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94–904 PDF 2016

S. Hrg. 114–423 

IRS CHALLENGES IN IMPLEMENTING THE 

AFFORDABLE CARE ACT 

HEARING 

BEFORE THE

COMMITTEE ON 

HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

APRIL 15, 2015 

Available via the World Wide Web: http://www.fdsys.gov/ 

Printed for the use of the 

Committee on Homeland Security and Governmental Affairs 

( 
(II) 

COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS 

RON JOHNSON, Wisconsin Chairman 

JOHN MCCAIN, Arizona 

ROB PORTMAN, Ohio 

RAND PAUL, Kentucky 

JAMES LANKFORD, Oklahoma 

MICHAEL B. ENZI, Wyoming 

KELLY AYOTTE, New Hampshire 

JONI ERNST, Iowa 

BEN SASSE, Nebraska 

THOMAS R. CARPER, Delaware 

CLAIRE MCCASKILL, Missouri 

JON TESTER, Montana 

TAMMY BALDWIN, Wisconsin 

HEIDI HEITKAMP, North Dakota 

CORY A. BOOKER, New Jersey 

GARY C. PETERS, Michigan 

KEITH B. ASHDOWN, Staff Director 

EMILY MARTIN, Counsel 

GABRIELLE A. BATKIN. Minority Staff Director 

JOHN P. KILVINGTON, Minority Deputy Staff Director 

TROY H. CRIBB, Minority Chief Counsel for Governmental Affairs 

PETER P. TYLER, Minority Senior Professional Staff Member 

LAURA W. KILBRIDE, Chief Clerk 

LAUREN M. CORCORAN, Hearing Clerk 
(III) 

C O N T E N T S 

Opening statements: Page 

Senator Johnson ............................................................................................... 1 

Senator Carper ................................................................................................. 4 

Senator Portman .............................................................................................. 15 

Senator Sasse .................................................................................................... 18 

Senator McCaskill ............................................................................................ 21 

Senator Ernst .................................................................................................... 23 

Senator Ayotte .................................................................................................. 25 

Senator Lankford .............................................................................................. 29 

Prepared statements: 

Senator Johnson ............................................................................................... 39 

Senator Carper ................................................................................................. 42 

WITNESSES 

WEDNESDAY, APRIL 15, 2015 

Hon. John A. Koskinen, Commissioner, Internal Revenue Service, U.S. Department of the Treasury .................................................................................... 6 

Prepared statement of John A. Koskinen .............................................................. 44 

APPENDIX 

WI constituent letter ............................................................................................... 52 

Responses to post-hearing questions for the Record from Mr. Koskinen ............ 53 

(1) 

1The prepared statement of Senator Johnson appears in the Appendix on page 39. 

IRS CHALLENGES IN IMPLEMENTING THE 

AFFORDABLE CARE ACT 

WEDNESDAY, APRIL 15, 2015 

U.S. SENATE, COMMITTEE ON HOMELAND SECURITY

AND GOVERNMENTAL AFFAIRS, Washington, DC. 

The Committee met, pursuant to notice, at 10:01 a.m., in room 

SD–342, Dirksen Senate Office Building, Hon. Ron Johnson, Chairman of the Committee, presiding. 

Present: Senators Johnson, Portman, Lankford, Ayotte, Ernst, 

Sasse, Carper, McCaskill, and Peters. 

OPENING STATEMENT OF CHAIRMAN JOHNSON 

Chairman JOHNSON. Good morning. This hearing will come to 

order. 

Commissioner Koskinen, I appreciate you coming here and preparing your testimony. I think we are all aware, probably painfully 

aware, that it is Tax Day today. We chose this day because we figured you are not particularly busy. But I know millions of Americans are trying to comply with our Tax Code. My wife was talking 

to me, actually last night—now, she is a former Internal Revenue 

Service (IRS) agent. And now that I have my job, she is actually 

doing our own family taxes, and she did ask me, when I retire from 

this gig, will I take it back over? But I think I am pretty satisfied 

with the current arrangement, so I would like to do that. 

But, of course, it is Tax Day, which is different from Tax Freedom Day. So I did ask my staff to find out when that is, which 

means, that is the day when Americans actually have paid taxes 

to the Federal Government. All the money that they have earned 

up to that point in time on average goes to the Federal Government. Past that point they get to keep the fruits of their labor. Tax 

Freedom Day is April 24, which my recollection of this is actually 

starting to move back a little bit closer to the actual Tax Day. But 

it is still a very long period of time that we work for the Federal 

Government. 

Now, as is my custom, I have got an opening statement, which 

I will ask unanimous consent to enter into the record.1 And I always get it because Senator Carper is a nice man. 

Senator CARPER. Reserving the right to object. I will not object. 

Chairman JOHNSON. Without objection, it is entered. 
2 

What I would like to do is read something else, and this is the 

letter we received from a constituent, and I think it is pretty appropriate to read today. It is a little bit long, but if you would bear 

with me, I think this would set really the discussion that we need 

to have today, because it is a serious letter and there are some serious concerns. 

‘‘Senator Johnson: We are writing to you because we are not sure 

where else to turn and also to make you aware of yet another issue 

with our affordable health care. We are both retired. We live on a 

moderate annuity payment which we each have and Scott’s Social 

Security. We had been receiving a distribution from an additional 

retirement plan, which was discontinued in May 2014.’’ 

By the way, let me mention this is written to me by Scott and 

Julie Thompson. They did allow me to use their name, which we 

are finding is getting more and more difficult to have taxpayers 

allow us to use their name because they are concerned if the IRS 

knows who they are and they are complaining about something at 

the IRS, they are afraid of being targeted. Now, that is pretty sad. 

But, anyway, Scott and Julie Thompson were willing to let us 

use their name, so let me continue. 

‘‘In the spring of 2014, we moved back to Wisconsin from Colorado to care for Scott’s elderly, dying father. In doing that, we 

moved out of the network of our Colorado health insurance. With 

the changes in the health insurance for 2014, we were buying a 

high-deductible health insurance plan through an insurance agency 

in Colorado. At that time our income was too high for us to qualify 

for subsidized premiums.’’ 

‘‘In April 2014, we contacted the Health Insurance Marketplace 

because that was the contact for health insurance coverage for Wisconsin. We were unsure if we would be able to change insurance 

in the middle of the calendar year. We spoke with the Marketplace 

agent who informed us that we had two qualifying events: the 

move from Colorado out of the network of our health insurance and 

the substantial reduction in our income as of May 2014. We were 

told we were eligible for coverage through the Marketplace and arranged for coverage with a plan that has providers in our area, effective June 1, 2014. We were told that we were eligible for a premium credit and arranged the full premium credit would be applied toward our monthly premium, leaving us with a monthly cost 

we could afford, just over $400 a month.’’ ‘‘We were told we needed 

to submit proof of our new current income by July 20, which we 

did. In response, we received a letter from the Marketplace dated 

September 20, 2014, stating, ‘‘We have verified your information. 

Your eligibility as described in your eligibility determination notice 

will continue unchanged.’’ 

‘‘Fast forward to February 2015. In the process of completing our 

2014 Federal income taxes, we now find out that our total income 

for 2014 is being used as the basis for our eligibility for the health 

insurance coverage. With that, we are not eligible for subsidized 

premiums and are now told we must pay a penalty, returning the 

entire subsidy amount of $11,550.’’ 

‘‘There is nothing in the reporting process which allows for taxpayers to report when there was a qualifying event. We knew that 

our income in the first half of 2014 was too high for us to be eligi-
3 

ble for coverage. That is why we had to buy our own insurance in 

Colorado. We were very straightforward about our situation in 

coming back to Wisconsin when we spoke with the Marketplace in 

April. We were told that a qualifying event would make us eligible 

for the premium subsidy, even in mid-year.’’ 

Now, again, this is a couple moving to Wisconsin to take care of 

a dying father. They followed all the rules. They talked to people 

they thought were knowledgeable. They were told they would be eligible for a subsidy. And now all of a sudden they are finding that 

they are going to have to pay back $11,550 of subsidy. 

I will continue: ‘‘Our entire gross annual income for 2014, including the distribution received for 4 months early in the year and 

Scott’s Social Security, is just over $62,000. The penalty being imposed is $11,550. This is 18.5 percent of our entire gross annual income. Considering the fact that it is being imposed via our income 

taxes, it is actually going to have to be paid out of our after-tax 

dollars, raising that percentage of our income even higher. And for 

a real ironic turn of events, we will possibly have to withdraw this 

money from a retirement account, which will create $11,550 of income, which will probably create a penalty for our 2015 coverage.’’ 

‘‘We do not know what the threshold is for eligibility for health 

insurance, but an $11,550 penalty on an annual income of approximately $60,000 for two people seems excessive. We really do not 

have any options except to pay this penalty in order to file our Federal and State income taxes by April 15. We do intend to file an 

appeal with the Marketplace. We did not do anything criminal. We 

did exactly as we were told by the agents for the Marketplace. We 

paid for coverage even when it was very expensive so that we 

would be compliant with the new law.’’ 

‘‘Moving to Wisconsin was a difficult, emotional time for us. We 

were thrilled that our new circumstances would allow us to have 

some good health insurance coverage. We never expected that what 

we were told would not be true. It seems to us that there must be 

many other people who had things happen to them during the year 

that affected their health insurance and their ability to pay for it. 

Can you help us at all? Scott and Julie Thompson.’’ 

Now, the sad fact of the matter is—and this is what this hearing 

is about—how the IRS is trying to comply with the Patient Protection and Affordable Care Act (ACA). That law is in place now. It 

did not particularly protect Scott and Julie Thompson. And there 

are thousands, if not millions, of Americans that we know lost their 

health care coverage, are paying higher amounts, are having to 

comply with now an even more complex tax system. And, of course, 

that is really the purpose of the hearing: How is the IRS trying to 

grapple—again, I have a great deal of sympathy for your agency in 

terms of the task it has trying to deal with and help taxpayers try 

and comply with the even added complexity of the Patient Protection and Affordable Care Act. 

So, again, that is the purpose of the hearing. I am looking forward to your testimony and your answers to our questions. 

With that, I will turn it over to our esteemed Ranking Member, 

Senator Carper. 
4 

OPENING STATEMENT OF SENATOR CARPER 

Senator CARPER. Thank you, Mr. Chairman. And, Commissioner 

Koskinen, it is great to see you. You have a tough job. Our jobs are 

not easy; you have a really tough job. And I just want to say thank 

you for your willingness to do this, to continue to serve the people 

of our country, and our thanks to those on the team that you lead 

for the difficult work they do. We do not make your job any easier. 

We do not make your job any easier because we do not fully fund 

the work that needs to be done, whether it is providing service to 

people or whether it is actually doing the audits and so forth to 

make sure that people are paying what they ought to be paying. 

We wait and delay passing Tax Code changes until it is well beyond any kind of reasonable deadline. We provide uncertainty in 

the Tax Code, and we expect you to come along and clean it up 

after us. 

There is an old cartoon character, Pogo, who said, ‘‘We have seen 

the enemy and it is us.’’ And many of the concerns that were cited 

by our Chairman can be really laid at our feet. My hope is that he 

will be able to help this constituent. People call my office every day 

for help in any variety of areas. And one of the reasons that people 

have called my office, probably thousands of times in the last 14 

years, is because they did not have any health care coverage. And 

for a lot of them, health care was a visit to the emergency room 

or, frankly, just doing without. And that is not a good option either. 

The question is: What are we going to do about it? People talked 

about doing something about it for years. And we did not. When 

Hillary Clinton was First Lady, she tried to do something about it, 

and it foundered and did not work out. And Barack Obama becomes President, and he says, ‘‘Well, let us give it another shot.’’ 

I serve on the Finance Committee, along with Senator Portman 

here. I do not know if he was with us when we did this work on 

the Finance Committee, but we tried a bipartisan effort for months 

involving three Democrats and three Republicans to try to figure 

out how to try to extend health care coverage to a lot of people that 

did not have it and rein in the growth of health care costs. And, 

frankly, after three or four efforts and months of trying led by Max 

Baucus and Chuck Grassley, two good friends, guys who worked 

across the aisle, we just could not do it. And in the end, we took 

two Republican ideas—the exchange, the marketplace, and creating 

large purchasing pools so that people did not have to be part of a 

big organization in order to get health care coverage and better 

coverage. We took that idea and we incorporated it into the law. 

And we took another Republican idea—thank you, Governor Romney—of the individual mandate, because the insurance companies 

said, ‘‘If you do not require people to get coverage, we will end up 

having to cover just the lame, the unhealthy, and the blind, and 

it is not an economically feasible approach.’’ 

