    [House Hearing, 115 Congress]
    [From the U.S. Government Publishing Office]

                   EXAMINING IRS CUSTOMER SERVICE CHALLENGES

    =======================================================================

                                  JOINT HEARING

                                   BEFORE THE

                                SUBCOMMITTEE ON
                             GOVERNMENT OPERATIONS

                                    AND THE

                          SUBCOMMITTEE ON HEALTH CARE,
                       BENEFITS, AND ADMINISTRATIVE RULES

                                     OF THE

                             COMMITTEE ON OVERSIGHT
                             AND GOVERNMENT REFORM
                            HOUSE OF REPRESENTATIVES

                         ONE HUNDRED FIFTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                 MARCH 8, 2017

                                   __________

                                Serial No. 115-2

                                   __________

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

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                  Committee on Oversight and Government Reform

                         Jason Chaffetz, Utah, Chairman
    John J. Duncan, Jr., Tennessee       Elijah E. Cummings, Maryland,
    Darrell E. Issa, California              Ranking Minority Member
    Jim Jordan, Ohio                     Carolyn B. Maloney, New York
    Mark Sanford, South Carolina         Eleanor Holmes Norton, District of
    Justin Amash, Michigan                   Columbia
    Paul A. Gosar, Arizona               Wm. Lacy Clay, Missouri
    Scott DesJarlais, Tennessee          Stephen F. Lynch, Massachusetts
    Trey Gowdy, South Carolina           Jim Cooper, Tennessee
    Blake Farenthold, Texas              Gerald E. Connolly, Virginia
    Virginia Foxx, North Carolina        Robin L. Kelly, Illinois
    Thomas Massie, Kentucky              Brenda L. Lawrence, Michigan
    Mark Meadows, North Carolina         Bonnie Watson Coleman, New Jersey
    Ron DeSantis, Florida                Stacey E. Plaskett, Virgin Islands
    Dennis A. Ross, Florida              Val Butler Demings, Florida
    Mark Walker, North Carolina          Raja Krishnamoorthi, Illinois
    Rod Blum, Iowa                       Jamie Raskin, Maryland
    Jody B. Hice, Georgia                Peter Welch, Vermont
    Steve Russell, Oklahoma              Matt Cartwright, Pennsylvania
    Glenn Grothman, Wisconsin            Mark DeSaulnier, California
    Will Hurd, Texas                     John Sarbanes, Maryland
    Gary J. Palmer, Alabama
    James Comer, Kentucky
    Paul Mitchell, Michigan

                                     ------

                   Jonathan Skladany, Majority Staff Director
                      Rebecca Edgar, Deputy Staff Director
                        William McKenna, General Counsel
                             Jack Thorlin, Counsel
                   Kevin Eichinger, Professional Staff Member
                             Kiley Bidelman, Clerk
                     David Rapallo, Minority Staff Director
                     Subcommittee on Government Operations

                     Mark Meadows, North Carolina, Chairman
    Jody B Hice, Georgia, Vice Chair     Gerald E. Connolly, Virginia,
    Jim Jordan, Ohio                         Ranking Minority Member
    Mark Sanford, South Carolina         Carolyn B. Maloney, New York
    Thomas Massie, Kentucky              Eleanor Holmes Norton, District of
    Ron DeSantis, Florida                    Columbia
    Dennis Ross, Florida                 Wm. Lacy Clay, Missouri
    Rod Blum, Iowa                       Bonnie Watson Coleman, New Jersey
                                     ------

        Subcommittee on Health Care, Benefits, and Administrative Rules

                           Jim Jordan, Ohio, Chairman
    Mark Walker, North Carolina, Vice    Raja Krishnamoorthi, Illinois,
        Chair                                Ranking Minority Member
    Darrell E. Issa, California          Jim Cooper, Tennessee
    Mark Sanford, South Carolina         Eleanor Holmes Norton, District of
    Scott DesJarlais, Tennessee              Columbia
    Mark Meadows, North Carolina         Robin L. Kelly, Illinois
    Glenn Grothman, Wisconsin            Bonnie Watson Coleman, New Jersey
    Paul Mitchell, Michigan              Stacey E. Plaskett, Virgin Islands

                                C O N T E N T S

                                  ----------
                                                                       Page
    Hearing held on March 8, 2017....................................     1

                                   WITNESSES

    Mr. John Dalrymple, Deputy Commissioner for Services and
      Enforcement, Internal Revenue Service
        Oral Statement...............................................     3
        Written Statement............................................     5
    Mr. Russell Martin, Assistant Inspector General, Returns
      Processing and Account Services, Treasury Inspector General for
      Tax Administration
        Oral Statement...............................................    16
        Written Statement............................................    18
    Ms. Jessica Lucas-Judy, Acting Director, Strategic Issues, U.S.
      Government Accountability Office
        Oral Statement...............................................    31
        Written Statement............................................    33

                                    APPENDIX

    Statement for the Record of Nina Olson, National Taxpayer
      Advocate, submitted by Chairman Meadows........................    62
    Get Backs from The Hon. John Dalrymple, Deputy Commissioner for
      Services and Enforcement, Internal Revenue Service.............    77

                   EXAMINING IRS CUSTOMER SERVICE CHALLENGES

                                  ----------

                            Wednesday, March 8, 2017

                      House of Representatives,
     Subcommittee on Government Operations, joint with
        the Subcommittee on Health Care, Benefits, and
                                  Administrative Rules,
                  Committee on Oversight and Government Reform,
                                                       Washington, D.C.
        The subcommittees met, pursuant to call, at 2:10 p.m., in
    Room 2154, Rayburn House Office Building, Hon. Mark Meadows
    [chairman of the Subcommittee on Government Operations]
    presiding.
        Present from the Subcommittee on Government Operations:
    Representatives Meadows, Hice, Jordan, DeSantis, Blum, and
    Connolly.
        Present from the Subcommittee on Health Care, Benefits, and
    Administrative Rules: Representatives Jordan, Meadows,
    Grothman, Mitchell, Krishnamoorthi, and Plaskett.
        Mr. Meadows. The Subcommittee on Government Operations and
    the Subcommittee on Health Care, Benefits, and Administrative
    Rules will come to order. And without objection, the chair is
    authorized to declare a recess at any time.
        The IRS is the Federal agency that the average American
    probably interacts with more frequently than most other
    agencies in the Federal Government. And as we look at customer
    service at the IRS and how most Americans experience the
    Federal Government, we owe it to them to make sure that their
    experience is clear and helpful. And if the taxpayers can get
    help from the IRS to understand some of the often more
    complicated tax obligations, the IRS then does not have to
    spend as much time looking or providing resources for audits or
    enforcement.
        Unfortunately, the 2015 tax season had one of the worst
    customer service records in IRS history with only 38 percent of
    the taxpayers who called the IRS assistance line actually
    getting a representative. And thereafter, the average wait time
    was well over 30 minutes.
        And so as we look at this, as the IRS calls for more
    resources, Congress indeed did grant them $298 million in for
    the 2016 tax season with $176 million specifically marked for
    taxpayer services. As a result, the 2016 filing season was
    better but still not as good as it was a decade earlier.
        So as we look at today's hearing, I am going to keep my
    opening remarks very brief because we are expecting votes here
    in just a few minutes. And we will certainly yield to a number
    of the other members as they have questions. And I will include
    some of that in my questioning. And the entire written
    statement will be made part--or opening statement will be made
    part of the record.
        Mr. Meadows. So with that, I will now recognize the ranking
    member for his opening statement.
        Mr. Krishnamoorthi. Thank you, Chairmen Meadows and Jordan,
    for holding this important hearing on a topic that is so
    familiar to so many Americans: IRS customer service.
        Many of the individuals I represent encounter challenges
    when dealing with the IRS. The individuals are hardworking,
    honest Americans who are doing everything they can in order to
    comply with their tax obligations. I have seen some of these
    individuals go to great lengths to fulfill their
    responsibilities: contacting the IRS and others for help,
    providing what seems like an endless stream of documentation to
    their agency and their employers in order to get on an
    installment plan, and in some cases even digging into their
    hard-earned retirement savings to pay their outstanding tax
    debts. So while IRS says that it is working hard to improve
    customer service, it can be difficult for many of my
    constituents to believe in some cases.
        As our nation's tax code becomes increasingly complex, the
    burden placed on those trying to maintain tax compliances also
    increases. It is absolutely critical that the IRS have the
    appropriate channels to assist these well-meaning taxpayers and
    processes in place to rectify situations in which these
    channels fail.
        For that reason, and as a former small businessman, I hope
    we can shed some light on the processes currently in existence
    at the IRS for assisting customers before, during, and after
    the filing season. All customers deserve to have their
    questions answered in a timely, effective, and respectful
    manner.
        What does it take to make that happen? As the Oversight
    Committee, we have a responsibility to ensure that government
    works effectively and efficiently and is responsive to the
    citizens it serves. We should encourage agencies to take a hard
    look at themselves and identify areas that are working, as well
    as those that need improvement. We should encourage agencies to
    adopt best practices from other areas of government and the
    private sector, and we should certainly encourage agencies to
    listen to feedback from those on the other side of the table.
    Only after doing that can we have a meaningful discussion of
    what needs to be done and what resources need to be devoted in
    order to make our system succeed.
        I hope that these are discussions we can have today, and I
    look forward to the testimony of our witnesses. Thank you. I
    yield back.
        Mr. Meadows. I thank the gentleman.
        The chair recognizes the gentleman from Ohio, Mr. Jordan,
    for his opening statement.
        Mr. Jordan. I want to just thank the chairman for helping
    us put this important hearing together. As we are heading into
    tax season or into tax season, I think this is going to be some
    hopefully valuable information for the folks we get the
    privilege of serving and representing.
        So with that, I would yield back and look forward to the
    witness' testimony.
        Mr. Meadows. I thank the gentleman. We will hold the record
    open for five legislative days for any member who would like to
    submit a written statement.
        I will now recognize our panel of witnesses. I am pleased
    to welcome the Honorable John Dalrymple, deputy commissioner
    for Services and Enforcement at the Internal Revenue Service.
    Welcome. Mr. Russell Martin, deputy inspector general with the
    Treasury, inspector general for the Tax Administration,
    welcome. And Ms. Jessica Lucas-Judy, acting director of
    Strategic Issues at the U.S. Government Accountability Office,
    welcome.
        And pursuant to committee rules, all witnesses will be
    sworn in before they testify, so if you would please rise and
    raise your right hand.
        [Witnesses sworn.]
        Mr. Meadows. Thank you. Please be seated. And let the
    record reflect that all witnesses answered in the affirmative.
        In order to allow time for discussion, we would ask that
    you please limit your oral testimony to five minutes, but your
    entire written testimony and statement will be made part of the
    record.
        And so, Mr. Dalrymple, we will recognize you for five
    minutes.

