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95–098 PDF 2015

THE TAXPAYER ADVOCATE ANNUAL REPORT 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

GOVERNMENT OPERATIONS 

OF THE

COMMITTEE ON OVERSIGHT 

AND GOVERNMENT REFORM 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

APRIL 15, 2015 

Serial No. 114–22 

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

( 

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

http://www.house.gov/reform 


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COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM 

JASON CHAFFETZ, Utah, Chairman 

JOHN L. MICA, Florida 

MICHAEL R. TURNER, Ohio 

JOHN J. DUNCAN, JR., Tennessee 

JIM JORDAN, Ohio 

TIM WALBERG, Michigan 

JUSTIN AMASH, Michigan 

PAUL A. GOSAR, Arizona 

SCOTT DESJARLAIS, Tennessee 

TREY GOWDY, South Carolina 

BLAKE FARENTHOLD, Texas 

CYNTHIA M. LUMMIS, Wyoming 

THOMAS MASSIE, Kentucky 

MARK MEADOWS, North Carolina 

RON DESANTIS, Florida 

MICK MULVANEY, South Carolina 

KEN BUCK, Colorado 

MARK WALKER, North Carolina 

ROD BLUM, Iowa 

JODY B. HICE, Georgia 

STEVE RUSSELL, Oklahoma 

EARL L. ‘‘BUDDY’’ CARTER, Georgia 

GLENN GROTHMAN, Wisconsin 

WILL HURD, Texas 

GARY J. PALMER, Alabama 

ELIJAH E. CUMMINGS, Maryland, Ranking 

Minority Member 

CAROLYN B. MALONEY, New York 

ELEANOR HOLMES NORTON, District of 

Columbia 

WM. LACY CLAY, Missouri 

STEPHEN F. LYNCH, Massachusetts 

JIM COOPER, Tennessee 

GERALD E. CONNOLLY, Virginia 

MATT CARTWRIGHT, Pennsylvania 

TAMMY DUCKWORTH, Illinois 

ROBIN L. KELLY, Illinois 

BRENDA L. LAWRENCE, Michigan 

TED LIEU, California 

BONNIE WATSON COLEMAN, New Jersey 

STACEY E. PLASKETT, Virgin Islands 

MARK DeSAULNIER, California 

BRENDAN F. BOYLE, Pennsylvania 

PETER WELCH, Vermont 

MICHELLE LUJAN GRISHAM, New Mexico 

SEAN MCLAUGHLIN, Staff Director 

DAVID RAPALLO, Minority Staff Director 

CHRISTOPHER D’ANGELO, Professional Staff Member 

SARAH VANCE, Clerk 


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(III) 

SUBCOMMITTEE ON GOVERNMENT OPERATIONS

MARK MEADOWS, North Carolina, Chairman 

JIM JORDAN, Ohio 

TIM WALBERG, Michigan, Vice Chair 

TREY GOWDY, South Carolina 

THOMAS MASSIE, Kentucky 

MICK MULVANEY, South Carolina 

KEN BUCK, Colorado 

EARL L. ‘‘BUDDY’’ CARTER, Georgia 

GLENN GROTHMAN, Wisconsin 

GERALD E. CONNOLLY, Virginia, Ranking 

Minority Member 

CAROLYN B. MALONEY, New York 

ELEANOR HOLMES NORTON, District of 

Columbia 

WM. LACY CLAY, Missouri 

STACEY E. PLASKETT, Virgin Islands 

STEPHEN F. LYNCH, Massachusetts 


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C O N T E N T S 

Page 

Hearing held on April 15, 2015 .............................................................................. 1 

WITNESS 

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

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

Written Statement ............................................................................................ 8 

APPENDIX 

Colleen M. Kelley, National President, National Treasury Employees Union, 

Statement for the record ..................................................................................... 82 


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THE TAXPAYER ADVOCATE ANNUAL REPORT 

Wednesday, April 15, 2015 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON GOVERNMENT OPERATIONS, 

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM, 

Washington, DC. 

The subcommittee met, pursuant to notice, at 1:07 p.m., in room 

2247, Rayburn House Office Building, Hon. Mark Meadows (chairman of the subcommittee) presiding. 

Present: Representatives Meadows, Jordan, Walberg, Massie, 

Buck, Carter, Grothman, Connolly, Maloney, Norton, and Plaskett. 

Mr. MEADOWS. The subcommittee will come to order. 

Without objection, the chair is authorized to declare a recess at 

any time. 

I thank the witness for coming in today. Actually, the Taxpayer 

Advocate is an independent voice, which is well needed, certainly 

in our society, that defends the American taxpayer, and it is a 

privilege, Ms. Olson, to have you here and testify today. 

The complexity of the tax code and need for IRS to restore trust 

underscores that the taxpayers need to have someone fighting on 

their behalf, which is why Taxpayer Advocates do that so well and 

do it on a daily basis. As Members of Congress, we have an obligation to work with the American people and for the American people, and are committed to working with you in your efforts to ensure that the IRS improves taxpayer service delivery. 

The Taxpayer Advocate’s 2014 Report to Congress highlights unacceptably low levels of service that the IRS is delivering to the 

taxpayers, with the IRS estimating that it will only answer half of 

the incoming calls, and those answered may wait over 30 minutes 

for service. 

To give just a short personal story, in fact, when a member of 

my staff was receiving help for her personal tax return through the 

electronic Federal tax payment system and asked how long she 

would have to wait to speak with someone at the IRS who could 

help her over the phone, she was told, ‘‘Well, it’s really more of an 

exception that you will get to talk to someone.’’ 

I find that extremely troubling in light of the fact that most people, at least people in our generation, believe that you need to talk 

and you have to have that dialog to fully understand it. Hopefully 

there will be a day when a computer can answer things as compassionately and as completely as we would like to see. 

That is why I think it is critical that the IRS takes to heart the 

recommendations that you have offered, and the ranking member 

and I believe that we better work in a bipartisan way to not only 


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support those that work for the IRS, but to restore the integrity of 

many of our Federal workers, not just with the IRS. So we know 

that that will have a component of financial obligations which may 

be painful to my ears, but we have all talked about that going forward. 

I would like to say, though, that some of these issues, and what 

I look forward to hearing from you today, are those issues that may 

not have a direct correlation with the budget. We know that we 

have to address that, and as we look at that, and certainly there 

will be questions on both sides of the aisle as that happens, but I 

want you to look at those areas that maybe have been systemic in 

their nature that have not been a result of just fiscal budgetary 

constraints. 

So as we restore the faith in the IRS with the American taxpayer, I believe that part of that is with a more simplified tax code, 

one that I would think that it wouldn’t be difficult for me or anyone 

else to be able to figure out how to complete their tax return. Now, 

it almost ensures, today on tax day, I was on the phone with my 

son who was saying, well, what do I put in this column and what 

do I put in that column? I said, well, you should have done it a 

few days before today. But he was asking me all these different 

questions and what I found was, and being a guy who had been 

in business for many, many years, that I couldn’t answer the simple questions of someone who is just now getting to the point of 

paying real taxes. And he said, ‘‘Man, I can’t believe they take this 

much.’’ 

So, Ms. Olson, thank you so much for your tireless work advocating on behalf of so many people who feel like they are fighting 

against a machine that doesn’t care. And I say that because that 

is the general view. But I will say that whether it is with your 

group or with the IRS in particular, I find that there are a lot of 

people who truly want to serve this Country, and do so each and 

every day. And I think it is important that we address the issues 

so that the broader spectrum of those who faithfully carry out their 

duties each and every day do not get painted with that broad 

brush. 

With that, I would recognize the ranking member for his opening 

Statement. 

Mr. CONNOLLY. Thank you, Mr. Chairman, and thank you so 

much for holding this hearing. 

Welcome to Nina Olson, who has served as the national taxpayer 

advocate since, I think, 2001. I know all of us appreciate your service, Ms. Olson, and your appearance today. 

The 2014 Report identifies declining levels of taxpayer service 

the chairman just referenced as the No. 1 most serious problem 

causing serious compliance issues and inflicting undue hardship 

and stress on our fellow American taxpayers. The challenges facing 

the IRS are real and many, including an increasing number of filed 

tax returns; escalating threats of identity theft, refund fraud, and 

data breaches, and an enormous gap in the amount of taxes owed 

versus those that are actually paid. That gap could do a lot for 

helping reduce the national debt. 


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But despite these increasing and evolving challenges, according 

to Ms. Olson’s Report, there is a ‘‘widening imbalance between the 

IRS’s increasing workload and its diminishing resources.’’ 

One can’t ignore the reality that many of these serious problems 

are a result of the fact that we here in Congress created our Nation’s incredibly complex tax code, but in recent years we have 

stubbornly refused to appropriate the funds to administer it. 

The Annual Report notes that over the past five Fiscal Year the 

IRS’s inflation adjust to budget was cut by 17 percent. These budget cuts have forced the IRS to shed at least 12,000 employees. That 

is 12,000 employees. And further significant work force reductions 

expected this fiscal year. 

In this Fiscal Year alone, the IRS budget was slashed by $346 

million, costing at least $2 billion in lost revenue, according to IRS 

estimates. 

The irony here is that in deliberately lowering the funding level 

for the IRS to make the agency, in the words of the Financial Services Appropriations Subcommittee chair think twice about what 

you are doing and why and ‘‘focus on your core mission of providing 

taxpayer services, such as processing returns and refunds, providing customer service like answering the phone and catching tax 

cheats.’’ 

