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

                         THE NATIONAL TAXPAYER ADVOCATE

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

                                    HEARING

                                   BEFORE THE

                           SUBCOMMITTEE ON OVERSIGHT

                                     OF THE

                          COMMITTEE ON WAYS AND MEANS
                         U.S. HOUSE OF REPRESENTATIVES

                         ONE HUNDRED FIFTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                  MAY 19, 2017

                                   __________

                              Serial No. 115-OS04

                                   __________

             Printed for the use of the Committee on Ways and Means

     [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                                   __________

                         U.S. GOVERNMENT PUBLISHING OFFICE
    33-425                      WASHINGTON : 2019

     -----------------------------------------------------------------------------------
     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,
    gpo@custhelp.com.

                      COMMITTEE ON WAYS AND MEANS

                          KEVIN BRADY, Texas, Chairman

    SAM JOHNSON, Texas                   RICHARD E. NEAL, Massachusetts
    DEVIN NUNES, California              SANDER M. LEVIN, Michigan
    PATRICK J. TIBERI, Ohio              JOHN LEWIS, Georgia
    DAVID G. REICHERT, Washington        LLOYD DOGGETT, Texas
    PETER J. ROSKAM, Illinois            MIKE THOMPSON, California
    VERN BUCHANAN, Florida               JOHN B. LARSON, Connecticut
    ADRIAN SMITH, Nebraska               EARL BLUMENAUER, Oregon
    LYNN JENKINS, Kansas                 RON KIND, Wisconsin
    ERIK PAULSEN, Minnesota              BILL PASCRELL, JR., New Jersey
    KENNY MARCHANT, Texas                JOSEPH CROWLEY, New York
    DIANE BLACK, Tennessee               DANNY DAVIS, Illinois
    TOM REED, New York                   LINDA SANCHEZ, California
    MIKE KELLY, Pennsylvania             BRIAN HIGGINS, New York
    JIM RENACCI, Ohio                    TERRI SEWELL, Alabama
    PAT MEEHAN, Pennsylvania             SUZAN DELBENE, Washington
    KRISTI NOEM, South Dakota            JUDY CHU, California
    GEORGE HOLDING, North Carolina
    JASON SMITH, Missouri
    TOM RICE, South Carolina
    DAVID SCHWEIKERT, Arizona
    JACKIE WALORSKI, Indiana
    CARLOS CURBELO, Florida
    MIKE BISHOP, Michigan

                         David Stewart, Staff Director

                     Brandon Casey, Minority Chief Counsel

                                     ______

                           SUBCOMMITTEE ON OVERSIGHT

                        VERN BUCHANAN, Florida, Chairman

    DAVID SCHWEIKERT, Arizona            JOHN LEWIS, Georgia
    JACKIE WALORSKI, Indiana             JOSEPH CROWLEY, New York
    CARLOS CURBELO, Florida              SUZAN DELBENE, Washington
    MIKE BISHOP, Michigan                EARL BLUMENAUER, Oregon
    PAT MEEHAN, Pennsylvania
    GEORGE HOLDING, North Carolina

                                C O N T E N T S

                                   __________
                                                                       Page

    Advisory of May 19, 2017 announcing the hearing..................     2

                                    WITNESS

    Nina Olson, National Taxpayer Advocate...........................     5

                            QUESTIONS FOR THE RECORD

    Questions from The Honorable Vern Buchanan, to Nina Olson........   126
    Questions from The Honorable David Schweikert, to Nina Olson.....   130
    Questions from The Honorable Carlos Curbelo, to Nina Olson.......   134
    Questions from The Honorable Mike Bishop (MI-08), to Nina Olson..   138
    Questions from The Honorable George Holding (NC-02), to Nina
      Olson..........................................................   141

                       PUBLIC SUBMISSIONS FOR THE RECORD

    The Bright Lines Project.........................................   145

        IRS REFORM: LESSONS LEARNED FROM THE NATIONAL TAXPAYER ADVOCATE

                                  ----------

                              FRIDAY, MAY 19, 2017

                 U.S. House of Representatives,
                           Committee on Ways and Means,
                                     Subcommittee on Oversight,
                                                        Washington, DC.
        The Subcommittee met, pursuant to call, at 8:59 a.m., in
    Room 1100, Longworth House Office Building, Hon. Vern Buchanan
    [chairman of the subcommittee] presiding.
        [The advisory announcing the hearing follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Chairman BUCHANAN. The Subcommittee will come to order.
        Welcome to the Ways and Means Oversight Subcommittee
    hearing on IRS Reforms: Lessons Learned from the National
    Taxpayer Advocate.
        It has been nearly 20 years since Congress seriously
    considered reforms to the IRS. I am hopeful that as we embark
    on a renewed effort to improve the agency that we can work
    hand-in-hand with Members on both sides of the aisle. Working
    together, I am confident that we can find common ground and
    make progress.
        I think it is important to emphasize that our efforts to
    reform the IRS should not be seen as a punishment or a
    criticism of the average agency employee; instead, they are a
    recognition that the IRS's mission is very important. Every
    government entity, just like private companies, can benefit
    from a thorough review and some thoughtful, long-term planning
    and action. And that is what we are here for today.
        I have a business background. I started my own business
    many years ago, and my experience tells me that we always need
    to look for ways to improve. Continuous improvement has been
    part of my philosophy over a lot of years. We always find a way
    to get better and more efficient.
        When evaluating any entity- government or business- I
    always ask myself the reason for improving, but the big goal is
    to have continuous improvement, I think, as your organization
    has done so over the years.
        The task before us today is to ask the tough questions and
    look for solutions. This work is important because taxpayers
    need to be able to trust the entity administering the Tax Code.
    Ninety-eight percent of our tax revenues come to the IRS
    voluntarily. Only 2 percent is collected through the IRS
    enforcement action.
        Trust is a key component of voluntary compliance. The
    Taxpayer Bill of Rights contains the right to quality service,
    and I think that is one of our biggest focuses as second on the
    list. An IRS publication describes the right as the right to
    receive prompt, courteous, and professional assistance in
    taxpayer dealings with the IRS. As we consider reforms to the
    IRS, we should keep this right, as well as well as the other
    nine in mind.
        I look forward to working with the Ranking Member, Mr.
    Lewis, and other Members of the Committee, to make the IRS a
    21st century agency.
        I want to thank our witness, Ms. Olson, for being here
    today. She has been a champion for taxpayers for many years,
    and her insight on this topic will be valuable. I look forward
    to her testimony.
        I now yield to the distinguished Ranking Member, Mr. Lewis,
    for the purposes of an opening statement.
        Mr. LEWIS. Good morning, Mr. Chairman. Thank you very much
    for holding this hearing with the National Taxpayer Advocate.
        And I want to thank Ms. Olson for being here and for her
    many years of service.
        I would also like to thank our Members for being here. I
    know for some of us, this is a little early.
        Chairman BUCHANAN. I agree.
        Mr. LEWIS. But we are here.
        Mr. Chairman, we must approach the important matter of
    reforming and improving the Internal Revenue Service with a
    great deal of care. We must remain focused on doing what is
    right, and what is just for the interests of every American
    taxpayer. If we stay on a bipartisan path together, we help the
    IRS become a model of success for constituent services.
        The IRS is a large and complex organization that has
    suffered from a lack of resources for many years. Congress cut
    the agency's budget by almost $1 billion since 2010. These cuts
    hurt and harm taxpayer services and tax compliance.
        And the IRS needs technology, infrastructure, and employees
    to provide secure, quality customer service. For these reasons,
    responsible reform must include strong, robust funding. As we
    study the IRS structure and service, we must also consider how
    much the world has changed since Congress last acted on this
    matter.
        Over the last 20 years, smartphones and internet access
    created opportunities for some and barriers for others. Both
    taxpayers and those who serve them struggle with increased
    identity theft, fraud, and scams. Unfortunately, certain
    programs, like private debt collection, which have been tried
    and repeatedly failed, just lead to more confusion.
        Mr. Chairman, I believe that we agree on the importance of
    an agency that would provide taxpayers with greater access to
    customer service online, over the phone, and in person. I
    believe we can help build a tax administration system that will
    take advantage of new technology, while enhancing the security
    of taxpayer data.
        I believe that we must do better, and that if we work
    together, we can do better. I look forward to hearing from the
    National Taxpayer Advocate today, and learning more from her
    experience with taxpayers and the agency.
        And again, thank you, Mr. Chairman, for holding this
    hearing today. And thank you for your service. I yield back.
        Chairman BUCHANAN. Thank you, Mr. Lewis. And I look forward
    to working with you on the IRS reforms.
        Without objections, other Members' opening statements will
    be made part of the record.
        Today's witness panel includes one expert, Nina Olson, the
    National Taxpayer Advocate for Taxpayer Advocate Services at
    the IRS. And I did mention to her earlier, I met with a group
    of CPAs from Florida, and your organization was well thought
    of.
        And also last week, preparers that are here in Washington,
    I asked them about your organization, and they gave you high
    marks. I don't want you to get a big head, but the point is, we
    do believe in continuous improvement.
        Ms. Olson, we appreciate you being here today. The
    subcommittee will receive your written statement, which will be
    made part of the formal hearing record. You now have five
    minutes to deliver your oral remarks. You may begin when you
    are ready. Thank you.