                           WITNESS STATEMENTS

                      STATEMENT OF JOHN DALRYMPLE

        Mr. Dalrymple. Thank you. Chairmen Meadows and Jordan,
    Ranking Member ----
        Mr. Meadows. Maybe just pull the--yes, a little bit closer
    to you there. Yes.
        Mr. Dalrymple. I thought I was loud enough. Sorry.
        Chairmen Meadows, Jordan, and Ranking Member
    Krishnamoorthi, and members of the subcommittees, thank you for
    the opportunity to testify on IRS's taxpayer service efforts.
        The IRS spends a significant amount of time and resources
    on this part of our mission because every taxpayer contact is
    important to us. The most visible taxpayer service the IRS
    provides is the delivery of a smooth, problem-free tax filing
    season so people can file their returns and receive their
    refunds as quickly and easily as possible. I am pleased to
    report that, so far, the 2017 filing season has gone smoothly
    in terms of tax processing and the operation of our information
    technology systems.
        As of February 24, the IRS received more than 53.2 million
    individual returns on the way to a total of about 152 million.
    We've issued more than 41.3 million refunds for more than $127
    billion. The average refund so far is more than $3,000.
        During the filing season and throughout the year, the IRS
    provides assistance to taxpayers to help them meet their tax
    obligations. With over 150 million individual taxpayers, we
    realized there is no one-size-fits-all in terms of delivering
    service to them.
        We offer a mix of service channels and are always looking
    for ways to improve service delivery. Over many years, we've
    been working to expand our online service offerings because our
    research tells us that taxpayers increasingly prefer to
    interact with us through digital channels. Last year, taxpayers
    visited our website, IRS.gov, more than 500 million times. They
    used IRS.gov to find helpful tax information, check on the
    status of their refund, and perform transactions such as paying
    their tax bill.
        We've also been working to develop an online account at the
    IRS where taxpayers or their representatives can log in
    securely, get information about their account, and interact
    with the IRS as needed. We recognize that there will always be
    taxpayers who prefer not to interact with the IRS online. For
    that reason, we will continue providing and improving service
    on our other channels.
        One of these is phone service. The IRS receives more than
    63 million taxpayer calls a year on our toll-free lines. A very
    challenging year in fiscal year 2015 the level of service
    provided on the phones improved significantly in 2016 as a
    result of additional funding from Congress. I'm pleased to
    report that during the 2017 filing season we are again seeing
    an even improved phone service.
        The IRS also provides in-person help to millions of
    taxpayers who visit our Tax Assistance Centers, or TACs, as we
    call them. Each of these contacts is also important to the IRS,
    and to cut down on long lines at our TACs, the IRS in 2015
    began testing the idea of letting people make appointments in
    advance. We extended the appointment process to call--I'm
    sorry, to all TACs as of this year. Doing so has dramatically
    cut wait times, and we've had no reports of any lines outside
    TACs so far this filing season.
        Another way the IRS provides in-person help is by
    supporting nearly 12,000 volunteer income tax assistance and
    tax counseling for the elderly sites around the country.
    Volunteers at these sites provide free tax preparation help to
    eligible individuals. Along with the service we provide on
    these channels, the IRS also processes nearly 8 million pieces
    of correspondence from taxpayers each year, and these taxpayers
    are also important to us.
        The IRS remains dedicated to improving taxpayer service
    across all of our channels. Chairmen Meadows and Jordan,
    Ranking Member Krishnamoorthi, this concludes my statement, and
    I'd be happy to take questions.
        [Prepared statement of Mr. Dalrymple follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Mr. Meadows. Thank you so much for your testimony. As
    Murphy's law would have it, they called votes just about the
    time that you started speaking. And so what we are going to do
    is go into recess. And for planning purposes, it will actually
    be subject to the call of the chair, but for those of you that
    may want to get a cup of coffee, if you will plan on being back
    here no later than 10 till 3:00. It may be later than that but
    certainly--the subcommittees stand in recess subject to the
    call of the chair.
        [Recess.]
        Mr. Meadows. The subcommittees will come to order. Thank
    you all for your patience and willingness to stay with us
    throughout this.
        Mr. Dalrymple, I want to congratulate you on your upcoming
    retirement. A little birdie told me that you were retiring in a
    couple of weeks, so we will try to make this as painless as
    possible. How about that?
        Mr. Dalrymple. You can't imagine how I appreciate that.
        Mr. Meadows. And before I recognize you, Mr. Martin, I want
    to recognize Mr. Sapp who is here from Drake Software, a good
    friend and constituent from back in North Carolina, who
    actually deals with these kinds of issues. And so it is good to
    have you here as well.
        So, Mr. Martin, you are recognized for five minutes.

                      STATEMENT OF RUSSELL MARTIN

        Mr. Martin. Thank you. Chairmen, Ranking Members, and
    members of the subcommittee, thank you for the opportunity to
    testify on IRS's efforts to provide customer service to
    taxpayers, including those who are victims of identity theft.
        For the 2017 filing season, taxpayers have multiple options
    to choose from when they need assistance from the IRS. Examples
    include the toll-free telephone lines, face-to-face assistance,
    the mail, self-assistance through IRS.gov, and social media
    channels such as Twitter and Facebook.
        Despite other available options, taxpayers continue to use
    the telephone as the primary method to seek assistance from the
    IRS. The IRS is projecting a 75 percent level of service for
    the 2017 filing season, an increase from 72 percent reported
    for the 2016 filing season. The level of service represents the
    relative success rate of taxpayers who call the IRS for
    assistance.
        As of February 11, 2017, the IRS reports it answered
    approximately 2.5 million calls and provided an 82 percent
    level of service. Each year, millions of taxpayers also seek
    assistance from one of the IRS's 376 walk-in offices known as
    Taxpayer Assistance Centers or TACs. Although the IRS reports
    there are 376 TACs for the 2017 filing season, 24 are not open
    because they have not been staffed. The IRS estimates that the
    number of taxpayers it will assist at its TACs will continue to
    decrease. The IRS plans to assist more than 3.4 million
    taxpayers at its TACs in fiscal year 2017, a 22 percent
    decrease from fiscal year 2016.
        Taxpayers also interact with the IRS through the mail. The
    IRS's ability to timely process taxpayer correspondence remains
    a challenge. IRS management stated that the reduction in
    available staff is the most significant factor in not timely
    responding to taxpayer correspondence.
        In response to increased demand for online self-assistant
    options, the IRS continues to increase the services they
    provide online. However, as we have reported, the risk of
    unauthorized access to tax accounts increases as the IRS
    expands its focus on delivering online tools. Therefore, it is
    critical that the methods the IRS uses to authenticate
    individuals' identities provide a high level of confidence that
    tax information and services are provided only to individuals
    who are entitled to receive them.
        Much of the IRS's ability to serve taxpayers require
    staffing. Beginning in fiscal year 2015, the IRS made some
    resource decisions, which significantly affected the level of
    service provided to taxpayers. This included shifting a
    significant portion of the user fees it collects to operation
    support to implement other obligations required by law. In
    fiscal year 2016, the IRS received $178 million in additional
    funding by Congress. As a result, it has increased its level of
    service substantially from its low of 38 percent in fiscal year
    2015.
        The IRS also continues to devote significant resources to
    assist victims of identity theft. In July 2015 the IRS created
    a centralized unit to combine the skills of employees working
    identity theft cases in multiple functions into one
    directorate. This has resulted in improvements in case closure
    time frames and a reduction in case closing errors.
        To help protect identity theft victims and improve
    authentication, the IRS began issuing unique identification
    numbers to eligible taxpayers in fiscal year 2011. The issuance
    of these numbers to confirmed victims of identity theft reduces
    IRS's resources needed to resolve identity theft cases.
    Specifically, this number helps the IRS verify a victim's
    identity at the time their tax return is filed and, as a
    result, not delay the processing of the taxpayer's return or
    issuance of their refund.
        However, TIGTA has identified that confirmed victims of
    identity theft tax accounts were not always consistently
    updated to ensure that these identification numbers were
    generated as required. This results in the need to
    unnecessarily use additional resources to review future tax
    return filings.
        TIGTA has reported that the trend of lower budgets and
    reduced staffing has affected the IRS's ability to deliver its
    priority program areas, including customer service and
    enforcement activities. The allocation of limited resources
    requires difficult decisions to balance customer service with
    enforcement activities.
        This ends my statement, and I look forward to your
    questions.
        [Prepared statement of Mr. Martin follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Mr. Meadows. Thank you, Mr. Martin.
        Ms. Lucas-Judy?

