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tv   Hearing on IRS Treatment of Taxpayers  CSPAN  May 20, 2022 8:00pm-9:49pm EDT

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>> the declining audit rate, the staffing needs and tax return processing backlogs in the hearing is an hour and 45 minutes. chair pascrell: good morning and welcome >> good morning and welcome to everybody, the subcommittee on oversight and thank you for the work you have been doing it on
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both sides of the aisle, particularly getting something done for the market people and to the witnesses today, you're holding this hearing in a highbred form and you know what i think about that and i know what many of you think about that but we are where we are. [laughter] and we are holdingng this hearig in compliance with the regulations for remote committee proceedings pursuing to house resolution eight and before we turn to today's core topic i want to remind the members of the few procedures to help navigate this hybrid format and first consistent with regulations, the committee will keep microphones muted to limit thegr background noise and membs joining virtually, are responsible for hun you thinkth themselves when they seek recognition or when recognize
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for the five minutes. committee staff will commute and members, only in the event of inadvertent have background music and say, when the members are present in the proceedings via webex, and ms have their cameras on and if you need to step away to attend another proceeding, please turn your camera and audio off rather than logging out of the platform and will dispense with the practice of observing the givens rule and go in order of seniority for questioning and alternating between the majority in the minority. beginning with members of the oversight subcommittee of course read and i think you all for your continued patience as we navigate the procedures and continue servingng our country together this great time of need and with outcome i will now turn to the important topic of today's hearing, the taxpayer fairness, across the irs.
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any oversight subcommittee meets today to discuss a very important topic taxpayer fairness across the irs easy to say and we talked about it for about 15 years. i firmly believe the irs must treat all taxpayers fairly and equitably and only a policy, but just to make a phone call to the 800 number, which is a disaster and admitted by the irs, this is essential to the irs core mission into the taxpayer experience predict whether the irs has processing returns, answering taxpayer questions or conducting audits, there cannot be one texas and for theer wealthy, and then another for everyone else.
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and yes, that is exactly what we have. for years i've sounded the alarm honor to shared tax system and since i've been tournament at the of the subcommittee, the cooperation of other people on the right and the people on the left, we've held multiple hearings on making our tax system fair. we've not h done much in getting things accomplished though and that is interesting, clearly out tax code can be fair i've offered legislation to close that that gapping blue bold and many loopholes in our laws that face resistance by vested interest in that is not all republicans and my own party, sometimes we cannot get out of her own way.
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so i've been fair about this, and that is my job. based on testimony submitted before the subcommittee, and'v believe me i've read through it twice on this particular subject and i have also made important suggestions to the treasury and the irs the actions they can take themselves to make things more fair and better. i mean, i don't think that is a big ask, and apparently it is. we will continue to press the administration on these points. today's hearing, we will highlight administration and enforcement to and we entered looking at some of the way the millionaires and billionaires have vastly different experiences with the irs and the average american. we've heard reports about
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returned backlogs in the tens of millions, not thousands, millions we've uncovered erroneous notices being mailed to the taxpayers. that's great and wonderful pretty we have worried about millions of taxpayers call the irs to receive a no answer from the nation's sake read have to be lt. colombo to see the irs has entered has major problems predict these irs failures cannot continue and to learn mos fixing these issues, we've invited mr. ken gorman, and he is the irs commissioner for wages and investment in the chief taxpayer experience officer and we've got the guy. we brought him here and we thank
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him for his time along with his colleagues and we are eager to learn how the irs is actively working to improve the taxpayer experience predict for the americans are not millionaires. many report showing the irs ordering the low income families at a much a higher rate than high-income taxpayers and that is not what we were told by the director of the irs and you know what i think about that, i don't talk behind his back, and specifically data shows that a taxpayer with income under $25000, get this, is twice as likely to be audited then someone earning between $20,100,000 etc.
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and that's an outreach, i don't know what is and is even worse if you claim the earned income tax credit, probably one of the greatest tools we have in fighting poverty in the united states of america irs is four times more likely to audit you if you are getting earned income tax credits, why because it is quicker and it is less expensive. the irs seemed to send the poor americans the same way that horrible global colors use the washington journals, the irs goes after people cannot easily defend themselves and you've got it, no use mentioning, come to the point and you want to change
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things, there's nothing to hide. and i asked the g ao to study and asked him to study the order books and the trends. and today mr. james - and think james and the director of strategic issues at the gao, the county office will report on gao's findings we ask for this and we got it today. and as a little movie preview, taking a gander at the graft behind me, showing nosedive the audit rates of the superrich the last decade. and the purpose and i will say this again, being here on the chair, equally anybody in the committee could have been the chair. but the reason is very importann
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to understand, we are not here to soak the rich, there is not going to get us there and people pay their fair share in how we treat all people that come to the irs their particular problems is very important to nott just me, but to the most american people. and so the rates are an important part of thousand i understand it the irs justifies his ordering of record and its staff limitations predict how many times have we heard that predict since 2008 and i know that the irs has a difficult time operating many people in the congress have spent a decade slashing their funding for the irs, to sabotage the tax
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enforcement against the rich and now we have the numbers. we're the numbers to prove it but too many decisions that they irs involve looking at what can be done rather than what should be done and families should not face the consequences of the irs's funding problems while the rich get off scott free. in the deliberate sabotage of the irs, and that's what i'm calling it, has created an agency that cannot process returns and cannot give the taxpayers quickly and not even answer telephone calls forho he. in this irs's fairly to modernize and prepare for ther future. and about parties they are responsible.
