[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]


                        THE IRS IN THE PANDEMIC

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

                                HEARING

                               BEFORE THE

                 SUBCOMMITTEE ON GOVERNMENT OPERATIONS

                                 OF THE

                   COMMITTEE ON OVERSIGHT AND REFORM

                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED SIXTEENTH CONGRESS

                             SECOND SESSION

                               __________

                            OCTOBER 7, 2020

                               __________

                           Serial No. 116-125

                               __________

      Printed for the use of the Committee on Oversight and Reform
      
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]      


                       Available on: govinfo.gov,
                         oversight.house.gov or
                             docs.house.gov
                             
                             
                               __________
                               

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
41-987 PDF                  WASHINGTON : 2020                     
          
--------------------------------------------------------------------------------------                            
                             
                             
                   COMMITTEE ON OVERSIGHT AND REFORM

                CAROLYN B. MALONEY, New York, Chairwoman

Eleanor Holmes Norton, District of   James Comer, Kentucky, Ranking 
    Columbia                             Minority Member
Wm. Lacy Clay, Missouri              Jim Jordan, Ohio
Stephen F. Lynch, Massachusetts      Paul A. Gosar, Arizona
Jim Cooper, Tennessee                Virginia Foxx, North Carolina
Gerald E. Connolly, Virginia         Thomas Massie, Kentucky
Raja Krishnamoorthi, Illinois        Jody B. Hice, Georgia
Jamie Raskin, Maryland               Glenn Grothman, Wisconsin
Harley Rouda, California             Gary Palmer, Alabama
Ro Khanna, California                Michael Cloud, Texas
Kweisi Mfume, Maryland               Bob Gibbs, Ohio
Debbie Wasserman Schultz, Florida    Clay Higgins, Louisiana
John P. Sarbanes, Maryland           Ralph Norman, South Carolina
Peter Welch, Vermont                 Chip Roy, Texas
Jackie Speier, California            Carol D. Miller, West Virginia
Robin L. Kelly, Illinois             Mark E. Green, Tennessee
Mark DeSaulnier, California          Kelly Armstrong, North Dakota
Brenda L. Lawrence, Michigan         W. Gregory Steube, Florida
Stacey E. Plaskett, Virgin Islands   Fred Keller, Pennsylvania
Jimmy Gomez, California
Alexandria Ocasio-Cortez, New York
Ayanna Pressley, Massachusetts
Rashida Tlaib, Michigan
Katie Porter, California

                     David Rapallo, Staff Director
                     Wendy Ginsberg, Chief Counsel
                          Amy Stratton, Clerk

                      Contact Number: 202-225-5051

               Christopher Hixon, Minority Staff Director
                                 ------                                

                 Subcommittee on Government Operations

                 Gerald E. Connolly, Virginia, Chairman
Eleanor Holmes Norton, District of   Jody B. Hice, Georgia Ranking 
    Columbia                             Minority Member
John P. Sarbanes, Maryland           Thomas Massie, Kentucky
Jackie Speier, California            Glenn Grothman, Wisconsin
Brenda L. Lawrence, Michigan         Gary Palmer, Alabama
Stacey E. Plaskett, Virgin Islands   Ralph Norman, South Carolina
Ro Khanna, California                W. Gregory Steube, Florida
Stephen F. Lynch, Massachsetts       Fred Keller, Pennsylvania
Jamie Raskin, Maryland
                         
                         
                         C  O  N  T  E  N  T  S

                              ----------                              
                                                                   Page
Hearing held on October 7, 2020..................................     1

                               Witnesses

Charles P. Rettig, Commissioner, Internal Revenue Service
Oral Statement...................................................     8

Erin M. Collins, National Taxpayer Advocate, Taxpayer Advocate 
  Service
Oral Statement...................................................    10

Vijay A. D'Souza, Director, Information Technology and 
  Cybersecurity, Government Accountability Office
Oral Statement...................................................    12

Written opening statements and statements for the witnesses are 
  available on the U.S. House of Representatives Document 
  Repository at: docs.house.gov.

                           Index of Documents

                              ----------                              

Documents entered into the record during this hearing are listed 
  below and available at: docs.house.gov.

  * Center for Taypayer Rights Written Statement; submitted by 
  Chairman Connolly.

  * Statement by Joseph Hickey; submitted by Chairman Connolly.

  * The New York Times, ``Trump's Taxes Show Chronic Losses and 
  Years of Income Tax Avoidance'', article ; submitted by 
  Chairman Connolly.