                    STATEMENT OF JESSICA LUCAS-JUDY

        Ms. Lucas-Judy. Chairmen Meadows and Jordan, Ranking
    Members Connolly and Krishnamoorthi, members of the
    subcommittees, thank you for this opportunity to discuss GAO's
    recommendation for improving IRS customer service. My statement
    today focuses on two areas: IRS's performance in 2016 compared
    to prior years and its efforts to improve service for victims
    of identity theft.
        During the filing season, millions of taxpayers contact
    IRS. The service also processes most of the approximately 150
    million tax returns it receives during this time and issues
    more than 100 million refunds. The scale of these operations,
    as well as IRS's declining resources, have raised concerns
    about its ability to provide service to taxpayers. Maintaining
    quality customer service is important because it helps
    taxpayers comply with the tax code.
        Regarding the first area, performance, IRS provided better
    telephone service to callers during the 2016 filing season
    compared to 2015. More people who wanted to speak to an
    assister were able to get through. In fact, it was the highest
    level of service for a filing season since 2011. However, IRS
    performance during the full fiscal year remained low.
        In addition, wait times were much shorter than in 2015, 11
    minutes rather than 23 minutes on average. Total calls where
    taxpayers abandoned the call, were disconnected, or received a
    busy signal declined about 10 percent. These improvements were
    because IRS devoted additional resources and staff to answering
    calls, as well as offered overtime to staff after receiving
    additional funding and allocating user fees.
        However, IRS does not make customer service information,
    including average wait time, easily available such as through
    an online dashboard. Without this information, taxpayers are
    not well informed on what to expect when they're requesting
    services from IRS. Accordingly, we recommended that IRS display
    customer service standards and performance online, and the
    agency agreed.
        The second area is customer service for victims of identity
    theft refund fraud. IRS estimates it paid at least $2 billion
    identity theft refunds in 2015. Such fraud also burdens honest
    taxpayers because authenticating their identities can delay
    processing their returns and their refunds.
        We found IRS has overall improved aspects of service for
    victims of this fraud. For example, IRS reduced its backlog of
    cases and began consolidating inventory and better managing its
    case flow. However, we did find three things that IRS could
    further improve. First, IRS's file retrieval and scanning
    processes contributed to delays and unnecessary document
    requests. We reviewed a sample of 16 identity theft cases, and
    in two of those cases it had taken six weeks or more for IRS to
    retrieve and scan the requested documents, during which time
    the assisters closed the cases without receiving the documents.
    This leads to the question whether or not they were even
    needed. We recommended IRS review its retrieval and scanning
    procedures for improvements, which IRS agreed to do.
        Second, we found potential weaknesses in IRS's internal
    control processes could lead to IRS paying refunds to
    fraudsters. In discussion groups, IRS assisters and managers
    told us some assisters may release refunds even if indicators
    on the account show the tax return was under review for
    identity theft. We recommended IRS improve its data or collect
    new data to monitor how and why assisters might be releasing
    refunds before closing these types of cases.
        IRS disagreed, stating that the problem was not widespread
    and current processes are sufficient. However, we maintain the
    data IRS was using had weaknesses and were not sufficient to
    make that determination.
        In response to our draft report, IRS sent us an analysis
    that they said showed this type of error does occur but may not
    be as widespread as the discussion group participants
    suggested. We'll continue to work with IRS on this important
    issue.
        Finally, we found IRS does not notify taxpayers when a
    dependent's identity appears on a fraudulent return. By not
    doing so, IRS is limiting taxpayers' ability to take action to
    protect its dependents' identity. We recommended IRS revise
    notices to victims to include information such as whether
    dependents were claimed on the fraudulent return, and IRS
    agreed with this.
        In summary, as taxpayers file their returns for 2016, it's
    important that IRS ensures timely, quality service. IRS can
    increase transparency and accountability by implementing our
    recommendations to provide performance information, improve
    file retrieval and scanning, determine how assisters might
    release refunds, and notify taxpayers when dependents'
    identities have been used fraudulently.
        This concludes my prepared remarks, and I'll be happy to
    answer any questions that you may have.
        [Prepared statement of Ms. Lucas-Judy follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Mr. Meadows. Thank you all.
        The chair recognizes the gentleman from Ohio, Mr. Jordan,
    for five minutes.
        Mr. Jordan. Thank you, Mr. Chairman.
        Mr. Dalrymple, why has taxpayer service at the IRS been
    terrible?
        Mr. Dalrymple. Taxpayer service at the IRS has been
    improving, in fact, I think this year is a perfect example of
    where taxpayer service could be going forward given the
    resources necessary ----
        Mr. Jordan. Taxpayer advocates said that taxpayer service
    is the number one most serious problem at the Internal Revenue
    Service. The current Commissioner, someone who, frankly, I am
    not a big fan of, said it was ``abysmal.'' Mr. Meadows, the
    chairman, indicated in his opening comments that 38 percent of
    the callers asking for assistance, only 38 percent actually got
    to a representative.
        Mr. Dalrymple. That was in 2015. In ----
        Mr. Jordan. That is why I said why has taxpayer service at
    the IRS been terrible?
        Mr. Dalrymple. Well, it's--it was clearly a resource issue,
    Congress.
        Mr. Jordan. Resource issue?
        Mr. Dalrymple. Yes.
        Mr. Jordan. Could it be your priorities were misplaced?
    Could that be a problem?
        Mr. Dalrymple. I don't think so. I think the real issue
    here is how the budget actually works. You know, the IRS
    receives its budget in three specific categories: taxpayer
    service, enforcement, and operation support. And in order to
    move money from--between those appropriations, it has to ask
    for permission from Congress to do so.
        And in 2015 actually we moved $30 million from enforcement
    into our taxpayer service operation. So I don't think that's --
    --
        Mr. Jordan. And you asked Congress for that ----
        Mr. Dalrymple. And we asked Congress to do that, and they
    allowed us to do that.
        Mr. Jordan. Why didn't you ask for more? Why didn't you ask
    for it more often ----
        Mr. Dalrymple. We had ----
        Mr. Jordan.--to offset this terrible performance ----
        Mr. Dalrymple. We--if ----
        Mr. Jordan.--with 30-minute wait times, only 38 percent
    actually talk to a representative.
        Mr. Dalrymple. The ----
        Mr. Jordan. Your own Commissioner said it was abysmal.
        Mr. Dalrymple. It was abysmal. There's not enough money to
    go around for anything. The audit rates at the IRS have also
    dropped ----
        Mr. Jordan. Well, let's talk about ----
        Mr. Dalrymple.--dramatically. It's ----
        Mr. Jordan. Let me just give you one example of what I
    would argue is mismanagement of taxpayer resources at the
    Internal Revenue Service. You know a gentleman named Terry
    Milholland?
        Mr. Dalrymple. I--he was the former CIO.
        Mr. Jordan. He was former what?
        Mr. Dalrymple. The former CIO.
        Mr. Jordan. Chief information officer?
        Mr. Dalrymple. Yes.
        Mr. Jordan. Okay. And was he chief information officer when
    the IRS targeted conservative groups? Was he functioning in
    that role at that time?
        Mr. Dalrymple. I'm not certain when he became CIO.
        Mr. Jordan. Yes, between 2008 and 2016 he definitely was.
    Was he chief information officer when Lois Lerner's hard drive
    crashed?
        Mr. Dalrymple. I think he probably was.
        Mr. Jordan. He was. And was he chief information order--
    officer, excuse me, when 422 backup tapes were destroyed at the
    IRS, tapes under subpoena?
        Mr. Dalrymple. I think he would have been the CIO at that
    point.
        Mr. Jordan. Yes. And was he the gentleman who issued the
    preservation order to not destroy those 422 backup tapes?
        Mr. Dalrymple. He could have been.
        Mr. Jordan. He definitely was. I have seen it. And did Mr.
    Milholland live in Washington, D.C.?
        Mr. Dalrymple. I'm not sure where Mr. Milholland lived.
        Mr. Jordan. Yes. He lived in Texas. In fact, in 2015 alone,
    $55,000 was spent by Mr. Milholland, taxpayer money, for him to
    commute to Texas, come up here to Washington, and 30 weeks of
    commuting back and forth, the guy who is in charge of
    maintaining--keeping the records, the guy who gave the
    preservation order that wasn't followed, backup tapes
    destroyed, $55,000, $18,000 for lodging, $7,000 for meals and
    incidentals, $2,500 for airport parking, 14--$1,100, excuse me,
    for mileage and toll reimbursement, $1,500 he charged for taxi
    service. He probably took taxis instead of Uber.