         STATEMENT OF NINA E. OLSON, NATIONAL TAXPAYER ADVOCATE

        Ms. OLSON. Chairman Buchanan, Ranking Member Lewis, and
    Members of the Subcommittee, thank you for inviting me to
    testify today regarding the operations of the Internal Revenue
    Service, and to offer some suggestions to improve the
    responsiveness of the agency to U.S. taxpayers.
        It has been nearly two decades since Congress last reviewed
    and updated the laws governing IRS operations. A lot has
    changed during that time, and tax administration would benefit
    from a fresh review of those laws.
        In my written statement, I make the following points:
    First, reforms to IRS operations will be most successful if
    Congress consults widely on its proposals, engages IRS
    employees and external stakeholders, and provides the IRS with
    adequate funding to succeed.
        Second, sound tax administration should be predicated on
    foundational principles, and the most important principle is
    respect for taxpayer rights. Not only is respecting the rights
    of the taxpayers who pay our Nation's bills the right thing to
    do, but there is significant empirical data that suggests
    building trust with taxpayers, which requires respecting their
    rights, enhances voluntary compliance as well.
        In 2015, Congress codified the provisions of the Taxpayer
    Bill of Rights, or TBOR, as part of a provision requiring that
    the Commissioner ensure IRS employees receive training and act
    in accord with those rights. The challenge now is to ensure
    that TBOR is not merely aspirational, but is incorporated into
    the very ethos of the IRS, and explicitly into its business
    practices.
        I believe a clear statement that taxpayers actually have
    the 10 fundamental TBOR rights would provide a stronger
    foundation for effective tax administration. And, therefore, I
    recommend that Congress enact the Taxpayer Bill of Rights as a
    freestanding provision in the Internal Revenue Code.
        Third, to become an effective 21st century tax
    administration, the IRS must place greater emphasis on taxpayer
    service. In my view, there is no conflict whatsoever between
    providing high-quality taxpayer service and taking actions to
    ensure tax compliance, particularly on the part of persons
    actively seeking to evade tax. It should not be an either/or
    proposition.
        But to create an environment that encourages taxpayer trust
    and confidence, the IRS must change its culture from one that
    is enforcement-oriented to one that is service-oriented.
        Of the IRS's current appropriated budget of $11.2 billion,
    43 percent is allocated to enforcement, while only 4 percent--I
    repeat, only 4 percent--is allocated to taxpayer outreach and
    education activities.
        According to IRS data, the agency dedicates only 98
    employees to conduct outreach and education to the roughly 62
    million small business and self-employed taxpayers, and only
    376 employees to conduct outreach and education to the 125
    million wage and investment taxpayers. Meanwhile, the IRS has
    over 3,000 revenue officers who collect field collection
    activity, and over 8,800 revenue agents who conduct field
    audits.
        In RRA 98, Congress directed the IRS to restate its mission
    to place a greater emphasis on serving the public and meeting
    taxpayers' needs. In response, the IRS adopted the following
    mission statement: ``Provide America's taxpayers top-quality
    service by helping them understand and meet their tax
    responsibilities and by applying the tax law with integrity and
    fairness to all.''
        In 2009, with no public discussion or notice to Congress or
    to myself, the IRS quietly changed its mission statement to
    read, ``and enforce the tax law with integrity and fairness to
    all.'' This shift in tone and emphasis from ``applying'' to
    ``enforcing'' the law suggests IRS leadership disagreed with
    the congressional directive and decided to place greater
    emphasis on enforcement in the mission statement.
        Accordingly, I recommend that Congress require the IRS to
    revise its mission statement to reemphasize a noncoercive
    approach to tax administration and explicitly affirm the role
    of taxpayer rights as a guiding principle for tax
    administration.
        Fourth, Congress has passed three important taxpayer rights
    bills, including RRA 98. And in my testimony, I highlight
    provisions that IRS has--that Congress has enacted, that the
    IRS has either not implemented, defined away through writ
    guidance, or only done a partial job.
        Fifth, RRA 98 joint oversight hearings would give Congress
    better insight into the IRS strategic and operational plans,
    promote dialogue between Congress, IRS, and interested
    stakeholders, and help ensure the tax writing and
    appropriations committees coordinate their expectations and
    approaches toward the IRS operations.
        Thank you for this opportunity, and I look forward to
    answering any questions.
        [The prepared statement of Nina Olson follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Chairman BUCHANAN. Thank you very much.
        At this time, we will now proceed to the question-and-
    answer session. I think we are going to have to limit the
    questioning to four minutes instead of five, because we have a
    briefing at 10:00, so I would ask all the Members to adhere to
    that.
        As is my custom, I will hold my question until the end. I
    now recognize the gentleman from Arizona, Mr. Schweikert, for
    any question he might have.
        Mr. SCHWEIKERT. Thank you, Mr. Chairman, and Ms. Olson.
        This is sort of unique for a couple of us up here because
    we are so used to actually having witnessed, particularly in
    the IRS, where we have a series of dodging stories and things
    that are frustrating.
        When we have reached out to Arizona, we actually had people
    say nice things about the organization, a little concern on
    speed, but actually said nice things. So you win a prize for
    having a unique conversation with us today.
        Can I start with one thing, though, that did come up in the
    conversations we had in Arizona about this hearing that was
    coming up, and that was, with outreach to our office and then
    also to your office, individuals who are--were called in the
    gig economy, the Uber driver, the person who crowdsources their
    work through the internet, and the discussion of how they
    access information saying, ``Hey, here are the rules for me to
    save for my retirement, here are my rules on what must be set
    aside.''
        First, as the Advocate, do you believe your organization is
    doing enough to make it easy to access that information? The
    way you post it up on your website, the way you deliver that
    information? And then the same thing for, as you observe, how
    the IRS delivers that information to those folks in that part
    of our economy?
        Ms. OLSON. Well, I am very concerned about this population
    as it is growing. It is a very fast growing part of it. And I
    am concerned they will get into trouble with self-employment
    tax, not save for retirement, et cetera.
        One thing that my office is working on right now, that we
    receive suggestions about from other sectors, is to develop a
    wizard where people who are starting in the gig economy can
    actually go on to our taxpayer toolkit online and see all the
    steps that they need to do and get to the different places: Get
    an employer identification number, understand about calculating
    self-employment tax and when they need to pay it; get to the
    place where they can calculate or learn about the different
