[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
         
         
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                  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.]
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