Unfortunately, with these budget cuts, we have achieved exactly 

the opposite result, and it almost looks, by design, to guarantee the 

opposite result. 

The Report highlights the consequences of these ill advised cuts, 

noting ‘‘35.6 percent of phone calls went unanswered by customer 

service representatives; 50 percent of pieces of correspondence not 

handled in a timely fashion; zero tax returns, virtually, were prepared by IRS walk-in sites; and localized outreach in education 

have all but disappeared. 

Ms. Olson, in her report, eloquently captured the bottom line in 

the 2014 Report, noting, ‘‘It’s a challenge for any tax agency to 

properly administer a system such as the one we have, but it’s impossible for an under-funded tax agency to do so. The victims of 

this under-funding are not just the IRS and its employees, but 

maybe, more importantly, the victims are U.S. taxpayers themselves.’’ 

I couldn’t agree more with that assessment. Gutting the IRS’s 

budget is, to me, penny wise and pound foolish. We don’t have to 

love the IRS to understand that it is the revenue collection agency 

of the U.S. Government and that we could actually, by making it 

more efficient, we could spread the idea of tax fairness and equality. It doesn’t preclude making the tax system, as the chairman 

said, fair and easier and more efficient. But starving the IRS of resources has created lots of problems for our fellow citizens, and I 

certainly look forward to hearing Ms. Olson’s testimony to further 

elucidate that issue. 

Thank you, Mr. Chairman. 

Mr. MEADOWS. I thank the ranking member. 

I will hold open the record for five legislative days for any members who would like to submit a written Statement. 


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We will now recognize our witness. I am pleased to welcome Ms. 

Nina Olson, the National Taxpayer Advocate at the Internal Revenue Service. 

Welcome, Ms. Olson. Pursuant to committee rules, witnesses will 

be sworn in before they testify, so if you would please rise and 

raise your right hand. 

Do you solemnly swear or affirm that the testimony you are 

about to give will be the truth, the whole truth, and nothing but 

the truth? 

[Witness responds in the affirmative.] 

Mr. MEADOWS. Let the record reflect that the witness has answered in the affirmative. 

Thank you. You are now recognized for your opening testimony. 

And we will be more lenient with our 5 minute rule so that we can 

hear completely from you. 

STATEMENT OF NINA OLSON, NATIONAL TAXPAYER 

ADVOCATE, INTERNAL REVENUE SERVICE 

Ms. OLSON. Thank you. 

Chairman Meadows, Ranking Member Connolly, and members of 

the subcommittee, thank you for inviting me today to discuss the 

National Taxpayer Advocate’s 2014 Annual Report to Congress. As 

you know, I am required by statute to report each year on at least 

20 of the most serious problems facing taxpayers and to make administrative and legislative recommendations to mitigate, if not 

eliminate, those problems. 

In addition to my reporting function, the Taxpayer Advocate 

Service, through its local taxpayer advocate offices, handles, on average, about 250,000 cases each year in which taxpayers have a 

problem or a dispute with the IRS and are experiencing significant 

hardship. 

The underpinning of my 2014 Report is the Taxpayer Bill of 

Rights, or TBOR, which the IRS adopted at my recommendation in 

June 2014. Because taxpayer rights, their existence and their protections, are essential to establishing and maintaining taxpayer 

trust in the tax system, I recommended that Congress codify the 

TBOR. I am delighted that the House is voting today on this important piece of legislation and that companion legislation will be 

introduced in the Senate, probably today. 

The next step is to ensure that these rights have enforceable 

remedies. In my report, my first legislative proposal is a brief description of all of my office’s recommendations for taxpayer protections, including some new ones, organized under one or more of the 

10 rights in the TBOR. It is my concern about the right to quality 

service that drove me to identify as the No. 1 and No. 2 most serious problems the IRS’s current failure to meet taxpayer service 

needs and the IRS’s lack of a method to determine what those 

needs are from a taxpayer’s perspective. 

From January 1st through April 13th of this year, the IRS answered only 37 percent of the calls it received from taxpayers who 

were gated to a customer service representative, and those taxpayers who managed to get through sat on hold an average of 

about 24 minutes. By comparison, 71 percent of taxpayers got 


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through and waited on hold an average of about 14 minutes during 

the same period just last year. 

The IRS is only answering the most basic of tax law questions 

through April 15th, and none after that date. Let me repeat. If you 

call tomorrow, April 16th, you will not get answers to any tax law 

questions from the IRS. 

The IRS is no longer preparing tax returns for the most vulnerable populations, namely, the elderly, the disabled, and the low income; and as of April 4th, over 44 percent of individual correspondence, that is, letters from taxpayers, is over age, compared to 28 

percent last year. 

I have never seen such low levels of taxpayer service during my 

40-year career in the field of tax, and they are officially the worst 

since at least 2001, when the IRS implemented its current performance measures. 

Taxpayers call and write the IRS not only to get answers to tax 

law questions, refund status, or transcripts, but also to request 

penalty abatements, respond to math error assessment notices, and 

arrange to make payments. If taxpayers can’t get through to the 

IRS for any of these transactions, the IRS will proceed to collect 

taxes and penalties that the taxpayer actually may not owe or cannot afford to pay and still meet basic living expenses. This causes 

real harm to real taxpayers. 

This performance decline is huge and results largely from a combination of more work and reduced resources. On the workload 

side, the IRS is receiving 11 percent more returns from individuals, 

18 percent more returns from business entities, and 70 percent 

more telephone calls through Fiscal Year 2013 than 10 years ago, 

not to mention implementation of the Affordable Care Act and the 

Foreign Account Tax Compliance Act. 

On the funding side, the IRS’s budget has been reduced by about 

17 percent in inflation-adjusted terms since Fiscal Year 2010. As 

a consequence, the IRS has already reduced its work force by nearly 12,000 employees, and it projects it will have to reduce its work 

force by several thousand additional employees during Fiscal Year 

2015. 

Even considering advances in technology, these cuts go too far 

too fast. I don’t see any substitute for sufficient personnel if highquality taxpayer service is to be provided. 

Having said that, I also believe it is incumbent on the IRS to 

spend the resources it has as effectively and efficiently as possible. 

Reductions in service always should be made with the goal of minimizing the impact on taxpayers and performance. I find it difficult 

to ascertain exactly how the IRS made its resource allocation decisions with respect to taxpayer service or what data it relied upon 

in regard to taxpayer impact and need. 

Similarly, it is my experience and the findings of several research studies conducted by my office that the IRS regularly creates work for itself, especially in the context of its enforcement programs. In my testimony and my Report, I have provided numerous 

examples of programs in which I believe the IRS can utilize its resources more effectively and efficiently. 

To illustrate with just one example, I have testified before this 

subcommittee twice before on the subject of tax-related identity 


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theft. For years I have pointed out the waste of government resources and taxpayer time and the angst caused by the IRS’s failure to assign a single employee to identity theft cases involving 

multiple years or multiple IRS functions. But because the IRS does 

not evaluate its performance from the taxpayer’s perspective, that 

is, having to navigate one’s way around multiple divisions even as 

you experience the trauma of having your identity stolen, the IRS 

has refused to conduct a pilot of our proposal, much less implement 

it. 

In my 2014 Report, I have produced the hard evidence of just 

how much time and effort on the IRS’s and the taxpayers’ part the 

current IRS identity theft procedures cost. Our studies showed that 

over two-thirds of IRS identity theft cases were moved around 

within or between IRS functions, with each reassignment delaying 

resolution and frustrating the taxpayer. When cycle time was 

measured from the perspective of the taxpayer, it was 2 months 

longer than what the IRS officially pronounces it to be. And we 

found that the IRS closed 22 percent of the cases prematurely, that 

is, not providing to the taxpayers the relief they so badly needed. 

All of this burden and delay is avoidable. The IRS just needs to 

spend a few minutes at the first contact identifying those cases involving multiple years and issues, and assigning those folks to a 

single employee who serves as their sole contact throughout the duration of the case and ensures that all issues are addressed. That 

would provide victims with the effective assistance they deserve. 

I am sometimes asked why the IRS does not adopt more of my 

office’s recommendations, which to many people seem so reasonable. It is worth noting that the IRS actually accepts somewhere 

around half of the recommendations we make in each report. But 

even when there is agreement in principle, the recommendations 

may not be implemented because of funding or programming priorities, or because a conceptual agreement is undermined by disagreement over the details. 

First and foremost, the IRS defines itself as an enforcement 

agency. As a result, it sometimes seems to overlook the fact that 

the real driver of our self-assessment system is taxpayers’ willingness to voluntarily come forward and report and pay the tax they 

owe. So high-quality taxpayer service is critical. Yet, the IRS 

knows very little about why taxpayers comply with the tax law, 

and it knows even less about how its enforcement and service initiatives actually impact taxpayers’ willingness to comply. 

The world changes, and unless management continually tests 

and evaluates its assumptions about the effectiveness of its programs, it will continue to run them the same way, causing it to 

miss opportunities to improve efficiency and productivity, and to 

win taxpayer trust. 

I don’t want to paint a very dark picture of the IRS. The IRS actually functions very well for the significant majority of taxpayers, 

and IRS employees, including Taxpayer Advocate Service employees, are incredibly dedicated and hardworking. In addition, the IRS 

is embarking on a comprehensive review of its service and compliance approaches to map out a vision of how tax administration 

should operate 5 years from now. This effort provides Congress 


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with an opportunity to ensure the IRS is on track for treating taxpayers fairly and reasonably. 

