U.S. GOVERNMENT PUBLISHING OFFICE

33–793 WASHINGTON : 2019

LEGISLATION TO IMPROVE 

TAX ADMINISTRATION 

HEARING 

BEFORE THE

SUBCOMMITTEE ON OVERSIGHT 

OF THE

COMMITTEE ON WAYS AND MEANS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED FIFTEENTH CONGRESS 

SECOND SESSION 

JANUARY 30, 2018 

Serial No. 115–OS11 

Printed for the use of the Committee on Ways and Means 

( 

ii 

COMMITTEE ON WAYS AND MEANS 

KEVIN BRADY, Texas, Chairman 

SAM JOHNSON, Texas 

DEVIN NUNES, California 

DAVID G. REICHERT, Washington 

PETER J. ROSKAM, Illinois 

VERN BUCHANAN, Florida 

ADRIAN SMITH, Nebraska 

LYNN JENKINS, Kansas 

ERIK PAULSEN, Minnesota 

KENNY MARCHANT, Texas 

DIANE BLACK, Tennessee 

TOM REED, New York 

MIKE KELLY, Pennsylvania 

JIM RENACCI, Ohio 

PAT MEEHAN, Pennsylvania 

KRISTI NOEM, South Dakota 

GEORGE HOLDING, North Carolina 

JASON SMITH, Missouri 

TOM RICE, South Carolina 

DAVID SCHWEIKERT, Arizona 

JACKIE WALORSKI, Indiana 

CARLOS CURBELO, Florida 

MIKE BISHOP, Michigan 

DARIN LAHOOD, Illinois 

RICHARD E. NEAL, Massachusetts 

SANDER M. LEVIN, Michigan 

JOHN LEWIS, Georgia 

LLOYD DOGGETT, Texas 

MIKE THOMPSON, California 

JOHN B. LARSON, Connecticut 

EARL BLUMENAUER, Oregon 

RON KIND, Wisconsin 

BILL PASCRELL, JR., New Jersey 

JOSEPH CROWLEY, New York 

DANNY DAVIS, Illinois 

LINDA SA ́ NCHEZ, California 

BRIAN HIGGINS, New York 

TERRI SEWELL, Alabama 

SUZAN DELBENE, Washington 

JUDY CHU, California 

DAVID STEWART, Staff Director 

BRANDON CASEY, Minority Chief Counsel 

SUBCOMMITTEE ON OVERSIGHT 

LYNN JENKINS, Kansas, Chairman 

DAVID SCHWEIKERT, Arizona 

JACKIE WALORSKI, Indiana 

CARLOS CURBELO, Florida 

MIKE BISHOP, Michigan 

DARIN LAHOOD, Illinois 

TOM REED, New York 

JOHN LEWIS, Georgia 

JOSEPH CROWLEY, New York 

SUZAN DELBENE, Washington 

EARL BLUMENAUER, Oregon 

iii 

C O N T E N T S 

Page 

Advisory of January 30, 2018, announcing the hearing ....................................... 2 

WITNESSES 

Representative Jason Smith, 8th District of Missouri ......................................... 17 

Representative Peter Roskam, 6th District of Illinois .......................................... 17 

Representative James Renacci, 16th District of Ohio .......................................... 24 

Representative Tom Rice, 7th District of South Carolina .................................... 25 

Representative Steve Chabot, 1st District of Ohio ............................................... 27 

Representative Bill Posey, 8th District of Florida ................................................ 28 

Representative Louie Gohmert, 1st District of Texas ........................................... 31 

SUBMISSIONS FOR THE RECORD 

Internal Revenue Service Criminal Investigation (IRS CI) ................................. 33 

Representative Patrick McHenry, 10th District of North Carolina ..................... 34 

American Institute of Certified Public Accountants (AICPA) .............................. 35 

American Payroll Association (APA) ...................................................................... 43 

Nonprofit Data Project of the Aspen Institute ...................................................... 46 

National Association of Tax Professionals (NATP) ............................................... 50 

Small Business & Entrepreneurship Council (SBE Council) ............................... 59 

(1) 

LEGISLATION TO IMPROVE 

TAX ADMINISTRATION 

TUESDAY, JANUARY 30, 2018 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON WAYS AND MEANS, 

SUBCOMMITTEE ON OVERSIGHT, 

Washington, DC. 

The Subcommittee met, pursuant to notice, at 2:01 p.m., in Room 

1100, Longworth House Office Building, Hon. Lynn Jenkins [Chairman of the Subcommittee] presiding. 

[The advisory announcing the hearing follows:] 

2 

ADVISORY 

FROM THE COMMITTEE ON WAYS AND MEANS 

SUBCOMMITTEE ON OVERSIGHT 

FOR IMMEDIATE RELEASE CONTACT: (202) 225–1721 

Tuesday, January 30, 2018 

OS–11 

Chairman Jenkins Announces Member Day 

Hearing on Legislation to Improve 

Tax Administration 

House Ways and Means Oversight Subcommittee Chairman Lynn Jenkins (R– 

KS), announced today that the Subcommittee will hold a hearing on Member proposals for improvements to the IRS administration of the U.S. tax system. The 

hearing will take place on Tuesday, January 30, 2018, in room 1100 of the 

Longworth House Office Building, beginning at 2:00 p.m. 

Oral testimony at this hearing will be limited to Members of Congress who have 

either introduced or co-sponsored legislation related to improving the IRS. Members 

wishing to testify at this hearing should contact the Subcommittee at (202) 225– 

9263 or Liz.Navin@mail.house.gov by no later than noon on Friday, January 26. 

However, any individual or organization not scheduled for an oral appearance may 

submit a written statement for consideration by the Committee and for inclusion in 

the printed record of the hearing. 

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS: 

Please Note: Any person(s) and/or organization(s) wishing to submit written comments for the hearing record must follow the appropriate link on the hearing page 

of the Committee website and complete the informational forms. From the Committee homepage, http://waysandmeans.house.gov, select ‘‘Hearings.’’ Select the hearing for which you would like to make a submission, and click on the link entitled, 

‘‘Click here to provide a submission for the record.’’ Once you have followed the online instructions, submit all requested information. ATTACH your submission as a 

Word document, in compliance with the formatting requirements listed below, by 

the close of business on Tuesday, February 13, 2018. For questions, or if you 

encounter technical problems, please call (202) 225–3625. 

FORMATTING REQUIREMENTS: 

The Committee relies on electronic submissions for printing the official hearing record. As always, submissions will be included in the record according to the discretion of the Committee. 

The Committee will not alter the content of your submission, but we reserve the right to format 

it according to our guidelines. Any submission provided to the Committee by a witness, any materials submitted for the printed record, and any written comments in response to a request for 

written comments must conform to the guidelines listed below. Any submission not in compliance with these guidelines will not be printed, but will be maintained in the Committee files 

for review and use by the Committee. 

All submissions and supplementary materials must be submitted in a single document via 

email, provided in Word format and must not exceed a total of 10 pages. Witnesses and submitters are advised that the Committee relies on electronic submissions for printing the official 

hearing record. 

All submissions must include a list of all clients, persons and/or organizations on whose behalf 

the witness appears. The name, company, address, telephone, and fax numbers of each witness 

must be included in the body of the email. Please exclude any personal identifiable information 

in the attached submission. 

Failure to follow the formatting requirements may result in the exclusion of a submission. All 

submissions for the record are final. 

3 

The Committee seeks to make its facilities accessible to persons with disabilities. 

If you are in need of special accommodations, please call 202–225–1721 or 202–226– 

3411 TDD/TTY in advance of the event (four business days notice is requested). 

Questions with regard to special accommodation needs in general (including availability of Committee materials in alternative formats) may be directed to the Committee as noted above. 

Note: All Committee advisories and news releases are available at 

http://www.waysandmeans.house.gov

f 

/ 

Chairman JENKINS. The Subcommittee will come to order. Welcome to the Ways and Means Oversight Subcommittee Member 

Day hearing on legislation to improve tax administration. Today is 

a unique opportunity for us to hear from colleagues about their legislative ideas and priorities related to reforming the IRS. 

Tax administration is an issue that I have been familiar with for 

my entire professional life. As a CPA I have had many years of experience helping individuals and small businesses navigate the 

complexities associated with filing their taxes. 

I know the relationship between the IRS and taxpayers can be 

strained, particularly as taxpayers strive to understand their tax liability and the IRS struggles to communicate and provide help. I 

am looking forward to exploring ways to restore the relationship 

between taxpayers and the IRS and help the agency better understand and administer the tax code. 

Over the last year, through more than 10 formal hearings and 

Committee events, this Subcommittee has heard from high-level 

IRS executives, the National Taxpayer Advocate, and agency 

watchdogs such as GAO and TIGTA on how the IRS is functioning, 

and where they are succeeding and where some assistance may be 

necessary. We have also heard from practitioners, public interest 

groups, small businesses, and individuals about the challenges they 

face with the IRS. 

One of the challenges I would like to highlight today is the dispute resolution process at the IRS. This is an administrative process where the agency seeks to resolve controversies without litigation. If a taxpayer disagrees with an IRS decision or assessment, 

Congress determined that a review by an independent IRS employee should be available. 

Unfortunately, over time, the process set up by the IRS has become less independent, and taxpayers are frustrated. Some express 

frustration at not being able to plead their case face to face. Others 

have been completely denied access to independent review. Taxpayers are losing faith that they will receive an independent and 

fair review of their case. 

I am looking forward to working with Ranking Member Lewis to 

address these concerns and others, as we craft a bill to reform the 

IRS. 

In addition to hearing from my Subcommittee colleagues here behind this dais, I am eager to hear from other non-Subcommittee 

Members who have spent time and energy on bills to improve the 

way our tax code is administered. Today’s hearing will be structured as follows. 

Members will have 5 minutes to discuss their tax administration 

legislative priorities. I would remind those Members that they are 

4 

also able to submit written testimony in support of their legislation. 

I want to thank our witnesses and Members of the Subcommittee 

for taking time to be here today. 

And with that I would like to yield to the distinguished Ranking 

Member, Mr. Lewis, for the purpose of an opening statement. 

Mr. LEWIS. Madam Chair, thank you for holding this hearing on 

proposals to improve the administration of our Federal tax system. 

Let me begin by congratulating you on your appointment, and 

welcome you as our new chair. I enjoyed working with our friend 

and colleague from Florida, and I look forward to working with 

you. 

Today we will hear suggestions from our colleagues on how to 

improve IRS operations and taxpayer services. In a Nation as great 

and diverse as ours, taxpayers have unique perspectives and needs. 

Madam Chair, as you know, we have a voluntary tax system that 

depends on taxpayers understanding their responsibility and receiving timely answers to their questions. Unfortunately, identity 

theft and tax fraud continue to challenge tax administration. It is 

particularly important that all taxpayers, especially those who are 

low-income, disabled, and senior citizens receive fair, quality, inperson services. 

Over the past 8 years, Congress cut the agency budget by almost $1 billion. I said it before and I will say it again: You cannot 

squeeze blood from a turnip. We all know that the agency is in desperate need of more funding and staff. For these reasons, we must 

strengthen the Internal Revenue Service. 

Madam Chair, I would like to share a brief overview of my bill 

to improve taxpayer service: H.R. 2171, the Taxpayer Protection 

Act of 2017. The Democratic Members of this Subcommittee joined 

me in introducing this legislation. My bill would repeal the private 

debt collection program that costs three times more than it collects, 

and abuses thousands of low-income taxpayers, by enrolling them 

in installment agreements that they cannot afford. The program is 

a shame and a disgrace, and it must end. 

My bill will also strengthen low-income taxpayer clinics, fix the 

offer-in-compromise program, and improve overall funding for taxpayer services. 

Finally, I will—it would ensure that taxpayers know whether the 

professional preparing their return is licensed and in good standing 

with the IRS. This bill proposes good, sound policy, and I hope our 

colleagues on both sides of the aisle will support it. 

Madam Chair, thank you again, and I ask unanimous consent 

that my full statement is included in the record. And thank you for 

holding this hearing. I look forward to the testimony of our colleagues, and I yield back. 

Chairman JENKINS. Without objection. 

[The prepared statement of Hon. John Lewis follows:] 

5 


33793A.001

OPEN1NG STATEJ\IIENT OF RANKING MEMBER JOHN LEWIS (D-GA) 

COMMITTEE ON WAYS AND MEANS 

SUBCOMMITTEE ON OVERSIGHT 

HEARING ON LEGISLATION TO IMPROVE TAX ADMINISTRATION 

January 30, 2018 

Madam Chair, thank you for holding this hearing on proposals to improve the 

administration of our federal tax system. Today, we will hear suggestions from our colleagues on 

how to improve IRS operations and taxpayer services. 

Madam Chair, as you know, we have a voluntary tax system that depends on taxpayers 

understanding their obligations and receiving timely answers to their questions. In a nation as 

great and diverse as ours, taxpayers have unique perspectives and needs. Unfortunately, identity 

theft and tax fraud continue to challenge tax administration. It is particularly important that all 

taxpayers - especially those who are low-income, disabled, and senior citizens -- receive fair, 

quality, and in-person services. For these reasons, we must strengthen Internal Revenue Service 

(IRS) staff and training and arm the agency with adequate tools to fight identity theft and tax fraud. 

Without necessary resources, the agency will not be able to implement the ideas discussed 

today. Over the past eight years, Congress cut the agency's budget by almost one billion dollars. 

We all understand that the Internal Revenue Service is in desperate need of more funding and staff. 

These reductions ha1m both taxpayer services and tax administration. We should adopt many of 

these good ideas only if the agency receives the additional funding it needs to carry out its duties. 

Madam Chair, I would like to share an overview of my bill to improve taxpayer servicesH.R. 2171, the Taxpayer Protection Act of2017. The Democratic Members of this Subcommittee 

joined me in introducing this legislation. H.R. 217 1 reflects many of the values in the Taxpayer 

Bill of Rights. 

H.R. 217 1 would repeal the private debt collection program restarted in 2015 by the 

Majority. The program abuses thousands of low-income taxpayers by enrolling them in 

installment agreements that they cannot afford. In her most recent report to Congress, the National 

Taxpayer Advocate states that the program only collected $6.7 million from taxpayers at a cost w 

the iRS of$20 million, which is tluee times the amount collected. Nearly 30 percent of the people 

who made payments under the program had·incomes below $20,000, about 40 percent had incomes 

below 250 percent of the poverty level, and some were Social Security Disability Insurance (SSDI) 

recipients. 

Simply said, Mad run Chair, the collection of federal taxes is a core function of government. 

A for-profit focuses on bonuses and commissions; it cannot and will not ever have the best interest 

of taxpayers at heart. We have been down this road before. Each and every single time, private 

debt collection fails. It creates confusion and wastes taxpayer dollars. The program is a shame 

and a disgrace, and it must end. 

In addition, our legislation would allow the IRS to refer taxpayers to Low-Income 

Taxpayer Clinics for assistance, increase authorized grants to such clinics, and improve overall 
6 

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33793A.002

funding for taxpayer services. H.R. 2171 also would repeal the partial payment requirement for 

taxpayers who would like to enter into an offer-in-compromise to settle their tax liabilities. Today, 

the law requires taxpayers to make a nonrefundable partial payment of 20 percent of the amount 

of d1eir offer with their application. Our bill would repeal the nonrefundable deposit tllat prevents 

taxpayers from settling their debts. 

Finally, H.R. 2171 would authorize the agency to regulate tax return preparers and disclose 

information to the public related to tax return preparer misconduct. The IRS currently receives 

over !50 million tax retums each year, which mostly paid return preparers submit. Taxpayers 

should be able to know whether the professional preparing their return is licensed and in good 

standing with the IRS. As you can see, the Taxpayer Protection Act proposes good, sound policy, 

and I hope our colleagues on both sides.ofthe aisle will support this bill. 

Madam Chair, like you, I care deeply about the agency's ability to provide service to 

taxpayers. Again, I thank you for holding this hearing, and I look forward to the testimony of our 

colleagues. 
7 

Chairman JENKINS. Thank you, Mr. Lewis. Thank you, Mr. 

Lewis, without objection. 

Other Members’ opening statements will be made part of the 

record. 

Now we are going to hear from the Members of the Subcommittee on their priorities to improve tax administration. And 

with that I will recognize Mr. Schweikert for 5 minutes. 

Mr. SCHWEIKERT. Thank you, Madam Chairman. We have actually two pieces of legislation out there, and here is the basic concept. One is often referred to as a third-party verification, but let’s 

use sort of a simple model example. 