So we ended up taking those two good ideas and incorporated 

them into the law, and one of the ideas behind the exchange, as 

you know, is that for people whose income is not great, we wanted 

them to be able to purchase health insurance through this purchasing pool to maximize their leverage. But for folks whose income is low, they get a tax credit, and the tax credit eventually 

phases out at, I think, 400 percent of poverty. 
5 

1The prepared statement of Mr. Carper appears in the Appendix on page 42. 

2 Constituent letter submitted by Senator Johnson appears in the Appendix on page 52. 

Whether the origin of those ideas was Republican or Democrat, 

I think they are good ideas. And the question is: How do we make 

it work? And one of the ways we make it work is to make sure that 

you have at the IRS the resources so when people call you with 

questions about this stuff, you can actually give them a good answer. 

On Thursdays, tomorrow, our Senate chaplain, Barry Black, 

hosts a Bible study group. He does it every Thursday that we are 

in session for the most part. It includes Democrats and Republicans, those of us who need the most help. And one of the things 

he often shares with us is Matthew 25: ‘‘When I was hungry, did 

you feed me? When I was naked, did you clothe me? When I was 

sick and in prison, did you visit me? When I was thirsty, did you 

give me to drink?’’ Matthew 25 does not say anything about, ‘‘When 

I had no health care coverage, did you do anything for me?’’ Two 

thousand years ago I guess they were not thinking about that. 

But it is very real to us today. We had some 40 million people 

who had no health care coverage just a few years ago, 40 million 

people. And today that number has been knocked down by about 

a third. And on behalf of all those people who have coverage, including the kids the—the young people up to the age of 26 who 

have coverage on their parents’ plan, that is a very good thing that 

has happened. The question is: Can we do better at this? You bet 

we could. And we will. And my hope is that we will, as we go forward, instead of trying to kill the Affordable Care Act, we will find 

ways, in a bipartisan way, working with the administration to fix 

the problems that need to be fixed. And I am encouraged that we 

will do just that. 

I have more in a statement here that I would like to enter for 

the record.1 But I am happy that you are here and look forward 

to a good conversation. And if it is not perfect—as I like to say, let 

us make it better. 

Thanks so much. 

Chairman JOHNSON. So are you going to ask permission for that? 

Senator CARPER. Yes. 

Chairman JOHNSON. Without objection. 

I would also like to ask that I enter the letter from the Thompsons into the record as well.2 Without objection, so ordered. 

Chairman JOHNSON. It is the tradition of this Committee to 

swear in witnesses, so, Commissioner, if you would please stand? 

Do you swear that the testimony you will give before this Committee will be the truth, the whole truth, and nothing but the 

truth, so help you, God? 

Mr. KOSKINEN. I do. 

Chairman JOHNSON. Thank you. 

Commissioner John Koskinen is the Commissioner of the Internal Revenue Service. Prior to his appointment, Mr. Koskinen 

served as the Non-Executive Chairman of Freddie Mac from 2008 

to 2012 and as Acting Chief Executive Officer (CEO) in 2009. Commissioner. 
6 

1The prepared statement of Mr. Koskinen appears in the Appendix on page 44. 

TESTIMONY OF HON. JOHN A. KOSKINEN,1 COMMISSIONER, INTERNAL REVENUE SERVICE, U.S. DEPARTMENT OF THE 

TREASURY 

Mr. KOSKINEN. Thank you, Chairman Johnson, Ranking Member 

Carper, and Members of the Committee, thank you for the opportunity to appear before you today. In the spirit of without objection, 

I would like to have my entire testimony submitted for the record 

and give you a brief synopsis. 

Chairman JOHNSON. So ordered. 

Mr. KOSKINEN. The subject of today’s hearing, IRS implementation of the tax-related provisions of the Affordable Care Act, is an 

important one and is discussed in detail in my written testimony. 

But before addressing the Affordable Care Act and because today 

is, as the Chairman noted, April 15, I would like to provide the 

Committee with an update on the tax return filing season. 

I would also like to note that today marks the 60th anniversary 

of the April 15 tax deadline. Congress moved the deadline back 

from March 15 to April 15 starting in 1955 to provide more time 

for processing tax returns. 

In some ways, this is like the start of a Dickens novel, as I have 

said in other contexts. It is the best of times; it is the worst of 

times. 

Let us begin with the best of times. I am pleased to report that 

the 2015 filing season has gone smoothly in terms of tax return 

processing and the operation of our information technology (IT) systems. Thus far, the IRS has received more than 120 million tax returns from individuals on the way to an expected 150 million individual returns. We have issued more than 83 million refunds for 

more than $230 billion. For the vast majority of taxpayers who did 

not have issues with their returns and who chose direct deposit, refunds moved quickly through the system and reached them in 21 

days or less. 

Since today is the filing deadline, I would like to remind anyone 

who has not finished their taxes that, while time is running out, 

anyone who cannot make the deadline can file an automatic 6- 

month extension. 

Return processing this filing season has gone even better than 

anticipated given the challenges we faced beforehand. Along with 

our normal preparations, we also had to prepare for the tax-related 

Affordable Care Act changes and changes related to the Foreign 

Account Tax Compliance Act, and there was also late tax extenders 

legislation passed in December. 

Integrating all of these changes into our antiquated IT systems 

and still being able to open filing season on schedule on January 

20 was a great accomplishment by our experienced and dedicated 

employees. I deeply appreciate their commitment to the mission of 

the IRS and their hard work. 

I also want to thank our partners in the tax industry, especially 

tax professionals and developers of tax software and other products. Without them, the filing season could not run smoothly. 

We are also indebted to the more than 90,000 volunteers who 

help people prepare their returns at more than 12,000 volunteer in-
7 

come tax assistance sites all over the country each year. I am 

proud to say that many of these volunteers are current IRS employees or retirees. 

Specifically regarding the IRS portion of the ACA, all indications 

are that most taxpayers have been able to fulfill their filing obligations without a great degree of difficulty. I would like to talk a little later about the letter you received. 

We provided an array of communication products to taxpayers 

and tax preparers well in advance of the tax filing season. We also 

developed a special section on our website providing information 

about the Affordable Care Act. We also worked with software developers to ensure that the estimated 90 percent of taxpayers who 

were going to file using software or tax preparers would be easily 

able to provide the necessary information required by the ACA and 

file their returns without difficulty. 

We believe these activities taken together were a big reason why 

processing of returns with shared responsibility payments and premium tax credits generally went smoothly. I would note that for 

the vast majority of people, the ACA provisions only took a moment 

or two to handle. All most taxpayers had to do was check a box 

when prompted by their tax software indicating that they had coverage. 

Now a word about the worst of times. Return processing has 

gone smoothly if you are simply filing your return without questions or need to contact us. That is the situation most taxpayers 

found themselves in this tax season. But if you needed to contact 

us, it has been very difficult and a much less positive story. 

Customer service both on the phone and in person has been far 

worse than anyone would want. It is a simple matter of not having 

enough people to answer the phones and provide services at our 

walk-in sites as a result of the cuts in our budget. 

We are dismayed by the reports of taxpayers lining up outside 

our Taxpayer Assistance Centers hours before they open just to get 

service. Taxpayers who called us had long wait times on the 

phones. On bad days, fewer than 40 percent of the calls were able 

to reach a live assister, and that was often after a 30-minute wait 

or longer. This was frustrating not just for taxpayers but also for 

the IRS customer service representatives who want to have the resources to be able to provide much better customer service. 

As we begin preparations next month for next year’s filing season, one complicating factor is the need for us to implement as part 

of the ABLE Act the certification requirement for professional employer organizations on a tight timeline and without any additional 

funding. 

Complicating matters still more is the work ahead of us to continue implementing the tax-related provisions of the ACA for the 

next filing season along with the expanded requirements for the 

Foreign Account Tax Compliance Act. And we expect another round 

of tax extender legislation later in the year which we hope will be 

passed well in advance of December. 

So I am concerned that when I testify next year on the 2016 filing season, the report on the return processing front may not be 

as good as it was this year. The employees of the IRS will do everything they can to effectively and efficiently deliver next year’s filing 
8 

season, but we need help. We need the Congress to pass any legislation regarding tax extenders as early as possible this year and to 

provide us additional resources in the 2016 budget. With that help, 

I am much more confident about the chances of delivering another 

smooth filing season for the Nation’s taxpayers next year. 

With regard to the letter the Chairman recited and received, obviously this is the first year of the program, and taxpayers are, in 

fact, and tax preparers are adjusting to the requirements of the 

act. There is a reference there to the penalty. It is not a penalty. 

It is actually a repayment of the premium advanced payment provided. We spent a significant amount of time last year, starting 

about a year ago, trying to remind taxpayers that if their circumstances changed during the year, particularly if their family 

size changed or if their income changed, either up or down, they 

should contact the marketplaces and advise them. It sounds as if 

they provided income information that was not properly applied to 

their situation, which is a relatively rare circumstance. It is actually the first time I have heard someone say that they got the 

wrong information from the health care marketplaces. We have encouraged most of the people who discovered that they have underestimated or overestimated their income and, therefore, have an 

adjustment in their premium tax credit, did it because it is difficult 

for all of us to estimate a year in advance what our income is going 

to be. But the indications are that close to half of the people, about 

45 percent of the people, are actually getting a bigger refund because they overestimated their income to be careful; 50 to 55 percent are getting a smaller refund. Again, while we will not have 

full data for another 3 or 4 weeks, it does appear that there are 

relatively few people who are in a situation where they actually 

owe taxes as a result of having underestimated their income for the 

year. 

I would stress that we are doing everything we can in this transition year to help taxpayers whatever their difficulties are. The 

Treasury Department issued a policy saying that, to the extent 

that taxpayers are having difficulty with their payments, either in 

terms of understanding exactly what they owe on April 15, or to 

the extent that they owe additional funds, there will not be any 

penalty for an inability to pay. You still owe interest and you still 

should file, but the Treasury has removed any penalties for difficulties in this transition year. 

As I say, we have been delighted—and I think it is because over 

90 percent of people used software—that we have not seen—and we 

monitor the calls we get every day—a significant response from the 

public with regard to any difficulties they are having. As I say, if 

you use the software, you just answer the questions. You never 

have to deal with the instructions. You never have to deal with the 

forms. 

I am struck by the Chairman’s concern, which it is my concern, 

and that is, the point that people are nervous about revealing their 

names if they have a problem because somehow they will then be 

disadvantaged in dealing with the IRS. I think it is critical for compliance and it is critical for just the operation of the tax system in 

the United States for every taxpayer to feel comfortable that they 

are going to be treated fairly no matter who they are, no matter 
9 

who they voted for in the last election, no matter what organization 

they belong to, and, in particular, they are going to be treated fairly even if they have a problem. We encourage not only our employees but taxpayers to let us know if things are not going the way 

they think they ought to or the way we think they are going to go, 

because the only way we will be able to fix systems, the only way 

we will be able to get better is if we know what the problems are. 

So my encouragement to any taxpayer is if you have a problem, 

we are here to help you. As our revenue agents say, we distinguish 

between those trying to become compliant and those trying to 

cheat. If you are trying to become compliant and you have a problem—you have had a change in circumstances, you have difficulty 

with your ability to pay your taxes—we really want to work with 

you. We spend a significant amount of time and money trying to 

help taxpayers figure out what they owe and how to pay it. We 

have online installment agreements you can enter into if you cannot meet your payments when you file on April 15. We negotiate 

offers in compromise for people who have difficulty now and into 

the future meeting their tax obligations. And we simply want to 

stress that if you have a problem, we are here to help you. 

I would also remind people, though, if you are going to try to cut 

corners and cheat, we actually are going to find you, and we will 

not be happy about that. But we are anxious, as I say, wherever 

a taxpayer has difficulty, to try to help them. I always say, ‘‘Call 

us and we will help.’’ I always get a little nervous when I say call 

us because I know how long it takes to get through. And as Senator 

Carper said, when we ask for more funds, it is not that we want 

to add back the 13,000 people that already have been retired from 

the agency and not replaced, but we do need funds in the interim 

while we are building toward the future to be able to have enough 

people simply to answer the phones when people call. 

With that, I would be delighted to answer any questions you 

might have. 

Chairman JOHNSON. Well, thank you, Mr. Commissioner. 

I will say that this is not unusual that taxpayers are afraid to 

offer their names because of fear of retribution. That is very prevalent in people that certainly I talk to. And that is a real problem 

because of the targeting, and I think it makes it even more important that we actually hold people accountable, that the American 

people see that those that did the targeting are brought to some 

semblance of justice, and that it is actually correct in the IRS. This 

is a problem, and it is very prevalent. This is not just something 

that is unusual. 

It did strike me, I was actually surprised, that this is the first 

time you have ever heard that the marketplace or one of the exchanges gave out incorrect information. I would think that because 

of the complexity of the law it would be far more prevalent. 

