U.S. GOVERNMENT PUBLISHING OFFICE

33–389 WASHINGTON : 2019

2017 TAX FILING SEASON 

HEARING 

BEFORE THE

SUBCOMMITTEE ON OVERSIGHT 

OF THE

COMMITTEE ON WAYS AND MEANS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED FIFTEENTH CONGRESS 

FIRST SESSION 

APRIL 26, 2017 

Serial No. 115–OS03 

Printed for the use of the Committee on Ways and Means 

( 


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COMMITTEE ON WAYS AND MEANS 

KEVIN BRADY, Texas, Chairman 

SAM JOHNSON, Texas 

DEVIN NUNES, California 

PATRICK J. TIBERI, Ohio 

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 

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 

VERN BUCHANAN, Florida, Chairman 

DAVID SCHWEIKERT, Arizona 

JACKIE WALORSKI, Indiana 

CARLOS CURBELO, Florida 

MIKE BISHOP, Michigan 

PAT MEEHAN, Pennsylvania 

GEORGE HOLDING, North Carolina 

JOHN LEWIS, Georgia 

JOSEPH CROWLEY, New York 

SUZAN DELBENE, Washington 

EARL BLUMENAUER, Oregon 


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C O N T E N T S 

Page 

Advisory of April 26, 2017 announcing the hearing ............................................. 2 

WITNESSES 

Kirsten Wielobob, Deputy Commissioner for Services and Enforcement, Internal Revenue Service ............................................................................................. 6 

Michael McKenney, Deputy Inspector General for Audit, Treasury Inspector 

General for Tax Administration .......................................................................... 16 

Jessica Lucas-Judy, Acting Director, Strategic Issues, Government Accountability Office ......................................................................................................... 36 

QUESTIONS FOR THE RECORD 

Questions from Representative Vern Buchanan of Florida to Kirsten 

Wielobob ................................................................................................................ 106 

Questions from Representative Jackie Walorski of Indiana to Kirsten 

Wielobob ................................................................................................................ 109 

Questions from Representative Mike Bishop of Michigan to Kirsten Wielobob . 112 

Questions from Representative Patrick Meehan of Pennsylvania to Kirsten 

Wielobob ................................................................................................................ 117 

Questions from Representative George Holding of North Carolina to Kirsten 

Wielobob ................................................................................................................ 119 

SUBMISSIONS FOR THE RECORD 

AICPA, statement .................................................................................................... 120 

Thomas A. Schatz, Citizens Against Government Waste, statement .................. 132 


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THE 2017 TAX FILING SEASON 

WEDNESDAY, APRIL 26, 2017 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON WAYS AND MEANS, 

SUBCOMMITTEE ON OVERSIGHT, 

Washington, DC. 

The Subcommittee met, pursuant to notice, at 2:02 p.m., in Room 

1100, Longworth House Office Building, the Honorable Vern 

Buchanan [Chairman of the Subcommittee] presiding. 

[The advisory announcing the hearing follows:] 


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Chairman BUCHANAN. The Subcommittee will come to order. 

Welcome to the Ways and Means Oversight Subcommittee hearing 

on examining the 2017 tax filing season. 

Every year this Subcommittee holds a hearing on tax filing season. The annual hearing is an opportunity to hear about the 

progress and challenges the IRS has administering the Tax Code, 

and to learn what Congress might be able to do to help. 

In our country, we have a voluntary tax system. A key element 

of voluntary compliance is taxpayers being treated fairly. If taxpayers perceive that others are cheating the system and getting 

away with it, compliance will decrease. 

Just last week, in South Florida, it was announced that three 

people were indicted for stealing personally-identifying information. 

They filed over 2,000 fraudulent tax returns and claimed more 

than $6.8 million dollars. Thankfully, these fraudsters were caught. 

The good news is that they are facing serious prison sentences and 

financial penalties. The bad news is that their fraudulent activity 

existed for roughly seven years before finally being stopped. We 

have to do better. 

One tax credit that has been particularly prone to fraudulent activities is the Earned Income Tax Credit, often referred to as the 

EITC. Unfortunately, the IRS estimates that approximately 24 percent of all EITC payments are improper. We are talking about big 

money here: roughly $16.8 billion dollars was paid out improperly 

in the 2016 tax year. 

However, it is unclear how much of that 16 billion is fraud, and 

how much is miscalculation or paperwork errors. Income 


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misreporting is a major cause of improper EITC payments. Although the IRS has implemented some corrective actions to prevent 

erroneous payments and has had some success, we would like to 

do better. Stopping $3.6 billion dollars is good, but allowing the 

idea that four times that amount goes out the door is not acceptable. Taxpayers deserve better. 

False reporting of wages and withholding make up more than $1.3 billion in potentially undetected fraudulent tax returns. Providing the IRS with wage information faster should allow the agency to verify the W-2 information matches the information filed by 

the taxpayer. Until this year, the IRS only received a small amount 

of the wage data prior to refunds being sent out to taxpayers. 

The majority of the matching was done in the summer, after the 

filing season was over. This forced the IRS to pay refunds and then 

determine whether they were properly being paid. 

In December of 2015, in the PATH Act, Congress changed the reporting deadline for employers to submit W-2 information to the 

Social Security Administration, which is then sent to the IRS. Congress also requires that refunds claiming certain refundable tax 

credits, like the EITC, would be held until February 15th. 

The goal of these two provisions is to allow the wage verification 

before the refund is issued, and to reduce the pay-and-chase method of fraud detection. The 2017 tax filing season is the first time 

the IRS will be implementing these provisions. Although it is still 

a bit early to make any judgements, I am eager to receive an update from our witnesses on the outcome of these changes. 

I want to thank the witnesses for being here today, and I look 

forward to your testimony. 

Chairman BUCHANAN. I now yield to the distinguished Ranking Member, Mr. Lewis, for the purposes of an opening statement. 

Mr. LEWIS. Thank you, Mr. Chairman. Mr. Chairman, I hope 

that you had a wonderful break. And it is good to see you at this 

hearing. Thank you again, Mr. Chairman, for holding this hearing 

on the 2017 tax filing season. I would also like to thank all of the 

witnesses for being with us today. 

First, let me congratulate the Internal Revenue Service on a successful filing season. Through mid-April, agents processed over 115 

million tax returns, and delivered more than 85 million tax refunds 

worth $245 billion. There were no major delays. 

Last Congress we provided additional funding for taxpayer service, and the results were very encouraging. The level of service continued to improve, and taxpayers’ average waiting time went down 

to about 7 minutes. This is a good start. With bipartisan support 

it can be better, much better. 

Congress must fully fund the IRS. Despite the success of the filing season, I am concerned that the agency does not have the resources to serve taxpayers. Since 2010 Congress cut the IRS budget 

by almost $1 billion. This is not right. It is not fair. As I said in 

the past, and I will say again, you cannot get blood from a turnip. 

For some reason the majority seems to think that outsourcing a 

core government function helps an underfunded agency. For the 

record, I want to be crystal clear. In today’s world, private debt collection will only make a bad situation much worse. We have been 

down this road before. It has been tried and tried again. Each and 


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every single time private debt collection fails. It creates confusion 

and wastes taxpayers’ dollars. 

More—most importantly, the program does not help serve the 

American people. Let me explain how things have changed since 

Congress last repealed this program. In the fall of 2013, the Treasury Inspector General for Tax Administration began investigating 

a new way of scams. Nearly 2 million victims received telephone 

calls from people pretending to be IRS or Department of Treasury 

employees. Some of us, even Members of this very Committee, received calls from these criminals. 

If these people are calling Members of the Committee, Members 

of the Subcommittee of the Ways and Means Committee, Members 

of the full Committee of the Ways and Means Committee, what are 

they doing to other people? The thieves demand money, they claim 

that the victim owes unpaid taxes. To date these criminals have 

swindled taxpayers out of more than $55 million. 

Before the return of the private debt collectors, our best defense 

for taxpayers was a simple and clear message: the agency will 

never call you. Now there is confusion. The new message is that 

the IRS will not call you, but a private debt collector might. It 

makes absolutely no sense. 

Mr. Chairman, today I am introducing the Taxpayer Protection 

Act. It will repeal this terrible program, and I hope all of my 

friends on both sides of the aisle will support this commonsense 

bill. 

This afternoon the Administration released its principles for tax 

reform (sic). I must express my concern about beginning tax reform 

when the public has no idea how the proposal will personally benefit the first family (sic). 

On April 15th, thousands of Americans took to the streets and 

demanded transparency, truth, and accountability. They know 

there is no provision in the Internal Revenue Code that prevents 

the President from releasing his tax return. Failure to meet this 

standard presents a dangerous and slippery slope for policy makers. The American people expect and deserve better. 