You qualify for an earned income tax credit. And today we expect 

the IRS to do an algorithm. We have actually done legislation to 

delay the payment going out. What would happen if I came to you 

and said there is a more elegant way to do that, and the person 

who is actually under—played by the rules and has earned that 

value could get it almost immediately? 

The ability to have the tax return and a couple of the key fields 

balanced against—we will call them private commercial databases 

saying, hey, this database over here says this person had $200,000 

worth of consumption, but they are telling us they made $30,000 

last year. You know that should probably go into the pile to be 

looked at again. 

But if it matches instantly, it is an elegant way to use just a simple, high-high-speed computer match to say, yes, we have good data 

here, a good request. It—we don’t see fraud. Send the person the 

resources they have earned. It is much more elegant. 

And I don’t mean to hurt anyone’s feelings who is a programmer 

at the IRS, but it is much more elegant than trying to design an 

algorithm that, as soon as you understand what the algorithm is 

looking for, you design the—you put in paperwork to work on—to 

the outskirts of the algorithm to work around it. 

The data is already out there. It doesn’t mean you transfer information to a private vendor. You just look for the match. And so it 

is a red light/green light. It is simple, it is fast. It would be, I believe, dramatically less expensive. And over time we need to accept 

using technology to make the IRS much faster and much more elegant on these. 

The second one I want to share with you is how many of you 

have ever gotten a loan? You have gone out and gotten an SBA 

loan or a home mortgage or this and that. You remember filling out 

the piece of paper saying, ‘‘IRS, please tell my lender what my last 

couple years of tax returns were’’—particularly if you are an independent contractor. 

Do you know that, if I look on here, the technology today is functionally fill out this 56—or, excuse me, 4506T form, and then fax 

it. Fax it in. Come on. Let’s actually sort of reach into this century 

and just ask for the 4506T, the income verification for our brothers 

and sisters who are out there getting a loan, that they can use this 

thing called the Internet and technology, fill out the form, turn it 

in. You know there are plenty of ways to make it much safer than 

a fax. 

This legislation, I believe, is Representative McHenry’s, so it is 

already out there. Both of these we already have in bill form. And 

8 

it is just the embracing of modern technology and this thing called 

the Internet to make it more efficient and more simple for Americans. 

And with that I yield back, Madam Chairman. 

Chairman JENKINS. Thank you, Mr. Schweikert. I will now recognize Mrs. Walorski for 5 minutes. 

Mrs. WALORSKI. Thank you, Chairman Jenkins, for holding 

this hearing. 

It is hard to believe that it was just literally over a month ago 

that President Trump signed the Tax Cuts and Jobs Act into law, 

yet we have already seen workers getting raises, bonuses, and better benefits, and companies announcing new investments in equipment and facilities right here in the United States. 

While this was the most transformative overhaul of the tax code 

in 32 years, it is easy to overlook the fact that it has been 20 years 

since Congress took a major look at the structure of the IRS. A lot 

has changed since then. 

In 1999, only 23 percent of individual returns were e-filed. In 

2016, that figure was 89 percent. With the growth in e-filing, 

fraudsters are, unfortunately, becoming more and more sophisticated in their techniques. And yet the IRS’s IT infrastructure is 

woefully lacking. They still rely on systems from the Kennedy Administration. There is a clear, critical, and urgent need for the IRS 

to fundamentally overhaul its IT systems, but repeated mistakes, 

big and small, have undermined our trust that they will get it 

right. 

Consider this quote from a September 17th TIGTA report: ‘‘The 

IRS suspended the Enterprise Case Management, or ECM, project 

due to insufficient funding and staffing. In addition, the IRS determined that the software product selected for ECM could not support an enterprise-wide deployment.’’ 

To put it more plainly, the IRS bought the wrong product, and 

then didn’t have enough money to buy the right one. I would be 

pretty upset if my husband took $20 to get gas for the car, but 

came back and said, ‘‘Honey, I need another $20 because I got a 

new ice scraper instead. Also, we need to call a tow truck because 

I ran out of gas.’’ 

Unfortunately, this isn’t the only failed acquisition. The IRS 

wasted $12 million on an email system that, as it turned out, they 

could not use. According to TIGTA, again, they bought it ‘‘without 

first determining project infrastructure needs, integration requirements, business requirements, and whether the subscriptions were 

technologically feasible.’’ But considering the wasted staff time in 

rebidding the contract, you are actually talking about a mistake 

that cost well over $12 million. The staff time and taxpayer dollars 

could have been devoted to other critical IT projects. 

The IRS is run by human beings, and human beings make mistakes. But when a mistake happens, we need to ensure that there 

is accountability, and that procedures are followed to prevent it 

from happening again. 

The IRS would also benefit from a better strategic vision and 

long-term planning. Back in 2009 the agency embarked on the return review program, or RRP, a new fraud detection program to replace legacy systems. It came in years behind schedule, and hunVerDate Sep 11 2014 07:04 Feb 19, 2019 Jkt 033793 PO 00000 Frm 00012 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\33793.XXX 33793
9 

dreds of millions of dollars over budget. The RRP is a long saga. 

But I want to highlight one episode in particular. 

The IRS put the project into a ‘‘strategic pause’’ in 2014. They 

cited many reasons, but here is a sampling: ‘‘To determine the priority and direction from IRS senior leadership; to articulate and 

align RRP’s role in the broader business vision; to develop a road 

map for future State capabilities and architecture for RRP; to ensure clear and concise understanding of scope, cost, and schedule 

with contractors.’’ And finally, ‘‘budgetary constraints.’’ 

Looking at this list, I wonder how any project could ever be on 

time or on budget. I see things like this and I can’t help but ask, 

‘‘Are these budgetary constraints real? Are they because people 

spend so much time spinning their wheels without any direction 

they just really run out of money?’’ 

Now, the RRP is more or less up and running, and that is a good 

thing. It will help catch fraud. But the process was a failure. Picture a basketball player on a breakaway. He trips on his own shoelaces, but heaves the ball up while falling and makes the basket. 

You wouldn’t say, ‘‘Good job,’’ you would say, ‘‘Tie your shoelaces.’’ 

Had the underlying planning issues that led to such a cost overrun and long delay with the RRP been fixed—are new projects like 

CADE too needlessly doomed to the same fate? 

Chairman Jenkins, this is the trust gap. It didn’t open up overnight, and it won’t be closed overnight, either. But we absolutely 

have to fix it. I believe, if we can instill more accountability, better 

contracting practices, and better strategic planning, the IRS really 

can get on the right path. Some of this can be legislative, but some 

involves a cultural shift. It is up to our next IRS Commissioner, 

who I hope will make this a priority. 

Our Committee is seeking to closely engage the IRS on multiple 

fronts to better understand these issues, too. Still, I look forward 

to this Committee’s continued work in the overhaul on reforming 

the IRS. I look forward to hearing our colleagues’ ideas today, and 

I yield back. 

Chairman JENKINS. Thank you. 

Mr. Bishop, you are now recognized for 5 minutes. 

Mr. BISHOP. Thank you, Madam Chairwoman. Thank you for 

the opportunity to speak today, and I would like to let you know 

that I appreciate the fact that we are holding hearings about the 

IRS, a great opportunity to discuss much-needed steps to improve 

the Service. And I look forward to working with the Committee to 

do so. 

Over the last year or so we have had a number of meetings with 

various officials at the IRS, and I am continually amazed and 

shocked to hear about its archaic technology and infrastructure, 

and how much we need to do to ensure that the IRS is pulled into 

the 21st century. 

That said, it is imperative that this Subcommittee explores ways 

to improve the IRS’s technology and capabilities. Furthermore, 

when it comes to taxpayers, many of whom still receive paper 

checks that do not have access to the—we—pardon me a second, 

pardon me. Let me rewind a little bit here. 

When we talk about the IRS and its capabilities, I want to begin 

with my ongoing suggestion that we need to do whatever we can 

10 

to address refunds. And I want to backtrack because, while we get 

a long way in this discussion about IRS reforms, one of the things 

that we talk about—that we have not talked about, I believe, 

enough is about the process of distributing refunds. And during the 

2006 filing season the IRS issued 104 million refunds, 19 million 

of which went out by paper check. 

When refunds are issued by paper checks, it is important to note 

that it costs the government about a dollar per check. But if processed electronically, it costs mere cents. The potential savings are, 

therefore, abundantly clear. 

Furthermore, when it comes to the taxpayer, many receive these 

paper checks, don’t have access to a bank or a credit union, and 

must resort to payday lenders or other check-cashing organizations, 

oftentimes who will charge a substantial fee and nullify the benefits of the refund. By enhancing the electronic payments, there will 

be fewer costs to the government. And, most importantly, taxpayers 

are able to keep more of their rightfully owed refund. 

Madam Chairwoman, electronic payments are simply quicker 

and more secure. And for those reasons I have been working on legislation to increase the number of tax refunds that are processed 

electronically. And I hope it can be included in the final package 

this Subcommittee produces. 

I would like to submit by unanimous consent, if I could, Madam 

Chairwoman, a statement that I have from the Electronic Transaction Association, which is an association representing over 500 

companies that offer electronic transaction processing products and 

services. They encourage Congress to work with the IRS to implement electronic payments for Federal income tax refunds. 

And that said, Madam Chairwoman, I would ask by unanimous 

consent that we submit this into the record. 

Chairman JENKINS. Thank you, Mr. Bishop. Without objection. 

[The submission for the Record of Hon. Mike Bishop follows:] 

11 


33793A.003

1620 L Street NW, Sutte 1020 

Washl09ton, DC 20036 

Statemem of The Electronic Transactions Association 

United States House of Representlltives 

Committee on Ways & Means 

Subcommittee on Oversight 

202.828.263$ 

e!e<:tran.org 

Member Day Hearing on Legislation to Improve Tax Administmtion 

January 30, ?O 18 

Chainnan Jenkins, Ranking Member Lewis and members o f the Committee, 

The Electronic Transactions Association ("ETA") appreciates the opportunity tO submit 

this statement for the record for the Committee's Member day hearing on legislation to 

improve tax administration. 

ETA is an international trade association representing over 500 companies that 

offer electronic transaction processing products and services. The purpose of ETA is to 

help the payments industry by providing leadership through education, advocacy, and 

the exchange of information. ETA's membership spans the breadth of the payments 

industry to include payment networks, financial institutions, transaction processors, 

mobile payments products and services, voice-service providers, payments 

technologies, software providers, and hardware suppliers. ETA member companies 

touch, enrich and improve the lives of every consumer by making the global flow of 

commerce possible. 

ETA encourages Congress to work with the IRS to implement electronic 

payments for federal income tax refunds. As you may know, federal income tax 

refunds are- the only significant government payment that is not required to be made 

electronically (as a result o f an exemption incluc:lcd in the Debt Collection and 

Improvement Act of 1996 "DC I A"). In our electronically focused economy, ETA asks 

that Congress lllke important steps to modernize and make more efficient and secure 

federal income tax refunds. 

ETA also feels it is important that Congress take action to enc·ourage and 

support consumer choice when it comes to receiving their federal income tax refunds. 

With an increasing number of Americans conducting their financial lives through 

financial products & services that were not yet available when the UClA was written, it 

is important that American taxpayers be given the choice to receive payments in the 

manner that best fits their financial lives. 

Innovative financial products, such as prepaid c.nrds and digital wallets, are 

particularly important to the approximately 68 million Americans with limited or no 

access to traditional financial services and products. These products provide them with 
12 

f 


33793A.004

a secure, affordable, and convcnicm option to make payments and receive deposits. 

Encouraging electronic payment for federal ULx refunds would allow more Americans 

to be brought into main stream financial services and, thus, benefit from the security 

and convenience it provides. Action on th is issue has also become more importa nt than 

ever given that Congress recently passed a Jaw that will increase income tax refund 

payments for millions of Americans. 

ETA's members arc dedicated to providing their customers with conven ient, 

secure, and timely financial services and products that make their lives easier. We 

believe that it is time that Congress requires the IRS do the same with their customers, 

the American taxpayer. 

ETA would li ke to thank the Committee for the opportunity to prov ide a 

statement for the record on this important topic. If you have any questions about this 

statement or the issues discussed, please contact Scott Talbott, ETA Senior Vice 

President ofGovemment Affairs at or stalboll@elcctran.oro. 
13 

Mr. BISHOP. On the top of the security, every day we hear that 

countless hackers and criminals are developing new schemes to 

steal taxpayer refunds, and are constantly trying to access the 

IRS’s data. In an effort to combat bad actors and collaborate and 

share best practices to fight off emerging threats, the IRS formed 

the IRS Security Summit, which is a partnership of the IRS, State 

revenue agencies, and the private industry. By all accounts, this 

Summit has been beneficial for the parties involved, and I think we 

should explore more ways this Congress can further assist this effort. 

In closing, I wholeheartedly agree with everyone in the room that 

the IRS is in dire need of reform. We have had plenty of bipartisan 

agreement on these issues over the last year, and I think this is 

a real opportunity to improve the IRS for the American taxpayers 

and start bridging the gap, the trust gap. 

Thank you very much, and I yield back. 

Chairman JENKINS. Thank you. 

Mr. Reed, you are recognized for 5 minutes. 

Mr. REED. Thank you, Madam Chair. And I appreciate the opportunity to have the discussion today with our colleagues in regard to ways to improve the IRS. 

And I was listening to my good friend from Indiana, Mrs. 

Walorski, talking about the status of the computer programming, 

if you would, in the IRS. And I remember fondly the conversation 

I had with a prior IRS Commissioner about the discussion in regard to Fortran being the computer code that is utilized in some 

areas of the IRS in regard to its computer programming situation. 

And, for those that may not know what Fortran is—because I 

look around this room and I see many folks in this hearing room 

today that were probably born 20 years after the creation of 

Fortran—it is a 1950s, 1960s computer programming system that 

is so antiquated, my understanding in the conversations with the 

former IRS Commissioner, that it is very difficult to even fix that 

computer code because no one knows what it is. They have all retired or gone to the great beyond. 

So this is an area that, hopefully, with technology, as my good 

friend from Arizona had mentioned, can be improved upon in regard to providing better services to our constituents and to the 

American public. 

But I wanted to focus in particular, Madam Chair, on improvements in the IRS that I truly do believe need to occur in regard 

to serving populations in rural communities such as yours in Kansas, Ms. Jenkins. And one of the areas that I see, just some simple 

reforms that maybe the IRS can take heed to, is utilizing technology when it comes to callback features, for example. 

When folks call a service organization today, often they will be— 

hear a recorded message saying if you would like a call back, we 

can provide a call back to you at the phone number that you enter 

into the program. That is a simple relief reform that would go so 

far to help the needs of taxpayers across the country, especially in 

rural communities. 

In our district we have very limited live centers where folks can 

go into areas like Jamestown, New York, or Elmira, New York, and 

meet with an actual person to discuss their sensitive IRS matters. 

14 

Using these types of phone services that accommodate the interests 

of our constituents—you know, many are working families, many 

are working mothers, working fathers that have difficulty trying to 

travel. Our district, from point to point across the district, is about 

a 5-hour drive, to be perfectly honest with you. It is very difficult 

to get to these centers and to have a conversation in regard to the 

issues before the IRS. 

So doing things such as that callback feature, I think, is a simple 

reform that they could implement. 

I also like the concept that is being discussed in regard to a yearround call center. I know the IRS, from information we have received, has kind of an off-season, on-season type of resource allocation. If we could maybe provide those resources on a year-round 

basis, many of the issues, especially as we go through tax reform, 

that many of the taxpayers deal with can be headed off—and have 

access to information sooner, rather than waiting potentially for an 

on-season staffing level that allows them to talk to real people. 

And then, finally, Madam Chair, you know, I think it would be 

appropriate on these issues in regard to the IRS that maybe we 

have a dedicated line to people like yourselves, who are CPAs, enrolled agents, and then, therefore, maybe their more technical, advanced questions get the resources immediately responded to by 

staffing sophistication on the other end of the phone that can address those inquiries, as opposed to folks that may just have some 

basic questions and information requests that they could potentially get through a direct line. Maybe this would allocate the 

phone system so that you are not on hold for a significant amount 

of time, you are actually getting to the resource from the IRS in 

a timely fashion at the level that maybe your question or inquiry 

deserves the matching of that resource on the other end of the 

phone line. 

So, for those simple reforms, I would advocate for the continuation of this hearing, and appreciate the Chairman putting this together and hearing from our colleagues and others ideas to improve 

services for what we all believe needs to be done in the IRS—better 

service to the people across America. 

Chairman JENKINS. Thank you, Mr. Reed. 

Mr. LaHood, you are recognized for 5 minutes. 