    forms of retirement saving, et cetera; and then, most
    importantly, if they have problems, how they can resolve them,
    including getting to the Taxpayer Advocate Service. That is
    something we are developing right now.
        Mr. SCHWEIKERT. And I know that may be slightly different
    than as you viewed your charter as the Advocate, but sometimes
    the Advocate may be proactive. And this is something that we
    all, as Committee Members, are going to have to deal with right
    now is that associated mother organization, if they were to
    give advice saying, ``You know you can save for your
    retirement.'' They may have just set them off as becoming an
    employee and no longer being an independent contractor. And we
    are going to have to sort of figure out, you know, what are we
    going to do to help this population be able to have that
    future?
        Now, on the IRS side, do we see the agency itself doing
    enough? Does the public access have access to the organization
    you are contracted with? Where does that person go right now to
    get that information?
        Ms. OLSON. So, the IRS did create a web page in response to
    a small business hearing last year to address some of the
    issues for the gig economy. I think, as always, we can all do
    more.
        This goes back to the fact that there are only 98 employees
    conducting outreach and education to the self-employed
    population in the United States. And there are 14 States that
    do not have one of those employees located in them.
        Mr. SCHWEIKERT. And I know we are in our last 30 seconds. I
    have a fixation that the use of technology as a way to direct
    folks who are having difficulties with the IRS.
        Do you actually, as the Advocate, almost publish saying
    this is a problem that comes to us quite often, here is how it
    has been resolved, here is the form you need? What are you
    doing proactively in that part of the world?
        Ms. OLSON. Well, we identified the needs of the gig economy
    as a most serious problem in my annual report to Congress, and
    we made recommendations. And we have also created materials
    from my local taxpayer advocates in each State to actually
    conduct outreach proactively to groups, and that is one of
    their assignments to identify stakeholders in their
    communities.
        Mr. SCHWEIKERT. Thank you, Mr. Chairman. I yield back.
        Chairman BUCHANAN. I now recognize the distinguished
    Ranking Member, Mr. Lewis, for any questions he might have.
        Mr. LEWIS. Thank you, Mr. Chairman.
        Ms. Olson, it is my understanding that you held a dozen
    public meetings around the country. What did you learn?
        Ms. OLSON. You know, it was remarkable. We learned a number
    of things: One was how hard people are trying to communicate
    with the IRS and how much they actually want to. We learned
    that people thought that having digital online tools would be
    very, very helpful, but they were no replacement for talking to
    the IRS; and that there was a very strong desire for the IRS to
    hear them and listen to them.
        We learned that--from all sorts of different populations,
    the concern about identity theft and the scams that are going
    on out there. Those were very strong issues. We learned about
    issues about payroll service providers ripping off taxpayers
    who are securing their services.
        And then we heard from experts about how best to design
    digital services to make them usable by people, but not replace
    the communication, the person-to-person communication, whether
    it is on the phone or in person. And that was a very strong
    message.
        Mr. LEWIS. I know, as the Taxpayer Advocate, you don't
    believe that quality service can be provided on the cheap.
        Ms. OLSON. Taxpayer service is, to me, the key way that you
    build trust with taxpayers. And you can do taxpayer service
    whether you are trying to do outreach and education or within
    an audit or within collection activities.
        If you take that approach that you are trying to bring the
    taxpayer into voluntary compliance and understand why they are
    having compliance difficulties, and you are listening to the
    taxpayer, then that is how you bring taxpayer service and
    taxpayer rights into what I call the ethos of the organization.
        And there is no conflict with exercising the enforcement
    and compliance tools that you have. Providing taxpayer service
    doesn't eliminate a single one of those powers that the IRS has
    when they need to use them.
        Mr. LEWIS. Do you think the 1998 Reform Act was successful?
        Ms. OLSON. I think the 1998 Reform was very successful. I
    think that what we need to do is go back--and that is partly
    why I gave you all the list of some of the provisions that I
    saw that weren't successfully implemented from the IRS.
        I think what Congress focused on in 1998 was very key, and
    we need to make sure that the IRS does what you all directed
    them to do, or learn why they couldn't do it and then revise it
    so that it fits into 21st century tax administration.
        Mr. LEWIS. Did it achieve its goals?
        Ms. OLSON. I think that it achieved it. It made the IRS
    focus on taxpayer service, but with these budget cuts, it sort
    of moved away from that as a primary focus. And it is really
    moving away from that person-to-person contact.
        And I keep saying to people in the IRS, people are giving
    up their money. We are taking their money for the greater good.
    Why would we not want to talk to them and hear from them and
    listen to their concerns, even if we have to tell them, you
    know, we can't solve your problem in the way you want, this is
    the law. By listening to them, we gain trust, and that is what
    we need to do. And we have gotten away from that.
        Mr. LEWIS. Again, thank you for being here, and thank you
    for your years of service.
        Chairman BUCHANAN. I now recognize the gentlelady, Mrs.
    Walorski, from Indiana.
        Mrs. WALORSKI. Thank you, Mr. Chairman.
        Thanks, Ms. Olson. Again, many thanks from my constituents
    in Indiana's Second District. You have helped--in the five
    years I have been here, you have been able to mitigate and help
    somewhere over 90 percent of the questions that we have had.
    And I am very, very grateful to you for what you have done. You
    have probably seen everything in 16 years.
        So I just wanted to pick up on what you said that you
    learned from the hearings that you guys had on the issues of ID
    theft, tax fraud, and scams. That is what we really get
    burdened by, folks in our district that have gotten caught in
    these issues.
        And my question is this: On this Return Review Program, the
    RRP, that started in 2009, this thing has tended to end up to
    be like a boondoggle. I just kind of wanted to hear from you on
    its predecessor, the Electronic Fraud Detection System, or the
    EFDS, which, in 2010, the IRS said was too risky to maintain,
    upgrade, or operate beyond 2015. But here we are in 2017. The
    EFDS is still the principal fraud detection system, because the
    RRP still isn't ready for prime time.
        In fact, TIGTA said there is no estimated date for full
    implementation, and GAO estimates that the program has incurred
    over $86.5 million in cost overruns. So when the RRP has run as
    a pilot, it yielded a high false-positive rate, and it missed
    $313 million in fraudulent filings.
        So let's set aside the numbers and stats and talk about the
    actual people behind them. You have documented well what
    taxpayers go through in your annual reports. But for the
