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THE TAXPAYER ADVOCATE ANNUAL REPORT TO 

CONGRESS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

GOVERNMENT OPERATIONS 

OF THE

COMMITTEE ON OVERSIGHT 

AND GOVERNMENT REFORM 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

SECOND SESSION 

April 15, 2016 

Serial No. 114–66 

Printed for the use of the Committee on Oversight and Government Reform 

( 

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

http://www.house.gov/reform 


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COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM 

JASON CHAFFETZ, Utah, Chairman 

JOHN L. MICA, Florida 

MICHAEL R. TURNER, Ohio 

JOHN J. DUNCAN, JR., Tennessee 

JIM JORDAN, Ohio 

TIM WALBERG, Michigan 

JUSTIN AMASH, Michigan 

PAUL A. GOSAR, Arizona 

SCOTT DESJARLAIS, Tennessee 

TREY GOWDY, South Carolina 

BLAKE FARENTHOLD, Texas 

CYNTHIA M. LUMMIS, Wyoming 

THOMAS MASSIE, Kentucky 

MARK MEADOWS, North Carolina 

RON DESANTIS, Florida 

MICK MULVANEY, South Carolina 

KEN BUCK, Colorado 

MARK WALKER, North Carolina 

ROD BLUM, Iowa 

JODY B. HICE, Georgia 

STEVE RUSSELL, Oklahoma 

EARL L. ‘‘BUDDY’’ CARTER, Georgia 

GLENN GROTHMAN, Wisconsin 

WILL HURD, Texas 

GARY J. PALMER, Alabama 

ELIJAH E. CUMMINGS, Maryland, Ranking 

Minority Member 

CAROLYN B. MALONEY, New York 

ELEANOR HOLMES NORTON, District of 

Columbia 

WM. LACY CLAY, Missouri 

STEPHEN F. LYNCH, Massachusetts 

JIM COOPER, Tennessee 

GERALD E. CONNOLLY, Virginia 

MATT CARTWRIGHT, Pennsylvania 

TAMMY DUCKWORTH, Illinois 

ROBIN L. KELLY, Illinois 

BRENDA L. LAWRENCE, Michigan 

TED LIEU, California 

BONNIE WATSON COLEMAN, New Jersey 

STACEY E. PLASKETT, Virgin Islands 

MARK DeSAULNIER, California 

BRENDAN F. BOYLE, Pennsylvania 

PETER WELCH, Vermont 

MICHELLE LUJAN GRISHAM, New Mexico 

JENNIFER HEMINGWAY, Staff Director 

DAVID RAPALLO, Minority Staff Director 

KATIE BAILEY, Staff Director, Subcommittee on Government Operations 

CHRIS D’ANGELO, Professional Staff Member 

JACK THORLIN, Counsel 


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SUBCOMMITTEE ON GOVERNMENT OPERATIONS

MARK MEADOWS, North Carolina, Chairman 

JIM JORDAN, Ohio 

TIM WALBERG, Michigan, Vice Chair 

TREY GOWDY, South Carolina 

THOMAS MASSIE, Kentucky 

MICK MULVANEY, South Carolina 

KEN BUCK, Colorado 

EARL L. ‘‘BUDDY’’ CARTER, Georgia 

GLENN GROTHMAN, Wisconsin 

GERALD E. CONNOLLY, Virginia, Ranking 

Minority Member 

CAROLYN B. MALONEY, New York 

ELEANOR HOLMES NORTON, District of 

Columbia 

WM. LACY CLAY, Missouri 

STACEY E. PLASKETT, Virgin Islands 

STEPHEN F. LYNCH, Massachusetts 


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C O N T E N T S 

Page 

Hearing held on April 15, 2016 .............................................................................. 1 

WITNESSES 

Ms. Nina Olson, National Taxpayer Advocate, Internal Revenue Service 

Oral Statement ................................................................................................. 4 

Written Statement ............................................................................................ 7 

Mr. James Buttonow, Chairman, Electronic Tax Administration Advisory 

Committee, Internal Revenue Service 

Oral Statement ................................................................................................. 51 

Written Statement ............................................................................................ 53 


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THE TAXPAYER ADVOCATE ANNUAL REPORT 

TO CONGRESS 

Friday, April 15, 2016 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON GOVERNMENT OPERATIONS, COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM, Washington, D.C. 

The subcommittee met, pursuant to call, at 9:37 a.m., in Room 

2154, Rayburn House Office Building, Hon. Mark Meadows [chairman of the subcommittee] presiding. 

Present: Representatives Meadows, Jordan, Walberg, Carter, 

Grothman, Maloney, Plaskett, and Lynch. 

Mr. MEADOWS. The Subcommittee on Government Operations 

will come to order. And without objection, the chair is authorized 

to declare a recess at any time. 

I want to thank you both for coming. We have a few other things 

that are going on, so we’ll have members coming in and out. 

We are here today obviously to examine the taxpayer advocate’s 

2015 annual report. The taxpayer advocate is a statutorily required—she is statutorily required to provide a report to Congress 

and must also identify 20 of the most serious problems facing the 

American taxpayer. So I look forward to hearing from my friend, 

Nina Olson, the taxpayer advocate, about how to better serve the 

American taxpayers by overcoming these problems. 

I would, on a personal note, just say thank you, Ms. Olson, for 

coming to western North Carolina to advocate on behalf of the taxpayer. And really to hear the concerns of so many, it was very refreshing, well-received, and it just shows that you are going the 

extra mile to get that input. 

I would also like to thank you for your dedication to, you know, 

working to protect the American taxpayer. This was on full display 

when you came to my district for the town hall, but it was also interesting to see the other information that was helpful to understand about tax administration. 

As far as this year’s annual report, I would like to note that, as 

we look to spend considerable time discussing the Future State 

plan that is currently being developed by the IRS, this plan will 

lead to a greater electronic tax administration and online service 

for the IRS. We obviously have a witness here from Greensboro, 

North Carolina, to talk on those issues. 

And these are a positive and important trend for the American 

taxpayer. However, we want to make sure that we have the responsibility to ensure that these are done in a safe, secure manner that 

protects the information and rights of the taxpayer. 


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So I would welcome comments of the taxpayer advocate on this 

topic, as well as yours, Mr. Buttonow, the chairman of the Electronic Tax Administration Advisory Committee. Your expertise in 

the area of tax administration will provide a valuable insight as 

Congress conducts the oversight of the IRS’s Future State plan. 

The taxpayer advocate report also discusses troubling trends in 

two important areas: improper payments of the earned income tax 

credit and the difficulties administering the Affordable Care Act. 

The EITC is one of the largest and most important tax credits 

available to low-income taxpayers, and the taxpayer advocate reports that noted an estimated 27 percent—that is right, 27 percent—of the $65 billion in EITC claims result in improper payments. This is roughly $17.5 billion and potentially a massive 

waste. We will look forward to hearing more from the taxpayer advocate about what is being done to reduce the improper payments 

with regard to the EITC payment program. 

Regarding the ACA, the IRS has seen massive overpayments by 

individuals of the individual mandate penalty fee. Last year, approximately 412,000 taxpayers overpaid by an average of $123 per 

return. The IRS needs to help taxpayers understand precisely what 

is their penalty for payments under the ACA. 

The taxpayer advocate also noted that the businesses face a complicated calculation to establish their obligations to pay the employer-shared-responsibility payment under the ACA. We have 

heard from constituents in my district as it relates to that complex 

issue as well. The IRS has not issued any clear guidance to help 

them calculate that payment obligation. Furthermore, the taxpayer 

advocate reports that the IRS’s employees who will handle those 

complex cases lack the specialized training needed to do their job 

effectively. 

So in short, the ACA has imposed burdensome requirements on 

the American taxpayer, but the IRS is not doing enough to help the 

public understand and comply with the law. 

I look forward to hearing from both of our witnesses today, and 

I want to thank each of you for coming. 

Mr. MEADOWS. And I will now recognize Ms. Plaskett as the 

ranking member providing an opening statement instead of Mr. 

Connolly. So she is now recognized for her opening statement. 

Ms. PLASKETT. Thank you very much, Mr. Chairman. 