So, in my view, to sum up, the best way for Congress to hold the 

IRS accountable for how it allocates resources and makes decisions 

is through active, consistent oversight of the agency; not just on the 

issue of the day, but on the routine work the IRS does. It is critical 

that the IRS take steps to rebuild congressional and taxpayer trust. 

It is also critical that Congress provide the oversight and funding 

that the IRS needs to do its important work of helping taxpayers 

meet their tax obligations and collecting the revenue on which the 

rest of the Government depends. 

This hearing is a significant step in that direction of consistent 

oversight, and I thank you for inviting me here today to be part 

of this important work. Thank you. 

[Prepared Statement of Ms. Olson follows:] 


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Mr. MEADOWS. Thank you, Ms. Olson, for your important work. 

Your entire written Statement will be made part of the record. 

The chair recognizes the vice chair of the Government Operations 

Subcommittee, the gentleman from Michigan, Mr. Walberg. 

Mr. WALBERG. I thank the chairman and thank you for holding 

this hearing. 

Ms. Olson, thank you for the work you do and thank you for still 

having a smile on your face as you to do it. 

Today I guess we would say Happy Tax Day. Relative to the complexity of the IRS tax code and the fact that as a result of the, last 

count, 18 different tax increases put into the code now through the 

Affordable Care Act, at a cost of over $770 billion over the course 

of the next 10 years, I wanted to ask this starting question, Ms. 

Olson. Why did your office identify health care implementation as 

a ‘‘most serious problem’’ in your most recent report? 

Ms. OLSON. Well, whenever you have a program of such size as 

the Affordable Care Act, there are opportunities for things to go 

wrong, so we have tried to identify in advance, based on just past 

experience, what could possibly go wrong in this filing season and 

what burden it puts on taxpayers. 

This program, the Affordable Care Act, is particularly challenging because the IRS, who has actually accorded itself very well 

during this filing season on its obligations under ACA, is on the receiving end of lots of other Federal agencies, and that is often 

where the problems are arising; for example, getting incorrect information from the exchanges that we are supposed to be matching 

up against taxpayers’ returns. We didn’t create that information; 

we are just on the receiving end of it. 

Mr. WALBERG. Is that part of the problem for the 800,000 people 

who got wrong information that they are probably going to pay for? 

Ms. OLSON. That is correct. Well, I think that the idea is that 

they are supposed to wait. If they filed early with the incorrect information, no one will collect that, so all the taxpayers of the 

United States will pay for that. Others who got incorrect information but may be owed more money should file amended returns if 

they have already filed before they got their corrected information. 

And that, I would note, creates more work for the IRS, because we 

not only have to process the original return, but the amended return. 

Mr. WALBERG. What additional problems may result for the taxpayer from this law? 

Ms. OLSON. So we are seeing some issues where taxpayers aren’t 

aware that they are eligible for an exemption of the individual 

shared responsibility payment, and so they may be either paying 

the penalty or we may be sending them a bill when in fact they 

may not have to pay it. We are seeing instances where we are getting returns in where we think taxpayers do have a premium tax 

credit but they haven’t submitted a reconciliation, so we have to go 

back out and ask them to do that. 

So all of these touches take time and bring in phone calls. And 

I think we really won’t see the impact of this until after the filing 

season, when we start sorting through all this stuff. 

Mr. WALBERG. Which is my next question. Will your office or the 

IRS, or both, collect data related to this tax season on the number 


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of individuals who will have their tax refund changed as a result 

of the health care law? 

Ms. OLSON. Yes. And in my June report to Congress we will do 

a summary based on the information we have as of June 30th on 

this filing season and the outcome of the filing season with respect 

to the Affordable Care Act. 

Mr. WALBERG. Do you have any estimates now or guesstimates? 

Ms. OLSON. I really don’t. I do know, and this is an interesting 

thing, that as of this week the IRS was still looking for 1.5 million 

returns from taxpayers who should be getting the premium tax 

credit. I think a lot of taxpayers held off until the last week of the 

filing season because they were concerned whether they would owe 

or not. And that is why we just don’t know what the impact of the 

Affordable Care Act is. We were anticipating 4 million total and we 

haven’t gotten in 1.5 million, and that is the last week of the filing 

season. So anything could happen. 

Mr. WALBERG. Wow. 

Ms. OLSON. Yes. 

Mr. WALBERG. After this filing season, will you be able to review 

or collect the actual numbers of Americans who saw their tax bill 

grow or shrink as a result of the health care law? 

Ms. OLSON. Yes, at least with respect to the Affordable Care Act 

or the individual shared responsibility payment. 

Mr. WALBERG. Will you also be able to collect information on the 

number of Americans who filed for an exemption? 

Ms. OLSON. I think so. Some of the exemption data comes from 

the exchanges, but we would at least know some taxpayers have 

said we have a pending exemption at the exchanges, so we would 

at least have that kind of information. 

Mr. WALBERG. Thank you. My time has expired. I yield back. 

Mr. MEADOWS. I thank the gentleman. 

The chair will recognize Mrs. Maloney from New York because 

the ranking member has deferred to you. 

Mrs. MALONEY. I want to thank the ranking member for deferring to me. I have a conflict with another committee I am supposed 

to be participating in, but I very much wanted to hear Ms. Olson’s 

testimony and to tell you that the Americans living abroad, the legitimate taxpayers living abroad, have told me numerous times 

how cooperative you have been, and I have a series of questions 

they asked me to ask you. I hope I have a chance to get them answered; otherwise, I will put them in the record. 

I was very interested in your attention to identity theft, and I 

think every member on this panel can attest to the fact that we 

are getting calls every day in our district offices about that, and I 

just would like to followup on those points that you raised in your 

testimony and in your written report. In light of the limited operating budget at the IRS, are you satisfied with the agency’s ability 

to evolve its fraud detection filters to keep up with these new 

schemes that are coming out every day? 

Ms. OLSON. You know, I think that this is a challenge for any 

kind of agency, and I think the IRS is actually doing a very good 

job, and I think that recently they held a security summit with 

some of the private entities to identify ways to learn from them 


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what schemes they may be seeing and sharing information so we 

can maybe get even further ahead of this. 

But I do have to say people who are perpetrating these schemes 

are very, very creative and we are always going to be in the instance of letting some returns go through and then picking it up 

on the back end when somebody has come in and said, wait, you 

have harmed me instead of the thief. 

Mrs. MALONEY. And would additional funds improve your ability 

at the IRS for fraud detection filters? 

Ms. OLSON. I think that it would allow us to maybe bring in 

some folks, who had also critical pay authority to bring in really 

talented people to work on this, yes. 

Mrs. MALONEY. And also the IRS has reported that it was able 

to prevent, this is tremendously important, to prevent the payment 

of approximately $24.2 billion in tax refunds. Would you expect the 

amount of fraudulent refunds the IRS could prevent, do you think 

they would be higher if you were funded to the point that you feel 

is proper? 

Ms. OLSON. I think we would be able to prevent more. I think 

that the amount of refunds we will prevent will continue to increase anyway because word is out: hit the IRS. 

Mrs. MALONEY. I just also want to ask you about taxpayers 

abroad. We are in a world economy now and we have many Americans with business interests overseas, and they owe taxes to the 

United States, and there is widespread fear and uncertainty for potential assessment of onerous tax evasion penalties when a taxpayer makes a filing error and the general complication of filing 

from overseas to the extreme number of forms that are required. 

I fully support your efforts to find tax avoiders and prevent tax 

havens overseas, but I have a concern and I support the legitimate 

American citizens that are residing abroad and they often find 

themselves without regular banking services. Now, this is a huge 

problem. My office has seen notices from individual account holders 

from foreign banks that effectively State that Americans need not 

apply because of our onerous banking requirements, and these U.S. 

citizens have had their foreign and domestic accounts closed or 

have been refused accounts. 

I really want to commend that you have really been responding 

to this, but this is a tremendous problem if Americans, because 

their companies are abroad or whatever reason, they are studying 

abroad or they have a business abroad or whatever, that they can’t 

even have a bank account because of the onerous requirements 

that the banks put on them that are put on by our system. 

So I want to commend your recent recommendations with regard 

to bona fide, honest Americans living abroad with their taxes, such 

as eliminating duplicative reporting requirements and developing a 

definition of financial accounts based on where the American citizen is a bona fide resident. 

What is the next step in consideration for these recommendations that you have put out? 

Ms. OLSON. Well, first, I think that the laws actually allow the 

IRS to interpret them much more reasonably toward American citizens and other U.S. taxpayers living abroad. You don’t need additional legislation, in most instances, and that is why we have made 


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administrative recommendations to the IRS. The next step is for 

Congress to basically hold the IRS and the Treasury Department 

accountable for making these changes. 

Mrs. MALONEY. But the problem that we have is that the foreign 

banks or the banks overseas are refusing to service American bank 

accounts, and this is a huge problem. 

Ms. OLSON. I think if you really carved out that exception for 

bona fide residence, that you would eliminate some of the fears 

from the foreign banks about these reporting requirements. The 

FATCA regime is new and it remains to be seen whether it is effective, and I think some entities are running scared because it just 

sounds so onerous. They may join up in 5 years, but 5 years going 

without an account is crazy for someone abroad. And there are at 

least 7 million U.S. citizens living abroad, not to mention the U.S. 

taxpayers. 

