[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]
THE IRS IN THE PANDEMIC
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON GOVERNMENT OPERATIONS
OF THE
COMMITTEE ON OVERSIGHT AND REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
SECOND SESSION
__________
OCTOBER 7, 2020
__________
Serial No. 116-125
__________
Printed for the use of the Committee on Oversight and Reform
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available on: govinfo.gov,
oversight.house.gov or
docs.house.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
41-987 PDF WASHINGTON : 2020
--------------------------------------------------------------------------------------
COMMITTEE ON OVERSIGHT AND REFORM
CAROLYN B. MALONEY, New York, Chairwoman
Eleanor Holmes Norton, District of James Comer, Kentucky, Ranking
Columbia Minority Member
Wm. Lacy Clay, Missouri Jim Jordan, Ohio
Stephen F. Lynch, Massachusetts Paul A. Gosar, Arizona
Jim Cooper, Tennessee Virginia Foxx, North Carolina
Gerald E. Connolly, Virginia Thomas Massie, Kentucky
Raja Krishnamoorthi, Illinois Jody B. Hice, Georgia
Jamie Raskin, Maryland Glenn Grothman, Wisconsin
Harley Rouda, California Gary Palmer, Alabama
Ro Khanna, California Michael Cloud, Texas
Kweisi Mfume, Maryland Bob Gibbs, Ohio
Debbie Wasserman Schultz, Florida Clay Higgins, Louisiana
John P. Sarbanes, Maryland Ralph Norman, South Carolina
Peter Welch, Vermont Chip Roy, Texas
Jackie Speier, California Carol D. Miller, West Virginia
Robin L. Kelly, Illinois Mark E. Green, Tennessee
Mark DeSaulnier, California Kelly Armstrong, North Dakota
Brenda L. Lawrence, Michigan W. Gregory Steube, Florida
Stacey E. Plaskett, Virgin Islands Fred Keller, Pennsylvania
Jimmy Gomez, California
Alexandria Ocasio-Cortez, New York
Ayanna Pressley, Massachusetts
Rashida Tlaib, Michigan
Katie Porter, California
David Rapallo, Staff Director
Wendy Ginsberg, Chief Counsel
Amy Stratton, Clerk
Contact Number: 202-225-5051
Christopher Hixon, Minority Staff Director
------
Subcommittee on Government Operations
Gerald E. Connolly, Virginia, Chairman
Eleanor Holmes Norton, District of Jody B. Hice, Georgia Ranking
Columbia Minority Member
John P. Sarbanes, Maryland Thomas Massie, Kentucky
Jackie Speier, California Glenn Grothman, Wisconsin
Brenda L. Lawrence, Michigan Gary Palmer, Alabama
Stacey E. Plaskett, Virgin Islands Ralph Norman, South Carolina
Ro Khanna, California W. Gregory Steube, Florida
Stephen F. Lynch, Massachsetts Fred Keller, Pennsylvania
Jamie Raskin, Maryland
C O N T E N T S
----------
Page
Hearing held on October 7, 2020.................................. 1
Witnesses
Charles P. Rettig, Commissioner, Internal Revenue Service
Oral Statement................................................... 8
Erin M. Collins, National Taxpayer Advocate, Taxpayer Advocate
Service
Oral Statement................................................... 10
Vijay A. D'Souza, Director, Information Technology and
Cybersecurity, Government Accountability Office
Oral Statement................................................... 12
Written opening statements and statements for the witnesses are
available on the U.S. House of Representatives Document
Repository at: docs.house.gov.
Index of Documents
----------
Documents entered into the record during this hearing are listed
below and available at: docs.house.gov.
* Center for Taypayer Rights Written Statement; submitted by
Chairman Connolly.
* Statement by Joseph Hickey; submitted by Chairman Connolly.
* The New York Times, ``Trump's Taxes Show Chronic Losses and
Years of Income Tax Avoidance'', article ; submitted by
Chairman Connolly.
IRS IN THE PANDEMIC
----------
Wednesday, October 7, 2020
House of Representatives
Subcommittee on Government Operations
Committee on Oversight and Reform
Washington, D.C.
The subcommittee met, pursuant to notice, at 10:06 a.m.,
via Webex, Hon. Gerald E. Connolly (chairman of the
subcommittee) presiding.
Present: Representatives Connolly, Norton, Sarbanes,
Plaskett, Khanna, Lynch, Raskin, Maloney (ex officio), Hice,
Grothman, Palmer, Steube, and Keller.
Also present: Representatives Porter and Pascrell.
Mr. Connolly. OK. The committee will come to order.
Without objection, the chair is authorized to declare a
recess of the committee at any time.
Without objection, full committee member Katie Porter, the
gentlewoman from California, and Representative Bill Pascrell,
the gentleman from New Jersey on the Ways and Means Committee,
shall be permitted to join this subcommittee and be recognized
for questioning during the course of this hearing.
Without objection, it is so ordered.
I now recognize myself for an opening statement. The
Internal Revenue Service collects more than $3.5 trillion in
taxes, roughly 95 percent of the Federal revenue. And it
manages the distribution of more than $370 billion every year
in refunds. The revenue the IRS collects for the Federal
Government funds critical programs and benefits like Social
Security, Medicare, and veterans health services. The billions
of dollars in refunds distributed to taxpayers each year is a
lifeline for many Americans, especially those at or living
below the poverty line.
The IRS is a critical agency that we turn to in the
Nation's hour of dire need. Today's hearing will examine how
that agency was ill-prepared to meet those needs. We'll look at
how decades of deliberate starvation of the IRS prompted a dire
financial situation and left an agency with what a former
taxpayer advocate referred to as a prehistoric IT
infrastructure.
We'll show how a decade of attrition hindered the IRS'
ability to meet the complex needs of our Nation during the
unprecedented pandemic and attendant economic collapse.
According to the Congressional Budget Office, from 2010 through
2018, when Republicans were in control of the Congress,
lawmakers cut the IRS budget 20 percent in inflation-adjusted
dollars, resulting in a 22-percent staff reduction.
Thirty percent of these staff were in the IRS enforcement
positions. After years of disinvestment in IRS enforcement
capacity, unpaid annual taxes owed but not collected are
estimated at $450 billion a year. The starvation and chronic
underfunding also prevented the IRS from investing in IT
systems.
I ask unanimous consent to enter into the record the
Treasury Inspector General for Tax Administration's report
entitled ``Legacy Systems Management Needs Improvement,'' which
finds that nearly three-quarters of the 400 active IRS systems
reviewed by the TIGTA are legacy systems, meaning very old.
Another disturbing finding is that was in that report was
that the IRS does not have a handle on how many legacy systems
it actually has or the cost associated with those systems. This
does not sound like an agency ready to fully serve the American
people during a pandemic.
This past year has highlighted just how many individuals
rely on the IRS. In addition to administering the two--2020 tax
filing system, the IRS was also tasked with distributing
emergency economic impact payments or stimulus checks to
Americans. The IRS had to manage the effects of the pandemic
while it was simultaneously expected to mail 170 million
additional stimulus checks to Americans in need.
Years of IT system neglect and the failure to modernize
legacy systems that date back to the Kennedy administration, in
some cases, prevented the IRS from effectively transitioning to
virtual operations. Like many agencies, the IRS sought to find
ways to keep its work force safe while trying to meet its
expanded mission, but it didn't stand a chance.
Its gutted work force and anachronistic IT systems were
simply not enough to keep up. The pandemic forced the IRS to
shut down many of its core operations across the country,
including taxpayer phone lines and walk-in centers. The agency
largely abandoned taxpayers, many of whom--or all of whom are
our constituents at a moment of great confusion and concern.
As I've noticed, the IRS' operational challenges did not
happen overnight. As shown in the tables on the screen, since
2010, the previously controlled majority Congress ransacked the
IRS' budget and the agency was forced to reduce its work force
by 22 percent. That's 20,000 full-time employees.
These significant repeated budget cuts forced the IRS to
make difficult resource allocation tradeoffs. Leaders had to
choose among providing quality customer service to taxpayers,
enforcing tax laws, and updating IT systems. The severe
financial, technical, and staffing problems are a direct result
of years of partisan hostility, reckless so-called
investigations, and unwarranted budget cuts from the majorities
then in control of Congress. And, today, when the American
people are relying on the IRS the most, the agency is gasping
for air.
While our witnesses will testify that the IRS did what it
could with the available resources, it's what didn't get done
that's troubling. It's the millions of taxpayers who are unable
and still are unable to get their refunds because they filed a
paper return. It's the millions of tax returns that hit a snag
and the corresponding taxpayers couldn't get assistance because
call centers were closed.
It's the 9 million Americans who have yet to receive that
stimulus check from April, primarily because the IRS does not
have their information or because their income is so low, they
don't qualify to file a return.
These are our Nation's most vulnerable people. We have a
duty to help them in the midst of this crisis. Millions of
people who desperately rely on the IRS to receive much-needed
financial assistance to pay for medical care, groceries,
housing are still waiting for those refunds and stimulus
checks.
These people are like my constituent Joseph, who did not
receive his 2018 tax refund until February of this year because
his wife passed away and the IRS held up his return to get more
information. The same issue, which the IRS promised Joseph
would not be a problem again, plagued his 2020 tax return,
which still has not been processed.
I ask we insert into the hearing record a statement from
Joseph about his continued concerns with the IRS.
Other constituents have followed the rules and filed and
are being told to just wait. People can't afford to just wait.
They need this financial assistance now. On September 16, I
wrote the IRS asking about these types of delays and the
inconsistent responses staff have provided our constituents,
IRS staff. That was three weeks ago. I've yet to receive a
response.
It's also important to point out that budget cuts to the
IRS have burdened our Nation's poor in another important way.
When the IRS collects taxes each year, it relies heavily on
taxpayers to report their income and calculate the amount of
tax they owe. Most people, in fact, 99 percent of them, do.
Some taxpayers, however, often the most wealthy among us,
including potentially the current President of the United
States, fail to properly pay their taxes. They hide earnings,
claim dubious deductions, such as $70,000 for hairstyling. Not
a deduction available to most of us, and they fail to properly
pay their taxes as a result.
Since 2010, as a direct result of these budget cuts from
the past, the IRS has done less to enforce tax laws because it
can't. If you take a look at the chart on the screen, you'll
see that, between 2011 and 2019, the percentage of individual
income taxes it examined dropped by half. Half. That's
catastrophic, and it directly impacts revenue for the Federal
Government.
The weakening of these vital oversight efforts harms both
taxpayers and public confidence in the tax system. It does,
however, help the wealthy and encourages even more of them to
skirt and cheat the tax system. I was pleased with reports on
Monday indicating that the IRS is finally investigating
allegations of criminal tax fraud at the National Rifle
Association.
I've long led congressional efforts asking the IRS and the
Department of Justice to investigate the NRA and its CEO Wayne
LaPierre. According to studies out of the University of
Pennsylvania, by simply beefing up the auditing capacity of the
IRS to allow for more oversight of the super wealthy, those
claiming more than $10 million in adjusted gross income, our
government would collect more than $7.5 trillion over the next
decade. More than paying all of the pandemic-related expenses
by this Federal Government combined.
That's the size of the tax gap with the wealthy, who fear
little consequence right now from a beleaguered IRS and have
left in our Nation's coffers.
I look forward to hearing from our witnesses today on ways
Congress can help support the IRS instead of politically
targeting the agency and stripping it bear of the resources it
desperately needs as we've done all too often in the past. We
also hope to ensure that the IRS' Chief Information Officer and
CIOs throughout the Federal Government play a pivotal role in
developing and meeting agency performance goals.
I look forward to working with my colleagues on both sides
of the aisle toward legislation that does just that. I hope
this hearing will garner the evidence and justification needed
for Congress to build back the agency that it has so unjustly
ravished over the last decade and so it's prepared to help
struggling Americans in dire need of assistance during the
worse pandemic in a hundred years.
And, with that, I call upon the distinguished Ranking
Member, Mr. Hice, for his opening statement.
Mr. Hice. Thank you, Chairman Connolly.
I appreciate the opportunity to have an opening statement,
and like you, I also have constituents who are awaiting
refunds, and they've been seeking--many of them as far back as
February, and I certainly share that.
I would also just say, Mr. Chairman, that I believe it's
improper for you to accuse the President or seemingly accuse
him of not paying his taxes. In the first place, you don't know
that. And I hope this hearing today will stay focused on issues
that are germane to the topic at hand, specifically IT
modernization. That is what this should be focused on, and I
hope we do that.
And, with that, let me just say that this subcommittee has
been tracking, as you all know, the legacy IT systems and the
reality that those legacy systems pose a risk to Federal agent
missions and the purpose that many of our agencies have.
You know, with many of these agencies, especially the IRS,
some of these older IT systems, they are very complicated, and
they are going to require modernization. It is inexcusable for
us to be facing some of the issues that we're facing and for
our constituents and the American taxpayers to be the ones who
are taking it in the gut over this.
And without modern technology systems that can meet modern
day challenges, our agency missions are at risk, and taxpayer
resources will continue to be spent on archaic and inefficient
technology systems of ages past. This committee understands how
the Federal Government continues to spend a majority of the IT
budget merely maintaining these legacy systems instead of
investing in IT modernization reforms, which needs to occur.