Good morning to you. Thank you so much for being here with us. 

I first want to thank Mrs. Olson, Mr. Buttonow, for the work 

that they do and for being here today. I sincerely believe that the 

work that you both do on behalf of taxpayers and Congress is vitally important, especially this time of year when millions of Americans are filing their taxes and, you know, frustrating. And I personally—I think I have little stomachaches during this time of 

year, what about you, Mark? 

Mr. MEADOWS. Without a doubt. 

Ms. PLASKETT. I hear from my constituents—and I know, Ms. 

Olson, you hear from people all over the country—who find themselves this time of year frustrated and stressed. I appreciate the forums you have been holding around the country listening to stakeholders and taxpayers alike so that we can learn what their concerns are and how we can look for solutions. That is fantastic. 


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Many of these frustrations stem from having a difficult time getting through to a person at the IRS, whether it is the long wait 

times for calls or not having a call answered at all. Unfortunately, 

this less-than-robust service is not unexpected. When Congress 

slashes the inflation-adjusted budget of the IRS by $1.2 billion, I 

do not know what we expect to happen to taxpayer services. 

Ms. Olson, you address this in your report stating, ‘‘The national 

taxpayer advocate has been recommending against significant reduction in the IRS’s budget because reductions of this magnitude 

harm taxpayers.’’ 

Because of the budget cuts Congress has imposed, the IRS has 

cut staffing and now has 13,000 fewer full-time permanent employees. Because of the budget cuts, IRS’s IT systems are totally obsolete. Some of the systems date back to—I thought this was a typo 

when I saw it—but it says Kennedy Administration. These systems 

are so old that young IT professionals and recent college graduates 

do not want and do not know how to work on them. The IRS cannot find people who can code in the old languages that run these 

systems. This is absolutely unsustainable. 

The IRS has outlined its plan to modernize its IT systems, create 

efficiencies through online taxpayer accounts in its Future State 

Initiatives. Congress needs to fund this initiative so that we can reverse this trend of degrading taxpayer services because of the cuts 

we have made. 

Congress approved $290 million in additional funding for fiscal 

year 2016, which was a step in the right direction, but we need to 

make strides, not mere steps. But online customer service is not a 

one-size-fits-all solution for the country. There are millions of taxpayers who do not have access to or feel comfortable doing financial 

transactions online still. The IRS needs to take this into account. 

Ms. Olson, I understand you have some concerns about this plan, 

and I look forward to hearing from you today. And the IRS needs 

to take these concerns into account when moving forward. The IRS 

needs to be transparent and engaged with taxpayers and Congress 

as they develop the Future State Initiative. 

You also raised an excellent point, Mrs. Olson, when you state, 

‘‘In this environment of more work and inadequate funding, it is 

easy to bash the IRS. This bashing in turn can produce a bunker 

mentality in the IRS that makes it wary of sharing things with the 

public until they are absolutely finalized. But that means the IRS 

will almost certainly miss things and get things wrong precisely because it hasn’t engaged the public and floated proposals publicly 

before they become set in stone.’’ 

You also recommend Congress assert our oversight authority and 

insist the IRS come sooner rather than later to explain the specifics 

of the Future State Initiative. You also state—and I am going to 

quote you again—‘‘It is important that these hearings be kept separate from the hearings Congress has conducted in recent years over 

actual or perceived IRS shortcomings. Letting us see their plans 

and their initiatives and their thoughts on moving forward, not just 

having hearings about what specifically they’re doing.’’ 

I feel like you were speaking directly to this committee, were you 

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vice and to bury the hatchet so that we can work together to improve taxpayer services for all of our constituents. 

Thank you very much. 

Mr. MEADOWS. I thank the gentlewoman for her comments. And 

I want to follow up just very briefly on that. It is very easy when 

we start to look at problems in the Federal Government to paint 

with a very broad brush all Federal employees. Ms. Olson, you 

know I had the opportunity to visit some of the employees at the 

IRS. It is part of a longer process where not only do we visit them 

here but throughout the country, as you and I have discussed. 

And so I want for the record today for all those IRS employees 

to know that the vast majority of them want to serve the American 

taxpayer not only in a professional manner but in one that is indicative of customer service that would be highlighted in the best of 

the private sector. So my hat’s off to the hundreds of thousands of 

Federal workers who each day show up. I am committed in a bipartisan way to make sure that we address the real problems and 

focus in on that. And that is the reason for this hearing today. And 

yet at the same time applaud those who day in, day out show up 

to work very diligently on behalf of the American taxpayer. 

So I would like to say that we will hold the record open for 5 legislative days for any member who would like to submit a written 

statement. 

We will now recognize our panel of witnesses. I am pleased to 

welcome Ms. Nina Olson, the national taxpayer advocate at the Internal Revenue Service; and Mr. James Buttonow, the chairman of 

the Electronic Tax Administration Advisory Committee at the Internal Revenue Service. Welcome to you both. 

And pursuant to committee rules, all witnesses will be sworn in 

before they testify, so I would ask you to please rise and raise your 

right hand. 

[Witnesses sworn.] 

Mr. MEADOWS. Thank you. Let the record reflect that the witnesses answered in the affirmative. You may be seated. 

In order to allow time for discussion and questions, we would ask 

that you limit your oral testimony to 5 minutes, but your entire 

written statement will be made part of the record. 

So I would like to recognize you, Ms. Olson, for 5 minutes. 

WITNESS STATEMENTS 

STATEMENT OF NINA OLSON 

Ms. OLSON. Okay. Chairman Meadows, Ranking Member 

Plunkett—Plaskett, and distinguished members of the subcommittee, thank you for holding today’s hearing on the national 

taxpayer advocate’s 2015 Annual Report to Congress. In the report 

I identified the IRS’s Future State plan as the number one most 

serious problem for taxpayers, and I will focus on that issue in my 

testimony today. 

I will start with a simple but foundational question. What is taxation about? To my mind, taxation involves taking money from one 

person and applying that taking to the greater good of many if not 

all. That is an extraordinary thing to ask of people. A tax system 

depends on taxpayers being willing to offer up their hard-earned or 


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saved dollars and let their money be applied to everyone’s or someone else’s benefit. 

So the central question in tax administration is how do we promote that willingness? What does the tax administrator need to do 

to maintain and expand taxpayers’ willingness to pay their taxes? 

The answers to these questions should drive both the current and 

future state of the IRS. 

Taxpayers are experiencing many problems today because the 

IRS lacks adequate resources to assist them. Since fiscal year 2010, 

we estimate the IRS’s budget has been reduced by about 19 percent 

on an inflation-adjusted basis. That is a huge reduction for any organization, particularly one as labor-intensive as the IRS. 

This year, Congress has given the IRS an additional $290 million, which is very helpful, and I am hopeful Congress will continue 

to provide additional funding in the coming years to ensure our nation’s taxpayers receive the assistance they deserve. 

Budget constraints have greatly influenced the IRS Future State 

plan that envisions how the agency will operate in 5 years and beyond. A central component of the plan is the creation of and reliance on online taxpayer accounts. The IRS believes online accounts 

will produce significant cost savings and enable it to substantially 

reduce its expenditures for telephone and in-person assistance. 

The crux of my disagreement with the IRS boils down to whether 

taxpayers will ultimately use online accounts as a substitute for 

personal service or whether taxpayers will use online accounts as 

a supplement to—for personal service. 

While I have long advocated that the IRS offer online account access to taxpayers, I believe the IRS is wrong in assuming online accounts will substantially reduce taxpayer demand for telephone 

and face-to-face assistance for many reasons, including that millions of taxpayers do not have internet access. 

Millions of taxpayers with internet access do not feel comfortable 

trying to resolve important financial matters over the internet, particularly in the face of massive security breaches on online government systems. And many taxpayers are not cookie-cutter, thus requiring a degree of back-and-forth discussion that is better suited 

for conversation and that taxpayers will insist upon. Therefore, it 

is critical the IRS not develop future plans based on assumed cost 

savings that may not materialize. 