Mr. LAHOOD. Thank you, Chairwoman Jenkins, for holding this 

Subcommittee hearing today, and to my colleagues for their advocacy and testimony on this important topic. 

Ensuring an efficient, accountable, and transparent IRS is key to 

restoring the relationship between taxpayers and the agency, as 

well as an effective implementation of the tax code. Items of importance include ensuring a service-first agency, instilling confidence 

that taxpayer information is protected, and upgrading IRS technology for the 21st century, among other things. 

It has been over 20 years since major reforms were made to the 

IRS. I appreciate the work this Subcommittee has done over the 

last year, including the Better Way blueprint. As the newest Member of this Subcommittee, I look forward to beginning engaging in 

this important work. 

First, I would like to mention a bill that I am a cosponsor of, 

H.R. 3541, the Free File Permanence Act of 2017. This legislation 

15 

was introduced by my colleague from Illinois, the Chairman of the 

Health Subcommittee, Peter Roskam. If enacted, this legislation 

would make permanent the IRS’s Free File program. I have held 

a number of information seminars throughout my district on this 

subject, and people understand how important it is. 

This program is a public-private partnership between the IRS 

and tax software companies and State departments of revenue that 

enables low-income and underserved individuals to choose between 

the best tax preparation products to prepare and electronically file 

their Federal return for free. This actually saves the Federal Government money in the process. 

Ensuring taxpayers have access to the tools and resources they 

need to simplify the tax process, this is important and a major part 

of H.R. 1, which was just signed into law. 

Second, I would like to raise a different issue that I am working 

on to address through my own legislation. Currently, by law, the 

IRS Taxpayer Advocate Service can issue a—issue a taxpayer assistance order for specific case issues. While authorized by the 

Commissioner, the IRS Taxpayer Advocate Service does not have 

the same codified authority to issue taxpayer assistance directives 

for systemic issues. 

Ensuring that the IRS Commissioner is responsive in a timely 

and substantive way to both types of requests is important to assure that areas for improvement within the agency are recognized 

and addressed. 

In the event that the IRS Commissioner does not respond, it is 

worth considering what else can be done to ensure that the taxpayers’ issue is fully reviewed and acknowledged. I look forward to 

continuing to find the best way to fix this situation, and hope to 

have bipartisan support on this legislation. 

With that, Chairwoman Jenkins, I yield back my time. Thank 

you. 

Chairman JENKINS. Thank you. I now recognize Mr. Curbelo 

for 5 minutes. 

Mr. CURBELO. Thank you, Madam Chairman, and congratulations on your new role. I am thrilled that we will be working together under your leadership to reform, modernize, and revamp the 

IRS. And I know that Members on both sides of the aisle will have 

plenty to contribute to this process. 

I want to take the opportunity today to discuss critical legislation 

I introduced with Representative Danny Davis of Illinois, and— 

which is very fitting, given what we are discussing today. 

Our bill, the Volunteer Income Tax Assistance Permanence Act 

of 2017, would permanently authorize the Internal Revenue Service 

to administer the Volunteer Income Tax Assistance matching grant 

program. With the VITA program, the Federal Government partners with the local community to provide free tax preparation services for individuals with an annual income of less than $54,000, 

and those with limited proficiency in English. The program is specifically targeted to ensure taxpayers have access to services where 

they can confidently file returns without fear of being scammed by 

fraudulent preparers. 

Tax return preparer fraud consistently ranks among the IRS’s 

dirty dozen tax scams, and we know this problem all too well in 

16 

South Florida. Filing a tax return is enough of a headache, without 

the added fear of being scammed. The VITA program helps insulate the most vulnerable populations from this threat. 

The legislation also ensures that VITA grant recipients maintain 

strong records of accuracy that will save taxpayers money. The program already boasts a 94 percent accuracy rating, even including 

returns with a complicated earned income tax credit. When taxpayers use VITA services to file their returns, they can rest assured knowing that their returns will be filed accurately and without the threat of fraud. 

The success of the VITA program is evident in its growth. The 

number of tax returns prepared by the VITA program was 3.8 million in the 2016 tax filing season, up 100 percent from the number 

of returns prepared in the 2014 season. This program is critical to 

the residents of South Florida that I am honored to represent, 

where tax fraud and abuse of low-income filers is rampant, especially among immigrant communities. 

According to Branches, a participant in the VITA program in 

Miami-Dade County, approximately 60 percent of residents qualify 

for assistance. In 2016, Branches helped residents file 9,845 tax returns at no cost, and secure $11.5 million in refunds. I look forward 

to visiting a VITA center operated by the United Way in South 

Florida in the very near future. 

Funding for this essential service has received bipartisan support 

under both Republican and Democratic Administrations. The 

House and Senate Appropriations Committees have continued to 

include strong funding for taxpayer services like VITA, regardless 

of which party is in the majority. The VITA Permanency Act would 

provide the longevity this program needs because it benefits so 

many. 

H.R. 2901 already has the support of 38 bipartisan Members, including 13 Members of this Committee. I urge my colleagues to join 

us in supporting the VITA program, which has a proven track 

record of success in assisting the most vulnerable in our communities. 

Thank you very much, Madam Chair, and I yield back. 

Chairman JENKINS. Thank you, Mr. Curbelo. I would like to 

recognize the Ranking Member for a few statements. 

Mr. LEWIS. Thank you very much, Madam Chair. I just want to 

recognize Mr. LaHood. Did he walk out? 

Chairman JENKINS. He did. 

Mr. LEWIS. He did. But tell him I just wanted to observe that 

he has become a Member of the Committee, and to welcome him. 

I enjoyed working with his father over the years, when he was a 

Member of the Congress. 

Chairman JENKINS. Very nice, thank you. 

We are now joined by non-Subcommittee Members who have 

some legislative ideas. We are going to just move right down the 

line. 

We have the Honorable Representatives Smith, Roskam, Renacci, 

and Rice. 

And, with that, we will yield to the Honorable Representative 

Smith from Missouri for 5 minutes. 

17 

STATEMENT OF THE HON. JASON SMITH, A REPRESENTATIVE 

IN CONGRESS FROM THE STATE OF MISSOURI 

Mr. SMITH OF MISSOURI. Thank you, Chairman Jenkins. It is 

a great honor to be before your Committee. 

The passage of the Tax Cuts and Jobs Act in December created 

a pro-growth tax code for the American taxpayer. And folks across 

the Nation are starting to see the benefits of the lower rates in 

their paychecks. Just last week I visited three different employers 

in Southern Missouri who were either handing out bonuses, increasing hourly wages, or strengthening benefits as a result of the 

new tax code. 

An important next step following such momentous tax reform is 

to ensure that the agency tasked with administering the tax code, 

the IRS, works effectively and efficiently for the American taxpayer. The IRS has been rightfully scrutinized over the years for 

its mismanagement and abuses of the American taxpayer, targeting long wait times and unauthorized spending, just to name a 

few. We need an IRS which protects and serves the American taxpayer, not one which proactively seeks to harm them. 

Simply put, the IRS, in its current form, needs to be ripped out 

by its roots and turned on the—turned on its head into an entity 

which serves the American public, not one which only looks to 

hinder our families, farmers, and small businesses. 

In July of last year, I introduced bipartisan legislation with my 

colleague on the Committee, Representative Terri Sewell, called the 

Preserving Taxpayer Rights Act. This good-government legislation 

would put a stop to an IRS which is inefficient, time consuming, 

and expensive for taxpayers. My bill takes the burden off the backs 

of taxpayers by allowing them to take certain cases to the IRS Office of Appeals, removes threatening tools of the IRS taking taxpayers to court, and protects their private and sensitive information by preventing outside groups from participating in audits, 

codifying into law something the President has instructed Treasury 

to do. 

The American taxpayer deserves an IRS that is less burdensome 

and more transparent. They need an IRS that would work for 

them, not against them. Madam Chairman, it is my hope that, as 

you and your colleagues on the Oversight Subcommittee consider 

legislation to overhaul the IRS, you include the Preserving Taxpayers Rights Act as a mechanism to make the IRS work better for 

the American taxpayer. 

Thank you again for holding this hearing, and I look forward to 

working with you on this and other issues. 

Chairman JENKINS. Thank you, Mr. Smith. 

Chairman Roskam, you are recognized for 5 minutes. 

STATEMENT OF THE HON. PETER ROSKAM, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS 

Mr. ROSKAM. Thank you, Madam Chairman, and Ranking 

Member Lewis. It is an honor for me to be here today, and I deeply 

appreciate the work of the Subcommittee on which I have served. 

And I am here to talk about two pieces of legislation for your consideration. 

18 

The first is H.R. 3641, the Free File Permanence Act, which is 

a commonsense bill that makes the free file program permanent. 

It is a program that is a public-private partnership between the 

IRS and a group of companies which have agreed to offer commercial, online tax preparation and electronic filing services to consumers. This partnership allows free tax filing for any taxpayer 

making less than $66,000, removing a financial burden for taxpayers and ensuring that they are receiving quality guidance on 

how to file their taxes. 

As an added bonus, the program actually saves the Federal Government an estimated $13 million a year because electronic filings 

are less expensive for the IRS to process than paper versions. 

H.R. 3641 has 122 cosponsors, including Chairman Jenkins and 

Representatives DelBene, Walorski, Curbelo, Bishop, and LaHood 

on this Subcommittee. 

Now, the second bill that I want to bring to your attention is 

one that Ranking Member Lewis is very familiar with, because he 

and I were partners in uncovering this scandal at the IRS. It is 

H.R. 1843, the Clyde-Hirsch-Sowers RESPECT Act. And it was 

during our time when we were leading the Committee together 

where we uncovered civil asset forfeiture abuse last Congress, and 

Congressman Crowley is the lead Democrat sponsor on this legislation. 

Here is what happens, in a nutshell. If a person deposits $10,000 

or more into a financial institution, that institution is required to 

submit a currency transaction report to the Treasury Department. 

Avoiding this reporting requirement by purposefully staying below 

the $10,000 limit is a Federal crime known as structuring. Structuring was made illegal in 1986 to prevent large-scale criminal enterprises, terrorists, and money launderers from hiding their 

money from authorities by consistently depositing just shy of the 

$10,000 limit. 

Okay, so far so good. It makes perfect sense. But when structuring is believed to have occurred, the IRS can use its civil asset 

forfeiture authority to seize funds in the bank accounts and force 

the owner of the funds to prove that they were obtained legally. 

Unfortunately, this very Subcommittee uncovered multiple instances where the IRS abused this authority, and was stealing 

legally-earned funds solely because the owners ran afoul of structuring laws. 

In some instances, the rightful owners of the money were told by 

bank tellers that depositing over $10,000 causes a headache of paperwork for the bank, so they deposited under $10,000 to be considerate, of all things. 

In another instance, a taxpayer deposited under the limit because their insurance policies didn’t cover $10,000 in off-premise 

losses. 

Finally, some taxpayers deposited under the limit simply because 

they didn’t want their private information sent off to the IRS every 

time they made a deposit. The RESPECT Act limits the IRS’s civil 

asset forfeiture authority. It requires that, in order for—to seize 

funds the IRS believes have been structured to avoid reporting requirements, the IRS must first show probable cause that those 

19 

funds are derived from an illegal source or connected to some other 

criminal activity. Perfect common sense. 

It also provides important procedural protections, including a 

post-seizure hearing for people whose assets the IRS has seized 

within 30 days after the seizure, or longer if the asset owner requests an extension. 

We have just seen too many of these stories about the IRS seizing assets of honest, law-abiding taxpayers. And codifying these 

protections is something that I think should be included in any tax 

administration bill. 

The RESPECT Act passed the Ways and Means Committee 

unanimously, which means that everybody supported it except the 

newly-arrived Mr. LaHood from Illinois, and we got him when he 

voted for it on the House floor. It overwhelmingly passed the 

House. I urge its—both of these bills consideration. 

And I thank you, Madam Chairman, for the opportunity and— 

or the Ranking Member, Mr. Lewis, for your work, in particular, 

on the RESPECT Act. 

I yield back. Thank you. 

[The prepared statement of Hon. Peter Roskam follows:] 

20 


33793A.005

Roskam Testimony 

Ways & Means Subcommittee on Oversight: 

Member Day Hearing on Tax Administration Legislation 

Thank you Chairman Jenkins and Ranking Member Lewis 

for the opportunity to testify in front of the Oversight 

Subcommittee. At the risk of offending my colleagues on the 

Health Subcommittee, a part of me truly misses my time on 

Oversight, and I envy the important work that you all are on the 

front lines of. 

I'm here today to discuss two truly bipartisan pieces of 

legislation that I believe merit inclusion in any tax 

administration package. 

HR 3641, the Free File Permanence Act is a common sense 

bill that makes the free file program permanent. This program 

is a public-private partnership between the IRS and a group of 

companies which have agreed to offer free commercial online 

tax preparation and electronic filing services to consumers. This 

partnership allows free tax filing for any taxpayer making less 

than $66,000, removing a financial burden for taxpayers and 

ensuring that they are receiving quality guidance on how to file 

their taxes. As an added bonus, this program actually saves the 

federal government an estimated $13 million per year because 

electronic filings are much cheaper for the IRS to process than 
21 


33793A.006

paper versions. HR 3641 has 122 cosponsors, including 

Chairman Jenkins and Representatives DelBene, Walorski, 

Curbelo, Bishop, and LaHood from this Subcommittee. 

The second bill I urge inclusion of in any tax administration 

package is HR 1843, the Clyde-Hirsch-Sowers RESPECT Act. This 

bill should be very familiar to Members of this subcommittee as 

I worked with Ranking Member Lewis to uncover civil asset 

forfeiture abuse last Congress and Congressman Crowley is the 

lead Democrat sponsor of this legislation. 

If a person deposits $10,000 or more into a financial 

institution, that institution is required to submit a currency 

transaction report to the Treasury Department. Avoiding this 

reporting requirement by purposefully staying below the 

$10,000 limit is a federal crime known as "structuring". 

Structuring was made illegal in 1986 to prevent large scale 

criminal enterprises, terrorists, and money launderers from 

hiding their money from authorities by consistently depositing 

just shy of that $10,000 limit. 

When structuring is believed to have occurred, the IRS can 

use its civil asset forfeiture authority to seize funds in the bank 

accounts and force the owner of the funds to prove that they 

were obtained legally. Unfortunately, this subcommittee 
22 


33793A.007

uncovered multiple incidents of the IRS abusing this authority 

and stealing legally earned funds solely because the owners ran 

afoul of structuring laws. In some instances the rightful owners 

of the money were told by bank tellers that depositing over 

$10,000 causes a headache of paperwork for the bank so they 

deposited under $10,000 to be considerate. In another instance 

a taxpayer deposited under the limit because their insurance 

policies did not cover more than $10,000 in off premises losses. 

Finally some taxpayers deposited under the limit simply 

because they did not want their private information sent off to 

the IRS every time they made a deposit. 

The RESPECT Act limits the IRS's civil asset forfeiture 

authority. It requires that in order to seize funds the IRS 

believes have been structured to avoid reporting requirements, 

the IRS must first show probable cause that those funds are 

derived from an illegal source or connected to other criminal 

activity. It also provides important procedural protections, 

including a post-seizure hearing, for people whose assets the 

IRS has seized within 30 days afterthe seizure, or longer, if the 

asset-owner requests an extension. 

We have seen too many horror stories about the IRS 

seizing the assets of honest law abiding taxpayers, and 

codifying the protections in this bill is a no brainer. The 

RESPECT Act passed both the Ways & Means Committee-
23 

f 


33793A.008

which means that everyone but the newly arrived Mr. LaHood 

supported it- and the House Floor by voice votes this Congress. 

That's when we finally got my colleague from Illinois on the 

record. 

Thank you all again for your time and for considering these 

two important bills which make vital improvements for 

taxpayers. 
24 

Chairman JENKINS. Thank you. 

Mr. Renacci, you are recognized for 5 minutes. 

STATEMENT OF THE HON. JAMES RENACCI, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF OHIO 

Mr. RENACCI. Thank you, Madam Chairwoman and Ranking 

Member Lewis. I want to thank you for holding this hearing. I believe that reforming the IRS’s ability to administrate our tax code 

is a critical next step to the—following the passage of the Tax Cuts 

and Jobs Act. 

I am pleased to discuss two pieces of legislation today that I believe will help the IRS better serve the American people, the Improper Tax Payment Reduction Act of 2017, and the Stolen Identity 

Refund Fraud Prevention Act of 2017. I will start with the Improper Tax Payment Reduction Act of 2017. 

