inventory if you well as they have been kicked out for an error in the return for they been kicked out for matching, identity theft there's a whole host of reasons, keeping in mind we are the gate keeper for fraud. where the gatekeeper for cyber. get over 1.6 billion cyber attacks per year with recent world events you want us to be

that gay paper. you want us to be ever vigilant and you absolutely must fund us to keep those gates closed for the benefit of every american. we get hit it is emotional. : : :

2021 and many of the small businesses and nonprofits are still waiting on relief for the third, second and first quarter last year while processing delayed eight to ten months. when congress authorizes the program designated to be emergency relief receiving the advanced payment could mean life or death for small businesses and nonprofits in every single congressional district. with the processes to ensure that individuals could receive these direct payments during the pandemic, explain why the irs handles the processing like a normal piece of correspondence and that you do not have the

procedure to prioritize the credits. >> we do have procedures in place but we do not have the ability to automate the systems. that's one of the differences to automate in order to process it but i would encourage that we arrange a meeting or call with your staff and the folks who are there. >> i do not have your personal phone number by the way. make sure i get it. >> [inaudible] >> probably not my better move. >> can you commit to the committee that they play are opposed to the processing including creating a dedicated mailbox, phone line and updated the timelines on when to expect the refunds specifically for small businesses and nonprofits and attempting the credits? >> i come from a small business environment and my dad all

taxpayers but small business taxpayers. the challenges the pandemic presented to them previously and they have nowhere to turn to. >> but you know any time a business obeisance the door whether it is a trust, glassdoor they are taking a gamble by being in business. and the speculation that it was eliminated in 2021 within the infrastructure bill because members of congress did not think employers were taking advantage of the relief. congress should not have accurate, couldn't have the accurate information due to the processing delays. again, at your agency. can you tell many how many claims from the previous quarter amendment before 242021 and how

many have been processed since? >> i don't have that with me but i could get that for you this afternoon. and i just want to be clear the irs isn't the one that got rid of the tax credit. we follow the law. >> i know that and i think you and look forward to continuing to work with you and i also urge all my colleagues on the committee to cosponsor the bipartisan bill to reinstate the ert saver the first quarter. it's hr 6161 and it will deliver our promise to relief to the small businesses and nonprofits in the communities. thank you and i will yield back. the gentle ladies time has expired and the chair recognizes mr. horse fruit for five minutes. >> thank you madam chair and i appreciate the important and timely hearing of the commissioner. good to see you and all of your

team members. congratulations on 50 years of service. i'm going to get right into it because we have a number of priorities facing the american people, and on one of them is the issue of gas prices. they are simply too high and it's imperative that we identify solutions to bring them down. since president putin started his devastating war in ukraine, the price of gas has gone up 75 cents, but the price of oil is rising disproportionately to the cost of a barrel of oil. as gas prices soar in 2021, the largest companies made a combined $205 billion in record profits according to a new report. exxon mobil, the largest oil and gas company in the u.s. reported

over $23 billion in profits in 2020 alone which is a 60% increase compared to 2019 profit of 14 billion. this on top of the tax cut that they got under the trump tax proposals and three oil companies actually paid an effective federal tax rate of zero. at the same time, many of the big oil companies are not paying their fair share of taxes, as i said and there are many not paying any at all and they are not doing anything to pass the profits on to consumers at a time when the american people need it the most. this is simply not fair and it's time that it be addressed. so, what steps is and can the irs take to provide relief to the american people as it pertains to accountability for these big oil companies and the

price of gas at the pumps. >> we will do all we can for every american throughout and that will continue for the employees. we are not a brick and mortar organization. i would encourage congress to take a look at the law and in conjunction with that there was a discussion about an excess profits tax and a lot of things the media is talking about in the space. we do not have the resources to go after the super bigs as you referred to them to the very low income people to identify for auditing at a higher and

disproportionate rate and we don't have the adequate staffing we need. and those that have record profits and are not taxing that to consumers. does the irs support providing an income-based tax relief to provide consumers with a monthly rebate paid for by the excess profits of big oil companies? that would be a policy called for treasury. i want to solutions now. we cannot wait. my constituents are struggling to get by as it is and yes we have a lot of priorities but this is one that must be addressed. >> the secretary will meet with you. >> i hope you well and i appreciate his leadership.