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these have now:on the presiden. too far the commissioner appointed by the last presidency, and he quickly select a replacement, now that he's only got a certain time left as well as another one, the last administrations and they walkedyo out three months earlir than before and you know, you think all of the public is blinded to this, they don't know what is going on and if we say it enough times, though understand what we are talking about they deserve nothing but the truth and i'm investing in the irs and i support additional funding and wisely spent by the irs need to do more to improve the operations and eliminate backlogs into answer more telephone calls and improve audit selection. these are the absolute basics and there is no excuse in 2022,
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when you fill the basics coming on going to the next step. so i welcome to today's witnesses were lucky to have you both thank you before someone yelled five minutes to the ranking member, my friend mr. rice, i think were still friends, mr. rice, you have five minutes for an opening statement and thank you for being here. >> thank you mr. german of course we are still friends andr thank you to our witnesses were being here today i want to first take a a moment and think the employees atfr the irs for the dedication to the agency's mission at a time of increased complexities brought on by changes in the tax code is, the irs undertook an unprecedented effort to organize and distribute hundreds of millions of covid-19 relief payments are suffering the same staffing issues as the rest of the world
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and all in the midst of a pandemic. in your efforts have been heroic and, none of that has been easy and i want to say thank you for your hard-working and dedicated public service another topic of taxpayer fairness across the irs is important to what he is also one that is been covered by that subcommittee many times i have that we can move beyond talking points and work on solutions. and i believe the most significant unfairness facing american taxpayer's right now is the lack of customer service at the irs. the irs is sitting on 13 million and processed tax returns in over 20re sees million tax retus that are waiting needing further irs action pretty and at the same time, irs phone service levels are near all-time lows making it nearly impossible to reach an irs agent or help with
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attacks or audit matters predict many taxpayers waiting for resolutions of the tax filings d to receive long-overdue refunds and this is unfair and it needs to be fixed. i know we will hear about the rates and earned income tax credit and mr. chairman, we counted at least six prior hearings under your leadership and touchon on the solid rate issue and p while it is a perfectly fine topic, a seventh hearing on this issue does not seem to desire to make progress towards a solution. the g.i. oh four already indicates what we already know the real administered of issues around the earned income tax credit to the program has annual improper payment rate of around 24 and 25 percent and not just the irs with a have been tellins
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the states as well and the last fiscal year, the improper payment amount on the earned income tax credit totaled $19 million this is a huge problem and it necessitatesne audits and the earned income tax credit is complex when it comes to claiming a qualifying w under child in producing the necessary documentation to establish eligibility. the problem must be addressed and i like to see us more resolutions to address the drivers of the higher earned income tax credit error rate which is at least partially responsible for hunting a higher percentage of taxpayers claiming this credit and instead of criticizing the audit rated, this fix the underlying problem at another hearing to cover the same topic and talking points we heard over and over and over again, one accomplish much and i
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do wish we could've work together in commissioning thisli report mr. chairman and i would like to point out it leaves out important variables related to the earned income tax credit that would better assist congress in understandingco thep data and these problems include failure to adequately discuss the differences between earned income tax credit correspondence audits andnd traditional in pern audits and whether they even belong in the same data set. in treating tax credits with 25 percent inter- rate, the same as tax returns from taxpayers that earned their income and recorded with a w-2, was a 99 percent voluntary compliance rate, and failure to include the results of a secretary munitions 2020, directive to the irs to prioritize increasing audit
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rates for high income earners and failure to absolutely or adequately explain by the irs received $1.86 billion in appropriations, on top of its annual budget for 20 relief legislation in the american rescue plan and bringing it this total funding - 2010 levels and without said mr. chairman, there are real problems with the earned income tax credit administration. congress can and should play a role in trying to solve the problems that we work together on creative solutions. we need to think creatively about how to make the credit easier to administer and bring down improper payment rates into say the irs has no room forde improvement may be the understatement of the year, from the it modernization which would solve a lot of these problems, to improve the taxpayers service to some of the other great
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issues discussed in the gao report of the irs and in congress role-play improving the situation predict and how we can move forward after this hearing andge work together on solutions and thank you and healed back. >> i just want to bring attention that were going to lose one of our staff members and she's going on to greater things as treasury and the assistant of in terms of the treasury department and i want to acknowledge isabel more, thank you for your work for the last three years and terrific job and we are proud of you and i know you voided take over the treasury department when you get there.
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hard worker on the subcommittee i think the payoff and we wish you well at the new position at the treasury department and good lucke to you. thank you mr. rice, and withouti objection all members, opening statements will be made part of the record. now we turn to our witnesses. w why these meetings have been numerous, we have had different topics in different subjects but i wanted to make sure we have exhausted some of the public understands is taken a long time to get us to understand, what we are talking about in this way as for the gaa, this report. october 7, 2020, who was asked to appear before conley's
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committee predict the oversight committee. nas commissioner reddick about a report that he had stated at that time and we asked him to face,i i'm not talking behind s back, the irs low income tax players disproportionally of the wax into wealthy because it's easier to pick on easier americans and he every part of the actor under october 7, 2020, meeting in the report is absolutely false. for the taxpayers, who have more than $10 million in total positive income, the rate is 8 percent andnd he noted that. now the earned income tax rate is 1.1 percent. i didn't not divine wealthy taxis of the few who have over $10 million. it was after his testimony that
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gao report was requested to get the facts and then we have the facts. so the testimony from that meeting, admitted in a recent report that the irs audits though income tax plate and prepares disproportionally over the wealthy. and no will hear the report in this committee, before this report, will not have substance in the committee's report that's why they asked you three gentlemen to be here tonight and this testimony is devastating compared to what i'm going to hear and everybody on this panel and everybody here in the audience and i will turn to our
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witnesses that, our first witness is mr. ken corbin the commissioner of the chief taxpayer officer the irs and annexed witnesses going to be james - director of issues at the gao. in your statements remain for the record and its entirety and we would ask that you summarize your testimony and help you with that please keep an eye on the clock obviously and big overtime i will tell you about it. so mr. corbin, thank you for taking the time to be here today and take your time, make your presentation at and you are on. >> i'm all right, thank you ranking members and members of the subcommittee and thank you for this opportunity to testify
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thatve i have been serving as te commissioner of the irs wage and investment division since 2017 predict last year, housel became the irs chief tax payer experiee officer is speaking from both perspectives, i believe the irs has a responsibilityur to ensure everyone who interacts with us, has both options and access. they should be able to choose how they interact with us and have access to the information they need. we should be able to accomplish their interaction without difficulty and this applies to everyone, individuals with business taxpayers, exempt organizations, tax professionals and it takeovers the tax community and elsewhere. and during the filing season and throughout the here come the rs offers assistance so the people
