[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



[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]



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

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
25-233 PDF                  WASHINGTON : 2017                     
          
----------------------------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Publishing Office, 
http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center, 
U.S. Government Publishing Office. Phone 202-512-1800, or 866-512-1800 (toll-free). 
E-mail, [email protected]. 
                                
                      
                      
                      
              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.]

                                APPENDIX

                              ----------                              


               Material Submitted for the Hearing Record
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

                                 [all]