This legislation addresses improper payments under the Earned 

Income Tax Credit, which is also known as EITC. The EITC 

incentivizes work, while providing a refundable tax credit to qualifying taxpayers. Unfortunately, the program is currently riddled 

with fraud and error. The 2016 report from the Treasury Inspector 

General estimated that nearly 1 in 4 payments are improper, exceeding $16 billion annually in improper payments. This is unacceptable. 

It is our responsibility to ensure that our constituents’ hardearned dollars are being properly spent. My legislation seeks to address this issue in four ways. 

First, it clarifies existing law to prevent overstatement of selfemployment income. 

Next, it encourages information verification when there are reporting discrepancies. 

Then it allows excess credit payments in instances where it is 

impossible to resolve reporting discrepancies after verification requests. 

Finally, it captures information vital to fraud prevention, long 

before paying out on the EITC. 

This is commonsense legislation. It passed out of the House on 

November 16, 2017, in the first vote by the House on the Tax Cuts 

and Jobs Act, but it was not ultimately included in the final legislation that came out of conference due to inability to meet the reconciliation rules. 

I look forward to seeing the Improper Tax Payment Reduction 

Act of 2017 included within the tax administration legislation we 

are discussing today. 

The other piece of legislation I want to discuss is the Stolen Identity Refund Prevention Act of 2017. This bill combats tax-related 

identity theft, while also helping victims. Mr. Lewis was a cosponsor on this legislation. 

Not too long ago I was a victim of identity theft. I leveraged this 

experience to come up with the safeguards to prevent others from 

going through what I went through. 

Five highlights of the legislation include establishing a centralized point of contact at the IRS for victims of identity theft, making 

it simpler for victims to resolve tax-related identity theft cases. 

25 

Requiring—number two, requiring the IRS to notify taxpayers 

when the IRS discovers unauthorized use of taxpayers’ identification information. 

Three, requiring the IRS to submit a feasibility study regarding 

establishment of a program for identity-theft-related tax fraud victims to opt out of electronic filing. 

Four, establishing an information-sharing and analysis center to 

collect, analyze, and share actionable data and information to detect and prevent identity theft. 

Five, creating a local law enforcement liaison’s role within the 

IRS to coordinate on identity theft cases with local police and law 

enforcement. 

Last spring this bill reported favorably out of the Ways and 

Means Committee by voice, and passed the House on suspension by 

voice. However, it is yet to move forward in the Senate. As such, 

I look forward to seeing the Stolen Identity Refund Prevention Act 

of 2017 included within the tax administration legislation we are 

discussing today. 

In conclusion, the IRS needs our help in order to be—more efficiently administer the tax code and better serve our constituents. 

I look forward to again advancing these two commonsense bills and 

working on additional reforms in collaboration with the IRS. 

I appreciate the Chairwoman, her staff, and my colleagues for 

working on these important issues with me last year and going forward. I also thank you for allowing me to participate in this hearing today. 

I yield back the balance of my time. 

Chairman JENKINS. Thank you. 

Mr. Rice, you are recognized for 5 minutes. 

STATEMENT OF THE HON. TOM RICE, A REPRESENTATIVE IN 

CONGRESS FROM THE STATE OF SOUTH CAROLINA 

Mr. RICE. Thank you, Chairman Jenkins, Ranking Member 

Lewis. Thank you for holding this hearing and giving me the opportunity to discuss my legislative proposals to improve the Internal Revenue Service. 

We need to make the IRS more customer-service-oriented, an 

agency that protects taxpayer rights, and fairly and efficiently administers our new tax code. 

The first legislative proposal I have will help achieve the goal of 

IRS reform—H.R. 3153, the Electronic Signature Standards Act. 

This bill, which I introduced in the House on behalf of myself and 

Representative Ron Kind, would provide a simple, no-cost, privatesector option for small businesses and individual taxpayers to comply with the requirements of our tax system. 

The bill would require the IRS to issue guidance establishing 

uniform standards and procedures for the acceptance of electronic 

signatures on disclosure authorization and power-of-attorney forms. 

Currently, the IRS allows for the use of electronic signatures on 

an ad hoc basis, accepting electronic signatures on certain forms, 

while prohibiting their use on other forms. This lack of uniform 

treatment adds an extra layer of confusion for practitioners that 

are trying to help taxpayers navigate our tax system, while limVerDate Sep 11 2014 07:04 Feb 19, 2019 Jkt 033793 PO 00000 Frm 00029 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\33793.XXX 33793
26 

iting filing options for taxpayers that increasingly rely on modernday advancements such as electronic signatures. 

The IRS has acknowledged that an e-signature option would reduce unnecessary expenses and time spent obtaining physicallysigned forms. Yet the IRS has still not issued uniform guidance for 

the use of these signatures. Put simply, H.R. 3153 would make the 

IRS move forward with an additional secure filing option that they 

already support. 

I would also like to discuss a proposal for legislation that I plan 

on introducing in the coming weeks that would provide taxpayers 

with more certainty and peace of mind when they need it most. 

This legislation would provide for an automatic 30-day reset of any 

IRS filing deadline that occurs in the wake of a major, major disaster declaration for events such as hurricanes or wildfires. 

Under current law, the Secretary of Treasury and the IRS have 

discretion to extend filing deadlines for certain forms of taxpayers 

dealing with the effects of major natural disasters. While the IRS 

often provides filing deadline relief to the affected taxpayers, it 

does—it usually takes days or even weeks for the IRS to reach that 

decision, leaving taxpayers in limbo. When Hurricane Matthew 

devastated my district in October 2016, I had many constituents 

contact me, concerned with how they were going to file their tax 

forms—more concerned with how they were going to file their tax 

forms than with dealing with their flooded homes and businesses. 

The past few months served as a reminder that, in times of extreme need that occur in the aftermath of natural disasters, the 

last thing that Americans should be worried about is whether the 

IRS might fine them for missing a filing deadline. 

Ultimately, this proposal would ensure the IRS works for the 

American taxpayer when they need it most, the exact type of reform we need as we consider how to bring the agency into the 21st 

century. 

I look forward to working with you and this Committee to 

achieve commonsense taxpayer-friendly reform of the IRS. 

Thank you, and I yield back. 

Chairman JENKINS. Thank you. 

I want to thank all our colleagues that joined us today. We are 

going to take a recess and go vote, and we will reconvene immediately following the last vote. 

[Recess.] 

Chairman JENKINS. The Subcommittee will come to order. I 

welcome everyone back to the Ways and Means Oversight Subcommittee Member Day hearing on legislation to improve tax administration. Today’s hearing will continue as before, and Members 

will be given 5 minutes to discuss their tax administration legislative priorities. 

I also remind Members that they will have the ability to submit 

written testimony in support of their legislation. 

And I want to thank our witnesses. And this second panel will 

include Representatives Chabot, Gohmert, and Posey. 

And, with that, I would like to yield Representative Chabot 5 

minutes. 

27 

STATEMENT OF THE HON. STEVE CHABOT, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF OHIO 

Mr. CHABOT. Thank you very much. Good afternoon, Chairman 

Jenkins, Ranking Member Lewis, and Members of the Subcommittee. Thank you for the opportunity to share a few thoughts 

on ways to improve tax administration at the IRS. 

Let me begin by congratulating your Subcommittee for its work 

on the Tax Cuts and Jobs Act. We hear on a daily basis the positive results this law is already generating for hard-working Americans. From the impact on corporations to how the new withholding 

tables will affect employees, this law is delivering. 

As Chairman of the Committee on Small Business, I want to 

thank you for keeping small businesses front and center during the 

debate. Small businesses now have more parity when it comes to 

the tax code. With monumental tax cuts now in place, Congress 

must address how the tax code is administered. More specifically, 

I would like to discuss the treatment of the Nation’s true job creators, small businesses. 

Two out of every three new private-sector jobs are generated by 

small businesses. With over 29 million small businesses in the 

United States, the economy is intricately linked to the health of our 

smallest firms. Unfortunately, small businesses often face challenges when managing their taxes. 

While often operating on the margins, small business owners do 

not have the resources available to hire an army of tax professionals to calculate their taxes. Rather, they sacrifice time away 

from growing and creating jobs to address IRS matters. For the 

economy to continue to record impressive marks, Main Street 

America must be operating at full strength. 

Moreover, the code has not kept pace with technological advancements that are changing how businesses operate and reach customers. As a result of multiple hearings exploring this topic, I introduced H.R. 3717, the Small Business Owners Tax Simplification 

Act of 2017, with the aim of modernizing the process for the Nation’s small businesses, entrepreneurs, and start-ups. H.R. 3717 

takes simple, commonsense steps to reform tax administration. 

For example, H.R. 3717 realigns estimated tax payment deadlines, which cause confusion because they currently do not fall 

when calendar quarters actually conclude. To bring further clarity, 

H.R. 3717 aligns the tax filing thresholds of the Form 1099 Miscellaneous and the Form 1099–K. 

Next, the legislation requires the Secretary of the Treasury to set 

standards for accepting digital signatures. And when a direct deposit refund is in order, pre-notification testing is also required. To 

address the pace at which small businesses are pursuing the sharing economy, where they utilize technology and web-based applications to reach customers, we examined the important decisions 

small businesses make when it comes to independent contractors 

and worker classifications. 

Specifically, the legislation allows companies to enter into voluntary withholding agreements and offer voluntary training without impacting classifications. These changes can make a difference. 

At a hearing that explored this legislation, a witness commented 

that H.R. 3717 ‘‘is a necessary first step, and would bring about 

28 

much-needed simplification.’’ Another witness explained, ‘‘H.R. 3717 

proposes commonsense changes to better meet the needs of the 

growing number of sharing economy operators and self-employed 

small business owners.’’ 

I respectfully ask the Committee to take into account these provisions as you address tax administration, and we look forward to 

continuing to work with you on them. We owe it to the small businesses and entrepreneurs and start-ups that define our communities and neighborhoods to simplify tax administration. 

We thank you very much. 

I think I finished early. And I yield back, and I will be happy 

to answer any questions. 

Chairman JENKINS. Thank you. 

Mr. Posey, you are recognized for 5 minutes. 

STATEMENT OF THE HON. BILL POSEY, A REPRESENTATIVE IN 

CONGRESS FROM THE STATE OF FLORIDA 

Mr. POSEY. Thank you, Madam Chair and Ranking Member. 

Chairman JENKINS. Do you want to hit your microphone on? 

Mr. POSEY. Thank you, Madam Chair and Ranking Member, for 

holding this hearing today to discuss proposals to reform the U.S. 

Internal Revenue Service administration of our tax system. 

As tax day approaches, Americans are being reminded why filing 

taxes is a dreaded experience, especially in the case of seniors 

whose retirement finances are simple, yet require a very complicated filing process. 

My bill, H.R. 2721, the Seniors Tax Simplification Act of 2017, 

would allow for easier tax form completion for senior taxpayers. 

The IRS currently prohibits individuals over 65 years old from filing the one-page 1040–EZ form, even if they have a simple return 

and choose not to itemize deductions. It really doesn’t make sense. 

Specifically, the EZ form does not include lines for Social Security or other retirement benefits, as well as interest in capital gains 

on investments. 

The Seniors Tax Simplification Act of 2017 will direct the Internal Revenue Service to create a new, basic, easy-to-read form called 

1040–SR for senior taxpayers earning Social Security retirement 

benefits, interest, and capital gains, while extending the commonsense convenience of the 1040–EZ form. The Seniors Tax Simplification Act of 2017 has recently been endorsed by the American 

Association of Retired Persons and the 60-Plus Association. 

I would like to ask unanimous consent to include in the record 

a January 24th letter of support from AARP and a January 9th letter of support from the 60-Plus Association for the Seniors Tax 

Simplification Act of 2017. Thank you. 

[The submissions for the Record of Hon. Bill Posey follow:] 

29 


33793A.009

Real Possibilities 

January 24, 2018 

The Honorable Bill Posey 

2150 Rayburn House Office Building 

Washington, D.C. 20515 

Re: H.R. 2721 , The Seniors' Tax Simplification Act of 2017 

Dear Representative Posey: 

On behalf of our nearly 38 million members and all Americans age 50 and older, AARP 

would like to take this opportunity to express our support for H.R. 2721, the Seniors' Tax 

Simplification Act of 2017. AARP appreciates your commitment to provide tax filers, 

especially older Americans who have Social Security income, access to a new and 

simpler tax form. 

The Seniors' Tax Simplification Act of 2017 seeks to address some of the challenges 

and complications associated with filing federal income taxes by requiring the Internal 

Revenue Service (IRS) to offer a new filing form, similar to the existing Form 1 040EZ, 

that includes Social Security benefits and distributions from qualified retirement plans. 

The bill can be further strengthened by including a clear declaration of the new form's 

purpose and encouraging the IRS to take steps to increase taxpayer awareness of, and 

has access to, the new form. Many of our members and other Americans age 65 and 

older would appreciate the creation of such a form, which could simplify the preparation 

of their federal income taxes. 

We thank you for your efforts to make tax filing a simpler task for all Americans, 

especially for those who are retired and receiving Social Security. If you have questions 

or need additional information you can call me, or contact Jasmine R. Vasquez of 

Government Affairs at 202-434-3711 or at jvasquez@aarp.org. 

Sincerely, 

~A¥ Joyce A. Rogers 

Senior Vice President 

Government Affairs 
30 

f 


33793A.010

60 PLUS ASSOCIATION 

Jumes L. Marlin 

Fotmder/Citairtnmt 

The Honorable Bill Posey 

U.S. House of Representatives 

2 150 Raybum House Office Building 

Washington, DC 20515 

Dear Congressman Posey, 

Rep. Roger Zion (R-IN, 1967-75) 

Honorary Chairman 

January 9, 2018 

Pat Boone 

National Spokesman 

On behalf of over 25,000 senior citizen activists in your district, Florida 8, the 60 Plus Association thanks 

you for your continued leadership and for introducing the Seniors Tax Simplificalion Acl oj2017. fi.R. 2721. 

We continue to stand with you on this impottant issue and support your efforts. 

This legislation is absolutely crucial so seniors will have a form to use that will ease their reporting 

requirements of those on Social security and one that will allow for simpler and hassle-free tax reporting. 

We are all aware of the benefits of the 1040 EZ form which allows the rRS to properly calculate either 

liabilities or refunds. However, as you know, this luxury is not granted to seniors filing since that form docs 

not include a line for pension and Social Security income. 

What is imporcant in this legislation is thai I he "Form 1040SR" will include a line for pension and Social 

Security income. Seniors deserve and need a new form that is much more user friendly for those over the 

age of65. 

Your legislation is most definitely in the best interests of seniors and we will alert our senior tize~ivists 

of the importance for tltis bill as well as encourage !hem to contact their Member of Congress to join you in 

sponsoring this much needed piece of legislation. 

Again, we sincereiy appreciate your leadership on this issue. Seniors can always count on you! 

Sincerely, 

r~ James L. Martin 

Chaim1an 

0~ 60 Pl!u A.flo.:inlioN it tl 25;ytor..flld 1101!J>ariilmt DrtlllitfJiiDR WDrithtg ftt dtalh Ia:< rtpta/, loring Jotio/ SCmri(J 11111/ M(diaJrt, offirdnblt 

preltrip!/oJJ dt?f!.11 kwflnJ ""'!;! rOJIJ opd flh11r i11,, sjrat1m'NJ n lfll ~~~I"NN"'Itl, kss to#J ttpj'JrtHit'b tlf »vii OJ n jfrid mUNrtll(t 18 /lu CDRJii llltiqr.. 60 

Pl111 ral/1 <111111/Jfr'rl jn111 tu:'f!r 7 mi!JitJu t:dit•isls. 60 P/11.1 lwu bHn mlktl, 1}Jn inctr(JJiJ!J!y i'!f!IN!'IIiol PJJi()f' dli~N'IJ/":lf'," and tn'O,JHi!:'fd nl tht 

tJ!kn~~H ~~e to tl;, AARP. 

60 Plus Association 

515 King Street • Su ite 315 • Alexandria, VA l2314 

(703) 807·2070 • Fax (703) 807·2073 

info@6oplu<.org 
31 

Mr. POSEY. Again, I thank you for the opportunity to testify 

today. The Seniors Tax Simplification Act is a simple, commonsense solution, which would provide a measure of relief for our senior citizens who deserve a tax filing option that is fair and simpler 

than allowed under current law. 

I know you all want to do something for our seniors, too. I look 

forward to working with the Committee to modernize our tax administration policies, and I thank you again, and I yield back. 

Chairman JENKINS. Thank you. I want to thank all our colleagues who came before us today, those on the Committee and 

those off the Committee. And with that, I see our final witness. 