Again, thank you, Mr. Chairman, for holding today’s hearing. I 

look forward to hearing from all of the witnesses. 

And again I want to thank each and every one of you for being 

here. I yield back. 

Chairman BUCHANAN. Thank you, Mr. Lewis. 

Without objection, other Members’ opening statements will be 

made part of the record. 

Today’s witness panel includes three experts: Kirsten Wielobob, 

Deputy Commissioner, Office for Services and Enforcement, Internal Revenue Service; Michael McKenney, Deputy Inspector General 

for Audit, Treasury Inspector General for Tax Administration; and 

Jessica Lucas-Judy, Acting Director for Strategic Issues, Government Accountability Office. 

The Subcommittee has received your written statements, and 

they will all be part of the formal hearing record. You each have 

five minutes to deliver your oral remarks. We will begin with Ms. 

Wielobob. 

You may go when you are ready. 


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STATEMENT OF KIRSTEN WIELOBOB, DEPUTY COMMISSIONER 

FOR SERVICES AND ENFORCEMENT, INTERNAL REVENUE 

SERVICE 

Ms. WIELOBOB. Chairman Buchanan, Ranking Member Lewis, 

and Members of the Subcommittee, I am the new deputy commissioner for services and enforcement at the IRS, having been appointed to this position just over a month ago. I am here today to 

update you on the 2017 tax filing season. 

Through April 21st, the IRS received more than 135 million individual returns. We issued over 97 million refunds for more than 

$268 billion in total, with an average amount of $2,763. While the 

public’s filing season concluded on April 18th, the IRS’s filing season continues until we have processed all returns, deposited payments, and sent appropriate refunds. 

Filing season 2017 had many achievements. Focusing on 3 areas, 

we implemented changes and acted under the PATH Act of 2015. 

We improved taxpayer assistance, and we continue to work to protect taxpayer information against identity theft. 

With respect to the PATH Act, IRS was required to hold tax refunds until February 15th if taxpayers claimed the Earned Income 

Credit or the Additional Child Tax Credit. Not unexpectedly, this 

change slowed the overall pace of refunds early in this filing season. The pace accelerated after February 15th, when we released 

more than $50 billion in EITC and ACTC refunds. 

The PATH Act also accelerated the filing date of Forms W-2. 

These changes, together, helped the IRS improve our ability to spot 

incorrect or fraudulent returns, as well as to better identify valid 

returns. 

With a year between the passage of the PATH Act and the effective date of the provisions, we had time to work internally and externally to communicate, work with partners, and set expectations 

about W-2 and refund timing. This was helpful to the taxpaying 

public, businesses, and the IRS. 

With respect to taxpayer assistance, we are improving across all 

service channels. We understand we need to be available to taxpayers, no matter how they prefer to get information and communicate with us. We improved our level of service on our toll-free 

telephone lines again this year, as we did in 2016, and anticipate 

that the average level of service for the full filing season will be 

about 75 percent. 

This improved level of service results from several factors related 

to Congress. First, the additional funding we received to improve 

taxpayer service. Secondly, there was no late-breaking legislation 

in calendar year 2016. And, thirdly, we had ample lead time to implement PATH Act changes. 

The additional funding directly improved phone service and freed 

resources to reduce our correspondence inventory. In our experience, over-aged correspondence correlates to increased phone demand, as taxpayers call regarding the status of letters they have 

sent in. 

We continue to experience strong demand for our online services. 

Taxpayers visited our website, IRS.gov, more than 500 million 

times last year, and more than 320 million times so far this year. 

The popular electronic tracking tool, ‘‘Where’s My Refund,’’ was 


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used about 300 million times last year, and more than 246 million 

times this year. 

Service at our taxpayer assistance centers also improved. During 

recent filing seasons, many TACs saw such heavy demand that taxpayers were lining up for hours before the centers opened. In 2015 

we tested the idea of letting people make appointments. This 

worked so well that we extended the appointment process to all 

TACs this filing season. We had no reports of long lines, we were 

able to help taxpayers more effectively, and we still managed to 

serve many thousands who visited us without an appointment. 

With respect to identity theft refund fraud, we continue to make 

steady progress, which has been advanced since 2015, due to the 

collaboration with states and industry that we call the security 

summit. This year the number of people who reported to us that 

they were victims of identity theft dropped 46 percent. Even with 

this progress, the fraud filters in our system are still catching a 

large number of false returns. Last year our system stopped more than $6.5 billion in fraudulent refunds on 969,000 returns filed by identity thieves. Identity 

theft is still a major threat to tax administration, and we will continue fighting to protect taxpayers and secure taxpayer information. 

Looking forward, we recognize that tax reform and other tax legislation may be on our horizon. The IRS doesn’t take a position on 

policy questions. Our job is to implement the laws that Congress 

passes. We do hope to offer our perspective on the administrability 

of any legislation, however, which helps ensure that your goals are 

reached effectively and efficiently for taxpayers and the tax system, 

as a whole. Building on the successful implementation of the PATH 

Act, we also hope that Congress will once again include lead time 

so we can prepare taxpayers, practitioners, and our own systems 

for the changes. 

Chairman Buchanan, Ranking Member Lewis, and Members of 

the Subcommittee, that concludes my statement. 

[The prepared statement of Ms. Wielobob follows:] 


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Chairman BUCHANAN. Thank you. Mr. McKenney, you are up 

next. 

STATEMENT OF MICHAEL MCKENNEY, DEPUTY INSPECTOR 

GENERAL FOR AUDIT, TREASURY INSPECTOR GENERAL FOR 

TAX ADMINISTRATION 

Mr. MCKENNEY. Chairman Buchanan, Ranking Member Lewis, 

and Members of the Subcommittee, thank you for the opportunity 

to discuss the 2017 filing season and efforts to combat identity 

theft. 

One of the continuing challenges the IRS faces each year in processing tax returns is the implementation of tax law changes. For 

the 2017 filing season, tax law changes include those provisions of 

the PATH Act specifically intended to reduce fraudulent and improper refundable credit claims. 

To date, our work has found that the IRS has held refunds, as 

required, for returns with an EITC or Additional Child Tax Credit 

claim, and has released those returns, as required, if they were not 

identified for additional review. We are evaluating the IRS’s implementation of key provisions of the PATH Act, and plan to issue our 

final report later this calendar year. 

The IRS is continuing its trend of increasing dependence on technology-based services, such as IRS.gov and other online tools to assist taxpayers. As of April 8th, the IRS reports 276 million visits 

to the IRS.gov during this filing season. However, with the availability of online tools comes the risk of unauthorized access. 

For example, in March 2017 the IRS de-activated the online data 

retrieval tool, which is used by students and parents to obtain information needed to complete the free application for federal student aid, due to a likely breach of sensitive taxpayer data. Effective 

authentication of individual identities is critical to maintaining taxpayer confidence that their personal information is safe with the 

IRS. 

For its toll-free assistance lines, the IRS reports that, as of April 

8, 2017, 16 million calls have been answered with automation, and 

telephone assisters had answered nearly 8.4 million calls and provided a 78.6 percent level of service. The IRS plans to assist approximately 3.4 million taxpayers in person at its taxpayer assistance centers this fiscal year: 23.6 percent decrease from the prior 

year. Although the IRS reports that it has 376 taxpayer assistance 

centers for this filing season, 24 are not open because they have 

not been staffed. 

The IRS continues to devote significant resources to stopping tax 

fraud from identity theft and assisting victims. Our ongoing work 

shows that the IRS is making progress in this area. In February 

2017 we reported that the IRS efforts are resulting in improved detection of fraudulent tax returns from identity theft before the refunds are released. 

For the 2007 (sic) filing season, the IRS is using 197 identity 

theft filters to identify potentially fraudulent individual tax returns, and prevent the issuance of fraudulent tax refunds. 

TIGTA has reported previously that the IRS does not always effectively provide assistance to victims of identity theft. To better 


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assist victims, the IRS created a centralized unit in July 2015 to 

combine the identity theft work and multiple functions into 1 directorate. Since this action was taken, there have been improvements 

in case closure timeframes, and a reduction in case-closing errors. 

To help protect identify theft victims and improve authentication, 

the IRS began issuing unique identification numbers to eligible taxpayers in fiscal year 2011. However, TIGTA has reported that taxpayer accounts were not always consistently updated to ensure that 

these numbers were generated for taxpayers, as required. This results in the need to use additional resources to review future tax 

returns received using victims’ identities. 