With the majority of agency IT spending going to the
operations and maintenance of these old systems, new
investments are crowded out. I think that's where we need to
get some answers today. We have talked a lot about different
approaches that can be utilized and bring multi-year IT funding
mechanism to be established.
I think we need to go beyond talk and start actually
getting some answers and hearing what some of these agencies
are doing to implement modernization efforts. And it is up to
each of these agencies to utilize some of the resources that
have been made available.
With the IRS specifically, some modernization efforts,
despite repeated large investments by Congress, which, let's
keep in mind, is really investments from the American taxpayer.
In spite of these large investments, the IRS continues to
drag on and seemingly never reach completion of modernization.
We need answers for those type of problems. How in the world
can Congress have faith that another $1 or $2 billion or
whatever it may be at the end of the day that it will be
proposed by the House and the Senate will actually get anything
in return?
Again, I say we need answers to these questions. This
committee wants to understand how these pervasive and continual
challenges can be addressed. This is a bipartisan issue with
potential bipartisan legislative solutions, but we have to
understand the actual problems preventing agencies like the IRS
from moving into modern, agile, and robust technology operation
environments in the future.
To be fair, we all know that, in a rapid response to the
global pandemic, there have been a number of emergency
assistance programs that have been passed into law this year,
and it has been unprecedented. We all understand that. There
have been a lot of mandates that have been involved, and as a
result, we have seen nearly every American taxpayer received
checks and that occurred in an extraordinarily swift manner by
the IRS, and for that, we're grateful.
And you look back at the Economic Stimulus Act of 2008, it
took weeks and weeks for that to be doled out, but like every
other large enterprise in the world, the IRS has had its
operational challenges related to the pandemic. We get that.
There have been issues with the CARES Act stimulus payments
reaching their intended destinations. There have been a number
of issues, but not all the issues--and I get this as well--not
all the issues and problems have been technologically related.
There have been legal issues, procedural issues, work force
issues, data access challenges, but we need to understand the
actual calls of problems before we can recommend any policy
solutions. I hope that the hearing today will provide some
information in that regard.
And to that point, Commissioner Rettig, I hope that you and
the other witnesses today can help me and my colleagues
understand how we can address the underlying barriers
preventing successful technology modernization so that we can
ensure the success of the IRS' critical mission. Congress
cannot afford to blindly continue throwing money at IT
problems. We have got to find a new approach. We've got to have
answers. We've got to have modernization.
So, with that, Mr. Chairman, I want to thank you, and I
want to thank our witnesses for bearing with Congress and these
proceedings. I thank them for participating in today's hybrid
hearing, and I appreciate the opportunity to be able to have
each of them here today.
With that, Mr. Chairman, I yield back.
Mr. Connolly. I thank the gentleman, and I look forward to
working with him, and I thank him for the spirit--the
bipartisan spirit he has laid out for us moving forward in
terms of trying to address, especially the technology
challenges the IRS is facing.
I would also ask unanimous consent that a series of
articles talking about the President's tax situation, including
the assertion that, in the last two years, he paid $750 per
year and no taxes for 10 of the previous 15 years. That's not
just the chairman's opinion; that is a series of analyses based
on documents not denied by the White House. Called fake news,
but not a single item, including the deductions and the
payments I cited, has been denied by the White House.
So, I enter that into the record, so that it's clear it's
not just one Member's opinion, including this Member's.
With that, I see the chairwoman of our full committee is
on, and I want to defer to her for any opening remarks she may
have with respect to this hearing.
Welcome, Chairwoman Maloney.
Mrs. Maloney. Thank you so much to my good friend and
colleague Chairman Connolly for holding this important and
timely hearing on the IRS in the pandemic.
First, I want to congratulate you on already convincing the
IRS to move back the deadline for low-income individuals to
register for an economic impact payment. Until Monday, the
deadline to register for the EIP was next Wednesday, October
15. And now these individuals who earn so little they don't
even qualify to pay taxes have until November 21 to claim this
vital resource.
And without this hearing and the chairman's work, that
extension was unlikely. So, congratulations on improving the
lives of those who need this money the most. This is a huge
victory for the subcommittee and for those struggling on the
brink of poverty across this Nation.
For the past decade, there's been a concerted effort to gut
the IRS and to starve it of the funding it needs to do its job
on behalf of every taxpayer in this Nation. Sadly, after years
of partisan attacks and neglect, it was no surprise that the
IRS was not prepared to handle the unique circumstances that
the corona crisis presents. After all, this agency is operating
on information technology systems that date all the way back to
the Kennedy administration.
We can now see the very real consequences of the past
decade. We cannot simply decimate essential Federal agencies
and then expect them to miraculously meet their missions in
times of crisis. For example, in June, just a few months into
the pandemic, we discovered that the IRS sent roughly 1.4
billion in EIPs to dead people. Some of my constituents told me
that they received EIPs for their dead relatives and were still
waiting for their own checks. While the IRS had access to the
Social Security Administration's death file, the Treasury
Department's Bureau of Fiscal Service, which distributes the
payments, did not.
This fix seems simple. Let's share the file and reduce
improper payments in the next round of stimulus checks. If it
needs to be a legislative fix, let's make it happen. Today,
we're going to hear from witnesses who claim that the IRS did
the best it could with what it had. But that's not the real
question.
We need to be asking what the IRS could have done to help
our country if it had been properly funded and adequately
staffed instead of being subjected to years of bitter
Republican abuses.
In another example my constituents told me they threw away
IRS-issued debit cards because they looked like a scam and the
IRS failed to inform them that the cards were coming. Others
said that the online, quote, ``Get My Payment'', end quote,
tool was confusing and made them think they were ineligible for
an EIP when they were, in fact, eligible.
Today, we will hear that individuals across our Nation,
including my constituents, are still waiting to receive money
that their government owes them--money they need to buy
medicines, pay rent, put food on their tables. Past Republican
Congress' prevented the IRS from investing in staff and
technologies that would have allowed for a smooth transition
and a continuity of service to all taxpayers throughout the
pandemic.
Because of decades of partisan attacks, many individuals
and small businesses might not see their tax returns any time
soon. They may not see their economic impact payments or EIPs
until September 2021. They need this money now, not in 11
months, but now. That's how Congress designed these stimulus
payments, and it seems clear that the IRS is not equipped to
meet this moment.
The systemic decade-old gutting of the IRS forced the
agency to shut down taxpayer services and assistance just when
the rules were most confusing and taxpayer needs were greatest.
The long-term starvation of the IRS means that victims of
domestic abuse can have their stimulus payments seized by their
abusers because the IRS doesn't have the resources and staff it
needs to help address this problem.
For many women who are domestic abuse victims, this lack of
IRS resources means they can't achieve economic independence
and escape abusive relationships. This is a complicated
problem, but the IRS shouldn't simply shrug its shoulders and
point them to the court system, which they can't afford to
participate in. Let's find a solution here today and help these
women.
The lack of resources at the IRS means that the wealthiest
residents of our Nation, those reporting more than $10 million
a year, can avoid paying proper taxes because there are so few
capable enforcement staff available to audit them. There's
little chance they'll be audited, caught, and prosecuted.
Instead, the IRS has been auditing the poor and the vulnerable
because it's easier.
Our government is leaving on the table trillions of dollars
owed by the wealthy. Finally, I want to express my support of
the legislation I know the chairman is working on. Legislation
that would require agencies to think about how technology will
improve service delivery and agency performance across the
enterprise of the Federal Government. I support these types of
critical measures that often take place under the legislative
radar.
Thank you so much, Chairman Connolly, for all of your hard
work that you have done in this area. I am here to support your
work in every way. It is important that we've reached this
point of reckoning, and we need to move forward.
Mr. Chairman, again, congratulations on your achievements
in holding the IRS responsible and moving forward with ideas to
make them more up-to-date and IT savvy for the future. I thank
you so much.
And I yield back.
Mr. Connolly. I thank the distinguished chairwoman of the
full committee, Mrs. Maloney, and I thank you for your
leadership and for your support. I very much appreciate it.
Now, I'd like to introduce our witnesses.
Our first witness today is Charles Rettig, who's the
Commissioner of the Internal Revenue Service. And we will hear
from Erin Collins, the National Taxpayer Advocate at the
Taxpayer Advocate Service. And, finally, we'll hear from Vijay
D'Souza, who is the Director of Information Technology and
Cybersecurity at the Government Accountability Office.
The witnesses will be--if you would all rise and raise your
right hand, we swear in our witnesses as a matter of course
here on the committee. Do you swear or affirm that the
testimony you're about to give is the truth, the whole truth,
and nothing but the truth so help you God?
Let the record show that all three of our witnesses
answered in the affirmative. Thank you.
Without objection, your full written testimony will be
entered into the record in full.
With that, Commissioner Rettig, you're now recognized for a
five-minute summation of your testimony. Welcome.
STATEMENT OF CHARLES P. RETTIG, COMMISSIONER, INTERNAL REVENUE
SERVICE, GOVERNMENT ACCOUNTABILITY OFFICE
Mr. Rettig. Thank you. Chairman Connolly, Ranking Member
Hice, and members of the subcommittee, thank you for the
opportunity to discuss IRS operations and our efforts to help
taxpayers during the COVID-19 pandemic.
Nearly two years into my term as Commissioner, I remain
extremely proud to be working with the IRS knowing that 96
percent of the gross receipts of our country flow through the
IRS has strengthened my belief that a healthy, functional IRS
is critical to the overall success and well-being of our
country.
The importance of the IRS to every American has become
especially apparent since the spring as our Nation has faced
unprecedented challenges. The IRS has been at the forefront of
successfully providing rapid economic relief to taxpayers
during COVID-19. The IRS response serves to illustrate how
critical it is for the agency to receive consistent, timely,
and adequate multi-year funding such that we can succeed in
providing the services that our country so rightly deserves.
This funding is critical as the Nation continues to weather
COVID-19 and will also help the agency prepare for future
emergencies. IRS employees have worked around the clock since
mid-March to implement major provisions of the CARES Act,
especially the economic impact payments to help millions of
Americans during this challenging time.
So far, more than 160 million economic impact payments have
been issued, totaling more than $270 billion, with many of the
payments recognizing more than two people, their payments for a
household as opposed to an individual. In delivering economic
impact payments, we balanced the statutory requirement to
deliver these payments as rapidly as possible with the need for
accuracy and the concern about potential fraud.
I also want to call to your attention an important number.
The Treasury Inspector General for Tax Administration confirmed
that the IRS correctly computed the payment amount for
approximately 98 percent of the payments as of May 21. The 98
percent figure is great, however, there is more to do. The
strength of our agency is our employees. Our employees want to
do more, and we will do more with the assistance of Congress.
We have remained concerned about getting payments out to
people who don't normally file a return, including historically
underserved communities of our Nation, such as the lower income
taxpayers, homeless communities, and various others who do not
normally interact with the government or certainly with the
Internal Revenue Service.
We've worked with our partners to translate economic impact
payment outreach materials into more than 35 languages and have
distributed these materials throughout the country. From the
beginning, we have been aggressively seeking the assistance of
community-based organizations and many others in identifying
eligible Americans.
We ask for your help and the help of every Member of
Congress in sharing and disbursing this information widely and
broadly. We realize how difficult this period has been for so
many Americans. For that reason, the IRS also provided
important administrative relief. We postponed the filing
deadline from April 15 to July 15, the latest Tax Day ever in
the history of our country.
We implemented the People First Initiative, under which we
temporarily adjusted our processes to help people and
businesses during these uncertain times. While pursuing our
responsibilities with respect to the CARES Act and COVID
relief, we had to adjust and redeploy resources, and our
employees have remained dedicated to delivering the 2020 filing
season as they continued to process electronic returns, issue
direct deposit refunds, and accept electronic payments.
As of September 25, we have processed more than 153 million
individual returns and issued nearly 122 million refunds for a
total exceeding $289 billion while we were also processing
economic impact payments and preventing cyber-attacks in a host
of other areas.
During this time, we've also focused on enhancing the
experience of taxpayers who have limited English proficiency.
For the first time ever, the Form 1040 filed next year will be
available in Spanish. Basic tax information is available in
more than 20 languages. People who call in can get interpreter
services for more than 350 languages and for these actions, I
am extremely proud of our employees.
On the enforcement side, we have redeployed resources to
the best of our abilities to highlight and focus on certainly
high-income individuals and certain types of transactions that
such individuals participate in. Our phased-in reopening has
been difficult, we understand, for Members of Congress, for
taxpayers, and others. However, the health and safety of our
employees had to remain paramount throughout.
Our employees shared the same health and safety concerns as
shared by every other American for themselves, for their
family, and for their neighbors and their community. And we had
to focus on that while also trying our best to respect our
responsibilities to this country, both with respect to filing
season, as well as with respect to the issuance of these
payments, maintaining a vigilant, robust enforcement
atmosphere, protecting cybersecurity issues. And we receive
more than 2.5 million attacks per day on our systems, 1.6
billion per year. And we understood that in this situation
where we scaled back our activities, where we closed the
majority of our physical facilities, where we moved almost
57,000 people to teleworking, we undertook all of that while
also doing our best to maintain our responsibilities to this
country from every perspective.
