Skip to main content

tv   Hearing on IRS Treatment of Taxpayers  CSPAN  May 18, 2022 10:03am-11:51am EDT

10:03 am
10:04 am
chair pascrell: good morning and welcome to everybody. i want to call order the subcommittee on oversight and thank you for all the work you guys and gals have been doing on the committee on both sides of the aisle. i think we struck something in getting something done with the american people. our two witnesses today. we're holding this hearing in a hybrid forum. you know what i think about that and i know what many of you think about that. we are what we are. [laughter] we're holding this hearing in compliance with the regulations for remote committee proceedings pursuant to house resolution 8. before we turn to today's
10:05 am
important topic, i want to remind members of a few procedures to help you navigate this hybrid format. first, consistent with regulations, the committee will keep microphones muted to limit background music and noise. members joining virtually are responsible for unmuting themselves when they seek recognition or when recognized for their five minutes. committee staff will mute members only in the event of inadvertent background music. second, when members are present in the proceeding via webex, they must have their cameras on. if you need to step away to attend another proceeding, please turn your camera and audio off rather than logging out of the platform. finally, we will dispense with our practice of observing the gibbons rule and instead going
10:06 am
in order of seniority for questioning. alternating between the majority and minority, beginning with members of the oversight subcommittee, of course. i thank you, all, for your continued patience as we navigate the procedures to continue serving our country together in this great time of need. with that i'll turn to the important topic of today's hearing on taxpayer fairness across the i.r.s. the oversight subcommittee meets today to discuss a very important topic -- taxpayer fairness across the i.r.s. easy to say. we've talked about it for about 15 years. i firmly believe the i.r.s. must treat all taxpayers fairly and equitably, not only in policy but just making a phone call to the 800 number which is a
10:07 am
disaster admitted by the i.r.s. this is essential to the i.r.s.'s core mission and to the taxpayer experience. whether the i.r.s. is processing returns, answering taxpayer questions, or conducting audits, there cannot be one tax system for the wealthy and another for everyone else. and yet, that is exactly what we have. for years, i've sounded the alarm on our two-tier tax system. since i've been chairman of this subcommittee, with the cooperation of the people on the right and the people on the left, we have held multiple hearings on making our tax system fairer. we haven't done much in getting things accomplished, though. that's interesting.
10:08 am
clearly, our tax code can be fairer. i have offered legislation to close that gapping loophole and many loopholes in our laws that have faced resistance by vested interests. and that's not all republicans. my own party, sometimes we can't get out of our own way. so i've been fair about it. that's my job. based on testimony submitted before this subcommittee -- and believe me, i've read through it twice on this particular subject -- i've also made important suggestions to the treasury and i.r.s. on actions they can take themselves to make things fairer and better. i mean, i don't think that's a big ask. apparently it is. we will continue to press the
10:09 am
administration on these points. today -- today's hearing we will highlight administration and enforcement, looking at some of the ways in which millionaires, billionaires have vastly different experiences with the experience than the average american. we have heard reports about returned backlogs in the tens of millions, not thousands, millions. we have uncovered erroneous notices being mailed to taxpayers. that's great. that's wonderful. we have learned about millions of taxpayers calling the i.r.s. only to receive no answer from the agency. you don't have to be lieutenant columbo to see the i.r.s. has major problems.
10:10 am
these i.r.s. failures cannot continue, and to learn more about the i.r.s. and how it's fixing these issues, we've invited mr. ken corbin. mr. corbin is the i.r.s. commissioner for investment and the chief taxpayer experience officer. we got the guy. we brought him here. we thank him for the time he's taking, along with his colleague. mr. corbin, we're eager to learn how the i.r.s. is actively working to improve the taxpayer experience for americans who aren't millionaires. there are many reports showing that the i.r.s. is auditing low-income families at a much higher rate than high-income taxpayers. that's not what we were told by the director of the i.r.s.
10:11 am
and you know what i think about that. i don't talk behind his back. specifically, data shows that a taxpayer with income under $25,000 -- get this -- is twice as likely to be audited than someone earning between $200,000 and $500,000, etc. i mean, if that isn't an outrage, i don't know what is. and it's even worse if you claim the earned income tax credit. probably one of the greatest, greatest tools we have in fighting poverty in the united states of america. the i.r.s. is four times more likely to audit you if you are getting earned income tax
10:12 am
credits. why? because it's quicker and it's less expensive. the i.r.s. seems to see poor americans the same way the harlem globetrotters view the washington generals. the i.r.s. goes after people who can't easily defend themselves. you got it. and no use mincing words. if you want to change things, there's nothing to hide. i asked the g.a.o. to study -- i asked them to study the audit books and the trends. today, mr. james mcthai -- did i pronounce it correctly? thank you, james. the accounting office. will report on g.a.o.'s findings. we asked for this. we got it today. as a little movie preview, take
10:13 am
a gander at the graph behind me showing nose diving audit rates of the superrich the last decade. the purpose -- and i'll say this again of me being here in the chair. equally, anybody in the committee could have been the chair. but the reason is very important to understand. we're not here to soak the rich. that's not going to get us to nirvana. people paying their fair share and how we treat all people that come to the i.r.s. with their particular problems is very important, not just to me, but to the most american people. so the audit rates are an important part of that. i understand the i.r.s. justifies its auditing record on
10:14 am
its staff limitations. how many times have we heard that since 2008? i know that the i.r.s. has a difficult time operating. there are many people in the congress have spent a decade slashing the funding for i.r.s. to sabotage tax enforcement against the rich. and now we have the numbers to prove it. too many things are looking at what can be done rather than what should be done. low-income families should not face the consequences of the i.r.s.'s funding problems while the rich get off scot-free. deliberate sabotage of the i.r.s. -- that's what i'm calling it -- has created an
10:15 am
agency that cannot process returns, cannot correspond with taxpayers quickly, cannot even answer telephone calls for help. thirst is failing -- this i.r.s. is failing to modernize and prepare for the future, and both parties are responsible. these failures are why i have now called on the president to fire the commissioner appointed by the last president and quickly select a replacement now that he's only got a certain time left as well as another one -- the last administration's appointment. so wait until the end and they'll walk out three months earlier than before. you know, you think all the public is blinded to this? they don't know what's going on? if we say it enough times,
10:16 am
they'll understand what we're talking about. they deserve nothing but the truth. i believe in investing in the i.r.s. i support additional funding wisely spent, but the i.r.s. must do more to improve its operations to eliminate backlogs, to answer more telephone calls, to improve audit selection. these are the absolute basics, and there is no excuse in 2022 when you fail the basics. you're not going to the next step. so welcome today's witnesses. we're lucky to have you both, mr. corbin, mr. mmctigue. i yield to mr. rice -- i think we're still friends -- for five
10:17 am
minutes. mr. rice: yes, we're still friends. i want to thank the employees at the i.r.s. for their dedication to the agency's mission. at a time of increased complexity brought on by changes in the tax code, the i.r.s. undertook an unprecedented effort to organize and distribute hundreds of millions of covid relief payments while suffering the same staffing issues as the rest of the world, all in the midst of a pandemic. and your efforts have been heroic. none of that has been easy. and i want to say thank you for your hard work and dedicated public service. now the topic of taxpayer fairness across the i.r.s. is important, but it is also one that's been covered by this subcommittee many times. i hope we can move beyond talking points and work on solutions. i believe the most significant
10:18 am
unfairness facing american taxpayers now is the lack of customer service at the i.r.s. the i.r.s. is sitting on 13 million unprocessed tax returns and over 26 million tax returns that are waiting, needing further i.r.s. action. at the same time, i.r.s. phone service levels are near all-time lows, making it nearly impossible to reach an i.r.s. agent for help with tax or audit matters. many taxpayers have been waiting for resolution to their tax filings and to receive long overdue refunds. this is unfair and it needs to be fixed. i know we'll hear from at least one of our witnesses about audit rates and the earned income tax credit. mr. chairman, we've counted at least six prior hearings under your leadership that have touched on this audit rate issue. and while it is a perfectly fine topic, a seventh hearing on this
10:19 am
issue doesn't seem designed to make progress toward a solution. the g.a.o. report indicates what we already know -- there are real administrative issues around the earned income tax credit. the program has an annual improper payment rate of around 25%. it's not just the i.r.s. that's been telling us this. the states as well. in the last fiscal year, the improper payment amount on the earned income tax credit totalled $19 billion. this is a huge problem, and it necessitates audits. the earned income tax credit is complex when it comes to claiming a qualifying child and producing the necessary documentation to establish eligibility. the problem must be addressed. i'd like to see us work on solutions to address the drivers
10:20 am
of the high earned tax credit error rate, which is at least partially responsible for auditing a higher percentage of taxpayers claiming this credit. instead of criticizing the audit rate, let's fix the underlying problem. another hearing to cover the same talking points we've heard over and over and over again won't accomplish much. i do wish we could have worked together in commissioning this report, mr. chairman. i'd like to point out the report leaves out important variables related to the earned income tax credit that would better assist congress in understanding the data. these problems include failure to adequately discuss the differences between the earned income tax credit correspondence audits and traditional in-person audits and whether they even ballooning in the -- belong in the same data set.