The IRS likes to say it needs to provide the same type of service 

that financial institutions provide to their customers. Well, the results of the most recent annual survey conducted by the Board of 

Governors of the Federal Reserve System shows that—and I quote 

here—‘‘While mobile banking users are utilizing technological platforms at a high rate and on a consistent basis, they have also 

maintained connections to their banks through the more traditional 

branch and ATM channels.’’ 

Yet despite this evidence of consumer behavior in the financial 

sector, for several years now the IRS has been reducing face-to-face 

taxpayer service options at its taxpayer assistance centers, and it 

has recently decided to switch to an appointment-only system at all 

of its TACs by the end of 2016. The TACs, which were previously 

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And the IRS is conducting a pilot under which it will not even accept tax payments from walk-in taxpayers. 

In short, the IRS is failing to meet the needs of many walk-in 

taxpayers for personal assistance, and I find the notion of declining 

to accept tax payments from walk-in taxpayers inexplicable and 

baffling for a tax collection agency. 

The results of the appointment-only TAC pilot show 20 percent 

of the taxpayers had to wait between 13 and 41 days to obtain an 

appointment and 5 percent had to wait more than 41 days for an 

appointment. 

In my written testimony, I describe how taxpayers who arrive at 

a TAC without an appointment are being treated. I am also concerned that as taxpayers give up and stop going to the TACs because they are not provided—providing adequate assistance, the 

IRS will use the data of declining usages to justify further reductions in in-person service. 

For many years and in many areas, the IRS has made more services more difficult to use and then touted the declining usage of 

that service as a basis to cut the service further and to eliminate 

it entirely. To me it—that’s disingenuous. 

I believe the IRS must—the Future State must adopt as its north 

star the needs of the vast majority of taxpayers who are willing to 

comply with the laws. I use the word ‘‘willing’’ here deliberately because it includes taxpayers who may not now be in compliance. 

These are taxpayers who want to comply but for one reason or another are not able to. My point here is that rather than designing 

tax administration around the small minority of taxpayers who are 

deliberately evading payment of tax, we should design our rules 

and procedures to make it easier and clearer for the willing taxpayers to comply. 

In my opinion, any Future State plan will fail unless the IRS 

changes its focus to prioritize taxpayer assistance and does a better 

job of listening to taxpayers and their representatives about what 

it takes to maintain and enhance voluntary compliance. 

Thank you, and I’ll be glad to answer any questions. 

[Prepared statement of Ms. Olson follows:] 


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Mr. MEADOWS. Thank you, Ms. Olson. 

Mr. Buttonow, you are recognized for 5 minutes. 

STATEMENT OF JAMES BUTTONOW 

Mr. BUTTONOW. Thank you, Mr. Chairman. Thank you—— 

Mr. MEADOWS. If you will push that red button right in front of 

you, or it will be red once you push it. 

Mr. BUTTONOW. Thank you, Mr. Chairman. And thanks to the 

subcommittee for holding today’s hearing on the national taxpayer 

advocate’s 2015 Annual Report to Congress. 

The taxpayer advocate and her office are critical voices to the 

rights of all taxpayers in the improvement of tax administration. 

Each year, the taxpayers’ best friend, Nina Olson and her team, 

take a very productive approach to reducing taxpayer burden while 

increasing overall voluntary compliance. 

The IRS Electronic Tax Administration Advisory Committee, or 

ETAAC as we’re known, was formed by law in 1998 to make strategic recommendations to Congress on how to improve overall tax 

administration through electronic means. In short, we are objective, outside digital strategy consultants to the IRS. 

In the past few years, ETAAC has been focused on two big challenges in tax administration today: first, the proliferation of tax 

identity theft; and second, the inadequate levels of taxpayer service 

at the IRS caused by an antiquated customer service model. The 

committee believes that a key solution to both of these problems is 

a more innovative digitally enabled IRS. Much of this is outlined 

in the IRS’s Future State Initiative. 

Now, to address the urgent problem of tax identity theft, the IRS 

commissioner has formed a security summit, which is a coalition of 

State and industry leaders. ETAAC applauds this collaboration 

with industry and the—for the IRS in working together with this 

important group to find solutions. Authenticating taxpayer identities is absolutely foundational to a digitally enabled IRS, and the 

Security Summit is working towards some innovative solutions to 

this challenge. 

But today, I’m going to focus on the Future State of taxpayer 

service at the IRS. Now, first, let’s take a look at where we are 

today. Now, for most taxpayers interacting with the IRS, it’s not 

quick, it’s not easy, and it’s mostly done by paper and phone. Most 

taxpayers have no idea about their tax information or their status 

at the IRS, and when they do have to interact with the IRS, they’re 

often greeted with long wait times and extended answer periods. 

Now, these are big problems, especially for the 43 percent of taxpayers who have to interact with the IRS outside of filing a tax return. 

Now, the IRS’s current state and their history, quite frankly, 

could leave us feeling quite pessimistic about the near-term possibility of modernizing taxpayer service. But the IRS has committed 

to a digitally enabled taxpayer service model with its Future State 

Initiative. The IRS Future State vision aligns with ETAAC’s vision 

of how taxpayers should be served by their tax administrator. 

Now, an ideal taxpayer experience allows taxpayers to fully understand their tax obligations, have transparent access to their tax 

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fectively and securely interact with their tax administrator in the 

way that they want to be served. Now, these are big statements, 

but they’re not revolutionary. In fact, the Future State mirrors the 

customer service experience that most financial institutions and 

many other companies already provide today. 

So what will the Future State mean for taxpayers? First, it will 

mean transparency when there’s hardly any today. Taxpayers will 

get information customized to their circumstances, including their 

specific tax responsibilities. The Future State will also mean realtime taxpayer service, so it’ll allow taxpayers to securely interact 

with the IRS online. 

Now, what about taxpayers who want or need to deal with the 

IRS in person or by phone? Now, these taxpayers, they’re not left 

behind. It’s true that increasing numbers of taxpayers prefer interacting online. When the IRS creates digital tools, it can meet their 

expectations. But importantly, by doing so, the IRS will also free 

up phone lines and IRS employees for taxpayers who really need 

and prefer human interaction. The IRS will meet taxpayers where 

they want to be served whether it’s online, by phone, by chat, by 

taxpayer assistance center, a VITA site, or a low-income taxpayer 

clinic, or through a tax professional. 

Now, let me sum it all up. The Future State of the IRS enables 

technology as part of a holistic taxpayer service strategy. The Future State embraces digital solutions to allow the IRS to maximize 

its limited resources. It creates targeted capacity to serve all taxpayers they way they want to be served. ETAAC endorses the digital service components of the IRS Future State plan. 

Now, to take it a step further, we have abdicated to Congress 

that the IRS actually accelerate these plans, but this won’t be easy. 

We know that the IRS has many obstacles to overcome, and this 

includes satisfying all of us that the security of taxpayer information comes absolutely first. 

So on behalf of the ETAAC, thank you for inviting us to testify 

on this important topic on the Future State of the IRS. I’d be 

happy to take any questions from the subcommittee. 

[Prepared statement of Mr. Buttonow follows:] 


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Mr. MEADOWS. Thank you so much. 

The chair recognizes the vice chair of the Government Operations 

Subcommittee, the gentleman from Michigan, Mr. Walberg, for a 

series of questions. 

Mr. WALBERG. Thank you, Mr. Chairman. And probably the 

three of us being here indicates that we don’t fear the IRS, right? 

[Laughter.] 

Mr. WALBERG. So then why are we here? No, I certainly agree 

with the points you made about the general IRS employee attempting to do their job but a difficult job. 

Ms. Olson, 2015 is the first year that the IRS has to implement 

a number of measures that are targeted with the Affordable Care 

Act, for example, one of those being the employer shared-responsibility payment. Your report suggested that the IRS doesn’t know 

which employees are going to be responsible for evaluating employers so those employees probably will not have adequate training if 

I understand the report. Let me ask you, what complexities will the 

IRS employees face in determining which employers must pay the 

employer-shared responsibility payment? 

Ms. OLSON. I think there are a lot of questions about what employees are going to be included in some very complex calculations 

to determine who is covered, who should be covered, and then who 

isn’t covered. And that all goes into the calculation of whether the 

employer is going to be penalized. And the penalty is very, very 

stiff and very steep. And our concern has been that we have heard 

from a lot of employers about the complexity of these determinations, and that they have not been able to get answers in the way 

or with the speed that they need to get them. 