    benefit of everyone here, can you walk us through what happens
    to a single mom, a small business owner, a person who either
    gets flagged as a false positive or a fraudulent return?
        Can you just go through how do you find out what hoops they
    go through and what this really means to people?
        Ms. OLSON. Right. Depending on what system triggers them as
    a suspected fraudulent return, they either get a letter or they
    are just--their refund is just held up and they have to call
    the IRS.
        If they get a letter, they are told that they have to
    verify themselves either online or they may have to go into a
    walk-in site. And to do that, they just can't walk in. There
    are no longer walk-in sites; they have to make an appointment.
    And sometimes you are told it might take weeks to get an
    appointment, and you won't be able to get your refund before
    you do that.
        And, then, even if you go through that, it may be that your
    return is stopped by some other filter once it goes back into
    the processing, so then you have to go through it all again.
        Identity theft and refund fraud have been the top two case
    receipts in TAS, Taxpayer Advocate Service, for the last 5
    years, and they really are a significant part of our inventory.
    It is devastating to people.
        Mrs. WALORSKI. So aside from the time element and the
    frustration, does it not cost taxpayers money as well if they
    need to seek professional services to be their Advocate?
        Ms. OLSON. Well, absolutely. Absolutely. And this affects
    people who are low income, high income. It doesn't matter. And
    people are having to get their preparers to call, and people
    often submit documentation multiple times.
        There is no one person assigned to their case, so every
    time they call, they have to tell their story to a different
    person. These are all recommendations we have made.
        You know, the other thing on the filters is that we have
    recommended that the IRS create sort of a dedicated team during
    the filing season on the IT side. So as we start seeing filters
    that have very high false positive rates, that you have a team
    that can get in there and adjust those filters. Don't wait
    until later.
        Mrs. WALORSKI. I apologize about interrupting, but what
    about commercially available technology that is there? Is it
    your opinion that just from a commonsense perspective, this
    would be where we would move to with an unbelievable amount of
    errors in fraud and money that is being spent and this whole
    lack of accountability on the system?
        Would you not agree that that would be someplace that we
    could look at and say let's mitigate this as quickly as we can
    on behalf of the taxpayers?
        Ms. OLSON. Certainly, the financial sector has tried to
    figure out about financial fraud and, you know, electronic
    fraud. And the IRS is meeting with those people. The
    commissioner established the security summit, and I think that
    is a significant step.
        Mrs. WALORSKI. I appreciate it. We are out of time.
        I yield back. And thanks again. Thanks, Mr. Chairman.
        Chairman BUCHANAN. I now recognize the gentlelady from
    Washington, Ms. DelBene.
        Ms. DELBENE. Thank you, Mr. Chair.
        And thank you, Ms. Olson, for being with us today and for
    all of your service.
        I wanted to talk to you about technology in particular,
    because you talked so much about that in your testimony and
    kind of the dire state that it is in right now. Can you give us
    a brief overview of how technology decisions are made at the
    IRS today, and kind of, briefly, whether you think the
    organizational chart is working well in terms of helping make
    those decisions?
        Ms. OLSON. Well, I think, you know, there are lots of
    executive steering committees on the technology side that
    review the priorities of how the IRS is going to spend its
    money. And the IRS, in addition to the cybersecurity concerns
    that we have, which are very great, the major concern that we
    have got, in addition to the RRP system, which is our return
    fraud detection system, is our enterprise case management
    system.
        We have about over 60 systems, and they don't communicate
    with one another. And so employees have to get permission to
    get into things, and often they can't. It slows things down. It
    is manual. It is not virtual. Our case files aren't virtual.
        It is astonishing. And that is a heavy lift that the IRS,
    in my opinion, is very far behind on, but is finally
    beginning--after spending millions of dollars, to get up to
    speed.
        And then we have the fact that we are still on--we have the
    two oldest information systems in the Federal Government,
    according to GAO, where we are keeping our taxpayer information
    on. And that is a significant concern, getting from those
    systems to something that is 21st century is going to be a huge
    lift.
        Ms. DELBENE. And I assume, when we talk about cyber having
    old systems, that is very concerning, and it is concerning
    because access to information is so cumbersome, as you said, it
    slows down your ability--IRS's ability to do so its job.
        Ms. OLSON. Right.
        Ms. DELBENE. Why do you think things have gotten so bad?
    Why are we so outdated?
        Ms. OLSON. My personal opinion, from observing it while I
    have tried to develop my own case management system for my own
    employees, is that partly, we don't have the talent inside the
    IRS. We haven't been able to recruit the people that we need
    to.
        And then I think that there is not enough communication
    between the IT function and the business operating divisions
    who are going to use these systems, so that things go--get
    developed that actually aren't what the operating divisions
    need, but then the operating divisions don't have a chance to
    tell that. And then money gets wasted, and I have seen that a
    lot.
        Ms. DELBENE. You know, I think that is a common problem
    that we have seen in technology implementations in government
    generally and something we need to continue to focus on. Do you
    have current modernization plans within the IRS that you think
    are going to help address these issues?
        Ms. OLSON. I think particularly for the ECM, the IRS has
    just put out a request for information to hear from off-the-
    shelf products that are doing a case management system to see
    what is out there, and then they will build to request for a
    proposal.
        I think that is the appropriate approach to really get a
    sense of the universe, instead of focusing on one thing that
    turns out not to be good, but we have invested $80 million in
    it or something like that. So they are finally on the right
    track in that regard.
        They do need more funding to be able to bring in the
    talent, but they also need more oversight from you all so that
    you all are understanding that that funding is being spent
    appropriately.
        Ms. DELBENE. Thank you so much. My time has expired.
        I yield back, Mr. Chair.
        Chairman BUCHANAN. Thank you.
        I now recognize the gentleman from Pennsylvania, Mr.
    Meehan.
        Mr. MEEHAN. Thank you, Mr. Chairman.
        And thank you, Ms. Olson, for your work.
        Ms. Olson, oftentimes, the IRS has a direct relationship
    with taxpayers because it relates to the taxpayer paying his or
    her taxes. But they serve another role, and it implicates a lot
    of people in which the information that one puts into his or
    her IRS tax return is relevant for another purpose.
        And I speak to something which is touching families all