Mr. Gohmert, you are recognized for 5 minutes. 

STATEMENT OF THE HON. LOUIE GOHMERT, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

Mr. GOHMERT. I will try to be as brief as possible. I have just 

one thing I wanted to bring to your attention today. 

I know, in prior elections, and especially in 2016, the idea was 

brought forward by a number of candidates that we should do away 

with the Internal Revenue Service. 

And some years back I was having a conversation with a guy I 

dearly love, a brilliant man, Arthur Laffer. Dr. Laffer, of course, 

was the economic advisor for Ronald Reagan. And we were discussing the IRS and all the power they had, the potential for 

abuse, and how wonderful it would be if there were not an agency, 

an entity in our U.S. Federal Government, that had their power. 

It seems that the IRS is the one agency that can legally just 

push the Constitution aside and come after folks. You are guilty 

until proven innocent. You have to pay taxes before you can contest 

them, even if the IRS is wrong. We have seen people—and there 

have been testimonies I have seen before I ever came to Congress— 

from people who were targeted by vengeful IRS agents. 

And I said, ‘‘Look, I would love to get rid of the IRS, Art, but, 

as a former felony judge, I know there are going to be people that 

will cheat. You are going to have to have somebody that will check 

and make sure—keep everybody honest.’’ 

And I don’t know, if you get rid of the IRS, how do we do that, 

make sure that people have an incentive to stay honest? 

And I know in the last election he talked about a flat tax would 

enable you to get rid of the IRS. But let’s say we keep the current 

tax system. Dr. Laffer said the problem with the IRS is they have 

too much power. They can decide who they are going to audit, they 

can decide how thoroughly they are going to audit them, if they are 

going to demand more and more and more, if they are going to just 

keep pushing the envelope and what you are required to produce. 

And they can decide, once they have audited you, how—what they 

are going to do with the next step. 

Do they think there was criminal conduct? If so, do they pursue 

it as a criminal case? Do they feel they should even take your 

homestead that virtually nobody else can. They get to decide what 

happens from there. Do they pursue it as a criminal violation and 

give it to a prosecutor? From a pecuniary standpoint, what do they 

do? 

32 

And he said, ‘‘There is the problem. No one entity should ever 

have all of that power.’’ 

And so here—and I appreciate you both being here. I know you 

all are busy as can be. And Madam Chair, I appreciate your attentiveness, as well as that of the Ranking Member, Mr. Lewis. 

But he said, ‘‘What you do is get rid of the IRS, and you create 

a small agency of CPAs. All they do is audit. And they never, ever 

get to choose who they audit. Each audit is chosen at random.’’ And 

so, just because you are audited one year doesn’t mean you won’t 

randomly come up another year. 

So they don’t get to abuse, they don’t get to single people out because of politics or one thing or another. They are handed the 

name and address of who is to be audited, they do their audit as 

good CPAs. When they finish the audit, they turn in the results, 

and that is the end of what they can do. 

Then you have someone else make a decision. Is this criminal? 

Is this civil? What should be the ramifications? But it takes all of 

that just arbitrary power, the potential, the temptation to abuse 

somebody—and I just think that is what we ought to pursue. And 

I know it is a big step to get rid of a department, but that is really 

so serious, I would appreciate the Committee’s considering that. 

And I yield back. 

Chairman JENKINS. Thank you, Mr. Gohmert. 

And again, I want to thank all of our Committee and nonCommittee Members that came before us today. There were a lot 

of good legislative solutions proposed, and I look forward to working together to include some of those in a bill to make reforms to 

the IRS. 

Please be advised that Members have 2 weeks to submit written 

questions to be answered later in writing. Those questions and 

your answers will be made part of the formal hearing record. 

And with that, the Subcommittee stands adjourned. 

[Whereupon, at 3:36 p.m., the Subcommittee was adjourned.] 

[Submissions for the Record follow:] 

33 

f 


33793A.011

Chairwoman Jenkins, thank you for holding this hearing on in1proving tax administration and for 

allowing members the opportunity to provide feedback. 

As you are aware, the IRS is home to our nation's sixth largest law enforcement agency - IRS 

Criminal Investigation (CI). This division is solely responsible for the enforcement of criminal 

violations of our nation's tax laws and share jurisdiction over violations of money laundering and 

bank secrecy laws. They are also an indispensable tool used to investigate terror financing cases 

and they often work jointly with many of our country's other federal law enforcement agencies. 

In fiscal year 2016, IRS CI initiated nearly 3,400 cases and achieved a remarkable conviction 

rate of over 92 percent. As a former United States Attorney, I have bad the privilege of working 

with many CI special agents and personally know the value of their urunatched financial 

investigatory abilities. 

As you know, the core function of IRS is to collect taxes and provide taxpayer services. This 

division of IRS serves a fundamentally unique role in the enforcement of criminal, not civil, 

violations. Indeed, they are a unique and vital component and we should be sure they are 

properly supported. Allowing the division to have a more direct line of communication with the 

IRS Coll11llissioner is a needed first step. The internal bureaucracy can have an impact on cases 

CI agents pursue, and strengthening the relationship between the division and the IRS 

Commissioner would help to ensure that necessary investigations move forward. 

Along with giving the division a more direct line of communication with IRS Commissioner, a 

dedicated and predictable funding stream would assist the division by giving certainty that would 

help in long-tenn plarming. The division currently has approximately 550 fewer agents now than 

they did in 20 I 0, however the crimes they investigate continue to rise. Indeed, as terror 

fmancing and money laundering schemes become more complex, and as identity theft becomes a 

common occurrence, we should be empowering the division as they continue to battle these 

schemes head-on. 

Unfortunately, IRS's mismanagement ofCI and their inability to prioritize Cl's needs has caused 

a troubling drop in the number of CI special agents and staff. The lack of adequate funding, 

combined with internal red tape bas, led to a reduction in the number of CI's investigations and 

convictions at a time when offenses such as identity theft, money laundering, tax-related fraud, 

and terror financing are all on the rise. 

As the Committee continues working to improve our tax administration, we must place a 

premium on the world-class financial investigations CI caJTies out each day. Again, thank you 

for taking the time to seek input on this inlportant issue. 
34 

f 


33793A.012

Rep. Patrick McHenry 

STATEMENT FOR THE RECORD 

Member Day Hearing on Legislation to Improve Tax Administration 

January 30, 2018 

Thank you, Chairman Jenkins and Ranking Member Lewis, for the opportunity to submit a writt en 

statement for the record. 

Today 1 write in support of my bill, H.R. 3860 "IRS Data Verification Modernization Act of 2017," which 

would provide a much-needed technology update t o t he way that the IRS verifies Ameri can taxpayers' 

income. 

Currently, Americans file what is called a 4506-T form with t he IRS, which grants t he IRS permission to 

send summarized tax ret urns to lenders processing loan applications, including: mortgages, credit cards, 

and small business loans. 

Unfortunately, this little form can take two to eight business days for the IRS to process. 

Why does it take so long? 

Believe it or not, the IRS still processes this form manually. The IRS requires the form to be submitted 

via mail or fax machine at one of five Income Verification Express Service offices where it is manually 

processed and sent back with a response to t he lender. There is no electronic way to submit these 

forms and there is no automated process in place to streamline what should be a straightforward, 

secure process. 

While the idea of someone sitting by a fax machine waiting for these requests to arrive seems almost 

comical, the reality is that this little form creates a significant delay to our financial system and adds an 

unnecessary element of risk as to whether this paper process is well organized and secure. Meanwhile, 

hardworking Americans have to wait even longer to close on their dream homes, get a credit card they 

need for gas and groceries, or to continue funding their small businesses. 

Our bill is simple. It requires t he IRS to automate their process for income verification by building an 

application programming int erface, or "API." An API is a common technology solution that provides a 

more secure, real-time way for income verification to take place. 

In closing, I want t o thank Rep. Blumenauer for joining me as an original cosponsor of this bipartisan, 

bicameral legislation, as well as Rep. Schweikert for his continued support. 
35 


33793A.013

WRITTEN STATEMENT 

OF 

THE AMERJCAN INSTITUTE OF CERTIFIED PUBLIC ACCOUl'<!ANTS 

SUBMITTED FOR THE RECORD OF THE 

JANUARY 30, 2018 

HEARING OF 

THE UNITED STATES HOUSE OF REPRESENTATIVES 

COMMITTEE ON WAYS AND NIEANS 

SUBCOMMITTEE ON OVERSIGHT 

ON 

LEGISLATION TO IMPROVE TAJ( ADMINISTRATION 

1455 Pennsylvania Ave. NW, Washing1on, DC 20004·1081 

T: +I 202.737.6600 F: +I 202.638.4512 

aicpaglobal.com 1 cimaglobal.com 1 aicpa.org 1 ogma.org 
36 


33793A.014

AICPA's Written Statement for the Record 

U.S. House Ways and Means Committee, Subcommittee on Oversight 

January 30, 2018 Hearing on "Legislation to Improve Tax Administration" 

Page 1 of7 

INTRODUCTION 

The American Instin.te of CPAs (AICPA) applauds the leadership taken by the House Ways 

and Means Oversight Subconunittee to consider legislative solutions related to refonning the 

Internal Revenue Service (IRS or "Service"). We are conm1itted to supporting Congress in its 

efforts to ensure a service-<>riented, modernized tax administration that earns the respect and 

appreciation of individuals, businesses, exempt organizations, as well as their advisers. 

As taxpayers face a period of uncertainty regarding the sweeping tax law changes of Pub. L. 

No. 11 5-97, it is critical that the IRS is a modem-functioning agency that will issue immediate 

guidance on priority issues, 1 focus on the needs of taxpayers and tax preparers,

2 and intplement 

the legislation in an effective and efficient manner. 

In this statement, we provide a series of recommendations that will strengthen tax 

administration and inlprove compliance programs while protecting the public. An effective 

ta.x administration system should include proper governance and oversight, proficient taxpayer 

services and a practitioner-focused services unit, which can collectively improve the taxpayer 

experience while streamlining the tax administration system. Furthermore, the regulation of 

tax return preparers and the limited use of contingency fees are necessary to promote voluntary 

compliance and protect taxpayer rights. 

RECOMMENDATIONS 

1. IRS Governance & Oversight 

As practitioners with vast experience working with the IRS, we have incorporated the lessons 

learned and built upon the foundation established by the Report of the National Commission 

on Restr11cturing the IRS ("Restructuring Commission" or "commission") and outline below 

governance and oversight recommendations to shape the agency of the future that everyone 

desires. 

Governance Objectives. Successful governance of the IRS will include strong leadership, 

accountability, and transparent policies working collectively towards needed change. In order 

to hold the IRS accountable, the agency's governance, management and oversight structure 

must:3 

• Develop and maintain a shared vision among all personnel and stakeholders with 

continuity; 

• Set and maintain consistent priorities and strategic direction; 

1 See AICPA letter, "Request for Jnunediate Guidance Regarding Pub. L. No. 115-97," January 29, 2018. 2 See AI CPA statement, "What the Taxpayers Want or Need from the IRS to Complv with tl1e Tax Laws," May 

17, 2016. 3 Tite National Commission ofRestmcmriug the Internal Revenue Setvice, A Visiouforn New IRS, Reporl oflhe 

Nnlionnl Commission on Res/l'ltcluring 1he lnlemnl Revenue Service, June 25, 1997, page 8. 
37 


33793A.015

AlCPA's Written Statement for the Record 

U.S. House Ways and Means Committee, Subcommittee on Oversight 

January 30, 2018 Hearing on "Legislation to Improve Tax Administration" 

Page 2 of7 

• Impose accountability on senior management; 

• Develop appropriate measures of success; 

• Ensure that the budget and technology support priorities and strategic direction; 

and 

• Coordinate oversight and identify problems at an early stage. 

Congressional Oversight. Congressional oversight is a critical process in ensuring executive 

branch compliance with laws, evaluating performance, and providing the transparency 

necessary to maintain the public's tmst. We recommend re-establishing the annual joint 

hearing review• to focus on the following priorities: (1) strategic and business plans; (2) 

taxpayer service and compliance; (3) technology and modernization; and (4) filing season. 

As once required by statute/ the Joint Committee on Taxation should provide a bi-annual 

report on the overall state of the Federal tax system.6 However, the statute stipulates that the 

report is only required if the necess01y resources are appropriated to carry out the 

requirement. Such a report would contribute to stability at the IRS and assist it in achieving 

its mission. Therefore, we urge Congress to appropriate the necessary funds for the report. 

IRS Oversight Board. The IRS Oversight Board was intended to provide experience, 

independence and stability to assist the IRS in moving forward in a focused direction. 

However, the board received criticism for being "ineffective" and "missing in action" in 

achieving its stated mission, 7 and suspended operations due to an insufficient number of 

members to constitute a quomm. 

We recommend that Congress require a Government Accountability Office (GAO) review of 

the private sector board and detennine if it is an essential component to providing the trust and 

continuity that will allow the IRS to become a respected, service-oriented organization. The 

GAO could provide recommendations to ensure the board has sufficient authority to (1) hold 

the IRS accountable for successfully fulfilling its mission; (2) oversee the implementation of 

key reconm1endations from advisory groups; and (3) ensure the IRS remains independent and 

non-partisan. 

Human Resources. Congress should enable and encourage the IRS to utilize the full range of 

available authorities to hire and compensate qualified and experienced professionals from the 

private sector, as needed, to improve the Service's ability to meet its mission. It is also cmcial 

for the IRS to designate a senior-level executive dedicated to overseeing and collaborating 

with the practitioner conmlllnity in creating a practitioner services unit (see discussion below). 

4 P.L. 105-206, sec. 4002, expanded IRC section 8022(c) regarding reporting by the Joint Conunittee on TaxatiotL 

P.L. lOS-311 (10/4104) modified this provision by removing the specifics required for the annual report and 

eliminating the joint review after 2004 (also see IRC section 802l(f)). A statutory change is needed to reinstate 

the required joint review. 

s !d. 6 IRC section 8022(3). 1 Morningstar, Inc., The IRS Has No Independent Oversight171is Tax Season, April 18, 2016. 
38 


33793A.016

AlCPA's Written Statement for the Record 

U.S. House Ways and Means Committee, Subcommittee on Oversight 

January 30, 2018 Hearing on "Legislation to Improve Tax Administration" 

Page 3 of7 

2. IRS Taxpaye1· Service 

To instill trust in the tax administration system, we recommend taxpayer service goals based on the 

foUowing two guiding principles: 

• The IRS should only initiate contact with a taxpayer if the lRS is prepared to devote 

the resources necessary for a proper and timely resolution of the matter. 

• Customer satisfaction must be a goal in every interaction the IRS has with taxpayers, 

including enforcement actions. Taxpayers expect quality service in all 

interactions with the IRS, including taxpayer assistance, filing tax returns, paying 

taxes, and examination and collection actions. 8 

Resources necessary. Appropriate hiring, adequate training, skillfi.tl management, and the 

necessary technological tools are essential for the IRS to meet its responsibilities. The leaders 

of the IRS must have the experience and skills to motivate their workforce and lead them to 

the realization of the desired vision. Organizational alignment from Congress, the President, 

the Commissioner, and through the ranks of the IRS, is necessary to delivering the promised 

goals. 

Furthennore, to enable the IRS to achieve the improvementS required for a 21" century tax 

administration system, the IRS needs a modem technological infrastmcture. Currently, the 

IRS has two of the oldest information systems in the federal government making the 

information technology fi.mction one of the biggest constraints overall for the IRS.

9 Without 

modem infrastmcture, the IRS is unable to timely and efficiently meet the needs of taxpayers 

and practitioners. 

Customer satisfaction. Measurement tools are required to achieve customer satisfaction goals, 

including fairness in enforcement. The IRS made significant progress in measuring taxpayers' 

opinions in the years following the issuance of the Restructuring Commission. However, in 

recent years, the Service has stopped reporting on customer satisfaction surveys and analysis. 

We recommend that customer satisfaction surveys, gauging performance at all levels within 

the IRS, continue as an appropriate success measure. Congress should utilize the survey results 

during the oversight and appropriations processes to ensure the Service is continually meeting 

the needs of taxpayers. 

A service-focused approach, with taxpayer education in mind, will require the IRS to take into 

consideration the needs of both tax practitioners and un-represented taxpayers, and the varying 

methods needed to interact with them. 