With that, I want to just reemphasize that we depend on
consistent, multi-year funding to deliver top quality services
to our taxpayers, to protect the health and safety of our
employees, to conduct enforcement initiatives, to provide
guidance, and to support badly needed long-term modernization
efforts.
Chairman Connolly, Ranking Member Hice, and members of the
subcommittee, this concludes my statement, and I would be happy
to take questions.
Mr. Connolly. Thank you, Commissioner Rettig.
Ms. Collins, you are recognized for your five-minute
statement.
STATEMENT OF ERIN M. COLLINS, NATIONAL TAXPAYER ADVOCATE,
TAXPAYER ADVOCATE SERVICE
Ms. Collins. Chairman Connolly, Ranking Member Hice, and
distinguished members of the subcommittee, thank you for
inviting me to testify at today's hearing, ``The IRS in the
Pandemic.''
I started my job as a National Taxpayer Advocate on March
30, just after the IRS and much of the country----
Mr. Connolly. Let me interrupt without penalizing you.
That's my birthday, so congratulations.
Ms. Collins. Oh. Well, thank you. It was a very important
day for a lot of reasons.
So, at that point, most of the country was shutting down
due to the pandemic and little did I know then how much the
pandemic would impact both tax administration for the IRS, but
also with respect to taxpayers.
As we continue to grapple with the pandemic, my best wishes
go out to all those impacted by the virus. In my statement
today, I will share three predominant points about the past six
months.
First, despite its constraints, the IRS has done its best
job to handle more work with reduced funding, but taxpayer
service and revenue collection has both suffered over the
years, as you have noted. In the height of this year's filing
season, it was given the task of disbursing the economic impact
payments to some 160 million eligible individuals and their
families. Millions of homes ordinarily don't file a tax return
with the IRS, and the IRS had to find them.
This filing season the overwhelming majority of taxpayers
did not experience problems in filing their return or the
receipt of their refunds. Over 90 percent of individual
taxpayers file their returns electronically and efile
capabilities were operational throughout the pandemic. About 70
percent of the taxpayers claimed refunds, most of those refunds
were paid without delay, particularly 83 percent that were
disbursed by a direct deposit.
But as has been noted, it's the people who did not receive
the refunds that we're most concerned with. Second, despite the
IRS' strong performance, many taxpayers experienced significant
delays resulting in financial hardship. Many taxpayers still
file their returns on paper, either by choice or by necessity.
In 2019, the IRS received about 18 million individual paper
income tax returns. This year, for the protection of the health
and safety of its employees, the IRS shut down its mail
processing operations from March to early June. During that
time, millions of tax returns, checks, and other correspondence
piled up.
As of September 19, the IRS estimated that it had a backlog
of about 5.8 million pieces, including an estimated 2.8 million
unopened returns. For taxpayers counting on those refunds to
meet their basic living needs, the delays have been
particularly painful. In a typical year, the IRS receives about
100 million telephone calls and several million visits to its
walk-in taxpayer assistance center.
Due to the pandemic, the IRS shut down its toll-free lines
for about a month and slowly began resuming service. It also
shut down its taxpayer assistance center for about three
months. Some taxpayers also experienced delays in their receipt
of their economic impact payment. And as the Commissioner
noted, the inspector general found that the IRS correctly
computed about 98 percent of the amount of the EIPs correctly.
But based on 160 million payments, that leaves about 3 million
payments of eligible individuals who are claiming additional
amounts that they are now requesting from the IRS, and plus I
believe we've identified several million cases where payments
were not made at all.
At first, the IRS took the position that most taxpayers who
wanted their increased payment amounts would have to wait until
they filed their 2020 return, but my office and others urged
the IRS to find ways to correct some of these underpayments
immediately. The IRS has since developed processes and programs
in its systems to fix many of these problems. However, the IRS
simply does not have the resources necessary to make a manual
case-by-case adjustment in potentially several million cases.
However, the individuals still have a right to file it on
their upcoming tax return, but that brings me to my final
point.
The IRS desperately needs more resources to do its job of
helping taxpayers and collecting revenue. There's an old
expression: you can't get blood from a turnip.
If the IRS continues to be starved its resources, it will
continue to struggle. It needs more customer taxpayer
representatives, agents, and to assist those taxpayers, and it
needs more modernization of its IT systems.
The IRS' IT struggles are known, and as the chairman noted,
to compound its challenges, the IRS budget has been reduced by
about 20 percent since 2010 while the number of tax returns has
increased 13 percent. As a result, the IRS lacks the staffing
it needs to serve taxpayers. Although, I'm new at this job, it
is clear that the IRS is well behind private sector financial
institutions in providing the much-needed services.
Americans are entitled to top quality service and a tax
administration they can trust and work with.
Thank you for inviting me here today, and I welcome working
with you and your staff in the future and happy to answer
questions.
Mr. Connolly. Thank you, Ms. Collins.
Mr. D'Souza, welcome.
You're recognized for your five-minute summation.
STATEMENT OF VIJAY A. D'SOUZA, DIRECTOR, INFORMATION TECHNOLOGY
AND CYBERSECURITY, GOVERNMENT ACCOUNTABILITY OFFICE
Mr. D'Souza. Thank you, Chairman Connolly, Ranking Member
Hice, and members of the subcommittee, thank you for the
opportunity to testify today on GAO's prior work relating to
IRS' IT operations and modernization efforts.
My name is Vijay D'Souza. I'm a director in GAO's
Information Technology and Cybersecurity team, but this
statement draws on work conducted by our team, as well as our
strategic issues and financial management teams.
Effective IT is essential to IRS' operations and was, as
everyone's noted, important to the distribution of millions of
economic impact payments disbursed as part of the CARES Act.
GAO currently has work under way looking at IRS' efforts in
this area.
For this most recent fiscal year, IRS spent over $3 billion
on IT, of which a little more than 80 percent was for ongoing
operations and less than 20 percent was for modernization
activities.
IRS' IT budget has been fairly flat over the last 10 years.
One of IRS' goals specifically and the Federal Government's in
general is to reduce the proportion of spending for ongoing IT
operations. Although IRS does make effective use of IT in
billions of transactions a year, our prior work has found
numerous issues related to IT operations and modernization.
I'll mention a few of these issues now.
First, GAO's responsible for auditing IRS' financial
statements. As part of this process, we assess that IT controls
related to IRS' financial systems, we identify cybersecurity
issues, and we make recommendations. We also track IRS'
progress in addressing prior year recommendations. Most
recently in May, we identified 18 use cybersecurity
recommendations, including these new recommendations that a
total 132 cybersecurity recommendations remain outstanding.
Second, as part of our ongoing assessments of IRS
operations, we identify IT issues that limit IRS' ability to
conduct its mission. I'll highlight a couple of them for you
here. In January 2020, we reported on computer problems IRS
customer service representatives experienced that caused some
taxpayer phone calls to disconnect mid-call. We recommended,
and IRS agreed, that it should both identify the causes of this
problem and track the resulting down time.
In February, we reported that IRS could only capture
certain business tax information in PDF format, which is harder
for it to use than other electronic open data formats. These
other formats would better allow the agency to analyze
information in these returns for enforcement and other analytic
activities.
We recommended that IRS consider the cost and benefits of
converting this information. Although IRS disagreed with our
recommendation for one of its business units, we still think
this is worth doing and would help IRS with compliance efforts.
Finally, we have conducted numerous examinations of IRS' IT
management activities, including those related to its efforts
to modernize its computer systems, which, as others have noted,
some of which are based on programming languages more than 50
years old.
In May 2016, we reported on IRS' use of older programming
languages for key computer systems, most notably its individual
master file, which is the core individual tax processing
system. We recommended IRS develop a plan with timelines to
replace IMF. IRS does have an effort called CADE 2 under way,
which will replace core parts of the IMF, but does not yet have
a plan for replacing the overall system.
Recently, IRS' acting CIO told us that IRS is beginning to
develop such a plan. In June 2016, we reported on IRS' process
for prioritizing its IT investments, both for ongoing
operations and modernization activities. For modernization
activities specifically, we found that IRS had not fully
developed and documented a prioritization process. IRS' acting
CIO has told us the agency hopes to have this process fully
implemented for Fiscal Year 2022.
In June 2018, we looked at IRS management of several
operations and modernization investments. We found that IRS did
not fully address a number of assessments and risk-management
activities that were needed around those investments.
We also identified several weaknesses in IRS work force
planning activities. From this report, we made 21
recommendations. As of today, IRS has addressed three of these
recommendations and taken steps to address others. And we've
recently started work where we're going to update this
assessment.
Every aspect of IT, including cybersecurity operations and
modernization efforts, is critical to IRS' mission and service
to the American taxpayer. Going forward, continued attention to
the issues we have identified is important to IRS' ability to
meet the challenges it faces. Also important, as others have
noted, is stable and consistent funding for IRS' efforts.
Mr. Chairman and Mr. Ranking Member, this concludes my
statement. I'm happy to answer any questions you have.
Mr. Connolly. Thank you very much, Mr. D'Souza.
Just a clarification: In your testimony, you referred to
the fact that the IRS budget has been relatively flat. Do you
consider a 20-percent cut in its budget relatively flat that
resulted in a 22-percent reduction in its work force?
Mr. D'Souza. So, I was specifically talking about the IT
budget, not the overall budget. There's definitely a
difference.
Mr. Connolly. Oh. Oh. Right. I just want to clarify. Thank
you.
The chair now calls on the distinguished Congresswoman from
the District of Columbia, Ms. Norton, for her five minutes of
questions.
Ms. Norton. I thank my good friend from Maryland
particularly for this hearing. I think the average taxpayer----
Mr. Connolly. Excuse me. I am from the great Commonwealth
of Virginia, not from Maryland.
Ms. Norton. What a terrible mistake. And I see my friend
from Maryland is on the committee.
Mr. Connolly. We love Maryland, but we love Virginia more.
Ms. Norton. But I want you to know that the District was
formed out of both Maryland and Virginia, so I thank you for
that too.
Mr. Chairman, I think if people have been listening to this
testimony that the average taxpayer and the statistics are that
the American people are extraordinary compliant, but they are
astonished by what they have learned about the state of the
IRS.
I'm particularly interested in economic impact payments.
They go to people who don't pay their income taxes because
their earnings are not enough.
Now, according to the statistics I have, on September the
18, the IRS said it was going to start mailing letters to these
9 million Americans who don't pay income taxes but are due to
get this economic impact payment. These are people who have
very low incomes, but I do want to say how happy I am that the
IRS has just extended the registration deadline for these
nonfilers, these low-income people to claim this economic
impact payment to November the 21, 2020.
I'm asking all members to email--consistently email your
constituents to let them know these people, you know that they
are Democrats and Republicans, that they can still get an
economic impact payment up to November 21. I think that's our
obligation.
Mr. Rettig, this is my question for you. How many of these
roughly 9 million people were eligible to get these funds, this
economic impact payment, have yet to register a claim for an
economic impact payment, these low-income filers people?
That's for Mr. Rettig.
Mr. Rettig. Yes. How many people have not received EIP, is
that the question?
Ms. Norton. Of the roughly 9 million have not yet
registered to claim an economic impact payment, how many of
these low-income people have not tried to claim?
Mr. Rettig. That--our pool is not necessarily low income.
That pool was put together through a variety of indirect
methods by a variety of Federal agencies and then tried to
match it to our system. So, I would not wrap that with--it's
about 8.4 million. The letters have not gone out----
Ms. Norton [continuing]. But how many--OK. Thank you.
It's 9 million people. I just want to know how many have
yet to claim their economic impact payment.
Mr. Rettig. I'm having difficulty hearing you. Is the
question, how many people have not claimed the payment? We are
not able to quantify the number of individuals who have not
been identified.
Ms. Norton. Mr. Chairman, Mr. Chairman, I ask that that
number be required to be later given to the committee.
Mr. Rettig, is it possible that an eligible income
individual not receive a payment? Is everybody going to receive
it?
Mr. Rettig. We intend for everyone to receive it. We're
holding over seven outreach events this week, pretty much every
week. We have provided tool kits to 535 Members of Congress to
be distributed to all of their local offices. We have
interacted with 137 different ethnic media outlets around the
country, hundreds and hundreds of homeless shelters. I have
participated in person at homeless shelters around the country
and other similar events----
Ms. Norton. Well, thank you very much. I'm sorry. My time
is so limited. My time is so limited. I've got to go on to the
next question, but that's very good to hear.
Mr. Rettig, the CARES Act says that provisions regarding
the stimulus should be directed--that's $1,200 to every
eligible individual. There's no language in the statute that
directly or even indirectly suggests that incarcerated people
are not eligible.
Why were incarcerated people not receiving their $1,200?
Mr. Rettig. That's an issue to present to Treasury, and
it's an issue that is actually in litigation, and it would be
inappropriate for me to comment upon litigation.
Ms. Norton. Mr. Chairman, I just want to say that many of
these are joint filers. They have families. They have child
support payments, and I ask the committee to followup on why
incarcerated people do not receive these payments which says,
according to the statute, every eligible--the CARES Act says
every eligible person may receive.
And I thank you very much for the time given to me.
Mr. Rettig. Thank you.
Mr. Connolly. I thank the Congresswoman, and I assure her
we will followup on that because there is no language
prohibiting such payments.