10:21 am
claiming a tax credit with a 25% error rate is the same as tax returns from taxpayers that earn their income and reported with a w-2 with a 99% voluntary compliance rate, failure to include the results of secretary mnuchin's 2020 directive to the i.r.s. to prioritize increasing audit rates for high-income earners and failure to adequately explain that the i.r.s. received $1.86 billion in appropriations on top of its annual budget through covid relief legislation and the american rescue plan, bringing its total funding to 2010 levels. with that said, mr. chairman, there are real problems with the earned income tax credit administration, and congress can and should play a role in trying
10:22 am
to solve these problems. if we work together on creative solutions. we need to think creatively about how to make the credit easier to administer and bring down improper payment rates. to say the i.r.s. has a lot of room for improvement may be the understatement of the year. from i.t. modernization, which would solve a lot of these problems, to improved taxpayer service to some of the audit rate issues discussed in the g.a.o. report, both the i.r.s. and congress have a role to play in improving the situation. i hope we can move forward, after this hearing, and work together on solutions. thank you and i yield back. chair pascrell: i just want to bring attention to -- we're going to lose one of our staff members, and that's important. she's going on to greater things
10:23 am
at treasury. she's going to be an assistant over there in terms of the treasury department. i want to acknowledge isabel moore. isabel, thank you for your work for the last three years. did a terrific job. we're proud of you. we know you'll take over the treasury department when you get there. hard work on this subcommittee i think has paid off. we wish you well in your new position at the treasury department. so good luck to you. want to make sure i didn't forget that. thank you, were rice. without objection, all members' opening statements will be made part of the record. now we're going to turn to our witnesses. why these meetings have been numerous -- and we've had
10:24 am
different topics and different subjects, but i wanted to make sure we have exhausted so that the public understands. and it's taken a long time to get us to understand what we're talking about, and that's why i asked for the g.a.o. report. on october 7, 2020, i was asked to appear before gerry connolly's committee, oversight committee. and i asked commissioner redick about a report that he had stated at that time. and we asked him face-to-face. i am not talking behind his back. the i.r.s. audits low-income taxpayers disproportionately of tax cheats because it's easy to pick on regular americans, and he replied at the october 7, 2020, meeting -- that report is absolutely false.
10:25 am
for taxpayers who have more than $10 million in total positive income, the rate is 8%. he noted that. now, the earned income tax rate is 1.1%. i did not define wealthy tax cheats as the few who have over $10 million. it was after his testimony that the g.a.o. report was requested to get the facts. and now we have the facts. so the testimony from that meeting admitted in a recent report that the i.r.s. audits low-income taxpayers disproportionately over wealthy tax cheats. so now we're going to hear the
10:26 am
report. things that i brought to this committee before this report will now have substance in the committee's report. and that's why we've asked you two gentlemen to be here today. and this testimony is devastating compared to what i'm going to hear and everybody on this panel and everybody here in the audience and out there. we're going to turn to our witnesses. our first witness is mr. ken corbin, the commissioner for wage and investment and a chief taxpayer experience officer at the i.r.s. our next witness is going to be james mctigue, director of strategic issues at the g.a.o. your statements will be made part of the record in its entirety. i'd ask you you summarize your testimony in five minutes or less. to help you with that time,
10:27 am
please keep an eye on the clock, obviously. if you go over your time, i'll tell you about it. so mr. corbin, thank you for taking the time to be here today. take the time, make the presentation, and you're on. mr. corbin: all right. thank you. thank you, chairman pascrell, ranking member rice, and members of the subcommittee. thank you for this opportunity to testify. i've been serving as the commissioner of the i.r.s.'s wage and divestment division since 2017, and last year, i also became the i.r.s.'s chief taxpayer experience officer. speaking from both perspectives, i believe the i.r.s. has a responsibility to ensure everyone who interacts with us has both options and access. they should be able to choose how they interact with us and
10:28 am
have access to the information they need. they should be able to accomplish their interactions without difficulty. this applies to everyone, individuals, business taxpayers, exempt organizations, tax professionals, and stakeholders in the tax community and elsewhere. during the filing season and throughout the year, the i.r.s. offers assistance so people can file their returns and receive their refunds quickly and easily. this help comes through a variety of channels -- online, over the phone, in person at our taxpayer assistance centers across the country, and another way we facilitate is in-person help through over 9,000 vita and t.c.e. sites, including military bases. due to many factors, the 2020 filing -- tax filing season has been complex and challenging.
10:29 am
to address this, we took a number of steps to help taxpayers, including sending out more than 250 million letters to help people who needed to reconcile their economic impact payments or their advanced child tax credit payments. we expanded our customer callback technology to cover 70% of the toll-free demand and save taxpayers $1.7 -- 1.7 million hours of hold time. we've began to use voice and chatbots, but we understand that part of service comes in person. and so we've offered saturday hours at our taxpayer assistance centers in more than 90 cities across the country. we've made the earned income tax credit assistance tool on more user -- more user friendly. enhancing the taxpayer experience also means improving service to diverse communities. we're committed to helping all
10:30 am
taxpayers, including those who have limited english proficiency. we have shown that commitment in many ways. just to cite a few examples, in 2021, we issued the 1040 in spanish. we now give taxpayers the opportunity to indicate on a schedule l.e.p. whether they want us to contact them in a language other than english. this year for the first time, we also gave our vita partners access to interpreter services, which we offer on the phone and in person. these are all important steps, but we have a much longer term plan for enhanced taxpayer experience, stemming from the taxpayer first act of 2019. t.f.a. was the catalyst for our efforts to help develop this plan. the taxpayer experience office is taking the lead on these efforts. we are setting the strategic direction for improving taxpayer experience. we are implementing the taxpayer experience to ensure the i.r.s.