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can file their returns and receive the refunds quickly and easily printed in this comes through a variety of channels, online, over the phone, in person enter taxpayer assistance centers around the country and another way we facilitate in person health through over 9000 become a science including military bases. many factors, the 2020 filing season has been complex, and challenging into addresses we took a number of steps to help taxpayers including tuning out more than 250 million letters, to help people who need to reconcile, their economic impact payment or their child tax credit payment to and they expanded our customer callback technologies to cover 70 percent of the total treatment and safe
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taxpayers 1.7 million hours of hold time. we begane to use voice and chat box we also understand it that service comes in person so we offered saturday hours at a taxpayers assistance centers and more than nine cities on the country and we have made it the earned income tax credit assistance on the irs .gov more user friendly and enhancing the taxpayer experience, also means improving service to the diverse communities and we committed to helping all taxpayers including those who have limited english i proficiency we have shown that commitment in many ways and just decide a few examples in 2021, we issued the 1040 in spanish, we nowe get taxpayers the opportunity to indicate on the schedule ltp, they want to us to contact women in language other than english and this year for the first time, we also gave our
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partners access too interpretive services which we offer on the phone if an in person and these are all important steps that so we have a much longer-term plan for enhanced taxpayer experiences stemming from the taxpayer first active 2019. it see he was a catalyst for efforts to help develop this plan. it attacks very experience office is taking the lead of these at first, we are setting the strategic direction for improving taxpayer and attacks very screens in implementing the taxpayer expands to ensure the irs meets the needs of all types of taxpayers and stakeholders who rely on us for information. and we are very excited about the improvements we are making and truly to be successful we need help withee him need help, and that means the presence fiscal year 2023 budget proposal $14.1 billion for the irs allow it to continue improvingnu
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taxpayer service, modernizing our system, and ensuring families in the tax system. but we also need a stable multiyear funding, to be able to truly lever with a taxpayers need and what they deserve and what they expected pretty this concludes my statement and i'll be happy to answer your questions. >> thank you mr. corbin, and no i want to call on the next person in your expertise and thank you for being here. >> thank you mr. chairman and republican leader price and members of the subcommittee and think you for the opportunity to discuss our report on trends in audit rates of individual taxpayers and donuts are one of the key tools that irs has to ensure compliance with the tax laws and provide assurance to
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the public that everyone is paying their fair share and taxpayers are also more likely to voluntarily comply if they believe in tax return may be audited and according to the irs most recent estimate individual taxpayers and report their income tax on average, by about 245 believe dollars each year. however are review shows that irs audit a decrease in percentage of individual taxta returns, over the last decade. and over all the other rate is about one third of what it was in 2010, when nine out of 1000 returns were audited compared to fewer than three of 102,019, and furthermore wildly auto rates have decreased from under for all income levels and has decreased more for higher income taxpayers and on the rates that taxpayers with incomes of more than $2000, decreased the most and largely because hiring him audits tend to be more
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complicated and require auditors to manually review multiple issues and as the staff is declined, irs is not been able to conduct as many of these audits compared to the lower income audits which are less complex and involves more automated processes and in addition, the number of high income returns has nearly doubled the meaning of more audits are needed to achieve the same audit rates. nevertheless, the irs has continued to audit hiring him taxpayers at a greater rate than the work income taxpayers in the sink of the audit ready for the taxpayers claiming of the earned income tax credit, he is three times the average rate for all taxpayers and according to irs, returns claiming your income tax credit has historically had high rates of improper payments and therefore require greater enforcement. in terms of audit results from the majority of additional taxes the irs recommends comes from the audits from taxpayers withme
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incomes below $200,000 in simply because there are so many more taxpayers is more audits in this category but the average additionalen tax recommended for audit was significantly higher for higher income taxpayers ranging from five - 31 times the average amount of for all taxpayers with us on public us about his as measured by the average number of hours per audit has generally been stable for a lower income returns but has more than doubled for the returns with incomes over $200,000.42 the rs even greater complexity of higher income audits, and attrition contributed to this increase in on us for the lowest income taxpayers resulted in higher amounts of recommended additional tax per audit hour compared to all income groups except for the highest income taxpayers have pretty this is driven by the fact that the id audits occur before funds are paid and are conducted through
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correspondence and therefore require less time to complete and overall the underlying driver of these trends is that irs is had replacing audit staff lost to attrition and retirement this due in large part to the budget reduction irises had to manage over the last decade and for example, 2021, virus budget was 11.9 billion which is more than 20 percent below what it wasn't 2010, after adjusting for inflation as a result of the secrecy irs officials said that they expect to employ about 75007 this fiscal year and a level nearly identical to staffing in 1973. and at the same time, the irs has been tax with ever-increasing responsibility making economic impact payments, to eligible individuals during the pandemic and helping individuals buy health insurance under the affordable peer act and this is on top of implementing major changes to her taxes some of the text cousin jobs act, and other tax
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law changes that occur each yeae in in conclusion we rely on voluntary compliance and historically the rate of voluntary compliance has been fairly stable but if other rates continue to decline, the key tools producing voluntary compliance may lose its effectiveness and taxpayers may be losing confidence in our tax system and further eroding compliance as a congress considers reinvesting in the irs, we will continue to look at how irs leverages available resources to address these trends and help the taxpayers meet the responsibility and ensure everybody is paying their fair share so republican leader risa members of the subcommittee, this concludes mye repaired remarks i look forward to your questions. >> without objection each member will be recognized for five minutes for question the witnesses as was mentioned earlier, we will - in his hybrid
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setting and said we will go in order of seniority for thebe questioning and going back and forth between the majority minority in the subcommittee members. unmute yourselves when you recognize were five ms. i'll begin by recognizing myselff or five minutes pretty thank you for the report and your finding is, away from page to page, they are alarming. who benefits most from declininn other rates, low income taxpayers over upper income tax payers. >> mr. chairman i would say the nobody benefits from declining audit rates, governments, not
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society, not honest taxpayers, all of those folks lose when the audit rates and voluntary compliance decline. and as i mentioned in my statement, declining audit rates could lead to the client andn that voluntary confidence in our tax system. >> is it true that which you go over quite extensively in your report, that is nearly four times as likely to be audited then somebody that makes $450,000 in income per year. >> the data show that is correct. >> why does the irs focus on the low income audits rather than those of the wealthy.