        Mr. Dalrymple. I'm not sure when Uber even began,
    Congressman.
        Mr. Jordan. Well, it was certainly in 2016, 2015. So maybe
    it is that the IRS doesn't have the priorities in the right
    place. Do you know what is streamlined critical pay authority,
    Mr. Dalrymple?
        Mr. Dalrymple. Streamlined critical pay authority allows
    the IRS to be able to direct hire skilled individuals that we
    need to, particularly generally in our IT functions to be able
    to ----
        Mr. Jordan. Allows you to pay them more than they would
    otherwise get, right, more than the top salary allowed under
    the pay schedule for Federal work?
        Mr. Dalrymple. For SES, that's correct.
        Mr. Jordan. Yes. Was Mr. ----
        Mr. Dalrymple. And--but also in addition to that, it allows
    us to directly hire them quickly because these people ----
        Mr. Jordan. Okay, quickly.
        Mr. Dalrymple.--have skills that don't ----
        Mr. Jordan. You hired this guy quickly, but he couldn't
    move here in eight years. He still lived in Texas charging in
    one year alone $55,000, couldn't take Uber, took a taxi
    instead. Was Mr. Milholland getting critical pay?
        Mr. Dalrymple. I believe he was.
        Mr. Jordan. I know he was, right? So he was getting paid
    more than any other Federal worker, couldn't live here, $55,000
    in one year, hanging out at the Hyatt, taking taxis, reimburse
    him for everything you can imagine it looks like here. And
    while he is the chief technology officer, the guy who is
    critically important, we have got to pay more than we pay
    anyone else in the Federal Government under his watch, the
    chief technology officer, Lerner's hard drive crashes, 422
    backup tapes are destroyed even though he personally gave the
    preservation order to preserve all communication. And here is
    the kicker: He purchased some $12 million email archiving
    system that these guys at GAO said he never even implemented,
    $12 million just thrown down the drain. And you are telling me
    that it is improving and it wasn't pathetic and it wasn't
    terrible?
        Mr. Dalrymple. You asked me about the taxpayer service
    activities, not about the IT organization. And by the way, they
    don't work for me.
        Mr. Jordan. Was this taxpayer dollars that were used for
    Mr. Milholland?
        Mr. Dalrymple. I assume that they would have been, of
    course ----
        Mr. Jordan. Of course, right?
        Mr. Dalrymple.--appropriated dollars.
        Mr. Jordan. And you just told me you can ask to have money
    transferred and that we have already given the authority to do
    that in situations to actually better serve the taxpayers. All
    I am saying is it could be priorities are a little out of place
    at the IRS, and that is contributing to the pathetic taxpayer
    treatment, customer service, or lack of customer service that
    the hardworking taxpayers of this country have been receiving.
    I went over time, Mr. Chairman. I appreciate the indulgence.
        Mr. Meadows. I thank the gentleman. The chair recognizes
    the gentleman from Virginia, Mr. Connolly, for five minutes.
        Mr. Connolly. I thank the chair, and I would ask ----
        Mr. Meadows. A generous five minutes.
        Mr. Connolly. I thank the chair. I ask that my opening
    statement be entered into the record without objection.
        Mr. Meadows. Without objection.
        Mr. Connolly. I thank the chair. Welcome to the panel.
        Well, in listening to my friend Mr. Jordan--and I will say
    this underscores for me why it makes sense to have the seat of
    government here in Washington and limit some of this remote
    location for some of our key hires.
        Why was Mr. Milholland traveling back and forth from Texas,
    Ms. Lucas-Judy?
        Mr. Dalrymple. I really don't know what Mr. Milholland's
    arrangement was with the IRS.
        Mr. Connolly. Do you know, Ms. Lucas-Judy?
        Ms. Lucas-Judy. No, I don't.
        Mr. Connolly. Okay. Mr. Martin?
        Mr. Martin. No, I do not.
        Mr. Connolly. Okay. I guess I want to shift the subject a
    little bit to the--well, the budget and the IT budget in
    particular, which you brought up, Mr. Dalrymple. Ms. Lucas-
    Judy, how much has IRS budget been cut in the last six or seven
    years, about $1 billion or more?
        Ms. Lucas-Judy. It's been about--a decline of about $900
    million.
        Mr. Connolly. I am sorry?
        Ms. Lucas-Judy. About $900 million since 2011 I believe.
        Mr. Connolly. Okay. And how many--in terms of numbers of
    personnel, what has been the reduction or increase net?
        Ms. Lucas-Judy. I don't have the precise figures. I'd be
    happy to get those to you. But I know it's--the number of full-
    time equivalents has gone down across ----
        Mr. Connolly. Rather significantly, has it not?
        Ms. Lucas-Judy. Yes.
        Mr. Connolly. Do you know, Mr. Martin?
        Mr. Martin. I would agree it's gone down rather ----
        Mr. Connolly. No, I am not asking ----
        Mr. Martin.--but I don't have the--I don't have a specific
    number.
        Mr. Connolly. Mr. Dalrymple, do you know? I can't hear you,
    sir.
        Mr. Dalrymple. Seventeen thousand employees over that span.
        Mr. Connolly. Fewer?
        Mr. Dalrymple. Fewer.
        Mr. Connolly. Net?
        Mr. Dalrymple. Net.
        Mr. Connolly. Seventeen thousand. Well, that is a number
    worth GAO's attention, Ms. Lucas-Judy. I mean, it is has not
    just gone down a bit. Seventeen thousand by any account is a
    lot.
        Ms. Lucas-Judy. Yes, and that is something that GAO has
    noted in a number of our reports, and we are looking at ----
        Mr. Connolly. But, I mean--but isn't that ----
        Ms. Lucas-Judy.--capital management ----
        Mr. Connolly. Isn't that about 20 percent of the workforce?
        Ms. Lucas-Judy. Yes.
        Mr. Connolly. Well, that is a lot of people. And your
    budget has gone down almost by $1 billion. I mean, even if
    everyone whistled while they work, I would think those kinds of
    reductions might have some effect on productivity and on the
    ability to provide high-quality customer service. Fair
    statement, Ms. Lucas-Judy?
        Ms. Lucas-Judy. Yes, sir.
        Mr. Connolly. From a management point of view. Now,
    sometimes we do more with less. Sometimes we make ourselves
    more efficient. But when I look at IRS, given the, you know,
    unceasing war on the IRS and the constant drumbeat about Lois
    Lerner and the so-called attack on certain political
    orientation of various organizations, it has all seemingly been
    a justification for gutting the IRS, an agency we don't like
    because it is big and it is the vehicle that finances the
    enterprise, which we also apparently don't like.
        Would you say, Mr. Dalrymple, that these cuts have had an
    appreciable effect on the ability of the IRS to fully perform
    its mission?
        Mr. Dalrymple. Absolutely. Taxpayer service has been in
    some instances abysmal. I mean, the Commissioner was right
    about that. We haven't been able to answer the telephones when
    we should. We haven't been able to answer correspondence as--at
    the speed we should. We haven't been able to develop online
    services at the rate we should for taxpayers. Our audit rates
    are down dramatically. Our collection--our collections are down
    over time. There ----
        Mr. Connolly. Just speaking of collection so people
    understand, how much money is left on the table do we estimate
    every year really owed to the government but not collected
    because of lack of resources?
        Mr. Dalrymple. Well, the tax gap is estimated at about $450
    billion, and that's just ----
        Mr. Connolly. A year?
        Mr. Dalrymple. A year.
        Mr. Connolly. Wow. That is a lot of money. Okay. One thinks
    about what one could do with that amount of money if you had
    it.
        And on the IT side, last time we looked at this I want to
    say the average age of computers at the IRS was about seven
    years. I assume it is now older. Is that about right, Mr.
    Dalrymple?
        Mr. Dalrymple. I can't comment on that. I'm not a--I'm not
    familiar enough ----
        Mr. Connolly. Ms. Lucas-Judy, do you know?
        Ms. Lucas-Judy. I do know that we have recommended that IRS
    needs to modernize a lot of it systems ----
        Mr. Connolly. Right.
        Ms. Lucas-Judy.--that that will go a long way towards
    helping the organization.
        Mr. Connolly. But, I mean, if you are replacing computers
    every seven or eight years, that is not the industry standard.
    The industry standard is more like two to three years, is that
    right?
        Ms. Lucas-Judy. Right. And they are relying a lot on legacy
    systems.
        Mr. Connolly. Correct. And so--that is right, on top of
    that. So part of the problem, what could go wrong with that?
    Well, a lot of hard drive crashes like that which occurred in
    the IRS that was certainly the focus of hearings in this
    committee, is that not correct?
        Ms. Lucas-Judy. I'm not--I have not looked at that specific
    instance.
        Mr. Connolly. Well, I am not asking about that specific
    instance. I am generally saying when computers are that old and
    ----
        Ms. Lucas-Judy. They do become unreliable.
        Mr. Connolly. Right. And we have problems. And the guidance
    in some parts of the IRS anyhow--correct me if I am wrong--was
    in order to archive material, the instructions were print and
    save. Ever hear of that, Mr. Dalrymple?
        Mr. Dalrymple. I have, and that's ----
        Mr. Connolly. That is astounding. And we have, what, 81,000
    employees, something like that?
        Mr. Dalrymple. Something in that neighborhood ----