10:31 am
meets the needs of all types of taxpayers, stakeholders who rely on us for information. we are very excited about the improvements we're making, but truly to be successful, we need help. we need help. and that means the president's fiscal year 2023 budget proposal, which seeks $14.1 billion for the i.r.s. if we allow us to continuing to improve taxpayer service, modernizing our systems, and ensuring fairness in the tax system. but we also need stable, multiyear funding to be able to truly deliver what taxpayers need, what they deserve, and what they expect. this concludes my statement. and i'll be happy to answer your questions. chair pascrell: thank you, mr. corbin. and now i want to call on
10:32 am
mr. mctigue for your expertise and thank you for being here. mr. mctigue: thank you, mr. chairman. republican leader rice and members of the subcommittee, thank you for the opportunity to discuss our report on trends in i.r.s. audit rates of individual taxpayers. audits are one of the key tools that i.r.s. has to ensure compliance with our tax laws and provide assurance to the public that everyone is paying their fair share. taxpayers are also more likely to voluntarily comply if they believe their tax return may be audited. according to the i.r.s.'s most recent estimate, individual taxpayers underreport their tax on average by an average of $245 billion each year. however, our review shows i.r.s. has auditing a decreasing percentage of individual tax returns over the last decade. overall, the audit rate is about
10:33 am
1/3 what it was in 2010 when nine out of 1,000 returns were audited compared to fewer than three in 1,000 in 2019. furthermore, while audit rates have decreased for all income levels, it has decreased mr. moran: higher -- for more higher income taxpayers. it has decreased because higher income audits needs them to review multiple issues. i.r.s. has not been able to conduct as many of these audits compared to lower income audits which are generally less complex and involve more automated processes. in addition, the number of high-income returns has nearly doubled, meaning, more audits are needed to achieve the same audit rate. nevertheless, i.r.s. has continued to audit higher income taxpayers at a greater rate than lower income taxpayers. that said, the audit rate for
10:34 am
taxpayers claiming the earned income tax credit is three times the average rate for all taxpayers. according to i.r.s., returns claiming the earned income tax credit have historically had high rates of improper payments and therefore require a greater enforcement presence. in terms of audit results, the majority of additional taxes i.r.s. has recommended comes from audits from taxpayers with incomes below $200,000 simply because there are so many more taxpayers and less audits in this category. but the average additional tax recommended per audit was significantly higher for higher income taxpayers ranging from five to 31 times the average amount for all taxpayers. over this time, the cost of audits is measured by the average number of hours spent per audit has generally been stable for lower income returns but has more than doubled for returns with incomes over $200,000. according to i.r.s., even
10:35 am
greater complexity of higher income audits -- auditor attrition contributed to this increase. audits of the low income taxpayers resulted in higher amounts of recommended additional tax per audit hour compared to all income groups except for the highest income taxpayers. this is driven by the fact that eitc audits occur before refunds are paid and conducted through correspondence and, therefore, require less time to complete. overall, the underlying driver of these trends is that i.r.s. had difficulty replacing audit staff lost to attrition and retirement. this is due in large part to the budget reductions i.r.s.'s has had to manage over the last decade. for example, in fiscal year 2021, i.r.s.'s budget was $11.9 billion, which is more than 20% below what it was in 2010 after adjusting for inflation. as a result of this decrease, i.r.s. officials said they expect to employ about 75,000
10:36 am
staff this fiscal year, a level nearly identical to its staffing in 1973. at the same time, i.r.s. has been tasked with ever-increasing responsibilities, such as making economic impact payments to eligible individuals during the pandemic and helping individuals buy health insurance under the affordable care act. this is on top of implementing changes under the tax cuts and jobs act and other tax law changes that occur each year. in conclusion, our tax system relies on voluntarily compliance. historically, the rate of voluntary compliance has been fairly stable, but if audit rates continue to decline, one of the key tools for boosting voluntary compliance may lose its effectiveness and taxpayers may be losing confidence in our tax system, further eroding compliance. as the congress considers reinvesting in i.r.s., we will continue to look at how i.r.s. leverages available budget resources to address these
10:37 am
trends and help taxpayers meet their responsibilities and ensure everyone is paying their fair share. chair pascrell, republican leader rice, members of the subcommittee, this concludes my remarks. i look forward to my questions. chair pascrell: we'll opening the hear for questions. without objection, each member will be recognized for five minutes to question our witnesses. as was mentioned earlier, we will not observe the gibbons rule in this hybrid setting and will instead go in order of seniority for questioning, alternating between the majority and minority beginning with members of the oversight subcommittee. members appearing virtually are reminded to unmute yourselves when you are recognized for five minutes. i'll begin by recognizing myself for the first question. mr. mctigue, thanks for the report. your findings i read from page
10:38 am
to page are alarming. who benefits the most from declining audit rates, low-income taxpayers or upper income taxpayers, mr. mctigue? mr. mctigue: i would say no one benefits from declining audit rates. not the government. not society. not honest taxpayers. all of those folks lose when audit rates and voluntary compliance decline. as i mentioned in my statement, you know, declining audit rates could lead to declines in voluntary compliance, undermining confidence in our tax system. chair pascrell: is it true that a low-income mother claiming the eitc that mother is nearly four
10:39 am
times as likely to be audited than someone with $450,000 in income per year? mr. mctigue: the data shows that is correct. chair pascrell: why does the i.r.s. focus on low-income audits rather than those of the wealthy? mr. mctigue: well, i.r.s. does attempt to balance audit rates across different types of taxpayers, across different income categories. with the earned income tax credit, as some have mentioned, it is a very successful program, but it is plagued by very high improper payment rates which many have concerns about. it has a rate of 25% of the most recent fiscal year that resulted in approximately $19 billion in improper payments. the one tool that i.r.s. has to
10:40 am
ensure compliance with the program is audits. there's no source of third-party information to help verify eligibility for the program. so the one tool we have is to conduct audits. i would point out, however, that a lot of folks who claim the earned income tax credit have roughly about half of claimants do use a paid tax preparer. and g.a.o. recommended back in 2014 that the congress should give i.r.s. the authority to oversee and regulate and put in place, you know, things such as competency testing and education requirements for these preparers to better help low-income taxpayers or all taxpayers who turn to them for services in trying to comply with our tax laws. and that -- you know, we still
10:41 am
stand behind that recommendation and think it would help reduce improper payments and also help earned income tax credit recipients, both who currently receive but also those who may not understand that they are eligible for it and help bring them into the program. chair pascrell: let me give you an example of that. then, you can answer the question. isn't it true that when you are an eligible eitc individual within the tax code that if you do not respond to the i.r.s.'s correspondence -- that's if you get it, which is very important to understand. you briefly referred to that in your report. isn't it true you're counted as a default? mr. mctigue: that is correct. i.r.s. does reach out when issues are flagged.
10:42 am
if the agency does not receive a response, there's no change that potential refund is held. pacific pavk so therefore -- chair pascrell: so therefore, an earned income taxpayer, and there are still people in the congress who are still fighting that, that war is over, i think. but isn't it true that these are the numbers that we refer to on the eitc when they have no correspondence, nothing back and forth, and just by not responding, whether it's their fault or not, they're considered in default of the program that they're partaking in? you're telling me that's what's happening. why can't that be corrected? mr. mctigue: i will let i.r.s.
10:43 am
speak to that. i think i.r.s. has a number of programs that they try to educate both taxpayers and the paid preparers that i mentioned previously. when they identify issues, they do not -- they do educate them on the requirements of the program so that taxpayers will not be flagged for audit and go through that whole process, to save them time of -- and stress. chair pascrell: mr. corbin, equitable and fair tax administration across the i.r.s. is essential. what is the first measure the i.r.s. will do to improve the taxpayer filing experience for low and moderate-income taxpayers? will i.r.s. implement a simplified tax form for some taxpayers and in so, when? mr. corbin: so i think the answer to that is the first
10:44 am
steps around helping taxpayers understand the different credits that are available is providing them education and outreach. so our very first step is to interact with our community partners, make sure we work with people in the community and ourselves there to provide education about what the credits mean, how to file their return and what options are available to them. and then to make sure we have the tools available for taxpayers to simply file or enable our partners to assist taxpayers. chair pascrell: that's pretty basic, isn't it? mr. corbin: yes, sir. yes, it is. chair pascrell: my office has received many calls -- and for my brothers and sisters in the congress, i get the same from them. get calls from neighbors, small businesses who have not received their refunds or pandemic relief. what is the status of i.r.s.