Tax scams are constantly evolving, which will require the IRS to 

continually adapt its detection and prevention processes. In addition to identity theft, the telephone impersonation scam remains on 

the IRS’s list of the top dirty dozen tax scams. 

Since the fall of 2013, more than 1.9 million intended victims 

have received unsolicited telephone calls from individuals falsely 

claiming to be either the IRS or Department of Treasury employees. The callers demand money under the pretense that the victim 

owes unpaid taxes. To date, over 10,300 victims have purportedly 

paid more than $55 million to these criminals. TIGTA has made 

several arrests in connection with the scam, and has numerous investigations underway. 

TIGTA has continuing audit and investigative work in the areas 

I have just discussed, and we will keep the Committee updated on 

the results. 

Chairman Buchanan, Ranking Member Lewis, and Members of 

the Subcommittee, thank you for the opportunity to share my 

views. 

[The prepared statement of Mr. McKenney follows:] 


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Chairman BUCHANAN. Thank you. 

Ms. Lucas-Judy, please proceed with your testimony. 

STATEMENT OF JESSICA LUCAS-JUDY, ACTING DIRECTOR, 

STRATEGIC ISSUES, GOVERNMENT ACCOUNTABILITY OFFICE 

Ms. LUCAS-JUDY. Chairman Buchanan, Ranking Member 

Lewis, Members of the Subcommittee, thank you for this opportunity to discuss GAO’s work on the 2017 tax filling season. My 

statement today focuses on 2 areas: IRS’s implementation of requirements to help address identity theft, refund fraud, and improper payments, and its performance in 2017 compared to prior 

years. 

As you have heard, wage information reported on W-2s had not 

been available to IRS until after most refunds had been processed 

and paid. We had previously reported that earlier access to that information could allow IRS to verify income reported on returns before issuing billions of dollars in fraudulent refunds. 

Consistent with our findings, Congress advanced the deadline for 

filing W-2s to January 31st. Congress also required IRS to hold all 

refunds for taxpayers claiming the Earned Income Tax Credit, 

EITC, or the Additional Child Tax Credit, ACTC, to provide time 

to use W-2 data to verify returns. As of February 17th, IRS had 

over 214 million W-2s available from the Social Security Administration. That is more than twice as many as the same time last 

year. 

All returns were subject to a process that IRS calls systemic 

verification, where it uses wage and withholding information on 

the W-2 to verify what is reported on the tax return. The difference 

is IRS had to hold refunds until February 15th for returns that 

were claiming EITC or ACTC, even if it was able to verify the information earlier. 

By contrast, IRS released refunds for returns that were not 

claiming those credits, even if the W-2s were not yet available for 

verification. Because of the earlier reporting deadline, more W-2s 

were available for both types of returns, and the verification results 

were similar. 

There were, however, 3 challenges that caused delays in having 

W-2 data available in time for verification. First, IRS received electronic W-2 information daily from Social Security, but could only 

process it on a weekly basis, due to its aging technology. Secondly, 

employers requested extensions, or they missed the reporting deadline. And thirdly, SSA did not begin transmitting paper W-2s to the 

IRS until March. 

SSA estimated it had approximately 17.4 million paper W-2s as 

of February 15th. As of the end of March, it had transmitted about 

3.8 million of those to IRS. Consequently, IRS processed refunds 

without W-2 information for taxpayers whose employers submitted 

paper W-2s, although their returns were still subject to other fraud 

checks. 

IRS does not yet know how effective systemic verification was in 

preventing identity theft refund fraud or improper payments. However, IRS’s initial review showed it identified about 162,000 returns 

worth about $863 million as potentially fraudulent. These returns 


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had claimed EITC or ACTC and, therefore, IRS had to hold them 

until February 15th. 

W-2 information had not been available when IRS first processed 

the returns, and they had not been flagged by IRS’s other fraud filters. During the hold period, IRS kept cycling the returns through 

its verification process, and eventually the corresponding W-2s arrived and showed that there was a mismatch. IRS sent those for 

further investigation. 

Switching now to filing season performance, IRS provided better 

telephone service to callers during the 2017 filing season compared 

to recent years. More people who wanted to speak to an assister 

were able to get through. In addition, wait times continued to decrease, down to less than 7 minutes compared to almost 10 minutes 

last year. 

Overall, the call volume decreased about 30 percent. And, as a 

result, IRS redirected assisters to reduce the backlog of written correspondence. It also launched a new online account service that 

provides taxpayers the ability to view their account balance and access IRS’s online payment system. 

Security continues to be an issue, however. In March IRS and 

the Department of Education responded to security concerns and 

removed an online tool for obtaining tax information that is used 

for student financial aid. IRS expects the tool to be unavailable 

until at least October. 

In summary, legislative changes for W-2 reporting show promise 

for detecting potentially fraudulent returns, although full results 

are still unknown. And IRS faced some challenges in implementing 

them. IRS also continued to improve service during the filing season. My written statement describes the status of recommendations 

that we have previously made for improving IRS’s online services 

and customer service more broadly. 

Chairman Buchanan, Ranking Member Lewis, Members of the 

Subcommittee, this concludes my remarks and I will be happy to 

answer any questions you have. 

[The prepared statement of Ms. Lucas-Judy follows:] 


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Chairman BUCHANAN. Well, thank you. And I want to thank 

all of you for your excellent testimony. We will now proceed to the 

question-and-answer session. As is my custom, I will hold my question until the end. 

I now recognize the gentleman from Arizona, Mr. Schweikert, for 

any question he might have. 

Mr. SCHWEIKERT. Thank you, Mr. Chairman. There are so 

many things to ask, so we will sort of do this at, like, the speed 

round. 

First off, there was a number you were saying that—I believe it 

was almost a 40 percent reduction in identity fraud use on filings. 

Did I get that number correct? And what got you to that number? 

Ms. WIELOBOB. We had a 46 percent reduction in those folks 

calling us to report that they were victims of identity theft. 

Mr. SCHWEIKERT. Okay, so it was not—so it was from individuals contacting the IRS, saying, ‘‘My identity was used fraudulently.’’ 

Ms. WIELOBOB. Reporting themselves as victims of identity 

theft, yes. 

Mr. SCHWEIKERT. Okay. Ms. Lucas-Judy, can you walk me 

through? Because in sort of the data metrics, you were saying, 

okay, you have had great success in matching W-2 data to the requests for refunds and those. 

How much outside data—do you ever use proprietary data, or 

purchase other data, or bounce requests for refunds off of private 

databases? 

Ms. LUCAS-JUDY. We were reporting specifically on IRS’s use 

of the W-2 wage data—— 

Mr. SCHWEIKERT. Yes. My question was the next level out. 

Ms. LUCAS-JUDY. Right. 

Mr. SCHWEIKERT. Are there other identifications used in the 

adherence of making the decisions of an Earned Income Tax Credit? Are those things going out the door, or is it just solely the delay 

and the match to W-2? 

Ms. LUCAS-JUDY. In this case it was about the delay and the 

matching of the W-2s, because the W-2s were coming in, in some 

cases, after the refunds were being paid. 

Now, IRS does have a number of other checks that it does 

throughout the process to determine which returns would be potentially fraudulent. 

Mr. SCHWEIKERT. Well, my concern is the difference in the designs of an algorithmic look and an actual match look. 

Ms. LUCAS-JUDY. Right. 

Mr. SCHWEIKERT. They are two very different things. One is, 

hey, you know, the attributes of this filing look like it meets our 

statistical model of potentially being dodgy, where this one, this 

person saying they made this income, therefore they do qualify for 

child care tax credit, you know, with these attributes, we can 

bounce it off and get red light, green light almost instantly if the 

attributes match. And if the attributes don’t match, then you 

know—because if I was hearing the discussion that there may have 

been a concern saying, hey, this waiting until the February date— 

well, there is an alternative to the delay, but that is—requires 

using data matching with other databases. 


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Ms. LUCAS-JUDY. Right, and they are still matching against 

other things. 

And one of the issues is that when IRS identifies a potential mismatch, it still has to go through and do some form of additional 

verification, additional investigation to determine whether or not it 

is actually fraudulent. 

Mr. SCHWEIKERT. Back to the question. Sorry—and I may not 

be communicating very crisply—what are you matching to? Is that 

algorithmic, is it W-2? Are you using any outside data sets to 

match to? 