Mr. KOSKINEN. I meant in terms of an individual being told the 

wrong information about the validity of their income. Obviously, as 

has been widely publicized in this first year, the Centers for Medicare and Medicaid Services (CMS) has been very forthcoming about 

the 1095 information returns and the errors that have appeared in 

some of those and have been trying to make sure that taxpayers 

get the updated, correct information in their 1095–As. I know CMS 
10 

has been working with thousands of taxpayers to make sure that 

the information in those 1095–As is correct. So to that extent, 

clearly in a transition year there have been a reasonable number 

of cases, but still compared to the 4.5 million taxpayers we expect 

to file, the numbers are surprisingly smaller than you would expect. But you are exactly right. As you would expect in the first 

year of one of these programs, some of the information returns 

have had to be corrected, have had to be updated. Some taxpayers, 

appropriately, have said the information in that return does not 

correspond with either the payments I have made or the premium 

support I have gotten. And there are 30,000 or 40,000 of those that 

are being worked through by CMS. 

Chairman JOHNSON. I think correctly, and you did correctly state that what they are paying, the $11,550, is not a penalty. It is just 

reimbursement of the subsidy that they were incorrectly provided. 

But, again, they view that as a penalty. You can kind of understand that. 

Mr. KOSKINEN. I understand. 

Chairman JOHNSON. They followed all the rules. I was just reading what they said. I take your point. 

But speaking of penalties, one of the things I found interesting 

in the briefing packet here is that the average penalty paid by people, an individual decided to really exercise their freedom and not 

purchase insurance—by the way, is that a penalty or a tax, that 

$95 or the greater of one percent? Is that a penalty or a tax? I forgot how that was ruled. 

Mr. KOSKINEN. The ruling I think has been it is a tax. It is called 

the ‘‘shared responsibility payment.’’ 

Chairman JOHNSON. OK. So my point being that the average tax, shared responsibility tax, is not the $95 minimum. It is the one 

percent of income, which ends up being about $172. Is that correct 

for this year? 

Mr. KOSKINEN. I do not have that number, but clearly 95 is the 

minimum, but it goes to one percent of your income. 

Chairman JOHNSON. And it is the greater of? 

Mr. KOSKINEN. Yes. And it is $95 for adults in your family. So 

if you have two or three people—— 

Chairman JOHNSON. So if you extrapolate that, that is about 80 

percent higher than the minimum. So the average, 172 is 1.8 times 

the minimum of 95. So if you extrapolate that to next year, the 

minimum penalty will be $325, correct? 

Mr. KOSKINEN. Yes. 

Chairman JOHNSON. Or one percent of your income, whichever is 

greater. 

Mr. KOSKINEN. Next year it goes to 2 percent, I think. 

Chairman JOHNSON. Oh, OK, it goes to 2 percent. OK. So I just 

did the math on one percent. It is going to double that then. So 

what I was looking at is $325 times 1.8 percent would be 588, double that then. Correct? So the average tax penalty will be closer to 

$1,200 next year. 

Mr. KOSKINEN. Well, the one percent, you do not add both the 

95 or the—— 

Chairman JOHNSON. I understand. I am just trying to extrapolate what this is going to be in the future. 
11 

Mr. KOSKINEN. Clearly, the statutory shared responsibility payment is geared to go up, and that is designed to encourage people 

to get health insurance. 

Chairman JOHNSON. I am trying to figure out about what we can 

extrapolate that penalty will be next year. So you are saying it is 

the greater of $325 or 2 percent of income? 

Mr. KOSKINEN. That is right, but let me just check. I have experts here. 

Chairman JOHNSON. Is that correct? 

Mr. KOSKINEN. OK. The consensus is we think it goes to 2 percent. We would be happy to make that clear. In any event, either 

way, the statutory framework provides that the payment goes up 

if you do not have coverage in the second year to a reasonable higher amount than for the first year. So it will be increasingly encouraging people to buy health insurance. 

Chairman JOHNSON. Right. So here is my point, because what gets laid out there is the $95, the $325, and the $695. That is a 

number. And then as a percentage of income, the greater of. So this 

year, the percentage of income is really what drove it, so the average penalty was 1.8 times that minimum $95. So if you extrapolate 

that, if it is one percent, it will be $588 next year; if it double that, 

it will be $1,176. 

Mr. KOSKINEN. You would not—— 

Chairman JOHNSON. If you are talking as a percentage of income, 

that will be a pretty good extrapolation in terms of what the average penalty would be. 

Mr. KOSKINEN. Right. 

Chairman JOHNSON. If this year’s is 172 at one percent, next year’s at 2 percent will be $1,176. And the third year of the implementation of Obamacare, then we could look for, instead of—not 

$695 as the minimum penalty, extrapolate our experience from this 

year, it will be closer to $2,500 will be the average penalty paid if 

Americans exercise their freedom and choose not to buy an individual policy. So I kind of want to lay that on the table there. That 

is what the government is going to tax—I think it is a penalty, but 

that is what we will tax the American people for not buying health 

care. 

I was a little surprised—I should not have been surprised—that 

only 4 percent of the subsidies that are provided are calculated 

properly, and you say about half of them are calculated too high, 

half of them are calculated too low. Do you kind of expect that 

trend to continue? It is just going to always be difficult to calculate 

that and estimate it, correct? 

Mr. KOSKINEN. No, I think what is going to happen, right now 

70 percent of people, give or take a little, get refunds on their taxes 

generally, and they do that because we all over-withhold. Nobody 

knows exactly—well, if you get the same job and do not do anything different, you know what your income is going to be. But 

most taxpayers estimating their income understand you cannot estimate accurately, so they tend to over-withhold so that, in fact, 

they get a refund rather than having tax owed. We expect that taxpayers have done that—nobody tells them they have to do that. 

Taxpayers do that, learning the situation, we expect that what will 

happen is people will be careful in estimating their income as the 
12 

basis for calculating the premium tax credit, and they will make 

sure that they overestimate their income to make sure that, in effect, the adjustment is in their favor when they get to file their 

taxes. 

So we expect that as consumers adjust to the law, increasingly 

what will happen is that there will be positive increases in refunds 

or declines in amounts owed because people will have adjusted to 

the fact that you want to be careful when you estimate your income 

and you want to build in the possibility that you will get a pay 

raise or your spouse will get a job, and if there is a big change, 

again, you should call the marketplace. But I think what we have 

seen in withholding generally is people are careful, and they basically in the case make sure that they have a refund coming rather 

than a tax owing. 

Chairman JOHNSON. Very quickly, last question. How are you 

coming in terms of 100 percent income verification to really evaluate the correctness of those subsidies? Do we have 100 percent income verification now? 

Mr. KOSKINEN. Well, to the extent we ever have 100 percent income verification—that is one of the reasons I say it would be nice 

to get W–2s in January rather than March. Most taxpayers are trying to be compliant. They provide us their income, and we then 

audit it over time when we get information returns. Ultimately it 

is as correct as what the taxpayers tell us and what the information returns do. We assume ultimately that the income provided to 

us after the fact is correct. 

Chairman JOHNSON. OK. Thank you. Senator Carper. 

Senator CARPER. Commissioner Koskinen, I often say, almost 

every day, find out what works, do more of that. When we are trying to figure out how to make sure that we did not end up with 

an insurance pool which was largely older people, sicker people, 

less healthy people, to try to find out what works. We turned to 

Massachusetts, the one State that actually tried to address this 

issue, set up exchanges for health care coverage, and Governor 

Romney and the State of Massachusetts established the individual 

mandate. That is really where we took that idea from. They were 

several years ahead of us, and we are just going through our first 

tax filing season where all this is before us and before your employees. 

Massachusetts has been doing this for not just one year. They 

have had several years of experience. Do you have any idea, does 

anybody with you have some idea of has it smoothed out? Has it 

smoothed out over time as people become used to this, working 

with the exchanges, working with their Tax Code there? Has it gotten any easier? 

Mr. KOSKINEN. Anybody know? At this point—and, again—— 

Senator CARPER. And what, if anything, can we learn from them? 

Mr. KOSKINEN. I think we could probably learn a lot. The tax policy side of this in terms of what works or does not work really is— 

tax administration, the policy issues are Treasury, the administration, and the Congress. But in all that I have seen, I have not seen 

that there is an ongoing issue in Massachusetts which would lead 

you—— 

Senator CARPER. I have not heard about it, if there is one. 
13 

Mr. KOSKINEN. We have not, so that would lead you to conclude, 

to the extent the mandate still exists there, people have adjusted 

to it, and it has been implemented and executed without difficulty 

over time, because, as I say, policy is the issue of—people outside 

of tax administration, we have and I have personally just kept 

track of what is in the press, and I have not seen any indications 

that Massachusetts has run into any difficulties at this point. 

Senator CARPER. OK. Good enough. 

I want to go back to the example cited by our Chairman to make 

sure I understand this. Let us say a year ago my family and I 

thought we were going to earn about $50,000 in 2014, and my wife 

got a job, and we ended up making twice that. We will say 

$100,000. And we had felt at the beginning of the year we were 

going to be eligible for tax credits at a certain level toward the purchase of our health care through the exchange. And as it turns out, 

at the end of the year, because of her income, additional income 

that we had not anticipated, we were not eligible for either as 

much in tax credits or maybe any tax credit at all. And we will say 

in this example it turns out I got a tax credit for $5,000, and ultimately I was not eligible for that. I had to pay that back, I presume through the Tax Code, through the filing. But that is not a 

penalty. That is basically an overpayment for a tax credit that was 

extended to me that I ultimately was not eligible for. 

I want to make sure we are talking apples and apples here, but 

is what I just laid out, is that essentially what is happening in the 

situation that Senator Johnson shared? 

Mr. KOSKINEN. Yes. Actually, it is important to understand 

where the money went. In effect, a taxpayer generally comes to the 

marketplace, buys a policy. It is determined what their premium 

is going to be and what portion of that premium paid to the insurance company will be paid on their behalf as a credit. So in the 

particular case here, or any case, at the end of the year what has 

happened is you bought insurance, the premiums have been paid 

to the insurance company, and the question is: How much of that 

premium you owe and how much was eligible for the credit? 

So in this particular case, ultimately it was determined that the 

insurance was bought, that $11,000 was a premium payment to the 

insurance company, and the question is in this particular case the 

taxpayer owes the premium, was not entitled to a credit for that 

premium paid. So it is not a penalty. It is not money that went to 

the taxpayer. It helped buy the insurance for the taxpayer. 

It is one of the reasons we spent a lot of time last year and we 

are going to continue to spend time this year reminding people in 

your circumstance, for instance, where your situation changes, your 

wife gets a job, you get a pay raise of any significant amount, you 

should contact the marketplace and advise them of the change, and 

the premium advance payment will be adjusted accordingly. Therefore, over time we think that as more and more people get adjusted 

to the fact that it is not just a question of stopping payment, you 

actually need to make sure the marketplace is updated, as I said 

to the Chairman earlier, we expect over time people will make 

those calls and make those adjustments earlier. They also will be 

careful in their estimates of what they are going to earn to make 
14 

sure that they do not underestimate it. And so we think that this 

will work its way out to even a smoother filing system. 

As I say, thus far—we monitor the calls that come in—we have 

not seen a significant number of calls with people who have problems. We know, as I said, there have been adjustments made by 

CMS, which runs the marketplace with any number of taxpayers, 

but even there, of the estimated 4.5 million taxpayers who will file 

returns reconciling the premium tax credit, the number of people 

affected is a relatively smaller percentage for the first year. 

Senator CARPER. OK. Thank you. 

Gene Dodaro was here sitting in your seat yesterday, by himself, 

and he spoke, as you have, pretty much without notes and did a 

terrific job. One of the questions that I asked him was what more 

can we do to help the IRS serve the people of this country to make 

sure that we are meeting our responsibilities as taxpayers, but also 

making sure that we are providing the kind of service that we 

would expect, hopefully the kind of service that—Claire McCaskill 

was auditor for the State of Missouri, and when I was State treasurer, we tried to provide really good service. And the State of Delaware Division of Revenue won the quality award a couple of years 

ago because they provide excellent service. We are very proud of 

that. 

But it galls the hell out of me to know that people call the IRS 

and they have to wait forever to get somebody on the line, or they 

go to the IRS office and they have to wait to go see somebody. We 

are complicit in that. We in the Legislative Branch are complicit 

in that because we are not providing a reasonable amount of funding for the IRS. 

Yesterday, Gene Dodaro said there are things that the IRS has 

done to be able to use the resources they have more efficiently, and 

he said this is good. He said there are some things that you have 

not done that they believe you ought to. And he said we should provide more in terms of resources, like three things. And what I 

would hope that we will do is act on his advice, and certainly with 

your participation and that of your team. 