10:45 am
backlogs? we've been talking about this for many years. and has the agency created any new search teams to address the backlogs? if not, can we expect something new? mr. corbin: yes, sir. so we started out calendar year 2022 with about 8.2 million paper returns in inventory at the beginning of this calendar year. as of may 6, from that original 8.2 million, we have 1.7 million left. what we have done is continue to create those surge teams that you mentioned, bringing back employees from other parts of the agency, whether they're in enforcement or some other part of the agency that have the skill set necessary to help us process those returns. we brought those folks back to help us do that. we also have brought people back
10:46 am
in from other parts of the agency to help us in our accounts management function, which is the function that answers the phones and works the paper correspondence. so the surge teams continue. we're thankful to congress. they gave us some new hiring tools this year. and so we've been actively going out recruiting and trying to get new team members into the i.r.s. to help us do that. our goal -- our goal is to bring the i.r.s. back to a state prior to the pandemic. we have to process these returns. we have to process this paper so that we can get back to the business of providing the service that taxpayers deserve. chair pascrell: i thank you for testifying today. i thank you for testifying today. and now i want to recognize mr. rice, our ranking member, for five minutes to ask questions. mr. rice: thank you, mr. chairman. thank you, again, for the
10:47 am
witnesses for being here today. i was a tax lawyer and c.p.a. before coming to congress. i've seen the i.r.s. and the troubles they've had for decades. this isn't new. i mean, it's exacerbated, certainly. none of these customer service issues are new. i remember as a tax lawyer i would set up a small business, pass-through entity, s corporation or whatever and we would need a tax i.d. number. i would have a young lady on my staff to call the i.r.s. because she would be on the phone for hours. this wasn't -- this wasn't last year. this was in the 1990's. this is not anything that just happened. chair pascrell: that's my point. mr. rice: mr. corbin, what percentage of the i.r.s. employees are back in the office full time? mr. corbin: so i don't know the percent. i know that our employees is a return to office force, not a return to work. our employees that don't have portable work have all been back
10:48 am
in the office since the pandemic began working in our processing centers. our other employees who are eligible for telework have been working. like our customer service representatives. mr. rice: you don't have the percentage that are back in the office full time? mr. corbin: no, sir. mr. rice: well, i suspect -- going through a pandemic, some of this is understandable, but we got to get back to work. i suspect a lot of the problems we face here with processing returns and with customer service are because we don't -- we're not back in the office yet. we need to do everything we can, because the rest of the world is back in the office. we got to get the federal employees back in the office as well. there's no excuse for it. they need to be back in the office. how is the success in the hiring going on? are you filling the open positions? mr. corbin: it's a very competitive market for the positions that we're trying to fill. mr. rice: so you're not really getting success in filling your
10:49 am
open positions? mr. corbin: we're getting some success with our customer service representative hires. some of our lower positions or paid positions. mr. rice: i know you were trying to hire 5,000 people. did you get half of that? mr. corbin: we have not got half it. mr. rice: have you spent the $1.6 billion in pandemic relief? i think the last time we spoke to the commissioner, none has been spent. has it been spent? mr. corbin: $1.6 million helped us with hiring so, yes. miss rice: mr. mc -- mr. rice: mr. mctigue, if you earn $25,000, you are twice to be likely to be audited -- if you take out -- if you take out the eitc, and if you then claim the eitc you are four times
10:50 am
likely, is that right? if you make less than $25,000 a year and you do not claim the eitc, do you have -- do you have a figure in front of you what your percentage audit rate is? mr. mctigue: for taxpayers who earn less than $25,000, the audit rate is about .4%. mr. rice: that includes people that claim the eitc? mr. mctigue: it does. it would be lower than that. mr. rice: it would be much lower, wouldn't it? it would be lower than those who make more than $200,000? mr. mctigue: they do claim the earned income tax credit. mr. rice: the vast majority the ones that get audited that's under $25,000 is because they claim the eitc, correct? mr. mctigue: i'm sure the reasons vary. mr. rice: the audit we're talking about is not like i.r.s. agents knocking on your door.
10:51 am
it's a correspondence audit, right? mr. mctigue: it is a correspondence audit. i know from personal experience getting a letter from the i.r.s. is a bit unnerving. so i want to just count the fact that it's simply a letter. mr. rice: i got it. i want this to be fair -- across the board it needs to be fair. you yourself said -- what are the error rates on eitc? what are the error rates? mr. corbin: i -- mr. mctigue: historically it's been in the 25% range. the most recent fiscal year that amounts to $19 billion in improper payments. mr. rice: and we heard the same thing from state attorneys general. we heard the same thing from states -- secretaries of state. we heard the same thing from benefits coordinators within state agencies this program is rife with errors and fraud. and that's part of the i.r.s. is to prevent that from happening, right? that's part of their duty,
10:52 am
correct? mr. mctigue: yes, sir. you know, i.r.s. has a lot of tools to try to address that. mr. rice: sorry to rush you. i have such limited time. but one problem we have is, i think, we're not asking for enough justification in terms of details that we need to confirm that the credit is due when we get the return filed. so can you give us some suggestions? you don't have to do it right now. if you can give us two or three suggestions like maybe including the dependents' social security number. maybe requiring the w-2 be filed with the return so that it's obvious the eitc is appropriate or it is not, wouldn't the number of audits drop drastically? mr. mctigue: we have to look at the details. some of the information you mentioned, such as w-2's, that are already required, you know,
10:53 am
under the path act, the i.r.s. is able to match those w-2's with tax returns. that's helped a lot. mr. rice: i thought the i.r.s. was sending these refunds without getting the -- not waiting for the w-2's, that's not true? mr. mctigue: at least for the early part of the tax filing season, i.r.s. holds tax returns until they receive the w-2's. and does an income verification of -- mr. rice: what else do we need to verify that would eliminate the need for these audits? what else do we need to verify besides the w-2 that would eliminate the needs for these audits? mr. mctigue: off-hand, we didn't look at that. i am not completely familiar with the -- mr. rice: it seems like it would be an obvious way to solve this problem. if we asked them what they needed up front rather than having get it after they filed the tax return. if you can provide this committee with one or two suggestions on things that would make it -- where it's obvious they need it. and then i'll end up with this.