8 Verbatim quote oftlte two guiding principles, The National Commission ofRestmcturiug the Internal Revenue 

Setvice, A Vision (or a New IRS Reoorr o(rhe Narional Commission 011 Restructuring the Jmenwl Revenue 

Service, JtUJe 25, 1997, page 23. 9 National Taxpayer Advocate, Annual Reporrro Congress 2016. Execlllive Summary: Preface Special Focus 

and Highlighrs, 2016, page 3 1-32. Tite repon references a 2016 GAO report (GA0-16-468) which fmmd that 

some of teclmology the IRS still relies on was first placed in use 56 years ago. 
39 


33793A.017

AI CPA's Written Statement for the Record 

U.S. House Ways and Means Committee, Subcommittee on Oversight 

January 30, 20 18 Hearing on "Legislation to Improve Tax Administration" 

Page4 of7 

3. IRS Puctitioner Services Unit 

The IRS should create a new dedicated "executive-level" practitioner services unit that would 

centralize and modernize its approach to all practitioners. Over time, the IRS has established 

a number of functional departments. These individuals are dispersed across the IRS and are 

not coordinated in a manner that enables practitioners to timely access critical information 

(such as their clients' account status or the availability of dispute resolution opportunities). 

Nor do the current teams or processes systematically solicit, gather or evaluate practitioner 

feedback. Enhancing the relationship between the IRS and practitioners would benefit both 

the IRS and the millions of taxpayers served by the practitioner community. 

A dedicated practitioner services unit would allow the IRS to rationalize, enhance, and place 

under common management the many current, disparate practitioner-impacting programs, 

processes, and tools. Moreover, by centralizing these programs, IRS employees would have a 

consolidated approach to timely resolving issues. This coordination and improved access of 

infonnation would prevent unnecessary delays and inefficiencies (such as requiring 

practitioners to submit the same information multiple times to multiple IRS employees). 

Finally, to ensure success of the practitioner services unit, it is essential for these services to 

approximate comparable private sector services and allow practitioners to resolve account 

issues for their clients in a timely and efficient manner. 

Online tax professional account. The IRS should provide ta.x practmoners with a tax 

professional account as part of the IRS 's online portal with account access to all of their clients' 

infonnation (both individual and business accounts) where the practitioner has a valid power 

of auomey (POA) on file. Additionally, the secure tax professional account should allow the 

IRS to communicate directly to practitioners the information necessary to improve taxpayer 

awareness and allow practitioner corr-espondence with timely acknowledgement of receipt. 

Furthermore, a centralized login system allowing for single sign-on authentication of the 

practitioner and immediate access to all client data, as opposed to practitioner authentication 

before accessing each client's account, is an indispensable efficiency for the IRS and 

practitioners alike. 

Secure platfonn. The development of the online portal should include a comprehensive, agile 

platform that protects users' identities and their data, detects threats and inunediately responds 

to potential security breaches. In order to enhance taxpayer protection, practitioners who want 

access to taxpayer accounts should consent to guidelines such as Circular 230 or other similarly 

approved requirements. Professional tax practitioners can become particularly active and safe 

users of online services if the IRS invests early in providing a digital mechanism for POA and 

disclosure authorization and creates practitioner accounts contemporaneously with individual 

online accounts. 

To continue to improve efficiency, the IRS should also focus its attention on replacing the 

Centralized Authorization File with a consolidated online solution utilizing electronic 

signatures and an algorithmic-driven approval process that is as close to real time as possible. 
40 


33793A.018

AICPA's Written Statement for the Record 

U.S. House Ways and Means Committee, Subcommittee on Oversight 

January 30, 2018 Hearing on "Legislation to Improve Tax Administration" 

Page 5 of7 

Robust practitioner hotlines. IRS should provide practitioners with a robust practitioner 

priority hotline (or hotlines) with higher-skilled employees. These employees should have the 

experience and training to understand and address more complex technical and procedural 

issues. This expertise would allow the IRS to focus its training on a particular technical area 

allowing designated employees to resemble its counterparts in the private sector. The IRS 

should also consider hiring experienced people, such as, graduate students or retired 

practitioners seeking part-time or seasonal employment. 

Designated customer service representatives. Under the practitioner services unit, the IRS 

should assign customer service representatives (also known as a single point of contact) to 

each geographic area to address unusual or complex issues that practitioners were unable to 

resolve through the priority hotlines. We recommend allocating the number of representatives 

based on the number of practitioners in a specific geographic area. 

4. Regulation of Tax Return Preparers 

The AI CPA bas always been a steadfast supporter of the goals of enhancing compliance and 

elevating ethical conduct. We support the use of a preparer tax identification munber (PTIN) 

for all signing tax preparers, and subjecting all tax preparers to Circular 230. To help protect 

the interests of taxpayers, the AICPA thinks Congress should provide the IRS with a focused 

and well-defined approach to the regulation of tax return preparers with Congressional 

oversight. 

Subjection of all tax preparers to Circular 230. Requiring tax return preparers to follow the 

Circular 230 standards of conduct as delineated in the Internal Revenue Service Return 

Preparer Review report is essential. 10 In the report, the IRS proposed requiring: 

. all signing and nonsigning11 tax return preparers to comply with the 

standard of conduct in Part IO of Title 31 of the Code of Federal Regulations 

and reprinted in Treasury Department Circular 230. The authority of 

attorneys, certified public accountants, enrolled agents, enrolled actuaries 

and enrolled retirement plan agents to practice before the IRS will not 

change from the authority they have under current Treasury Department 

Circular 230. 

The remaining tax return preparers will be authorized to prepare returns and 

to represent a client before the IRS during an examination of any return that 

the tax return preparer prepared for the client as they are currently permitted 

under the liutited practice provisions in section l0.7(viii) of Treasury 

Department Circular 230. The conduct of the tax return preparer in 

connection with the preparation of the return and any representation of the 

10 Jmemal Revenue Service Retum Preparer Review; December 2009; page 37. 11 See AICPA comment letter, "Chainnan's Marl< of a Bill to Prevent Identity TI1eft and Ta~ Reftmd Fraud," 

September 15,2016, position 011 "Limitation on IRS's Authority to Require a PTIN," page 6. 
41 


33793A.019

AICPA's Written Statement for the Record 

U.S. House Ways and Means Conunittee, Subcommittee on Oversight 

January 30, 2018 Hearing on "Legislation to Improve Tax Administration" 

Page 6 of7 

client during an examination will be subject to standard of conduct in 

Treasury Department Circular 230. Further, inquiries into possible 

misconduct and disciplinary proceedings relating to tax return preparer 

misconduct will be conducted under Treasury Depanment Circular 230. 

Defined parameters for examination and continuing education. Congress should mandate that 

the IRS enact a testing and continuing education program similar to the registered tax return 

preparer program in effe.ct prior to Loving v. IRS d1at would apply exclusively to "unenrolled 

preparers." The one-time basic 1040 "entrance" examination to ensure competency in 

individual income tax retum preparation and the requirement for unenrolled preparers to 

satisfy I 5 hours of annual continuing education were both appropriate and necessary to protect 

taxpayers from incompetence and misconduct, while not raising the bar so high that there are 

an insufficient number of preparers to assist taxpayers wanting and needing such assistance. 

Specific parameters and limitations regarding an examination and continuing education are 

also appropriate to ensure a tax rerum program does not expand beyond Congress's goals of 

protecting the public from incompetent and unscrupulous tax return preparers. 

Limitation on IRS's Authority to Require a PTIN. Congress should limit the IRS's authority 

to require a PTIN. In order to protect the interests of the public, the IRS should track (through 

the use of the PTIN) all individuals that sign a tax return. However, in order to prevent 

potential overregulation and duplicative filing obligations, Congress should exclude nonsigners from the requirement to obtain a PTIN if those non-signers are supervised by an 

attorney, CPA, or enrolled agent; and (ii) the supe1vising professional signs the tax returns or 

claims for refimd prepared by the individual. Such au exclusion from the current PTIN system 

would recognize the inherent regulatory regime within which CPAs and other Circular 230 

legacy practitiouers already practice, as well as the fact that CPA firms must stand, as a matter 

of licensure, behind the work doue by the members and employees of their firms. 

Authorization to Revoke PT!Ns. The IRS could more effectively utilize their current PTIN 

system to protect the public from incompetent and fraudulent tax rerum preparers. We, 

therefore, reconunend that Congress grant the IRS specific authority to revoke a PTIN to 

efficiently prevent unqualified and unscrupulous preparers from continuing to file inaccurate 

and fraudulent tax returns. 

GAO Study on IRS's Exchange of InfOimation with State Taxing Authorities. The AI CPA 

supports directing a GAO study on the impact of increasing the exchange of information 

relating to return preparers beMeen the IRS and state taxing authorities. Such exchange of 

information (for example, a list of revoked PT!Ns and the reasons for the revocations) would 

improve tax administration by reducing duplicate government resource expenditures and 

increasing taxpayer compliance. 

Mitigation of Marketolace Confusion. Congress should also require the IRS to take steps to 

mitigate marketplace confusion. For example, prior to Loving v. IRS, the fRS recognized the 

potential for marketplace confusion when it required subjecting the currently-unenrolled 
42 

f 


33793A.020

AICPA's Written Statement for the Record 

U.S. House Ways and Means Committee, Subcommittee on Oversight 

January 30, 2018 Hearing on "Legislation to Improve Tax Administration" 

Page7 of7 

community to the guidance in Notice 2011-45, 2011-25 IRB 886, with regard to advertising 

restrictions. 

5. Contingent Fees 

Finally, the AI CPA opposes any expansion of tbe use of contingent fee arrangements which 

are not in the best interest of the public. The AI CPA's Code ofProfe.ssional Conduct and State 

Boards of Accountancy have rules addressing the appropriate use of contingent fees in tax 

practice and allow for contingency fees on a limited basis. Allowing tax prepare1'S a financial 

interest in a tax return (in other words, a contingent fee arrangement), encourages tax preparers 

to take positions that increase their fee rather than positions supported by the law. The AI CPA 

is available to work with Congress and the IRS in addressing adequate use of contingent fees. 

CONCLUDING REMARKS 

The AI CPA appreciates the opportunity to submit a statement for the record. We look forward 

to working with the Subcommittee as you continue to improve taxpayer services through a 

modemized tax administration system and improved compliance programs. 

The AICPA is the world's largest member association representing the accounting profession 

with more than 418,000 members in 143 countries and a history of serving the public interest 

since 1887. Our members advise clients on federal, state, local and international tax matters 

and prepare income and other tax returns for millions of Americans. Our members provide 

services to individuals, not-for-profit organizations, small and medium-sized businesses, as 

well as America's largest businesses. 
43 


33793A.021

AMERICAN 

PAYROLL 

ASSOCIATION 

February 9, 2018 

The Honorable Lynn jenkins 

Chair, Ways and Means Oversight Subcommittee 

U.S. House of Representatives 

http:/ jwaysandmeans.house.gov 

Re: Improvements to the IRS's Administration of the U.S. Tax System 

Dear Representative jenkins: 

Thank you for the opportunity to provide the U.S. House of Representatives with information 

regarding improving the IRS's administration of the U.S. tax system. The American Payroll 

Association (APA) is a professional organization serving the interests of more than 20,000 payroll 

professionals nationwide. Our primary mission is to educate members about the laws and 

regulations that impact payroll operations, including tax administration. Our advocacy goals center 

on reduced administrative burden for government, employers, and individuals workers. With 68.5 

percent of tax collections coming from wage withholding and employer taxes, the IRS's 

implementation of U.S. tax policy is extremely important to APA. 

APA's recommendations are based on two overarching approaches for Congress to consider. First, 

APA suggests that Congress require the IRS to develop an agency-wide business plan and that funds 

be allocated specific to that plan with regularly scheduled reports to Congress on plan 

implementation measures. Second, the IRS should have a multiyear investment strategy for 

infrastructure projects. 

Historically, in the budget process and in proposed bills, funds have been allocated to pay for 

specific tasks or projects. The desire to do this comes from an interest in ensuring that the IRS acts 

in the best interest of taxpayers by spending money on taxpayer services and preventing the agency 

from spending on undesirable activities. The difficulty with this process is that it causes the IRS to 

shift its focus each time a new budget passes, which stymies the agency from providing long term, 

quality taxpayer services. 

A business plan would clearly define the goals of the IRS and include specific, measurable 

opportunities to s uccessfully accomplish those goals, identify the current team of employees and 

hiring needs, as well as provide financia l forecasting. Some of this information is already ava ilable 

as part of the IRS's existing activities. Specific measures can emphasize the taxpayer bill of rights 

without the negative impact of blocking agency enforcement action or spending on failed systems 

and services. The plan can be adjusted over time to the extent of shifts in Congressionally 

established tax policy, technology changes, and taxpayer service needs. 

160 I 18th Stteet. NW. Suite I, Washington, DC 20009 • 202-248-390 I • www.americanpayroll.org 
44 


33793A.022

American Payroll Association- Recommendations on IRS Tax Administration Page 2 of 3 

To date. testimony and reports provided to Congress have focused on whether the IRS is following 

federally-established guidelines regarding technology. This communication among federal agencies 

is part of the problem. The IRS is limited in its ability to accept stakeholder recommendations 

because the agency cannot deviate from already established notions about risk and accuracy. Even 

if the IRS is able to modernize its systems. without flexibility even these modernized systems will 

be antiquated in a few years and the cycle will continue. APA recommends that Congress review the 

federal guidelines to determine whether they make sense and whether they can be flexible. 

APA also believes that Congress should change its focus regarding individual taxpayer services. 

Most of the revenue collected by the IRS comes from employers and tax practitioners. yet the IRS is 

pushed to design and implement electronic systems and procedures first for individual taxpayers 

and then employers and tax practitioners. The result is technology systems and processes that do 

not always operate well. 

For example. when the IRS developed an a uthentication process for its e-services following the 

guidelines established by the National Institute of Standards and Technology. user identity involved 

a mobile phone in the name of the individual user. This process for authentication was then 

required for employers only to discover that employer-provided mobile phones were not 

registered in the name of individuals (e.g .• the payroll professional managing tax filing is given a 

mobile phone registered to the company through its IT department). Some employers will not allow 

employees to use their own mobile phones for company business. Therefore, the a uthentication 

process is difficult to use. 

To address this shortcoming. the IRS created a number ofwork-arounds involving a combination of 

telephone service. trips to tax centers. and 10-day mail service. For payroll professionals 

performing services for multiple employers (i.e .• payroll service companies, tax practitioners). 

authentication requires proof of identity and power to provide the services to customers. a much 

more complicated authentication process. This complication expands when an employee leaves a 

company and the employer needs to remove them from IRS e-services and allow access by another 

employee. If the IRS was able to design and implement authentication focusing on employers and 

practitioners first. APA believes significant administrative burden would have been avoided. 

The same type of problem exists for the updated IRS website, in which the design and information 

provided are based on the needs of individual taxpayers. while payroll professionals are wondering 

how to find the information they need to comply with the tax code. APA believes that systems and 

services designed for employers also will work for individuals. 

In fairness to the IRS. political pressure to focus technology on individual taxpayers and then 

businesses comes from political leaders. This can be seen in the patchwork of proposed bills put 

before the Ways and Means Oversight Subcommittee for consideration. Congress has the unique 

ability to move the IRS into a business plan based on the greatest percentage of collections. 

Individual taxpayers are extremely important to tax administration. but edge cases and legislative 

band aids should not drive the agency. 
45 

f 


33793A.023

American Payroll Association- Recommendations on IRS Tax Administration Page 3 ol3 

For example, a call-back service sounds like a great idea to be more responsive to all taxpayers. 

However, implementation is not so simple. This type of service requires modern hardware and 

software systems, including an authentication process to protect against identity theft and tax 

fraud. Rather than separate legislation, Congress should ask the IRS to determine the feasibility of a 

call-back service as part of the agency's investment plan for infrastructure projects. 

To create and implement a business plan and significantly improve technology requires adequate 

agency funding. For this reason, APA urges Congress to increase the IRS's budget. While we have 

criticized the agency's logic, the IRS plays a critical role in enforcing federal tax law to secure 

financing for a myriad of federal programs. including national defense, highway building and 

maintenance, veterans' benefits, medica l research, and disaster relief. A healthy dialogue on 

improving tax administration does not diminish, but increases, the va lue of the IRS and the vital 

role it plays. 

APA is encouraging Congress to allow an even greater role for stakeholders in working with the IRS 

to create and implement a business plan and improve technology for all taxpayers. We urge you to 

take the necessary steps to provide flexibility and funding for this purpose. 

Sincerely, 

Rebecca Harshberger, CPP 

American Payroll Association 

Cochair, IRS Issues 

Subcommittee 

Stephanie Salavejus, CPP 

American Payroll Association 

Cocha ir, IRS Issues 

Subcommittee 

Alice P. )acobsohn, Esq. 