        Mr. Connolly. Yes.
        Mr. Dalrymple.--including all of the full-time folks plus
    temporaries and seasonal ----
        Mr. Connolly. Right.
        Mr. Dalrymple.--et cetera.
        Mr. Connolly. And we have got data on every single tax
    filer, which is several hundred million, right?
        Mr. Dalrymple. That's correct.
        Mr. Connolly. So what could go wrong with that? So at the
    very least, hopefully, we here in Congress, if we are concerned
    about customer service, if we are concerned about the very
    issues that have been cited, maybe we could make a smart
    investment in IT to make the IRS more efficient, doing more
    with less, and we can close that gap of the amount of money
    owed but not collected, my shorthand, I think obviously could
    make an appreciable difference in financing other investments,
    including the new President's defense initiative, which is $54
    billion, a small part of the $450 billion you referred to.
        So with that I yield back. Thank you, Mr. Chairman.
        Mr. Jordan. [Presiding] Mr. Martin, just real quick, my
    good friend from Virginia said the so-called targeting. When
    TIGTA did its report, did it use the term so-called or did it
    say targeting took place at the IRS?
        Mr. Martin. We said inappropriate criteria was used.
        Mr. Jordan. Okay. I appreciate that. I appreciate that.
        The gentleman from Georgia is recognized.
        Mr. Hice. Thank you, Mr. Chairman.
        Mr. Dalrymple, let me just go with you here. I am shocked--
    actually, not shocked. Probably all of us have experienced
    these kind of statistics with the IRS, but in 2015, less than
    10 percent of the callers whose returns were flagged as
    suspicious for possible identity theft, less than 10 percent
    were able to get through an IRS helpline. What is that number
    now?
        Mr. Dalrymple. Well, our levels of service right now on our
    helplines is right around 80 percent. We're scheduling about 75
    percent for this filing season and about 70 percent overall.
        Mr. Hice. More than 60 percent could not get through the
    National Taxpayer Advocate phoneline that is the safety net.
    What is that figure now?
        Mr. Dalrymple. I have no idea what the--what it is.
        Mr. Hice. In 2015 the IRS received more calls than ever. Is
    that true?
        Mr. Dalrymple. Yes. And the reason for that--that's true is
    because people call back over and over if they can't get
    through so ----
        Mr. Hice. Okay. Well, it doesn't matter to me what the
    reason is but they received more calls than ever and answered
    fewer calls ----
        Mr. Dalrymple. That's correct.
        Mr. Hice.--than ever. Do you know what official time is?
        Mr. Dalrymple. I do know what official time is.
        Mr. Hice. Do you have any idea how many people with the IRS
    are on official time?
        Mr. Dalrymple. I couldn't tell you that number. I have no
    idea.
        Mr. Hice. Could you get that number and provide it for me?
        Mr. Dalrymple. Yes, we can.
        Mr. Hice. All right. I would like a divided in those that
    are 100 percent ----
        Mr. Dalrymple. Sure.
        Mr. Hice.--versus those that are part-time.
        Mr. Dalrymple. Absolutely.
        Mr. Hice. Thank you for that.
        Mr. Hice. In 2012, our reports show that the IRS approved
    62 people to be 100 percent on official time as contact service
    representatives. These are people answering phones, that type
    of thing, approved 62. I am assuming that is 62 more than what
    perhaps were on official time before. Now, official time means
    that they are hired to do IRS work but they end up doing union
    work. In 2012 you had 62 of them that you approved who were
    customer service reps that went to 100 percent. In addition to
    that, there were another 70 that were approved for other IRS
    jobs. Any idea how many phone calls those 62 people could have
    answered?
        Mr. Dalrymple. I couldn't tell you that. I ----
        Mr. Hice. Our calculations show that those 62 people could
    have answered approximately 11,000 phone calls a week. That is
    over half-a-million phone calls a year, and yet you were not
    able to answer phone calls. People were waiting in line. And I
    am quite confident that there are more people on official time
    now at the IRS then there were five years ago. Is that a fair
    assessment?
        Mr. Dalrymple. I have no idea how many people were on
    official time.
        Mr. Hice. Okay. But we are going to find out that, and like
    I said, I'm confident. Was there any discussion during 2015 on
    those who were on official time 100 percent of their time--was
    there any discussion saying that a crisis was underway of
    getting people who are on official time to come off and go back
    to work?
        Mr. Dalrymple. No. That's governed by our union contract.
    So no, there was no discussion ----
        Mr. Hice. So who allows these people to go on official time
    to begin with?
        Mr. Dalrymple. Well, if they're in a position--a specific
    position with the union that allows for them to be on 100
    percent official time, that's governed by our union contract.
        Mr. Hice. So you have no say-so--no one at the IRS has any
    say-so whatsoever as to how many people are on official time?
        Mr. Dalrymple. We have--they have to justify their official
    time based on the amount of time that they're expected ----
        Mr. Hice. And you are not able to justify your reason for
    them not to be on official time because you have a crisis with
    people not being able to get in to the IRS?
        Mr. Dalrymple. I have to say I'm not familiar enough with
    the union contract to be able to say that we couldn't move them
    to work status ----
        Mr. Hice. So so far as you know there is no mechanism in
    place for the IRS to retrieve people who are on official time
    to come back to work?
        Mr. Dalrymple. I'm not aware--it's possible that the union
    contract allows for that but I'm not certain.
        Mr. Hice. Don't you think that might be something to be
    certain of if there is such a catastrophe where people are not
    able to get answers?
        Mr. Dalrymple. I think that it's probably something I
    should know but I don't.
        Mr. Hice. I think it probably is, too. I have just got a
    couple of seconds left. You know, we hear of these kind of
    issues over and over, and the IRS has come before this
    Congress, this committee over and over, and always the answer
    is we need more resources. I am absolutely convinced the IRS
    does not need--you don't have a resource problem; you have a
    waste problem. You have got people right there who were hired
    to do the job who are going off doing union work rather than
    the job for which they were paid to do. That seems awfully
    wasteful to me on the backs of taxpayers and on the backs of
    people who need answers to their tax returns.
        Mr. Chairman, I yield back. Thank you.
        Mr. Jordan. I thank the gentleman.
        I now recognize the gentleman from Illinois for his five
    minutes of questions.
        Mr. Krishnamoorthi. Thank you, Mr. Chairman.
        Mr. Dalrymple, after your experience here, are you still
    planning to retire in two weeks?
        Mr. Dalrymple. If not earlier.
        [Laughter.]
        Mr. Dalrymple. Just kidding.
        Mr. Krishnamoorthi. Well, in any case, thank you all for
    coming today. I know this is not a--I think it is always useful
    to have a feedback loop and obviously this hearing is part of
    that process.
        Look, as a former small business owner, I too have
    struggled to consistently obtain quality, timely customer
    service from the agency. I don't think this is just merely one
    or two data points. I think that there are a lot of people who
    have struggled at times. But I hope and believe that you want
    to do your best to improve the level of service there.
        One question I have is, you know, does the IRS survey
    taxpayers to better understand, you know, their concerns? And
    if so, how does that process work?
        Mr. Dalrymple. We do survey taxpayers and on a fairly
    regular basis. We've surveyed taxpayers individually, we survey
    practitioners. So we do a fair amount of survey work and have
    for quite some time, in fact, that is how we have focused our
    whole view of what the future of the IRS should look like in
    the work that we're doing so we know what taxpayers want and
    need and how they want to get that information, et cetera. We
    have that information available to us.
        Mr. Krishnamoorthi. But do you do the survey or do you have
    third parties do these surveys?
        Mr. Dalrymple. We get them through surveys we do ourselves.
    We get them through surveys that are done for us. So we have
    multiple ways of getting that information and data.
        Mr. Krishnamoorthi. And these percentages that you folks
    quote, the 70, 80 percent, and so forth, who actually
    completes--how is that percentage computed?
        Mr. Dalrymple. It's a model that we've--we have that we've
    agreed with our auditors on in terms of how it is calculated.
    It goes back, you know, almost 20 years. And so, yes, it's a
    model that we use. We know exactly how--what our demand is, how
    many people try to get in, how many people weren't able to get
    in, how many people got cut off, et cetera. All that goes into
    the level of service number that I've mentioned.
        Mr. Krishnamoorthi. Right. Let me just suggest that perhaps
    you folks may want to take another look at this model of how
    you survey taxpayers to determine what is really underlying