This is a new initiative, but I think this is where transparency 

and engaging with the population that’s going to be penalized is— 

should have happened a long time ago and needs to happen now 

and really needs to heed them, what their concerns are. 

Mr. WALBERG. Do you see any efforts toward that direction? 

Ms. OLSON. I think people are trying. I think that it’s not as open 

as I would like. I also think some of it is that the IRS isn’t the only 

one involved in this. You know, they’re getting information from 

other areas. The law is very complex, and there are lots of government agencies involved. 

It’s getting better, but we want to see more engagement, and we 

want to see more guidance, even if it’s put out there in a temporary 

format. 

Mr. WALBERG. Okay. Another area with ACA is the workweek, 

the hours, 30 hours—— 

Ms. OLSON. Right. 

Mr. WALBERG.—provisions that is there. IRS, from your report, 

has failed to issue formal guidance about calculating—— 

Ms. OLSON. Right. 

Mr. WALBERG.—full-time employees for the Employer Shared Responsibility Act. Has the IRS offered a reason why it will not help 

employers, especially when they can’t use the Web site and the information on the Web site as a defense—— 

Ms. OLSON. Right. 

Mr. WALBERG.—for failure to—— 

Ms. OLSON. Right. 


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Mr. WALBERG.—do it the way the IRS then says they should? Is 

there a reason why they won’t help employers to understand their 

obligation? 

Ms. OLSON. I have not heard a reason, and we really focused in 

on that 30-hour calculation because that’s what we heard a great 

deal from employers. You know, they need to have some certainty 

in a way they’ll accept and answer as long as they have an answer 

so that then they can do their own programming. There’s a whole 

domino effect to this guidance. You know, once you get it out there, 

people have to program their own systems. They have to do their 

assurance processes and things like that. 

And people are doing the best they can and they’re worried that 

they will be penalized and the penalties won’t be abated if they 

show good-faith effort. And we’re trying to identify the issues and 

raise them to the IRS and get them to engage with the community. 

Mr. WALBERG. Well, certainly, guidelines ought to be a defense—— 

Ms. OLSON. You would think so. 

Mr. WALBERG.—if they have attempted to follow it. 

Ms. OLSON. Yes. If you—and if you tried—— 

Mr. WALBERG. Yes. 

Ms. OLSON.—to follow what was generic out there on the Web 

site, that goes to the penalty abatement. But again, why would you 

want to put an employer in the position of having to ask for penalty abatement when they could have avoided the penalty in the 

—— Mr. WALBERG. Right, in the first place. 

Ms. OLSON.—beginning if they had the guidance? 

Mr. WALBERG. Yes. On the individual shared-responsibility payment issue, you have indicated that in tax year 2014 approximately 

412,000 taxpayers overpaid the penalty associated with a failure to 

apply. The average, you stated, was $123 per return. What percentage of taxpayers had to make the individual shared-responsibility 

payment? 

Ms. OLSON. Pardon? What—— 

Mr. WALBERG. What percentage of taxpayers? 

Ms. OLSON. You know, I don’t know the answer to that. I—it’s 

in my testimony. It’s in my annual report. I can get you that. 

Mr. WALBERG. We have 412,000 taxpayers. I was just wondering 

what percentage—— 

Ms. OLSON. Of them all—— 

Mr. WALBERG.—of those—— 

Ms. OLSON.—I—actually, I don’t know the answer to that—— 

Mr. WALBERG. Okay. 

Ms. OLSON.—but I can give you that—— 

Mr. WALBERG. If we could get that, that would—— 

Ms. OLSON.—percentage. 

Mr. WALBERG.—be great. 

Ms. OLSON. Yes. You know, those overpayments were—a lot of 

them were driven by software not asking taxpayers to identify their 

exemptions. And so they were actually exempt from having health 

insurance, but they didn’t ask, and so—the software didn’t ask, and 

so they didn’t tell anybody. And that’s also true that some of the 

preparers didn’t ask. 


AKING-6430 with DISTILLER
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We were able to work with the software companies to get some 

of those programs changed for this filing season, and we’ll be looking very carefully at those overpayments to make sure that it 

doesn’t happen again. 

Mr. WALBERG. Well, thanks for looking. I yield back. 

Mr. MEADOWS. I thank the gentleman. 

So, Ms. Olson, one quick follow-up question. Is the guidance ambiguous enough that the IRS should consider a waiver of penalties 

until we get the guidance more specific? 

Ms. OLSON. My personal opinion is that this law is so complex 

that for the first year we should be very, very lenient and only 

apply a penalty where there’s truly egregious, in-your-face ignoring 

of basic requirements, that this is a learning process and we have 

to have a partnership with the tax—the employer population so 

that we can identify the issues, get clearer guidance out there, use 

this filing season as a dry run. That is how I would have approached it. 

Mr. MEADOWS. All right. Thank you, Ms. Olson. 

The chair recognizes the gentleman from Massachusetts, Mr. 

Lynch, for a series of questions. 

Mr. LYNCH. Thank you, Mr. Chairman. And I want to thank both 

of the panelists for your willingness to help the committee with its 

work. 

I did have a question that was raised earlier about the Affordable Care Act. A big part of the funding mechanism for the Affordable Care Act was the so-called Cadillac tax. Now, the Cadillac tax 

applies to generous health care plans, a lot of union health care 

plans. I am a former union president myself, so I have served as 

a trustee of the health care plan. 

The tax is about a 40 percent tax. It applies to both the employer 

and the employee. Now, Congress in its wisdom delayed the implementation of the Cadillac tax until 2020. However, the limit stays 

the same, so thousands and thousands, probably millions of more 

people will be in that Cadillac tax category when 2020 rolls around. 

So for every dollar over the limit, you will pay a 40 percent tax, 

so 40 cents for every dollar you put into your health care over the 

limit. And it is prorated for employer and employee, so the employee is going to have pay more on tax, this Cadillac tax, and the 

employer. I read it more closely. And then the tax itself, the penalty is taxed, so it really comes out to like a 58 or 59 percent penalty on every dollar spent over that limit. 

I am just wondering, do employees and employers know that? Do 

the health care plans—— 

Ms. OLSON. I think that’s some of the—— 

Mr. LYNCH.—I mean—— 

Ms. OLSON.—problem with the Affordable Care Act. There are so 

many moving pieces in it that getting education out about all of 

these issues is very difficult. I have not looked at the statute specifically to see whether it’s indexed for inflation. 

Mr. LYNCH. It is not. 

Ms. OLSON. Then that would be something that we—— 

Mr. LYNCH. Yes. 

Ms. OLSON.—seriously need to—— 

Mr. LYNCH. Right. 


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Ms. OLSON.—look at. 

Mr. LYNCH. We asked Mr. Gruber, Jonathan Gruber, who was 

one of the architects of this plan, and he explained that it was not 

adjusted for the rate of inflation because they wanted more and 

more people over time to be captured by that tax. 

And, you know, I will confess I am a former union attorney and 

union president. In my history I have dealt with a lot of union 

plans not only for the ironworkers but for the Teamsters and the 

wardrobe workers. And so all of these plans are going to be—and 

a lot of these big companies like Gillette and Raytheon and all— 

funny, the people who sat down with their employees and worked 

out a plan for their health care plan, the people who did the right 

thing, they are the ones that are going to be hit with this tax. And 

it is a huge, huge problem, and it is multiplied because of the 

amount of the tax and now we have delayed it so more and more 

people are going to be captured. 

And I am just wondering from the IRS position, are we educating 

consumers about that because when it hits, it is going to be like 

a tidal wave. It is going to wipe out a lot of health care plans. I 

am just wondering if we have contingency plans for that event? 

Ms. OLSON. I think this is something that, because it is so far 

off, it is not something that the IRS is thinking about messaging, 

and yet—— 

Mr. LYNCH. Yes. 

Ms. OLSON.—on the other hand, if you are really trying to drive 

people’s behavior, you should be starting the messaging now so 

that it—— 

Mr. LYNCH. Yes. 