 
                          IRS IN THE PANDEMIC

                              ----------                              


                       Wednesday, October 7, 2020

                   House of Representatives
      Subcommittee on Government Operations
                          Committee on Oversight and Reform
                                                   Washington, D.C.

    The subcommittee met, pursuant to notice, at 10:06 a.m., 
via Webex, Hon. Gerald E. Connolly (chairman of the 
subcommittee) presiding.
    Present: Representatives Connolly, Norton, Sarbanes, 
Plaskett, Khanna, Lynch, Raskin, Maloney (ex officio), Hice, 
Grothman, Palmer, Steube, and Keller.
    Also present: Representatives Porter and Pascrell.
    Mr. Connolly. OK. The committee will come to order.
    Without objection, the chair is authorized to declare a 
recess of the committee at any time.
    Without objection, full committee member Katie Porter, the 
gentlewoman from California, and Representative Bill Pascrell, 
the gentleman from New Jersey on the Ways and Means Committee, 
shall be permitted to join this subcommittee and be recognized 
for questioning during the course of this hearing.
    Without objection, it is so ordered.
    I now recognize myself for an opening statement. The 
Internal Revenue Service collects more than $3.5 trillion in 
taxes, roughly 95 percent of the Federal revenue. And it 
manages the distribution of more than $370 billion every year 
in refunds. The revenue the IRS collects for the Federal 
Government funds critical programs and benefits like Social 
Security, Medicare, and veterans health services. The billions 
of dollars in refunds distributed to taxpayers each year is a 
lifeline for many Americans, especially those at or living 
below the poverty line.
    The IRS is a critical agency that we turn to in the 
Nation's hour of dire need. Today's hearing will examine how 
that agency was ill-prepared to meet those needs. We'll look at 
how decades of deliberate starvation of the IRS prompted a dire 
financial situation and left an agency with what a former 
taxpayer advocate referred to as a prehistoric IT 
infrastructure.
    We'll show how a decade of attrition hindered the IRS' 
ability to meet the complex needs of our Nation during the 
unprecedented pandemic and attendant economic collapse. 
According to the Congressional Budget Office, from 2010 through 
2018, when Republicans were in control of the Congress, 
lawmakers cut the IRS budget 20 percent in inflation-adjusted 
dollars, resulting in a 22-percent staff reduction.
    Thirty percent of these staff were in the IRS enforcement 
positions. After years of disinvestment in IRS enforcement 
capacity, unpaid annual taxes owed but not collected are 
estimated at $450 billion a year. The starvation and chronic 
underfunding also prevented the IRS from investing in IT 
systems.
    I ask unanimous consent to enter into the record the 
Treasury Inspector General for Tax Administration's report 
entitled ``Legacy Systems Management Needs Improvement,'' which 
finds that nearly three-quarters of the 400 active IRS systems 
reviewed by the TIGTA are legacy systems, meaning very old.
    Another disturbing finding is that was in that report was 
that the IRS does not have a handle on how many legacy systems 
it actually has or the cost associated with those systems. This 
does not sound like an agency ready to fully serve the American 
people during a pandemic.
    This past year has highlighted just how many individuals 
rely on the IRS. In addition to administering the two--2020 tax 
filing system, the IRS was also tasked with distributing 
emergency economic impact payments or stimulus checks to 
Americans. The IRS had to manage the effects of the pandemic 
while it was simultaneously expected to mail 170 million 
additional stimulus checks to Americans in need.
    Years of IT system neglect and the failure to modernize 
legacy systems that date back to the Kennedy administration, in 
some cases, prevented the IRS from effectively transitioning to 
virtual operations. Like many agencies, the IRS sought to find 
ways to keep its work force safe while trying to meet its 
expanded mission, but it didn't stand a chance.
    Its gutted work force and anachronistic IT systems were 
simply not enough to keep up. The pandemic forced the IRS to 
shut down many of its core operations across the country, 
including taxpayer phone lines and walk-in centers. The agency 
largely abandoned taxpayers, many of whom--or all of whom are 
our constituents at a moment of great confusion and concern.
    As I've noticed, the IRS' operational challenges did not 
happen overnight. As shown in the tables on the screen, since 
2010, the previously controlled majority Congress ransacked the 
IRS' budget and the agency was forced to reduce its work force 
by 22 percent. That's 20,000 full-time employees.
    These significant repeated budget cuts forced the IRS to 
make difficult resource allocation tradeoffs. Leaders had to 
choose among providing quality customer service to taxpayers, 
enforcing tax laws, and updating IT systems. The severe 
financial, technical, and staffing problems are a direct result 
of years of partisan hostility, reckless so-called 
investigations, and unwarranted budget cuts from the majorities 
then in control of Congress. And, today, when the American 
people are relying on the IRS the most, the agency is gasping 
for air.
    While our witnesses will testify that the IRS did what it 
could with the available resources, it's what didn't get done 
that's troubling. It's the millions of taxpayers who are unable 
and still are unable to get their refunds because they filed a 
paper return. It's the millions of tax returns that hit a snag 
and the corresponding taxpayers couldn't get assistance because 