The last thing I want to say, we have a bunch of people who are 

preparing tax returns on which there is an earned income tax credit. We know there is a high improper payment related to earned 

income tax credits. A lot of those tax returns are prepared by people who are not credentialed. And I know you have been pushing 

for us to do something to better ensure that people who are helping 

millions of taxpayers prepare their returns have some reasonable 

amount of credentials. Would you just take a minute on that? I 

know I have run out of time, but this is an important point. 

Mr. KOSKINEN. Yes. I would stress, as I said, we have a wonderful working relationship with the tax preparer community, and the 

vast majority know what they are doing, do a good job, work their 

way through the complexities of this Tax Code, which is obviously 

more complex than anybody wants it to be. 

But there are about 400,000 of those tax preparers that have no 

credentials. They have not become enrolled agents. They are not 

CPAs, they are not lawyers. Of that 400,000, as I say, a lot of them 

study hard, work hard, and do provide a good service. 
15 

There are a group of them that do not have a lot of background, 

much training, and do their best but make a lot of mistakes. And 

then there is a small percentage of them that are crooks, that you 

can find them easily because you can drive through any center city 

and there will be a sign saying, ‘‘Come to us. We can help you get 

a better refund. We can get you a bigger refund. Just sign a blank 

return. We will take care of it for you.’’ 

And across the board we think people have noted numerous 

times it takes more credentials to cut your hair than to prepare 

your taxes. And at some point there ought to be some minimum 

qualifications before you can actually go to a taxpayer and say, ‘‘I 

will take care of your taxes for you.’’ And we have a voluntary program. The courts ruled we did not have the authority to require 

minimum qualifications, so we have asked the Congress for legislation that would require some minimum level of continuing education just the way CPAs and lawyers and others have to just keep 

up. 

Senator CARPER. Thank you. I would just ask my colleagues on 

this Committee, including those who serve on Finance, to see if we 

cannot address this. This is an issue that cries out to be addressed. 

Thanks so much. 

Chairman JOHNSON. Thank you, Senator Carper. It does almost 

speak probably to the overregulation of the hair-cutting industry. 

[Laughter.] 

For the record, because we got the information, my back-of-theenvelope calculation here on the penalties. The first year, $95 or 

one percent of your income. This year it is about $172. That is 1.8 

times the minimum. Next year it is going to be 2 percent of income, 

so the $325 minimum penalty times 1.8 times 2 is $1,176, would 

probably be the extrapolated average penalty, tax, next year. The 

third year, $695 times 1.8 is $1,258 times 2.5 percent would be 

$3,145. That is the extrapolated average penalty over the next couple years, 172, ramped up to about $1,176, to the third year over 

$3,000. So, with that—— 

Mr. KOSKINEN. I think part of the calculation is you either pay 

the minimum $95 or the $325 or the 1 or 2 percent, but you do not 

add them all up. 

Chairman JOHNSON. I understand, whichever is greater. Again, 

I am just saying the average penalty goes from 172, probably to 

1,176, probably to 3,146, in the ball park. Senator Portman. 

OPENING STATEMENT OF SENATOR PORTMAN 

Senator PORTMAN. Thank you, Mr. Chairman. And, Commissioner, thank you for being here today. I usually see you over at 

the Finance Committee, and this I guess is really a Tax Day hearing, so it is appropriate to talk about the broader issues. But I 

want to focus in on the 1095–A issue that—the relationship to the 

Affordable Care Act. A couple months ago, as you know, the administration announced that it had sent out about 800,000 incorrect 

tax statements, and obviously it is very important to my constituents and folks around the country because they rely on these statements. I think they were initially told, do not worry about filing 

your taxes until we get a corrected statement, and then more re-
16 

cently told go ahead and file your taxes and you will not be penalized based on information you relied on that is inaccurate. 

So it has caused a lot of confusion, and I am sure you have heard 

a lot about it. 

Mr. KOSKINEN. Yes. 

Senator PORTMAN. I have, as I am sure many of my colleagues 

have. I have a constituent named Linda from Ohio. Unlike the 

Chairman’s constituent, she is not interested in sharing her last 

name today, but she got the incorrect 1095–A from the marketplace 

in mid-January. She has been trying to correct it ever since. And, 

one of these stories of contacting folks at the IRS, February 15, she 

was informed by two different people her correction was denied. 

February 17, she received a phone call that it had not been denied, 

but it was in escalation. She was able to arrange a phone call between the supervisor and the marketplace, but, anyway, she was 

still not able to get a straight answer out of the system. 

Mr. KOSKINEN. I would note that she is calling CMS, not the 

IRS. The issues about the 1095, the data in it, is all managed by 

CMS. And they do have a very vigorous customer service effort 

working through those kinds of questions. 

Senator PORTMAN. I appreciate that and stand corrected. I believe she did call the IRS initially but was redirected—— 

Mr. KOSKINEN. Probably got referred to the CMS. 

Senator PORTMAN. Yes. Anyway, lots of questions about how we 

can help solve this problem and really the scope of the problem. If 

you could today give us what the IRS’ best estimate is of the percentage of people who received a subsidy in 2014 and have to repay 

a portion of that subsidy, do you have a sense of that? 

Mr. KOSKINEN. We will not know because it takes us awhile to 

post, and it will be another 3 or 4 weeks. But thus far, it appears 

that slightly less than half of the people are getting an increased 

refund because they got smaller advance payment of the premium 

tax credit than they were entitled to, and that is based on their 

final income. About 50 to 55 percent are getting a smaller refund 

because they got too much advance payment beyond what they 

were—but they are still getting a refund, but it has an adjustment. 

And the adjustments are—we do not know what the dollars are. I 

have seen tax preparers estimating that their experience is that it 

is $300 one way, $500 another way. 

We do not have information or indication of who actually as a result of having gotten too much of an advance payment to the insurance company on their behalf actually end up as a result owing 

tax, the situation that the Chairman’s constituent is in. Thus far, 

the indications are—although, again, I would stress we will have 

better information in 2 or 3 weeks when we evaluate it is a small 

number of people in that category. That was what our estimate 

was, that to say the vast majority of people get a refund in any 

event, the swings in whether you got too much of an advance payment or too little of an advance payment are relatively modest 

enough that they are absorbed within the refund itself. But we will 

have much better data for you in probably about 3 weeks. 

Senator PORTMAN. We would appreciate getting that data. Without answering the question today, just if we could submit the question to you today, and we will also submit more for the record, an 
17 

estimate of what that percent would be in terms of the folks receiving a subsidy that have to repay a portion of it if the income 

verification process were more accurate and working properly, because that is obviously one of the big challenges that we have. 

The other issue that I think is going to continue to be something 

we hear about from our constituents is the State-Federal data 

sharing. There was a story in the Wall Street Journal—you probably saw it; I think it was yesterday—about Marta Champan from 

New Mexico. She expected to receive an $850 Federal refund. Instead, she had to pay taxes, and the reason is that apparently the 

exchange did not account for her husband’s Social Security benefits 

of $9,000. So there may be a lot of reasons for that failure, but it 

gives me concern that the State-based exchanges might not be communicating properly with the Federal databases. It seems like the 

government should have been able to help her avoid that error. 

In any event, she reports that she felt this was—a quote in the 

Wall Street Journal—‘‘kind of a trick’’ that she would not have gotten the insurance had she understood its full price and now has 

dropped her plan for this year. So I guess my question for you 

there is: In terms of the information flow between the State and 

the Federal Government, do you believe that that is adequate? And 

how could that be improved? 

Mr. KOSKINEN. At this point, about income verification I should 

explain a little how the process works. The taxpayer goes to the 

marketplace and makes an estimate of what they are going to earn. 

Senator PORTMAN. Right. 

Mr. KOSKINEN. For instance, if you enrolled last fall, you would 

estimate what you are going to earn in 2015. We then get pinged 

by the marketplace, either the State or the Federal marketplace, 

and asked for an income verification, and that income verification, 

surrounded by protections and not revealing it to anybody outside, 

basically says what was your earnings in the previous tax year. So 

in the case of the Social Security payment, if that was on the income the year before, that data would have gone back to the marketplace. So, in other words, suppose the taxpayer came and said, 

‘‘I am going to make $25,000 new year,’’ we would be asked what 

did they actually file the year before, and if that was $42,000 or 

$35,000 with some Social Security payments, that information 

would go back to the marketplace, and they would have a discussion with the applicant or make a note to the applicant that their 

estimate of income does not correspond with the verification. 

The Inspector General (IG) looked at the income verification information we provided in the initial enrollment period over 15 to 

20 million, and found that we were 99.5 percent accurate in terms 

of the information we gave both to the State and to the Federal 

marketplaces. So it ultimately is up to the consumer to make an 

estimate, just as I say we all do when we are filing our withholding 

estimates and our estimated tax payment estimates. What are we 

going to earn in the next year? Most people with any variety in 

their employment circumstances never know exactly what that is 

going to be. So, again, our expectation is that as the process moves, 

more and more people will understand they have to be careful 

about estimating their income. If you underestimate it and, therefore, get a bigger premium paid to the insurance company on your 
18 

behalf, it will all work out when you have to reconcile and you will 

pay it back. So our expectation is that those percentages of the 

number of taxpayers when they reconcile who get larger refunds 

will go up because just the same way people when they file their 

taxes, 60 to 70 percent of them get refunds, because they, in effect, 

overestimated what they are going to owe, so they will have a refund. And we think that is where it will work. 

But in terms of the actual accuracy, the accuracy of the information that we are providing to verify the estimate provided by the 

taxpayer thus far is not a difficulty and not a problem, and the 

States get the same information from us automatically. 

Senator PORTMAN. Commissioner, I have lots of other questions 

for you, and I will submit those for the record. And a lot of it to 

me goes to the process here. One of the things that the Inspector 

General, as you know, has said is that the ability to detect overpayment of subsidies is going to be tough until you have implemented 

a predictive and analytical fraud model. So I will submit some 

questions to the record about that process. 

Again, I appreciate your service and the fact that it is going to 

be a complicated tax season for you, and we will be following up 

with more questions. 

Mr. KOSKINEN. That would be fine. 

Senator PORTMAN. Thank you. 

Chairman JOHNSON. Thank you, Senator Portman. Senator 

Sasse. 

OPENING STATEMENT OF SENATOR SASSE 

Senator SASSE. Thank you, Mr. Chairman. Thank you, Mr. Commissioner, for being here. 

Are you familiar with the Jonathan Adler piece in the Washington Post yesterday about the 100 to 400 percent Federal poverty 

level (FPL) qualification levels for the ACA? 

Mr. KOSKINEN. No, I did not see that article. 

Senator SASSE. OK. So he is summarizing essentially a Yale 

Journal of Regulation Piece about the ACA’s authorities and who 

qualifies for the tax credits, and it is my understanding that it is 

100 percent to 400 percent of the Federal poverty line. Correct? 

Mr. KOSKINEN. I think that is right, yes. 

Senator SASSE. OK. It looks like you all have written a rule essentially rewriting Section 36B of the statute that disregards the 

100-percent income level. I am curious if that is true and how you 

have the legal authority to do that. 

Mr. KOSKINEN. I am not aware of that. I will be delighted to get 

you information. I am not aware that we have done anything that 

would ignore the statutory framework. 

Senator SASSE. OK, great. Thank you. We will followup with a 

letter and try to engage your staff and understand how that would 

work. 

The particular concerns I have are related to the broad application of IRS discretion, obviously in the regulatory and rulemaking 

process, but also in particular cases. I think as the Chairman and 

Ranking Member mentioned, many of our constituents, when I 

travel Nebraska, there is genuine fear of the IRS because there is 

a lack of understanding about how discretion is applied by the 
19 

agency. And if Section 36B were rewritten, it is not clear that an 

employer would not be subject to employer mandate penalties if 

employees that they have that would have been Medicaid eligible 

end up on exchange through no fault of the employers, they could 

suffer a penalty in that case. So I would love to get more information about that. 

Could you help us understand more broadly how policy decisions 

in the rulemaking process are made between the Department of 

Health and Human Services (HHS), the IRS, and the White House? 

You have 36 components of the ACA under your jurisdiction. Is 

that true? 

Mr. KOSKINEN. Actually, all the tax provisions of the ACA come 

under our jurisdiction. As I said, as a general matter, our role in 

life is tax administration. So policy issues about what legislation 

ought to look like, what changes in this act ought to be, are decisions made by the Treasury, the White House, and the Congress 

ultimately. We simply implement what goes on. 

Issuance of regulations is a joint effort between the Treasury Department and the IRS. We are a bureau of the Treasury Department. We do not issue regulations by ourselves. They technically 

have the authority, but obviously we design and draft regulations 

with an eye on what is the impact on tax administration. 

If there is a policy decision about do you increase this or that, 

for instance, the policy decision about the penalty application, that 

is a decision by the Treasury Department. We get involved in that 

only to the extent that it is a question of what are the implications 

for tax administration and would it work better, easier, which is 

the best way for it to work. 