    across America today, and that is, college applications,
    including for financial aid. And so as colleges and
    universities interact with their students, they are reliant on
    the ability for the applicants to let people know what their
    financial status is, and that means they need to get into IRS
    databases.
        Outward facing tools have been used by the IRS so that I
    authenticate who I am, and then you allow me to go back into my
    tax return and forward that information onto my financial aid
    application. As a parent who has gone through this process--and
    I know I am speaking for many--it is so incredibly frustrating
    to begin with.
        But now, we are seeing that this system, which has
    purportedly been put in place, the outward-facing tools, has
    actually been compromised. Hundreds of thousands of Americans
    trying to make this application have found that their
    identities have been stolen.
        And as a result, now we not only can't utilize the tool,
    but you have people who are trying to make those applications
    who are now frustrated, feeling time deadlines for applying to
    their schools, don't know where to go to get the information.
        And it is particularly egregious because oftentimes, the
    very people making these applications, may be a student who
    doesn't know the information that his or her parents have.
        Can you speak to me about the outward-facing tools that the
    IRS is using, what you know about this compromised situation,
    about what the IRS is doing to make that taxpayer relationship
    move more slowly--flow more appropriately.
        Ms. OLSON. Well, first, the information the IRS has is such
    a valuable asset of the Federal Government and the taxpayers of
    the United States that we have to make sure that it is
    protected in every way possible. And that means that there has
    to be very high--high-level screens for people to authenticate
    who they are, because identity thieves are very sophisticated.
        And last year, the IRS learned that there were risks to the
    way that people were getting access to IRS data through this
    FAFSA system. And while they tried to work with the Department
    of Education over time, they learned that what the IRS needed
    for the protection of that data, the Department of Education
    couldn't put into their system. And they had to make--they gave
    several workarounds, and those workarounds weren't able to be
    implemented by the DOE.
        Mr. MEEHAN. Was the problem on the Department of Education
    part?
        Ms. OLSON. It was my understanding it was on the level of,
    you know, the types of systems that DOE has, and we were
    setting very high standards for access to that information. And
    so the IRS had to--really felt, according to their risk
    analysis, that they had to stand down.
        And now they have just put it back up again. They have
    worked through some issues. But I think that it is going--this
    is where you have some difficulty where you have one agency and
    the another agency, and you need to get them together.
        Mr. MEEHAN. Well, what is your sense? Is the Department of
    Education collaborating and cooperating with the IRS?
        Ms. OLSON. I think they are now, and I think--this is my
    personal opinion, but I think they are now. I think it is a
    matter of technology. But it is also that I think they didn't
    understand initially the level of concern that we have about
    people getting access to this incredibly important data and
    misusing it.
        Mr. MEEHAN. Well, thank you. I would ask for your
    continuing oversight on that particular issue, because as we
    speak, millions of Americans----
        Ms. OLSON. Certainly.
        Mr. MEEHAN [continuing]. Are dealing with this very
    frustrating system. Thank you.
        Ms. OLSON. Certainly.
        Mr. MEEHAN. I yield back.
        Chairman BUCHANAN. I now recognize the gentleman from
    Connecticut, Mr. Larson.
        Mr. LARSON. Thank you, Mr. Chairman. I especially
    appreciate the opportunity to meet the committee. I want to
    thank you and Mr. Lewis for this opportunity.
        Ms. Olson, I have nothing but great respect and admiration
    for you and the job that you have done.
        Representative Courtney and myself have been dealing with
    an issue, along with Representative Neal up in New England,
    that deals with foundation crumbling, not dissimilar to a case
    that happened many years ago in the south with what they
    referred to as a Chinese drywall.
        And in both cases, the circumstances are that, through no
    fault of the individual, they all of a sudden find themselves
    in a situation in the case of Connecticut where their
    foundations are crumbling. There is no insurance coverage. And
    so we are pursuing relief--in this case, from the IRS, to use
    this as a casualty loss.
        And as I said, there is ample precedent for this in the
    China drywall situation. And our initial discussions with both
    the Commissioner and Secretary Mnuchin have been very positive,
    but--and we also know that in Connecticut, the Taxpayer
    Advocate Service has been incredibly supportive.
        Any advice or recommendations, and could we beseech you for
    the support of the National Taxpayer Advocate?
        Ms. OLSON. Well, I have been aware of this problem and had
    my staff attorneys meet with chief counsel attorneys of the IRS
    to look at the law pertaining to casualty loss deductions and
    why it--how it could apply in this instance. And just this
    week, we submitted to the IRS chief counsel a request for
    priority guidance that they put this issue on their priority
    guidance plan to give guidance.
        And we have actually--it wasn't just a request, we pointed
    out how they could do it to grant relief to these taxpayers.
    And I will be more than happy to share that request with you so
    you can see what we wrote up.
        Mr. LARSON. I would be delighted to receive that. And we
    appreciate your continued advocacy. And as I said earlier, this
    is something that impacts people, and now it is estimated that
    more than 30,000 people in Connecticut will be impacted by
    this. But the straining actually runs from Canada all the way
    down to the Sound, so we are trying to forewarn people as well
    with this.
        But I can't thank you enough as well as both the
    cooperation that we have received today from the IRS and
    Treasury. And I view that, in large part, because of your
    involvement and the Taxpayer Advocate Service involvement.
        Ms. OLSON. Thank you.
        Mr. LARSON. With that, Mr. Chairman, I would--I would just
    like to also ask you at some point--not for here--but I would
    love to get your opinion on the Japanese system of collecting
    and simplifying their Tax Code and what opinions you might have
    on that. That is not a question for here, but perhaps later I
    could follow up with you on that.
        Ms. OLSON. Certainly.
        Mr. LARSON. With that, Mr. Chairman, I thank the committee
    for indulging me and yield back my time.
        Chairman BUCHANAN. Anytime, Mr. Larson.
        I now recognize the gentleman from North Carolina, Mr.
    Holding.
        Mr. HOLDING. Thank you, Mr. Chairman.
        Ms. Olson, I would like to ask you about a subject that
    came up at one of your public forums last year. A tax
    practitioner in Red Oak, Iowa, raised concerns about
    statistical audits, meaning audits that are done for research
    purposes by the IRS.
        And although you acknowledge the importance of these
    research audits, you also recognize that they can be painful