call centers were closed.
    It's the 9 million Americans who have yet to receive that 
stimulus check from April, primarily because the IRS does not 
have their information or because their income is so low, they 
don't qualify to file a return.
    These are our Nation's most vulnerable people. We have a 
duty to help them in the midst of this crisis. Millions of 
people who desperately rely on the IRS to receive much-needed 
financial assistance to pay for medical care, groceries, 
housing are still waiting for those refunds and stimulus 
checks.
    These people are like my constituent Joseph, who did not 
receive his 2018 tax refund until February of this year because 
his wife passed away and the IRS held up his return to get more 
information. The same issue, which the IRS promised Joseph 
would not be a problem again, plagued his 2020 tax return, 
which still has not been processed.
    I ask we insert into the hearing record a statement from 
Joseph about his continued concerns with the IRS.
    Other constituents have followed the rules and filed and 
are being told to just wait. People can't afford to just wait. 
They need this financial assistance now. On September 16, I 
wrote the IRS asking about these types of delays and the 
inconsistent responses staff have provided our constituents, 
IRS staff. That was three weeks ago. I've yet to receive a 
response.
    It's also important to point out that budget cuts to the 
IRS have burdened our Nation's poor in another important way. 
When the IRS collects taxes each year, it relies heavily on 
taxpayers to report their income and calculate the amount of 
tax they owe. Most people, in fact, 99 percent of them, do. 
Some taxpayers, however, often the most wealthy among us, 
including potentially the current President of the United 
States, fail to properly pay their taxes. They hide earnings, 
claim dubious deductions, such as $70,000 for hairstyling. Not 
a deduction available to most of us, and they fail to properly 
pay their taxes as a result.
    Since 2010, as a direct result of these budget cuts from 
the past, the IRS has done less to enforce tax laws because it 
can't. If you take a look at the chart on the screen, you'll 
see that, between 2011 and 2019, the percentage of individual 
income taxes it examined dropped by half. Half. That's 
catastrophic, and it directly impacts revenue for the Federal 
Government.
    The weakening of these vital oversight efforts harms both 
taxpayers and public confidence in the tax system. It does, 
however, help the wealthy and encourages even more of them to 
skirt and cheat the tax system. I was pleased with reports on 
Monday indicating that the IRS is finally investigating 
allegations of criminal tax fraud at the National Rifle 
Association.
    I've long led congressional efforts asking the IRS and the 
Department of Justice to investigate the NRA and its CEO Wayne 
LaPierre. According to studies out of the University of 
Pennsylvania, by simply beefing up the auditing capacity of the 
IRS to allow for more oversight of the super wealthy, those 
claiming more than $10 million in adjusted gross income, our 
government would collect more than $7.5 trillion over the next 
decade. More than paying all of the pandemic-related expenses 
by this Federal Government combined.
    That's the size of the tax gap with the wealthy, who fear 
little consequence right now from a beleaguered IRS and have 
left in our Nation's coffers.
    I look forward to hearing from our witnesses today on ways 
Congress can help support the IRS instead of politically 
targeting the agency and stripping it bear of the resources it 
desperately needs as we've done all too often in the past. We 
also hope to ensure that the IRS' Chief Information Officer and 
CIOs throughout the Federal Government play a pivotal role in 
developing and meeting agency performance goals.
    I look forward to working with my colleagues on both sides 
of the aisle toward legislation that does just that. I hope 
this hearing will garner the evidence and justification needed 
for Congress to build back the agency that it has so unjustly 
ravished over the last decade and so it's prepared to help 
struggling Americans in dire need of assistance during the 
worse pandemic in a hundred years.
    And, with that, I call upon the distinguished Ranking 
Member, Mr. Hice, for his opening statement.
    Mr. Hice. Thank you, Chairman Connolly.
    I appreciate the opportunity to have an opening statement, 
and like you, I also have constituents who are awaiting 
refunds, and they've been seeking--many of them as far back as 
February, and I certainly share that.
    I would also just say, Mr. Chairman, that I believe it's 
improper for you to accuse the President or seemingly accuse 
him of not paying his taxes. In the first place, you don't know 
that. And I hope this hearing today will stay focused on issues 
that are germane to the topic at hand, specifically IT 
modernization. That is what this should be focused on, and I 
hope we do that.
    And, with that, let me just say that this subcommittee has 
been tracking, as you all know, the legacy IT systems and the 
reality that those legacy systems pose a risk to Federal agent 
missions and the purpose that many of our agencies have.
    You know, with many of these agencies, especially the IRS, 
some of these older IT systems, they are very complicated, and 
they are going to require modernization. It is inexcusable for 
us to be facing some of the issues that we're facing and for 
our constituents and the American taxpayers to be the ones who 
are taking it in the gut over this.
    And without modern technology systems that can meet modern 
day challenges, our agency missions are at risk, and taxpayer 
resources will continue to be spent on archaic and inefficient 