If I might also add, at the same time that we are imposing all 

these requirements on foreign U.S. taxpayers abroad, the IRS announced that it was closing the remaining four tax attache offices 

that we have in U.S. embassies abroad to save $4 million; and that 

is, to use the same phrase, it is penny wise and pound foolish as 

we are imposing more and more responsibilities and burdens on 

these taxpayers. 

Mrs. MALONEY. Well, my time has expired. I just feel this is a 

huge problem that we should have a bipartisan approach to because many Americans, we are in a global economy, Americans live 

overseas and they are entitled to bank accounts. 

Anyway, thank you so much. 

Ms. OLSON. Thank you. 

Mr. MEADOWS. I thank the gentlewoman. 

The chair recognizes the gentleman from Ohio, Mr. Jordan. 

Mr. JORDAN. I thank the chairman. 

Ms. Olson, you have been the taxpayer advocate for 14 years? 

Ms. OLSON. Yes, I have. 

Mr. JORDAN. God bless you. How many people work for you? 

Ms. OLSON. I have about 1,800, 1,900 employees. 

Mr. JORDAN. Nineteen hundred employees all around the Country, right? 

Ms. OLSON. Yes, 74 offices. 

Mr. JORDAN. When did your main office or any of your offices 

first learn that the Internal Revenue Service was targeting conservative groups around the Country? 

Ms. OLSON. I think it was about February. My office and headquarters learned in February 2013. We got, between 2011 and 

early 2013, about 19 cases, and they showed up in different offices. 

Mr. JORDAN. So you learned before Ms. Lerner went public on 

May 10th, 2013 at the Bar Association with the plan and questioning and gave the false narrative that she gave, you learned before that date, 2 months before that date. 

Ms. OLSON. We had one case elevated to us in my headquarter 

office. 

Mr. JORDAN. And how did that get elevated to you? 

Ms. OLSON. Through my employees who had two or three cases 

in their office and they saw a pattern, and they went over to Ms. 


AKING-6430 with DISTILLER
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Lerner and Holly Paz, Ms. Paz, and we talked to them about this 

case and we got that case moving. 

Mr. JORDAN. So you met with Ms. Lerner and Ms. Paz in February 2013. 

Ms. OLSON. I personally did not, but my staff did. 

Mr. JORDAN. Your people did. And tell me about that discussion. 

Ms. OLSON. They talked about what was going on in that case, 

and we said what are your concerns and what information do we 

need to get, and they said we are putting out guidance and we will 

start processing these cases; and at that point they put out guidance. 

Mr. JORDAN. Did they tell you at that time that the terms Tea 

Party and Patriot were the identifying terms used to select these 

groups, pull them out, give them enhanced scrutiny, and deny 

them their First Amendment rights to get their tax-exempt status 

and exercise their free speech? 

Ms. OLSON. No, they did not. 

Mr. JORDAN. They didn’t tell us that? 

Ms. OLSON. No, they did not say that to my staff. 

Mr. JORDAN. So you learned official targeting was taking place 

when the rest of the world learned on May 10th, 2013. 

Ms. OLSON. Yes, I did. 

Mr. JORDAN. OK. Now, you said you had a few cases come to you. 

We had dozens of people, Tea Party groups, come to us clear back 

in 2011 and 2012. We actually met with Ms. Lerner, our personal 

staff and oversight staff met with Ms. Lerner in 2012 and she lied 

to us and said there was no targeting going on, so we asked for the 

investigation. So I have to believe the taxpayer advocate, as your 

stuff said, you are the voice of the taxpayer. Your job is to resolve 

problems at the IRS every year and address systematic issues within the IRS. I have to believe you had notice before February. 

Ms. OLSON. I did not. 

Mr. JORDAN. So no one of those 1,900 employees across the Country, dozens and dozens of news accounts of groups saying, you 

know what, we are getting asked all kinds of intrusive questions, 

we are being delayed now a couple of years, no one in your 1,900- 

employee organization came to you and said, you know what, we 

may want to come to look into this; after all, we are supposed to 

be the voice of the taxpayer and we have millions of people across 

the Country who are being denied their First Amendment rights by 

the Internal Revenue Service? That never set off any alarms? 

Ms. OLSON. My employees worked each of those 19 cases, and 

most of them were from the congressional offices that folks had referred to us, and they worked them and they got relief in some and 

they didn’t get relief in others, but they kept working them. And 

it wasn’t until February 2013 that one office had three cases that 

looked like it was a pattern and elevated it to my office. 

Mr. JORDAN. OK, I want to clarify something, Ms. Olson, and I 

appreciate that. So those 19 cases you referred to, you said there 

were two or three that you took to Ms. Lerner and Ms. Paz in February 2013. 

Ms. OLSON. There was one. 

Mr. JORDAN. Oh, one of them you took. So when did you get that 

first of those 19, was that back in 2011, 2012? 


AKING-6430 with DISTILLER
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Ms. OLSON. It was spread out over a million cases. It was spread 

over from 2011 to 2013. 

Mr. JORDAN. So the Office of the Taxpayer Advocate was on notice much earlier than 2 months before Ms. Lerner gave her Statement? 

Ms. OLSON. About six of my offices received cases between 2011 

and 2013. 

Mr. JORDAN. OK. I got it. 

Ms. OLSON. Those 19 cases were spread out. 

Mr. JORDAN. OK, I have 1 minute left and I want to go to an article in Politico from just last month, well, 2 months ago, February 

26th of this year, and it says, From the IRS, Death by Delay. At 

least a half dozen applicants are still waiting for an answer from 

the IRS. And the one that they cite the most in here is the Albuquerque Tea Party, which is still waiting, been waiting 5 years to 

get something that should take a lot less time than that. What are 

you doing about that situation and the other five entities who are 

in the same position? 

Ms. OLSON. I can’t discuss individual taxpayer cases. 

Mr. JORDAN. OK, take it from the general sense. What are you 

doing about these entities who are still being denied their opportunity to exercise their most fundamental right, their First Amendment free speech rights in a political nature? What are you doing 

as the voice of the taxpayer to help these groups, who some have 

been waiting as long as 5 years? 

Ms. OLSON. My staff is closely looking at the IRS’s exempt organization procedures with respect to 501(c)(3)’s and 501(c)(4)’s. And 

I can’t really talk about the specific cases to say whether they are 

reasonably being looked at or that the IRS is still—— 

Mr. JORDAN. I am out of time. If I could, Mr. Chairman. 

Can you get us the date that you got the first notice from a Tea 

Party or conservative organization that they were being harassed, 

the very first time that your office was noticed that something 

might be going wrong here? 

Ms. OLSON. I think the first case arrived in the Taxpayer Advocate Service sometime in early 2011 or late 2010, in one office in 

the Taxpayer Advocate Service. 

Mr. JORDAN. Great. 

Thank you, Mr. Chairman. 

Mr. MEADOWS. I thank the gentleman. 

The chair recognizes the ranking member of the Government Operations Subcommittee, the gentleman from Virginia, Mr. Connolly. 

Mr. CONNOLLY. Thank you, Mr. Chairman. 

Just to clarify your testimony, did your offices or your employees 

also get complaints about BOLOs involving progressive names? 

Ms. OLSON. I think there were two cases or so dealing with that. 

Mr. CONNOLLY. In your opinion, were groups denied their First 

Amendment rights by the IRS in this process? 

Ms. OLSON. I think the IRS used certain terms to identify cases 

that raised questions, and I think that was incredibly inappropriate. And I am not a judge, so I will not render an opinion on 

whether it violated their First Amendment rights. 


AKING-6430 with DISTILLER
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Mr. CONNOLLY. And are you aware of a number of organizations 

that, in fact, to this day have been denied their request for tax-exempt status? 

Ms. OLSON. I think that we may have had one case where they 

were denied, but that was after 2013. 

Mr. CONNOLLY. One. 

Ms. OLSON. I think that is correct. 

Mr. CONNOLLY. One. 

Ms. OLSON. I can certainly verify it and get back to you. 

Mr. CONNOLLY. So the narrative that a whole bunch of people are 

out there being persecuted by the hot nail boot of government 

would seem to be a bit of an exaggeration. 

Ms. OLSON. I think most of them during that time were just held 

up and no decisions were made. 

Mr. CONNOLLY. Is it not also true that with respect to 501(c)(4)’s, 

many of these organizations, if they chose, could self-declare? 

Ms. OLSON. Yes, they do not need the IRS letter to be treated 

as a tax-exempt organization. 

Mr. CONNOLLY. Thank you. 

Mr. Chairman, I also would ask unanimous consent to enter into 

the record a Statement of Colleen Kelly, the National President of 

the National Treasury Employees Union, responding to the testimony today, and a letter addressed to both you and me from the 

Professional Managers Association just for inclusion in the record. 

Mr. MEADOWS. Without objection. 

Mr. CONNOLLY. I thank the chair. 

Mr. CONNOLLY. I want to go back now to the whole issue of the 

funding of IRS. To what extent do you think a lot of the problems 

we are talking about, closing overseas office representatives, customer service, let alone audit capability and the like, has to do 

with, frankly, the starvation of—I mean, it is one thing to say let’s 

get efficient and let’s cut back, but $1.2 billion in cuts, 12,000 employees fewer in roughly a 4-year period, that sounds pretty serious 

to me. 