    their concerns, you know, what is working, what is not working,
    and with regard to what is working, learning from those best
    practices. What is not working, we have to kind of deal with
    it. And I know from personal experience as a former small
    business owner, as well as people I have worked with, you know,
    there is just a kind of a--how do I say it--kind of a
    frustration that they are not being heard sometimes. And so I
    think I respectfully submit that perhaps you should go back and
    take a look at these customer survey methodologies, as well as
    those percentages that you compute, because I am not sure that
    they are consistent with how people perceive the IRS. And I
    think that if you did that, it might be, you know, a salutary
    benefit for all of us really.
        Ms. Lucas-Judy, I have a question. Do you folks kind of try
    to get a sense of what are the best practices of the IRS and,
    you know, how to learn from them?
        Ms. Lucas-Judy. One of the things you're talking about, the
    customer service in looking at surveys and models, one of the
    things that we have recommended for a long time that IRS do is
    compare its phone service with best in the business ----
        Mr. Krishnamoorthi. Right. Right.
        Ms. Lucas-Judy.--you know, try to do some sort of
    benchmarking.
        Mr. Krishnamoorthi. Right.
        Ms. Lucas-Judy. Initially, when we made the recommendation,
    IRS did not agree with it. They thought that, okay, they're the
    only ones who provide that kind of service ----
        Mr. Krishnamoorthi. Right.
        Ms. Lucas-Judy.--and there's nobody really comparable out
    there to look at. But I'm pleased to say that in working with
    IRS over the last couple of years on this, they've come around
    and decided that it actually would be worthwhile to do a
    benchmarking study. And, in fact, they completed the study and
    we're reviewing it now to try to see-- because you can never
    get to 100 percent. You would love to be able to answer 100
    percent of the calls, never have anybody get a busy signal, but
    that's not realistic. And so we were hoping that they can look
    at what other industries do to figure out what is a good level
    of service, what is a good target to strive for.
        Mr. Krishnamoorthi. Yes, I think it is really important to
    borrow from what we learn in the private sector about
    benchmarking against the best practices out there for customer
    service and just generally, you know, how do you handle such a
    large volume of calls and make sure that people are treated
    fairly, with respect, with dignity and responsiveness?
        And so if you leave with anything today, I would just
    respectfully submit that there has to be a bigger emphasis on
    that going forward because at this time, I mean, given how
    people perceive government and the IRS, we can't afford for
    them to--their trust to further erode. And so I would
    respectfully, you know, request you folks to really take a hard
    look at this and do some soul-searching on this.
        Thank you. I yield back.
        Mr. Jordan. The gentleman from Michigan is recognized.
        Mr. Mitchell. Thank you. And, Mr. Dalrymple, first let me
    wish you well in your retirement. I hope it goes well for you,
    sir.
        Let me ask you, in 2016, Commissioner Koskinen testified
    that as he computed, the return investment for enforcement
    operations is roughly $4 for every $1 spent on enforcement. Can
    you enlighten the committee as to how that calculation was
    made? Because I understand that the number was thrown out there
    but there is no description of how that calculation was--that
    return investment was calculated.
        Mr. Dalrymple. Actually, I'd be happy to get the
    calculation and submit it back to the record. I can't describe
    it specifically, but basically let me give some general ----
        Mr. Mitchell. Well, rather than take up a lot of time, if
    you would submit that to the committee, that would be
    appreciated. I have questions, and rather than tie them up ----
        Mr. Dalrymple. Sure. Certainly.
        Mr. Mitchell. I would like to see that. That would be--I am
    a business guy like my colleague from Illinois and would like
    to know how--I believe return investment matters.
        Mr. Dalrymple. Just a small point on that, it's a
    compendium, so some things we have $15 or $20 to $1 return,
    some we have $3 or $4 to $1 return, et cetera. So it's a
    compendium and we can get you that information.
        Mr. Mitchell. Have you done a similar analysis in terms of
    return investment for customer service spending? And what is
    that number?
        Mr. Dalrymple. We've had a very difficult time finding any
    way to measure that. We've tried over the years, but to be
    honest, we've never come up with a legitimate measure of return
    on investment for service activities.
        Mr. Mitchell. Okay. Enforcement comprises about 43 percent
    of your budget as of this year, $11.2 billion, which is roughly
    $5 billion just doing quick a government math. You spoke of
    moving $30 million from enforcement to customer service.
        Mr. Dalrymple. Right.
        Mr. Mitchell. With all due respect, I mean, of a budget of
    $5 billion for enforcement, moving $30 million is like the
    light bill for the week. I mean do we really seriously think
    that is going to make an impact on it--from business, $30
    million of $5 billion isn't much.
        Mr. Dalrymple. Well, it's $30 million against a $2 billion
    budget for taxpayer service, so it's a bigger percentage for
    them. Having said that, though, it's not a huge amount. It's
    what was necessary to reach certain levels of either inventory
    or levels of service on the phone, et cetera. So we had the
    additional $290 million that Congress gave us, which $178
    million of it was dedicated to taxpayer service. We had some
    monies from user fees that we put into taxpayer services, and
    then in addition to that we still had a shortfall in terms of
    where we wanted to be in terms of levels of service, and we
    were able to move another $30 million out of enforcement into
    taxpayer service. Now ----
        Mr. Mitchell. And even after moving the money, you still
    end up with significant shortfalls of reasonable customer
    service response.
        Mr. Dalrymple. Well, for this year, as I said, we're very
    close to--we're between 75 and 80 percent on our telephone
    level of service. Our inventories and correspondence are the
    lowest they've been in four years. Generally speaking, taxpayer
    services here is the best it's been in the last five or six
    years. And I can't really speak prior to that.
        Mr. Mitchell. Well, let me suggest that--I mean, part of
    the frustration that my colleagues noted about the reputation
    of the IRS is the difficulty people have, as you have already
    heard, getting someone to answer the phone. Now, for the world
    of the private sector, we actually had standards of that.
        Mr. Dalrymple. Right.
        Mr. Mitchell. Calls were answered in three to four rings.
    In fact, we actually had secret shoppers that went around and
    shopped it to see if calls were answered, and when they were
    answered, did they get their questions responded to.
        Mr. Dalrymple. Right.
        Mr. Mitchell. It seems to me that you haven't set the same
    kinds of standards that we would expect in the private business
    world.
        Mr. Dalrymple. We actually do some of that. We have quality
    reviewers that shop the lines, listen for responses, whether
    they're correct or not. You know, we are not in business for a
    profit so we don't really want to answer the telephone in--on
    the first or second ring because what that means is you are
    actually waiting for the next call to come in.
        Mr. Mitchell. Well, what is your standard for answering the
    phone?
        Mr. Dalrymple. We would love to be at about an 85 to 86
    percent level of service, which would mean basically that
    people were waiting less than a minute or two to get the next
    assister on the line.
        Mr. Mitchell. Now, I am new here ----
        Mr. Dalrymple. And we've been there before. We have
    achieved that in the past.
        Mr. Mitchell. When were you there last?
        Mr. Dalrymple. In the--you know, I--just a little history
    here. I left the--I retired from the service before in 2006.
        Mr. Mitchell. And you came back?
        Mr. Dalrymple. And I came back. I was asked to come back. I
    was also--at one point in time the Commissioner Wage and
    Investment Division, which handles all of our telephone
    services. When I was Commissioner of the Wage and Investment
    Division, our telephone service was in the high 80s, and at
    that point in time we started to drift into the high 90s. We
    actually found out that we had employees waiting for the next
    call, which is not an efficient way for a government to run
    their telephone systems. So about 85 to 87 percent we found out
    was really the right place to be if we could get our telephone
    service to that level.
        Mr. Mitchell. Well, my time is expired. I thank the chair.
    And let me wish you well again in your retirement, sir.
        Mr. Dalrymple. Thank you.
        Mr. Mitchell. Thank you.
        Mr. Dalrymple. I appreciate that.
        Mr. Mitchell. I yield back.
        Mr. Jordan. The gentleman from Florida is recognized.
        Mr. DeSantis. Thank you, Mr. Chairman.
        Mr. Dalrymple, the news just broke this afternoon that two
    years after the fact the IRS has located almost 7,000 documents
    that are related to the targeting of conservative groups. Are