technology systems of ages past. This committee understands how 
the Federal Government continues to spend a majority of the IT 
budget merely maintaining these legacy systems instead of 
investing in IT modernization reforms, which needs to occur.
    With the majority of agency IT spending going to the 
operations and maintenance of these old systems, new 
investments are crowded out. I think that's where we need to 
get some answers today. We have talked a lot about different 
approaches that can be utilized and bring multi-year IT funding 
mechanism to be established.
    I think we need to go beyond talk and start actually 
getting some answers and hearing what some of these agencies 
are doing to implement modernization efforts. And it is up to 
each of these agencies to utilize some of the resources that 
have been made available.
    With the IRS specifically, some modernization efforts, 
despite repeated large investments by Congress, which, let's 
keep in mind, is really investments from the American taxpayer.
    In spite of these large investments, the IRS continues to 
drag on and seemingly never reach completion of modernization. 
We need answers for those type of problems. How in the world 
can Congress have faith that another $1 or $2 billion or 
whatever it may be at the end of the day that it will be 
proposed by the House and the Senate will actually get anything 
in return?
    Again, I say we need answers to these questions. This 
committee wants to understand how these pervasive and continual 
challenges can be addressed. This is a bipartisan issue with 
potential bipartisan legislative solutions, but we have to 
understand the actual problems preventing agencies like the IRS 
from moving into modern, agile, and robust technology operation 
environments in the future.
    To be fair, we all know that, in a rapid response to the 
global pandemic, there have been a number of emergency 
assistance programs that have been passed into law this year, 
and it has been unprecedented. We all understand that. There 
have been a lot of mandates that have been involved, and as a 
result, we have seen nearly every American taxpayer received 
checks and that occurred in an extraordinarily swift manner by 
the IRS, and for that, we're grateful.
    And you look back at the Economic Stimulus Act of 2008, it 
took weeks and weeks for that to be doled out, but like every 
other large enterprise in the world, the IRS has had its 
operational challenges related to the pandemic. We get that.
    There have been issues with the CARES Act stimulus payments 
reaching their intended destinations. There have been a number 
of issues, but not all the issues--and I get this as well--not 
all the issues and problems have been technologically related. 
There have been legal issues, procedural issues, work force 
issues, data access challenges, but we need to understand the 
actual calls of problems before we can recommend any policy 
solutions. I hope that the hearing today will provide some 
information in that regard.
    And to that point, Commissioner Rettig, I hope that you and 
the other witnesses today can help me and my colleagues 
understand how we can address the underlying barriers 
preventing successful technology modernization so that we can 
ensure the success of the IRS' critical mission. Congress 
cannot afford to blindly continue throwing money at IT 
problems. We have got to find a new approach. We've got to have 
answers. We've got to have modernization.
    So, with that, Mr. Chairman, I want to thank you, and I 
want to thank our witnesses for bearing with Congress and these 
proceedings. I thank them for participating in today's hybrid 
hearing, and I appreciate the opportunity to be able to have 
each of them here today.
    With that, Mr. Chairman, I yield back.
    Mr. Connolly. I thank the gentleman, and I look forward to 
working with him, and I thank him for the spirit--the 
bipartisan spirit he has laid out for us moving forward in 
terms of trying to address, especially the technology 
challenges the IRS is facing.
    I would also ask unanimous consent that a series of 
articles talking about the President's tax situation, including 
the assertion that, in the last two years, he paid $750 per 
year and no taxes for 10 of the previous 15 years. That's not 
just the chairman's opinion; that is a series of analyses based 
on documents not denied by the White House. Called fake news, 
but not a single item, including the deductions and the 
payments I cited, has been denied by the White House.
    So, I enter that into the record, so that it's clear it's 
not just one Member's opinion, including this Member's.
    With that, I see the chairwoman of our full committee is 
on, and I want to defer to her for any opening remarks she may 
have with respect to this hearing.
    Welcome, Chairwoman Maloney.
    Mrs. Maloney. Thank you so much to my good friend and 
colleague Chairman Connolly for holding this important and 
timely hearing on the IRS in the pandemic.
    First, I want to congratulate you on already convincing the 
IRS to move back the deadline for low-income individuals to 
register for an economic impact payment. Until Monday, the 
deadline to register for the EIP was next Wednesday, October 
15. And now these individuals who earn so little they don't 
even qualify to pay taxes have until November 21 to claim this 
vital resource.
    And without this hearing and the chairman's work, that 
extension was unlikely. So, congratulations on improving the 
lives of those who need this money the most. This is a huge 
victory for the subcommittee and for those struggling on the 
brink of poverty across this Nation.
    For the past decade, there's been a concerted effort to gut 
the IRS and to starve it of the funding it needs to do its job 
on behalf of every taxpayer in this Nation. Sadly, after years 