The chair now calls on the distinguished ranking member,
Mr. Hice, who looks very relaxed and very comfortable, for his
five minutes of questioning.
Mr. Hice.
Mr. Hice. Thank you, Mr. Chairman. And I am very relaxed,
but it's good to be part of this hearing. I do want to
respond--Ms. Collins brought up some interesting issues during
her opening statement, and one of which has been said by some
others here today about the IRS starving in terms of fund.
I would just, for the record, bring back to reality that,
in 2010, that was kind of a watermark year for IRS funding, and
what did they do when they had that kind of funding? There were
lavish conventions. There were ridiculous videos. There were
targeting of conservative groups. And I think it's important
for these types of things to not be repeated.
Commissioner Rettig, we're hopeful and trustful that you
will be able to make sure that this type of wasteful spending
does not happen again, but also as mentioned, I believe it
was--and I think I've got these numbers correct. I was trying
to write them down: 18 million paper filings of tax returns for
this past year, 5.5 million in backlog, and I believe it was
2.8 million that were unopened.
As it relates to the paper filings, those that were mailed
in, that is certainly nowhere near 90 plus percent of
completions. 18 million filed and 5.5 million backlogged and
nearly 3 million unopened is, frankly, an unacceptable amount.
We are hearing from our constituents right and left why their
tax returns have not come back. So, really, I just, on behalf
of those constituents, not only in my district but across the
country, when can they expect those mailed in returns to be
opened, dealt with, and then to receive their refunds?
Mr. Rettig. Sir, as of September 25, we've received 12.9
million paper returns. We had a current paper backlog of
approximately 5.3 million of which we estimate that
approximately 2.5 million is returns. We are processing our
backlog at the rate of about 1.3 million per week, which I
think is exceptional. In March/April timeframe, we were at
about a 23 million backlog. So, we have about 1.3 million we're
going through per week keeping in mind that we average
somewhere between 3 to 500,000 pieces of mail each week, and so
we need to open the mail to determine, is it a return, or is it
some other type of correspondence?
So, we do prioritize the returns in terms of the processing
of the paper mail, including correspondence that is received.
We process the returns on a priority basis, and of that, we
process refunds on a priority basis. And so I can certainly
tell you, sir that our people are----
Mr. Hice. With those kinds of numbers, it sounds like----
Mr. Rettig. working really hard. We're doing----
Mr. Hice [continuing]. Sounds like----
Mr. Rettig. Two shifts and have offered overtime to all of
our people to get through this.
Mr. Hice. OK. So, it sounds like to me from what you're
saying is that most of those, the backlog, should be pretty
much dealt with by the end of this month. Is that correct?
Ballpark?
Mr. Rettig. I can't say that because it depends upon what
they open. Sometimes they open something that's complex and it
takes a particular period of time. If the straight averages
work, we are going through 1.3 million per week. We have 5.2-,
5.3 million pieces total, but keeping in mind 3-to 500,000 come
in on top of that. So, it's a process.
I can vouch for the effort, and I can certainly vouch for
the desire and the sensitivity, and remember that our work
force is reflective of the communities that they live in and
the communities that they're processing these returns for----
Mr. Hice. I get that.
Mr. Rettig [continuing]. So, we get it.
Mr. Hice. I thank you for your effort, but effort does not
resolve the issue for those who are waiting. I do appreciate
the effort, but we have a lot of people who are struggling.
Let me hit on the IT question here. Congress has provided
billions, as you well know, of funding for IT modernization and
there's mixed results.
We still are a long ways behind. If more funding is given
for IT modernization, how can you ensure the fact that those
funds are going to be effectively used and managed so that we
actually have the end result of IT modernization rather than
continually trying to maintain and support legacy systems?
Mr. Rettig. Well, the appropriation earmarks what the
funding would be for. And, within the separate appropriations
and allocations, I think that we could cover that.
Also, in terms of efficiency and IT efficiency, it should
be noted that, filing season 2019, we set records for
processing per second, per hour, and per minute. And we broke
those records in filing season 20 during the COVID pandemic,
with most of our facilities shut down, and we came to 2.275
million returns processed per hour, 632 per second, without any
technological errors.
And the same group of IT folks who handle our filing season
were also responsible for implementing the EIP payments, which
was not only for individuals that we had information, but
individuals we did not have information. And then we inherited
the programming for the Veterans Administration as well as for
Social Security Administration. And we created portals that
more than 14 million people came in through a nonfilers portal.
Our same IT folks took care of all of that at the same time.
We did not have the luxury of onboarding hundreds or
thousands of folks to help us in that situation. We had people
who had to multitask. And these particular folks worked 15-to
17-hour days, seven days a week from March through July. And I
would say that our folks performed. I would suggest and request
on an IT appropriation, oversight--specific appropriations for
where we are.
The Taxpayer First Act was passed--strong bipartisan
support--has tremendous provisions in it for modernizing the
systems of the Internal Revenue Service, but it does not yet
have any funding associated with it. So, you know, in my mind
set, these things come together.
We take our responsibilities to Congress, to the American
people, and to our employees and the neighborhoods that our
employees live very seriously. We want to perform, and we want
people to be proud of the Internal Revenue Service.
Mr. Connolly. The gentleman's time has expired.
Mr. Hice. Mr. Chair, that's a great answer, but I don't
believe it fully answered my question. But I know my time has
expired, so I yield back.
Mr. Rettig. I'm available for all of you on a one on one.
Mr. Connolly. Let me just say, Mr. Hice, I--I think it may
be implicit in your line of questioning is, despite the
accomplishments of the IRS under very adverse circumstances,
remember that we also represent the community.
Mr. Hice. Uh-huh.
Mr. Connolly. And I think Mr. Hice is pointing out--and I'm
certainly joining him. I gave some examples in my opening
remarks. We're hearing from constituents who aren't being well
served, who are panicking in some cases about their refunds or
their direct payments still. And we need a better response,
frankly, in terms of a liaison with Members of Congress to be
able to serve those taxpayers, our constituents.
And I hope you're hearing that because generally we hear
from people when things aren't working. So, that may be a small
percentage, but it's, you know, real human beings and real
needs.
So, I echo what my friend, Mr. Hice, has said. We need to
really work on that, and I think, frankly, having a stepped-up
liaison for us to be able to go to some kind of ombudsman who
can help solve problems for taxpayers would be very welcome
under these----
Mr. Rettig. May I provide a brief comment?
Mr. Connolly. Yes, of course.
Mr. Rettig. In conjunction with that, you know, we had a
phone line for Congress that got essentially overrun with the
volume. So, we're sensitive and understanding. And then it was
my bright idea to create an email box such that our folks could
work it around the clock on emails received.
We received, I think, over 100,000 emails from house.gov or
senate.gov, and so my bright idea really overran us as well,
but it was an effort to try to get there.
I very--sir, I spent 36 years on the outside representing
individuals with respect to the Internal Revenue Service and
tax-related matters. I very much understand the concepts that
each of you are there. I take these concepts to heart.
And there have been some comments with respect to lower
income individuals as well as different ethnic communities, and
I have not been in front of many of you before, but I want to
add into this two points that I'm very proud--and I'm closing
here, but two points that I'm very proud.
I am the first Commissioner in the history of the Internal
Revenue Service whose spouse came into the United States as a
refugee from a refugee camp and whose parents do not speak
English but happen to now live in the United States.
I'm also the first Commissioner to come to the Internal
Revenue Service who has a son or daughter who is Active Duty
United States military who has deployed twice, who has the
privilege of wearing the flag on his shoulder, and I take that
to heart. Those are the issues as to why I came on board.
Mr. Connolly. Thank you, Mr. Rettig, and we certainly honor
your personal history and commitment. Remember, Members of
Congress are also patriots and committed to their constituents
and trying to make----
Mr. Rettig. I believe we are all serving.
Mr. Connolly. Trying to make things work under very adverse
circumstances.
And thank you, Mr. Hice, for allowing me to piggyback on
that.
The chair now calls on the gentleman from Maryland, Mr.
Sarbanes, for his five minutes.
Mr. Sarbanes. Thank you, Mr. Chairman. Can you hear me?
Mr. Connolly. Yes. We can hear you loud and clear.
Mr. Sarbanes. OK. Terrific. Thanks for the hearing.
Mr. Rettig--Commissioner Rettig, I want to give you credit,
because you're certainly putting a brave face on in view of
these dramatic cuts that the IRS has experienced over a period
of years now. I mean, the numbers are breathtaking. The work
force having been reduced by 22 percent since 2010 has
obviously undercut the IRS' daily operations in a significant
way.
And I want to salute the frontline workers at the IRS, the
rank and file, who are really engaged in acts of heroism every
day trying to lift up a caseload that I think is drowning them.
So, we have to get more resources to the IRS, and that has
to be a number-one priority for Congress, and I think it ought
to be a priority of any administration. Unfortunately, we have
not seen that from the Trump administration.
When the IRS doesn't have enough resources, the fact of the
matter is that the rich get richer, high-end tax cheats get
away with not paying their taxes, frauders are able to get away
with their schemes, and those who ought to be on the receiving
end of severe and significant enforcement by the IRS are not.
Meanwhile, those average Americans out there who play by
the rules and look to the IRS to engage with them in a
straightforward way and get them their refunds, make sure the
earned income tax credit is processed, make sure that these
economic payments that come from these stimulus measures we've
put in place are getting to them, they're the ones that are
getting short shrift here.
So, I think that's what's so offensive to many of us, is,
when the IRS doesn't have the resources that it should, it
can't do what's necessary to enforce against those who are
trying to evade their tax obligations on the one hand, and it
can't provide the kind of service to everyday Americans who are
playing by the rules on the other hand.
Ms. Collins, can you talk a little bit more with us about
how adequate funding around enforcement can actually pay huge
dividends for the IRS and clamp down on the kinds of schemes
and efforts to avoid a tax payment that we know are going on
out there every single day? Put some numbers behind that for
us.
Ms. Collins. Well, sure. As we all know, that our U.S. tax
system is a voluntary tax system, and we depend on people
willing every year to sit down, fill out that form, and pay
their appropriate amount of taxes. So, I really think
enforcement is a reward to those who voluntarily comply. And I
think, if the public does not see that the IRS is enforcing the
laws, we're going to be at risk of losing people continuing to
voluntarily comply.
Mr. Sarbanes. Well, I appreciate that because, you know,
sometimes those who want to attack the IRS on ideological
grounds, they sort of say, you know, ``Be afraid; the tax man
cometh.'' But, when the IRS is coming for those who aren't
paying their taxes, aren't playing by the rules, that's the
appropriate kind of enforcement.
And the resources that you can garner if you do that
enforcement well can then be redeployed again to help serve
those taxpayers out there that are playing by the rules, are
looking for that refund, are looking for the benefits that can
come when we use the IRS to distribute important stimulus
payments in the midst of a pandemic like we're doing right now.
So, that's the tradeoff we see. And we have an obligation
to make sure that the IRS is funded in a way that it can do its
job and do its job on behalf of that broad set of Americans
that rely on this agency to make sure resources get distributed
in a fair fashion.
So, Mr. Chairman, thank you for this hearing. It, I think,
emphasizes once again why we as a committee, why Congress needs
to work hard to get the resources to this agency, but also why
we need leadership from the top--and I'm not talking about
Commissioner Rettig right now; I'm talking about the President
of the United States--who understands the valuable service that
the IRS can provide.
And, with that, I yield back.
Mr. Connolly. I thank the gentleman.
Mr. Grothman, the gentleman from Wisconsin, is now
recognized for his five minutes.
Mr. Grothman, I see you.
Mr. Grothman. Yep. There we are.
Mr. Connolly. I hear you now.
Mr. Grothman. Can you hear me? OK. Good.
Mr. Connolly. We can hear you.
Mr. Grothman. OK. First of all, I thank--I'd like to thank
Mr. Rettig for being here. I think his agency is professional,
and I think any implication that they are intentionally
avoiding segments of the population, as it so frequently is, is
misplaced and is insulting.
That being as it's said, it's not a perfect agency. So, we
have some questions for you.
In Wisconsin, we had a lot of people who couldn't get their
tax refunds, and at least we were informed part of the problem
was that they had shut down the Fresno office. Now, that's
unrelated as far as I can see to the quality of IT. It's, you
know, just as deficient to apparently have a lot of tax returns
sitting there unopened, and, as the result, people waiting, you
know, months for their tax refunds. Maybe some still don't have
it.
I'm wondering if you could comment on the decision to shut
down the Fresno center, and what was or is being done to make
sure that people were getting their tax refunds? After all,
here we have money that people here have already worked for and
are waiting to have it come. And is it your belief that right
now, all or almost all of the refunds that will end up in the
Fresno center are paid off?
Mr. Rettig. Well, the Fresno service center is scheduled
for a closing. We've closed two other centers, and I think
there is two others beyond that. That's actually part of a
consolidation that's going on for the Internal Revenue Service
for years as paper filings were reduced and electronic filings
increased.
And our current statistic on electronic filings is almost
92 percent. So, it used to be 92 percent, let's say, in paper
filings, and so we had campuses around the country, some
dedicated to individual returns, some dedicated to business
returns.