    you familiar with those documents?
        Mr. Dalrymple. I am not.
        Mr. DeSantis. Are you familiar with the news report?
        Mr. Dalrymple. I am not.
        Mr. DeSantis. We would like to know on our committee if you
    can get us an answer ----
        Mr. Dalrymple. Sure.
        Mr. DeSantis.--whether those are documents that have
    previously been provided to this committee or to other
    committees in the Congress ----
        Mr. Dalrymple. I'll find that out.
        Mr. DeSantis.--because we went through this for years and
    years and there were a lot of emails that were destroyed, there
    were backup tapes, and it was really, really frustrating to do
    that experience.
        Mr. DeSantis. We have asked, a number of us on the
    committee, for the President to make a change at the IRS to
    really bring in some new blood so we can start reforming the
    agency. And the targeting was one of the issues and how the
    agency responded to that, but there is also issues that we see
    about really a contempt for the taxpayer. I mean, the agency
    will go and they will, you know, try to get taxpayers dead to
    rights on producing their taxes and all this other stuff, but
    then you have employees--you had a single IRS employee that
    spent, according to a Senate Committee on Finance report, spent
    $43,000 staying at the Ritz-Carlton in Pentagon City. How is
    that acceptable?
        Mr. Dalrymple. I'm not familiar with a report that says
    that we had an IRS employee that spent $43,000 staying at the
    Ritz-Carlton.
        Mr. DeSantis. It was over the course of a year. It was a
    lot of stays obviously, but that is the ----
        Mr. Dalrymple. Well, I have to assume that the Ritz-Carlton
    was offering government rate per diem at that location is all I
    can assume, but I don't know the particulars around that.
        Mr. DeSantis. Well, it would be the type of thing that I
    think it would be tough for that to have been the most
    appropriate thing.
        You also had--again, this is the same report, the Senate
    Finance Committee, IRS employee rented a $1 million townhome in
    Arlington for almost $5,000 a month with tax dollars. I mean,
    how is that acceptable?
        Mr. Dalrymple. Again, I'm not really familiar with that.
        Mr. DeSantis. Okay. Well, this is I think frustrating for
    us. And I know there are a lot of taxpayers that they don't
    feel that they always get the benefit of the doubt from the
    IRS. In fact, when Congress reduced the budget for the IRS in
    response to the targeting, there was a major drop-off in
    customer service. It was very difficult for the people, the
    taxpayers to get through. So the bureaucracy was really not
    affected. It was all put on the taxpayer. And you had people
    that really couldn't get their questions answered, and that
    obviously has a lot of effects for our economy and for their
    well-being.
        Ms. Lucas-Judy, let me ask you this. What are the metrics
    that the IRS uses to assess customer service, to measure it?
        Ms. Lucas-Judy. The primary one is the one we've been
    talking about, the telephone level of service, but they also
    for correspondence--for paper correspondence they track the
    percentage of--the backlog. They track the percentage that are
    what they call over-age, so those that are 45 days or older.
    They track the traffic to the different services that they
    provide online, as well as ----
        Mr. DeSantis. Does it track whether people are satisfied
    with their level of service?
        Ms. Lucas-Judy. That I think would be a question that I
    would defer to Mr. Dalrymple.
        Mr. Dalrymple. Actually, we do--we survey every taxpayer
    that we have contact with on a satisfaction survey, so the
    answer is yes, we do.
        Mr. DeSantis. Okay. And so you keep--do you know what
    percentage of callers are satisfied?
        Mr. Dalrymple. Actually, the number's quite high so--but I
    don't know what it is off the top of my head, but I could get
    that for you.
        Mr. DeSantis. Okay.
        Mr. DeSantis. Now, did we satisfactorily answer your
    question? Is that kind of the way you go about it in terms of
    customer service?
        Mr. Dalrymple. It's a series of questions that try to get
    at how satisfied the taxpayer was with the interaction that
    they had.
        Mr. DeSantis. Ms. Lucas-Judy, what are the GAO
    recommendations, if any, about--are there other metrics that
    can be used so that the IRS can better understand the issue
    with customer service?
        Ms. Lucas-Judy. Well, we've made a number of
    recommendations, including that they have a comprehensive
    customer service strategy to help them determine overall among
    telephones, correspondence, walk-in, online, what they're
    looking for ideally and what's the most efficient, most
    effective way to get to that.
        We've also made recommendations that they have other
    metrics for correspondence, that they include performance
    targets for their correspondence. And in addition, we've got
    some recommendations--we've made some suggestions to Congress
    that would help IRS as well in terms of having authority to
    adjust or correct math errors that they see.
        Mr. DeSantis. Great. My time is up. Mr. Chairman, these
    emails, we need the answers on those emails ----
        Mr. Jordan. Sure do.
        Mr. DeSantis.--and see, were they responsive to us then not
    provided? And they may have been provided because this is in
    the context of a FOIA suit with Judicial Watch, but even within
    the context of that FOIA suit, this is two years late where
    they said they didn't have them and now all of a sudden they
    are producing them. And so ----
        Mr. Jordan. No, we will ----
        Mr. DeSantis.--that obviously is troubling. I yield back.
        Mr. Jordan. Well, sir, I thank the gentleman for raising
    that issue and the others.
        Do you need congressional authority to move user fee
    dollars around, Mr. Dalrymple?
        Mr. Dalrymple. No, that authority was granted to us back in
    the '90s to be able to use that ----
        Mr. Jordan. You can use it wherever you want?
        Mr. Dalrymple. Yes.
        Mr. Jordan. You can use it on customer service?
        Mr. Dalrymple. Yes.
        Mr. Jordan. Did you focus in on customer service or were
    some of those user fees moved over to implement the Affordable
    Care Act?
        Mr. Dalrymple. We used--we did have to use user fees for
    the Affordable Care Act, FATCA, the FAST Act, the PATH Act, the
    HTCs, the human--HCTC. We've had a number of ----
        Mr. Jordan. But of those acts, which one would you have
    used more--which one was probably the bigger hurdle or the one
    that required most of the user fee dollars? Would it be the
    Affordable Care Act?
        Mr. Dalrymple. It would be a guess for me to answer that. I
    can find out for certain ----
        Mr. Jordan. Well, give me your best guess. You have worked
    there a few years.
        Mr. Dalrymple. I would guess--I would have guessed it would
    have been the ACA.
        Mr. Jordan. Yes, so would I. So would I. So that could have
    contributed to the terrible customer service that taxpayers
    were receiving.
        You mentioned earlier that ----
        Mr. Dalrymple. But that's a legislative mandate.
        Mr. Jordan. No, I understand.
        Mr. Dalrymple. Yes.
        Mr. Jordan. I understand.
        Mr. Dalrymple. Okay.
        Mr. Jordan. Yes. The ability to use the user fees or the
    ACA or both?
        Mr. Dalrymple. Both.
        Mr. Jordan. Right. I understand that. But the ACA is one I
    didn't vote for.
        Mr. Dalrymple. I can't ----
        Mr. Jordan. I didn't vote for the user fee, the ability to
    move the user fees because I wasn't here.
        Mr. Dalrymple. I appreciate that. Okay.
        Mr. Jordan. You mentioned earlier that the budget has been
    reduced at the IRS and that, as a result of that, there is
    17,000 less people working at the IRS. Is that accurate?
        Mr. Dalrymple. That's accurate, yes.
        Mr. Jordan. Okay. I mean, that is reflecting your testimony
    in an accurate way, I think. What time frame are you talking
    about, that 17,000?
        Mr. Dalrymple. I believe that's between 2010 and 2016.
        Mr. Jordan. And that 17,000 were because you received fewer
    dollars in your budget. Were those people let go? Were they
    fired? Were they said, dismissed?
        Mr. Dalrymple. Most of them were either--have retired and
    not hired behind or we didn't bring as many temporary or
    seasonal employees on because that's ----
        Mr. Jordan. So no one was actually told to hit the road?
        Mr. Dalrymple. We did--there was no riff if that's what
    you're asking.
        Mr. Jordan. That is exactly what I am asking.
        Mr. Dalrymple. No, not to my knowledge.
        Mr. Jordan. Okay.
        Mr. Dalrymple. Again, I didn't report back to the IRS until
    2013, but I don't believe there was a riff.
        Mr. Jordan. So people retired, you just didn't rehire?
        Mr. Dalrymple. That's right.
        Mr. Jordan. Okay.
        Mr. Dalrymple. Or hire people that would have come back
    from a seasonal job, so that is a bit different. If you're a
    seasonal employee with us, we don't have to offer your season
    back to you, and in instances like that ----
        Mr. Jordan. No, I understand. You probably hire a few more
    people at tax season than other times of the year I can guess.
        Mr. Dalrymple. A lot more, yes.
        Mr. Jordan. Right. I get that. Okay. If he is ready, we
    will get Mr. Grothman. We will just be at ease for a second
    while we wait for the gentleman from Wisconsin to come back. Is