American Payroll Association 

Senior Manager, Government 

Relations 
46 


33793A.024

Statement on Tax Administration 

Submilled to 

The United States House Ways and Means Committee 

Oversight Subcommittee 

February 13, 2018 

On behalf of" 

Nonprofit Data Project of the Aspen Institute 

GuideS tar 

C. Eugene Steuerle 1 

Elizabeth T. Boris, Ph.D.

2 

Thank you for providing us with this opportunity to discuss ways to improve tax 

administration for exempt organizations.3 

We write to share several technical recommendations which we believe will increase 

transparency, advance efficiency and improve tax administration for exempt organizations, 

while saving taxpayer money. 

The nonprofit sector is an invaluable resource in our society. Not only does the sector help 

millions of individuals in need, it represents five percent of the nation's gross domestic 

product (GOP) and is a maj or source of j obs. According to the Bureau of Labor Statistics, 

nonprofits account for over 10% of all private sector employment. 

One of the best sources of information on nonprofits is the Form 990, which most nonprofit 

organizations are required to fi le annually with the IRS and make publicly available upon 

request. Current law already requires very large nonprofit organizations (those that tile at 

least 250 returns during the calendar year and have over $10 million in assets) and very small 

nonprofit organizations (those with gross receipts of less than $50,000 annually) to file their 

tax returns electronica!Jy. Those in between are not subject to this requirement. 

1 All opinions expressed herein are solely I he aulhor's and should nol be attribuled lo any of1he individuals or 

organizalions wilh wbicb he is associaled. 

l All opinions expressed herein are solely I he au1hor's and should not be am·ibllled to any of the individuals or 

organizalions wilh which she is associaled. 

3 The Nonprofil Dala Projecl of the Aspen lnslilute's Proj!rarn on Philanthropy and S<x:iallnnovation convenes 

leading figures inlhe field of nonprofil rese<l.rch to assess and improve the stale of the nation's nonprofit data. 

GuideS tar is the world 's largest source of infom1a1ion on the nonprofit seclor. 

Eugene Sleuerle is the Richard B. Fischer Chair and Institute Fellow at the Urban J.nslitute. 

Elizabeth Boris, Ph.D. is tile Institute Fellow a1 the Cemer on Nonprofits and Philanlhropy at tlle Urban Institute. 

1 
47 


33793A.025

Until recently, the IRS made 990 forms available to the public by providing images of them 

in TIF format (Tagged Image File) via DVDs. A year's worth of990s, both e-filed and 

paper-filed, cost over $2,000. Once purchased, the image-based 990s had to be re-processed 

to render them searchable, a practice that was not only expensive and inefficient, but also 

delayed access to the infom1ation and increased the potential for errors and omissions. 

In June 2016, the IRS- in response to a federal lawsuit- began releasing electronically-filed 

Fonn 990s as open, machine-readable data for free to Amazon Web Services. Today, tllis 

covers over 60% of the Fom1 990 series. The remaining 990s are still paper-filed and are noi 

released as open data. 

The tax administration benefits of universal e-filing and open nonprofit data include: 

• Increased Transparency: Nonprofit leaders, donors, businesses, policymakers 

and the public can make better decisions, understand trends in the field and gauge 

where some nonprofits stand in comparison to their peers. 

improved Efficiency/Cost-Reductions: Electronic filing lowers the cost of 

processing returns, saving the IRS and taxpayer money, while also enabling the 

agency to use resources more efficiently. 

• Reduction of Fr·aud: E-filing makes it easier to detect and locate potential 

problems through computer analysis. More timely and accessible data will not 

only help the IRS and state charity officials address compliance concerns (as the 

National Association of State Charity Officials has noted), but it will also boost the 

public's ability to monitor charities. Furthennore, the Advisory Committee on Tax 

Exempt and Government Entities (ACT) observed in its 2015 report that the IRS 

utilized less than half of the infom1ation from the Form 990 for data analytics 

functions, due to the constraints of manually entering data from paper fom1s. 

Electronic filing by all nonprofits will result in more information being available 

for electronic review, and thus higher utilization of990 data for tax compliance and 

analytical purposes. 

• Improved Accuracy/ Reduced ErTors: E-filed returns, as opposed to paperfiled retums, reduce inaccurate calculations and cut down on mistakes. Fewer 

errors and better front-end identification of such errors also reduce taxpayer 

burden in the filing process. 

• More Innovation/ Business Opportunities: Entrepreneurs and innovators 

will have data available to develop new, usefhl "apps" and products that can 

help solve problems in our comm1mities and contribute to the economy. 

Improved Infor·mation fot· the Public: The development of tools that use, 

aggregate and combine Fonu 990 data with other datasets can provide a wealth 

of information, such as pinpointing nonprofit trends, tracking the flow of 

philanthropic giving relative to need, and determining how the nonprofit sector 

impacts local economies. 

2 
48 


33793A.026

We also note that mandatory electronic filing of the Form 990, coupled with the release 

of machine-readable data by the IRS, is a non-controversial, revenue-neutral provision 

(as rated by the Joint Committee on Taxation) that has been embraced by lawmakers on 

both sides of the aisle. It has been included in the: 

CHARITY Act of20 17, introduced by Reps. Mike Kelly and Earl Blumenauer; 

Tax Reform Act of2014, introduced by the former Chair of the House Ways and 

Means Commillee, Rep. David Camp; 

• CHARITY Act of2017, introduced by Senators John Thune and Bob Casey and 

co- sponsored by Senators Ron Wydcn, Pat Roberts, and others; 

• Taxpayer Bill of Rights Enhancement Act of2017, sponsored by Senators Thune 

and Grassley; 

• Taxpayer Protection Act of2016, marked up by the Senate Finance Committee in 

April 2016; and, 

• Presidential budgets, from FY 2014-2017. 

NEED TO ADDRESS TECBNICAL/COMMUNICA TIONS GAPS: 

Furthermore, in light of the IRS's historic release of open, machine-readable e-filed Fonn 990 

data on Amazon Web Services (A WS), we reco!lllllend that the IRS address several technical 

and communications gaps so that the full potential of these data can be realized. 

The steps, outlined below, would vastly improve the overall 990/A WS ecosystem and further 

advance the accessibility of information to the public. 

• Continue to encoul'age electronic filing. The IRS should continue to actively promote 

the availability of electronic filing, as well as consider other appropriate incentives forefiling. For example, the Department of Treasury should eliminate the minimum $10 

million asset threshold on mandatory electronic fLiing, thus increasing the number of 

nonprofits subject to the mandatory e-filing requirement. 

• Appoint a 990/ A WS technical liaison within the IRS. The public would benefit from 

an IRS point person, or mechanism, for handling technica l questions regarding the Fonn 

990 data on A WS. Currently, there is no procedure, or contact, for addressing questions 

as they arise. This is not only inefficient and frustrating for tax-exempt stakeholders, but 

it deprives the Service of a feedback loop that could be used to make upgrades and 

corrections that are particularly important during the early stages of this new undertaking. 

• Make technical con ·ections to the A WS dataset, i.ncluding addressing need fo•· Form 

990 "metadata." The Extensible Markup Language (XML) files on A WS have proved to 

be a challenge for even high-level data scientists. Though the initial release of the files 

look place over one year ago, data scientists are still working to address such problems as 

multiple versions of the fom1s and the lack of documentation or "metadata." In fact, the 

Aspen Institute has been convening a group of data scientists who are working 

collaboratively to address these challenges as the tasks are too great for any one 

individual or group. 

3 
49 

f 


33793A.027

One of the challenges this group has encountered, for example, is the inaccessibility of 

the IRS Form 990 XML schema. According to Dr. David Borenstein, Ph.D., former 

Director of Data Science at Charity Navigator and now an independent data consultant, 

the schema in an XML document is equivalent to the header row in a spreadsheet: the 

document is nearly useless without them. "Spreadsheets require a column definition, or 

"header" row, in order to be useful. Without this row, the viewer can only guess at the 

meaning of each column. XML has an equivalent concept, called a schema definition. 

The schema defmition is strictly necessary for the accurate interpretation ofXML 

documents." 

Recently, the schema were moved to an IRS Secure Object Repository (SOR) that 

requires individuals to engage in a complex registration process prior to accessing the 

schema. This process - essentially registering as an authorized e-file provider for the IRS 

- requires applicants to make available their Social Security Number and Adjusted Gross 

Income, as well as pass a detailed "suitability check." The whole process appears to take 

months to complete. 

Given that U1e Fonn 990 is a public document, we would like to know why those simply 

wishing to access Form 990 schema must endure a lengthy, intmsive and inapt 

registration process. We are greatly concerne-d that a registration process that involves 

sensitive information will have a chilling effect on the usc of990 data by the public. 

Communication between the IRS and the nonprofit data community on such issues as 

improving public access to Fom1 990 schema would be helpful. 

Create a Regular 990/ A WS release schedule and web page. A Jack of communication 

has left many tax-exempt stakeholders in the dark when it comes to the regularity and 

timing of the release of electronically-filed 990s to A WS. The creation of a 990 data 

release schedule would allow the public to plan ahead. In addition to a release schedule, 

the IRS should consider using the format of the Exempt Organizations Business Master 

File page on the rRS website to create a page pertaining to thee-filed 990s. This page 

would recap the particulars of the release such as record counts, posting date, provide 

contact information for communications, as welJ as serve other functions. 

CONCLUSION: 

We thank the Oversight Subcommittee tor this opportunity to improve tax administration. 

Mandatory Form 990 e-filing coupled wiU1 the release of the fonns as open, machine-readable 

data wiJI benefit the public and the nonprofit sector, while strengthening law enforcement and 

enhancing accountability. We also believe that addressing the technical/communications gaps 

outlined above will increase the availability, quality, and utility of the Fonn 990 and, 

importantly, build stronger avenues for dialogue between the IRS and the nonprofit sector. 

Please contact the Nonprofit Data Project of the Aspen Institute with any questions. 

Nonprofit Data Project of the Aspen Institute 

GuideS tar 

C. Eugene Steuerle 

Elizabeth T. Boris, Ph.D. 

4 
50 


33793A.028

January 26, 2018 

The Honorable Kevin Brady, Chairman 

House Committee on Ways & Means 

1102 Longworth House Office Building 

Washington, DC 20515 

The Honorable Richard Neal, Ranking Member 

House Committee on Ways & Means 

1106 Longworth House Office Building 

Washington, DC 20515 

The Honorable Lynn Jenkins, Chairwoman 

House Subcommittee on Oversight 

1102 Longworth House Office Building 

Washington, DC 20515 

The Honorable John Lewis, Ranking Member 

House Subcommittee on Oversight 

1106 Longworth House Office Building 

Washington, DC 20515 

RE: Ensuring a Modem-Functioning IRS for the 21 " Century 

On behalf the members of the National Association of Tax Professionals, our organization is committed to 

supporting Congress in its efforts to ensure a service-oriented, modernized tax administration system that 

earns the respect and appreciation of individuals, businesses, exempt organizations, as well as their advisers. 

Since our members advise millions of taxpayers on tax-related matters, assist them with compliance 

responsibilities, and represent them before the Internal Revenue Service (IRS), we are uniquely poised to 

being part of the solution. 

In collaboration with other professional organizations and former agency executives, we submit the enclosed 

"Ensurjng a Modem-Functioning IRS for the 21st Centurv" framework for your consideration. 

In summary, we offer the following recommendations: 

• Any effort to modernize the business practices and technology of the IRS should build on the 

foundation established by the Reoort of the National Commission on Restructuring the Internal 

Revenue Service released June 25, 1997. 

As part of Congressional oversight, we recommend re-establishing the annual joint hearing review. The 

Joint Committee on Taxation should provide a bi-annual report on the overall state of the Federal tax 

system. 

• The GAO should review the IRS Oversight Board and determine if it is an essential component to allow 

the IRS to become a respected, service-oriented organization. 

We recommend enabling and encouraging the IRS to utilize the full range of available authorities to hire 

and compensate qualified and experienced professionals from the private sector, as needed. to 

improve the Service's ability to meet its mission. 
51 


33793A.029

• The legislative and executive branches should determine the appropriate level of service and 

compliance they want the IRS accountable to provide and then dedicate appropriate resources for the 

agency to meet those goals. 

Customer satisfaction surveys are valuable and shoold continue as an appropriate success measure 

for the agency. 

The IRS should provide the needed face-to-face interaction to accommodate those taxpayers who 

cannot afford or choose not to use the online account features. 

It is crucial for the IRS to designate a new dedicated "executive-level" practitioner services unit. Under 

this service unit, the IRS should provide tax practitioners with a tax professional account with immediate 

account access to all of their clients' information. The secure account must also include single sign-on 

authentication. The IRS should also offer robust practitioner priority hotlines with higher-skilled 

employees capable of addressing complex technical and procedural issues that practitioners are 

unable to resolve throogh the priority hotlines. 

Simply put, it is time for change. We are committed to focusing on solutions and how, together, we ensure 

the IRS becomes the modern-functioning agency that is desired by all. We appreciate your consideration of 

our views and welcome an opportunity to meet with you to answer any questions, provide feedbac•k or 

discuss how we can continue to support your efforts in improving our tax administration system. 

Sincerely, 

Scott Artman, CPA 

Executive Director 

National Association of Tax Professionals 

sartman@natptax.com 

800.558.3402 

Gerard Cannito, CPA, CFP® 

President 

National Association of Tax Professionals 

president@natptax.com 

800.558.3402 

cc: Members of the House Ways and Means Subcommittee on Oversight 
52 


33793A.030

Ensuring a Modern-Functioning IRS for the 21s1Century 

Approved by: 

alliantgroup, LP 

American Institute of CPAs Crowe 

Horwath, LLP 

National Association of Enrolled Agents 

National Association of Tax Professionals 

National Conference of CPA Practitioners 

National Society of Accountants 

National Society of Tax Professionals 

Padgett Business Services 

Developed by: 

JohnAms 

Scott Artman 

John Barrie 

Michael P. Dolan 

Justin Edwards 

Larry Gray 

Roger Harris 

Keith Huebel 

Edward Karl 

Sheldon Kay 

Melissa M. Labant 

Melanie E. Lauridsen 

Troy K. Lewis 

Stephen Mankowski 

Annette Nelfen 

W. Val Oveson 

Kathy Petronchak 

Jeffrey A. Porter 

Christine Speidel 

JeffTrinca 

Nina Tross 

Derek Wagner 

April 3, 2017 
53 


33793A.031

Ensuring a Modern-Functioning IRS for the 21 st Century 

Statement of Purpose 

As we approach the 20th anniversary of the Repolt of the National Conunission on Restructuring the 

Jntemal Revenue Service ("Restructuring Commission" or "commission"), we recommend that any 

effort to modernize the Intemal Revenue Service (IRS or "Service'') and its technology infrastructure 

should build on the foundation established by the Restructuring Commission. TI1e similarities 

between the condition of the IRS today and the circumstances that motivated the creation of the 

Restructuring Commission are striking. 

The current degradation of the IRS taxpayer services is unacceptable. The percentage of calls from 

taxpayers the IRS answered between 2004 and 2016 has dropped from 87% to 53%. Comparing 

2004 to 2016, the number of calls the [RS received from taxpayers increased ,from 71 million to I 04 

million, yet the number of calls answered by telephone assistors declined from 36 million to 26 

million.• The National Taxpayer Advocate Nina Olson observed that " taxpayers are receiving the 

worst levels of taxpayer service since at least 200 I, when the IRS implemented its current 

perfonuance measures, In fact, the levels of service are the lowest I have witnessed in my 40 years of 

working in the field of taxation."2 

As tax practitioners, we advise millions of taxpayers on tax matters, assist them with compliance 

responsibilities, and represent them before the IRS. We understand what is working and not working 

with tax administration from both taxpayer and practitioner perspectives, As one of the IRS's most 

significant stakeholders,

3 we are both poised and committed to being part of the solution, 

Vision Statement 

The following vision statement is a quote from the original report of the Restructuring Commission 

issued on June 25, 1997.'1 We believe tltis statement is as valid today as it was then, and is the basis 

of our efforts to provide recommendations on how to make the IRS an evolutionary and respected 

federal agency of the 2 1" Century . 