of partisan attacks and neglect, it was no surprise that the 
IRS was not prepared to handle the unique circumstances that 
the corona crisis presents. After all, this agency is operating 
on information technology systems that date all the way back to 
the Kennedy administration.
    We can now see the very real consequences of the past 
decade. We cannot simply decimate essential Federal agencies 
and then expect them to miraculously meet their missions in 
times of crisis. For example, in June, just a few months into 
the pandemic, we discovered that the IRS sent roughly 1.4 
billion in EIPs to dead people. Some of my constituents told me 
that they received EIPs for their dead relatives and were still 
waiting for their own checks. While the IRS had access to the 
Social Security Administration's death file, the Treasury 
Department's Bureau of Fiscal Service, which distributes the 
payments, did not.
    This fix seems simple. Let's share the file and reduce 
improper payments in the next round of stimulus checks. If it 
needs to be a legislative fix, let's make it happen. Today, 
we're going to hear from witnesses who claim that the IRS did 
the best it could with what it had. But that's not the real 
question.
    We need to be asking what the IRS could have done to help 
our country if it had been properly funded and adequately 
staffed instead of being subjected to years of bitter 
Republican abuses.
    In another example my constituents told me they threw away 
IRS-issued debit cards because they looked like a scam and the 
IRS failed to inform them that the cards were coming. Others 
said that the online, quote, ``Get My Payment'', end quote, 
tool was confusing and made them think they were ineligible for 
an EIP when they were, in fact, eligible.
    Today, we will hear that individuals across our Nation, 
including my constituents, are still waiting to receive money 
that their government owes them--money they need to buy 
medicines, pay rent, put food on their tables. Past Republican 
Congress' prevented the IRS from investing in staff and 
technologies that would have allowed for a smooth transition 
and a continuity of service to all taxpayers throughout the 
pandemic.
    Because of decades of partisan attacks, many individuals 
and small businesses might not see their tax returns any time 
soon. They may not see their economic impact payments or EIPs 
until September 2021. They need this money now, not in 11 
months, but now. That's how Congress designed these stimulus 
payments, and it seems clear that the IRS is not equipped to 
meet this moment.
    The systemic decade-old gutting of the IRS forced the 
agency to shut down taxpayer services and assistance just when 
the rules were most confusing and taxpayer needs were greatest. 
The long-term starvation of the IRS means that victims of 
domestic abuse can have their stimulus payments seized by their 
abusers because the IRS doesn't have the resources and staff it 
needs to help address this problem.
    For many women who are domestic abuse victims, this lack of 
IRS resources means they can't achieve economic independence 
and escape abusive relationships. This is a complicated 
problem, but the IRS shouldn't simply shrug its shoulders and 
point them to the court system, which they can't afford to 
participate in. Let's find a solution here today and help these 
women.
    The lack of resources at the IRS means that the wealthiest 
residents of our Nation, those reporting more than $10 million 
a year, can avoid paying proper taxes because there are so few 
capable enforcement staff available to audit them. There's 
little chance they'll be audited, caught, and prosecuted. 
Instead, the IRS has been auditing the poor and the vulnerable 
because it's easier.
    Our government is leaving on the table trillions of dollars 
owed by the wealthy. Finally, I want to express my support of 
the legislation I know the chairman is working on. Legislation 
that would require agencies to think about how technology will 
improve service delivery and agency performance across the 
enterprise of the Federal Government. I support these types of 
critical measures that often take place under the legislative 
radar.
    Thank you so much, Chairman Connolly, for all of your hard 
work that you have done in this area. I am here to support your 
work in every way. It is important that we've reached this 
point of reckoning, and we need to move forward.
    Mr. Chairman, again, congratulations on your achievements 
in holding the IRS responsible and moving forward with ideas to 
make them more up-to-date and IT savvy for the future. I thank 
you so much.
    And I yield back.
    Mr. Connolly. I thank the distinguished chairwoman of the 
full committee, Mrs. Maloney, and I thank you for your 
leadership and for your support. I very much appreciate it.
    Now, I'd like to introduce our witnesses.
    Our first witness today is Charles Rettig, who's the 
Commissioner of the Internal Revenue Service. And we will hear 
from Erin Collins, the National Taxpayer Advocate at the 
Taxpayer Advocate Service. And, finally, we'll hear from Vijay 
D'Souza, who is the Director of Information Technology and 
Cybersecurity at the Government Accountability Office.
    The witnesses will be--if you would all rise and raise your 
right hand, we swear in our witnesses as a matter of course 
here on the committee. Do you swear or affirm that the 
testimony you're about to give is the truth, the whole truth, 
and nothing but the truth so help you God?
    Let the record show that all three of our witnesses 
answered in the affirmative. Thank you.
    Without objection, your full written testimony will be 
entered into the record in full.
    With that, Commissioner Rettig, you're now recognized for a 
five-minute summation of your testimony. Welcome.