Ms. OLSON.—sinks in and they can make the plans to not be hit 

in 2020. 

Mr. LYNCH. Yes. 

Ms. OLSON. You know, I also—— 

Mr. LYNCH. The dilemma is that costs of health care keep going 

up—— 

Ms. OLSON. Right. 

Mr. LYNCH.—and you are telling people you want them to spend 

less—employers and employees, you are telling them, because of 

the tax, you want them to spend less on health care. 

Ms. OLSON. Right. 

Mr. LYNCH. And so, you know, it is tough to reconcile—— 

Ms. OLSON. From the taxpayers’ perspective, not indexing it— 

and I understand the policy reasons for why you wouldn’t—but it’s 

like the alternative minimum tax—— 

Mr. LYNCH. Right, exactly. 

Ms. OLSON.—you know, it’s so—— 

Mr. LYNCH. More and more people get captured. 

Ms. OLSON. It’s so irrational when—— 

Mr. LYNCH. Yes. 

Ms. OLSON.—the taxpayer sees that number coming up and they 

think they’ve held their withholding and everything like that, that 

you can have all the policy reasons in the world, but it feels profoundly unfair to the taxpayer. 

Mr. LYNCH. Yes. Mr. Buttonow, do you have any comments on 

that? 


AKING-6430 with DISTILLER
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Mr. BUTTONOW. Just I think I could echo was—I could echo what 

Nina says. And the ACA has got so much complexity to is, is that 

when you’re dealing with the IRS, they’re like what’s urgent now. 

And so what’s urgent now—— 

Mr. LYNCH. Right. 

Mr. BUTTONOW. What—what’s urgent now, you know, after a 

while, you know, you look at what’s urgent now, you fall behind on 

some things. And when you talk about falling behind on some of 

the individual shared responsibility of the—with the employer 

shared-responsibility penalty, you’re looking at maybe the IRS 

should employ some of their administrative relief items like firsttime abatement or such like that so that it gives taxpayers some 

relief because, you know, taxpayers are getting caught up on this— 

not voluntarily being caught up on this. They’re just a victim of not 

knowing what to do. So—— 

Mr. LYNCH. Right. 

Mr. BUTTONOW.—you know, in order to promote voluntary compliance, by all means, I think you should give them a waiver the 

first year. 

Mr. LYNCH. Okay. All right. Fair enough. Thank you both. I yield 

back. 

Mr. MEADOWS. I thank the gentleman. 

The chair recognizes the gentleman from Georgia, Mr. Carter, for 

5 minutes. 

Mr. CARTER. Thank you, Mr. Chairman. And thank you for being 

here. We appreciate you being here. This is obviously very important to all of us and all Americans. 

Ms. Olson, in your 2015 taxpayer advocate report you list the 

right to a fair and just tax system as a taxpayer right. You would 

agree to that, right? 

Ms. OLSON. Absolutely. 

Mr. CARTER. Do you agree that a fair and just tax system is one 

that ensures that the tax credits only go to those who are qualified 

to get them? 

Ms. OLSON. Absolutely. Taxpayers need to know that, you know, 

everyone is paying the right amount of tax, and that would include 

not getting credits that aren’t—they are not eligible for. 

Mr. CARTER. So it is inclusive in a fair and just—— 

Ms. OLSON. Absolutely. 

Mr. CARTER.—tax system that tax rebates aren’t going to people 

who shouldn’t be getting them? 

Ms. OLSON. Absolutely. 

Mr. CARTER. Okay. In the report that we referenced earlier, the 

report stated that improper payments constitute 27 percent, 27 

percent of the $65 billion that were handed out annually through 

the earned income tax credit. That amounts to $17.7 billion of improper payments—— 

Ms. OLSON. That’s—— 

Mr. CARTER.—$17.7 billion—— 

Ms. OLSON. Yes. 

Mr. CARTER.—of improper payments. How do filers obtain improper payments? How does that happen? 

Ms. OLSON. These improper payments come in when taxpayers 

fill out their tax return and claim the earned income tax credit. 


AKING-6430 with DISTILLER
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And the payments can occur for—overpayments can occur for many 

reasons. It can be that they are incorrectly stating their income. 

They can be claiming a child that they are not eligible to claim because that’s where most of the eligibility—that’s the eligibility requirement, to have a qualifying child. The law is very complex and 

it’s easy to fall afoul. There are a percentage of those payments, although no one really knows, that are attributable just to out-andout fraud, whether it’s that there’s a preparer involved saying, 

okay, here, you claim somebody else’s child or a taxpayer decides 

that they’re going to claim somebody else’s child—— 

Mr. CARTER. Okay. Well, let me—— 

Ms. OLSON.—but—— 

Mr. CARTER.—Let me ask you specifically. Is it possible—in your 

research has it indicated that illegal immigrants have received 

some of these improper payments from the earned income tax credit? 

Ms. OLSON. It should not be possible because if they’re—— 

Mr. CARTER. But does your research indicate that it happens? 

Ms. OLSON. I do not see that as—the IRS does not see that as 

a major issue because for the earned income tax—— 

Mr. CARTER. But—— 

Ms. OLSON.—credit—— 

Mr. CARTER. Not as a major issue, but is it—— 

Ms. OLSON. No, but —— 

Mr. CARTER.—an issue? 

Ms. OLSON. I do not think it is because, for the earned income 

tax credit, you have to have a Social Security number and use that 

on the return. You cannot use an ID—— 

Mr. CARTER. But we’re not naive enough to believe that there 

aren’t fraudulent Social Security numbers out there. 

Ms. OLSON. There are Social Security numbers that people— 

identity thieves are using, and if someone who’s an undocumented 

person or an illegal immigrant as you call it, you know, files a return with someone else’s Social Security number, that is identity 

theft and—— 

Mr. CARTER. I understand—— 

Ms. OLSON.—we have—— 

Mr. CARTER.—and I—I am sorry. 

Ms. OLSON. Yes, okay. 

Mr. CARTER. I don’t mean to interrupt but, you know, I don’t 

know that we are necessarily going to agree on this. But I want 

to ask you, is it possible for an illegal immigrant who is given or 

granted protection or protected status—for an illegal immigrant 

who is granted protected status under President Obama’s Executive actions, can they obtain the earned income tax credit? 

Ms. OLSON. If they have a Social Security number under that 

program that’s authorized for work—— 

Mr. CARTER. Is it possible to get a Social Security number under 

that program? 

Ms. OLSON. I don’t know the answer under that program, but if 

under that program they could get a Social Security number authorized for work, they could claim the earned income credit under 

the law. 


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Mr. CARTER. So the answer to my question, can an illegal immigrant who is granted protected status under President Obama’s Executive orders obtain the earned income tax credit, the answer is 

yes? 

Ms. OLSON. If they have a Social Security number authorized for 

work. That’s the requirement that’s—in the earned income credit, 

you have to have a Social Security number authorized to work, 

your spouse has to have a Social Security number authorized to 

work, and your child that you’re using has to have a Social Security number authorized to work. 

Mr. CARTER. Okay. As I understand it, improper payments of the 

earned income tax credit have increased since 2005. 

Ms. OLSON. They’ve actually—— 

Mr. CARTER. They have increased from 2005 to the present day. 

Ms. OLSON. There may have been an increase. I thought it was 

fairly stated—— 

Mr. CARTER. Is it possible that that increase can be attributed 

to illegal immigrants? 

Ms. OLSON. My personal opinion is not. That’s my personal opinion. 

Mr. CARTER. Do any of the studies indicate—— 

Ms. OLSON. None of the IRS—— 

Mr. CARTER.—and back up your personal opinion? 

Ms. OLSON. None of the IRS studies indicate that. I’m just telling 

you what—the sources of the error for the earned income credit, 

the majority of the errors are attributable to overstated income. 

Mr. CARTER. I understand, but I am specifically interested in illegal immigrants who are getting this, and all I want to ask you, my 

final question is is the administration addressing—or the IRS, are 

you addressing this at all? 

Ms. OLSON. The IRS is certainly looking at undocumented persons, persons who don’t have Social Security numbers getting credits that they shouldn’t be getting. 