But all of the policy issues are decided, again, by the administration and ultimately by the Congress in terms of legislative either 

recommendations or fixes. 

Senator SASSE. So would that be true with regard to the credits 

for illegal immigrants as well, the decisions that were made about 

the refundability of credits for folks that under the ACA would not 

have qualified under the statute but appear to be getting credits 

in certain cases? The IRS plays no role in that rulemaking process? 

Mr. KOSKINEN. In the rulemaking process, we participate in the 

discussions about if you are going to make that change—we may 

chime in on what we think the law is, but the policy decision— 

there is an Office of Tax Policy in the Treasury Department that 

is responsible for tax policy. We meet every 2 weeks going over regulations to make sure that as those regulations are designed, that 

they are designed with tax administration not only in mind but as 

a part of that to make sure that as the regulations get changed, 

they do not inadvertently either make life more difficult for taxpayers or more difficult for the administration of the tax laws. 

Senator SASSE. Got you. So in the King v. Burwell case that we 

are going to probably have a ruling from the Court in June, when 

those decisions were made about credits in the States that did not 

have state-based exchanges, those decisions were made in the 

Treasury Department’s Tax Policy Division? 

Mr. KOSKINEN. Yes. Those interpretations of the policy issue are 

up to Treasury. We participate, as I say, in those issues giving our 

view as to how it would be for tax administration, what works or 
20 

does not work. But the policy calls and the development of the act 

to begin with are the responsibility of Treasury, the White House, 

HHS, and ultimately the Congress. 

Senator SASSE. OK. So going back to the Chairman’s opening 

issue with his constituent, if a decision was made—what was the 

number, $11,000, Chairman Johnson, of a tax bill? 

Chairman JOHNSON. Correct. 

Senator SASSE. How will the decision be made about the timeline 

of repayment of that—you said you want to dispute calling it a 

‘‘penalty,’’ but that obligation that they have? 

Mr. KOSKINEN. To repay the premium that went to the insurance 

company. That is tax administration, and so the taxpayer will either file their taxes and add the $11,000 back that they owe. Or 

if they have difficulty with that, they will contact us. We keep encouraging them to do that. You do not have to hire somebody off 

late-night TV to come deal with the IRS. They can work on an installment agreement. Actually, you can develop an installment 

agreement yourself online, which is one of the new things we have 

developed over the last year. 

If they have substantial financial difficulties, they can work with 

us about an offer in compromise to actually figure out how to settle 

it. Those are all tax administration issues, and we are responsible 

for those. 

Senator SASSE. I am nearly into Senator McCaskill’s time, so one 

last question. I earlier said 36 provisions. It is 34 provisions of the 

ACA. Who is the point person inside the IRS for the tax administration of all the new ACA authorities? 

Mr. KOSKINEN. Ultimately the Commissioner is, which is why I 

am here. In other words, I have met every 2 weeks for the last 15 

months with the IT people, the program office, the business people, 

working toward the implementation of—the development of the 

systems, the implementation of them, making sure this filing season got started. And so I am ultimately responsible. 

Senator SASSE. And it is your judgment that the IRS is up to the 

task of administering all the new ACA authorities? 

Mr. KOSKINEN. Thus far, I think the filing season has shown that 

we have done a remarkable job in the face of both the challenges, 

getting them into—we have a very—what I call fondly ‘‘a Model T’’ 

with a great sound system and a GPS system and a new engine, 

but it has applications running for 60 years. To pull that off, I am 

delighted. You could have made a lot of money betting on that result 15 months ago. 

So I think we are up to it. I do think—and I have thought for 

a year about it—we do statutory mandates, so we will always have 

a highest priority of whatever statute you pass. But when our resources are cut, it means that we cannot do other things that we 

have discretion over. So it is tax enforcement, taxpayer service, improvement of our IT systems have to be put on hold. But I think 

in terms of the implementation of the Affordable Care Act, I could 

not be more pleased with what the employees of the IRS have been 

able to do. 

Senator SASSE. Thank you, Commissioner. 

Mr. KOSKINEN. Thank you. 

Chairman JOHNSON. Thank you, Senator Sasse. 
21 

Let me just admit that back-of-the-envelope calculations are dangerous because my logic was in error. Really the extrapolation 

would be about $172 times 2, it would be $344 in the second year, 

and about $430. So I want to correct the record. I was wrong. So 

it really looks like the minimum penalty would probably be the 

maximum penalty if we extrapolate it. So we are not talking about 

3,000 bucks. We are really talking the 325 and 695 as being average. So I just want to correct that. Senator McCaskill. 

OPENING STATEMENT OF SENATOR MCCASKILL 

Senator MCCASKILL. Thank you—— 

Mr. KOSKINEN. I appreciate your staff’s input because I could not 

do that on my own. 

Chairman JOHNSON. It was me. I was just thinking about it. It 

just seemed, man, that is why, I started going through that logic. 

This is unbelievable. And it was unbelievable, so I was wrong. 

Mr. KOSKINEN. 435 sounds a lot better. 

Senator MCCASKILL. Commissioner, everyone is offended at the 

notion—I was offended, everyone is offended, regardless of party or 

ideology—at the notion that the IRS would ever target groups 

based on their beliefs in this country. I understand the outrage. I 

understand the need to hold people accountable. But I would like 

you to explain that when we vent that frustration by cutting funding from your agency, who exactly we are punishing? 

Mr. KOSKINEN. Well, as other people have noted, when you punish the IRS by cutting its budget, ultimately you are punishing taxpayers because you limit our ability to provide the service to them 

that our employees want to provide. The people who care most 

about it are the people working in our call centers, in our assistance centers, whose satisfaction comes from helping people, and 

they feel they do not have the resources to do that. 

Senator MCCASKILL. Your budget has been cut by 18 percent 

since this scandal came up. What is the call wait now for a taxpayer who has a problem? What is the average amount of time 

they have to wait on the phone because you do not have enough 

personnel to answer the phones? 

Mr. KOSKINEN. At this point, when you get through, if you get 

through, it on average would have taken you about 28 to 30 minutes. 

Senator MCCASKILL. And what percentage of the phone calls can 

you even answer at this point after these draconian budget cuts 

that supposedly were punishing you, but as it turn out they are 

punishing my constituents who cannot talk to anybody because you 

have had to cut so many people? 

Mr. KOSKINEN. About 60 percent of the calls this year are not 

going through, and that increases, that exacerbates the problem, 

because if you do not get through—we have had over 6 million— 

the phone industry calls and courtesy disconnects, they are basically when the system gets overloaded and we know you are going 

to be there too long, you will just simply get disconnected. So you 

aggravate the problem because what happens is people have to call 

back. So, on average, a lot of people are calling two, three, or four 

times just to get into that queue to wait for the half-hour. 
22 

Senator MCCASKILL. And scams. We are going to have a hearing 

later today on the Aging Committee about the scam that is going 

on in this country where people make phone calls claiming to be 

the IRS. Then they basically steal money from victims through coercive efforts and misrepresentations on the phone. When you are 

able to go after the criminals, what is the return on investment for 

every dollar that you are given to go after the criminals? And I saw 

those criminals firsthand as a prosecutor who are using the IRS 

and the tax code to cheat all of us people in America who pay their 

taxes. What is the return on investment for every $1 you get? What 

do you return to the Treasury in terms of your ability to go after 

the criminals? 

Mr. KOSKINEN. Well, on enforcement alone, the return is over 10 

times the amount. As a general matter, when you give us $1, you 

get $4 to $6 back. 

Senator MCCASKILL. OK. 

Mr. KOSKINEN. So we are the only agency in the government, if 

you give us money, we promise to give you more back. 

Senator MCCASKILL. And let me make sure I understand and 

make the point because, this sometimes—and I do not want to get 

to, well, maybe I will get to an aggressively partisan place here. 

When you estimate your taxes, you are deciding what you are going 

to make and what you are going to owe to the government. Then 

you decide what is going to be withheld. If you are right, if you are 

perfect, then it is even. You do not owe anything and you do not 

get anything back. But if you underestimate your income, you 

might owe more. If you get less, and if you overestimate, you might 

have to pay more. So this is something every taxpayer has to do 

every year, correct? 

Mr. KOSKINEN. That is correct. 

Senator MCCASKILL. So really what we are doing with the ACA 

is exactly the same thing. 

Mr. KOSKINEN. That is right. 

Senator MCCASKILL. The individual has to estimate whether or 

not they are entitled to get this amount of money for their insurance premium or if, in fact, they are entitled to that amount. If 

they estimate wrong, they are either going to get money back or 

they are going to owe money. 

Mr. KOSKINEN. That is correct. And one of our goals is to try to 

educate the public—we have been doing that for a year—to understand that. 

Senator MCCASKILL. And they are going to get better and better 

at this. 

Mr. KOSKINEN. They will, and all of our experience in all of these 

kinds of programs is after the first year, everybody then pays even 

closer attention and understands that it is not a free good. 

Senator MCCASKIL1. OK. 

Mr. KOSKINEN. That when you get a premium, advance payment, 

it ultimately has to be reconciled with the reality of your income. 

Senator MCCASKILL. And, finally, calling it a ‘‘personal responsibility tax’’ I have a couple of minutes, and I am going to take them. 

A 32-year-old man in America has enough money to either buy a 

new Harley or health insurance. And under the umbrella of freedom, he decides, ‘‘I want a new Harley.’’ And he goes out, and he 
23 

puts that Harley on the pavement, and he is life-flighted to the 

nearest hospital. In America, we do not say to him, ‘‘You know 

what? You decided to buy the Harley. We are going to let you die.’’ 

Instead, we take him in the hospital and sometimes give him millions of dollars of health care. He goes bankrupt. The hospital has 

uninsured care. 

Now, there is no magic fairy that I am aware of—I do not think 

there is one at the IRS—that comes into that hospital and pays the 

bill. So what happens when that happens? When that guy decided 

to buy the Harley instead of the health insurance, the hospital calls 

the insurance company and says, ‘‘We are going to have to charge 

you more for labor and delivery. We are going to have to charge 

you more for a knee replacement. We are going to have to charge 

you more for an angioplasty.’’ Then, that insurance company calls 

the small business down the road and says, ‘‘You know what? I am 

going to have to raise your premiums.’’ And those premiums have 

been going up by double digits every year for years prior to this reform. 

Now the question we have here is one of personal responsibility, 

and I am lectured about personal responsibility from some of my 

friends on the other side of the aisle constantly. So the question is: 

Do we owe, all of us who pay insurance, should we pay a higher 

premium because he got to get a Harley? Or should he have personal responsibility to be able to cover his medical bills? And that 

is really the essence of this question. 

We say you have to have insurance when you are driving a car 

because you might, in fact, harm someone else. Well, when you go 

into the hospital with uninsured care, you are passing those costs 

on to people who have taken personal responsibility. 

So I get so tired of this notion that somehow this is the big arm 

of government instead of the notion that it is time in America we 

acknowledge that personal responsibility in the health care sector 

is just as important as personal responsibility in any other sector. 

I feel better. Thank you, Mr. Chairman. 

Chairman JOHNSON. Thank you, Senator McCaskill. Senator 

Ernst. 

Senator CARPER. Mr. Chairman, could I just say something? 

Chairman JOHNSON. Sure. 

Senator CARPER. I am Tom Carper, and I approve that message. 

[Laughter.] 

Chairman JOHNSON. Senator Ernst. 

OPENING STATEMENT OF SENATOR ERNST 

Senator ERNST. Thank you, Mr. Chairman, and I would like to 

state for the record I do ride a Harley, I have insurance, and I wear 

personal protective gear. So, yes, thank you very much. I am personally responsible. 

Mr. KOSKINEN. Did you all work this out beforehand? 

Senator ERNST. No, we did not. Fortunately, I do not make that 

choice. I know what I can afford, and do so accordingly. 

Anyway, a little bit more—I know Senator Sasse had brought up 

some good discussion about King v. Burwell where your role will 

be once that decision is made. If it goes the way I believe it should 

go, then we will have subsidies that have gone to States and to in-
24 

dividuals that should not have gone to those individuals. But what 

do we do—and maybe you have thought about this—in those hybrid situations? There is a handful of States, of which Iowa is one. 

It is a hybrid exchange. It is neither State nor Federal. It is a combination of both. Have you thought through that and what role the 

IRS might be playing, Commissioner? 

Mr. KOSKINEN. No, we have not. Basically there is no way for 

us—so we do not spend any time thinking about it—of trying to 

predict what the Court will hold and what it will decide in terms 

of how to parse through all of this and what the responsibilities are 

of States, the Federal Government, the Congress. And much like 

potential tax extenders, we basically, as I say, play the hand we 

are dealt. The Court will make a decision, and then we will respond. 

The policy issues, back to the earlier questions, about what the 

implications are beyond tax administration will be decisions made 

by the Treasury Department and the administration. But at this 

point, we have enough challenges running the filing season and the 

program as it is, and so it is what we are focused on. 