STATEMENT OF CHARLES P. RETTIG, COMMISSIONER, INTERNAL REVENUE 
           SERVICE, GOVERNMENT ACCOUNTABILITY OFFICE

    Mr. Rettig. Thank you. Chairman Connolly, Ranking Member 
Hice, and members of the subcommittee, thank you for the 
opportunity to discuss IRS operations and our efforts to help 
taxpayers during the COVID-19 pandemic.
    Nearly two years into my term as Commissioner, I remain 
extremely proud to be working with the IRS knowing that 96 
percent of the gross receipts of our country flow through the 
IRS has strengthened my belief that a healthy, functional IRS 
is critical to the overall success and well-being of our 
country.
    The importance of the IRS to every American has become 
especially apparent since the spring as our Nation has faced 
unprecedented challenges. The IRS has been at the forefront of 
successfully providing rapid economic relief to taxpayers 
during COVID-19. The IRS response serves to illustrate how 
critical it is for the agency to receive consistent, timely, 
and adequate multi-year funding such that we can succeed in 
providing the services that our country so rightly deserves.
    This funding is critical as the Nation continues to weather 
COVID-19 and will also help the agency prepare for future 
emergencies. IRS employees have worked around the clock since 
mid-March to implement major provisions of the CARES Act, 
especially the economic impact payments to help millions of 
Americans during this challenging time.
    So far, more than 160 million economic impact payments have 
been issued, totaling more than $270 billion, with many of the 
payments recognizing more than two people, their payments for a 
household as opposed to an individual. In delivering economic 
impact payments, we balanced the statutory requirement to 
deliver these payments as rapidly as possible with the need for 
accuracy and the concern about potential fraud.
    I also want to call to your attention an important number. 
The Treasury Inspector General for Tax Administration confirmed 
that the IRS correctly computed the payment amount for 
approximately 98 percent of the payments as of May 21. The 98 
percent figure is great, however, there is more to do. The 
strength of our agency is our employees. Our employees want to 
do more, and we will do more with the assistance of Congress.
    We have remained concerned about getting payments out to 
people who don't normally file a return, including historically 
underserved communities of our Nation, such as the lower income 
taxpayers, homeless communities, and various others who do not 
normally interact with the government or certainly with the 
Internal Revenue Service.
    We've worked with our partners to translate economic impact 
payment outreach materials into more than 35 languages and have 
distributed these materials throughout the country. From the 
beginning, we have been aggressively seeking the assistance of 
community-based organizations and many others in identifying 
eligible Americans.
    We ask for your help and the help of every Member of 
Congress in sharing and disbursing this information widely and 
broadly. We realize how difficult this period has been for so 
many Americans. For that reason, the IRS also provided 
important administrative relief. We postponed the filing 
deadline from April 15 to July 15, the latest Tax Day ever in 
the history of our country.
    We implemented the People First Initiative, under which we 
temporarily adjusted our processes to help people and 
businesses during these uncertain times. While pursuing our 
responsibilities with respect to the CARES Act and COVID 
relief, we had to adjust and redeploy resources, and our 
employees have remained dedicated to delivering the 2020 filing 
season as they continued to process electronic returns, issue 
direct deposit refunds, and accept electronic payments.
    As of September 25, we have processed more than 153 million 
individual returns and issued nearly 122 million refunds for a 
total exceeding $289 billion while we were also processing 
economic impact payments and preventing cyber-attacks in a host 
of other areas.
    During this time, we've also focused on enhancing the 
experience of taxpayers who have limited English proficiency. 
For the first time ever, the Form 1040 filed next year will be 
available in Spanish. Basic tax information is available in 
more than 20 languages. People who call in can get interpreter 
services for more than 350 languages and for these actions, I 
am extremely proud of our employees.
    On the enforcement side, we have redeployed resources to 
the best of our abilities to highlight and focus on certainly 
high-income individuals and certain types of transactions that 
such individuals participate in. Our phased-in reopening has 
been difficult, we understand, for Members of Congress, for 
taxpayers, and others. However, the health and safety of our 
employees had to remain paramount throughout.
    Our employees shared the same health and safety concerns as 
shared by every other American for themselves, for their 
family, and for their neighbors and their community. And we had 
to focus on that while also trying our best to respect our 
responsibilities to this country, both with respect to filing 
season, as well as with respect to the issuance of these 
payments, maintaining a vigilant, robust enforcement 
atmosphere, protecting cybersecurity issues. And we receive 
more than 2.5 million attacks per day on our systems, 1.6 
billion per year. And we understood that in this situation 
where we scaled back our activities, where we closed the 
majority of our physical facilities, where we moved almost 
57,000 people to teleworking, we undertook all of that while 
also doing our best to maintain our responsibilities to this 
country from every perspective.
    With that, I want to just reemphasize that we depend on 
consistent, multi-year funding to deliver top quality services 
to our taxpayers, to protect the health and safety of our 
employees, to conduct enforcement initiatives, to provide 
guidance, and to support badly needed long-term modernization 
efforts.
    Chairman Connolly, Ranking Member Hice, and members of the 
subcommittee, this concludes my statement, and I would be happy 
to take questions.
    Mr. Connolly. Thank you, Commissioner Rettig.
    Ms. Collins, you are recognized for your five-minute 
statement.