So, the concept that Fresno would be in the process of
closing--and it's about a year project from now--and we are
working, you should know, very hard to get placement of our
employees elsewhere within the Internal Revenue Service, and we
are also working with the----
Mr. Grothman. I don't mean to cut you off.
Mr. Rettig [continuing]. Private sector doing career days
to----
Mr. Grothman. Yes.
Mr. Rettig [continuing]. Place our folks on the outside. We
are one family.----
Mr. Grothman. I don't mean to--I don't mean to cut you off.
I don't----
Mr. Rettig. In terms of the----
Mr. Grothman. Can you hear me?
Mr. Rettig. I'm sorry. Yes.
Mr. Grothman. Yes. I don't think you get the gist of the
question. The problem is we are told that returns were sent to
the Fresno office. And, whether it was your decision or the
Governor of California, I don't know, but, after returns were
sent to the Fresno office, they were never opened and sat
there.
It's not a matter of the long-term decision to shut down
the Fresno office. I was told that the Fresno office was, as a
practical matter, not working at all due to the coronavirus,
and, therefore, people who sent tax returns there were not
getting their refunds, and they just remained there unopened.
Is that accurate? And, if so, is the office now up and
running, or what has become of the refunds for people whose
paper returns were sent to Fresno?
Mr. Rettig. So, it was my decision to close almost 90
percent of our 511 facilities around the country based on
health and safety concerns for our employees. We did it
procedurally with respect to local guidance, although we were
exempt from guidance. But during March, April, May, our
physical facilities were shut down. So, mail did create a
backlog during that period of time.
We have been working on that backlog, and I indicated
earlier a belief that we're within a couple of million paper
returns inside of a backlog, which is also why we would stress
for people who have yet to file a return to file that return
electronically because we are able to process it.
We did--as we opened versus campuses around the country, we
did shift physical mail from one campus to another when the--it
was more of an ability to open based on health and safety in
certain environments compared to others. So, we were moving
physical mail around the country to where we had the customer
service representatives and others to process the mail.
Similarly, we did the same thing electronically, but
electronically, we could actually do it within 30 minutes,
shift entirely from one campus to another. Physical mail----
Mr. Grothman. Yes. I just want to----
Mr. Rettig [continuing]. Requires trucks.----
Mr. Grothman. Yes. I don't mean to cut you off.
Mr. Rettig. Right.
Mr. Grothman. Have all of the returns, say, filed by April
15 that went to Fresno, because, if you're in Wisconsin, I
think, you know, you are supposed to mail to Fresno. Have they
been processed all, as far as you know?
Mr. Rettig. I will get back to you with specifics, but my
understanding is we're already into July. So, if somebody filed
a----
Mr. Grothman. OK.
Mr. Rettig [continuing]. Paper return in March or April----
Mr. Grothman. I'll give you one more question because I'm
running out of time.
A lot has been said about people not being able to get
these $1,200 checks. As I understand it, they were not supposed
to go to people who were here illegally. Are you doing anything
to make sure that those refunds are not going to people who are
here illegally?
Mr. Rettig. We have a series of filters and checks and
markers that go into our system, which are based on the
information that we have. We don't have complete information,
as you can imagine, to every person, whether they're domestic
or foreign. But, based on the information we have, our systems
are in line with the information that we have as to who should
or shouldn't get payments.
Mr. Connolly. The gentleman's time has expired. I thank the
gentleman.
Mr. Grothman. Thank you.
Mr. Connolly. The Congresswoman from the United States
Virgin Islands, Ms. Plaskett, is recognized for her five
minutes.
Ms. Plaskett. Thank you very much for the time, Mr. Chair,
and thank you to the witnesses for being here.
Mr. Rettig, just before I go into my line of questioning, I
don't want to leave that hanging out there as if there is a
perception on the part of IRS that you have given checks to
illegal aliens, as they are being called.
There is no reason to believe that the IRS are giving
checks to individuals who have not filed income taxes and are
therefore permanent residents and should be here lawfully. Is
that correct?
Mr. Rettig. To my knowledge, we've followed the law as the
law is written.
Ms. Plaskett. OK.
Mr. Rettig. That's correct.
Ms. Plaskett. Thank you. Thank you. Thank you for that.
Let's not begin thinking that these stimulus checks are being
given out willy nilly and are not serving the purpose for which
Congress intended them, that being to assist Americans and
those who are qualified to receive them from receiving them.
I wanted to ask you some questions with regard to how this
funding is being--the COVID pandemic is panning out and your
tremendous support to the people of the territories and to the
Virgin Islands.
In September, I wrote a letter to you, Mr. Rettig,
Commissioner, and to Secretary Mnuchin requesting temporary
waiver of requirement that bona fide residents of the Virgin
Islands be hospitalized in order to maintain physical presence
in the territory, for tax purposes, on days that are spent on
the mainland for medical reasons.
As you know, due to our tax structure and for some
individuals who utilize our economic development program and
receive tax benefits for being in the Virgin Islands, they have
a certain number of days that they have to reside in the
territory. However, due to COVID pandemic, many of those are
still on the mainland or have medical purposes.
Do you have a response, or do you have any status request--
status to give me on the update of my request to you?
Mr. Rettig. It's my understanding that Treasury is
responding and that that response will be coming. You know, I'd
hate to use the term ``soon,'' but my understanding is soon,
and let me say that, if it is--we have followed up, we will
followup, and, if soon is not in the space of less than 10
days, you'll hear from me or somebody on my behalf giving you a
better timeline, but it's--Treasury is handling the response to
you.
Ms. Plaskett. OK. Thank you. And, you know, in Washington,
you hate to hear the word ``soon.''
Mr. Rettig. Yes, I know.
Ms. Plaskett. But, you know, that's the kind of word that--
--
Mr. Rettig. Right. I know.
Ms. Plaskett [continuing]. I give my kids when I say maybe
you can go somewhere. It usually means no.
Mr. Rettig. You'll note my apprehension to it, I'm sure.
Ms. Plaskett. Thank you.
I also wanted to find out, you know, we had a terrible
situation. IRS--you and Treasury were so good to support us in
terms of when our Governors gave you the number of individuals
that were going to be receiving stimulus checks. Rather than
seeking reimbursement for the money under the Mirror Code, you
gave money upfront, and that has been really helpful to us
based on those numbers.
However, you may be aware that there was a snafu that
occurred in that primarily those individuals who received
Social Security checks were given two checks, one from Puerto
Rico, in form of a direct deposit, and the Virgin Islands.
Many of these are elderly people. Some of them rely solely
on Social Security. And they're really concerned because they
have been told to write a check to the government of the Virgin
Islands for the money that may have come from Puerto Rico, and
the government of the Virgin Islands will then send that money
to Puerto Rico for the double payments. The people are
concerned that Puerto Rico will still, in turn, come after
them, that that money hasn't been sent.
Are you aware of this issue, and is there any clarification
on what the correct procedure is for those individuals who
receive those checks to take care of that?
Mr. Rettig. Specific as to the Virgin Islands, that came to
my attention this week, and I also am understanding of a
situation where essentially there is a concern that a person
might issue a check but also have the same amount removed from
their account----
Ms. Plaskett. Yes.
Mr. Rettig [continuing]. In which case they essentially
received zero.
Our intention is that every eligible American receive their
payment and receive their payment in the correct amount. So, I
will actually personally look into that deeper, and, as far as
the advice, we do have advice for people who have received
duplicate checks. And some of those issues are because we
received information from multiple sources.
Ms. Plaskett. Multiple sources, uh-huh.
Mr. Rettig. We are trying to do it as rapidly as possible.
We did it to the best of our ability, but obviously there were
situations where things happened, you know, because of certain
programs who couldn't work together maybe and things like that.
But, as far as that, there is a payment provision on our
site where people can send checks. As far as sending them to
the Puerto Rico--the Virgin Islands folks sending it to Puerto
Rico, I need to look into that because I'm not sure if--
personally of that connection. We do have people there.
But our intention, desire, and support is as strong for the
people in the territories around the world as it is for people
in downtown Washington, DC, New York, or wherever. We
understand the need and purpose of these payments, and we are
trying our best.
You will hear back from me, and----
Ms. Plaskett. Thank you.
Mr. Rettig [continuing]. If not, I encourage you to again
reach out to me. Something you sent or forwarded yesterday did
get on my desk, so----
Mr. Connolly. OK.
Mr. Rettig [continuing]. You have the right channel.
Mr. Connolly. The gentlelady's time has expired.
Ms. Plaskett. OK. Thank you very much, Mr. Chair.
Mr. Connolly. We'll take you at your word that you will get
back to the gentlelady in terms of that inquiry. I thank the
gentlelady.
The gentleman from Alabama, Mr. Palmer, is recognized for
five minutes.
Mr. Palmer. Mr. Rettig, we had a hearing before the
Oversight Committee--I don't know--a few years ago, and I asked
then Commissioner Koskinen about a problem that Chairman
Connolly brought up, and that is the tax gap. And his--I asked
him why it is that we're failing to collect about $450 billion
a year, and his response was the complexity of the Tax Code.
I know our whole focus has been on the IT issue, and
certainly that's a major issue, but isn't that part of the
problem?
Mr. Rettig. Complexity is always a problem. The tax gap is
sort of multifaceted. It runs from guidance to a strong visible
enforcement presence. It runs to information reporting,
information reporting with withholding. It runs to the ability
to--for the IRS to require electronic filing of returns, which
are obviously quicker for us to process, and paper returns, a
lot of issues with respect to tiered partnerships.
We have ramped up over the course of the last year our
Office of Fraud Enforcement, which is extremely visible. We
ramped----
Mr. Palmer [continuing]. Just to----
Mr. Rettig [continuing]. Up an office of promoter
investigations with respect to individuals who participate in
certain abusive transactions.
Mr. Palmer. Mr. Rettig?
Mr. Rettig [continuing]. So, trying to maintain a visible
presence on that side----
Mr. Palmer. Mr. Rettig?
Mr. Rettig. Our criminal investigation force has been----
Mr. Palmer. Mr. Rettig, I'm----
Mr. Rettig [continuing]. Extremely visible.
Mr. Palmer. Mr. Chairman, I need to move on.
Mr. Rettig. Sorry.
Mr. Palmer. I would like for you to respond to that in
writing if you don't mind because I do think that's an issue.
There is another issue that I would like to discuss, and
it's something that I think the chairman has been supportive
of, and that's our work on dealing with improper payments, and
a lot of that has to do with technology issues in other
agencies, including the IRS.
One of the suggestions that I've made and we're trying to
get into a legislative format to introduce is to allow
agencies, as they reduce their improper payments, to take part
of the funds that they save for use to modernize their IT
systems.
Is that something, Mr. Rettig, that you think would be
helpful to the IRS?
Mr. Rettig. The IRS is all in on issues that lead to
funding for the Internal Revenue Service, assuming they're
approved by Congress and appropriately appropriated.
Mr. Palmer. Well, then, my next question would be: With the
realization that you've got these major IT issues, does the IRS
have a modernization plan that has clearly defined objectives,
an achievable schedule, because there are issues that have been
raised about the achievability of a schedule, and a realistic
budget for replacing the IT systems?
Because I've heard that some of these legacy systems still
operate on the old COBOL system. Is that true? And do you have
clearly defined objectives for modernizing your IT systems?
Mr. Rettig. We do. We don't have hardware that goes back to
the 1960's, but we do have language that goes back to the
1960's. And we have a modernization plan that was launched
April 2019. We also have modernization coming forth under the
Taxpayer First Act. Both of those are running together but
independent so that there is not overlap between those.
And we'd be pleased to have our folks come up and do a
briefing for you or for your staff, however it is appropriate,
to show you exactly where we are and where we're headed.
Mr. Palmer. Well, I want to get back to the funding for
this. So, I would propose that Congress amend the Payment
Integrity Information Act to allow agencies to direct a portion
of recovered improper payments into a fund for modernizing
their IT systems. And this is not just an IRS problem, as I
said earlier. It is throughout the Federal Government. And it
includes some of the states as well.
So, I would like to, Mr. Chairman, work with the committee
if we can in the time that's left in this Congress on an
initiative like that.
In the last few seconds that I have left, I'm going to go
off topic here, but I do want to congratulate the Department of
Justice, the FBI, and our intelligence services in the arrest
today of Alexander Kotey and Elsheikh. These are the alleged
kidnappers of James Foley, Peter Kassig, Steven Sotloff, and
Kayla Mueller. They are alleged to have kidnapped, tortured,
and murdered these people. And, while we have been in this
hearing, it was announced that they've been arrested.
I hope this brings some peace and closure for those
families who have been involved in that.
And, with that, Mr. Chairman, I yield back.
Mr. Connolly. I thank my friend from Alabama, and I welcome
his comments on the need to systematically develop a plan for
modernizing the IRS and bringing it into 21st century
technology, and I pledge to work with my good friend on
developing such plans here on the subcommittee.
Mr. Palmer. I know you mean that, and I thank the chairman.
Mr. Connolly. I thank my friend.
The gentleman from Maryland, Mr. Raskin, is recognized for
his five minutes.
Mr. Raskin. Thank you, Mr. Chairman.