Ms. LUCAS-JUDY. Well, we are—GAO is not doing the matching—— 

Mr. SCHWEIKERT. No, no, I meant—— 

Ms. LUCAS-JUDY. It is through IRS—— 

Mr. SCHWEIKERT [continuing]. As the observation at the—— 

Ms. LUCAS-JUDY. Right. So one of the things that we have recommended, we have pointed out that the more third-party information that is available for doing that kind of matching, the more effective it is going to be. And also that IRS—we have also recommended that Congress expand IRS’s correctable error authority, 

its math error authority, to be able to handle mismatches more 

quickly without having to go through and do audits of individual 

instances. 

Mr. SCHWEIKERT. From the IRS standpoint, is that something 

that has been—has there ever been a test, a data run, a look at— 

on being able to sort of do an A and a B—I know statute right now 

is you have to hold and wait so you have the W-2 data in the system. But there is other ways to get a quick match. 

I mean when some of these private databases know what ice 

cream I eat, they know my attributes and my income, my lifestyle, 

those things, wouldn’t that be a faster, cheaper, better way? And 

that way also, as all of us have a concern on the IRS’s ability to 

produce and maintain large IT systems, this way there is no IT 

system for the IRS to own and manage. It is just data matching. 

Ms. WIELOBOB. So currently, we do, as my co-panelist was describing, we do match income against the W-2s. And we also have 

a—— 

Mr. SCHWEIKERT. Okay, but that is still—— 

Ms. WIELOBOB. We also have—— 

Mr. SCHWEIKERT. But that is still—— 

Ms. WIELOBOB. But—— 

Mr. SCHWEIKERT [continuing]. Internal. I mean do you do any 

matching to anything in the outside world? 

Ms. WIELOBOB. We have a series of filters that we run the returns through to detect—— 

Mr. SCHWEIKERT. Okay, but the filter—— 

Ms. WIELOBOB [continuing]. Whether there is fraud. 

Mr. SCHWEIKERT. But the filters would all be algorithmic, internally produced. 

Ms. WIELOBOB. I would have to get back to you on that. You 

are beyond my level of expertise right here. 

Mr. SCHWEIKERT. Okay, sorry. 

Mr. Chairman, thank you, but it is an interesting idea. There 

may be a cheaper, better, more elegant way to get these benefits 


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out the door and at the same time deal with the amount of fraud 

that is still built into the system. 

With that I yield back, Mr. Chairman. 

Chairman BUCHANAN. I now recognize the distinguished Ranking Member, Mr. Lewis, for any questions that he might have. 

Mr. LEWIS. Thank you very much, Mr. Chairman. I just want 

to make a short statement before asking my question. In 2015 the 

Republican majority insisted that the Congress pass a law that requires the agency to hire private companies to collect unpaid taxes 

from taxpayers. And IRS, under the law, is required to turn over 

Social Security numbers and identifying information for tens of 

thousands of taxpayers to private debt collectors who will soon 

start collecting from the public. 

Do any of you have any concern about what is happening? Do 

you have any information, Ms. Lucas-Judy, about what has happened, is about to happen, that happened in the past? 

Ms. LUCAS-JUDY. GAO reported back in—I believe it was 

1997—on the pilot project that IRS did at that time using private 

debt collectors. And one of the things that we found was that the 

cost of the program at that time—the collection and—didn’t necessarily outweigh the costs. Sorry, the costs of the collection didn’t 

really outweigh the benefits of what they were bringing in. They 

were spending more on the private debt collectors. 

It was also additional opportunity costs involved in having to 

train the private debt collectors and to oversee their work, because 

there were limitations due to privacy concerns about what information they could have. 

Mr. LEWIS. Do you have any information or any history of citizens calling to the IRS saying they are being harassed by some private organizations all times of night, all times of day? 

Ms. LUCAS-JUDY. Well, as you have heard—— 

Mr. LEWIS. Any for the record? 

Ms. LUCAS-JUDY. Oh, I am sorry, go ahead. 

Mr. LEWIS. Do you have any information to support that people 

are being harassed? 

Ms. LUCAS-JUDY. Not necessarily of harassment. I mean, as 

you heard, the—it has been a very common scheme to have people 

impersonate IRS collectors and threaten people with imprisonment 

or, you know, losing benefits, or things like that. So that is something that would be a concern, and that IRS has expressed a concern about with using private debt collectors. 

They did put out a statement recently trying to explain what to 

expect if you are going to be contacted by a private debt collector 

who is under IRS’s authority to try to deal with that concern. 

Mr. LEWIS. Do you know whether the head of the IRS or any 

official at the IRS have made statements to the Congress saying 

this is not working, why are we going down this road again? Can 

we remember our history, what we have lost, what it is doing to 

the average taxpayer? 

Ms. LUCAS-JUDY. The program did just start, I believe, a few 

weeks ago. I don’t’ know if either of the other panelists has any 

comments on that. 

Mr. MCKENNEY. I guess I have a couple of comments. TIGTA 

has looked at the—kind of the creation of the program, the procVerDate Sep 11 2014 06:56 Feb 22, 2019 Jkt 033389 PO 00000 Frm 00068 Fmt 6633 Sfmt 6602 I:\WAYS\IN\33389\33389.XXX 33389

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esses that they are putting in place. And I guess the concerns that 

we have expressed so far—and they have a lot to do with the concerns about that telephone impersonation scam, you know, kind of 

coinciding with the implementation of this—and a few of the concerns we have—or I will mention 2 significant ones is—that we 

have expressed to the IRS. 

One is the authentication process. Authenticating who you are 

talking to. The process that IRS has for that, we believe, need to 

be strengthened, because there is just a potential that, you know, 

people will use this new process to, you know, perpetrate the scams 

that have already been underway. 

And then the other issue that we think is really important is the 

lack of a complaint panel, which helps identify problems early on 

and, you know, improve the program in case there is, you know, 

issues that people need to complain about. 

So those are the 2 main issues we brought up early on in the 

process, and we are continuing, and we will be reporting periodically on that program. 

Mr. LEWIS. Do you have any idea what effect the high-end taxpayers, or the low, middle-to-low-income taxpayers—what type of 

people are being harassed? What class of people? 

Mr. MCKENNEY. Well, ultimately, the—it calls for, really, inactive inventory, and the definition—anything that has been removed 

from inactive inventory will be involved in this program, and that 

is inventory which—one-third of the collection statute has been— 

has expired or it has been at least a year since anybody has contacted the person. 

Beyond that, what the criteria may be—— 

Mr. LEWIS. What I am trying to get to—whether the high rollers, people who make a lot of money, millions and billions of dollars, whether they are being harassed, or whether it is the middleincome, the working people that are being harassed by the private 

collectors. 

Mr. MCKENNEY. It is pretty early on in the program. I don’t 

really have any information yet. They just started sending those 

letters out, you know, in April. So I think, as far as what—— 

Ms. WIELOBOB. That is true. We just started sending out the 

letters—I think we are in the second week of sending accounts, actually, to the private collection agencies. So we don’t have many— 

we don’t have much data or results to share at the moment. 

But as far as the range of taxpayers who are—who may hear 

from a private collection agency, I think that it can cover the waterfront. 

Mr. MCKENNEY. And one other thing I should mention is, to 

date, TIGTA has received no complaints about the programs. 

Mr. LEWIS. Well, Mr. Chairman, if I may? 

Chairman BUCHANAN. Yes. 

Mr. LEWIS. In September 2014, Commissioner Koskinen sent a 

letter to the Senate Finance Committee outlining his concern with 

the private debt collecting program. Without objection, I would like 

to enter this letter into the record. 

Chairman BUCHANAN. Yes, not a problem, yes. 

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


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Chairman BUCHANAN. I now recognize Mrs. Walorski. 

Mrs. WALORSKI. Thank you, Mr. Chairman. 

Deputy Commissioner, I share your interest in eliminating tax 

fraud and identity theft, and have been following a couple of different programs. And I know you are new. I just wanted to at least 

talk to you about a program specifically to kind of—to just have a 

chance to talk about it and kind of see where the IRS is on it. 

It is the focus on the Return Review Program, or RRP. And I 

apologize, there are acronyms in all the names of these programs. 

But the RRP is the successor to the Electronic Fraud Detection 

System, which is EFDS, which, in 2010, the IRS said was too risky 

to maintain, upgrade, or operate beyond 2015. But here we are in 

2017, the EFDS is still the principal fraud detection system because, despite starting development in 2009, the RRP really still 

isn’t ready for prime time. It has only run as a pilot, didn’t perform 

particularly well, having a false positive rate and missing $313 million in actual fraudulent findings. 

So it is troubling to me that the IRS initially selected to undertake a unique blend—a unique build in the first place. But even 

more troubling to me is that, after such dramatic under-performance, delays, overruns, it seems to have simply been rubberstamped on these contract renewals in 2013 and 2016 without looking at alternatives or vetting new technology. 