Mr. CARTER. I—— 

Ms. OLSON. They are certainly looking at that. 

Mr. CARTER. I would certainly hope so because as we started out 

this conversation, a fair and just tax system would certainly involve that. 

Thank you, Mr. Chairman, and I yield back. 

Mr. MEADOWS. I thank the gentleman. 

The chair recognizes himself for a series of questions. And depending on votes, they are supposed to call votes here shortly. We 

will see whether Mr. Lynch and I have a series of second questions. 

Mr. Buttonow, let me come to you. You know, with the electronic 

filing and that being your expertise, do you see that electronic filing has increased the likelihood of identify theft at the IRS? 

Mr. BUTTONOW. Yes. 

Mr. MEADOWS. I need you to hit your button. 

Mr. BUTTONOW. Absolutely. I think what it—it’s one of the elements that enabled it, right? So, you know, electronic filing and 

fast refunds have come about, it offers the opportunity for tax ID 

thefts to beat the IRS to the refund. So they’ll get the refund quick, 

long before the IRS has the ability to go ahead and verify them as 

a taxpayer. 


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Mr. MEADOWS. All right. So if electronic filing has increased the 

likelihood of identify theft, further going more digital, as you mentioned in your opening testimony under the Future State plan, 

would that exacerbate the chances of identity theft? 

Mr. BUTTONOW. It could. It very well could. But if you adopt industry standards of authentication, it may in fact actually work in 

the opposite. 

One thing that we don’t have in our system today is we don’t 

verify taxpayers before they file. Anybody can come and go, right, 

offering the opportunity for identity thieves to take someone’s identity and go with it. 

Mr. MEADOWS. All right. 

Mr. BUTTONOW. If we were able to authenticate taxpayers before 

they filed, we would know who they are—— 

Mr. MEADOWS. All right. So —— 

Mr. BUTTONOW.—to offer an opportunity —— 

Mr. MEADOWS. So in that you make your living, I guess, with 

taxpayers being able to file electronically, is that correct? 

Mr. BUTTONOW. Actually, I don’t file one tax return a year, so no, 

I don’t make my living on—— 

Mr. MEADOWS. Okay. 

Mr. BUTTONOW.—the e-file. 

Mr. MEADOWS. Well, your group does. I mean, I guess you’re—— 

Mr. BUTTONOW. Yes. 

Mr. MEADOWS.—representing a group—— 

Mr. BUTTONOW. Yes. That—yes. I mean, and generally, we’re in 

favor of e-filing, right? That’s the mandate the ETAAC has had 

since 1998 where our original goal was to get the IRS when they 

were at 15, 20 percent e-file rate to 80 percent, and we’ve gone past 

that 80 percent goal. 

Mr. MEADOWS. Right. So if that is your goal and you have private 

stakeholders that are making a profit based on that and the potential danger is that because of that new model that we’re getting additional taxpayer identify theft. The hard question is is what liability or what protections does the private sector have versus the Federal Government? And that is the fundamental question we have 

to have. Is this all the IRS’s responsibility or is there a responsibility for the preparer/authenticator, as you have just mentioned? 

Mr. BUTTONOW. Well, I think it’s a shared effort, right? I—— 

Mr. MEADOWS. All right. 

Mr. BUTTONOW.—think it’s a shared—it’s definitely a shared effort. And that’s what the Security Summit is looking to do is to find 

where software companies can go ahead and put in those additional 

authentications, and they have done that. 

Mr. MEADOWS. All right. 

Mr. BUTTONOW. But I—but understand that that, you know, detection at the back end of it is still ultimately just detection. Prevention would be a better method. 

Mr. MEADOWS. I understand that. So the last question I have for 

you is what impediments are you finding that would stop the private stakeholders from assisting the IRS with that authentication 

process? 

Mr. BUTTONOW. The IRS’s willingness to do so, right? So—— 

Mr. MEADOWS. So you are saying they are not willing to do so? 


AKING-6430 with DISTILLER
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Mr. BUTTONOW. Well, I—so there’s—it—the IRS is clearly obviously the tax administrator. Them dealing with private industry 

is—I mean, obviously, they’re doing it more and more—— 

Mr. MEADOWS. But this Future State plan calls for more electronic filing and everything to be online—well, not online and 

transparent but online and digital in its nature so that we go what 

we call to a virtual customer service rep versus a real customer 

service rep. So you are saying that they are not willing to help the 

stakeholders authenticate? 

Mr. BUTTONOW. Well—— 

Mr. MEADOWS. Because that is a pretty bold statement. If it is 

true, we need to address it, but that is a bold statement. 

Mr. BUTTONOW. No, what I am saying is is the IRS needs to view 

industry as a partner, right? 

Mr. MEADOWS. And they don’t? 

Mr. BUTTONOW. Well, it’s a tenuous relationship, right? So you 

definitely need to look at—if you want the best technology out 

there, I’m not sure that looking inside the IRS to understand that 

is the best place, right? In order to be able—— 

Mr. MEADOWS. So how can Mr. Lynch—let me cut you off there 

because I am running out of time. How can Mr. Lynch and I assist 

you with the IRS to make sure that it is a hand-in-glove approach 

versus a—as you—I think your adjective was contentious. Did you 

say contentious? 

Mr. BUTTONOW. It’s tenuous. 

Mr. MEADOWS. Tenuous, okay. 

Mr. BUTTONOW. Yes. 

Mr. MEADOWS. All right. Wrong word, but go ahead. Tenuous. 

How can Mr. Lynch and I help you there? 

Mr. BUTTONOW. Well, I think by encouraging the IRS to work 

with industry. I mean, some—there are some barriers to going 

ahead and working with industry on some of the disclosure rules 

that make it a barrier for sharing information. So there needs to 

be a partnership, a true partnership between the industry and the 

IRS when it comes to all things technology. The IRS can’t expect 

to be a technology leader out there. There is many other people— 

many other companies and many other developers out there who 

are technology leaders. 

Mr. MEADOWS. Yes, they are still programming in COBOL so 

I—— 

Mr. BUTTONOW. Yes. Yes. 

Mr. MEADOWS.—understand that. 

Mr. BUTTONOW. I—— 

Mr. MEADOWS. Well, I have run out of time. I thank you. I have 

got some questions for Ms. Olson, but I am going to go to Mr. 

Lynch and recognize him for a second series of questions. 

Mr. LYNCH. Thank you, Mr. Chairman. 

You know, we have recounted some of the weaknesses in the IRS 

system, you know, lack of personnel, that has diminished of recent 

years, lack of communication between the taxpayer and the IRS, 

the risk of ID theft through filings. Do we have any idea how many 

false tax returns get filed every year? 

Ms. OLSON. Oh, there are millions. 

Mr. LYNCH. Yes. Okay. 


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Ms. OLSON. And I have to say that—— 

Mr. LYNCH. All right. You don’t need to get into that. 

The complexity of the system as well, the health care information 

component that has come in recently, and then the infrastructure 

weakness as well. I understand some of the programs that the IRS 

is using date back to the Kennedy Administration, which is sad. 

I am just worried about—not just worried about, but I am worried about the presumption of compliance, you know, within the 

American people. And I think most people pay their taxes, try to 

do the right thing. I know there are countries where that is not the 

norm. I know Greece is very, very low compliance, you know, with 

tax laws. Nobody pays—well, very few people pay their taxes. 

Mostly the government employees pay their taxes because the government takes it out right away. 

And I am just wondering, you know, with all these obstructions 

that I am listing here, are we going to see a lower rate—is there 

a trend now that you shouldn’t pay your taxes? You should get off 

the grid? Is that something that might result because of all of these 

factors, Ms. Olson? 

Ms. OLSON. I think that particularly last year’s filing season 

when we had such a low percentage of the phone calls answered 

by the IRS, you know, that—or when you won’t take a payment in 

a walk-in site —— 

Mr. LYNCH. Yes. 

Ms. OLSON.—you know, this is sending a message that we’re 

just—we can’t deal with you, and a taxpayer would say, well, if you 

can’t deal with me, I won’t deal with you. 

The problem with that is the IRS will eventually find you and 

it’ll be very unpleasant when that happens. 