Senator ERNST. OK. I do appreciate that. I hope that once the 

decision is made we can all jump on that together and figure out 

how we are going to handle that situation. So I do appreciate that. 

Since September 2014, Health and Human Services has dropped 

over 300,000 individuals from Obamacare because those individuals have failed to document their legal residency. So we do not 

know what their status is. Many of those were enrolled under the 

law for over a year, so 300,000 individuals. And during that time, 

many of them did receive premium assistance, tax credits, and 

cost-sharing subsidies for which they are not entitled. They cannot 

prove their residency; they are not entitled to those. 

So under the administration’s current policies, if an individual or 

family is unable to prove his or her citizenship or lawfully present 

status, HHS provides coverage and taxpayer-funded subsidies 

under the Affordable Care Act before the individual’s legal status 

can be verified by any government agencies. So if citizenship or 

lawfully present status is not verified or cannot be verified, then 

those individuals are dropped. So, again, 300,000 individuals have 

been dropped from Obamacare. And because many of those are 

part of this 300,000, if they are illegal immigrants, they are not 

necessarily filing tax returns, and so I understand that it would be 

difficult for the IRS to try and recoup improper payments or credits 

or subsidies because they will not be subject to the reconciliation 

process when they file tax returns, because they do not file tax returns. 

So how as the IRS are you able to handle that situation? What 

is the plan moving forward for those folks that were receiving credits or subsidies that are not filing? 

Mr. KOSKINEN. Those determinations and qualifications were 

made by CMS and HHS, which runs Medicare and Medicaid and 

has experience on recouping improper payments or payments made 

in error. And so this is an area where they will be responsible for 

doing that. 

Senator ERNST. That will not even be run through the IRS? 
25 

Mr. KOSKINEN. No. In other words, if they were not filing, they 

will—if the premiums have been paid on their behalf, at this point 

the idea is that CMS will pursue those to the extent that they pursue any other payments that they make, that turned out to be improper. 

Senator ERNST. OK. I can see that this is going to be a very difficult situation with so many different entities that are involved 

with subsidies, with tax credits, one agency not knowing how another agency is going to handle it. 

Mr. KOSKINEN. Well, no, we work together on that. There is not 

a gap. This has been, as somebody noted earlier, an effort that is 

not totally unique, but for us we spend a lot of time with CMS and 

have very good communications and working relationship with 

them. We spend a lot of conversation with the Treasury Department. As I note, we are bureau. But the policy issues are regularly 

reviewed by HHS and Treasury together. We chime in in terms of 

how it is going to affect tax administration, but I do not think there 

is any gap in where they are. As new issues come up, they obviously have to be resolved. But that is part of an ongoing discussion 

the agencies have. 

Senator ERNST. OK. Well, I do appreciate that. I know it is a 

very difficult situation. You have been thrown into this, and I appreciate your service, and thank you for coming today to testify. 

Thank you, Mr. Chairman. 

Mr. KOSKINEN. Thank you. 

Chairman JOHNSON. Thank you, Senator Ernst. Senator Ayotte. 

OPENING STATEMENT OF SENATOR AYOTTE 

Senator AYOTTE. Thank you, Chairman. Thank you, Commissioner, for being here. 

So I wanted to ask you about a situation that we have been facing in New Hampshire, but I do not think New Hampshire is 

unique on this. I received a number of complaints from my local 

libraries that they did not receive the necessary tax forms and instruction booklets. So in New Hampshire, we happen to have a 

high percentage of people that actually will file by paper, and historically they have been able to go to their local library and get the 

tax forms so that they can do their taxes. 

I wrote to you originally, I believe, in February about this issue, 

and the first response I got back, one of the primary reasons, you 

said, that these forms were not being provided to people at their 

libraries in New Hampshire was that the IRS budget was cut. But 

the reality is that on taxpayer services, Congress allocated the 

same amount of money. So why is it the IRS is unable to provide 

the same level of customer service this year? Because it is not just 

this library issue. For us in New Hampshire to have to go through 

the runaround that we did to get our libraries the basic tax forms 

so people could file their taxes, I mean, it just was kind of unbelievable to me when my staff told me all the runaround we were going 

through. 

So can you help me understand why this is happening? And what 

troubles me even more is that the National Taxpayer Advocate recently testified before the Senate Appropriations Committee that 

this year taxpayers are receiving the worst levels of taxpayer serv-
26 

ice since at least 2001, and the statistics are staggering in terms 

of 40 percent of the calls that the IRS is receiving from taxpayers 

are not being answered or responded to in any way. 

Mr. KOSKINEN. Right, and the answer to that is we get an appropriation in buckets for enforcement, for operations, which is taxpayer service and information technology; IG and Taxpayer Advocate are off on the side. We also have user fees that go through 

part of our operating budget that the appropriators are aware of. 

Historically, we have never been fully funded for taxpayer service. 

The amount of money provided has been then supplemented by, on 

average, about $150 million out of the various user fees that we 

charge. 

Because in both 2014 and 2015 we were zeroed out in funding for the Affordable Care Act, we asked for $300 million each year 

just for IT, and the Congress provided us zero. So the only way we 

could do it was to move money from wherever it was. So while the 

base appropriation for taxpayer service is the same, we had to take 

$100 million out of our user fee allocation to taxpayer service to 

put it into information technology to implement the act. So we have 

a significantly smaller amount of money available for taxpayer 

service than we have had before, and the appropriators understand 

that because we go through that with them regularly. 

We are as concerned as you are about the low level. As I said, 

I have now visited 37 cities. I have talked with, in town halls and 

otherwise, 13,000 IRS employees. And one of the common themes 

is not that they are overworked. One of the common themes is they 

want to help taxpayers. They get satisfaction out of answered questions. One of the concerns they had was when we told them they 

could only answer simple questions, not complicated questions, because complicated questions let the queue get longer. 

So it is clear, and we have tried to make it clear, we told the 

Congress last year, the appropriators, that if our budget was flat 

let alone cut by $350 million, we expected the level of service would 

drop to 53 percent. When we got cut by an additional $350 million, 

we had no choice, because we have to implement the statutory 

mandates. We have to run the filing season. We collect over $3 trillion for the government in the ordinary run of the filing season. So 

we cannot afford to have that not work. So when you cut our budget, the only places that get cut are enforcement, taxpayer service, 

and improvements in our information technology. 

Now, with regard to the forms, first of all, as I hope I thought 

when I read the letter to you and signed it and talked to people— 

our experience has been 85 percent of the forms we have been 

sending out do not get used. So we have been actually providing 

a lot of forms for landfills. For the libraries, as, again, we have 

tried—we worked with the Library Association. We provided them 

the basic forms, not schedules and others, but we provided them 

a format that would allow them to make copies of any form they 

wanted. They could download and make other copies of those. Anybody could call us—we have a special line for documents—and ask 

for documents; we would mail them to you. 

Now, there was as problem because with the extenders and the 

development of the forms, we could get them up online and you 

could download them online. You could go straight online to get 
27 

them. If you called us, it was going to take a few weeks longer before they actually got through the formal process. 

So we tried for taxpayers to give them alternatives. The library 

concern, which I understand, was printing documents, making copies is not a free good, you know, whether it is 10 cents or 15 cents 

a copy. With limited budgets libraries are strained by that. But 

that is why we tried to encourage them to say for their constituents 

they could go online and download them themselves. Some people 

do not have access to—— 

Senator AYOTTE. The problem is the people are going to libraries 

do not necessarily have access to that. 

Mr. KOSKINEN. Have access to the Web, and those people—we 

have tried to give visibility to it—could call a special line, and we 

would mail them the form. 

Senator AYOTTE. Well, I literally had to send my staff repeatedly 

over to get these forms for people in New Hampshire, and, we were 

only able to get 10 at a time. It was a little crazy. 

Let me just point out that from your testimony the one thing 

that people need to understand is you had to take money from the 

taxpayer services line to fund the implementation of the Affordable 

Care Act, essentially is what happened here. 

Mr. KOSKINEN. Yes. 

Senator AYOTTE. Because we funded you the same on taxpayer 

services, and you took the money to implement Obamacare. 

Mr. KOSKINEN. The money you gave us for taxpayer service is 

spent on taxpayer service. We actually put $50 million of user fees 

into it. It is the $100 million we had to put into the statutory mandate, and we have to do statutory mandates. We do not have a 

choice—— 

Senator AYOTTE. Well, yes, and in the 2015 budget, the GAO 

found the IRS used $12.1 million that was appropriated for taxpayer services to implement the Affordable Care Act. 

Mr. KOSKINEN. Yes. We have no choice. If you pass an act, the 

Congress passed—as I have said, ironically, 3 days after our budget 

was cut by $350 million, the Congress passed the ABLE Act with 

no additional funding and said, ‘‘You have until June 1 to do that,’’ 

and the Professional Employees Organization Act. 

Senator AYOTTE. So before I leave—— 

Mr. KOSKINEN. We will do that because you have told us to do 

it. But the only way we do that is we have to find the money somewhere. We have to take it where we have discretion. 

Senator AYOTTE. Right, so we are taking it from our core functions to do this. 

Mr. KOSKINEN. That is correct. 

Senator AYOTTE. I wanted to followup on an issue that—someone 

may have already asked you, but I want to followup, and that is 

the incorrect 1095–A forms sent to 800,000 individuals who enrolled in the health insurance through the Federal exchange. Do 

you know how many taxpayers in New Hampshire received an incorrect 1095–A form? 

Mr. KOSKINEN. I do not. Those forms are provided and designed 

and filled out by CMS, so they would be the ones that—if anybody 

knows, they would know. 
28 

Senator AYOTTE. And do you think that the people who waited 

a little longer, as I understand, they are being treated differently 

and are still on the hook for paying, that if they owe a larger premium, that they—as I understand, there may be a distinction between those, depending on when they filed and how they are going 

to be treated. How are the people in this country that, were misled 

in terms of what they thought that they were going to be receiving 

or not receiving or having to pay, how are you going to treat those 

individuals? And what are we going to do with the lost revenue on 

that? 

Mr. KOSKINEN. We have to sort through this. Of the 800,000, the 

estimate by CMS was about 50,000 had filed, and 750,000 were in 

the same pool, and the 50,000 could file amendment if they wanted 

to. So it is not a distinction. 

In terms of being misled, we have had a long, I think informative 

decision that—and I think after the transition of the first year, people will understand it better. When you register and apply for insurance coverage, you make an estimate of what your income is 

going to be for the year going forward, the way we all make estimates when we file our estimated payments and withholding. You 

make that judgment. We then provide income verification about 

what your last tax return filings were so that the marketplace can 

determine whether, in fact, you have an accurate estimate going 

forward. And on that basis, a determination is made. First, by 

working through what the premium for your insurance is, and then 

a calculation is made, how much of that premium will be paid on 

your behalf to the insurance company in an advance payment. 

One of the things that we have tried to make clear from our 

standpoint, because we wanted people to make sure if they had a 

change in circumstances, if they had a different estimate of what 

they were going to earn, they needed to go back to the marketplace 

so they would not have any bigger adjustment than necessary. But 

a lot of people actually, I think, went through and assumed that 

once they got the premium payment paid to the insurance company 

that somehow it was never going to get reconciled. Most people understood that it had to be reconciled, but a lot of people have, one 

way or the other, not understood that. We think going into next 

year everybody will understand when you make an estimate of 

your income and your family circumstances—if your income goes 

up, then you are entitled to less support for your insurance payment that goes forward. You still have the same insurance policy. 

It is just a question of how much do you pay, how much does the 

government pay. If the amount of income you are making goes up, 

you are going to be eligible for less. And if you let the marketplace 

know that immediately, it will adjust the advance payment immediately, and you will have no change or reconciliation at the end 

of the year. 

So we have spent a lot of time, CMS has spent a lot of time over 

the last year trying to get people to understand as 2014 unrolled 

that if your estimate was wrong or changed, you needed to get back 

to the marketplace. A number of people did. That would mean you 

would get a 1095–A for the part of the year that you were under 

one coverage, and then you would get another 1095–A when your 

premium changed. So at the end you would know exactly what 
29 

your premiums were. We think that is going to get much better in 

the second year because everybody will have now been through it 

once and will understand that you are making an estimate of your 

income, and you just have to be careful that that is as close to what 

the reality is going to be as you can make it. And if it changes over 

the course of the year, you need to get back to the marketplace. 

Senator AYOTTE. Thank you. 

Chairman JOHNSON. Senator Lankford. 

OPENING STATEMENT OF SENATOR LANKFORD 

Senator LANKFORD. Thank you. Commissioner, it is good to see 

you again. Thanks for the work you are trying to do for the American people and all that is going on. There is a tremendous amount 

that needs to be done. You have walked into the middle of a lot 

of chaos with laws that we all have some frustration with, and I 

appreciate what you are trying to do. 