And when I go a little further in terms of what that actually represents, half the work force is over 50, 40 percent are eligible to 

retire within 4 years, the number of employees under 30 has actually been declining, suggesting a less desirable workplace and is 

now less than 3 percent of the IRS work force, translating into 

1,900 employees under the age of 30 out of, I think, 9,100 employees, something like that, is that roughly right? 

Ms. OLSON. [No audible response.] 

Mr. CONNOLLY. As the advocate on behalf of the rest of us, what 

does this mean from your point of view, Ms. Olson? 

Ms. OLSON. Well, I think there is no answer to the taxpayer service side of the equation except more funding, even as we move more 

into electronic taxpayer accounts and things like that. When the 

IRS is proposing to do things to you, you really want to talk to 

somebody to make sure they got your information and understand 

what you are saying. 

On the enforcement side, I really do believe that they can do a 

lot better with their procedures, and there what I really worry 

about is that they are just not bringing the innovation in and they 

are not bringing the young folks that can look at it and say, well, 


AKING-6430 with DISTILLER
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let’s think about it as a different way, let’s take a different approach. So I think that there are opportunities on both sides. 

And then I will also say that I can’t emphasize enough that it 

is not just about the funding, because we could maybe absorb fewer 

employees as we get more electronic, but it is the amount of work 

that the IRS is getting. There is so much more work that we are 

doing. 

Mr. CONNOLLY. Well, let me stop you right there, because I asked 

Mr. Koskinen this question. The funding affects the IT investment. 

Ms. OLSON. Yes. 

Mr. CONNOLLY. So, for example, at IRS, correct me if I am 

wrong, the average replacement age is 7 years or above for a computer; whereas the standard in the private sector is between two 

and 4 years. Is that correct? 

Ms. OLSON. I can only attest to my own, the age of my own computer and my own BlackBerry and, yes, it is pretty darn old. 

Mr. CONNOLLY. And what can go wrong with that? 

Ms. OLSON. A lot. 

Mr. CONNOLLY. Right. 

Ms. OLSON. Like this morning I was bumped off the major IT 

system. 

Mr. CONNOLLY. And we were also told that in terms of archiving 

material, records, taxpayer records and the like, the general guidance at IRS is print and save. Is that correct? 

Ms. OLSON. [No audible response.] 

Mr. CONNOLLY. Well, when you are talking about the volume, we 

are talking about the number of taxpayers, number of employees, 

and so forth, print and save is just a pretty primitive way of trying 

to do business in this part of the 21st century, would you not 

agree? 

Ms. OLSON. I would agree with that. 

Mr. CONNOLLY. So when we look at reinvesting in IRS, it is technology, it is targeted personnel, and it is capability so that we are 

returning a level of customer service for American taxpayers that 

we would all agree is acceptable, as opposed to where we are right 

now, would that be fair? 

Ms. OLSON. That is correct. And I would also suggest setting 

some goals for the IRS and holding them accountable for it and 

saying how are you going to achieve this if we give you this money. 

Mr. CONNOLLY. I am all for doing that. 

Mr. Chairman, I think that is very good advice, setting goals before we, tying it to whatever additional resources we provide. 

Thank you very much. 

Ms. OLSON. Thank you. 

Mr. MEADOWS. I am shocked. I am shocked. 

We will go to the gentleman from Georgia. Mr. Carter is recognized. 

Mr. CARTER. Thank you, Mr. Chairman. 

Ms. Olson, thank you for being here. We appreciate this very 

much. Let me ask you, earlier this year we heard testimony that 

there were over 800,000 incorrect forms sent to taxpayers. Has that 

been corrected? 


AKING-6430 with DISTILLER
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Ms. OLSON. I have been told that they have either all been corrected or they are in the process of being corrected. It is not us correcting them, so I don’t know for sure. 

Mr. CARTER. Who was it correcting them? 

Ms. OLSON. It is CMS that is doing the correction. 

Mr. CARTER. And who is responsible for getting them to the taxpayers? 

Ms. OLSON. It would be CMS getting them to the taxpayers, and 

the IRS would get a copy as well. 

Mr. CARTER. OK. So you are assuming that it has been taken 

care of? 

Ms. OLSON. I have been told that it is either completely taken 

care, there may be a few stragglers, and they are in the process 

of being corrected. 

Mr. CARTER. Are these people who were impacted by this given 

any kind of extension or anything? 

Ms. OLSON. They were not given an extension; they were told to 

hold off filing if they hadn’t filed already, and if they had filed and 

they got a corrected one and they owed tax, they would not have 

to re-file. If they didn’t owe tax and they were due a refund, they 

should file an amended return. They were also given penalty relief, 

so if they owed tax and they couldn’t afford to pay, they wouldn’t 

be penalized for not paying the tax on time or not paying estimated 

taxes. 

Mr. CARTER. Is this going to have any kind of impact to delay 

their refunds? 

Ms. OLSON. Yes, I am sure it will. And we are also showing not 

just with the 800,000, but we have a bunch of returns that are 

coming in where we don’t have information from many of the State 

exchanges, so we have to delay the returns for a few days in order 

to be able to get information and match them. We have also just 

sent out about 290,000 letters to taxpayers where we are expecting 

to have a premium tax credit reconciliation and there isn’t any on 

their returns, so their refunds are being held up too; and that will 

require some work to go through. 

Mr. CARTER. Just out of curiosity, has this been more of a problem with the Affordable Care Act than you thought it would be? 

Ms. OLSON. Actually, I have to say I was very negative in my estimations; I thought it would be a huge problem and it has actually 

not been as much of a problem as I had thought it was. 

Mr. CARTER. Unless, of course, you are one of those 800,000. 

Ms. OLSON. Yes. 

Mr. CARTER. So it is the luck of the draw. 

Ms. OLSON. Oh, I am saying for those people who were caught 

up in it, it is very unpleasant and very disturbing. 

Mr. CARTER. For those people whose refunds may be delayed, are 

they going to draw interest or anything on that? 

Ms. OLSON. If it is after a certain period of time, I think it is 

May 15th, they draw interest; that is the law. Most of them come 

to us and ask for us to help with the processing of their returns 

if they have an economic hardship of some sort. 

Mr. CARTER. OK. And if they owed and it was sent to them incorrectly and then they got the correct form in, they won’t be penalized. 


AKING-6430 with DISTILLER
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Ms. OLSON. They won’t be penalized. And if they owe, they 

wouldn’t have to re-file. 

Mr. CARTER. OK. In one of the issues that you Stated was the 

most serious problem was No. 8: IRS does not ensure penalties to 

promote voluntary compliances recommended by Congress and others. When was that recommendation by Congress made? 

Ms. OLSON. Many years ago. Congress actually, in the 1998 Act 

and elsewhere, said to IRS, you know, we want you to look at how 

penalties are being used and whether they work. We passed these 

penalties and they are supposed to drive voluntary compliance in 

the future; come back and report to us whether we have got it 

right, are they using them in a way that drives voluntary compliance. 

Mr. CARTER. Has that been done? 

Ms. OLSON. Never. 

Mr. CARTER. Never. 

Ms. OLSON. Never. 

Mr. CARTER. And have we been given any explanation as to why 

it was not done? 

Ms. OLSON. No. 

Mr. CARTER. Who was in charge of it? 

Ms. OLSON. Well, it would be part of the IRS research function, 

and there is also a service-wide penalty office, and when we asked 

them are you looking at it, they said they didn’t have the resources. 

That was their official answer to us. 

Mr. CARTER. Are you serious? 

Ms. OLSON. I am serious. 

Mr. CARTER. You are not kidding, that is just what they told 

you? 

Ms. OLSON. I am not kidding. That was the answer. 

Mr. CARTER. So essentially they just ignored Congress. 

Ms. OLSON. Yes, that is part of our point in the Annual Report 

to Congress. And that is partly what I am saying about the oversight of the IRS, is that having a hearing that says, well, what do 

penalties do and how are you using them, and are you using them 

appropriately? Are you penalizing the wrong people? Are they making people angry? 

My office did a study that showed that taxpayers who are penalized and later got the penalty abated, taken away, actually became 

more noncompliant in the future than taxpayers who were never 

penalized at all. 

Mr. CARTER. That is very disturbing, very disappointing. 

Ms. OLSON. Which is just the opposite of what we want. 

Mr. CARTER. Absolutely. 

Ms. OLSON. Which creates rework for us. We now have a whole 

bunch of taxpayers who are more noncompliant than they were beginning. 

Mr. CARTER. OK. 

Mr. Chairman, I appreciate that and I yield back the remaining 

time. 

Mr. MEADOWS. I thank the gentleman. 

Ms. Olson, let me ask one question, because you know I have a 

burr in my saddle on this particular issue. Under sworn testimony 

before this subcommittee, it was a joint subcommittee hearing beVerDate Sep 11 2014 13:25 Aug 10, 2015 Jkt 000000 PO 00000 Frm 00074 Fmt 6633 Sfmt 6633 F:\95098.TXT APRIL

AKING-6430 with DISTILLER
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tween this committee and Mr. Jordan’s health care committee, we 

were told that the 800,000 wrong forms were a printing error and 

would be corrected within a week or so. That was sworn testimony. 

Do you believe that it could be as simple as a printing error if we 

are still dealing with it or just getting it fixed on April 15th? 

Ms. OLSON. I really don’t know what the cause of it is, so I can’t 

answer that. I apologize, but I don’t know. 