Mr. LYNCH. Yes. 

Ms. OLSON. And I think, you know, my concern is about the future. It’s a combination of where we are today. We’ve got this 

bright picture of the future, but our technology is so far behind 

today. And we’re just talking about, you know, a customer account, 

but the data into that customer account has to come from about 

200 different case management systems. And, you know, there are 

employees today who can’t see into this system when they’re trying 

to talk to a taxpayer on the phone and you have to call somebody 

else to get the answer to that. So how that’s going to merge in an 

online account, this is very, very complex. 

In the meantime, you also have the percentage of taxpayers who 

don’t or won’t use these accounts and for very good reasons. 

And the other issue that I have about the online account is, as 

we try to protect the security of the taxpayer—and we should set 

very high standards for that verification because we can’t have one 

leak. I mean, that would be horrible, and the impact on compliance 

would be huge. 

Mr. LYNCH. Yes. 

Ms. OLSON. But if we set it high, we will have people drop out. 

The IRS right now is testing a version of the online account with 

IRS senior management and non-bargaining unit employees. So 

these are people who are fairly sophisticated financially. Fifty percent of those volunteers could not get through the online account 

the first time around. 


AKING-6430 with DISTILLER
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Mr. LYNCH. Yes, that is not good. 

Ms. OLSON. Fifty percent. 

Mr. LYNCH. Okay. Thank you. Thank you for answering my question. Thank you. 

Mr. MEADOWS. Ms. Olson, I want to come back to a few things 

that have been mentioned today, but one of the things I heard 

when you were in western North Carolina was that we have a 

greater need for personal contact, that even with the online tools 

that may be here, that when that interaction, when there is a letter that comes from the IRS, that there is a desire to have not only 

a personal contact but just someone who can manage the system. 

And the frustration that I heard in the room was of hours of holding of just trying to get a real person somewhere who can answer 

the question. And then when they called back that they don’t leave 

enough detail that it actually leaves kind of this—they pass the 

football back, but they are not sure who they are getting the pass 

from. Was that input in North Carolina different than what you 

have heard in your other panels across the country? 

Ms. OLSON. We have heard this consistently. You know, we have 

heard both from taxpayers and practitioners that they want to talk 

to the IRS. For a taxpayer, they don’t understand the notice that 

they’ve received, and they want to hear from the IRS what it 

means. And that would be true whether they get it electronically 

or they get it, you know, in the mail. 

For the practitioners, they did say that they would find the online accounts very, very helpful because then—because they could 

look at the background, they could go online to their tax—their client’s account, see what’s going on in it, but then they would want 

to call the IRS. 

They would also use the account to monitor what happened after 

they talked to the IRS and the IRS said we’ll do X. So it could get 

rid of some phone calls and, you know, might get rid of two phone 

calls out of every, you know, transaction, but they still for that critical what are you—you know, let me tell you this, let me hear from 

you, they want that interaction. 

Mr. MEADOWS. So obviously part of that is a resource issue. 

Ms. OLSON. Yes. 

Mr. MEADOWS. Part of it is not a resource issue; it is a commitment issue. And the reason I say that is I heard about—you know, 

in your testimony you talked about having to schedule an appointment for walk-up centers. Now, we all love the fact that we need 

an appointment, but the other part of is is that what is perplexing 

to me is you have a willing taxpayer willing to give some of their 

hard-earned dollars to the IRS and show up and they are saying 

we can’t take the payment because you don’t have an appointment. 

Is that correct? 

Ms. OLSON. That’s correct. 

Mr. MEADOWS. Is that not insane? I mean, you know, I have 

worked in collections. I won’t make you comment on whether that 

is insane or not—— 

Ms. OLSON. I’m perfectly fine commenting on it. It is insane. I 

don’t understand the policy. I think it says to the—the taxpayer is 

standing there saying what? 


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Mr. MEADOWS. So we have heard a little bit about a directive 

memo that would suggest on what—as people try to comply where 

there is this compromise and they are saying, okay, here is my 

down payment. It is my understanding in the past if they are not 

up to speed on all their tax returns, we have taken that money and 

we have held it and said you need to get caught up, and once you 

get caught up, we will be able to agree to this. Is it true that now 

when someone comes in with a check and a compromise that if 

they are not caught up that we are sending the check back to the 

taxpayer? Is that true? 

Ms. OLSON. Yes. The IRS released a memo this week saying if 

you file an offer and compromise and you give us your down payment, we—and you’re not in compliance with all your tax returns, 

we are sending the money back to you, we are sending the offer 

back to you and saying get in compliance. 

Mr. MEADOWS. So I will ask a second time, is that not insane? 

Ms. OLSON. Yes, it is insane. 

Mr. MEADOWS. Okay. So we have American taxpayers who are 

willing to pay their taxes, albeit maybe reluctantly, but they are 

willing to do it, and we have the IRS who is giving the money back 

or refusing to take the money because they don’t have an appointment. 

Ms. OLSON. Yes, that makes no sense. 

Mr. MEADOWS. That should be headlines. I mean, I don’t understand why we would do that. 

So what can Mr. Lynch and I and Mr. Jordan and I do with Commissioner Koskinen to help him perhaps see the error of their 

ways? What would you recommend? 

Ms. OLSON. I think raising this in this hearing has certainly 

done a lot, but I honestly think that the IRS needs to do a better 

job when it makes these decisions of analyzing the consequences of 

these decisions and not just look at we’re saving money because 

we’re not handling these in-person contacts that are $60 per contact. You may have spent $60, but you might have brought in 

$5,000 by serving that taxpayer in that walk-in site. And that’s the 

not the analysis that’s happening, and that needs to be asked for. 

Mr. MEADOWS. Would you be willing to give this committee in 

the next 45 days or so your recommendations on what legislative 

fixes that you would recommend? Or actually, I am asking you to 

do that. 

Ms. OLSON. Yes. 

Mr. MEADOWS. And so if you would be willing to do that, what 

I would like to do is to make sure inn a bipartisan way we address 

that. There are a number of others. I think they are about to call 

votes. I am going to recognize the gentleman from Ohio for a series 

of questions so if—— 

Ms. OLSON. Thank you. Yes. 

Mr. JORDAN. Thank you, Mr. Chairman. 

Ms. Olson, thank you for being here and for the work of your office. 

Are you familiar with the—we had earlier this week the GAO 

here in this committee room talking about the $385 billion annual 

tax gap that exists. You are familiar with the GAO’s report? 


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Ms. OLSON. I haven’t read their most recent, but I’m very familiar with the tax gap and the—— 

Mr. JORDAN. Yes. And would you agree that that is a pretty accurate figure they have put on it? I mean—— 

Ms. OLSON. Yes. 

Mr. JORDAN.—the gentleman here from the IRS, frankly, agreed 

with GAO’s finding. 

Ms. OLSON. Well, I think that that data comes from the IRS, you 

know—— 

Mr. JORDAN. So you think it is right? 

Ms. OLSON. So it’s as correct as you can—it’s the known tax gap. 

There’s an unknown tax gap—— 

Mr. JORDAN. Yes. 

Ms. OLSON.—criminal activity, things like that, but yes, I think 

people—there’s a general consensus that’s the figure. 

Mr. JORDAN. And obviously all the Americans who pay their 

taxes would expect that all the revenue should be generated and 

that they would get the type of service that, you know, they need 

or expect from their government. And that is maybe not happening 

because of the failure to collect all the revenue due. 

Ms. OLSON. We have looked at the tax gap as a surtax on the 

taxpayers who are paying their taxes. 

Mr. JORDAN. Exactly right. And GAO had 112 recommendations 

to the IRS that would help deal with this significant tax gap. And 

our understanding is that the IRS has only implemented 53 of 

those 112 recommendations. Is that your understanding? 

Ms. OLSON. That, I think, is what the report said, yes. 

Mr. JORDAN. Yes. And obviously, that, too, seems to be not reflective of what is best for taxpayers, the failure of the IRS to implement all their recommendations. 

And the chairman was just talking about this appointment issue, 

which I didn’t know about, which is, as you said a couple times, 

I think, is crazy. I think the term you used or the chairman used 

was insane. Did any of the 112 recommendations deal with that 

issue? 