    Glenn coming?
        The gentleman from Wisconsin is recognized.
        Mr. Grothman. I know, you know, you certainly keep track of
    the quality of your folks and I hope you do. Years ago, I used
    to do taxes. And at the time not just me, other people felt
    compared to the Wisconsin Department of Revenue, because
    obviously we dealt with them both, that if you talk to your
    guys on the phone, they weren't always the sharpest. They
    didn't know their own laws. You know, you would call them three
    times and you would get three different answers. Well, you call
    them twice, you get two different answers anyway. Do you
    monitor the quality of your folks? I haven't done taxes for 20
    years, but do you have an opinion as to whether your folks know
    what the law is?
        Mr. Dalrymple. Yes. Actually, we do monitor their--every
    call is--can be monitored. We have a quality review system that
    statistically selects calls at random for quality assurance,
    and during that process, we determine whether--one of the main
    things we're looking for is did the taxpayer get the correct
    answer. And actually, we do quite well there. So if you get
    through to us, you're going to get pretty high quality.
        Mr. Grothman. Has it improved over time?
        Mr. Dalrymple. It's really been pretty stable over time, in
    the high 90 percent rage.
        Mr. Grothman. How long have you been monitoring it?
        Mr. Dalrymple. At least 20 years. And 20 years ago it was
    actually quite low. Probably for the last 10 or 15 years it's
    been quite high.
        Mr. Grothman. Better than 20 years ago, you have improved.
    Some of the stuff they want to know here is the amount that can
    be spent traveling by employees and, you know, it says here
    Federal employees can spend over $7,000 per month on lodging.
    Do you keep track of that or what is your travel policy for
    your people when they get around?
        Mr. Dalrymple. Well, first--well, travel policy isn't set
    by the IRS; it's set by--you know, government-wide by ----
        Mr. Grothman. Right, right, I understand.
        Mr. Dalrymple.--the GSA. So we do monitor, and we actually
    monitor how many people are traveling at any time and how long
    they're traveling. And we don't generally have very many people
    traveling for extended periods unless they're on some project.
    But that's typically what we monitor.
        Mr. Grothman. And how does it work? If somebody goes out
    there for a week or whatever, I mean, how much are they allowed
    to spend? Who determines where they stay, that sort of thing?
        Mr. Dalrymple. It's based on the per diem rate, so if they
    find a place to stay within the per diem rates, then, you know,
    they're--we don't ask them, you know, where they're staying or
    prohibit them from staying in places that are within those ----
        Mr. Grothman. Okay.
        Mr. Dalrymple.--rates.
        Mr. Grothman. I am going to give you a more open-ended
    question, and any one of you can answer it. And in part I think
    of the earned income tax credit, but in any event, people are
    always--you know, have ideas how to use the tax code for more
    and more things. Hopefully, this time around we use it for less
    and less, but historically, Congress always liked to use it for
    more and more. And I sometimes think when Congressmen propose
    things, they don't think how it is going to look to the
    Internal Revenue Service who has to deal with it, like somebody
    once came up with the earned income tax credit and they
    apparently didn't think of the fact that if you fill out a form
    and get a $5,000 check, fill out an easy form, a lot of people
    will take a crack at it, which is why the fraud is so high.
        But do you have any comments on the earned income tax
    credit? Or are there any other parts of the tax forms that you
    feel invites cheating or I guess I would say would require you
    to spend a lot more on compliance than you would want to?
        Mr. Dalrymple. Anything that is a refundable credit has
    always been a challenge for the Internal Revenue Service so
    whether it's the earned income tax credit or the advanced child
    tax credit, anything that actually is refundable back to the
    taxpayer. And by the way, there are corporate refundable
    credits, too. They're not just to individuals.
        Mr. Grothman. Right.
        Mr. Dalrymple. They cause us difficulty from a compliance
    standpoint.
        Mr. Grothman. Okay. So when you retire and run for
    Congress, you are going to take a swing at these things?
        Mr. Dalrymple. I am not running for Congress.
        Mr. Grothman. Oh. But you would take a swing at these
    things?
        Mr. Dalrymple. I don't know that I'd take a swing at them
    because, you know, there are reasons for them I understand. But
    from a tax standpoint they are challenging.
        Mr. Grothman. From a compliance standpoint they require a
    lot of your resources, and the reason they require a lot of
    your resources is they invite fraud, right?
        Mr. Dalrymple. They invite confusion and fraud both.
        Ms. Lucas-Judy. The GAO has reported that EITC does have a
    very high improper payment rate, and part of the reason for
    that is the complexity of the credit itself. And it's also
    self-reported.
        Mr. Grothman. Right. It would be easy if one wanted to
    cheat to try to cheat, right?
        Mr. Dalrymple. Right.
        Ms. Lucas-Judy. That's one of the reasons I think that IRS
    does audit--a lot of audits of EITC returns.
        Mr. Grothman. What happens when you find somebody has
    gotten a few thousand dollars they shouldn't get?
        Mr. Dalrymple. Well, what we try to do is actually find out
    that before they get the money back, so we do--most of those
    audits that were referred to are pre-refund audits. We do over
    300,000 of those every year, so we're stopping the refund from
    going out on the front end. It's very, very unlikely to get an
    EITC refund back if it's given to a taxpayer.
        Mr. Grothman. Once it is out, it is gone, huh?
        Mr. Dalrymple. It is very difficult to get it back at that
    point.
        Mr. Grothman. Do you ever try to do anything with those
    people?
        Mr. Dalrymple. I'm sorry?
        Mr. Grothman. Do you ever try to do anything with those
    people? I mean ----
        Mr. Dalrymple. Yes ----
        Mr. Grothman.--if somebody--if it is very apparent that
    somebody is claiming a credit they shouldn't get, does anything
    happen to the people who do that?
        Mr. Dalrymple. Well, actually, we bar them from getting the
    credit then afterwards. The other thing that would be
    incredibly helpful would be to have correctible error authority
    around earned income tax credit in terms--because we have to do
    examinations on all of these. If we had correctible error
    authority, the process would be much easier to stop the refunds
    when we saw them.
        Mr. Grothman. What does that mean, correctible error
    authority?
        Mr. Dalrymple. It means that when it's an obvious error on
    the return, we can actually reverse the credit that's being
    asked for as opposed to having to do a full examination to be
    able to stop the credit.
        Mr. Grothman. Okay. I know my chairman is indulging me, but
    you know I love this committee.
        Mr. Jordan. That is good.
        Mr. Grothman. I will give you one more--can I have one more
    question?
        Mr. Jordan. You sure can.
        Mr. Grothman. If there is one business, refundable business
    tax credit or one corporate tax credit, refundable credit that
    you feel is prone to be given erroneously, what would it be, if
    something comes to mind? You mentioned it is not just earned
    income tax credit; there are business credits, too.
        Mr. Dalrymple. I can't think of one off the top of my head,
    but I'd be happy to come back to you with ----
        Mr. Grothman. Yes, think of some so we can--yes. And how
    many of the EITCs percentagewise did you guys review do you
    think are fraudulent or erroneous? I should put it that way.
        Mr. Dalrymple. Yes. Because--the point that my colleague
    from the GAO made is this is an incredibly complex law for a
    very unsophisticated group of taxpayers. And so a lot of the
    mistakes made are not necessarily fraudulent. They are honest
    mistakes. And then the other thing that you've got here are not
    normal nuclear families, so determining who has the ability to
    claim the dependent, et cetera, all those things are incredibly
    difficult in this environment.
        Mr. Grothman. You are a nice man, Mr. Dalrymple, but I
    think you are naive. I think they do it on purpose. But ----
        Mr. Dalrymple. Yes, I don't know that many people would
    call me that, but I appreciate that actually.
        Mr. Grothman. You are a nice guy, as we say. Okay. Thank
    you much.
        Mr. Jordan. Let the record show the gentleman kept us
    waiting and still got eight minutes of questioning.
        [Laughter.]
        Mr. Jordan. Let me thank our witnesses. And, Mr. Dalrymple,
    we want to wish you the best in your retirement.
        Mr. Dalrymple. Thank you.
        Mr. Jordan. Thank you for being here on this important
    subject and for the important work that you do in uncovering
    what has been happening at the IRS.
        I would ask unanimous consent that members have five
    legislative days to submit questions for the record. Without
    objection, so ordered.
        The subcommittees stand adjourned.
        Mr. Dalrymple. Thank you.
        [Whereupon, at 4:33 p.m., the subcommittees were
    adjourned.]

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