Mr. MEADOWS. Let me ask it a different way, then. How long 

does it take to reprint something if it is a printing error? Now, you 

can answer that. 

Ms. OLSON. Well, it should not take long if it is a printing error. 

Mr. MEADOWS. A week? 

Ms. OLSON. Correct. 

Mr. MEADOWS. All right. Thank you. I appreciate the clarification. 

The chair recognizes the gentlewoman from the Virgin Islands, 

Ms. Plaskett. 

Ms. PLASKETT. Thank you, Mr. Chairman, ranking member. 

Good afternoon, Ms. Olson. I noted that in your 2014 Report you 

identified your most serious problem as the declining levels of taxpayer services, and that would appear to be a funding issue, if that 

is correct. 

Ms. OLSON. Yes. 

Ms. PLASKETT. Can you explain to me how that declining taxpayer services that you outlined in your report is affecting your 

ability to service the people that you are required to? 

Ms. OLSON. Well, as I have noted before, that people cannot get 

through the phones, their correspondence can’t be answered, so you 

actually get into a cycle where the taxpayer is calling and they 

don’t get through on the phone, so they write the IRS, and then 

they don’t get an answer from the IRS, so they call back. 

And the impact to the taxpayers is that taxpayers aren’t just 

calling about where their refund is, but they are calling to say you 

sent me a notice and you are going to assess tax against me and 

I don’t owe this tax. They are calling to say I know I owe some tax, 

but I want to enter into an installment agreement, don’t levy on 

my bank account. 

Ms. PLASKETT. Right. 

Ms. OLSON. And if they can’t get through, then the IRS is just 

automated. That is where they have done automation, for levying 

on bank accounts. 

Ms. PLASKETT. For getting the money. 

Ms. OLSON. For getting the money and for assessing additional 

tax. So that stuff just goes on auto-pilot and then bad things happen to taxpayers. 

Ms. PLASKETT. Well, I think that this is probably a very important area that Congress needs to consider, is the funding for the 

IRS generally and for your division so that you are able to assist 

individuals who are attempting to do the right thing, but may not 

understand or have the resources to do that. 

Ms. OLSON. Right. 

Ms. PLASKETT. I represent a particularly interesting area, the 

Virgin Islands, which has a very unique relationship with the IRS. 

We use the mirror tax code and we have very stringent guidelines 


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about what makes you a bona fide tax resident, what your sourcing 

rules are with regard to how people can take exemptions or whatever for their tax purposes. I wanted to ask you if you feel that the 

IRS is adequately represented in the Virgin Islands to deal with 

the issues that are unique to the people there. 

Ms. OLSON. I am very concerned about the IRS’s presence 

throughout the world on the civil side, and I think that the Virgin 

Islands we could certainly have more of a footprint there, just as 

I mentioned before with Mrs. Maloney that we needed more presence internationally on the civil side to provide taxpayers throughout the world who are U.S. taxpayers with assistance. 

Ms. PLASKETT. So one of the things that my constituents have 

noted is in the criminal investigations unit, potentially the lack of 

training that they may have in terms of understanding the mirror 

tax code. We have people who are constantly calling the Taxpayer 

Advocacy Group. Do you know or have you a record of what the 

size of your group or individuals, do you have people specifically 

that are assigned to the territories? 

Ms. OLSON. My Puerto Rico office and my Hawaii offices, both of 

them handle international taxpayer concerns, and Puerto Rico is 

one of my largest offices, so they get most of the Virgin Island 

cases; and we do a lot of training on them and we are very much 

aware of the bona fide resident issue and the statute of limitations 

issue in the mirror code issues. 

Ms. PLASKETT. Right, right. Because, of course, we are concerned 

that if you are in Puerto Rico, it means that the agents will focus 

more of their attention on Puerto Rico, so the Virgin Islands, which 

oftentimes is in competition with Puerto Rico for some of the individuals that are living there, that we may be getting short-shrift 

and that there may not even be due process that is completely adequate for all of the residents of those territories because of those 

specific issues. We are seeing a lot of litigation going on right now 

with the IRS because of that, which potentially could have been 

avoided if there had been a larger presence of the taxpayer advocates there. 

Ms. OLSON. Well, we were very involved in that issue that led 

to some of the litigation, and I think that my writings have been 

cited by the court, actually, in some of that litigation favorably, 

which I was pleased to see. We have actually put proposals out 

about expanding our taxpayer advocate offices into foreign countries. The reason why I have offices in every single State is because 

Congress put in the law that the taxpayer advocate has to have at 

least one office in each State. 

I can tell you today that if that wasn’t in the law, I wouldn’t 

have offices in every single State. There is no such language about 

territories and there is no such language about being some of the 

tax attaches that they are proposing to close abroad. So it is sort 

of hard for me to get that growth. And we have made a legislative 

recommendation and administrative recommendations to that effect of Congress actually legislating that we have some offices 

abroad or in the territories. 

Ms. PLASKETT. Well, I would love to work with your office to try 

and support that and push that forward. 

Ms. OLSON. Great. 


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Ms. PLASKETT. Thank you very much. 

Thank you very much, Mr. Chairman. 

Mr. MEADOWS. I think there is general agreement that there 

would be a number of people wanting to support that particular effort. 

Ms. OLSON. A lot of people competing in that position. 

Mr. MEADOWS. I think so. 

The chair recognizes the gentleman from Wisconsin, Mr. 

Grothman. 

Mr. GROTHMAN. Thanks much. 

In 2009 the IRS agreed to develop a plan to the way it administers penalties and offers a compromise. Could you comment on 

whether they have implemented such a plan or what is going on 

there? 

Ms. OLSON. This was for like payroll service providers or just 

generally offers and compromise? 

Mr. GROTHMAN. In general. 

Ms. OLSON. Yes. Well, we are constantly disappointed about how 

the IRS is underutilizing the authority Congress gave it to settle 

tax debts for reasonable collection potential or principles of equity 

or, you know, economic hardship. Basically, after a debt is 3 years 

old, the IRS has 10 years, in general, to collect a tax debt, and 

after a debt gets to year three, we collect essentially nothing on 

that debt. Old debts you just don’t collect on. 

So for the IRS to have all of these old debts and not use offer 

and compromise authority is just silly. We could get these taxpayers clean going forward. They have to promise to comply with 

the laws for the next 5 years. That is long enough to train a taxpayer to be a compliant taxpayer. 

Mr. GROTHMAN. Are tax debts dischargeable in bankruptcy? 

Ms. OLSON. Some debts are and some debts are not. 

Mr. GROTHMAN. A lot of these debts, what do you see causes 

somebody to be that far in debt? There is always the stereotype. 

You know, you think of somebody living the high life and not paying their taxes, but what do you think is the average person who 

owes 50, 100, 20 grand? 

Ms. OLSON. Yes. Most of it is somebody that might be self-employed and just didn’t account for the self-employment tax that is 

always a surprise at the end of the year. And the thing that is really disappointing is that many of the debts, whether it is on the 

business side or the individual side, are very small at the beginning; and the IRS just puts them in a queue and they sit there for 

years and years and the penalties and interest double. And interest 

accrues daily under the law, so it is just a huge amount, and before 

long the tax is actually dwarfed by the amount of penalty and interest. By the time the IRS picks up that case 6 years later, it is 

something that the taxpayer can’t pay, when they might have been 

able to enter into an installment agreement the first or second year 

and get rid of it over two or 3 years and be good going forward. 

Mr. GROTHMAN. You could have a situation where you have a 

self-employed person or maybe a small businessman, which is a 

self-employed person, who is just not making money. 

Ms. OLSON. Right. 

Mr. GROTHMAN. Right? And that is what is going on. 


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Ms. OLSON. Right. 

Mr. GROTHMAN. A lot of these debts, they are not bad people who 

are buying boats and vacations, they are just people who are working 60 hours a week losing money, right? 

Ms. OLSON. Yes. And some of these folks, they have gotten into 

trouble and they realize that they need to maybe not run the business; and going forward they are a wage earner and they have this 

back debt. So here we have a taxpayer who is compliant going forward. Let’s use offer and compromise to deal with this debt and 

help them not be burdened by it. 

And I don’t think the rest of the taxpayers of the world will object too much if they know that it is the amount that the person 

can really afford to pay. And that is the rules for offer and compromise, the reasonable collection potential, what we reasonably 

expect to be able to collect over the remaining 10 years. 

Mr. GROTHMAN. So what would happen is we probably get in 

more money and somebody’s life would no longer be ruined. 

Ms. OLSON. We have studies that show that. At one point, in 

2005, we studied the offer and compromise program and saw that 

the IRS, by rejecting offers, left money on the table. We tracked 

what happened with those cases, and not a dollar was collected and 

we turned down money that was being offered to us. 

Mr. GROTHMAN. Ms. Olson, it has been over 20 years since I was 

a lawyer, and I finally found somebody who has compassion on the 

poor small businessmen whose businesses fail. Well, good luck. I 

am glad you brought it to our attention. Do you have any suggestions what we can do to move these people along in the IRS, prod 

them along so they aren’t hounding these people onto death? 

Ms. OLSON. Submitting questions to them, holding a hearing 

about what they are doing on the collection side and why aren’t 

they using the offer and compromise authority better. That is the 

kind of oversight I think would be very, very productive because, 

actually, Congress has given it the tools to be able to resolve these 

issues and bring people into voluntary compliance going forward; 

and that is the name of the game, that they get into voluntary compliance, they go and sin no more. 