Ms. OLSON. Not to my knowledge. 

Mr. JORDAN. So there should be 113 at least then? 

Ms. OLSON. Sounds like it. 

Mr. JORDAN. Okay. Okay. The one thing I am concerned about 

is an IRS that won’t implement 112, now 113 recommendations 

that make sense, that will help taxpayers, treat them with the respect they deserve, is focused on something that I think potentially 

can harm taxpayers, harm their most fundamental liberties. And 

that is this whole geolocation stingray operation. Are you familiar 

with what stingray technology does? 

Ms. OLSON. I have a high level of understanding. I’m not detailed—— 

Mr. JORDAN. Okay. 

Ms. OLSON.—level, but I understand what you’re talking about. 

Mr. JORDAN. Yes. And the witness who was here earlier this 

week said that he believes—we posed a number of questions to Mr. 

Dalrymple, who frankly couldn’t answer many of them but said he 

would get back with us. But one thing he did offer to the committee 


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was that he believes 37 times this technology, which without a 

probable cause warrant was used on American taxpayers and—— 

Ms. OLSON. By the IRS. 

Mr. JORDAN. By the IRS, yes. I mean, good point, there are other 

agencies using it, too, I believe without Fourth Amendment probable cause type of warrants. And that the IRS is currently in the 

process of purchasing an additional stingray unit, additional technology at the cost of several hundred thousand dollars. Do you believe that is in the best interest of taxpayers? 

Ms. OLSON. I don’t know that I have enough information to answer that question. I need to know who is going to use it and what 

are the protections for using it. And I don’t have the knowledge 

about that. If it were not being—if it were available to anyone on 

the civil side of the IRS as opposed to the criminal side and due 

process protections and court orders were not being expected—— 

Mr. JORDAN. Let me ask the question this way—— 

Ms. OLSON. Yes. 

Mr. JORDAN.—Ms. Olson. Of those 112 recommendations that 

GAO made to deal with the $385 billion tax gap that we now know 

should frankly be 113 recommendations based on the discussion between you and the chairman, do any of those 113 recommendations 

encourage the IRS to purchase an additional stingray technology 

unit? 

Ms. OLSON. Not that I know of. 

Mr. JORDAN. Yes. That is my understanding, too. But, potentially, at least potentially you would agree with me that this stingray technology infringes on the very taxpayers you are supposed to 

be advocating for, infringes on potentially their most fundamental 

liberties? 

Ms. OLSON. I have a lot of concerns about its use. I share your 

concerns. 

Mr. JORDAN. I thank you. 

Thank you, Mr. Chairman. 

Mr. MEADOWS. I thank the gentleman. 

The chair recognizes the gentlewoman from New York, Mrs. 

Maloney. 

Mrs. MALONEY. Thank you, Mr. Chairman. Thank you, all of the 

panelists, and thank you to the ranking member. 

The IRS is developing the taxpayer experience of the future of 

virtual taxpayer assistance through individual online accounts. It 

will replace the personal interaction for digital-savvy taxpayers. So, 

Ms. Olson, you write in your report that this plan has been driven 

by a really important consideration, and that is the lack of appropriate funding and continual cutbacks to the operations of the IRS. 

In your opinion, does the plan have the potential for making the 

agency more efficient and saving money for the future? 

Ms. OLSON. I personally don’t think so. I think it will create a 

lot of rework for itself. 

Mrs. MALONEY. And if you were to move forward with this program, is it important or is it necessary for Congress to make a lot 

of contributions or contribute substantially to the cost of it or—— 

Ms. OLSON. Well, it’s going to require some significant up-front 

cost, revamping—— 

Mrs. MALONEY. Like about how much—— 


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Ms. OLSON.—whole systems. 

Mrs. MALONEY.—do you think? 

Ms. OLSON. I really couldn’t give you that estimate. I think it’s— 

parts of it are in the President’s budget proposals, things like that, 

that—but it is, you know, just—because we have systems that are 

still in COBOL, because we are just very archaic in our systems, 

to pull something off like this, to have it really an integrated system is going to cost a lot of money, a total—— 

Mrs. MALONEY. Okay. 

Ms. OLSON.—reengineering of the IRS IT. 

Mrs. MALONEY. Mr. Buttonow, most recent annual report to Congress from your organization makes the observation, ‘‘Future challenges require digital transformation at the IRS,’’ and you state, 

‘‘The IRS needs to transform its taxpayer services and compliance 

capabilities for the efficiency through digital tools.’’ It’s been reported that some of IRS’s systems date back to the Kennedy Administration. Will those systems support the transformation that 

you’re talking about, Mr. Buttonow? 

Mr. BUTTONOW. Yes, ultimately. Now, this is not going to happen 

overnight. I mean, what the IRS needs to do is build—if they want 

to have an online presence, an online taxpayer service, they need 

to start iterating on that now, which means give us a solid plan 

of what the details are and start improving on each iteration. So 

as the IRS develops its capabilities, those systems that support 

those capabilities will need to be upgraded. 

Mrs. MALONEY. The IRS Commissioner John Koskinen acknowledges the responsibility to serve all taxpayers, including those who 

prefer personal over digital interaction. And I guess I will ask this 

question to both of you. Is there anything that you have not seen 

in this plan that you believe should have been included to improve 

taxpayer services? 

Ms. OLSON. Well, my—again, my disagreement with the IRS is 

that the—we all agree that an online account is vitally important. 

My disagreement is that the online account is not going to substitute for in-person, you know, or phone assistance, that personal 

contact. It will supplement it. And as I said in my testimony, the 

Federal Reserve has borne that out in its surveys over the last 5 

years that people who are digital mobile banking users visit their 

branches on average three times in the month before the survey by 

87 percent. I mean, it’s an extraordinary percentage. People want 

multiple choices. And they will use the online account, they will 

also use the phones, and they will also do face-to-face. And we 

should provide that to them. And I don’t see that in the plan. 

Mr. BUTTONOW. And I would—— 

Mrs. MALONEY. Mr. Buttonow? 

Mr. BUTTONOW.—agree with all those statements. I don’t—this is 

not a replacement. This is absolutely not a replacement. 

Now—but we need to go online. The IRS needs to go online, it 

needs to serve taxpayers where they want to serve. There’s increasing preferences as the millennials come online. They want to deal 

digitally. Tax professionals who file 57 percent of their returns out 

there, they want to interact with the IRS digitally just for basic information. 


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Now, when it gets to more complicated areas of tax administration, things like compliance, then I think there’s a higher opportunity where people want to go ahead and talk with the IRS, but 

they should be able to interact with them online also. 

Mrs. MALONEY. I agree with you. It is certainly the way of the 

future. Everything is online, particularly with—— 

Mr. BUTTONOW. Your State is a great example of it. 

Mrs. MALONEY.—the younger generation. 

Mr. BUTTONOW. Right. 

Mrs. MALONEY. They communicate almost entirely online and 

read online. They are not even reading normal newspapers. Everything is online. So I feel it is a way we have to move and go towards. 

Is the IRS moving towards going online or not? 

Ms. OLSON. That is definitely its view of the future. 

Mrs. MALONEY. But right now, can you interact online? Can 

you—— 

Ms. OLSON. No, you cannot. 

Mrs. MALONEY.—ask—you know, certainly, basic questions—— 

Ms. OLSON. You can find—— 

Mrs. MALONEY.—should be answered online. 

Ms. OLSON. You can find out where your refund is. They—the 

IRS last October took off the only service it had where you could 

email a question and have someone answer it back to you. 

Mr. BUTTONOW. Yes. 

Ms. OLSON. So even as it’s moving forward, it’s moving backwards. 

Mrs. MALONEY. Okay. My time is expired. Thank you. 

Mr. MEADOWS. I thank the gentlewoman. I thank both of you for 

your testimony. They have called votes, and we have only got a few 

minutes left, and so I think we are both going to skip our closing 

remarks and just say thank you so much for being here today. 

If there is no further business before the committee, the committee stands adjourned. 

[Whereupon, at 10:47 a.m., the subcommittee was adjourned.] 

Æ 


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