So I know this doesn’t necessarily fall under your purview of 

services and enforcement, but you are here representing the IRS, 

so I wanted to at least throw this to you and say in Section 12.101 

of the Federal Acquisition Regulation, or FAR, requires federal 

agencies, including the IRS, to conduct market research to determine whether commercial items are available, and to acquire those 

items when they meet the needs of the agency. 

So, was there any market research completed, as well as 13 and 

16, to see if any commercial items could accomplish this mission of 

the RRP? 

Ms. WIELOBOB. So in addition to acronyms, we also make 

words out of acronyms. So we call that one EFDS. 

Mrs. WALORSKI. Okay, EFDS. 

Ms. WIELOBOB. So, Congresswoman, as you said, I am new. 

And I would be glad to get back to you on these questions, but they 

are really not only outside of services and enforcement, but beyond 

my scope, sitting here today. 

Mrs. WALORSKI. Can I ask just a couple more questions for the 

record, and have those sent back in writing? I would really—— 

Ms. WIELOBOB. Absolutely. 

Mrs. WALORSKI [continuing]. Really appreciate it, because here 

is my question, is in 2013 the IRS justified a sole-source contract 

for the RRP on the grounds that it was the only way to meet the 

project’s aggressive schedules. Obviously, those goals have still not 

been met in 4 years. 

So, given that failure to deliver, my other question is what did 

the IRS do to hold the awardee and the program management staff 

accountable? 

And then my final question is the period of performance for the 

current RRP contract expires this month. The IRS’s original cost 

for the RRP was $57.5 million. But, as I pointed out earlier, the 


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cost overruns alone were 86.5 million, as of a couple of years ago. 

I really want to know how much the IRS has actually spent developing, testing, and implementing this program. Bottom line. 

Ms. WIELOBOB. Okay. We will be glad to get back to you. 

Mrs. WALORSKI. And I would very much appreciate it. Thank 

you, Mr. Chairman. I yield back. 

Chairman BUCHANAN. I now recognize Ms. DelBene. 

Ms. DELBENE. Thank you, and thanks to all of you for being 

here with us today. 

Ms. Wielobob—hopefully I pronounced that right. 

Ms. WIELOBOB. That was very well done, thank you. 

Ms. DELBENE. Good. 

[Laughter]. 

Ms. DELBENE. I was very pleased to see that the IRS is making 

progress combating identity theft and fraud, and definitely believe 

we need to keep up the work and bolster programs that we know 

are working in this area. 

However, I would like to bring your attention to a possible negative side-effect of the program, and see if we might be able to work 

together to address it. In my district there seems that this past filing season to be an uptick in false positives. Constituents would receive a confirmation that their returns were being processed as 

normal. And then, after about 6 weeks or so, they would receive notification that they had been flagged for additional review. Then 

some saw additional wait times of 9 weeks or more, with very little 

communication about the status of their returns, or the reason for 

the delay. 

So I wondered if you could highlight some steps that are currently being taken to avoid false positives, to ensure that taxpayers 

who are flagged for review are receiving regular communication on 

their status, and prompt resolution. Are there additional things the 

IRS is considering to improve processing times for returns that are 

flagged in the taxpayer protection program? 

Ms. WIELOBOB. So I have not heard of—about an uptick in 

false positives until your statement. I mean we will check into our 

data, for certain. 

One of the things this filing season that has benefitted us is the 

earlier availability of the W-2 information. That has been—that 

has allowed us to detect fraudulent returns, but then also understand whether we have a valid return. And when we do have a 

valid return, release any refund that the taxpayer is due. So that 

was a big help to us this year. 

We are always looking to—we are always modifying our filters, 

we are finding our filters to become better, more adept at detecting 

both the fraudulent returns and the good returns, as we call them. 

Ms. DELBENE. Now, would the regular communications—so if 

someone was flagged, the other thing we had heard is they didn’t 

really get very good feedback on what was happening, going forward. 

Ms. WIELOBOB. Did they give you any more specifics, like—— 

Ms. DELBENE. I can give you more specifics on some of the individual cases that we had, and calls that we got into our office. But 

they—you know, we had heard, you know, from folks up to 9 weeks 


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of just not hearing anything after they found out that they had 

been flagged. 

Ms. WIELOBOB. Okay. I am sure that we have timeframes laid 

out for when we get back to folks, back to taxpayers, and we can 

look into those—— 

Ms. DELBENE. Okay. We will follow up on that. 

Ms. WIELOBOB. Okay, thank you. 

Ms. DELBENE. The other one was I know there have been improvements in handling call volumes. But there still seems to be 

a serious challenge for many taxpayers who need assistance. This 

season some of my constituents reported getting kicked off of the 

IRS phone system due to call volumes. 

And so, we ended up with many of the calls, where we would 

pass individuals on to taxpayer advocates to—due to their inability 

to get through. And I wondered if you could speak to this at all. 

Beyond what I assume are staffing issues, are there any technology 

issues that would cause folks who are on hold to be kicked off? 

Ms. WIELOBOB. You know, as you noted, we do face significant 

technology issues. And we did have a couple outages this year on 

our phones, but have got them—quickly resolved them, and hopefully as few taxpayers are disadvantaged as possible. 

We face a large call volume. Some of our systems—as we have 

money and we work to upgrade our systems, there are still systems 

that we do need to upgrade to prevent problems like that. 

Ms. DELBENE. Okay. If there is any more information on—— 

Ms. WIELOBOB. Okay. 

Ms. DELBENE [continuing]. What might be able to be done to 

help resolve that, I would appreciate it. 

Ms. WIELOBOB. Sure. 

Ms. DELBENE. Thank you. I yield back. 

Chairman BUCHANAN. I now recognize Mr. Curbelo. 

Mr. CURBELO. Thank you, Mr. Chairman, for this hearing. I admire your commitment to protecting American taxpayers and that 

of the Ranking Member, as well. 

Ms. Lucas-Judy, one of GAO’s recommendations was that the 

IRS should develop a comprehensive customer strategy. Can you 

expound a little bit on that recommendation? 

Ms. LUCAS-JUDY. We have actually had a number of related 

recommendations over the years. The first, I think, was in 2011 or 

2012. We were recommending that they establish the levels of service that they wanted for phones and for correspondence and other 

areas, and then really lay out a strategy for how they were going 

to achieve those, what kind of resources would be required to get 

that particular level of service. 

We also recommended that—in 2014, that they do some sort of 

benchmarking study to determine, with their telephone service, 

how it relates to those that would be considered the best in the 

business, you know, other large call centers that deal with a large 

volume of people across the country, what would be an appropriate 

amount of time to wait, what is considered to be an appropriate 

amount of time, you know, to resolve a call. 

And then, because there wasn’t a whole lot of action being taken 

to address our prior recommendations, we also made a matter for 


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congressional consideration to require Treasury to have IRS do 

comprehensive customer service strategy. 

So, IRS is making progress in addressing these. It did go ahead 

and do a benchmarking study, and we are evaluating—looking at 

the results of the study to see if it addresses our recommendation. 

I think they looked at 12 or 13 different public sector and private 

sector entities, and benchmarked themselves against that. 

In addition, they have also started to design what they call a future state initiative, which is a vision for future IRS services that 

accounts for in-person services, phone service, online service, just 

sort of a comprehensive picture. And that is the kind of thing that 

we were recommending. 

But some of the specifics are still lacking, in terms of, again, the 

sort of numeric targets for the different components of service, and 

specifically tying the resources in. What would it take to get you 

to these particular levels of service? 

Mr. CURBELO. Thank you very much. And, Ms. Wielobob, in addition to the IRS, outside groups also have the opportunity to provide taxpayers with assistance, specifically through VITA—Volunteer Income Tax Assistance—grants, Tax Counseling for the Elderly, and taxpayer advocate services. These programs are targeted to 

ensure taxpayers, especially those with lower incomes and limited 

proficiency in English, can confidently file returns without fear of 

being scammed by fraudulent preparers. 

I was actually proud to lead a bipartisan letter with 55 of my colleagues, including eight Members of Ways and Means, to the House 

Appropriations Committee calling for increased funding as Congress crafts our fiscal year 2018 budget. Can you discuss the IRS’s 

efforts to promote and educate taxpayers on options available, and 

how the agency is interacting or promoting these programs? 

Ms. WIELOBOB. The programs that you mention, particularly 

VITA and TCE, we provide grants to those organizations. We also 

work through partner organizations in what—through what is 

called our spec organization in wage and investment, where we 

reach out through those organizations to partners to provide assistance to taxpayers. 