10:54 am
i have a lot more i can talk about here. but you mentioned that part of the problem is we have people preparing tax returns that aren't qualified or maybe not ethical. and they're doubling up or increasing people's earned income tax credit that may be eligible for it. i have a bill called the taxpayer protection and paid preparer proficiency act that would allow the i.r.s. to regulate the folks who are prey pairing these -- preparing these returns, because i think this is a real problem and this might get at the source of the problem. do you agree, mr. mctigue? mr. mctigue: absolutely. in 2014 we did an undercover study. we visited 19 or 20 text preparer offices and only one out of those 19 got the right answer, if you will, the correct tax liability. and the fees that were charged
10:55 am
for, you know, one of the scenarios that we have was the eitc -- substantial fees, often, 50% or 100% of the weekly income of some of these. mr. rice: when you drop down the road and you have a sign saying get your eitc here today, it's a little bit of a clue. so mr. mctigue, would you co-sponsor my bill? no, i'm just kidding. mr. mctigue: we have a matter before congress supporting such regulation of paid tax preparers. we fully endorse that. mr. rice: thank you. i yield back. chair pascrell: thank you. very good, mr. ranking member. the chair now recognizes ms. chu for five minutes. welcome aboard. ms. chu: yes. thank you, chairman pascrell. in a march hearing of this subcommittee, commissioner redick forcefully pushed back on
10:56 am
my questioning of audits of low-income taxpayers, particularly those claiming the eitc. i want to thank the g.a.o. for showing that these concerns were well-founded, and i look forward to seeing the administration's response to my letter with senator elizabeth warren requesting more data and a plan of action to address this unfairness. mr. corbin, as i mentioned, eitc is unfairly audited at high rates. this means that filers who do not respond to correspondence audits will automatically have their credit reduced. this has major ramifications because the national taxpayer advocate found that low-income individuals are less likely to respond to audits. so with these facts in mind, can you talk about what the taxpayer
10:57 am
experience office offers to eitc filers to help them respond to audits and provide the necessary information to the i.r.s.? please talk about how you conduct outreach to these individuals and how the process can be improved to ensure that we minimize instances of low-income filers losing eitc simply because they don't respond to the audit. mr. corbin: yes, ma'am. i think some of the activities we do at the i.r.s., really, from an experience standpoint, comes from that outreach and education component. eitc is a very complex law, and, you know, our experience has been with taxpayers is that that complexity sometimes causes confusion. not out of a willful or intentional neglect for the law. but it's just the confusion from that. so some of the things that we do, we partner to do the eitc awareness days to get out and
10:58 am
make sure people are aware of what is available, such as our eitc assistant on to help them through those issues. we also, from an experience standpoint, one of the things that we will be working on is looking at our notices. because as noted, when you get a letter from the i.r.s., that could not be the best experience. but we need to make sure that our notices are clear and that we provide those opportunities. i think the other step that we have to make besides outreach and education and making sure taxpayers understand the law, but when they get a notice is that we have to provide that service on the backside. we have to be available to answer the phones, to help the taxpayers understand what we're asking for and why we're asking for it. so to answer your question, i believe it is a combination of education and outreach. i believe it's a combination of clear notices. and then on the backside of
10:59 am
that, providing opportunities for those taxpayers to be able to interact with us or community partners who they're comfortable with. i will say a lot of taxpayers really prefer to deal with nonprofits like united way or some other nonprofits, and so we need to design tools that we can provide nonprofits to help taxpayers where they choose to go to try and get help and assistance. ms. chu: ok. thank you for that. director mctigue, i was struck by your report's warnings that the i.r.s. estimates 15% of current auditors will retire in the next three years. i'm concerned about new hires being less experience and less qualified to handle complex audits required of high earners. so can you talk about the impact that attrition and retirement of experienced staff, what that will have on the i.r.s.'s capacity to audit? do we have the capacity to audit
11:00 am
high earners? and hopefully have less reliance on correspondence on low-income taxpayers? mr. mctigue: mr. mctigue: absolutely. they require more skill because of the number, variety and complexity of the issues. also some of the law is not clear exactly what is a deduction, what is proper valuation of an asset. so a lot of training is required for the most experienced tax agents. according to i.r.s., it can take up to a year of formal training and then four to five years of on-the-job training to really become one of the most seasoned and experienced tax auditors.
11:01 am
i.r.s. has also had issues in terms of not just retirement that was mentioned, but also retaining these highly skilled individuals. once they have the skills, they become very valuable. not just to the i.r.s. but to others in the private sector. i.r.s. a year or so ago did announce an initiative to try to bring in more midlevel examiners or experts that they could train up a little bit more quickly. that's something we're going to follow up on. ms. chu: thank you. i yield back. mr. pascrell: thank you for your questions. now i'd like to turn to mr. murphy, five minutes. mr. murphy: thank you, thank you. gentlemen, thank you for coming today. the i.r.s. should be a four-letter word but we'll keep it at three. we don't need any more, that's
11:02 am
just what people think in the country. but that's a part of our function. it's how we keep the country going. i've always been a little bit reluctant to like the word experience when you hear it in different context because i think sometimes it's just something we should do. we're in the customer service business, i'm a physician, we're in customer service, and so should our government be. so i appreciate the experience because this is something that as citizens we are customers when it comes to government functions. so let me ask a few questions here. i'm very, very disappointed because in reading some early literature, it said that the audit rates were not the same for -- that folks with higher incomes were audited higher and now we're hearing that that's really not the case. want to know why. can anybody answer why that is? why are we auditing folks with lower incomes more than higher incomes?
11:03 am
can anybody explain that? eith mother corbin or mr. mctigue -- either mr. corbin or mr. mctigue. it can't be a computer glitch. mr. corbin: we touched upon it a little bit in our report. i.r.s. has more visibility into the income of lower income taxpayers. mr. mctigue: lower income taxpayers tend to be wage earners and there's very good third party reporting that goes well to the i.r.s. and to the taxpayer to help them fill out their tax returns. that simplifies the process, it can be automated. a lot of those audits, all of the earned income tax credit audits actually are done by the wage and investment division, before refunds are sent. on the flip side, higher income audits, the income, you know, there's much less reporting on that income and it's more difficult.
11:04 am
it's more challenging. when you lose the expertise as the i.r.s. has over the past 10 years, with retirement and attrition of skilled auditors, they just can't -- mr. murphy: and i appreciate that. i don't want to us say that high earners are bad people. they're not. they're people oftentimes that have invested and done so much other things. it's not one versus the other. it should be a balanced playing field because we know that the top 10% of people provide the most majority of tax income to the country. so it's just about balance. mr. corbin, let me go back to this working from home deal. this is now a pet paoefb of mine. why is anybody on the i.r.s. working from home? mr. corbin: right now the vast majority of our employees working at home are customer service representatives. but they are returning to the office. mainly because they are still able to accomplish their work. they are still able to answer the call, work the correspondents from their
11:05 am
computer screens. but we are returning back to the office. but they all have been working. mr. murphy: and i understand this and -- but i guess don't have the efficiency people at home have, when working in the office, having discussions with colleagues, etc. i get it. but it's part of the great resignation, if will you in this country, that we've decided that people can work from home. they're less efficient and i don't -- i think less collegial and i think this -- and i agree with the chairman, i think everybody should be sitting here at this table right now. because that's how you deal with things, face to face. i'm sorry my colleagues don't all feel that way. i just think folks need to come back. if anybody could spit out, because we had eight million returns and you say you've now chopped that down to one million. how much is still owed to the american people? because those people i was told at the last meeting we had that it was about three million per
11:06 am
return. what is still owed to the american people for returns that have not been processed? mr. corbin: of the returns that haven't been processed, all of them are not due a refund. the average refund amount this filing season so far has been about $3,000. once those returns have all processed through our master file system, we can go take a look back and see exactly what that was. but right now until those returns are in the system and processed, it's difficult. mr. murphy: you understand the genesis of my question. the government's been holding onto money that's not theirs, especially now during a massive inflationary period where the people now are going to get money back that was actually less than what they were truly owed. mr. corbin: we are required to pay interest on refunds that we have delayed. mr. murphy: tax inflation adjusted? mr. corbin: no, sir. i don't believe so. mr. murphy: thank you, mr. chairman. thank you for your answers questions, gentlemen. i yield back.
11:07 am
mr. pascrell: great questions, mr. murphy. i might add the graphs in the report we have received are very, very informative. because when you find out how much the i.r.s. should have collected and what they didn't actually collect, it's astonishing. to find out the reasons for it, it's pretty convoluted and you were referring to that. we can't find the exact reason why that's been a history. i mean, this things happened during the pandemic. we have an ability to attach every problem that the i.r.s. has to the problems of personnel during the pandemic. you go back to the hearings of 10 years ago, five years ago, and you'd be astonished the questions they're asking aren't
11:08 am
too different than what we're talking about right here. so you're onto something. we'll talk about it. i'd like to now call on mr. schneider for five minutes. it's all yours, mr. snyder. mr. schneider: thank you, mr. chairman. i want to thank the witnesses for joining us today. i echo what my colleagues have said about the employees at the i.r.s. i know how difficult it has been during this pandemic. every agency in government, every employee in any business can tell stories days on end about the challenges of working through the pandemic. we know how hard it is. mr. corbin, let me focus -- you've been at the i.r.s. for a while. when did you start working there? mr. corbin: i started working at the i.r.s. when i was in high school at age 16. 35-plus years.