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>> the irs does not attempt to balance the audit rates across different types of taxpayers and across different incomeco categories that with the earned income tax credit as some have mentioned, it is a very successful program but it is plagued by high proper entrant improper rates which many aree concerned about roughly 25 percent of the most recent fiscal year that resulted in approximately $19 billion and empower often improper payments and the one tool that the irs has to ensure compliance, when the program is audits no third-party to have eligibility for the program once we have is to conduct the audits of i would point out however, that a lot of folks who claim the earned income tax credits roughly about half of the claimant's to use a
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paidla tax preparer and they hae recommended back in 2014, the congressss should have the irs e authority to oversee and regulate in one place thing such as competency testing and education requirements for these preparers to better help low incomeer tax bears are all taxpayers who turn to them for services than trying to comply with our tax laws. and we still stand to be entered behind the recommendation and we think that it would help reduce improper payments and also help earned income tax credit recipients who currently receive it but also those who may not understand they are eligible for it and help bring them into thep program. >> let me give you an example and then you answer the question. >> is a true that when you are
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ineligible ert individual, within the tax code, then if you do not responded to the irs correspondence, this is very important to understand, to usually refer to that in your report, isn't it true that your counted as a default. >> that is correct, when issues the flag at the agency if they do not receive a a response, there's no change the potential refundnd is held. >> so therefore you're the income taxpayer and there's people in progress are so fighting that in that war is over i think but, through that
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these are the numbers that we refer to on the ert form when they have no correspondence, nothing back and forth and just by not responding, whether it is there followed nuts, their considered in default in a program that partaking in and now, you're telling me that is what is happening, why can't that be corrected. >> while it irs. lori: that i think they have a number of programs really try to educate both the taxpayers in the paid preparers that i mentioned previously, when they identify issues, they do not pay preparers to try to educate them onog the requirements of the program so that the taxpayers will not be flagged for audit and approval process to save them time and stress.
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>> mr. corbin, equitable and fair tax administration across the irs is essential. what is the first measure the irs will do to improve it taxpayer filing experience for low and moderate income taxpayers will the iris implement a simple text warm for some taxpayers and if so, when. >> anything is or do that is the first step is run helping the taxpayers understand the different credits that d are available is providing them education and outreach for this arey very first step is to interact with our community partners to make sure that weve work with people in the community and ourselves there to provide education about what the credits mean and how to file the return and what options are available to them in and to make sure that we have a tool
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available for taxpayers to simply file or enable our partners to assist the taxpayers. >> my office is receiving many calls ten from five brothers and sisters in the congress, i get the same from them. we calls from neighbors and small businesses, who have not received it refund us for the pandemic relief. what is the status of the irs backlogs we been talking about this for many years and has the agency created any new surge teams to address the backlogs and if not, can we expect something new pretty. >> so we thought it out calendar year 2022, about 8.2 million
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paper returns in inventory at the beginning of the calendar year and as of may 6, from that originally .2, we have 1.7 million left and what we have done is continue to create a surge teams that you've mentioned it bringing back employees from other parts of the agency whether there enforcement or some other part of the agency that has the skill set necessary to help us process those returns we brothers folks back to help us do that. and we also have brought people back in from other parts of the agency to help us in our accounts management function which is no function that answers the phones and works the paper correspondence so the search teams continuing were thankful to congress they give us a new hiring tools this year and so we have been actively going out recruiting and trying to get new team members into the irs to help us
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do that.. our goal is to bring the irs back to a state prior to the pandemic pretty we have to process these returns we have to process the paper so that we can get back to the business of providing the service the taxpayers deserve. >> i think you for testifying today and for and for now i want to recommend mr. bryson rankingn member for five minutes. >> thank you and again to the witnesses for being here today and i was a cpa before i came to congress had i've seen the irs and the troubles they have for decades andnd this is not new, it's exasperating but none of these customer service issues or noon i remember when as textup water was set up a small business s corporation orio whatever and we would need to get a tax id number and i would have the young lady on my staff
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dedicated to calling the irs because she would be on the phone for hours and this was not last year, this was in the '90s and this is not anything that just happened. >> that is my point. >> mr. corbin, what percentage of the irs employees are back in the office full-time. >> i don't know thet percent, i know that our employees is a return to the office, not a return to work and our employees that do not have portable work, have all been back in the office since the pandemic began working on the processing centers and or other employees who are eligible have been working like our customer service representative. >> you don't know the percentages back in the office full-time. >> no. >> law suspect, going through pandemic, this understandable for some of this but we've got
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to get back a lot of these problems that we face here withe returns are because we are not back in the office yet we need to do everything we can becausee the rest of the world is back in the office and we gotta get the federal employees back in theo office, no excuse for it and they need to be back in the office and the success in the hiring, are you feeling those position. >> it is a very competitive market for the positions that we are trying to sell. >> so you're not really getting a whole lot of success we are getting some success with our customer service representative fires but some of our lower positions are paid position. >> i know you're required to hire 5000 people and did get half of the. >> we have not achieved the half of the 5000. >> have you spent the extra $1.8 million we gave them during the pandemic has any part of the been spent in a less admissible,
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none of it had been spent. >> so part of that 1.6 million has been reappointed to help us with the hiring. >> okay, one thing that the chairman said that i wanted mr. - if you could have me with us, he said that if you weren't sent $25000 act year for me were twice as likely to be audited to somebody made over $200,000 here is that true sweep if you take out the itc and he said hand if then you claim the rtc coming four times as likely, is that right. >> if you make less than $25000 year, and you do not claim the itc do you have a figure in front of you what your percentages are. >> for the taxpayers who earn less than 25000, moderate is about four tens of 1 percent. >> that includes people who claim - >> he does.