Mr. Rettig, greetings. Last week, I sent you a bipartisan
letter from more than a hundred different Members asking you to
ensure that victims of domestic violence, rather than their
abusers, get their stimulus checks. As you know, domestic
violence has soared during the pandemic. But the IRS response
has often been to tell abused spouses to get their money
through a divorce settlement, which is callous and
irresponsible.
Will you establish a process for domestic abuse survivors
to notify the IRS that their payment has been stolen away by
their abuser, and will you issue catchup payments to those who
have had their payments stolen?
Mr. Rettig. As tax administrator, we do not have the
discretion to issue payments other than as provided in the
CARES Act. The CARES Act requires the IRS to use tax return
information to the extent we have it.
So, in a situation involving a domestic violence, if a
joint return was filed, the IRS is required to issue, in that
context, $2,400 plus $500 for if there're dependents to the
joint filers. And, if there is banking information, it's
required to be deposited into that account.
The CARES Act does not provide the Internal Revenue Service
with discretion to add an additional, say, in this context,
$1,200 to the victim of domestic violence.
Mr. Raskin. Excuse me, Mr. Rettig. Didn't the IRS chief
counsel conclude----
Mr. Rettig. We, as people, are very sympathetic.
Mr. Raskin. Excuse me. Didn't the IRS chief counsel
conclude in 2009 that, if a stimulus payment is stolen or not
received, the IRS can issue a replacement payment? Why wouldn't
that apply in this circumstance?
Mr. Rettig. That's completely unrelated. If you'd like to
get into specifics, we can do it, but there were a lot--some
people are relying on the wrong issue there.
When we make a payment into a joint account the way that
the statute requires us to make that payment, it goes into that
joint account.
Mr. Raskin. OK.
Mr. Rettig. What happens to it once that payment gets
there----
Mr. Raskin. I'll followup with you later. Thank you. I'm
just running out of time.
Mr. Rettig. We can work with you specifically.
Mr. Raskin. But I wrote to Senator--I wrote to Secretary
Mnuchin on September 9 expressing concern about the President's
plan to require Federal employees to accept a payroll tax
deferral. This move is a political ploy to make it seem as if
Federal employees are earning more money than they're actually
earning, only to reach the end of the deferral period next
year, when suddenly they'll have a significant back tax
payment.
During a recent Senate hearing, I was encouraged to hear
Secretary Mnuchin agree with my Senator, Chris Van Hollen, that
it would be reasonable to give Federal employees a choice in
this matter.
Mr. Rettig, do you agree with Secretary Mnuchin, and will
the Federal Government indeed allow employees to opt out of
this tax deferral? If not, why not?
Mr. Rettig. The Internal Revenue Service is a bureau of the
Department of Treasury, and Secretary--I report to Secretary
Mnuchin, so the way that he indicates for us to go on policy
and other issues is the way that the Internal Revenue Service
will go.
Mr. Raskin. All right. My constituents have been calling to
voice opposition to this plan. Federal employee groups are up
in arms about it, and we should not be using Federal workers as
pawns.
Ms. Collins, I'd like to turn to you. In April, you told me
that your office could not help the public with certain EIP
payment issues. You updated that guidance in August and
announced you could help with some, but identified four
categories where the office couldn't help. This includes if the
EIP was determined based on the wrong tax year. Your response
has been that those taxpayers will have to wait till sometime
in 2021 to receive the money they're owed. That is baffling to
me for funds that were intended to provide immediate relief in
an emergency.
Ms. Collins, why isn't your office advocating for people in
that position?
Ms. Collins. We are advocating for those people, but the
challenge we have is, at the time the payments were issued, the
IRS relied on the CARES Act, which said that they had an option
to rely on the 2018 return if the 1919 return wasn't filed.
So, the challenge these taxpayers have is the amount when
it was issued was correct based on 1918, but the 1919 return--
for example, someone had a child, so now they have a qualifying
child. They're entitled to another $500.
That would have to be manually processed by someone within
the IRS. That's our challenge, is that the IRS does not have
enough staff to potentially do 3 million individual entries for
those individuals.
So, we are continuing to advocate for those people, but I
do understand the problems that the IRS has in working these
cases. It's not something that they can automate.
Mr. Raskin. OK.
Ms. Collins. They would have to go through----
Mr. Raskin. Well----
Ms. Collins [continuing]. Potentially 160 million returns
to see what changed between the two years.
Mr. Raskin. Mr. Rettig, let me ask you, then. When will the
IRS set up necessary procedures and processes to allow Ms.
Collins to assist all taxpayers who have not yet received their
EIP funds?
Mr. Connolly. The gentleman's time has expired, but the--
Mr. Rettig may respond.
Mr. Rettig. We currently have 11,300 customer service
representatives available on phone. Obviously, we get more
calls than that, so we don't--we aren't--we don't have the
ability and the staffing to answer all the calls, but we are
doing our best. And I can vouch for the fact that the taxpayer
advocate has advocated for the issues presented.
The Internal Revenue Service is in the scenario of needing
to prioritize quite a few issues that, when looked at
individually, clearly come across as an extreme high priority,
and then, when you look at it and you look at the volume of
individuals in this country and provisions in the CARES Act, we
have to prioritize those based on our resource availability.
We are doing our best, but we--certainly the CARES Act
itself provided for a true-up of amounts based on a 2020
filing, and that's where the language comes to, to filing the
return in 2020.
And, on the comments about extending the portal date to
November 21 from October 15, I would hope that folks would take
to heart the fact of our announcement on that called into the
fact that any further extension of that would jeopardize our
ability to handle the 2021 filing season. We are really trying
to be cognizant of many, many issues.
So, I thank you for the additional time, sir.
Mr. Connolly. Thank you.
The gentleman from Florida, Mr. Steube, is recognized for
five minutes.
Mr. Steube. Thank you, Mr. Chairman.
My questions are for Mr. Rettig.
First, I want to thank you for your service to our country
and for being here today, and also for your son's service to
our Nation in the armed services.
It's been reported in the media and GAO has provided
information that the IRS sent more than 1.4 billion in payments
to deceased or incarcerated individuals. I got a lot of people
in my district who received checks whose family members were
deceased, and a lot of people want to know how this could
possibly happen.
So, that would be my first question, is, how did that
amount of money go to people who are deceased?
Mr. Rettig. If you look at the stimulus payments that went
out in 2008, you'll see that the process for payments to
deceased individuals, and then Treasury looked at the specific
issues on decedents about the third week in May and determined
that deceased individuals were not eligible to receive
payments, and so, from the third week of May forward, those
payments did not occur. But those were calls made outside of
the Internal Revenue Service.
Mr. Steube. Well, is there efforts being----
Mr. Rettig. The vast majority of those funds have been sent
back or payments not sent out, actually.
Mr. Steube. OK. So, that was my followup question, was how
much of that, and what are you guys doing to recoup those
funds?
Mr. Rettig. I have the statistics. It would take me a
moment to get to it, but I believe something on the order of
one--and I'll get specifics. This is off the top of my head,
but I think that something on the order of the 1.1 billion of
the 1.4 billion or 800 million of the 1.1 billion, something
along those orders have been either returned or not sent out.
And so the net figure, I believe, is approximately 300 million.
Mr. Steube. OK. Yes. If you can get me those exact numbers,
I'd appreciate it, at your convenience.
What other changes has the IRS made to prevent improper
payments of existing funds or if there is future stimulus
payments? Is there parameters in place to prevent that from
going out?
Mr. Rettig. Well, certainly there's lessons learned anytime
an agency undertakes a massive responsibility like we did
through the CARES Act and the issuance of these payments. And
keep in mind there were business provisions incorporated within
the CARES Act as well that--and our folks were there.
So, we constantly monitor for lessons learned in terms of
our ability. And if there was to be another round--I know there
has been discussions, but, if there was to be another round, we
are confident that we are able to do so, and it shouldn't go
unnoticed that we issued about 81 million payments for $147
billion within less than two weeks when the CARES Act was
enacted, and that required substantial programming by us, so we
are as prepared as we can be, but we are better prepared than
we were the last time, and I think we did admirably the last
time.
Mr. Steube. What--in your expertise and in your position,
what specific legislative reforms do you think that Congress
and this committee should be looking at?
Mr. Rettig. Well, since 2011, every administration has
proposed the program integrity cap, which is funds directed to
enforcement. There is a pending--this year, it's about $400
million for enforcement. And the last program integrity cap
actually approved by Congress was in 2010. I think that's
significant.
In a lot of the areas--you know, in terms of like EITC
payments, giving the Internal Revenue Service--and this is
congressional--correctable error authority would be
substantial, would lessen the burdens on individuals. Giving
the Internal Revenue Service the ability to regulate return
preparers would be substantial. Enhancing the requirements for
electronic filing of forms would be substantial. Accelerating
the electronic filing of W-2 forms to the Internal Revenue
Service would be substantial.
There is a lot of issues that would come together to assist
us both from a guidance perspective as well as an enforcement
perspective, and, in my mind, those two go hand-in-hand. The
person who is up late at night trying their best needs to
understand what it is their requirements are, which is why
we've gone wholesale into assisting people who either are not
comfortable in the English language or do not speak English.
We've also tried to simplify the languages. We've got Q
codes on things that lead them directly to points on our
website and such. But, similarly, we've got to go out on the
enforcement side and maintain a visible presence.
Mr. Steube. Yes, and I agree with that. And, if there is--
if you can send those specifics that you just referenced, if
you have more specifics and information on that, to my office,
I would love to look at those issues.
Thank you for your time today, and my time has expired.
Thanks for being here.
Mr. Connolly. Thank the gentleman.
The gentleman from California, Mr. Khanna, is recognized
for his five minutes.
Mr. Khanna. Thank you, Mr. Chairman.
The IRS is responsible for collecting about $3.5 trillion
in revenue. One of the things that I kept hearing from my
constituents is, why are people not getting the checks in time?
Why is it taking so much time for the IRS to deliver stimulus
checks or to process the payments or collections?
It turns out that the IRS is still reliant on legacy
systems, some dating back all the way from the Kennedy
administration. And, you know, in Silicon Valley, they just
don't understand this. How is it that we haven't had software
updates since then?
So, as you know, in 2019, the IRS paid almost $3 billion to
operate its current information technology, and yet 2.3 billion
of that was on legacy IT systems.
Mr. D'Souza, could you describe the impact that the legacy
IT systems have on the IRS' ability to deliver services to its
taxpayers and fulfill its overall mission?
Mr. D'Souza. Sure. Thank you. I'd be glad to.
So, I do want to make sure folks know that, although the
systems rely on older technology, the underlying hardware, much
of it has been updated. But what the limitations are of using
these older technologies is--one most notably, it's hard to
find staff that know these skills. Programmers today aren't
coming out of school learning how to program in languages that
are 50 years old.
Second, it makes it harder for IRS to implement more online
services because, to the extent it can use contemporary
technologies, it's easier for it to implement those.
Relating to your point about the time it takes to do
things, you know, one of the biggest things that makes it
easier for the IRS to do things more quickly is for people to
do things electronically versus on paper. So, we have issued--
where--for example, where we've identified recommendations for
IRS to look at implementing more online services, and those
kinds of things will help speed things along.
Mr. Khanna. And why did it take so long for the economic
impact payments, the stimulus payments, to go out, and how is
that connected to the IT systems?
Mr. D'Souza. So, the vast majority of the payments did go
out, I think, fairly quickly. I think--you know, I think any of
the issues that we've talked about related to the payments had
more to do with sort of policy and procedural issues versus the
underlying technology actually.
I think the one outstanding issue is sort of identifying
the remaining people who haven't been able to claim their
payments and getting them access to the online portal that we
talked about.
Mr. Khanna. How have the technology systems limited the
ability to operate during the pandemic, and what are one or two
main things you would recommend needs to be changed?
Mr. D'Souza. Well, a lot of IRS' operations--sorry. Let me
back up a second.
Many of IRS' employees do have the ability to work remotely
already, but some of them didn't. So, for example, those in
customer service positions, those obviously opening mail, you
can't do that work remotely. To the extent that we can change
work processes to allow more of those IRS folks to do work
remotely, I think that would have longer term benefits beyond
the pandemic.
So, that's a primary area for them to focus on.
Mr. Khanna. Mr. Rettig, two questions for you.
First, the CIO of the IRS does not report to you directly.
Is that correct?
Mr. Rettig. Not--the CIO does not report directly, but I
talk to the CIO at least once a week, and many times seven days
a week.
Mr. Khanna. That----
Mr. Rettig. But that's a provision that is in the Taxpayer
First Act, and the IRS is being reorganized going forward. So,
I think you'll see that addressed.
Mr. Khanna. That's good.
And what do you think we need to do to modernize the IRS
and to help deal with these legacy IT systems, and what is the
plan to do that?
Mr. Rettig. We actually have a plan independent of the
Taxpayer First Act, and I think, given the interest--I'm very
familiar--you know, I'm from California--very familiar with the
valley, and I have three brothers-in-law who are in IT in the
valley. So, I'm understanding of, you know, where IT is, let's
say, in the valley compared to where IT might be in terms of
the Internal Revenue Service, and I have--had visits up there.
The Internal Revenue Service needs to come of age, and it
needs to come of age to be able to serve the people of this
country in a manner that the people of this country deserve to
be served. I think that, you know, universally, we all support
that. And, you know, we want the best for our people. We don't
want a tax administrator that is behind the times, and so we
have to earn that trust and respect through providing that
information to them.