   STATEMENT OF ERIN M. COLLINS, NATIONAL TAXPAYER ADVOCATE, 
                   TAXPAYER ADVOCATE SERVICE

    Ms. Collins. Chairman Connolly, Ranking Member Hice, and 
distinguished members of the subcommittee, thank you for 
inviting me to testify at today's hearing, ``The IRS in the 
Pandemic.''
    I started my job as a National Taxpayer Advocate on March 
30, just after the IRS and much of the country----
    Mr. Connolly. Let me interrupt without penalizing you. 
That's my birthday, so congratulations.
    Ms. Collins. Oh. Well, thank you. It was a very important 
day for a lot of reasons.
    So, at that point, most of the country was shutting down 
due to the pandemic and little did I know then how much the 
pandemic would impact both tax administration for the IRS, but 
also with respect to taxpayers.
    As we continue to grapple with the pandemic, my best wishes 
go out to all those impacted by the virus. In my statement 
today, I will share three predominant points about the past six 
months.
    First, despite its constraints, the IRS has done its best 
job to handle more work with reduced funding, but taxpayer 
service and revenue collection has both suffered over the 
years, as you have noted. In the height of this year's filing 
season, it was given the task of disbursing the economic impact 
payments to some 160 million eligible individuals and their 
families. Millions of homes ordinarily don't file a tax return 
with the IRS, and the IRS had to find them.
    This filing season the overwhelming majority of taxpayers 
did not experience problems in filing their return or the 
receipt of their refunds. Over 90 percent of individual 
taxpayers file their returns electronically and efile 
capabilities were operational throughout the pandemic. About 70 
percent of the taxpayers claimed refunds, most of those refunds 
were paid without delay, particularly 83 percent that were 
disbursed by a direct deposit.
    But as has been noted, it's the people who did not receive 
the refunds that we're most concerned with. Second, despite the 
IRS' strong performance, many taxpayers experienced significant 
delays resulting in financial hardship. Many taxpayers still 
file their returns on paper, either by choice or by necessity.
    In 2019, the IRS received about 18 million individual paper 
income tax returns. This year, for the protection of the health 
and safety of its employees, the IRS shut down its mail 
processing operations from March to early June. During that 
time, millions of tax returns, checks, and other correspondence 
piled up.
    As of September 19, the IRS estimated that it had a backlog 
of about 5.8 million pieces, including an estimated 2.8 million 
unopened returns. For taxpayers counting on those refunds to 
meet their basic living needs, the delays have been 
particularly painful. In a typical year, the IRS receives about 
100 million telephone calls and several million visits to its 
walk-in taxpayer assistance center.
    Due to the pandemic, the IRS shut down its toll-free lines 
for about a month and slowly began resuming service. It also 
shut down its taxpayer assistance center for about three 
months. Some taxpayers also experienced delays in their receipt 
of their economic impact payment. And as the Commissioner 
noted, the inspector general found that the IRS correctly 
computed about 98 percent of the amount of the EIPs correctly. 
But based on 160 million payments, that leaves about 3 million 
payments of eligible individuals who are claiming additional 
amounts that they are now requesting from the IRS, and plus I 
believe we've identified several million cases where payments 
were not made at all.
    At first, the IRS took the position that most taxpayers who 
wanted their increased payment amounts would have to wait until 
they filed their 2020 return, but my office and others urged 
the IRS to find ways to correct some of these underpayments 
immediately. The IRS has since developed processes and programs 
in its systems to fix many of these problems. However, the IRS 
simply does not have the resources necessary to make a manual 
case-by-case adjustment in potentially several million cases.
    However, the individuals still have a right to file it on 
their upcoming tax return, but that brings me to my final 
point.
    The IRS desperately needs more resources to do its job of 
helping taxpayers and collecting revenue. There's an old 
expression: you can't get blood from a turnip.
    If the IRS continues to be starved its resources, it will 
continue to struggle. It needs more customer taxpayer 
representatives, agents, and to assist those taxpayers, and it 
needs more modernization of its IT systems.
    The IRS' IT struggles are known, and as the chairman noted, 
to compound its challenges, the IRS budget has been reduced by 
about 20 percent since 2010 while the number of tax returns has 
increased 13 percent. As a result, the IRS lacks the staffing 
it needs to serve taxpayers. Although, I'm new at this job, it 
is clear that the IRS is well behind private sector financial 
institutions in providing the much-needed services.
    Americans are entitled to top quality service and a tax 
administration they can trust and work with.
    Thank you for inviting me here today, and I welcome working 
with you and your staff in the future and happy to answer 
questions.
    Mr. Connolly. Thank you, Ms. Collins.
    Mr. D'Souza, welcome.
    You're recognized for your five-minute summation.