    for taxpayers, and you even described the taxpayer under audit
    as, quote, ``a guinea pig.'' So I have significant concerns
    about these audits. You mentioned a couple of potential
    solutions at the forum last year. At the time, you said you had
    only been discussing these options internally. So has your
    thinking evolved any on these suggestions?
        Ms. OLSON. So, you know, the audit--as a representative--I
    represented taxpayers for 27 years, and as a representative, I
    had to sit through the predecessor to these audits, the tax
    compliance measurement program. And it was expensive and
    painful for the taxpayer, painful for the representative.
        But I also recognize the importance of these audits so that
    we don't go out and willy-nilly audit people that shouldn't be
    audited. You know, we need some kind of statistical gathering
    thing.
        And my thinking about these taxpayers being guinea pigs is
    that they are actually doing a service for the public. These
    are random audits. There may be nothing wrong with their
    returns at the end of the day, but the IRS is using it for data
    gathering.
        And so if they are doing that public service, they should
    be paid. And either that or either/and maybe we don't assess
    the tax at the end of the audit. You know, we found the errors,
    but they have sat through this for the public good, and so
    maybe we don't assess the tax that we found. Or we give them
    compensation for sitting through it. And I would suggest that
    that compensation be nontaxable so we don't, you know----
        Mr. HOLDING. Well, let me ask you this: Yesterday, GAO
    released a report on the national research program and
    employment taxes. And the GAO concluded that the IRS doesn't
    even have a formal plan to timely analyze, let alone actually
    use, the data it collected.
        So do you believe the IRS should continue to subject
    taxpayers, in your words, guinea pigs, to these burdensome,
    random audits if there is no plan to even use the information?
    And shouldn't the IRS actually use the data? If it is going to
    pay folks for the data, you know, of your suggestion, shouldn't
    they use it or shouldn't they just shut down the program? I
    mean, if GAO says there is no plan to even use it. So that is
    kind of doubly disturbing.
        Ms. OLSON. Yeah. I don't think they should shut down the
    program. I mean, they need to use the data. And I will look
    very carefully at the GAO audit, because I think GAO--that
    gives a plan for how the IRS could use it.
        I think the IRS needs to be an organization that uses the
    data that it has. And often, it doesn't develop strategies
    based on the data or it takes a long time to get it into
    operation, and that is just inexcusable.
        Mr. HOLDING. Well, listening to your answer to Ms.
    DelBene's question on technology in the IRS, it seems like the
    IRS has difficulty with technology just in its basic functions,
    and this is something above its basic function. And it makes
    it, perhaps, triply disturbing now that Ms. DelBene asked the
    probing question.
        Ms. OLSON. I think that the IRS is challenged in a lot of
    ways. I do believe that----
        Mr. HOLDING. That is the understatement of the day.
        Ms. OLSON. Yes.
        Mr. HOLDING. Mr. Chairman, I yield back.
        Chairman BUCHANAN. Thank you. I now recognize the gentleman
    from New York, Mr. Crowley.
        Mr. CROWLEY. Thank you, Mr. Chairman. Thank you for holding
    this hearing today.
        Thank you, Ms. Olson, for participating here, as well.
        Ms. Olson, recently, my good friend and colleague, John
    Lewis, introduced a bill, the Taxpayer Protection Act of 2017,
    which I am a cosponsor of, to repeal the private debt
    collection program. Do you think the IRS should outsource
    Federal tax collection, and should a new IRS have the authority
    to do this, hire private companies to collect unpaid taxes?
        Ms. OLSON. Well, it is my personal and professional opinion
    that the collection of tax is an inherently governmental
    function, because it requires the exercise of judgment and
    discretion to do it right, and take into consideration the
    facts and circumstances of taxpayers.
        But Congress has made the decision to create this
    outsourcing, and now, my focus has been on how the IRS is
    implementing this provision. And I have a lot of concerns about
    how it is being implemented.
        Mr. CROWLEY. For for-profit motive. Is that it?
        Ms. OLSON. I think that is part of the fundamental flaw
    with the program, that at least whatever you say about IRS--I
    mean, I think that IRS collection employees understand that the
    goal of collection is to bring taxpayers into voluntary
    compliance. And that may mean that you are focusing on the
    future that they be able to pay going forward, and will deal
    with their debt later.
        And the private debt collectors have the incentive to
    collect tax, just the amount that is before them, and get their
    commission. They don't--they would have no incentive to think
    about voluntary compliance going forward.
        Mr. CROWLEY. The consequence as it pertains to the taxpayer
    as well. Kind of, in my mind, my concern about criminal justice
    reform and privatizing of prisons, you know, you create beds.
    They need to fill them. That is how they get paid.
        In terms of the EITC, I know there has been a great deal of
    concern about fraud existing within the program itself. I would
    like to get your thoughts in terms of how much is really fraud
    and how much is basically mistakes that are made in terms of
    filling out the proper requisite papers.
        Ms. OLSON. Well----
        Mr. CROWLEY. Hank Paulson, for instance, I went into
    Goldman Sachs, he filed and he did it wrong, just to
    demonstrate, even the most brilliant, so to speak, can make
    mistakes.
        What recs do you have to make it an even more efficient--
    and more accessible and more efficient as well?
        Ms. OLSON. Right. Well, this year, in my annual report to
    Congress, I made a legislative recommendation that was really
    designed around trying to minimize the errors and fraud in the
    EITC, and we have attached it to my testimony.
        I do think that most of the errors are attributable to the
    complexity of the law, but the complexity of the law also
    creates opportunities for others to game it. And a lot of the
    fraud, the pure fraud, comes from some unregulated preparers
    that, you know, are preying upon an unsophisticated population
    and selling them something that is too good to be true.
        So you have got a lot of different things playing around
    there. But I believe that there are things that you can do,
    both administratively and legislatively, to minimize the
    improper payments. Some of that is going to the design, and
    others are going into the kind of both outreach and education
    and oversight that the IRS needs to do on this issue.
        Mr. CROWLEY. Thank you. I think for the integrity of the
    program itself, we need to be vigilant, mindful, but also
    understand, I think, the complexities in terms of the
    clientele----
        Ms. OLSON. Yeah.
        Mr. CROWLEY [continuing]. And their ability to actually
    fill out those forms properly.
        And, Mr. Chairman, just let me thank you for holding this
    hearing today as well in a very bipartisan spirit.
        Mr. Roskam and I have been working together on issues in
    relation to taxpayers' relationship with the IRS. We know it is
    not always pleasant. We know you all don't always get it right,
    and that is why I think we need a Congress, a vigilant