We do a fair amount of marketing, we do a lot of communication 

through the media. We have space on our website for VITA, TCE 

publication, essentially, or publicity—it is probably a better word 

to say that. 

Mr. CURBELO. Would you say there is room for growth for these 

programs, that they can do a lot more? Do you find them to be effective? 

Ms. WIELOBOB. Oh, they are very effective. They have—I have 

been around the IRS for 20 years, and they have been effective the 

whole time that I have been there, and we are very proud of the 

work that they do and our partnership with them. 

Mr. CURBELO. Well, thank you. And I again invite my colleagues to bolster these programs, because the more we can do to 

help the elderly, low-income individuals understand how the tax 

system works, and interact with the IRS, the better we are, as a 

country. 

So thank you very much, Mr. Chairman, I yield back. 


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Chairman BUCHANAN. I now recognize the gentleman from Oregon, Mr. Blumenauer. 

Mr. BLUMENAUER. Thank you, Mr. Chairman. If I could, I 

would like to request unanimous consent to enter into the record 

a half-dozen articles about private debt collection in the IRS. 

Chairman BUCHANAN. Yes, that is fine. 


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Mr. BLUMENAUER. Thank you. I appreciate our getting into 

the weeds here a little bit. This is important work, in terms of 

being able to provide appropriate service. The notion of the potential for scammers taking advantage of our constituents, people who 

are looting the treasury because they have found ways to be able 

to penetrate the system and get fraudulent returns. 

The numbers, however, are kind of staggering, in terms of what 

Congress has not invested. And I appreciate people holding the IRS 

accountable, but we have—just since my friends in the majority 

took over, we have dramatically reduced funding. Every year costs 

of households, businesses, and government goes up. The budget has 

gone down almost 10 percent, and that is not inflation-adjusted. 

There were over 92,000 employees who are trying to deal with 

230 million returns. And I appreciate the witnesses pointing out 

one of the nice things now is that, for once, Congress finished its 

job in time so you could actually print the forms. That hasn’t been 

the case, complicating both compliance by individual citizens, and 

opening windows for the people who are going to cheat. 

It strikes me that now we have less than 75,000 employees. We 

have 244 million returns, and they are more complex, and that we, 

as Congress and this Committee have not done a very good job of, 

I think, diving in to understand how we acquit this agency. What 

we have heard about their challenges, in terms of computer systems that you have to sort of get people out of cold storage to operate them, because nobody is trained on this stuff any more. They 

were talking language that I remember from computer classes from 

the early seventies. 

So we have made their task much more difficult, I think. And the 

thing that I guess concerns me the most is that Congress has been 

unwilling, for all the talk about private debt collection, Congress 

has been unwilling to invest in our own enforcement procedures. 

Now, Mr. Chairman, you were very successful in the private sector, and I will venture that you—one area that you didn’t underfund in your successful businesses was your accounts receivable department. I would venture you followed that pretty closely. 

The IRS, we have lost 6,800 positions, 30 percent of the enforcement staff. And for every dollar we invest there, we get $6 back. 

That would seem to me to be something that we on this Committee—and I really appreciate working with you, Vern, and—excuse me, Mr. Chairman, Mr. Ranking Member—to get down into 

the details. And I think this is one that really deserves our attention. 

One of the things that I find a little interesting in all of this discussion is we have got private debt collection now that has been 

mandated. You know, that wasn’t something we did on this Committee. The Subcommittee didn’t weigh all the evidence, look at the 

past failures of private debt collection, the abuses, and the fact that 

they ended up losing money for the Federal Government. This was 

passed in the highway bill. The highway bill. You know, it is a 

head-scratcher. 

The record—and we have gone through this, some of us old-timers on the Committee went through this, where this was dusted off 

and offered up. And I remember the last time we were having this 


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discussion, we were going, well, what is different? What is different? What is going to make that successful? 

Well, the point is we didn’t get the answer. But it wasn’t successful the last time. It ended up losing money. And there was a parade of horribles, in terms of the abuse of individual taxpayers. 

Now, we are all sensitive to the way that they are treated, and we 

get complaints. They don’t—but this is an open invitation to scam. 

And the track record has been horrific with the past 2 experiments 

like this. 

Mr. McKenney, you have a reference to the private debt collection at the end of your testimony, but you really didn’t elaborate 

on that. Can we talk for a moment about what you are going to 

be able to do to monitor, to make sure that taxpayers aren’t 

abused, and that it is successful, and if there is anything that is 

different now than what happened the 2 previous times that this 

was attempted and failed? 

Mr. MCKENNEY. Yes. You know, it is still very early in the 

process, but TIGTA actually is going to be providing oversight on 

this from 2 aspects. 

One, our office of investigations handles anything that may be, 

you know, improper misconduct-related or taxpayers are being 

scammed or mistreated. Office of audit looks at the systemic issues, 

as far as how that is working. We will be reporting out on that as 

it progresses. It is very early. They just started it. 

But in terms of monitoring whether it is, you know, cost effective, we will be reporting on that and any other problems we have 

seen. 

The early problems, obviously, I mentioned. But we will continue 

with that—— 

Mr. BLUMENAUER. Have you seen anything that has changed 

that will suggest that there is a dramatic improvement of the climate in which this is going to be conducted, as opposed to last couple times? 

Mr. MCKENNEY. It is really too early to comment on that. I 

think so. 

Mr. BLUMENAUER. Fair enough. We will look forward to your 

progress. 

Mr. MCKENNEY. Okay. 

Mr. BLUMENAUER. Thank you, Mr. Chairman. I appreciate 

your courtesy. 

Chairman BUCHANAN. Thank you. They have moved votes up, 

so we will recess to vote and reconvene as soon as possible after 

votes. The committee stands in recess. 

[Recess]. 

Chairman BUCHANAN. Well, thank you. Welcome back. I would 

like to recognize Mr. Bishop from Michigan. 

Mr. BISHOP. Thank you, Mr. Chair. Thank you to the panel for 

your time today. I am going to have to gather my thoughts here 

and get to my question. 

I, like the other Members of the Committee, are very concerned 

about taxpayer protections and taxpayer rights. But I want to shift 

a little bit in my focus here to something more specific. The taxpayer bill of rights was adopted by the IRS in 2014, and then by 


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Congress in 2017. That is the facts in which I have started this, 

and my research on this Committee hearing today. 

I then read the March treasury inspector general of tax administration’s report, specifically with regard to the IRS’s activities in 

the area of civil asset forfeiture and bank structuring cases. And, 

of course, bank structuring is the practice of making multiple cash 

deposits in a bank of less than $10,000 so you don’t hit that threshold for purposes of reporting requirements. 

It—in the report the recommendation portion of it number 3, 

page 21, provides that when the IRS investigates a citizen, the IRS 

should ensure they are informing the citizen of their rights. Now, 

the taxpayer bill of rights, in that document, the number-1 of those 

rights is the right to be informed. And I am just wondering if you 

can advise me, because I am—the way I am looking at it right now, 

it appears as though it does not apply to cases—in Title 31 cases 

with regard to civil asset forfeiture. 

In fact, the report found that in 229 interviews, only 5 of them 

were advised of their rights. That concerns me, as a citizen, it concerns me as a lawyer, a former prosecutor. I believe in due process 

and the right of every citizen to be advised, and especially in something as important as civil asset forfeiture. 

And I am wondering, Mr. McKenney. I guess this question best 

goes to you. If you can tell me a little bit more of what the agency 

found that prompted that recommendation, and tell me—give me 

your opinion as to what you think about how the IRS should proceed. 

Mr. MCKENNEY. Sure, thank you. Yes, you know, the real concern that we have on that is the taxpayers that were mostly affected were legal-source income, so there weren’t, you know, illegal 

activities, and they weren’t, you know, aware of the situation when 

they were being questioned. They weren’t informed as far as, you 

know, what the nature—what had previously happened, that their 

assets had already been seized, and that they—you know, didn’t— 

weren’t really made aware of, you know, their right not to talk to 

an attorney, and all of that (sic). 

And our view is, regardless of the type of case it is, since it is 

not always known at the beginning, that those rights would apply, 

and the IRS’s response, we felt, was somewhat incomplete, and 

that they would provide those rights in certain instances, but in 

any instances they concluded were grand jury cases, they wouldn’t 

necessarily apply. 

And our concern about that is they don’t really have a good definition in their procedures, as far as what is a grand jury case. 

Grand jury—you know, a lot of times they use grand jury subpoenas, but the case never really makes it in front of a grand jury. 