turning back to the tax filing season, i have two questions i want to get on the record. is there someone my staff can call with respect to the delays in the direct deposit issue that we are hearing about, and how is the department dividing its resources to address the backlog while also processing the incoming 2021 claims? >> i think your staff house my cell phone we have the friday briefings. we process on a first in an first-out basis and have about 2.5 million returns that were filed. 20 paper returns, excuse me, 21

and we have about 4.2 million total returns and inventory to be processed. everything else is in process and has fallen out for some particular reason. we can certainly go through it. i'm confident if i may if any of you were in my seat it would have the same passion and prior to that i sit here with the effort of the folks to get this right. we are working really hard on behalf of each of you. >> the chair recognizes you for five minutes. >> thank you for being here today. i would like to have some additional conversations around the ert see. a lot of companies, i was in

small business 35 years and understand the importance of the relief that congress gave and much of that didn't get to the businesses but they have exposure to the tax and they are struggling and we've talked to accountants and companies facing the ert see issue. filing the amended because they don't have the bandwidth in time for the filings. in the cases companies will be filing the april 22 returns with reduced wages but they haven't received the credit. also liable for the safe harbor on the estimated taxes which is

inflated to do to the latest wages and referred instances of companies have to take down short-term loans to pay the estimates or the liability that's due until they receive credits from the previous year. like my colleague pointed out, this program is meant to provide emergency assistance to small businesses and this might seem like a difference and i understand your passion but i can assure you the small businesses are hurting and shouldn't be penalized for doing the right thing. there are massive backlogs at the irs and procedures in place to address these issues. but they need to certainty that they will see the credits in a timely manner and at the assurances that will not be penalized. to those who fight a long time but have returned stuck in the

backlog. specifically as it relates to the ert see. >> specifically and generally we consider the penalty relief. i sent everybody here every time i go outside and do presentations, the 36 years representing taxpayers mostly with respect to the various state taxing agencies and of the accountants and in conversations. i would like to have that notice and find out because all automated notices stopped months ago and so we have addressed virtually everything. nothing is off the table for us to consider. we have regular meetings with

people all over and i think you heard me say i know thousands of people on the outside who fortunately or unfortunately have the cell phone i had before. >> thank you for protecting me. the point being, our ear is to the ground on the front lines in every direction. internally you heard me talk about the people handling the calls and that's getting to me. externally, my friends are the people you're talking about whether it's a small business owners, accountants and agents, people without a designation or with a designation so you understand in advance the need for the prayer ready. i do not anticipate people ending up with a penalty. when we had automated -- >> we have about a minute left about to the specifics because there were a lot of preparers

watching the video and we want to make sure they see this. i guess i am trying to put you on the spot. you've been on the other side representing the businesses. they are asking not to be penalized in the liability and estimates on money they haven't received yet. they understand it's not their e asking for anything special other than not to be penalized for money they haven't received yet. the people that provided the letters know the answers to the questions they have you ask me. the answer to that is -- >> i've been in business 35 years. multiple businesses with a personal thing it should be for everybody. >> that's what i'm speaking to. and i'm talking to the same people you're talking to. they are not my professional colleagues but your friends and business. we are all in the same thing. irs is an agency of people who understand and have gone through the same thing. >> you are not answering the

question. it's going to get out quickly because we are at the end of the quarter. >> the gentle man yields back and recognizes mr. davis for five minutes. thank you commissioner and for being here and answering the questions. let me thank you for your letter yesterday. >> i thought that went out to

you previously and you and i had discussions before and the letter was to confirm those discussions. >> to help understand the income tax credit provisions are relevant to them. from the congressional district helping educate constituents.

can your team provide myself and the committee income reports on a number for tax year 2021. could that information be provided? >> i have that information for you today. we don't keep the information directly but we do under the act required to hold those until february 15th. the information i have today is on the refundable credits that we have held as of february 15th but have since released the three basic categories. it's held not only for economic impact or earned income tax but

it was held only for the child tax credit and both child tax credit so in total, $34 billion was held through february 15th in accordance with of the act and we were not able to distribute that until after february 15th. the eit see was $2.3 billion. a ctc was $110 million. they hold a combine to so people would claim both credits $26.7 billion. there's $5 billion of other credits so those numbers were a total of 34,110,000,000 and a conjoined 26 billion for the combination of eit see. >> for the specifics i kind of rounded off.

>> thank you very much and again i want to shout out and say thanks to the taxpayers advocates in chicago to make sure the individuals understand the earned income tax credit and understand all those things to help them spread the word. so thank you very much, and i yelled back. i want to thank the commissioner for joining us today. please be advised members have two weeks to submit questions to be answered later in writing. those questions and your answers will be made a part of the formal hearing record and with

that, the subcommittee stands c-span now.

next a look at the laws and procedures in place to help preserve presidential records and other federal documents for this was held by the homeland security and governmental affairs committee. it is just over an hour. [background noises] [background noises] deep pockets.