    Congress, Mr. Chairman, and a committee like this to keep an
    eye on it to help you do your job, help us do our job, but
    help, most importantly, protect the interest of our
    constituents, the U.S. taxpayer.
        So, thank you, Mr. Chairman.
        Chairman BUCHANAN. Thank you.
        I now recognize the gentlelady from Tennessee, Mrs. Black.
        Mrs. BLACK. I thank the Chairman. I thank you for allowing
    me to sit in on the Subcommittee, although I am not a Member of
    the Subcommittee.
        But, Ms. Olson, I want to thank you for the work that you
    and your folks do at your agency. And as you said at the
    beginning of your comments that most people do want to pay
    their fair share and just to be left alone. They understand
    that they have a responsibility to pay their taxes. The U.S.
    has about 98 percent of voluntary tax compliance rate and has
    always been linked to be perceived fair and impartial.
        But in the most recent years, we have seen more of that
    impartiality, and I think that that is part of what we are
    seeing in the general population, that they have really lost
    trust in the IRS. So your agency is particularly important for
    helping us to be sure that we do at least have one reach into
    helping with that.
        One of the things that I wanted to go to is, of course, the
    complexity of the Tax Code doesn't help, and that is up to
    Congress to reform the Tax Code so that it can be something
    much simpler, which we are working on on our side.
        But the IRS is also a unique creature in that it doesn't
    really have a regulatory process like other Federal agencies
    do. And so they issued these guidances, and they don't solicit
    any public comments like you would in a Federal agency where
    there would be a change and there would be an opportunity for
    those public comments.
        And, in fact, on the IRS website, it actually has a section
    that says, ``Understand the IRS guidance. '' And it has seven
    kinds of guidance to taxpayers that they should be familiar
    with. And I will note the irony of this is that the IRS
    actually acknowledges within that statement that they say, and
    I quote, ``It may be puzzling and a mystery.''
        And so I wanted to ask you to talk a little bit about those
    guidances and what we can do to keep that from happening, and
    how that actually rolls out and takes place?
        Ms. OLSON. The IRS has many different types of guidances
    you point out, and some of them do go through the
    Administrative Procedure Act, you know, notice and comment, the
    regulations that we do.
        But it has--you know, it believes that getting out guidance
    is helpful to taxpayers. And, so, rather than going through
    what it views as the cumbersome regulatory process, which would
    require notice and comment, it does stuff to get out guidance
    faster.
        The downside about that is, as you say, there is no vehicle
    that they have designed for public comment on that. That
    doesn't mean you couldn't do it that way, but they don't. And I
    am very concerned about that.
        I am even more concerned--and I have written about this as
    a most serious problem--that they are moving more toward FAQs,
    you know, which are great in the sense that you get things up
    quickly, but you can't tell when a change has been made in the
    FAQ unless you print out the FAQ every single day and track it
    word for word.
        And they are not reliable, so that if you say you rely on
    an FAQ, and then the IRS says, Well, that is wrong, that is no
    defense. So you are--and as that gets done more, you are really
    leaving the taxpayer in a very vulnerable situation.
        Mrs. BLACK. And I want to reference that that is one of the
    things that I hear from my constituents is they call into to
    get the guidance, and they give the guidance, and they ask, can
    you please send me an email or something that I can use to
    verify if I use what your recommendations are.
        And the IRS will refuse to send them anything in writing.
    And this, to me, is a really big problem, where people are
    trying so hard to do it the right way, and then they get caught
    on it. And they say, ``But I called in, and I asked a
    question,'' and what they got from the IRS was, ``We cannot
    give you that in writing.''
        Ms. OLSON. Right.
        Mrs. BLACK. And so I see this as a big area that has to be
    looked at. And I appreciate you being here today and, again,
    thank you----
        Ms. OLSON. I am very happy to work with you on that.
        Mrs. BLACK. Thank you.
        Chairman BUCHANAN. I now recognize the gentleman from
    Michigan, Mr. Bishop.
        Mr. BISHOP. Good morning. Thank you. Thank you, Mr.
    Chairman, for the hearing today.
        I am looking at--the IRS is responsible for processing
    approximately 150 million tax returns every year, issuing
    refunds to taxpayers for about 70 percent of those 150 million
    tax returns. According to the IRS estimates, it says that the
    cost for a refund check is about a dollar.
        And I am wondering what the cost would be for a direct
    deposit--instead of a check, and also, how we might address
    that issue, the cost and the time using prepaid debit cards,
    and whether or not the IRS uses, for the tax returns, the debit
    express cards.
        Ms. OLSON. You know, this is something we identified in my
    annual report this year, is that it is so much--and it is so
    less expensive to do direct deposit, and then we have a large
    part of our population that is un-banked.
        And, so, rather than them going through check cashing
    places, et cetera, if they are already participants in this
    direct express program that is run by Treasury, why couldn't we
    put tax refunds on it?
        And, frankly, I am baffled why we don't do it. The Treasury
    can negotiate very good rates and charges. They already have
    this product. And it just makes sense. So I really don't have a
    good answer for you. That is why we made it a most serious
    problem: Why aren't we using it?
        Mr. BISHOP. So doesn't that open this wide open for fraud
    if we don't utilize this system?
        Ms. OLSON. Well, I think the concern about the fraud is
    obviated by the fact that people have to go to a bank to prove
    their identity. So you have all the PATRIOT Act requirements
    that were put in about proving your identity to open a bank
    account, and that is what they have to do for direct express.
    It is actually much more than what they would have to do to
    just get a card from, you know, some check cashing place.
        Mr. BISHOP. That is assuming that you could use that
    product for the refund.
        Ms. OLSON. Right.
        Mr. BISHOP. But we now use prepaid debit cards that don't
    have to go through that process.
        Ms. OLSON. Exactly.
        Mr. BISHOP. So that is what I am talking about to expose
    yourself to fraud; whereas, if we utilized it at the direct
    express debit card, we wouldn't have that problem.
        Ms. OLSON. Right, exactly.
        Mr. BISHOP. Has there been any discussion about allowing
    taxpayers to use prepaid debit cards for tax payments?
        Ms. OLSON. For payments?
        Mr. BISHOP. Yes.
        Ms. OLSON. I think that they can, actually. If they
    haven't, then the IRS is working on that to accept that online.
    They are really trying to work on the different ways that you
    can make electronic payments online directly.
        Part of the problem, though, is they now have on their
    online account you can make those payments, but you do have to
    be able to sign on as a taxpayer, and some of the security is
    very, very high for that.