So we didn’t think it was an adequate response. We believe they 

should be providing the taxpayers—they should be informing taxpayers, and providing their rights on a much more consistent basis, 

with possibly limited exceptions, but not to the extent that they responded—that was included in the response. 

Mr. BISHOP. Thank you, Mr. McKenney. And I guess I just— 

I ask Ms. Wielobob on follow-up, does the taxpayer bill of rights 

constitutional provisions regarding due process, does that apply in 

Title 31 cases? 


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Ms. WIELOBOB. In August of 2016 we actually changed our policy, so that we provide non-custodial rights in Title 31 cases. 

The difference with some of our cases is that those that are 

under the control of the Department of Justice, we have to—they 

have to give us permission to provide non-custodial rights in the 

Title 31 cases. And so, we have—we did change that policy in August of 2016. 

Mr. BISHOP. So the taxpayer bill of rights applies in Title 26 

cases? 

Ms. WIELOBOB. I am sorry—— 

Mr. BISHOP. Not title—excuse me. Title—the taxpayer bill of 

rights provision, the law, applies to Title 31 cases, civil asset forfeiture, as it would, say, in Title 26 cases? 

Ms. WIELOBOB. We have—the—what I can tell you is in—we 

changed the policy to provide non-custodial rights in Title 31 cases. 

Mr. BISHOP. But—— 

Ms. WIELOBOB. But you know what? I don’t have the exact provision in my head. 

Mr. BISHOP. Got you, okay. I guess that is it for me, and time 

is up. I yield back. 

Chairman BUCHANAN. I now recognize the gentleman from 

New York, Mr. Crowley. 

Mr. CROWLEY. I thank my friend and colleague from the great 

state of Florida for yielding me this time. Mr. Chairman, thank 

you. Thank you all for being here, as well, this afternoon. This is 

a really good time and opportunity to discuss taxpayer filing issues. 

I understand that, as of April 14th, the IRS had received over 

115 million tax returns from individuals and families, and that is 

really remarkable. And the task before the IRS is enormous, and 

we thank the men and women who are engaged in this process. It 

is not easy. 

And even as individuals across America filed their tax returns, 

many of whom have been protesting for the President, President 

Trump, to release his tax returns—even though he promised to do 

so, he refuses to release those taxes, will not make good on that 

promise, as well. 

So I would like to clarify with you an issue of IRS operations, 

and this is a question for the entire panel. And if you could please 

answer yes or no, I would appreciate it. 

Does Section 6103 of the Tax Code bar a taxpayer from releasing 

his or her tax returns? Ms. Wielobob? 

Ms. WIELOBOB. Wielobob. Yes, it does not. 

Mr. CROWLEY. Does not. Mr. McKenney? 

Mr. MCKENNEY. My understanding is no. 

Mr. CROWLEY. Ms. Judy. 

Ms. LUCAS-JUDY. No. 

Mr. CROWLEY. Thank you. This also is for the entire panel. And 

again, a yes-or-no answer I would appreciate. Under the Tax Code, 

may a taxpayer consent to the release of his or her tax return, even 

if they are under audit? 

Ms. WIELOBOB. Yes. 

Mr. MCKENNEY. Yes. 

Ms. LUCAS-JUDY. To the best of my knowledge, yes. 


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Mr. CROWLEY. So, as I understand it, there is nothing stopping 

a taxpayer who holds the position of, let’s say, President of the 

United States, from releasing his or her tax returns, even if they 

are under audit. Is that correct? 

Ms. WIELOBOB. A taxpayer can release returns that are under 

audit. 

Mr. CROWLEY. Even if they are President? 

Ms. WIELOBOB. Regardless of one’s line of employment. 

Mr. MCKENNEY. The same answer. 

Mr. CROWLEY. Ditto, ditto? 

Ms. LUCAS-JUDY. Defer to my colleagues on that. 

Mr. CROWLEY. We need an answer to the basic question who 

is President Trump fighting for, himself or the American people. 

Without his tax returns showing whether he is controlled by foreign banks and other outside influences, we simply can’t know. 

But for now, without direct knowledge on the conflicts this President is under, we don’t know why he is saying one thing, making 

one promise—that he will release his returns—and yet, when the 

rubber meets the road, doing the exact opposite. Again, not fulfilling his commitment and, quite frankly, lying to the American 

people. 

It is not easy for me to say that, having grown up with ‘‘I shall 

never tell a lie,’’ ‘‘who cut down the cherry tree,’’ or ‘‘Honest Abe’’. 

But this is not Honest Donald. 

And as we hear—as we near the conclusion of the first 100 days 

of this presidency, all we know is the end result is an uneven playing field for the working American. This is becoming of particular 

importance, as President Trump has now released his tax reform 

proposal. We don’t know how much President Trump has paid in 

taxes, but from his public statements we can guess that he has 

done his best to avoid paying them at all. 

So, will this tax plan allow more wealthy Americans and corporate fat cats to dodge paying taxes the same way? On first blush, 

it appears to. Being able to use pass-through entities to, in effect, 

give a—an ability of the wealthiest in our country a massive tax 

break, it is not tax reform, it is just a tax giveaway. 

The question will continue to hang over him and Republicans, 

quite frankly, who continue to protect him, until we get definite answers. And, as we discuss the tax filing season, I don’t want there 

to be any question over whether President Trump can release his 

or—his tax returns, as he has promised to do so, regardless of 

being under audit. The answer is clear. He can and he should. 

It is important information the American people deserve that 

nearly every president since the 1970s has released, including 

Richard Nixon. Let’s go to the bottom of these questions now, so 

that the American people win, not President Trump and his business interests. 

With that, I yield back the balance of my time. 

Chairman BUCHANAN. I now recognize the gentleman from 

North Carolina, Mr. Holding. 

Mr. HOLDING. Thank you, Mr. Chairman. Deputy Commissioner Wielobob, in answer to a question before we took a break for 

votes you said that the IT folks—IT at the IRS has serious problems. I believe that is—you characterized it as serious problems, or 


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as trouble. I don’t know if you remember how you characterized it, 

but the—are you—how much money was appropriated for IRS IT 

in 2016? 

Ms. WIELOBOB. I don’t know, sir. 

Mr. HOLDING. The—I know in 2014 it was $2.4 billion for IT 

investments in the IRS. And it has been consistently around that 

number for a number of appropriations. I mean the IRS has literally gotten billions upon billions of dollars to increase the IT capacity that you have, your IT infrastructure. 

We had a meeting with your IT folks—this has been about 2 

years ago now—the Oversight Committee, and they said they are 

just having a terrible difficulty trying to integrate programs, and 

so forth. And they made mention that the IRS still uses computer 

programs from the Kennedy Administration. Are you aware of 

that? 

Ms. WIELOBOB. Yes. We actually wrote—a publication had us 

with the oldest—the top 2 oldest—— 

Mr. HOLDING. Yes, I find it just incredibly troubling that we 

appropriate billions of dollars to fix it—if this happened in the private sector, heads would roll. I mean you couldn’t continue on in 

this way. 

Are you aware in—how many hours in 2016 were devoted to 

union activities in the IRS, paid hours of union activities in the 

IRS? 

Ms. WIELOBOB. I am not aware of the specific number, sit. 

Mr. HOLDING. The—again, from a hearing that we had a few 

years ago in 2014, the number was almost 500,000 hours of paid 

union activity in the IRS. 

There is one agency of government that has more paid hours of 

union activity. Are you aware what that agency is? 

Ms. WIELOBOB. No. 

Mr. HOLDING. It is the Veterans Administration. 

All right. I want to turn your attention to the IRS criminal investigation unit. I worked in the Department of Justice for a long 

time, and our local U.S. Attorney’s office, and had great success 

with IRS CI agents. They were great to have on the team, if you 

had a complex case. You always wanted one on your team. The FBI 

does a good job, but IRS CI does a better job on complex fraud 

cases, anywhere where you have got to track payments and net 

worth and so forth. 

Are you aware how much the IRS has reduced in personnel of 

IRS CI between 2010 and 2016? 

Ms. WIELOBOB. I believe it is approximately the same level of 

decrease that we have experienced across the agency. 

Mr. HOLDING. So 23 percent? About—— 

Ms. WIELOBOB. We are down, yes. 

Mr. HOLDING. So is that—you think it is consistent with—— 

Ms. WIELOBOB. That sounds in line—— 

Mr. HOLDING [continuing]. Across the agency? 

Ms. WIELOBOB. Yes. 

Mr. HOLDING. The—but I would imagine the IRS special 

agents, CI agents, are pretty valuable, as far as combating tax 

fraud and other crimes that seem to be on the rise, and fraud 

cases, and so forth. They are valuable? 