I want to talk through just a couple of things. We have talked 

before about the EITC and the identity theft issues. I want to just 

try to get a general sense of a timeline. You put together working 

groups. You are trying to get outside input on this. How do we get 

on top of this? We have a 22-percent estimated fraud rate over the 

EITC, somewhere around $13 to $16 billion in loss in that one program, and trying to be able to manage that. 

The challenge has always been—this has been a high-priority 

issue of how to get on top of this. You have come in in the last 2 

years. You walk into the middle of all this. What is the plan now 

to try to get on top of this $13 to $16 billion of loss? 

Mr. KOSKINEN. It is a major challenge for us. I have been concerned about it since I started. When I started, the challenges were 

to implement the back end of the Affordable Care Act, the front 

end of the Foreign Account Tax Compliance Act (FATCA), deal 

with extenders, deal with the filing season, deal with overall identity theft. We have made progress, good progress in some areas, 

progress in all those areas except for EITC. And if you look back 

over it over the last 10 years, the percentage of improper payments 

and the dollar volume of those have been pretty much within a 

range and not changing. 

Senator LANKFORD. Right. So how do we get on top of that? What 

is the plan for—— 

Mr. KOSKINEN. So the plan is I did put together a working group 

of everybody who knew anything about this to say we cannot keep 

doing the same thing—although we have tried a lot of stuff, we 

cannot keep doing it expecting somehow it is magically going to get 

better. So we went back to the drawing board. 

and we asked for support from the Congress. We need to get W– 

2s earlier so we can front-end validate what people are asking for. 

We need to have what is called ‘‘correctable error authority.’’ We 

see in the returns when there are errors. Two people claim the 

same dependent. You have said you have four, and our database 

says you have two. We cannot make that correction without sending you a letter and entering into a formal negotiation or audit or 

exam, and there is a limit to what we can do. We did last year 

about 450,000 of those exams, but we have 27 million applicants. 

And to the extent that 20 percent of them, 4 or 5 million, are get-
30 

ting the improper payment, we are never going to be able to audit 

our way out of the problem with resources. 

So we have said if we had correctable error authority, we could 

make that correction, advise the taxpayer. The taxpayer would still 

have the right to come in and say, ‘‘No, the person who claimed the 

child was wrong,’’ or, ‘‘I have really got three kids as opposed to 

one.’’ So you would always have the ability to make that clear. But 

we would be able to make those corrections directly. 

And then as we talked earlier, over 50 percent of the EITC returns are filed by tax preparers, and as I say, most of them know 

what they are doing. They tried to do the best they can. It is a complicated statute that if somebody wanted to simplify, we would be 

happy to support that. But it is complicated. So for an untrained 

preparer, it is very difficult to work through, so they are making 

honest mistakes. 

Then as I say, there are crooks who are advertising, ‘‘Come with 

us. We know how to get you a good refund.’’ We have tried to warn 

taxpayers. Certainly if your preparer says, ‘‘Just sign a blank return. I will take care of it for you,’’ you better get another return 

preparer, because, A, you may never see the refund; B, the refund 

may have nothing to do with what your reality is. 

So if we could get W–2s earlier, if we had correctable error authority, and if we had minimum requirements and qualifications 

training for tax preparers, we think the evidence is over the last 

10 years we could make a dent in this problem. We are never going 

to get it to zero, but to me, you just cannot—I have told people you 

cannot keep running the system this way. It looks either like we 

do not know it is a problem or we do not care about it or we cannot 

do anything about it. I think we can. 

Senator LANKFORD. And I would say that is a prime aspect of 

this Committee, is to be able to determine where we are stuck, let 

us know what we need to do so we can get it unstuck. 

Mr. KOSKINEN. Right. 

Senator LANKFORD. And you just articulated three different 

issues that you need Congress to be able to help with: the W–2 

issue, correctable error authority, and simplify the statute, EITC, 

so there is less gray area, basically that it is more black and white 

of who gets it and who does not get it, and how that gets applied. 

Is that correct, those three that I am picking up? 

Mr. KOSKINEN. What you got is really four. We need W–2s earlier. 

Senator LANKFORD. Right. 

Mr. KOSKINEN. We need correctable error authority. We need 

minimum requirements, qualifications for preparers. And if we 

could simplify the statute, it would be helpful. 

Senator LANKFORD. All right. This again is something you are 

trying to manage in the middle of all the transition in Obamacare. 

In September 2014, HHS dropped 300,000 people saying that they 

did not have the correct documentation for legal residency status. 

Some of those individuals were already in the process with the tax 

credits and the subsidies and everything else. What is the plan to 

recoup? Is there a way to recoup? Is there just a loss? We have 

300,000 people there that received a subsidy that HHS came later 
31 

back to and said no, they are not eligible for this after all? How 

is that working out? 

Mr. KOSKINEN. As you can imagine, it is a complicated situation. 

Basically what they got was advance payments of the premium tax 

credit, so they actually never got to the tax credit form. Basically 

the government had made an advance payment to the insurance 

company on their behalf. And so as a general matter, the policy has 

been that HHS and CMS, who deal with Medicare and Medicaid 

payments that often sometimes are made improperly, are retrieving those. And so the basic policy is that CMS and HHS are responsible. But when the payments are made on the basis of improper identification, at that point recouping those or collecting 

them again is up to them. 

Senator LANKFORD. So that is not up to you; that is up to HHS 

to—— 

Mr. KOSKINEN. That is right. 

Senator LANKFORD. We have 300,000 people that apparently received that advance payment that do not have citizenship or do not 

have documentation for citizenship at this point, and they are receiving this advance payment. But that is over there. 

Mr. KOSKINEN. That is over there, yes. 

Senator LANKFORD. OK. Let me ask another issue on this. The 

law itself with the Affordable Care Act, the law prohibits employers 

from reimbursing or otherwise providing financial support to employees to help them pay for an individually purchased plan for 

these smaller businesses and individuals. So if someone says they 

are going to go out onto the general market, the employer is going 

to just provide them some sort of tax-free amount. In the past, employers, especially small businesses, would say, ‘‘OK, I cannot afford you a policy, but I know you are going to go buy something; 

I am going to try to find some way to be able to help you do that.’’ 

My understanding is that is not legal anymore under the Affordable Care Act. Are you aware of what the tax policy is and the tax 

implications of that? 

Mr. KOSKINEN. That is my understanding, that is the tax policy. 

Again, it is not a policy the IRS sets. It is a policy set by the Treasury Department in response to the statutory language. 

Senator LANKFORD. Would the IRS have to carry out the penalty 

part of that, though, for the employer especially? Because my understanding is the employer actually—— 

Mr. KOSKINEN. Once somebody has decided either in the statute 

or the policy under the statute, what the policy is, the tax administration is our responsibility. So to the extent that once the rules 

are set, we are responsible for administering them so the penalties 

or the tax payments would be our responsibility. 

Senator LANKFORD. So at this point there is a consequence that 

could come down on someone who is trying to help someone pay for 

their premiums out on the general market rather than providing 

an individual coverage? 

Mr. KOSKINEN. Right. The Treasury Department has provided 

guidance in that regard, and so that point has been made. 

Senator LANKFORD. Mr. Chairman, can I make just one quick 

comment as well? 

Chairman JOHNSON. Sure. 
32 

Senator LANKFORD. The Kaiser Family Foundation has done a 

tremendous amount of research on all this and has done a very 

good job of getting the background. They listed in their research 

only 4 percent of households received the correct Obamacare subsidy. Now, again, that is not your responsibility to chase that down, 

but that becomes a big issue long term on managing, and it affects 

a lot of people as they go through all their tax planning and preparation. It is one of the aspects that has to be corrected. If we have 

4 percent of these folks, according to the Kaiser Family Foundation, that are receiving the correct subsidy amount up front to 

know what they are dealing with, we have a major problem that 

needs to be dealt with, with CMS and HHS. Otherwise, they are 

trying to clean up the consequences of it. 

Mr. KOSKINEN. I would just simply note that I am not sure we 

have a much higher percentage of people estimating their income 

and their withholding. In other words, what you are doing at the 

front end is making an estimate of what are you going to earn in 

the future. And that determines the advance payment you are entitled to. And so unless you know your job today and you know that 

no income is going to change, your family is not going to change, 

you are always going to be making an estimate that almost by definition is never going to be 100 percent. 

Senator LANKFORD. So this basically sets up Americans to fail at 

this point, or it sets them up to where they are going to have to 

file multiple forms through the year to be able to update pay. 

Mr. KOSKINEN. No, what is going to happen is what people do 

with their withholding. Right now the reason 60 to 70 percent of 

people get refunds is because they overestimate—— 

Senator LANKFORD. They guess high. 

Mr. KOSKINEN [continuing]. And that is what we expect people 

will do here, is they will be careful about estimating their income. 

They will not try to make it down the last dollar. They will say, 

‘‘I am going to overestimate my income to make sure that the premiums going to the insurance company I am entitled to, and that 

means I will probably get a bigger refund, because when it gets calculated, much like people getting refunds for their withholding and 

estimated tax payments, I will get a refund in April.’’ And so it will 

be, I think, that normal taxpayer behavior, which is the way they 

behave generally. 

Senator LANKFORD. Thank you. I yield back. 

Chairman JOHNSON. Thank you, Senator Lankford. 

Mr. Commissioner, in probably June of this year, the Supreme 

Court is going to be deciding on an IRS ruling in the King v. 

Burwell decision. Has the IRS done any planning in case that ruling comes down and is an adverse ruling in terms of your rulemaking? 

Mr. KOSKINEN. Well, as I said earlier, there are a wide range of 

possibilities of how the Court is going to rule in terms of both what 

it decides and how it decides it wants to have its ruling implemented. And in light of our challenges, just moving forward and actually, as I say, next month we have to start preparing for the next 

filing season, there is no way we can adjust the filing season planning trying to anticipate the various options. So much like we do 
33 

with tax extenders, we basically run on the assumption life will 

continue to look like it is, and then we have to adjust afterwards. 

Chairman JOHNSON. So, bottom line, no planning whatsoever. If 

the Supreme Court rules the way I believe the law is written, that 

the subsidies can only be paid through exchanges established by 

the State, that is going to create some real problems for the IRS, 

correct? 

Mr. KOSKINEN. But it depends on how the Court rules. The Court 

could rule—— 

Chairman JOHNSON. I understand that, but let us say they actually follow the law the way it is written, and they say that only 

subsidies can be paid through those exchanges established by the 

States, we have how many States that have Federal exchanges? 

How would you possibly handle that? Have you made any—again, 

my question is: Have you given any thought to that, any planning 

whatsoever in terms of that very possible eventuality here? 

Mr. KOSKINEN. No, there will be a set of issues, just as with statutes, there are policy questions about how to implement them. 

Some statutes are passed, and then people are given more time to 

transition. So depending on what the Court decision is, there will 

be policy decisions made about how to transition from one point to 

another. But depending on the decision, it could make life much 

more complicated for everybody. 

Chairman JOHNSON. You were not Commissioner when that ruling was handed down, correct? 

Mr. KOSKINEN. That is correct. 

Chairman JOHNSON. Did you ever look into or research how that 

ruling was developed? 

Mr. KOSKINEN. No. I have a rule of life—I have spent 45 years 

parachuting into 20 years in the private sector, 20 years in the 

public sector, agencies and organizations under challenge. And my 

rule of life is play the hand you are dealt and move forward. And 

so that decision was made before I got here, and my job is to administer the agency as best I can where we are. 

Chairman JOHNSON. So you have never looked into whether or 

not the IRS was working hand in glove with the White House and 

trying to get direction from them in terms of how they should rule 

on that? 

Mr. KOSKINEN. No, except as a general matter, we do not work 

hand in glove with the White House on anything, but these policy 

discussions we have are primarily with the Treasury Department. 

The regulatory process is worked with the Treasury. But I have no 

idea who talked to whom and how that process and those decisions 

were made. 

Chairman JOHNSON. OK. The IRS is also responsible for evaluating the exemptions for the individual mandate. How many Americans in general—or what is the estimate in terms of Americans 

that will qualify for the various exemptions that have been provided for? 

Mr. KOSKINEN. At this point, as I say, we have not pulled that 

data out of the returns, so I cannot give you an answer on that. 

But the assumption was basically that probably more people would 

file for exemptions, hardship exemptions, or that they had coverage 

for part of the year than people who will pay the shared responsi-
34 

bility payment. It will be, a number that we will actually see, and 

as I say, in 3 or 4 weeks we will be able to accumulate all of that 

data and understand where it is. 

Chairman JOHNSON. And, again, those that will be granted exemptions, that is going to be pretty much on an honor system? Is 

there going to be any way of trying to verify that through a potential auditing process? 