I would welcome the opportunity for myself and others to
meet with you or your staff to give you the details of two
separate plans. They're independent. There is no overlap, but
because tax--one came on the scene first, but we are looking at
them somewhat jointly.
But we have a modernization business plan that was launched
April 2019. We have yet to receive the funding requested on an
annual basis, but it's a six-year plan for that.
And then the Taxpayer First Act has modernization in it as
well, but I think, as you're all familiar with, there are no
funding appropriations associated with the Taxpayer First Act.
We need both of those.
Mr. Connolly. I thank the gentleman. I thank the gentleman.
Mr. Pascrell, the gentleman from New Jersey, is recognized
for five minutes. Welcome.
Mr. Pascrell, you need to unmute yourself.
Mr. Pascrell. Are we OK now?
Mr. Connolly. There you go.
Mr. Pascrell. Thank you.
I want to thank you for this opportunity. As chair of the
Oversight Subcommittee of Ways and Means Committee, I am very
interested in the IRS' operations.
This pandemic and economic crisis has been brutally hard on
a lot of our communities and constituents. We've heard some
very, very good questions from both sides of the aisle today.
There's still neighbors in our cities and towns without
economic impact payments or the IRS refunds that could help
make ends meet.
So, I'm pleased the Commissioner is here to answer
questions.
It must be said that he's utterly ignored the Ways and
Means Committee in the 116th Congress.
Mr. Commissioner, how can a Congress and the American
people be assured that the audits of the President's tax
returns are being conducted in a fair and scrupulous way and
without political interference? How can we be assured of that?
Mr. Rettig. Sir, as you know, I cannot speak to specific
matters as to any taxpayer as to whether or not issues
prospective to a return, to an examination of a return, to what
might be in the return, to what might be in the examination--
earlier, there was a reference with respect to a criminal
investigation of an organization. That reference did not come
from the Internal Revenue Service and the information in any
way associated with that did not come from the Internal Revenue
Service. I cannot confirm or deny that information.
Every taxpayer in this country is assured a confidentiality
and privacy with respect to their tax matters.
Mr. Pascrell. I don't want you to--I don't want to----
Mr. Rettig. So, as you know sir, I cannot--6103 and
otherwise--I cannot speak to that.
Mr. Pascrell. I don't want to get into a debate about
privacy. That was part of 6103 in the Code. I understand that.
Privacy is very critical to me. My record is my record.
But the point of the matter is it would seem that we've put
that aside when, under the investigation of Commissioner
Lerner--I believe it was 10 taxpayers who belonged to certain
organizations were made public without any apology because they
found nothing wrong. So, that answer is unacceptable.
The recent revelations of the President's lifetime of tax
abuse and malfeasance threatens public confidence in the IRS.
I'm talking about the very legitimacy of our Federal tax
system. I'm not sure you understand or appreciate that, sir.
To begin to restore this trust, you must fulfill the Ways
and Means Committee's legally binding request for the
President's tax returns--his business and personal tax returns
under 6103(f).
You have been illegally withholding them for the last 500--
and today, 407 days--547 days. Will you lawfully fulfill
Chairman Neal's request?
Mr. Rettig. Sir, as you know, that issue is pending
litigation, and it's not appropriate for me to discuss pending
litigation, and we have made--the committee is aware of that.
Mr. Pascrell. Mr. Rettig, you admitted in a recent report
that the IRS audits low-income taxpayers disproportionately
over wealthy tax cheats because it's easy to pick on regular
Americans.
This is, in part, a funding issue. But this is also a
leadership issue. Do you have an immediate plan to end this
shameful disparity? I call it shameful. How on Earth can any
American----
Mr. Rettig [continuing]. That report is absolutely false.
Let me repeat it for people who didn't hear it the first time--
absolutely false. For taxpayers who have more than $10 million
in total positive income per year, we audit at the rate of 8.16
percent. For the EITC community, we audit at the rate of 1.129
percent. Those facts are in our data book that was issued for
Fiscal Year 2019.
Mr. Pascrell. Well, this is----
Mr. Rettig. So, the earned income rate is 1.1 percent.
Taxpayers over $10 million, it is----
Mr. Pascrell. Mr. Chairman----
Mr. Rettig [continuing]. Eight-point-sixteen percent, and
taxpayers over $5 million----
Mr. Pascrell [continuing]. This is exactly why we wanted
you to come before the Ways and Means Committee.
Mr. Rettig [continuing]. About four-point-something percent
and taxpayers between $1 and $5 million, it's something on the
order of about three percent.
So, those numbers are disparate. The issue with respect to
the earned income tax is there is a $17 billion improper
payment associated with that per year that the IRS does all it
can do to get those payments out to the individuals as rapidly
as possible. 98 percent of the EITC payments are issued within
21 days. Two percent get pulled for issues with respect to the
fraud filters and ID theft and other issues that require a
manual look by a person, and we process those in a priority
fashion.
So, anybody who is going to be assert that the Internal
Revenue Service is in any way insensitive to any lower income,
ethnic community, geographically diverse community, rural
community, is absolutely wrong, and that should never come up.
Those comments taint the hardworking, dedicated, career
employees of the Internal Revenue Service who create our audit
plans, and that is not what the Internal Revenue Service is
about.
And I take obviously extreme discomfort in anybody
asserting the contrary----
Mr. Pascrell. Well----
Mr. Rettig [continuing]. And we would meet with any and
every of you to go through that in detail to back it up.
Mr. Connolly. The gentleman's time has expired.
Mr. Pascrell. Mr. Chairman, thank you for allowing me----
Mr. Connolly. Let me say, on behalf of Mr. Pascrell, I
think the question was not to disparage the IRS; it was to
ascertain whether reports about a discrepancy between the
percentage of audits of people receiving the EITC was on par
with the percentage of audits of people making more than or
reporting more than $10 million of disposable income. You have
vigorously denied that report.
Mr. Rettig. I respect Congressman Pascrell. There is
chatter outside of our buildings that implicate what I'm there
for or implicate where I went with respect to that, and it's
unacceptable to the IRS----
Mr. Connolly. I understand that, but it's not unacceptable
for a distinguished Member of Congress on the Ways and Means
Committee waived onto this subcommittee to ask that question.
Mr. Pascrell. Thank you.
Mr. Rettig. No, sir, and I agree. And I said I respect
Congressman Pascrell considerably, and I appreciate his
question.
Mr. Connolly. Well, good. Then we are in agreement on that.
We both respect Mr. Pascrell.
Thank you, Mr. Pascrell, for joining us.
The chair now recognizes the gentlewoman from California,
Ms. Porter, for her five minutes.
Ms. Porter. Commissioner Rettig, we are going to start with
a couple yes-or-no questions just
[inaudible] this go smoothly.
You have a responsibility to remain impartial and unbiased
in your role as IRS Commissioner, correct?
Mr. Rettig. Correct.
Ms. Porter. And, as IRS Commissioner, do you believe that
it's important to hold criminals accountable for tax fraud,
evasion, or other violations of the Tax Code?
Mr. Rettig. If this is--the Internal Revenue Service has a
very aggressive----
Ms. Porter. Reclaiming my time. Mr. Rettig, let me make
sure you can hear me because I don't think you want to waffle
on this part.
Mr. Rettig. I am having difficulty hearing you, ma'am.
Ms. Porter. OK. As IRS Commissioner, do you believe it is
important to hold criminals accountable for tax fraud, evasion,
and other violations of the Tax Code?
Mr. Rettig. The enforcement efforts----
Ms. Porter. Yes or no?
Mr. Rettig. The enforcement efforts of the Internal Revenue
Service are there to pursue those who do not comply with the
tax laws.
Ms. Porter. Reclaiming my time.
Commissioner Rettig, I'm not trying to be difficult here.
Do you believe in holding criminals accountable? Yes or no?
Mr. Rettig. That's what criminal investigation in the
Internal Revenue Service does.
Ms. Porter. All right. And holding those criminals
accountable----
Mr. Rettig. Actually, we investigate--they investigate. We
do not prosecute.
Ms. Porter. And holding those criminals accountable through
investigation stems from your sworn commitment to upholding the
Constitution, correct?
Mr. Rettig. That's correct.
Ms. Porter. I ask that because, in addition to the salary
you receive as an IRS Commissioner, you also earn between
$100,000 and $200,000 per year from your ownership of two units
at Trump International-Waikiki. You have continued to earn this
additional income while in office, correct? Yes or no?
Mr. Rettig. Correct. And all of that was approved before I
came on board, and each year----
Ms. Porter. Great. Reclaiming my time.
Mr. Rettig--and that was approved
Mr. Rettig [continuing]. By the ethics officials in the
Internal Revenue Service and other agencies, ma'am.
Ms. Porter. Mr. Rettig, did you disclose that information
to the Senate Finance Committee when you were nominated for the
position?
Mr. Rettig. Absolutely. And anybody who asserts in any way,
shape, or form that there was a concealment is absolutely
wrong. During my confirmation process, the Senate committee
received over 80 pages of invoices that specifically identified
that property.
The instructions for that property specifically say to put
the city and state where all properties are located. That is
exactly what transpired with respect to those properties and
other properties that I own, and anybody who asserts to the
contrary----
Ms. Porter. Reclaiming my time.
Mr. Rettig [continuing]. Really does not know what they're
talking about or the process.
Ms. Porter. OK. Commissioner Rettig, there is no need to
get upset or to disparage me----
Mr. Rettig. Ma'am, I've been dealing with that since I came
on board, and I do not take lightly anybody----
Ms. Porter. Reclaiming my time.
Mr. Rettig [continuing]. Trying to disparage my reputation
or my family's reputation.
Ms. Porter. Reclaiming my time.
Commissioner Rettig, I do not take lightly people attacking
the members of this committee who are simply trying to get----
Mr. Rettig. I do not intend to attack you. And, if so--if
it seemed that way----
Ms. Porter. Reclaiming my time.
Mr. Rettig [continuing]. I apologize to you and others.
Ms. Porter. Mr. Chair, would you please remind the witness
the time belongs to the gentlelady.
Mr. Connolly. The gentlelady commands and controls the
time.
Ms. Porter. Mr. Chairman----
Mr. Connolly. Ms. Porter?
Ms. Porter [continuing]. The time belongs to me.
Mr. Rettig, since you're getting upset about that line of
questioning, I'd like to try another one.
How many economic impact payments--how many people are
still waiting on their economic impact payments?
Mr. Rettig. First, let me apologize to you. If you took
that as an attack, ma'am, I have to indicate that that issue
has been out there, and, if it came across as hostile or
aggressive toward you, I do apologize. That is not who I am,
and I certainly would not imply that to you or other members of
the committee. So, I would hope that you would accept my
apology with respect to that.
With respect to individuals and payments that we are
struggling to issue, it's very difficult for us to identify
people who do not interact with the government, with the
Internal Revenue Service, with the homeless shelters, and
whatnot. We don't have a figure for you. I have been asked
earlier today to provide a figure.
Ms. Porter. OK. Mr. Rettig----
Mr. Rettig. I can tell you we're currently----
Ms. Porter [continuing]. Let me--let me reclaim my time
here. It's about 9 million, and, since you said that some of
these people haven't reached out to the government, I just want
to share our experience in our office where we have had 114
people reach out--114 constituents in my district alone, and we
have worked tirelessly, our casework team, to get answers for
those people for months and months and months.
At this point, we have answers for 13 of them. That is, as
you know, 11 percent. So, these other people, we have no
information. Fifty cases of these 114, we have not been able to
get any response at all from the IRS.
So, I would respectfully ask you to please communicate with
your team about responding in a timely way to congressional
inquiries because, for every American who is reaching out to
our office and is asking for help, one, we're not able to get
them help because the IRS doesn't respond to us in almost half
the cases, and, two, for every American who does reach out to
us, there are literally hundreds of thousands of more who are
just waiting and don't have that information.
So, I would really appreciate your going back to your team
and getting the committee a clear answer of the estimated
number of people who have not received economic impact payments
who are waiting and how many outstanding and unresponded-to
congressional inquiries you have on both sides of the aisle.
Thank you very much.
With that, I yield back.
Mr. Connolly. Thank you. And let me just say to Ms. Porter,
before she joined the hearing, I made the same point that there
are a number of constituents in all of our respective offices
who have not heard, who have confused instructions, have not
received payments, and we represent those constituents. And the
numbers you've shown are probably reflective of so many of us.
And I might add it's a bipartisan issue.
Mr. Hice, the ranking member, made the same point about his
constituents in Georgia, and what the chair asked Mr. Rettig to
do was to go back and look at the liaison functions with
Members of Congress because when somebody contacts our office,
it means everything else has failed, and so we've got to have
more responsive reactions from the IRS and Mr. Rettig, I would
say, Ms. Porter, I believe committed to doing just that. And we
will followup on that, but Ms. Porter raises a very good issue
and it is, I think, universally shared by Members of Congress.
Thank you, Ms. Porter, for bringing that up and using that
handy dandy white board you're so adept at. Thank you.
Mr. Rettig. And, once again, Congresswoman, I do apologize
if it was received as hostile, but it's obviously a personal
issue, so thank you.