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>> if you take out the people who do not. >> it would be lower. >> it would be much lower far lower than people who aren't 200,000. >> about 80 percent to collect the hundred income tax credit. >> and so the only reason that these people will not the only but the vast majority of the ones audited under $25000 is because they claimed that he itc, correct. >> i'm sure the reasons very. >> in the audit we are talking about here is not the iris ages knocking on yourr door, is a correspondence audited. >> it is a correspondence audited and i know from personal experience see a letter from the irs is a bit and i would discount the fact is simply a letter. >> i gotot it and listened offie to be fair across the board and the need to be fair that you said, what are the error rates
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or that he itc and winter they. >> i think you quoted them as well, historically, spinning th% 25 percent range in the most recent fiscal year that amounts to $19 billion in improper payments for mchenry for the same thing from the state attorneys general, and the same thing from say secretaries of state and we for the same thing from benefits or leaders and the state agencies that this program is with errors and fraud and is not the irs to prevent that from happening and part of their duty, correct. >> yesa . >> one problem i think we have am sorry to rush you but one problem that we have is i think that we are not asking for enough justification in terms of details that we need to confirm that the credit is when we get the return filed and so, can you
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give us some suggestions and you don't have to do it right now but two or three suggestions like maybe including of the defendants in the social security number, maybe requiring the w-2, to be filed with the return so that it is obvious that the itc is appropriate sorry it has not, wouldn't the numbers of audits of drop drastically. >> we would have to look at that he doesn't some of the information at the gym entity, such as w-2s, that are already required, was able to match those w-2s with tax returns and that is helped a lot. >> i think the irs was sending thewa refunds or without getting it or not waiting for the w-2s, that is not true. >> at least for the early part of the tax filing season the irs holds tax returns until they receive the w-2s. income verification of -
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>> what also i need to verify for these audits, what else do we need to verify beside the w-2 thatat would eliminate these. >> off handy we didn't a look at that and i'm not completely familiar with a. >> and seems to be that would be an obvious way to solve this problem and if we ask them what we needed up front rather than have them get it after they file the tax returns and so if you could provide this community with one or two suggestions of things that would make it where it's obvious that they needed in all end up with this i have a lot more that i can talk aboutar here but you mentioned that part of the problem is that we have people who prepare the tax returns who are qualified or maybe not ethical and doubling up or increasing people's earned income tax credit maybe they're not eligible for it and so i have a bill chairman that i would love to have you on with
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another call the taxpayer protection and paid preparer efficiency act that would allow the irs to regulate the pursuer fors preparing these returns because i think it's a real problem this might be at the source of the problem and do you agree.e. >> it absolutely in 2014, we did an undercover study and we visited 19 or 20 of tax preparer offices had only one out of this 19, correct tax liability and the fees that were charged, were you know, one of the scenarios that we had was the it substantial fees often 50 percent or 100 percent on the weekly income of some of these people. >> when you drive down the roadn and you see aside some he sells the said future e itc here today, it is a little bit of a clue itself which you cosponsor my billing i'm just kidding.
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[laughter] >> when we have a matter supporting such - we fully endorse it. >> thank you and i yield back. >> i think you can very good mrt recognizes the next person for five minutes and welcome aboard. >> thank you, and her march hearing of the subcommittee, commissioner push back on my questions on the high rate of audits and local income taxpayers those pretty good claiming he itc and i want to thank the gao for showing that they were well-founded and i look forward to seeing the administration response to my letter with senator elizabeth warren requesting more data and a plan of action to address this unfairness. mr. corbin, is a mention he itc
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filers are audited unfairly and because the irs audits the taxpayers, his seems that they do not respond to the correspondence audits will automatically have their credit reviewed and this has major ramifications because national taxpayer applicant it found that low income individuals are less likely to respond to the audit sent and some with these in mind can you talk about what the taxpayer offers to the ent hires to h help them respond to the audits and provide the necessary information to the irs in place, how do you contact the outreache and how the process can be improved to ensure that we minimize no income filers losing it he itc simply because they do not responded to the audit. >> it yes and so i think that some ofi the activity that we o
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at the irs really from the experience his point, comes from the recent education on e itc is a very complex law. our experience it with the taxpayers is that complexity, sometimes causes confusion, not out of a will for willful neglect of the law but it is just a confusion from that and so some of the things we do, wes partnered to do the e itc awareness day and to get out and make sure that people are aware of what is available and the assistance on irs .gov and help them through those issues and we also from an experienced standpoint, one of the things that we will be working on is looking at our notices because, as noted, when you get a letter from the irs that should not be the best experience but we need to make surere that our notices
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are clear and that we provided those opportunities and i think the other stuff that we have to make besides outreach and education's making sure that taxpayers understand the law but when they get a notices that we have to provide the service on the backside we have to be available to answer the phone said to help the taxpayers are asking for and why we are asking for it was not believe it is a combination of education and outreach and i believe this combination of notices and then on the backside of that, providing opportunities for this taxpayers to be able to interact with us for community partners will save a lot of taxpayers really prefer to deal with nonprofits like the united way or some other nonprofits and so we need to design the tools that we canan provide nonprofits of e taxpayers when they choose to go to try to get help.