Mr. KOSKINEN. Yes, what we will do in all of these matters, as 

we always do, is the computer selects returns that have issues, 

whatever they are. When we go into those, then we look at everything. And so of the 75 percent, give or take a little, of Americans 

who have checked boxes saying they have coverage, if we actually 

have an issue with your return, we will ask you for backup support 

for the fact that you had coverage, because you said you did. 

So we will track through, when somebody says, ‘‘Well, I had a 

hardship,’’ and it turns out you made a lot of money, and we are 

auditing you on that basis, it will be noted that while you applied 

for this exemption, you do not seem to qualify for it. And then you 

are subject to, in effect, penalties and interest, and the penalties 

for purposely understating your income can over time mount up. 

Chairman JOHNSON. Getting back to the couple that wrote me 

the letter and their $11,550 of subsidy they have to repay and just 

the timing of that, at what point in time, if they are just unable 

to repay it—I mean, they were talking about because they do not 

have the cash on hand, they do not have the ability to pay other 

than potentially having to pull money out of their retirement 

fund—which there is a pretty high penalty for doing that, correct? 

I mean, if you pull money out of your retirement fund, there is, 

what, a 10-percent penalty on that, plus you have to count it as income? 

Mr. KOSKINEN. If you have already retired and you are 591⁄2, 

then you can pull money out of your retirement fund, and all you 

do is pay income tax on it. There is on—— 

Chairman JOHNSON. They are not retired. They are actually— 

well, they might have been retired. 

Mr. KOSKINEN. If they are over 591⁄2, they do not have that problem, other than you pay tax on it because that is how the fund 

works. If you are under 591⁄2, then there is a penalty. 

Chairman JOHNSON. OK. So, again, somebody in that situation 

that was working, that had to pay that back, if they had to pull 

out—they may be paying a penalty in that. 

Mr. KOSKINEN. Right. 

Chairman JOHNSON. What about the timing of paying the subsidy anyway? 

Mr. KOSKINEN. As I have said, you can actually go online, and 

if you qualify—and in a case like this, you probably would—you 

can do an online installment agreement with us that would allow 

you to spread those payments over time. And you can do that online, or you can call us after the filing season, and hopefully you 

will be able to get through a little quicker. And you can arrange 

that. So you do not have to immediately take draconian steps to 

pay everything on time if you have legitimate concerns. And it 

sounds like in this particular case, an online installment agree-
35 

ment—or an installment agreement, online or otherwise, would be 

an appropriate response. 

Chairman JOHNSON. Over what time period would that be installment? 

Mr. KOSKINEN. It depends on the situation, but it is usually over 

3 to 5 years. 

Chairman JOHNSON. Do they pay interest on that as well? 

Mr. KOSKINEN. Yes, if you have not paid on time, then there is 

an interest charge, but there is no penalty charge. 

Chairman JOHNSON. OK. What is the interest payment on that? 

Mr. KOSKINEN. The interest rate goes at the government interest 

rate, which these days is, very low. 

Chairman JOHNSON. OK. That is all I have. Senator Carper. 

Mr. KOSKINEN. Not that I want to encourage people not to pay 

on time just because the interest rate is low. 

Chairman JOHNSON. I understand. 

Senator CARPER. My dad always used to say to my sister and me, 

‘‘Just use some common sense.’’ When we were little kids growing 

up, ‘‘Just use some common sense.’’ My mother used to say to us 

growing up, she always said, ‘‘Treat other people the way you want 

to be treated, Golden Rule.’’ 

In your response to Senator Johnson’s questions explaining how 

people can file online, go online and ask for an installment payment and pay no penalty but interest at the Government’s cost of 

borrowing, which is very low, that seems to me to be using some 

common sense. So it seems to me at least at first blush to be treating people the way I would want to be treated. So good for you. 

When I had to walk out, I said to Senator Johnson, another Committee I serve on, Environment and Public Works (EPW), we focused on the Nuclear Regulatory Commission (NRC) today. My 

Subcommittee jurisdiction there has jurisdiction over the NRC, so 

I wanted to be there for that. So I am kind of in and out here. I 

walked in and you were responding to Senator James Lankford’s 

questions, sort of like, What can we do, what do we need to do to 

be of assistance? 

I am a big believer in repetition, and I am going to ask you— 

this is important, and I just want to make sure we got this straight 

in terms of what we can be doing on this side of the dais to enable 

you and your folks to do a better job, a more cost-effective job. I 

just want to have you hit it again. 

Mr. KOSKINEN. This was in the context of what can we do with 

what thus far has been an intractable problem of improper payments in the earned income tax credit area. 

Senator CARPER. You may have answered this question—— 

Mr. KOSKINEN. But I am happy to repeat it again. The marketers 

say you have to make seven impressions before anybody hears you, 

so this will be two. 

Senator CARPER. OK. 

Mr. KOSKINEN. We need to get W–2s earlier so we can match up 

front. It would help us in a lot of ways, not just EITC, but in the 

EITC area it particularly would be helpful. We need what is called 

‘‘correctable error authority’’ when we can see there is an error, either on a given return or a set of returns, that we now have to go 

out and audit, and we just do not have the resources. We probably 
36 

never would want to do it that way. If we can make the correction, 

send the correction notice to the taxpayer, they can always come 

back and say, ‘‘Well, I really do have three kids instead of one,’’ or, 

‘‘That other person who claimed the child, it is not my fault. I get 

credit for it.’’ 

The third point is that we need help, because over half the returns for EITC are by paid preparers, making sure there are some 

minimum qualifications for people who are filling out tax returns 

on behalf of someone else. 

And then those are three things that are in what is called ‘‘the 

green book’’ that have been up on the Hill that weave out of that 

big telephone book, said these would be very important for EITC. 

Then I said the fourth thing would be the statute is very complicated in terms of trying to figure out who is in charge and where 

the children are and who gets credit for them, who had them for 

more than 6 months and what the relationships are. So I think a 

lot of tax preparers and low-income people are stymied by that 

complication, and so if somebody wanted to step back and say it 

is a great program, it has bipartisan support, it always has had, 

it has been reputed to be Ronald Reagan’s favorite poverty program, if there were a way to make it easier for people to figure out, 

both beneficiaries and their preparers, exactly who gets the credit 

and when, that would be helpful. 

But the first three are things that could be done now that would 

immediately give us a significant opportunity to make a dent, a significant dent in the issue, and if we were given the tools, we should 

be held accountable for, in fact, making that improvement. It will 

not go to zero, but it is a situation where I think we cannot keep 

running it without beginning to make progress in limiting those 

improper payments. 

Senator CARPER. Good. All right. Maybe one or two other quick 

ones. When you are sort of looking ahead and I do not know how 

long we will be fortunate that you will be our Commissioner at the 

IRS, but looking ahead into the future—— 

Mr. KOSKINEN. I think I have another 21⁄2 fun-filled years. 

Senator CARPER. Well, that is good. I am tempted to ask you 

what gives you joy in your work? I ask this of a lot of people. 

Mr. KOSKINEN. That give me joy, two things. One is it is an important agency. It is critical to the function of the government. So, 

you do not get up on Monday morning having to worry about 

whether what you are doing is important. 

The second thing is I have said it—and I do not say it for morale 

purposes or otherwise; I believe it. It is a wonderful workforce. As 

I say, I have talked to 13,000 employees across the country, and 

they are dedicated to the mission. A lot of their time is spent trying 

to help taxpayers. I have said it may take me awhile to convince 

people that we are from the IRS and we are here to help you. But 

we really do spend a lot of time trying to get information out, trying to help people in installment agreements, wherever it is. If you 

are trying to be compliant and trying to figure out how to pay your 

taxes, we want to help you do that. 

And so it has been a remarkable experience dealing with employees. We have been under a lot of stress, a lot of pressure, a lot of 

attacks. And to go talk with them, I have 37 cities I have been to. 
37 

I have had lunch with 15 to 20 randomly selected employees in addition to the town halls. They are a remarkable group, and so it 

gives me great satisfaction to work with them, and it is a great 

honor for me to be the IRS Commissioner. 

Senator CARPER. A couple years ago, I was listening to national 

public radio (NPR) on my way to the train station in the morning 

in Delaware, and they reported at the top of the news at 7 a.m., 

they said they had done an international survey. I guess some 

opinion research outfit had done an international survey and asked 

what is it that people most like about their jobs. And some people 

said they liked getting paid. Some people said that they liked having benefits—pension, health care, vacation time. Some people said 

they liked the folks they worked with. Some people said they liked 

the environment in which they worked. 

Most people said what they really liked about their work was the 

fact that what they were doing was important and they felt they 

were making progress. That was it. What most people said the 

thing they liked about their work is what they were doing was important and they felt they were making progress. 

And I find that we—God knows the work that you all are doing 

at the IRS is important. I think it was Oliver Wendell Holmes, 

what did he say? We need to have taxes in order to have a civilized 

society. We would have a less civilized society, that is for sure. 

But we are not allowing you to make the kind of progress that 

you ought to be able to make, and I think with your leadership and 

stewardship and, frankly, some good advice from GAO from time 

to time, and others, you are making progress. But you are not making the kind that you want to make and, frankly, that we want, 

the kind of wait times that we hear people are on the phones and 

people showing up at the offices and waiting and waiting, not having forms available because of us, because we change the tax laws 

so late in the game. We have a job to do here in concert with you 

so that the people that we serve can feel better about the job that 

you are doing, and you can as well. 

Thank you so much. 

Chairman JOHNSON. Thank you, Senator Carper. 

We always do give the witnesses a last chance at making a closing comment. If there is anything that was on your mind that you 

wanted to get off your chest here, we are happy to let you do that. 

Mr. KOSKINEN. I appreciate it. I think it has been a very important discussion about a very important subject matter. I think 

hopefully it has been helpful to the Members of the Committee. I 

think we are on television as well, so my hope is that people watching have a better idea about the Affordable Care Act, how it works, 

the efforts that we are making to try to make sure that it goes as 

smoothly as possible for people, the issues that I hope are helpful 

for the public to understand, those who are participating in the 

marketplaces, what they should pay attention to. And, again, when 

their circumstances change, they should get back to the marketplace to make sure that their reconciliation at the end of the year 

is totally painless, in fact, as it goes. 

But I do take Senator Carper’s point that, yes, the IRS is important. People ask me why I have been at this now going on a year 

and a half, why I continue to seem to be energetic and enthusiastic 
38 

about it. And I have said again if you spent 45 years of your life 

doing turnarounds and dealing with agencies under stress, you 

have to be optimistic. You have to assume that it is going to get 

better; otherwise, it does grind you down a little. And so I am optimistic. I do think that there are people anxious to be supportive 

of us. I think we have a responsibility—I have tried to stress that— 

to spend taxpayer dollars carefully. We are given these monies 

from people who worked hard to provide them to us, and we have 

to make sure that we use the funds well. We have to make sure 

people understand when there are problems, my goal in life—it 

would be nice, as I said at my confirmation hearing, to have no 

problems and say that is our goal. But even with a shrunken workforce, it is 87,000 people. It is the world’s most complicated Tax 

Code, and we deal with virtually every American and every American family. 

So our goal needs to be—and I think we should be held accountable for it—that when we have a problem, things do not go the way 

we expected, that we find it quickly, we fix it quickly, and we are 

transparent about it. And taxpayers need to be comfortable and 

confident we are spending their money wisely, we are going to treat 

all of them the same, we are going to treat them fairly. We are 

going to do, even with the limited resources, over a million audits 

this year. I do not want individuals thinking, ‘‘I am getting audited 

because of something I said, somebody I contributed to.’’ I want 

them to understand there is an issue in their return that caused 

us to look at it. And if somebody else had that issue, we would be 

looking at them as well, because I do think it’s basically a system 

that depends upon voluntary compliance. We collect $3.1 trillion a 

year, primarily because Americans are trying to pay the right 

amount and do the right thing. 

And so for that system to work, they have to have confidence in 

and be comfortable with the fact that tax administration is not a 

political enterprise. It is, in fact, designed to treat everybody fairly, 

to make sure that people pay their fair amount; if they have difficulty with it, that they can work with us to try to figure out how 

to deal with that. And if we can move in that direction, then we 

will be making progress in the most important way, which is to 

protect the voluntary tax compliance system of this country. 

Chairman JOHNSON. Mr. Commissioner, I appreciate that. The 

fact of the matter is the agency has lost credibility, and that credibility needs to be restored. I hope you do everything you can to restore that credibility. I appreciate your service, your thoughtful testimony, your forthright answers to our questions. 

This hearing record will remain open for 15 days until April 30 

at 5 p.m. for the submission of statements and questions for the 

record. This hearing is adjourned. 

Mr. KOSKINEN. Thank you. 

[Whereupon, at 11:52 a.m., the Committee was adjourned.] 
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