Mr. GROTHMAN. IRS is less compassionate than Congress? Good 

grief. OK. Thank you very much. 

I yield the rest of my time. 

Mr. MEADOWS. I thank the gentleman. 

Ms. Olson, I want to thank you for your testimony. I want to ask 

just a few, very few followup questions. I will give you a few others 

that your staff can respond to. 

One of those, and you touched on it much earlier in your testimony, was really with regards to service levels and measuring 

service levels, how the IRS does it, how you see it from a consumer’s point of view. How difficult would that be to start to look 

at it from the taxpayer’s point of view? 

I often think that the best penalty for some of the highest senior 

levels within the IRS is to make them get on the phone and wait 

for a response, as I do with some of our airline executives, because 

they get a special deal. If they experience what the average person 

experiences, perhaps they would see it as a problem. 


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So how do we best, in a bipartisan way, establish a standard for 

those service, what I call the cycle of service as they would see it 

from a taxpayer’s point of view? 

Ms. OLSON. I think the first thing the IRS needs to do is to really 

beef up its research on what taxpayer needs are. We have a very 

diverse population, and they have really not done the research in 

recent years to identify what taxpayers need and what types of taxpayers need what kind of services. We have proposed a model and 

we have worked with the IRS, but we have gotten to a stopping 

point, where you would be able to rank taxpayer services by the 

method in which it is delivered. 

So by the phone, face-to-face, online, and the difference types of 

services like answering tax law questions, answering account questions, and those sorts of things; and looking at it from the Government perspective, saying how much does it cost us to do, but then 

looking at it from the taxpayer perspective and surveying taxpayers and saying do you want this this way, do you want this 

service delivered this way, what are the barriers; and then matching them up and actually ranking services. 

I think in that way you would actually be able to say taxpayers 

have told us if we don’t get service delivered in this particular way, 

we will make mistakes on our returns. And then you could start 

doing research to see whether that actually bears out; and that 

would tell you that this service needs to be funded for phone, 

whereas this service could be done online. And it would be a data 

based method of resource allocation, but it would take into consideration the Government’s concerns about cost with the taxpayers’ 

concerns about burden and accuracy and being able to comply with 

the laws. 

Mr. MEADOWS. So why do you think they don’t have this rigorous 

methodology? I think counsel just shared with me it is No. 2 on 

your list. 

Ms. OLSON. Yes. 

Mr. MEADOWS. So why would they not have that? 

Ms. OLSON. I think some of it is because they are in a reactive 

mode. You know, they look at the budget and they say, we have 

to cut this much money. What things cost this much money? We 

will cut them. That is why you don’t have return preparation in the 

walk-in sites. That is why you got the four offshore offices cut. 

They are just looking around. It is not research based. 

And I think that goes to the point about making some investments, but holding them accountable; that you have to do some investments and say we want you to do this research. We know we 

might not see a return on investment this year, but it will guide 

your decisions going forward and will get investments and efficiencies down the line. 

Mr. MEADOWS. All right. How can we best give you the tools to 

continue to apply pressure? Because we will have this hearing, you 

will make another report in June, I guess it will be. But we will 

have these hearings and what both of us find is that there is a flurry of activity that happens leading up to the hearing, and then the 

hearing happens and everybody goes whew, it’s over, and then 

there is a flurry of activity if we have you in a year from now. 


AKING-6430 with DISTILLER
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How can we make sure that the recommendations that you have 

get implemented, and then when you go to the agency and they 

say, well, it is not a priority? What we would love to do is look at 

it from a real budget standpoint and a real cost-effective standpoint 

and try to figure out where we need to be on that. How can we do 

that? Is it to get highlight reports from your office on a more regular basis? 

Ms. OLSON. Well, that is one thing. For the last 2 years, I have 

given the commissioner a memorandum with 10 or 12 recommendations from my annual report that are low or no cost, and 

the proposal that we did for the second problem is one of those low 

or no cost. Do this, just work with us on it. 

I think it would be very helpful if this committee looked at some 

of our recommendations and thought this makes a lot of sense and 

we think the IRS should move in this direction, and communicate 

that to the commissioner one way or another and say please come 

back and tell us what you are doing on these recommendations. 

Mr. MEADOWS. All right. I will close with this. I will give you the 

other questions that you can answer and submit back to the committee as your time permits. But can you prioritize for us, not only 

from the top 10, but the ones that you have out there that have 

been out there that are an easy fix that have been out there forever, and what I would say is an aging process? This has been a 

problem for 10 years or 20 years, or the fact that they are not even 

willing to do a beta test on one of the easy recommendations. 

Ms. OLSON. Right. 

Mr. MEADOWS. I do believe that the commissioner wants to improve service. And that may not be a popular thing to say, but I 

do believe that he wants to do that. I also believe that when we 

get so big at times there is a difficulty at finding the right balance 

between, as you say, just cutting out. 

For example, some of the additional Dodd-Frank regulations that 

came in exacerbated the problem overseas that Mrs. Maloney was 

talking about. So we passed something on one side. It makes it 

more difficult in compliance. And as you and I have personally discussed, the form for the Affordable Care Act, I do know that it was 

probably designed by Jonathan Gruber, because it takes an MIT 

guy to figure it out. It is unbelievably complex, would you agree? 

Ms. OLSON. Yes, it is right up there with the alternative minimum tax. 

Mr. MEADOWS. If you would do that and highlight that for us. We 

are going to continue to come back to this and make it a priority. 

As the ranking member talked about, from an IT standpoint, I 

think there are some things that we can help out with and continue to work. 

I notice that we have been joined by the delegate from the District of Columbia, so the chair, if she is ready, is ready to recognize 

Ms. Norton. 

Ms. NORTON. I want to thank my good friend, the chair and the 

member from North Carolina. He always means well, believe me, 

I say to the taxpayer advocate. 

I have some questions for you. I think all of my colleagues must 

have had the same issues I have had for the first time ever. I must 

say it must be amazing to the IRS to see people willing to wait in 


AKING-6430 with DISTILLER
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line for the kinds of services. When I read about lines that the IRS 

had to come out and say no more today, you will have to come 

back, it is as if we are having something you were giving away. 

They are trying to give away their money. 

And I have to say to my good friends in the majority, there is 

a lot of chutzpah on taxpayer day to call in the taxpayer advocate, 

because what we are told is that it is the taxpayer advocate that 

everybody is being sent to when they have problems. 

And it looks like the Congress is taking no responsibility for 

what has happened. No one has ever heard of a 17 percent cut in 

any agency, but my friends are not able to abolish the IRS, although there are two or three Presidential candidates running on 

abolishing the IRS, so they are trying to abolish it by starving it 

to death without recognizing that who gets starved are constituent 

services. Yes, constituent services, something we live by. 

I was particularly outraged at what the Congress has done to the 

IRS has made it difficult for the IRS to take advantage of one of 

the great innovations in the Federal Government, and that is the 

VITA services. VITA volunteers, who must be certified, who come 

forward and, for free, fill out the tax preparation forms for people 

who are in modest income, and I think people $60,000 or so can 

still have that done. 

We have VITA sites that we work with. Indeed, I have a whole 

day where I invite the sites and we all fill out the forms. The tax 

advocate, of course, comes. Then the VITA sites go. They spread 

throughout the District of Columbia. This is typical, I am sure, of 

other members, and close to their neighborhood they just help whoever comes in. 

Now, you require that these people, 100 percent volunteers, be 

certified, take a test, as if they were civil servants. It is an amazing 

thing that the IRS has done for years. Now we are told that the 

VITA sites have been put in this extraordinary position that they 

now are being hammered because you can’t expand the VITA sites, 

these volunteers who have become expert in doing what you do, 

and yet here is the Congress kind of calling the taxpayer advocate 

to task. It is amazing. Chutzpah or something else beyond that it 

takes to say why aren’t you doing a better job. 

I have asked to come up, though, particularly because of the 

VITA sites. I adore them. They have to be certified; whereas, and 

correct me if I am wrong, if you are a company and you want to 

do taxes, does the IRS require any kind of certification for somebody who simply wants to set up a business and fill out your taxes 

and charge you for doing so? 

Ms. OLSON. First, I don’t feel this committee is calling me to 

task; they are holding me accountable and they have been very 

supportive. 

Ms. NORTON. Oh, you are so polite. 

Ms. OLSON. I am polite. They have been very supportive of the 

work that I have been doing. 

Ms. NORTON. And by the way, for every reason, the taxpayer advocate is everybody’s friend. The taxpayer advocate is who figures 

out the real problems our constituents have. But I can’t imagine 

offloading to you all the problems, saying the IRS is not available, 

but the tax advocate is. 


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Ms. OLSON. Right. Well, we are seeing a growth in our cases. 

I want to talk about the VITA program because we did make it 

a most serious problem this year in the Annual Report because of 

some of our concerns. 

The IRS staff supporting the program has been truncated, so I 

think the volunteers have not gotten the kind of support that they 

have needed in the last few years, and we have been concerned 

about how the IRS—Congress has appropriated funds to make 

matching grants to some of the volunteer programs, but there have 

been a lot of restrictions on them. They are not being able to use 

them in some of the ways that the individual programs may think 

best. 

Ms. NORTON. I don’t understand what you mean by that. 