11:09 am
mr. schneider: thank you for your service. over those years, i know because i spent time way back then working for a company which is in this space, but the complexity of the tax code and demand for compliance got more complex, is that a fair statement? mr. corbin: that's fair. yes, sir. mr. schneider: as phrebgsity has grown, the demand put on i.r.s. employees has only grown, right? mr. corbin: yes, sir. mr. schneider: and we've been asking you to meet those demands with fewer staff and constraints -- [indiscernible] -- is that fair? mr. corbin: yes, sir. mr. schneider: so more complexity, greater demands, more returns, fewer staff. and it's estimated somewhere between half a trillion, $500 billion and $1 trillion a year is not being collected that's probably due to the i.r.s.? is that the estimate that you hear? mr. corbin: i would agree with
11:10 am
the commissioner, yes, sir. mr. schneider: so the goal is to try to make sure that people pay the taxes that they owe. not a penny more, but also not a penny less. one of the things we've heard in this committee and know from past experience, the spector of knowing that someone is watching and making sure that information you file is correct and your tax return is complete is likely to increase compliance. that's kind of the assumption. mr. corbin: it absolutely is. trust in government is important. and i think that taxpayers want to know that their neighbor across the street or next door is paying their fair share. so i do think that that is a foundational piece of voluntary compliance. mr. schneider: that's part of the taxpayer experience. i know i pay my taxes as part of
11:11 am
my civic responsibility. i want to know that my neighbors, my colleagues, my business competition is paying their fair tax as well. that it's a level playing field. let me take you into a different direction. you do have this new role of taxpayers experience. how do you see taxpayer experience defineed? what do you want it to be for a taxpayer? whether it is a low-income taxpayer or someone -- [indiscernible] -- because they have higher income? mr. corbin: thank you. i think the taxpayers' experience really needs to be a human-centric design where we have to look at the different kinds of journeys for different kinds of taxpayers. service to one, service to all. so we have an obligation to map out the different journeys from low-income taxpayer to a middle income taxpayer to a small business to a tax-exempt business and watch their journey from filing and payment to going through compliance and
11:12 am
enforcement opportunities and i think if we do that human-centric focus, really trying to meet taxpayers where they want choice and access, we can improve not only trust in government but trust that they know that we are doing or implementing the laws correctly and accurately. so i believe it begins with watching the journey for each taxpayer and it takes the whole tax ecosystem from you all are partners in congress to our partners at g.a.o. and the i.r.s. to tax preparers to volunteers. it will take the whole community for us to get this right. mr. schneider: i couldn't be more -- you said something that i liked, the idea of service is on the back end. but the thought i had, i know i'm running out of time, i'd like to ask for another half hour if i could, but it's not just service on the back end. it's service on the front end
11:13 am
and who can use modern technology, develop our systems to be that exhumer focused on customer focused and it catches mistakes as people are entering into data the better information going in that i assume would help us reduce the number of audits on the back end as well. is that a fair statement? mr. corbin: that's absolutely fair. we've found through identity theft that prevention of identity theft is more important than detection. mr. schneider: which is true in everything. i wish i had more time. thank you for what you're doing. we want to partner with you. i look forward to working not just with you but with my colleagues on both sides of the aisle to try to make sure we're providing the necessary service to all taxpayers. not targeting anyone. i do have concerns that the number of audits for low-income earners, we have to make sure it's fair and i look forward to
11:14 am
making sure we do that. thank you and yield back. mr. pascrell: thank you, mr. schneider. before i turn to mrs. miller for five minutes, i just want to -- you brought up a great point, mr. corbin, about trusting government. and i think that's a valid issue. if agencies and departments are not functioning as we intend them to, unless we intend something different than we think, that's possible too, we need to correct those agencies. that's our job, our oversight job. in order to build trust in the community and make that connection. so, agencies need to perform and they must have basic performances that are necessary. we should be talking about that too.
11:15 am
mrs. miller. mrs. miller: thank you, chair pascrell. and thank you. mr. pascrell: you're welcome. mrs. miller: i appreciate you all being here to answer our questions today and before i begin i'd like to submit for the record a statement from the national taxpayers union on the dangers of increasing the i.r.s. enforcement budget and i'd also like to submit for the record a letter that i sent along with 67 bipartisan colleagues to secretary redick on april 7, 2022. that was six weeks ago. that's focusing on the i.r.s.' failure to process employee retention tax credit payments. and we have not received a response. with the news breaking in the last week that the i.r.s. has destroyed over 30 million unprocessed returns, i'm concerned that the agency's ability to process additional paperwork under the expanded reporting requirements, especially for the working class
11:16 am
americans, such as those that are receiving the 1099-k forms, and in order to pay for the reckless spending package last year, congressional democrats used a budget gimmick to lower the reporting requirement of the gig economy workers and small businesses from $20,000 and 200 separate transactions to simply $600 of income. and this will lead to many taxpayers receiving a form they've never seen before for taxes that they probably don't owe and leading to overpayments in the i.r.s. receiving an even higher volume of the 1099-k forms and in my opinion it creates a security risk. because many of the companies that operate the gig businesses or online marketplaces will then be forced to collect personal information such as social security numbers for the people that are doing and using the services, and that's putting
11:17 am
even more americans' data at risk of security breaches. and hacking. which we all know is an issue. and that's why last year i introduced h.r. 3425, which was called the saving gig economy taxpayer act, which would repeal this provision and return the threshold to the previous mark, saving working class people who are just trying to make their ends meet, as well as save the i.r.s. from a flood of paperwork and phone calls. so i urge my colleagues across the aisle to please join me in fixing this mistake. mr. corbin, with the call pickup rate hovering at 10%, what plan does the i.r.s. have to handle the influx of telephone calls likely to result in the taxpayers receiving a tax form that they've never seen before? mr. corbin: our plan is to make sure that we have enough customer service representatives, which right now our customer service representatives do two jobs.
11:18 am
they answer the phones, which is how taxpayers get their answers on the phone. but they are also responsible for account changes that are done on paper. so that would be like an amended return or a letter that you may send in. so we've been focusing this year on making sure that we get caught up on our account change work, 1040-x's, i probably shouldn't talk in forms, but get caught up on account change work so that we can get back to the business of being able to answer the phone more readily. we've also implemented what we call customer callback technology. it's available for about 70% of the call demand that comes in. our goal is to expand that, to over 90% of our call demand. and this saves taxpayers hours. because you don't want to sit on the phone listening to our music, we don't want to sit on the phone and listen to our music.
11:19 am
we did save 1.7 million hours in hold time last year using callback technology. so i think to answer your question, by enhancing information and how it looks on, by making sure --, by making sure we have the right staff tock able to answer the phone -- staffing to be able to answer the phone calls and to implement callback, that will let us get to the job of answering constituent calls. mrs. miller: you make it sound so smooth. i really hope that does happen. how do you plan to communicate with taxpayers that the amounts listed on the 1099-k are gross sales and that taxpayers can actually assert the original cost basis and other expenses to reduce those taxable sales even to zero? i'm just concerned that these small taxpayers will report the gross amount and it's not necessarily what's really taxable.
11:20 am
mr. corbin: yes, ma'am. it starts with outreach and education. so we start with making sure through our tax forms that we have throughout the summer that return prepares understand how -- preparers understand how to return the form. we'll create a simple poster that kind of explains it for our tax professionals. we also have what we called in the fall a get ready campaign. so that get ready campaign is a social media blitz, it's where the i.r.s. will give interviews. we go out and try to hit the ground and talk with community partners to make sure that they understand. and also partnering with other government agencies is critical. you are talking about small businesses. so connecting, i think, good government works when you're able to connect with other federal agencies and we use and leverage each other's channels and networks to be able to provide education so taxpayers understand what they're
11:21 am
receiving. mrs. miller: thank you. i yield back. mr. pascrell: [indiscernible] -- associate myself with everything you said. i think it makes sense. but we're in two different worlds. because a lot of things we're talking about today, we said many times before, we're in a different world in that we're taxing basically -- you're talking about basic things here. we're taxing income more than we have ever taxed it before and not assets, which have grown tremendously in the past 20 years. the burden is on the folks who work hard every day. this is not an anti-rich kind of thing. we want people to produce, we want people to make a lot of money. to live better than past generations. that's not the question.