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>> okay and thank you for that interrupter, i was struck by reports that they estimate about 15 percent current auditors will retire in the next three years and i'm concerned about the new hires with less qualified to handle the complex audits. so can you talk about the impact of retirement of experience staff and without will have on the capacity to audit. do we have the capacity to audit higher nurse and help the correspondence audits of the low income taxpayers. >> absolutely, is a mention my opening statement, higher income audits require more skill because of the number of variety in the complexity of the issues but also some of the mcgarity in
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the law, hit is unclear exactly what is a deduction in the proper vet evaluation of the nasdaq and so a lot of training training is required for the most experienced tax agents and according to the irs it can take up to a year of formal training and then, four - five years of job-training to really become one of the most seasoned and experienced it tax auditors and the irises also had issues in terms of not just retirements that was mentioned but also retaining these highly skilled added entered individuals and wednesday have the skills, they become very valuable not just to the irs but to others in the private sector. irs a year ago or so did
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announce the initiative to try to bring in more mid-level examiners or experts that they could train up a little bit more quickly and that is something that were going to follow up on. >> thankel you and i yield back. >> thank you for your questions and now i would like to turn to mr. murphy, five minutes. >> thank you and thank you. and we irs should be a four letter word but we will keep minute three and we don't need to be more that's people think in the country but that is a part of a function and how we keep the country going and so, i have always been a little bit reluctant to tubelike the word experience when you hear it in different context because i thank you so sometimes it is just something that we should be, were in s customer service d so our government should be and i actually appreciate it the
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title of experienced officer because thiser is something that citizens, we are customers when it comes to government functions. let me ask questions here and very disappointed because reading an earlier literature it says that the how to raise the same. for the folks with higher incomes they were audited higher. .. is? why are we auditing folks with lower incomes more than higher incomes? can anybody explain that? eith mother corbin or mr. mctigue -- either mr. corbin or mr. mctigue. it can't be a computer glitch. mr. corbin: we touched upon it a little bit in our report. i.r.s. has more visibility into the income of lower income taxpayers. mr. mctigue: lower income taxpayers tend to be wage earners and there's very good
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third party reporting that goes well to the i.r.s. and to the taxpayer to help them fill out their tax >> . >> and all of the earned income tax credit is done by the way of the investment. on s the flipside, higher income audits, there is much less on that income and it's more difficult and more challenging. when you lose the expertise as the irs has with retirement and the skilled auditors. >> i don't want to say high earners are bad people. otthey are not often times they have invested is not just one versus the other it should be a balance playing field
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because the top 10 percent of people provide the majority of tax income. it's just about balance. >> going back to working from home it is now a pet peeve of mine. why is anybody one? irs working from home? >> right now the vast majority of employees working at home our customer service representatives. but they are returning to the office. mainly because they are still able to accomplish their work. they can answerr the calls, work the correspondence from theirco computer screen. but we are returning back to the office. >> i understand this but i don't understand the efficiency you have when you are working ine, an office i get it bad it is part of the great reading your message.
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that everybody should be sitting at the table right now. but folks need to come back. if anybody could spit out with 8 million returns and you chop that downn to 1 million how much is still owed to the tiamerican people? those people at the last meeting - - meeting what is still owed to the americance people for the returns that have not been processed? >> all of them are not due a refund through the filing season so far as $3000 so once those returns have processed through to the master file system we can take a look back
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in and tell those returns are in the system. >> you understand the genesis of my system but it has been holding onto money that is not theirs is pass on —- especially during a massivewh inflationary period when that was less than what they were truly owed. >> we are required to pay interest on refunds. >> and tax inflation-adjusted? >> yes. >> thank you mr. chairman i yield back. >> the grandson the report are very very informative because when you find out how much the irs has collected and what they didn't it is astonishing.
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>> and to find out the reasons for it is pretty convoluted when you are referring to that. and we cannot find the exact reason why that has been history it wasn't just during the pandemic we had the ability to attach every problem the irs has to the problems of personnel during hthe pandemic if you go back to the hearings a ten years ago then you would be astonished also to call on mr. schneider for five minutes. >> i want to think the witnesses for joining us today. with employees of the irs.
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every agency and employee in any business and with those challenges of working to the pandemic. so you have been at the irs for a while. >> i started working at the irs when i was in high school. i spent some time way back c then with the company called commerce clearinghouse in the space. but the complexity of the tax code and the demands for compliance got more complex. is that a fair statement quick. >> yes. >> that complexity has grown to putn on the irs employees.
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and with those antiquated systems is that fair? so more complexity greater demandns and return with fewer staff. and as it turns out somewhere between half a trillion and $500 billion per year is not being pledged due to the irs is that the estimate? >> i would agree with the commissioner. >> so the goal is to make sure with the taxes that they oh, not a penny more. what we've heard with the committee and from past experience the specter of knowing that you might be
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audited to make sure that information file is correct andke complete is likely to increase compliance. that is the assumption under taxpayer experience. >> trust in government is important. i think taxpayers want to know that their neighbor across the street or next-door pays their fair share. i do think that is a foundational piece of voluntary compliance. >> i know i pay my tax. so with business competition pays their fair tax as well with the local playing field. but let me suggest with the role of taxpayer experience, how do you see that what do you want it to be for a taxpayer whether low
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income or because they have higher income? >> i think the taxpayer experience has to be human centric design service to one in service to all. i guess we have an obligation to map out the different journeys from low income taxpayer to middle income taxpayer to a small business and a tax-exempt business. and if we do that human centric focus trying to meet taxpayers to have access we can approve improve not only trust in government that they know what they are implementing the law correctly and accurately so i believe it begins with watching the journey for each taxpayer and
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takes the whole tax ecosystem. you are partners in congress at gaoao and take that to the irs and the tax preparers to the volunteers it would take the whole community to get this right. >> i cannot agree more. and was services on the backend. i would like to ask for another half hour but on the front and to use modern technology to be that consumer focused and that it catches the mistakes and then the better information going in that i assume would help us reduce the number of audits on the backend as well. >> that is absolutely fair.