. . . This Vision embraces an efficient, service oriented institution dedicated to 

collecting the proper amount of tax through the use of taxpayer education, 

modern customer service practices, and effective law enforcement 

techniques. The 

' National Taxpayer Advocate, Annual Report to Congress 2016. Executive Summary: Preface Special 

~Highlights, 2016. page 16. 2 National Taxpayer Advocate, written statement on "The National Taxpayer Advocate's 2014 Annual Report to Congress" before the Subcommittee on Government Operations Commtttee on Oversight and 

Government Reform U.S. House of Representatives, on April 15, 2015. 3 60% of all e-filed returns in 2016 were prepared by a tax professional. according to the Filing Season 

Statistic for Week Ending Dec,2. 2016, 4 The National Commission of Restructuring the Internal Revenue Service. A Vision for a NeW IRS Report of 

the National Commission on Restructuring the Internal Revenue Service. June 25, 1997, page R 
54 


33793A.032

motivated, skilled employees of this new IRS would receive the proper 

training, incentives, authority, tools, and management oversight to get the 

job done. This new IRS would be able to help people comply with a 

simplified tax code, while managing its data collection and taxpayer 

accounts according to methods and standards employed in the best private 

and public sector organizations. Finally, taxpayers would have adequate 

protections when the agency exercised its powers in an improper fashion ... 

IRS Governance & Oversight 

As practitioners with vast experience working with the TRS, we have incorporated the lessons 

learned from the Restructuring Commission and outline below governance and oversight 

recommendations to shape the agency of the future that everyone desires. 

Govemance Objectives. Successful govemance of the IRS will include strong leadership, 

accountability, and transparent policies working collectively towards needed change. In order to 

hold the IRS accountable, the agency's governance, management and oversight structure must:5 

Develop and maintain a shared vision among all personnel and stakeholders 

with continuity; 

Set and maintain consistent priorities and strategic direction; 

Impose accountability on senior management; 

Develop appropriate measures of success: 

Ensure that the budget and technology support priorities and strategic direction: 

and 

• Coordinate oversight and identify problems at an early stage. 

Congressional Oversight. Congressional oversight is a critical process in ensuring executive 

branch compliance with laws, evaluating perfom1ance, and providing the transparency necessary 

to maintain the public's trust. We recommend J'e-establisbing the annual joint hearing review6 

to focus on the following priorities: (I) strategic and bttsiness plans; (2) taxpayer service and 

compliance; (3) technology and modernization; and (4) filing season. 

As once required by statute, 7 the Joint Committee on Taxation should provide a bi-annual 

report on the overall state of the Federal tax system.

8 However, the statute stipulates 

that the report is only required if the necessary resources are appropriated to carry out the 

requirement. We believe that such a report would contribute to stability at the IRS and 

assist the agency in achieving its mission. Therefore, we urge Congress to appropriate 

the necessary funds for the report. 

5 Supra, page 9. 6 P.L. 105-206, sec. 4002, expanded IRC section 8022(c) regarding reporting by the Joint Committee on 

Taxation. 

P.L. 108-311 (10/4/04) modified this provision by removing the specifics required for the annual report and 

eliminating the joint review after 2004 (also see IRC section 8021(f)). A statutory change is needed to 

reinstate the required joint review. 1Jd. 

a IRC section 8022(3). 
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IRS Oversight Board. The IRS Oversight Board was intended to provide experience, independence 

and stability to assist the IRS in moving forward in a focused direction. However, the board 

received criticism for being "ineffective" and "missing in action" in achieving its stated mission,9 

and suspended operations due to an insufficient nwnber of members to constitute a quorum. 

We recommend that Congress require a Govemmellt Accountability Office (GAO) review of the 

private sector boa•·d and detem1ine if it is an essential component to providing the trust and 

continuity that will allow the IRS to become a respected, service-oriented organization. The GAO 

could provide recommendations to make certain the board has sufficient authority to (I) hold the 

IRS accountable lor successfully fulfilling its mission; (2) oversee the inlplementation of key 

recommendations from advisory groups; and (3) ensure the IRS remains independent and nonpartisan. 

Human Resources. Congress should enable and encourage the IRS to utilize the full range of 

available authorities to hire and compensate qualified and experienced professionals from the 

private sector, as needed, to improve the Service's ability to meet its mission. It is also crucial for 

the IRS to designate a senior-level executive dedicated to overseeing and collaborating with the 

practitioner community in creating a practitioner services unit (see discussion below). 

IRS Taxpayer Service 

Congress and the administration should detemune the appropriate level of service desired and 

needed by taxpayers. Agreed upon measures of success are necessary to inlprove both customer 

service and voluntary compliance. 

To instill tnlSt in the tax administration system, we recommend taxpayer service goals based on the 

following two guiding principles: 

The IRS should only initiate contact with a taxpayer if the IRS is prepared to devote 

the resources necessary for a proper and timely resolution of the matter. 

Customer satisfaction must be a goal in every interaction the IRS has with 

taxpayers, including enforcement actions. Taxpayers expect quality service in all 

interactions with the IRS, including taxpayer assistance, filing tax returns, paying 

taxes, and examination and collection actions. 10 

Resource-s necessary. Appropriate hiring, adequate training, skillful management, and the 

necessary technological tools are essential for the IRS to meet its responsibilities. The leaders of 

the IRS must have the experience and skills to motivate their workforce and lead them to the 

realization of the desired vision. Organizational alignment from Congress, the President, the 

Commissioner, and through the ranks of the IRS, is necessary to delivering the promised goals. 

The legislative and executive branches should determine the appropriate level of sen'ice and 

9 Morningstar, Inc., The IRS Has No Independent Oversight This Tax Season, Apri118, 2016. 

' 0 Verbatim quote of the two guiding principles, The National Commission of Restructuring the Internal 

Revenue Service, A Vision for a New IRS Reoort of the National Commission on Restructuring the Internal 

Revenue SeNice, June 25, 1997, page 23. 
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33793A.034

compliance they want the IRS accountable to provide and then dedicate appropriate 

resources for the agency to meet those goals. 

Furthermore, to enable the IRS to achieve tl1e improvements required for a 21" cent\rry tax 

administration system, the IRS needs a modem technological infrastructure. Currently, the IRS has 

two of the oldest infom1ation systems in the federal government making the iufonnation technology 

nmctions one of the biggest constraints overall for the IRS. 

11 Without modem infrastrucn1re, the 

IRS is unable to timely and efficiently meet the needs of taxpayers and practitioners. 

Customer satisfaction. Measurement tools are required to achieve customer satisfaction goals, 

including fairness in enforcement. The IRS made significant progress in measuring taxpayers' 

opinions in the years following the issuance of the Restrucruring Commission. However, in recent 

years, the Service has stopped reporting on customer satisfaction surveys and analysis. We 

recommend that customc1· satisfaction sUJ·veys, gauging performance at all levels within the IRS, 

continue as an appropriate success measure. Congress should utilize the survey results during the 

oversight and appropriations processes to ensure the agency is continually meeting the needs of 

taxpayers. 

A service-focused approach, with taxpayer education in mind, will require the IRS to take into 

consideration the needs of both tax practitioners and un-represented taxpayers, and the varying 

methods needed to interact with them. For example, the IRS may need to hone its traditional 

account services to provide the needed face-to-face interaction to accommodate those taxpayers 

who c.allllot afford or choose not to use the online account features. 12 

IRS Practitioner Services Unit 

The IRS should create a new dedicated "el:eCutive-level" practitioner sen'ices unit that would 

centralize and modernize its approach to all practitioners. Over time, the IRS has established a 

number of nmctional departments. These individuals are dispersed across the IRS and are not 

coordinated in a way that enables practitioners to timely access critical infonnation (such as, their 

clients' account status or the availability of dispute resolution opportunities). Nor do the current 

teams or processes systematically solicit, gather or evaluate practitioner feedback. Enhancing the 

relationship between the IRS and practitioners would benefit both the IRS and the millions of 

taxpayers served by the practitioner community. 13 

A dedicated practitioner services unit would allow the IRS to rationalize, enhance, and place under 

common management the many current, disparate practitioner-impacting programs, processes, and 

11 National Taxpayer Advocate, Annual Beoort to Conoress 2016. Executive Summary; Preface. Special 

Focus and Highlights. 2016, page 31 -32. The report references a 2016 GAO report (GA0-16-468) which 

found that some of technology the IRS still relies on was first placed in use 56 years ago. 12 Currently the IRS is focusing on technological service by relying heavily upon the Web-First Strategy 

Conjoint survey which ignores those taxpayers who are not online or who are unwilling to participate in 

online surveys. National Taxpayer Advocate, Annual Reoort to Congress 2016 Executive Summarv: 

Preface Special Focus and Highlights. 2016, page 20. 13 The IRS's Office of National Public Liaison (NPL) has enhanced the communications between the IRS and 

national stakeholder organizations with an interest in tax administration. The new unit would focus on 

centralizing and modernizing its overall approach (technology, programs, processes, communications and 

tools) to practitioners. 
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tools. Moreover, by centralizing these programs, IRS employees would have a consolidated 

approach to timely resolving issues. This coordination and improved access of information 

would prevent unnecessary delays and inefficiencies (such as, requiring practitioners to submit the 

same infonnation multiple limes to multiple IRS employees). Finally, to ensure success of the 

practitioner services unit, it is essential for these services to approximate comparable private 

secto•· se•·vices and allow practitioners to resolve account issues for their clients in a timely and 

efficient manner. 

Online tax professional account. The IRS should provide tax practitioners with a tax professional 

account as part of the IRS's online portal with account access to all ofthei•· clients' infOJ·mation 

(both individual and business accounts) where the practitioner has a valid power of attomey (POA) 

on file. Additionally, the secure tax professional account should allow the IRS to communicate 

directly to practitioners the infom1ation necessary to improve taxpayer awareness and allow 

practitioner correspondence with timely acknowledgement of receipt. 

Furrhem1ore, a centralized login system allowing for single sign-on authentication of the 

practitioner and immediate access to all client data, as opposed to practitioner authentication before 

accessing each client's account, is an indispensable efficiency for the IRS and practitioners alike. 

Secure platform. The development of the online portal should include a comprehensive, agile 

platfotm that protects users' identities and their data, detects threats and immediately responds to 

potential security breaches. In order to enhance taxpayer protection, practitioners who want access 

to taxpayer accounts should consent to guidelines such as Circular 230 or other similarly approve-d 

requirements.•• Professional tax practitioners can become particularly active and safe users of 

online services if the IRS invests early in providing a digital mechanism for POA and discloslll'e 

authorization and creates practitioner accounts contemporaneously with individual online 

accounts. 

To continue to improve efficiency, we a lso recommend that the IRS focus its attention on 

replacing the Centralized Authorization File (CAF) with a consolidated online solution 

utilizing electronic signatures and an algorithmic-driven approval process that is as 

close to real time as possible . 

Robust practitioner hotlines. IRS should provide practitioners with a t·obust pl'actitioner p•·io•·ity 

bot line (or hotlines) with higher-skilled employees. These employees should have the experience 

and training to understand and address more complex technical and procedural issues. This 

expertise would allow the IRS to focus its training to a particular technical area allowing 

designated employees to resemble its counterparts in the private sector. The IRS should also 

consider hiring experienced people such as graduate students or retired practitioners seeking parttime or seasonal employment. 

Designated cnstomer service representatives. Under the practitioner services unit, the IRS should 

assign customer service •·epr esentatives (also known as a single point of contact) to each 

14 At the time of drafting this document, Circular 230 is under the process of review. Circular 230 is a document containing the statute and regulations detailing a tax professional's duties and obligations while 

practicing before the IRS; authorizing specific sanctions for violations of the duties and obligations; and. describing the procedures that apply to administrative proceedings for discipline. 
58 

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geographic area to address wlUsual or complex issues that practitioners were unable to resolve through 

the priority hotlines. We recommend allocating the number of representatives based on the number of 

practitioners in a specific geographic area. 

Summary 

The current level of IRS taxpayer services is simply unacceptable. By ensuring an appropriate 

governance and oversight structure which focuses ou taxpayer service aud creatiug an executive- level 

practitioner services unit, we will increase the likelihood that the agency serves the needs of taxpayers 

and practitioners in a timely and efficient manner. 

To swmnarize, we offer the following recotmnendations: 

Re-establish the annual joint hearing review; 

Require the Joint Committee on Taxation to provide a bi-annual report; 

Require a GAO review of the private sector board; 

Enable the hiring of qualified and experienced professionals at the IRS: 

Determine the appropriate level of service and compliance the IRS is accountable to 

and dedicate appropriate resources for the agency to meet those goals; 

Gauge performance with customer satisfaction surveys; and 

Establish a dedicated "executive-level" practitioner services unit that provides for 

centralized and modernized services to timely resolve issues. 

We are committed to a service-oriented, modernized tax administration system that earns the respect 

aud appreciation of all taxpayers and stakeholders. 

National Association of Tax Professionals • P.O. Box 8002 • Appleton, WI 54912 
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33793A.037

Small 

~~J}c~ Business & Entrepreneurship Council 

Member Day Hearing on legislation to Improve Tax Administration 

January 30, 2018 

Statement for the Record 

Karen Kerrigan 

President & CEO 

Small Business & Entrepreneurship Council 

Committee on Ways and Means 

Subcommittee on Oversight 

U.S. House of Representatives 

The Honorable lynn Jenkins 

Chairman 

The Honorable John lewis 

Ranking Member 

301 Maple Avenue West • Suite 100 • Vienna, VA 22180 

www.sbecouncil.org 

Protecting Small Business, Promoting Entrepreneurship 
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33793A.038

Chairman Jenkins and Ranking Member Lewis, thank you for hosting this 

"Member Day" hearing to review and learn about legislation that will improve the 

administration of the U.S. tax system. Improving the efficiency of the tax system 

will be beneficial for small businesses, entrepreneurs and the self-employed. The 

Small Business & Entrepreneurship Council (SBE Council) is supportive of 

several of the ideas outlined by your colleagues at the hearing. 

SBE Council is a national, nonprofit advocacy, research and education 

organization that works to protect small business and promote entrepreneurship. 

For nearly 25 years, our members, staff and advisors have worked to advance 

policies and initiatives to strengthen the ecosystem for startups and small 

business growth. As someone who has served on the Taxpayer Advisory Panel, I 

know firsthand that the Internal Revenue Service (IRS) is always in search of 

practical ideas to improve their operations, compliance for taxpayers and overall 

efficiency. With that in mind, I am submitting this statement for the record to 

voice SBE Council's strong support for the legislation that Representative Steve 

Chabot, Chairman of the House Small Business Committee, outlined at the 

Member Day hearing. 

The Small Business Owners' Tax Simplification Act of 2017 (H.R. 3717) would 

make a significant and positive difference for small businesses and entrepreneurs. 

This bipartisan bill is the work product of House Small Business Committee 

members. SBE Council provided ideas and feedback during H.R. 3717's 

development, and our Entrepreneur-in-Residence testified in support of the bill 

before the House Small Business Committee. 

As Ways and Means Committee members well know, the tax system is not fully 

modernized. Improving efficiency would make life easier for many Americans and 

save money for taxpayers. Certainly, the IRS has come a long way in making 

improvements and using technology to support the administration of our tax 

system. Still, legislative fixes are needed to improve taxpayer experience and to 

bring more common sense to compliance. Some thresholds in the tax code have 

not been updated since the 1950s, and various provisions have not kept pace with 

technological advancements and the modern economy. Other policies just never 

made sense from their very start. 

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H.R. 3717 would institute simple fixes that reduce costs, complexity, uncertainty 

for small businesses, and improve administration within the agency. 

As proposed currently in H.R. 3717, several provisions would help to streamline 

administration within the IRS while making the tax system work better for small 

businesses and entrepreneurs. These provisions include: changing the estimated 

tax due dates to align with calendar deadlines to make payments truly quarterly; 

allowing voluntary withholding agreements and training services between 

contractors and "gig" entrepreneurs without impacting worker classification; as 

well as uniform standards for the use of electronic signatures. Another provision 

will modernize thresholds for self-employment income and Form 1099-Misc 

filings (the latter of which aligns with 1099k reporting requirements), which 

means paperwork reduction for both small businesses and the IRS. 

SBE Council believes H.R. 3717 in total will simplify and modernize the tax system 

for entrepreneurs and small businesses, which would build upon some of the 

changes and important reforms in the "Tax Cuts and Jobs Act." H.R. 3717 adds 

tremendous value to the overall goal of reducing complexity for taxpayers, while 

at the same time improving tax administration for the IRS. This is a win-win-win 

for taxpayers, small businesses and those who are responsible for making sure the 

tax code is administered fairly and effectively. 

Thank you for the opportunity to provide this Statement for the Record. Please do 

not hesitate to contact me if you have questions regarding my written statement. 

Respectfully submitted, 

Karen Kerrigan, President & CEO, SBE Council 

3