11:22 am
the question is fairness. and you make a lot of sense in what you have suggested. i'm going to read your bills. mrs. miller: thank you. mr. pascrell: i know one of them but i don't know the others. mrs. miller: thank you. mr. pascrell: i think that this is important and significant, what you asked. and i think mr. corbin got to the heart of the issue and he was not long about it. he got to the point right away. so fairness is why we're here. there's this aspect of it, operations. and the other aspect is the law itself, of a secretary paying a higher percentage than her boss on her taxes. and if we don't address that, this reduces the trust in government. and what you're asking reduces -- gets to the heart of reducing trust. so i thank you for your questions. mrs. miller: thank you.
11:23 am
mr. pascrell: you're welcome. now, the gentleman from nevada, mr. horsford, you've got five minutes. welcome aboard. mr. horsford: thank you, mr. chairman, hoh for holding this hearing on taxpayer fairness across the i.r.s. i am particularly interested in this topic given the focus on the experience of taxpayers and how it can differ based on income levels. this is not a talking point. this is a reality that my constituents face. to me this is an issue of economic equity and justice, as well as fairness. too many of my constituents feel that the cards are stacked against them. hardworking citizens in nevada's fourth congressional district go to work every day to provide for their families and to make their communities a better place to live and work and to raise a family. they pay their fair share of
11:24 am
taxes and are simply trying to live the american dream. at the same time they see millionaires and billionaires reap profits from their labor. so it should only seem just that they expect these billionaires to pay their fair share in taxes just like any other american that contributes to our country. however, steady study after study and now the g.a.o. report have confirmed lower income earners are more likely to be audited than millionaires and billionaires. this is a persistent and growing problem. one where the wealthiest american households evade taxes or hide their money in secret offshore bank accounts in order to avoid paying their tax obligations. i can't seem to wrap my head
11:25 am
around the reasons as to why we can't prioritize auditing millionaires and billionaires, knowing that we are losing out on hundreds of billions of dollars per year in tax collections. mr. mctigue, in the report titled "trends of i.r.s. audit rates and results for individual taxpayers by income," g.a.o. stated that in july of 2020, the treasury department mandated the i.r.s. maintain an 8% audit rate on high-income individual taxpayers. i.r.s. created a project to identify taxpayers with a total positive income of $10 million or more for that audit. mr. mctigue, you have been able to identify the total number of americans with a total positive
11:26 am
income of $10 million or more? and if so, how many individuals in that total number you have been able to audit since 2020? and what has been the amount of taxes collected as a result of those audits? mr. mctigue: congressman, thank you for the question. in our report on page 31, i believe, appendix 3, we do break out the number of audits, the number of returns by income category. so for those with total positive income of $10 million or more, there were approximately 24,000 returns submitted to the i.r.s. of those 24,000, ers audited -- i.r.s. audited 1,000 of those returns for an audit rate of about 4%. that is in 2019. the most recent data that we have. mr. horsford: even though the requirement is 8%.
11:27 am
even though the requirement is 8% that should have been identified for audit. is that correct? mr. mctigue: right. as i discussed earlier in my testimony, audits of these higher income taxpayers tend to take longer to complete. so there may still be audits under way that are not yet reflected in those data. mr. horsford: if you're talking 8% versus 4%, i doubt that it's that full amount. let me go on to another question to close. americans with the highest income account for a disproportionately large share of underreported taxes while at the same time low-income communities, especially black and latino communities, are targeted more by the i.r.s. for auditing. when looking at allocation of resources, the i.r.s. currently
11:28 am
utilizes, does it not make more sense to more closely scrutinize high-income households because, a, studies have thousand that the tax evasion under-reporting numbers are higher than that of low-income individuals? and b, that the money collected is far more significant than targeting low-income households. either one of you can answer that question. mr. mctigue: i'll start by saying that in 2013 we recommended that i.r.s. look at total direct income versus cost of conducting various types of audits and suggested that i.r.s. could increase the amount of revenue they collected by shifting resources along the lines that you described, from lower productive audits to higher productive audits. i.r.s. -- it took i.r.s. some time to develop a model to do that, to measure in particular on the cost side of various
11:29 am
types of audits. i.r.s. has begun implementing a model which does look at the return on investment of different types of audits, particularly for small business correspondents' audits. we think that's a step in the right direction and in terms of under-reporting income tax, the tax gap, i think it's important to note that of the $245 billion in under-reporting that i mentioned at the top of the hour, $110 billion of that is related to schedule c income, basically sell props or small businesses that report on a 1040. that is a huge amount. it represents about 25% of the gross tax gap. and to the effect that the i.r.s. can put more resources toward that and bring down that
11:30 am
under-reporting, i think it would be beneficial. mr. horsford: thank you. mr. pascrell: thank you for your questions. now i'm going to call on ms. plaskett. i know some of our members had other meetings and briefings and some are getting back here and some of them are not. you've got five minutes. ms. plaskett: thank you very much and thank you for your flexibility in allowing us to rearrange our schedules for markups and other ac teuflts that are going on -- activities that are going on. thank you so much for being here and want to thank the chairman, as well as the ranking member, for the work that's being done to conduct business of this subcommittee and oversight on taxpayer fairness across the i.r.s. of course being from the u.s. virgin islands, from a territory, we have very unique tax issues that we must deal with.
11:31 am
what is the i.r.s. doing to improving the interaction of taxpayers in the u.s. territory? is anything being done? mr. corbin: there are a number of activities that we are looking at in the territories to really help taxpayers. particularly with filing and understanding the requirements needed to get things such as the child tax credit or make sure that they're filing their returns, to get the benefits that they should receive. we've done a number of things like taxpayer experience days, which are basically i.r.s. employees coming in on saturday to help taxpayers. who have issues. we've been partnering with our sites on those experience days so taxpayers who may need to file a return can file a return or if they have questions about their filing, then an i.r.s. employee will be there to be able to help them. we also are working what we call
11:32 am
a community in practice. again, working with people on the ground. so these are your nonprofits, your community leaders, to provide the material and education around how and what's available through the tax code. so a lot of it deals with outreach and education. ms. plaskett: thank you. i know we talked previously about taxpayer advocates and the use of those to support. making phone calls to the i.r.s. related to the territories is very difficult. do you believe that you have sufficient number of taxpayer advocates and what would be an appropriate amount that you would need to support the demand as you see it or the f. t.e.'s? mr. corbin: the taxpayer advocate service is led by my colleague, aaron collins. i would probably would not comment on what she would like or what her needs would be. ms. plaskett: she wants more? mr. corbin: yeah. i can say assuredly she wants more. and i agree that she needs more.
11:33 am
ms. plaskett: right. it's better to get the support on the front end so that individuals don't have the scary experience on the back end. mr. chairman, i was thinking in preparing for this, the one experience i can remember as a child with the i.r.s. was my own parents. they were in the -- my dad was a new york city police officer and thus had quite a bit of overtime. my mom worked in the court system in new york. they were both union numbers. made decent salaries. gave a lot to charity. my mother had been an orphan and so gave back to the group that she belonged -- that supported her as a child. and i can remember an auditor coming to our home and the absolute fear that my parents had of, you know, 1970's, this man, white man, coming to their home and auditing them. and his remarking on what a nice home it was.