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we have foundt through identity theft and prevention is more important than detection. >> that is true and everything. i wish we had more time we look forward to working not just with you but and to make sure we are providing the necessary service and then the number of audits. and the tax filers. >> thank you mr. schneider. >> you brought up a great point. about trusting government and that is a valid issue. and as we intend them to
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unless we intend something different than we think and that t is possible so we need to correct those agencies in order to build trust in the community. >> so agencies need to perform. and to have basic performances and we should be talking about thatr.. >> thank you chair. >> . >> i appreciate you to be here and i would like to submit for the record a statement from the national taxpayers union on the dangers of increasing the irs a enforcement along with
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bipartisanck colleagues. and that was six weeks ago. and then the failure to process employee retention taxiv credit payments. we have not received a response. with news breaking in the last week the irs has destroyed 30 million unprocessed returns come i am concerned agencies ability to process additional paperwork under the expanded reporting requirements, especially for working-class americans such as those that are receiving that 1099 k form. and in order to pay for the reckless spending package, congressional democrats have a gimmick to lower the reporting requirements of the gig economy workers and small businesses from $20000.200000 transactions to simply $600 of
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income. in the farm they have never seen before and leading to overpayments with the irs receiving a higher volume in any of the companies that operate businesses are online marketplace with social security numbers and the people that are using the services and that puts more data at risk of security breach and hacking. and that is why last year i just introduced hr 3425 to repeal this provision andou return the threshold to the previous mark as well as
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saving the irs from a flood of paperwork and phone calls. please join me to make this mistake. and then to handle the influx of telephone calls likely to result from the taxpayers receiving a tax form that they have never seen before? so right now our customer service reps have two jobs and the answer the phone which is how taxpayers answer on the phone, but they are also responsible for account changes that are done on paper. that is like an amended return or ahi letter you may send in. we have been focusing this year to make sure we get caught up on our account
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change work and to get caught up on account change work so we can get back to the business to answer the phone more readily. we have also implemented what we have customer call back technology available for 70 percent of the call demand that comes in. our goal is0% to expand that to over 90 percent and this saves taxpayers hours you don't want to sit on the phone listening to music we don't is on the phone listening to her music but with one.7 million hours of hold time last year using call back technology. so to answer your question by enhancing information and how it looks on irs.gov to make sure we have the right staffing to answer the phone calls and then by implementing technologies such as callbacks to let us get to the job of
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canswering constituent calls. >> you make it sound so smooth.to i really hope that does happen. how do you plan to communicate with taxpayers the amount listed on the 1099 k are gross sales in the taxpayers can assert the original cost basis i am concerned that they will report the gross amount and is not what is taxable. >> it starts with outreach and education to make sure through tax forms we have throughout the summer that to understand how to explain the form to create a poster that explains it for tax professionals also a get ready campaign.
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it is a social media blitz and the irs does interviews and then we tried to hit the ground and talk with community partnersh to make sure they understand and partner with other government agencies is critical. you are talking about small businesses. so connecting good government works when you can connect with other federal agencies and we use and leverage these other networks to provide education so taxpayers understand what they are receiving. >> i yield back. >> i think it makes sense so we said many times before, we are in a different world that
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basically you're talking about basic things. we are taxing income more than we have ever taxed it before and those assets which have grown tremendously in the past 20 years. the burden is on those who work hard every day. this is not an anti- rich kind of thing. we want people to make a lot of money and to live better than past generations. that's not the question. the question is fairness and you make a lot of sense of what youea have suggested i will read your bills i knew one of them but i did not know the others. i think this is important and significant what you ask but i think mr. corning got to the
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heart of the issue and was not wrong about it and got to the pointai right away so fairness is why we are here there is this aspect of it of operations and the other aspect is the laws itself of the secretary paying higher percentage than herer boss on taxes. if we don't address that, this reduces the trust in government and what you are asking is harder to reduce trust. thank you for. your questions. now the gentleman from nevada youe have five minutes welcome aboard. >> thank you mr. chairman for holding this hearing. across the irs i'm particularly interested in this topic given the experience of taxpayers and
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how it can differ based on income levels. it's not talking point that my constituents face and his wellness fairness to me my constituentsts and then each and every day and then with the family and they pay their fair share taxes and are trying to start the american dream millionaires and billionaires reap profit so it should only seem just they expect the's billionaires to pay their fair share in taxes just like any
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other american that contributes to ournt country. however study after study and the gao reports low income earners will be millionaires and billionaires is a persistent and growing problem or to hide their money and secret offshore bank accounts in order to avoid paying the tax obligation and why we cannot prioritize auditing millionaires and billionaires and losing out and hundreds of billions of dollars per year of tax collection so in the report titled the trends of the irs on it rate stated in
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july of 2020 the treasury department mandated and 8 percent audit rate on high income individual taxpayers. with a total positive income of $10 million or more. have you t been able to identify the number of americans with a total positive income of $10 million or more? how many individuals of that number have you been able to audit since 2020 what has been the amount off taxes collected as a result of those audits? >> thank you for the question.
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and appendix number three we do breakout the number of audits and the number of returns by income category so a total positive income of 10 million or more their proximate 24000 return submitted to the irs. of those audited 1000 of those river 4 percent and that was 2019 the most recent data that ween had. >> even though the requirement is 8 percent? >> i'm sorry quick. >> even if the requirement is 8 percent that identify for audit? is that correct? >> as i discussed earlier in my testimony, the higher income taxpayers tend to take longer toha complete so there may be audits underway that
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are not yet reflected in that data. >> american with the highest incomes with a large share of unreported taxes at the same time especially black and latino communities are targeted more and looking at the allocation of resources the irs utilizes to scrutinize high income households because studies have shown that tax evasion and underreporting numbers are higher and then the money collected is far more significant in targeting lower income households and if
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you can answer that question? >> i will start by saying in 2013 we recommended the irs look at direct income with costs thets various parts of audits and suggested the irs could increase the amount of revenue they collected byhe shifting resources along the lines that you describe from lower productive audits to hire productive audits it took time tori develop a model to do that and to measure in particular on the cost side of the audits the irs has began implementing a model which does look at the return on investment of different types of audits but we think that's a step in the right direction in terms of and i think it's
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important to notee that of the 245 billion of underreporting that i mentioned at the top of the hour, 110 billion of that is related to schedule c income that are basically small businessess that report on a 1040. that is a huge amount and and that would be beneficial. >> i have a number of other questions but i will submit them for the record. >> and now i will call on some of h the members for their briefings some of them are getting back here and some of
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them are not. for those markets and other activities that are going on thank you so much for being here and thank you to the chairman and the ranking member for the work that is being done to conduct the business of this committee and oversight taxpayer fairness across the oversight and we have very unique tax issues that we must deal with so what is the irs doing to improve the interaction in the us territory? is anything being done? >> there are a number of activities we are down doing to help taxpayers with filing an understanding the requirements needed to get the
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child tax credit or to make sure they are filing a return to get the benefits they should receive. we have done a number of things like tax payer experience days which are basically and we have been partnering and those that they need to file a return they can file a return have questionso at the irs employee will be there and then to help them. and also working a community and practice working with people on the ground in the nonprofit and community leaders and that deals with outreach and education. >> we have talked previously and the use of those to support making calls to the
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irs it is very difficult. do youou believe you have sufficient number of taxpayer advocates and what is an appropriate amount you would need to support the demand as you see it? or the fte? and the taxpayer advocate service is led by my colleague. would not comment on what she would like or her needs. >> she once more assuredly. and i agree she needs more. and for that individuals don't have that scary experience on the backend so in preparing for this they were in new york city as a police officer and
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had quite a bit of overtime my mom worked in the court system in new york making decent salaries giving a lot to charity and my mother is an orphan so what supported her as a child i can remember in auditorat coming and the absolute fear that my parents had in97 the 1970s this white man coming to their home and auditing them and remarking on what a nice home it was in that consternation to themm as well. so i t agree with so many of my colleagues, i think there is a return on the investment in terms of audits that it would be the billionaires and i know that they take substantially longer, to conduct being from us territory and you have done a tremendous amount of audits
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on individuals whon have taken tax credits living in the us territories. and others can drag on for ten or 12 years but the outcome is tremendous in terms of the amount that goes back so do you take a look while there are substantially more individuals making $200,000 or less and by sheer numbers that amount would project you are going after individuals in that category dan millionaires or, billionaires? but do the return of the audits justify putting more resources into that group rather than the lower income bracket group? >> i cannot address the return on investment. >> don't you think that should be done? from theas actuarial standpoint?