Ms. OLSON. Well, for example, some of the programs want to be 

able to have a paid quality review person on their staff, which we 

should all agree would make sense. You have volunteers doing the 

returns. Maybe hire someone whose job it is to look at the quality 

of the returns. 

Ms. NORTON. They still have to do quality review. 

Ms. OLSON. That has to be a volunteer too. 

And then one of the issues about taking that test, it is deeply 

ironic that we require the volunteers to take a test, but we don’t 

have the authority to require unenrolled return preparers, people 

who can just hang up a shingle, aren’t attorneys, aren’t CPAs, 

aren’t enrolled agents. And the IRS did try to do that through the 

regulation, but the courts have overturned that, so now it is back 

in Congress’s court to really give us the legal authority. 

Ms. NORTON. And, of course, that would make more work for you 

if they made an error. 

Ms. OLSON. Yes, exactly. That is one of the biggest ways that we 

could get more quality in the tax system. 

But I have recommended this year, and I think the IRS may do 

this, we are actually limiting the number of volunteers who are attorneys, CPAs, or enrolled agents who are willing to volunteer, because every year they have to take this test; and these are people 

who are already, you know, have passed the bar exam, they have 

passed the CPA exam, they have passed the enrolled agent exam. 

So what I have recommended is have them take the test once in 

their lifetime and they just take a short quiz every year about any 

changes in the law, but don’t make them sit through it again; and 

you might get more volunteers. 

Ms. NORTON. And the IRS would get to do that? Congress 

wouldn’t have to do that? 

Ms. OLSON. Yes, it is all IRS rules. You don’t need legislation. 

Ms. NORTON. Well, as much as you can do to help yourself, the 

IRS, I think the IRS should simply do it. I think even Congress 

this year will look at those cuts and understand that they have 

contributed to the crisis. It is a crisis. I wanted to come out and 

just apologize and to thank you for the work of the tax advocate 

not only now when we are just dumping on you and nobody else 

is available to go see the tax advocate, but to thank you for what 

the tax advocate does all year, all the time, and how essential you 

have been to our constituents. Thank you very kindly. 

Ms. OLSON. Thank you. 


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Mr. MEADOWS. I thank the gentlewoman. 

The chair recognizes the gentleman from Ohio. 

Mr. JORDAN. I thank the gentleman. 

In the last questioning from the gentlelady from the District, you 

talked about growth in cases you are dealing with, and you attribute that to what exactly? 

Ms. OLSON. This year we have a 5 percent growth so far, and we 

are seeing that from the filing season, people not being able to get 

through on the phones and coming to us. 

Mr. JORDAN. Oh, that is because they are not getting answers to 

their questions. 

Ms. OLSON. That is right, or they are not getting their returns 

processed. 

Mr. JORDAN. And maybe I missed this earlier. Is that a trend? 

Ms. OLSON. The 5 percent is a trend, yes. 

Mr. JORDAN. So it was 5 percent bigger than last year and last 

year was 5 percent bigger than the previous year? 

Ms. OLSON. Let’s see. The previous year dropped from the year 

before, 2013 to 2014 had dropped a bit. 

Mr. JORDAN. It dropped, so it is not a trend. 

Ms. OLSON. It is not a trend, it is actually reversing the trend. 

Mr. JORDAN. OK, so the trend was coming down and this is the 

first year it went up. 

Ms. OLSON. It was going down for about 2 years, yes. 

Mr. JORDAN. All right. And, in your professional judgment, that 

is because of financial concerns?: 

Ms. OLSON. It is a taxpayer service issues and would bring financial concerns. 

Mr. JORDAN. Might it also, I am just going to hazard a hypothesis, might it also be the complexity of the tax code. The tax code 

continues to get more and more complex. Maybe we need a new 

one. 

Ms. OLSON. I have made the complexity of the code a No. 1 most 

serious problem for several years. 

Mr. JORDAN. OK. And that is based on your professional judgment that it is a financial cause, but also in your professional judgment it could be because of the complexity? 

Ms. OLSON. Absolutely. 

Mr. JORDAN. The ever-increasing complexity of the code. 

Ms. OLSON. Absolutely. 

Mr. JORDAN. And you have not had an outside study done to say 

which is bigger, or have you? 

Ms. OLSON. That is hard, but just looking at my cases, for example, 1 year we had a huge bump in our cases solely attributable to 

the first-time home buyer credit because it was a complex credit 

and we got 40,000 cases in 1 year. 

Mr. JORDAN. I would think that is the biggest concern. If you 

have a code that is that big, of course there are going to be questions. That is why we need to reform the tax code. 

Early on in the hearing you mentioned critical pay authority. 

Can you define what that is exactly? 

Ms. OLSON. That is a special hiring authority where the IRS is 

able to bring people from the private sector and pay them above 

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thority; they are able to come in for 4 years. But it is a way to 

bring the best and the brightest from the private sector. 

Mr. JORDAN. And what has happened to that authority? 

Ms. OLSON. It is called critical pay. 

Mr. JORDAN. No, no, what has happened. 

Ms. OLSON. It has expired. 

Mr. JORDAN. And you and Mr. Koskinen would like that to be 

back in place? 

Ms. OLSON. I think, yes. 

Mr. JORDAN. So just to be clear, this is the authority to pay people at a higher level, higher wage, higher salary than what they 

are entitled to under the Federal pay scale. 

Ms. OLSON. Yes, that is correct. 

Mr. JORDAN. And where do these people typically work? 

Ms. OLSON. They would work often in our IT function. That is 

what it was really originally intended for, was the information 

technology. 

Mr. JORDAN. And you know the difficulty we have as policymakers with that, right? 

Ms. OLSON. Would you explain that to me? 

Mr. JORDAN. Well, so you had critical pay authority for all this 

time and we had this whole escapade with—and these are the IT 

people, the tech people, of losing Lois Lerner’s emails; finding out 

you had lost them; the IRS not telling, not you, but Mr. Koskinen 

waiting 2 months to tell us they had lost them. 

Then once they inform us they had lost them, the inspector general, 2 weeks after, were informed that they were lost and that Mr. 

Koskinen has assured us that they cannot be recovered, that the 

backup tapes have been destroyed; 2 weeks after that, the inspector general drives to Martinsburg, West Virginia and gets the 

backup tapes and, lo and behold, we have found them. 

So all these IT people that you need critical pay authority to pay 

didn’t do a very good job in that situation, which has been the most 

high profile situation at the Internal Revenue Service over the last 

2 years. And now you and Mr. Koskinen is asking to pay these people more than anyone else on the Federal pay scale makes and give 

you this critical pay authority. I think that is going to be really difficult. 

Ms. OLSON. I can only say that it is my belief that it would benefit the IRS to be able to bring people from the private sector in 

to help us learn more about innovation and those sorts of things. 

And to get those people in, it is very hard to match the salaries 

that they are able to make on the outside, and that is the purpose 

of critical pay. 

Mr. JORDAN. Well, we respectfully have a slight different opinion. 

I thank the chairman for his indulgence. 

Mr. MEADOWS. The chair recognizes the ranking member, Mr. 

Connolly. 

Mr. CONNOLLY. Thank you, Mr. Chairman. 

Well, let’s try the other side of this. So maybe the way to get the 

IRS technologically advanced and solving the kinds of problems Mr. 

Jordan just described is actually let’s pay everyone in the technology and IT sector half of what they might make otherwise. 

Would that work? 


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Ms. OLSON. I don’t know. I mean, that is a proposal, yes. 

Mr. CONNOLLY. So do we have a brain drain going on in the IRS? 

Ms. OLSON. I think that right now it is very difficult to bring people in from outside. Some people view it as a challenge. I certainly 

do. I think Commissioner Koskinen does. 

Mr. CONNOLLY. Would it be fair to say that whatever that brain 

drain is or, put differently, the difficulty to recruit is particularly 

acute in the higher skilled end? 

Ms. OLSON. Yes, I would say that. 

Mr. CONNOLLY. So maybe having some pay differential or some 

kind of incentive pay structure might be useful if we are going to 

compete with the private sector or even have a fighting chance to 

do that. 

Ms. OLSON. I agree with that, and I don’t think it has to be 

matching private sector salaries because people come to work for 

the Government out of a public service motivation. But it is hard 

to take such a huge hit in your private sector salar. 

Mr. CONNOLLY. Switching subjects, what percentage of American 

taxpayers are voluntarily compliant in paying their taxes? 

Ms. OLSON. It is 83 percent or so before we count later on collections, and it is a little under 86 percent if you count late payments 

and enforcement collections. 

Mr. CONNOLLY. If you had a subset of those Americans where 

that percentage was 97 percent, how would you characterize that? 

Ms. OLSON. That would be extraordinarily compliant. 

Mr. CONNOLLY. Thank you very much. 

I yield back. 

Mr. MEADOWS. I thank the gentleman from Virginia. 

Ms. Olson, I would like to thank you for your time today, for taking the time to appear for your direct answers. It is very welcoming, coming from some committees where perhaps the answers 

are not as direct or complete. So thank you so much. 

Ms. OLSON. Thank you. 

Mr. MEADOWS. I would also like to thank the staff of the committee here. Much of the work that gets done is always their hard 

work that we carry out. 

And I would like to thank your staff, so many of them who are 

here today. Thank you for your work. Truly appreciate it. 

If there is no further business, without objection, the subcommittee stands adjourned. 

[Whereupon, at 2:30 p.m., the committee was adjourned.] 


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