11:34 am
really brought kind of consternation to them as well. so i agree with so many of my colleagues here that i think for the return on the investment in terms of audits, that it would be the billionaires and i know that those take substantially longer to conduct, being from a u.s. territory, and you all have done a tremendous amount of audits on individuals who have taken tax credits living in the u.s. territories. i know that those can drag on for 10, 12 years. but the outcome in some instances are tremendous. in terms of the amount that goes back. do you take a look at, while i know that there's substantially more individuals who are making $200,000 or less and thus by sheer numbers that amount of course would project that you were going more after individuals in that category than those who are millionaires or ultramillionaires,
11:35 am
billionaires, but do the return of those audits justify putting more resources into that group rather than the lower income bracket group? mr. corbin: i couldn't address the return on investment on audits. ms. plaskett: don't you think that should be done? mr. corbin: i absolutely -- ms. plaskett: from an act warrial standpoint -- act wearial standpoint, which one are we getting the most bang out of the buck from, right? mr. corbin: i agree with you. i was touched by your story with your family. ms. plaskett: they got out of it. everything ended up fine. but i can imagine for most american families the thought of someone sitting down and auditing them is terrifying. for the average american. mr. corbin: we want to change that experience. and hope hearings like this where constituents and citizens get to see me. not saying i'm the perfect person, but hopefully they'll
11:36 am
see that we are trying to be better and kinder and empathetic. because that is a part of i think federal service. is that we have to be empathetic to those -- ms. plaskett: i know my time has run out but i believe in data and i think that the data would bear out that the i.r.s. would receive more in terms of going after fewer individuals who make greater amounts of money than those who are the $200,000 or less. mr. pascrell: collecting what we should collect. $600 billion between what we should collect and what we actually collect. there's something wrong there. that's not chump change. $600 billion. not at all. now i'd like to call on another of our busy members,. mr. davis, and five minutes,. mr. davis, it's all yours.
11:37 am
thank you for getting back to the meeting. mr. davis: thank you very much, mr. chairman. let me thank you, mr. corbin, and your staff, for your attention this year to outreach and process consideration while fostering homeless youth newly eligible for the earned income tax credit. secondly, i am deeply concerned about the ability of vulnerable individuals to successfully overcome barriers in the current tax system. like my colleagues, i'm also deeply concerned that low income taxpayers receiving the earned income tax credit and other refundable credits receive dramatically greater scrutiny from the most -- while the most wealthy taxpayers do not.
11:38 am
how does it compare to prior tax years? can your team provide myself and this committee information on the number of claimants and the amount of refunds for tax year 2021, while refundable tax credits. for example, how many people claimed the tax credit this year compared to last year? and i know that i have lower income constituents who don't have to file taxes and who don't realize they could qualify for
11:39 am
those. what steps is the internal revenue service taking to allow these individuals to file easily after the normal deadline? and after the hearing, i'd appreciate an update on both the stimulus payments for the incarcerated and how the tax season went for foster and homeless youth. mr. corbin: yes, sir. i think you had a couple of data requests in there. so i'll make sure to take that back and get that information back to you. for tax year 2021, i would caution that that is still a year that's being processed. so the data that we were able to provide you would be just
11:40 am
through current or partial year data. it wouldn't give you the full picture. but we can do that. your other question was around what are we doing to still continue to advocate for taxpayers who are still eligible for some of the credits but may not have filed their return. i think working with your office, you know, we know that there are lots of taxpayers in different life circumstances like the homeless youth that you mentioned. so we have continued to reach out and talk with those nonprofits, particularly when you're doling with homeless youth. they tend to not -- they're not going to come to i.r.s. they're not going to trust the i.r.s. to give them the answers. but they will trust that advocate who is in the shelter with them, who they're comfortable with, and making sure that we provide those advocates with the tools they need to be able to file a return for free with the i.r.s., so
11:41 am
that those taxpayers can continue to claim or get those credits. because it is a refund tax return, the taxpayer did not have to file an extension to do that. but you will see our continued partnership and outreach and education throughout the summer. i look forward to working with your constituents and your office to make sure we hit the mark on that. mr. davis: thank you very much. and i just spoke to a lady this morning who has two children. she didn't file because she didn't have to file because she lives off of s.s.i. and it took me about 10, 15 minutes to help her understand that she is missing money and losing money. so let me thank you for the engagement and i appreciate the work especially that the agency
11:42 am
has done with my office and my staff and my committee relative to foster youth and individuals who are incarcerated. thank you, mr. chairman. and i yield back. mr. pascrell: thank you,. mr. davis. and thank you for your question. this brings us to a close today. i'd like to thank our witnesses. you two gentlemen did a fantastic job. i'm observed in your reports -- absorbed in your reports. i looked at them very, very carefully and red them very carefully. this is half of what we're doing in terms of any tax fairness. operations and then the legislation of how folks with money are more protected than people who don't make very much every year. and the emphasis, of course, needs to get back to assets which people have the ability to
11:43 am
camouflage, as you know. if you got 20 lawyers, that helps too. and what does the guy making $30,000 have? what lawyers does he have? that's why tax advocates are very important for the average individual. most don't get to see them or talk with them. and they could use the advice as well as somebody who spent the really big bucks. so i thank the both of you for responding to what we've asked for. sometimes it has nothing to do with what you asked for but you addressed those particular issues. this is an ongoing issue and i intend to have more targets in terms of the future of these programs going into effect and these -- this legislation going into effect that deals with
11:44 am
taxes. tax fairness should not simply be a tkpwhreub term -- glib term. tax fairness should mean that the people who don't make as much in terms of salaries and income really believe that the i.r.s. are not the evil guys, but they can't be nice guys either. that's not their job. that's not the i.r.s. that i know. so i'm looking for fairness and i understand the pressure that the workers at i.r.s. are under. and many of them are not trained for the high-end jobs that are on the front line folks who deal with the very problems we were talking about today. you have to train people. you used the term, being trained four years. well, in another three years, you know what the percentage of front line workers is going to
11:45 am
be reduced in the i.r.s.? that's a very sensitive question and it has a terrible answer. so we're not getting our footing to move forward. we don't have the tools. but we should. and that means that, something we didn't talk too much about here today, leadership is necessary. leadership that's different, that doesn't look for excuses. and we're here to help. you heard it from both sides. so this is not a partisan issue. and we're not here to soak the rich either. i'm going to be treated fairly and you're going to be treated fairly. when people feel that, they put their trust back in government. it's not an ancillary, it's not an addendum, it becomes basic to
11:46 am
what we're talking about. thank you. he want to thank the committee, ranking member. good questions today. i would thank the staff and they all, i believe, did their job. i pray to god i did mine. i want to thank you for being here and i hope a lot of people watched it and i hope a lot of people write in for questions and solutions. nobody likes to pay taxes, but lincoln found out that's how you get the war done. you get things done. and we should find that out too. thank you for coming and i adjourn the meeting. thank you very much. [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. visit] [captions copyright national cable satellite corp. 2022]
11:47 am
11:48 am
11:49 am
>> c-span brings you an unfiltered view of government got. scan the q.r. code at the right bottom to sign up for this email and stay up to date on everything happening in washington each day. subscribe today using the q.r. code or visit to subscribe any time. >> c-span has your unfiltered view of government. provided by these companies and more. >> cox is committed to providing eligible families access to
11:50 am
affordable internet through the connect to compete program. bridging the digital divide one connected and engaged student at a time. cox, bringing us closer. >> cox supports c-span as a public service, along with these other television providers. giving you a front row seat to democracy. good wednesday mornin. you can start calling in now. last night, the biggest headlines coming from pennsylvania. we take you there first to that undecided race, the republican senate primary. the latest from the associated press, dr. oz at 31.3%. his challenger, dave mccormick at


info Stream Only

Uploaded by TV Archive on