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what are we getting the most bang for our buck quick. >> absolutelyto i agree. i was touched by your story with your family. >> they got out of it. everything ended up fine but i can imagine for most american families the thought of: someone to sit down and audit them is terrifying for the average american. >> we want to change that experience and i hope hearings like this where constituents and citizens get to see me. not saying i'm perfect but hopefully they will see we are trying to be better and kinder and empathetic because that is a part of federal service. >> i know my time has run out but i believe in data and i think that would bear out the irs would receive more in terms of going out with you
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are individuals making greater amounts of money than making 200,000 or less. >> we are collecting what we should collect with $600 billion from what we should collect what we actually collect. there is something wrong there that's not chump change. >> and five minutes mr. davis sense of thank you for getting back to the meeting. >> thank you mr. chairman. let me thank you mr. corbin and your staff for your attention this year for outreach and consideration is newly for thend earned income tax credit second i am deeply
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concerned about the ability of vulnerable individuals to successfully overcome barriers with the current tax system. unlike my colleagues i'm deeply concerned lower income taxpayers receiving the earned income tax credit and other credit receives dramatically greater scrutiny when the most wealthy taxpayers do not. i understand the irs lacks the need but the imbalance should be stopped and the more specific data for each of the refundable credits to understand how these credits impacted families and workers this year compared to prior tax years.
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can your team provide myself and this committee information on the number of claimants and the refunds for tax year 21 with the refundable tax credits and how many this year compared to last year? i know i have lower income constituents who don't have to file taxes and who don't realize they could qualify for the ctc and the e-itc. so what steps is the irs taking to allow these individuals after the normal deadline? and then i appreciate an
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update on the stimulus payments for the incarcerated and how the tax season faster the homeless youth. >> i thank you had a couple of data request in their and to get that and information back to you so for tax year 21 i would caution that is still a year that is being processed. the data we can provide you is to currentnt or partial year data. the other question was around what are we doing to stille continue to advocate for taxpayers who are still eligible for some of the credits you may not have filed aow return? working with your office we know there are lots of
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taxpayers that are in different life circumstances like theth homeless youth. we have continued to reach out and talkth with the nonprofits especially dealing with homeless youth they will not come to irs or trust the irs to give them the answers. but they willl trust the advocate in the a shelter with them to make sure we provide those advocates with the tools they need to file a return for free with the irs so those taxpayers can continue to get the credits. because it is a refund the taxpayer did not have to file an extension to do that and i look forward to working with your constituents in your office to make sure we hit the mark on the.
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>> thank you very much and i just spoke to a d lady this morning she has two children but did notus file because she did not have to and it took me about ten or 15 minutes to help her understand she is missing many and losing money. so thank you for the engagement especially with the agency has done with my committee relative to foster youth thank you and i yield back. >> thank you mr. davis and for your question. this brings us to a close. thank you to our witnesses.
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you have done a fantastic job with your reports elected them very carefully and read them s very carefully misses half of what we're doing and then the legislation that with its more protected and then the emphasis is of course to get back to assets which people have theou ability to camouflag. if you have 20 lawyers that helps. what is the guy make it has $30000 that's why tax advocates are very important't for the average individual. most don't get to see them or
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talk with them. they could use the advice just as well somebody making big bucks. i think the both of you for responding to what we have asked for sometimes you get stuff it has nothing to do what you ask for but you address those issues. >> it's an ongoing issue. i intend to have more targets in terms of the future but these programs going into effect in this legislation going into effect. >> tax fairness should not just be a good term it should mean that people who don't make as much in terms of salaries and income really believe the iron on —- the irs are not evil that they cannot be nice either. that is not their job.
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that is not the irs that i know. so i am looking for fairness and i understand the pressures of the workers that irs are under. many of them wereth not trained high end jobs on the front line to deal with those we are talking about today. you have to train people when you use the term being trained for four years and then in a another three years do you know the percentage of front-line workers will be reduced in the irs?
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that's aar sensitive question with a terrible answer. we don't get the authority to move forward. we don't have the tools. but we should. leadership is necessary is different that doesn't look for excuses. then you order from both sides. >> it's not a partisan issue. not here to soak the rich. i will be treated fairly and you will be treated fairly
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when people feel that they put their trust back. it's not an ancillary. it becomes basic ton what we talked about. thank you to the committee and the ranking member i believe the staff all did their job and i pray to god i didn't mind. and to thank you for being here. i a lot of people watched it and for questions and csolutions. >> nobody likes to pay taxes but you get things done and we should find that out. thank you for coming i adjourn. thank you very much. [inaudible conversations]
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[inaudible conversations]
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walensky and dr. fauci is here. >> dr. rochelle walensky and dr. tony

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