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Ms. WIELOBOB. Of course they are, just as all of our employees 

are valuable to the tax administration system. 

Mr. HOLDING. So if you can get back to me with the decrease 

in IRS agents across the—our indication, our preliminary information, is that CI employees have been reduced at a higher rate than 

other IRS employees. Let’s make sure we are on the same page 

there. 

And with that, Mr. Chairman, I yield back. 

Chairman BUCHANAN. Thank you. Let me pose a few questions. 

First, I want to thank you for the opportunity to visit today. But 

we have a lot of CPAs in our area—and this has been going on for 

two or three years. I will say up front it seems like it has gotten 

better, in terms of identity theft. But I just met with a group of 

CPAs from all over the state of Florida. They have a quarterly 

meeting or something they do. We talk so it sounds like it has gotten better, but it is still a big problem. 

I mentioned one case in particular in Florida. It did finally get 

resolved, or you caught him after seven years, but it was 2,000 

fraudulent tax returns that were filed. They took in $6.8 million in 

the last year. I mean over a period of time. How does something 

like that happen? And do you have the mechanisms or whatever 

in place to try to prevent that, going forward? 

And let me just open it up to any of you that would like to respond. So identity theft in general, where are we at—I heard that 

you said 46 percent improvement, but are we really making those 

kinds of strides, or is there—it seems like there is still a lot more 

work that needs to be done. 

Ms. WIELOBOB. I think there is always going to be work that 

needs to be done in this area. What we have found is we have increased our ability to detect identify theft. We have made our system stronger. What we have found is that if criminals can’t get in 

through the front door, they try the side door. And so we are understanding that we need to work with partners. 

Right now we are heavily involved with what we call the security 

summit, which is the public-private partnership with industry and 

states, to try to share information across, again, the private sector 

and state governments to understand where the next attacks are 

coming from. 

So, we have made strides, not only in detecting identity theft and 

refund fraud, but trying to anticipate where the next attack is coming from. 

Chairman BUCHANAN. Yes. I talked with the Commissioner, 

and it was pretty clear that it is a lot of criminal enterprise. It is 

not just in the United States, but throughout the world, to some 

extent. So it is an ongoing battle. 

But do you have anything you would like to add to that, in terms 

of identity theft? I would like both of you to take a minute or so 

and comment on it. 

Mr. MCKENNEY. Yes, our view is some of the integrity provisions in the PATH Act are certainly going to help, because it provides IRS some information that can help in the verification. And 

I think that will help on 2 fronts. One is to avoid the false 


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positives, and the other is to catch the identity thieves. So it helps 

reduce burden and stop fraud. 

And the other, I think, is a lot of the initiatives that IRS has 

going on with the security summit and different data elements it 

is getting, the more data it can use to try to, you know, validate 

who is coming into the system, the more likely they will catch 

those returns that aren’t supposed to be in—— 

Chairman BUCHANAN. But is it your sense that we are getting 

better at it. I mean, it just seems like you plug one hole, then you 

have penetrated—— 

Mr. MCKENNEY. Well, that is the problem. It is—certainly recent statistics look like it has significantly improved, but you have 

to, you know, constantly be watching, because they seem to be able 

to morph and figure out the next way to get through and to validate themselves. And there is more and more information, as there 

is more systems that are hacked, or more personal information that 

is out there, more criminals can get their hands on it, they can use 

that information to make themselves appear to be the taxpayer. So 

that is a big problem that still needs to be overcome. 

Chairman BUCHANAN. Ms. Lucas-Judy? 

Ms. LUCAS-JUDY. I would echo what Mr. McKenney just said. 

I mean the statistics show that it seems to be getting better, but 

we have reported before in looking at IRS’s methods for estimating 

identity theft refund fraud, it has gotten better at detecting the 

things that it knows about. But there is still an unknown element 

out there of fraud, and so we are working with IRS on—as it is improving its estimations, its taxonomy for figuring out the extent of 

the problem. 

And then we have also been looking at how IRS authenticates 

users to determine whether or not taxpayers are who they say they 

are. 

And then, also, with the pre-refund systemic verification that 

they have been doing now, we think that is definitely a positive 

step. As I mentioned in my opening statement, the—one of the 

issues is that there is still the paper W-2s are not coming in in 

time for IRS—or, at least for this filing season, weren’t coming in 

in time for IRS to be able to use it. And we had previously identified that as a potential problem, and had suggested that Congress 

consider lowering the threshold for employers to electronically file 

W-2s. 

Currently the threshold is they have to have 250 W-2s to have 

to file electronically. And Treasury has suggested that it would be 

effective to have that down to 5 to 10 to be the requirement to have 

to file electronically—— 

Chairman BUCHANAN. Well, that is one area I would think 

that identity theft—that we could work together on. 

But give us your ideas about what we can do to be more helpful, 

because this is an area that I think is better, but there is still a 

lot of work to be done in this space. 

The other thing I just wanted to touch on is the Earned Income 

Tax Credit. They claim—this is your number—met with the Commissioner, I thought—I don’t want to put words in his mouth, but 

it is about—the abuse is about 24 percent up to $16 billion, or 

something in that range. It might not be all fraudulent, it might 


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be some improper documentation, or whatever. But it is another 

area that seems ripe with fraud. 

I would be interested just in your thoughts about where that is 

at, what are we doing about it, and how we deal with this going 

forward. And any of you who would like to start off, go ahead. 

Ms. LUCAS-JUDY. Well, for the Earned Income Tax Credit, as 

you said, that is one of the highest estimated levels of improper 

payments in the Federal Government. Of the $144 billion in improper payments, this is the—got the third highest error rate. And 

one of the issues is that the program is very complex. It is a complex tax credit, and it is difficult to determine, you know, who is 

eligible, and who is supposed to be getting it. 

It is not all fraud. Certainly it is—you know, some of it is overpayment, some of it is under-payments. Some of it possibly is 

fraud. We have recommended that regulating paid tax preparers 

would be something that Congress could do—— 

Chairman BUCHANAN. Yes, that was one suggestion that was 

told to me that makes some sense. 

Ms. LUCAS-JUDY. Right. 

Chairman BUCHANAN. Go ahead. 

Ms. LUCAS-JUDY. Right, because a large number of returns 

claiming the EITC are prepared by paid preparers. And IRS did a 

study a number of years ago, and found that more than half of 

those had errors. And likewise, we also 2 years ago did some undercover work, where we sent people in to 19 different paid preparers, and only 2 of the 19 were able to basically give us the right 

answer. A number of them also over-claimed, had our undercover 

investigators over-claiming the credit. 

So we think that is something, regulating paid preparers, and 

then also, as I said, reducing the threshold for W-2 filing. 

Chairman BUCHANAN. Mr. McKenney? 

Mr. MCKENNEY. The Earned Income Tax Credit is an area 

where the IRS actually identifies a lot more returns that they believe are, you know, invalid claims than they can address, because 

it requires an audit. 

So, I think one of the things the IRS has requested is expanded 

correctable error authority in those cases where it has reliable information that it can compare to indicate that that claim is not a 

valid claim, and they can correct it, and provide the taxpayer the 

opportunity, if the corrected amount—the taxpayer does have the 

opportunity to let them know, no, here is why it is actually the correct amount. 

But it is a much less expensive process to deal with in an audit. 

And that process to resolve that is a much lower cost, you know, 

closer to, like, a few dollars, compared to an audit, which, you 

know, can be hundreds of dollars to—— 

Chairman BUCHANAN. I think we made progress, but still a gigantic number. 

Would you like to add anything? 

Ms. WIELOBOB. I agree with both of my co-panelists about the 

W-2 thresholds, and then also the correctable error authority. 

I would also just suggest that the provisions in the Earned Income Credit area are quite complex, considering the fluidity of famVerDate Sep 11 2014 06:56 Feb 22, 2019 Jkt 033389 PO 00000 Frm 00108 Fmt 6633 Sfmt 6602 I:\WAYS\IN\33389\33389.XXX 33389

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ily situations. They are very difficult for IRS to verify. And so, any 

move towards simplification would be helpful, as well. 

Chairman BUCHANAN. Well, let me just say in closing, from my 

standpoint, any thoughts or suggestions or ideas that you could 

work with us, with this panel, we want to be helpful, make your 

job easier. I mean, I have heard some good ideas today. 

I guess, just in closing, I would like to thank all of you witnesses 

for appearing before us today. Please be advised Members have two 

weeks to submit written questions to be answered in writing. Those 

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

With that, the Subcommittee stands adjourned. 

[Whereupon, at 4:07 p.m., the Subcommittee was adjourned.] 

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