        Mr. BISHOP. What is the cost to process a check from a
    taxpayer?
        Ms. OLSON. You had said a dollar. I don't have that
    information right here, but I can get you it between the check
    versus direct deposit versus a debit card.
        Mr. BISHOP. We can agree it would probably be significant
    savings?
        Ms. OLSON. Oh, significantly less--yeah.
        Mr. BISHOP. Thank you very much.
        And, Mr. Chairman, I yield back.
        Ms. OLSON. Thank you.
        Chairman BUCHANAN. Thank you.
        Ms. Olson, I want to thank you upfront for your leadership
    and service over a lot of years. Like I said, I have heard a
    lot of good things. But I have got a litany of things I wanted
    to run down and touch on. We have got a few minutes.
        Identity theft. It has been huge in Florida. A CPA is
    coming to me--I think the CPA even had maybe his identity
    stolen. And I have got to tell you, to be candid about it, I
    think this is more, maybe two or three years ago, two years
    ago. It seems like it is a little better today, but I would
    like to get your take on where are we at with identity theft?
        Ms. OLSON. I think it is going better than it has been. The
    IRS has improved its processes somewhat. But three things have
    happened that have really made a difference: One is the
    legislation that you all passed, getting us the W-2 information
    by January 31, because that lets us be--if we can get the
    employer W-2s, we can see which is the legitimate W-2 versus
    the altered, fake W-2.
        The other thing that is happening is that the IRS is now,
    you know, requiring the software companies to ask for driver's
    licenses when they are filing electronic returns, and that
    really helps us identify whether this is a legitimate taxpayer
    or an identity thief, in many instances.
        And the third thing is there is a program that we are
    trying to get more and more employers to use where there is a
    code that is unique to that taxpayer's W-2 from that employer.
    And when they go to file electronically, if that code is put
    in, then we can tell that this is the correct W-2 and it is not
    an identity theft W-2.
        Chairman BUCHANAN. Let me ask you, just for the sake of
    time, you know, how many of the criminals, or the syndicates,
    are outside the U.S.? Do you have any sense of that? Someone
    claims a lot of this is done by Russia and others----
        Ms. OLSON. I really don't know. The criminal investigation
    division is working with so many other enforcement agencies to
    really monitor that. And, you know, it is so hard to track this
    stuff down.
        Chairman BUCHANAN. Because you say there is a bunch in the
    States, but you also hear that it is outside the country----
        Ms. OLSON. You hear about India and elsewhere, yeah.
        Chairman BUCHANAN [continuing]. Different organizations,
    Eastern bloc countries or something like that.
        Mr. Crowley brought up earned income tax credit. I know
    there are some complications probably in filing, but 24 percent
    fraud, tens of billions of dollars, I guess, a year. What is
    your take on that? I mean, why is it we can't seem to improve
    it somewhat? Is it lack of resources to educate people? I am
    sure that is part of it. He asked how much that was a part of
    it, but I was curious, just from your standpoint, where are we
    at on that?
        Ms. OLSON. I don't think there is any one thing we can do
    to bring that rate down. I think it is a sum of multiple
    things: It is education; it is doing really specific audits on
    it; it is doing other kinds of compliance activities; and it is
    doing a redesign of the provisions. Knowing what we know about
    where the errors and fraud are, we can change the design a
    little bit legislatively.
        Chairman BUCHANAN. Does it make sense to have higher
    standards for preparers, do you think, a lot of people are
    doing a lot of this work? Would that make a difference,
    education, training, and maybe some licensing?
        Ms. OLSON. I do think there would have to be minimum
    competency standards for preparers, primarily in the EITC area,
    because that is where we see--we know that the unregulated,
    unaffiliated preparers, not with the large preparation firms,
    are the greatest source of errors for the EITC population in
    the preparer base.
        Chairman BUCHANAN. Now, you were here, I think, 20 years
    ago, at the IRS. Were you here then when they did the IRS
    reforms?
        Ms. OLSON. I was actually a witness before this committee
    as the representative of a low-income taxpayer clinic.
        Chairman BUCHANAN. Okay. In your thought, it seemed like
    that made a big difference. I thought I heard you say that in
    your testimony. So in terms of where we are at today, it sure
    seems like 20 years, we could work together on a bipartisan
    basis to make some real reforms that make a big difference to
    the country. Do you think--you agree with that?
        Ms. OLSON. Yes. And I think the way that it was done in
    1998, where you heard from a diverse group of people, internal
    and external, experts in government, experts in business, you
    know, it made an incredible record. And when you read those
    hearings again, they are just very impressive.
        Chairman BUCHANAN. Well, we want to work with you and get
    all the stakeholders at multiple hearings. We are going down
    the road to see if we can't make a difference in that space.
        One other thing that has come up, or a couple of things
    that have come up in our area, is small business disputes. They
    seem like--it is usually sometimes not a lot of money, but it
    is a dispute. But they could end up spending more in
    professional fees and outsiders than just paying the check
    itself. Where are we at on that, or what is your sense of that?
        Ms. OLSON. You know, I think that that raises the issue of
    not just the audit side where there are these disputes, but the
    appeals function. And that, again, is one of my concerns that
    the IRS has moved to a more centralized, remote, impersonal
    appeals function, which really was the safety valve for small
    businesses.
        There are 12 States that don't have an appeals officer in
    them, so they don't understand the conditions of that State.
    And I think that it really takes--we should take a look at that
    appeals function and see how we really make it work as the
    safety valve that it was intended to be.
        Chairman BUCHANAN. And then my last question is just
    protecting taxpayers' rights is a key foundation. What
    additional tools could you use to make you even more effective
    on behalf of taxpayers?
        Ms. OLSON. Yeah. I think--I have written about this in my
    annual report. I have made recommendations about codifying,
    strengthening the taxpayer assistance order authority, and
    codifying something called the taxpayer advocate directive,
    where I can order the IRS to change its processes that would
    affect groups of taxpayers.
        And those are very important tools. But right now, they are
    just--the taxpayer advocate directive is just administrative.
        Chairman BUCHANAN. Okay. Thank you.
        I would like to thank our witness for appearing before us
    today. Please be advised that Members have two weeks to submit
    written questions to answer later in writing. Those questions
    and your answers will be made part of the formal hearing
    record.
        With that, this Subcommittee stands adjourned.
        [Whereupon, at 9:58 a.m., the Subcommittee was adjourned.]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

                                     [all]