Mr. Connolly. Thank you.
The chair now recognizes himself for five minutes.
Ms. Collins. Chairman, can I interrupt for one sec?
Mr. Connolly. Yes, of course, Ms. Collins.
Ms. Collins. I just wanted to point out you had talked
about a liaison and an ombudsman. That is what we do. That is
what our function is that Congress created the National
Taxpayer Advocate solely for that purpose. So, if our local
offices do have contacts with various staff members, and we're
happy to help in all these cases that we can help----
Mr. Connolly. And we appreciate that, but when a Member of
Congress calls a Federal agency that falls under our purview, I
expect an answer--not through a third party. Directly. When I
write a letter, I expect that letter to be answered. I think,
for the record, I presented a letter I sent three weeks ago
that has not yet been responded to. And, again, there's a
certain urgency here. These aren't just idle thoughts coming
from Members of Congress; we're trying in real time to help
constituents for whom for whatever reason the system has not
worked.
So, you're quite right to remind us you're a resource and
you're an asset that we should not overlook, but I think we
were talking directly about communication with the agency and
trying to get a better line of communication that works for
everybody.
Mr. Rettig.
Mr. Rettig. Sir, we accept that the taxpayer advocate is
housed within the Internal Revenue Service, and we have a
shared responsibility that when things come in through
legislative affairs, certain items are automatically routed,
certain items obviously are not. We accept and appreciate that
we could do a better job. We will not give you excuses for
staffing and funding and whatnot. I will only vouch for the
dedication and desire of, I think, one of the most hardworking
dedicated work forces in the entire Federal Government.
Mr. Connolly. We will stipulate that, but, again,
remember----
Mr. Rettig. Appreciate it. I'll take that back, sir.
Mr. Connolly. Yes. We operate in real time, too, and----
Mr. Rettig. Sir, if you're not happy, we're not doing our
job.
Mr. Connolly. All right.
Mr. Raskin. Mr. Chairman, point of order.
Mr. Connolly. Now my line of questioning.
Mr. D'Souza, I'm going to give Mr. Rettig a little bit of a
break. What do we know about the scope of the IT challenge at
IRS? I mean, we talk in generalization about legacy systems, do
we know how many legacy systems there are?
Mr. D'Souza. I think we actually had a finding that IRS
didn't have a complete inventory of its legacy systems, but I
think, you know, generally we do. I think that as----
Mr. Connolly. Can you give a number to that, generally?
Mr. D'Souza. I would have to get back to you.
Mr. Connolly. Are we talking about hundreds of systems,
dozens of systems, what?
Mr. D'Souza. I think on the order of hundreds.
Mr. Connolly. Hundreds?
Mr. D'Souza. But part of the thing I guess to keep in mind
is it depends a little bit on how the agency defines a system.
So, that's why I have to--I'll get back to you with a more
exact number.
Mr. Connolly. I would appreciate that. In fact, this
subcommittee is going to formerly request GAO for a
comprehensive inventory of the scope of the problem and
challenge.
And, by the way, what's wrong with a legacy system?
Mr. D'Souza. Well, as we discussed, they rely on older
technology----
Mr. Connolly. Yes.
Mr. D'Souza.--and it would be harder to find people to
employ to keep it up to date. You have a limited range of
vendors that support that technology. Over time----
Mr. Connolly. But I'm more interested--that's all
interesting.
Mr. D'Souza. OK.
Mr. Connolly. But I'm interested in how it affects
capability. So, a system that's 40 years old does not have the
same capability of handling the mass volume Mr. Rettig has to
handle than a contemporary system.
Is that correct?
Mr. D'Souza. So, I would say that actually the IRS' systems
do handle a very large volume----
Mr. Connolly. That wasn't my question. My question was,
when you compare a legacy systems capability to a system we
would deploy today, the former is inadequate compared to the
latter.
Mr. D'Souza. It is, but it's not in terms of volume. It's
probably in terms of capabilities it provides. We talked about
the ability to provide services online, provide information
more quickly to taxpayers.
Mr. Connolly. Well, is it more costly to maintain?
Mr. D'Souza. Yes.
Mr. Connolly. Yes. Any idea what percentage of the IT
budget Mr. Rettig oversees is devoted simply to maintaining
legacy systems?
Mr. D'Souza. So, 80 percent of the budget goes for ongoing
operations. The exact percentage of that, that's for legacy
systems. Again, I would need to get back to you on that.
Mr. Connolly. So, what is your estimate of what it would
cost to update completely the IT systems, both hardware and
software, and retire these legacy systems at the IRS?
Mr. D'Souza. I don't have an exact number, but what I can
say is that the modernization plans that we've talked about are
good first steps, but they actually don't fully address what it
would take to retire these legacy systems. One of the things we
ask the acting CIO is whether or not they had a full plan to
retire IMF, which is one of the biggest legacy systems. And
they said they were working on that. I think over time they've
taken various attempts at it, and they haven't been successful,
so, you know, we'll have to see----
Mr. Connolly. Wait. Wait. Mr. D'Souza, that's not an
adequate answer. They haven't been successful. Why have they
not been successful? To what extent--this hearing's about
resources to the IRS to make sure it as responsive as it can be
to the American people, and we've documented how they were
starved of resources and, in fact, vilified by this very
committee, I might add, for 10 years at the cost of
reinvestment. So, how has this affected capability?
Mr. D'Souza. Sure. So,, as the budget for these
modernization activities has been cut or as we've had
situations like a lapse in appropriations or continuing
resolutions, IRS has continually had to replan and reprioritize
its efforts. That takes time. It slows things down. They have
to move staff around. If they don't have enough staff, then
they have to triage and focus on high priority activities.
They're not able to do certain things.
One of the things we reported on indirectly answers your
question, though, is with this most recent--the Tax Cut and
Jobs Act, IRS had to shift its IT resources to implement those
changes versus some ongoing activities that it planned to do to
enhance its systems. So, those are all some examples of
tradeoffs the IRS has to make when it doesn't have resources.
Mr. Connolly. You say tradeoffs. Somebody might use a
different image, cannibalization.
By the way, it's not just legacy systems, is it? I remember
a few years ago when this committee was vilifying your
predecessor, Mr. Koskinen, whom I considered an exemplary
public servant, but nonetheless, members of this committee
vilified Mr. Koskinen because of crashes with hard drives
throughout the agency. And one of the things not discussed, of
course, because that would have been inconvenient, was the age
of the hardware we're talking about. I mean, PCs.
So, in the private sector, when I was in the private sector
for 20 years, we kind of replaced our PCs about every three
years. What is the replacement rate, what is the age and
replacement rate of PCs for IRS employees currently?
Mr. D'Souza. So, I don't have a current rate. What I can
say is when we did look at this issue a few years ago we found
that the majority of IRS IT equipment was outdated. Since that
time, we do know----
Mr. Connolly. Mr. D'Souza, outdated. How many years? How
old?
Mr. D'Souza. Again, I'd have to get back to you with the
specifics on that.
Mr. Connolly. Mr. Rettig, do you know?
Mr. Rettig. We're making--to the extent we get funding,
we're making real inroads into updating our systems. Most of
our systems are far beyond their useful life, and we have--for
most of those systems, we have extended the useful life on
things--like laptops and such. So, we extend the useful life
with warranties and whatnot. And then we end up having to go
beyond that because we don't have the ability to replace. One
comment just quickly in terms of efficiency as we were to
update our systems, something that has always stayed in my head
and it's pretty simple is, as we modernize and bring in chat
bots for people who call in, one employee can handle one
telephone call, but one employee can handle four chat box at
the same time.
So, that's a 4-to-1 leverage. We have 11,500 customer
service representatives. In theory, if it was direct math, it
would put us up to 40,000 by getting us there. Our ability to
leverage resources through a modernized system, which includes
both language--it includes software, it includes hardware--
would be greatly received by every employee at the Internal
Revenue Service, as well as I think by every American.
Mr. Connolly. Let me just say, Mr. D'Souza, we need more
from GAO than what we got here. We need a comprehensive
inventory of the nature of the IT systems, legacy systems,
hardware, software, Zoom capabilities, whatever, so that we
understand the scope of the problem, and we need dollar figures
assigned to that so we understand the investments that are
going to be required.
The other thing we need is an assessment from you and with
cooperation with the IRS, what's the return on investment? I
mean, we talk about GAO, the agency for which you work, that
roughly every dollar we invest in GAO, we get at least an $8 or
$11 return. Well, what's the comparable figure for the IRS? If
the IRS can do double the audits it does currently, presumably
the return on that is quite considerable especially when we
know at least $450 billion is left on the table, taxes owed but
not paid because of capability, capability of auditing,
tracing, collecting, enforcing.
And so those are important considerations, in addition to
we're in a pandemic, and while I think Mr. Rettig and Ms.
Collins have both indicated that they've done a very credible
job in trying to respond under the most adverse circumstances
with a history of disinvestment for 10 years. Nonetheless, we
know things are on the table.
With all of that, we know that millions of Americans still
haven't gotten their direct payment. Millions of Americans are
still complaining about a responsiveness from IRS in terms of
refunds or filing or processing a claim or making an appeal or
dealing with an audit.
So, these--the relationship between the investment in IT
and the capability of the IRS to do its job on behalf of the
American people--and, by the way, part of its job because of
voluntary compliance, which is so high in America compared to
other places, is based on the fact that I perceive the system
to be fair, that it's going to treat me the same way it treats
anybody else, rich or poor. They're going to hold that person
and me accountable.
And if that trust is damaged, compliance will fall and that
will hurt the ability of the U.S. Government to fund itself and
the services it provides people, especially during this period
of time, which is so challenging.
So, we need the GAO to really look more closely and provide
us with more comprehensive data in terms of the scope of the
problem and what it will take to address that problem.
Mr. D'Souza. We do have work under way that's looking at
some of these issues, and we'll be glad to update your staff.
Mr. Connolly. Well, we want you to expand that so that it's
not some of these issues; it's everything we've just described.
That's why we're having this hearing. And we need GAO as a
resource to help us understand the analytics and the boundaries
of those analytics.
Yes, Mr. Rettig.
Mr. Rettig. We obviously will cooperate with GAO in that
regard. I just wanted to add on one thing about the compliance
side of the house. We look at service and compliance together.
We look at the desire of the IRS to earn the trust and respect
of every American. I made the comments about getting into
different languages, lower income communities, expanding vital
resources, expanding resources to low-income taxpayer clinics.
When you consider that fiscal 1919 our gross receipts were
$3.56 trillion, which is 96 percent of the gross receipts of
the United States of America, and that part of a tax gap, the
voluntary compliance rate hovers around 83 percent and that's
for Americans who timely file and pay essentially and maintain
compliance; if we can help the folks who are trying to get it
on their own by in language, simple language, understandable
things, open up those avenues, answer the phones when they
place those calls and we're only to bump the voluntary
compliance rate one percent, sir, that's $35 billion a year
from Americans who want to get it right, who are proud to be
Americans, who are proud to file tax returns. And there's a lot
of people there.
This is the first time, to my knowledge, in the history of
the Internal Revenue Service that we've done such an expansion
into languages. I'm very proud to be the son of an immigrant
and the husband of an immigrant. Very respectful for the
challenges people have who come here and its incumbent upon us
collectively, sir, to make sure they have the ability to get it
right.
Modernization helps us significantly in that regard. It
also helps our enforcement component. So, we welcome the
assistance of Congress.
Mr. Connolly. Well, thank you, and the fact that you are
the son of immigrants, I'm a grandson of an immigrant, and you
married a refugee, I think just gives living proof to the fact
that immigration rewards and enriches America; it doesn't
detract from it.
And, by the way, with respect to refugees, I will just say
editorially, curbing the number of refugees, people fleeing
violence, is a very un-American thing from this Member's point
of view and we ought to be doing exactly the opposite, opening
our welcoming arms to people who are suffering violence and
persecution abroad. That's what refugee means, and that's what
the refugee program is designed to provide.
Mr. Rettig. Sir, to help you with perspective, my wife was
born and raised in Vietnam. After the fall of Vietnam, April
30, 1975, her father was taken away to a reeducation camp for
three years, nine months. She, in 1982, fled by boat. She's a
boat person for the term--I don't mean it in a derogatory
sense. I'm hugely proud of her.
Mr. Connolly. Sure. As you should be. And that's the story
of America. I know we're digressing, but the idea that we would
cap the number of refugees who are--who perhaps worldwide are
now at a record number, at 15,000, is disgraceful and, from my
point of view, un-American.
At any rate, on to IRS. We need more progress. We need more
help from GAO in broadening the scope, Mr. D'Souza. We'll be
glad to work with you and Mr. Dodero on that.
And, Mr. Rettig, hopefully you and Ms. Collins, who's new
on the job, will be creating mechanisms to be more responsive
to congressional inquiries because, remember, we're also
representing taxpayers, but taxpayers who have found for
whatever reason the system doesn't work.
With that, we have five days for additional questions that
may be submitted to our witnesses, and we would ask for a
speedy and expeditious response in writing should you get those
questions through the chair.
And, with that, this hearing is concluded. Thank you.
[Whereupon, at 12:24 p.m., the subcommittee was adjourned.]
[all]