STATEMENT OF VIJAY A. D'SOUZA, DIRECTOR, INFORMATION TECHNOLOGY 
      AND CYBERSECURITY, GOVERNMENT ACCOUNTABILITY OFFICE

    Mr. D'Souza. Thank you, Chairman Connolly, Ranking Member 
Hice, and members of the subcommittee, thank you for the 
opportunity to testify today on GAO's prior work relating to 
IRS' IT operations and modernization efforts.
    My name is Vijay D'Souza. I'm a director in GAO's 
Information Technology and Cybersecurity team, but this 
statement draws on work conducted by our team, as well as our 
strategic issues and financial management teams.
    Effective IT is essential to IRS' operations and was, as 
everyone's noted, important to the distribution of millions of 
economic impact payments disbursed as part of the CARES Act. 
GAO currently has work under way looking at IRS' efforts in 
this area.
    For this most recent fiscal year, IRS spent over $3 billion 
on IT, of which a little more than 80 percent was for ongoing 
operations and less than 20 percent was for modernization 
activities.
    IRS' IT budget has been fairly flat over the last 10 years. 
One of IRS' goals specifically and the Federal Government's in 
general is to reduce the proportion of spending for ongoing IT 
operations. Although IRS does make effective use of IT in 
billions of transactions a year, our prior work has found 
numerous issues related to IT operations and modernization. 
I'll mention a few of these issues now.
    First, GAO's responsible for auditing IRS' financial 
statements. As part of this process, we assess that IT controls 
related to IRS' financial systems, we identify cybersecurity 
issues, and we make recommendations. We also track IRS' 
progress in addressing prior year recommendations. Most 
recently in May, we identified 18 use cybersecurity 
recommendations, including these new recommendations that a 
total 132 cybersecurity recommendations remain outstanding.
    Second, as part of our ongoing assessments of IRS 
operations, we identify IT issues that limit IRS' ability to 
conduct its mission. I'll highlight a couple of them for you 
here. In January 2020, we reported on computer problems IRS 
customer service representatives experienced that caused some 
taxpayer phone calls to disconnect mid-call. We recommended, 
and IRS agreed, that it should both identify the causes of this 
problem and track the resulting down time.
    In February, we reported that IRS could only capture 
certain business tax information in PDF format, which is harder 
for it to use than other electronic open data formats. These 
other formats would better allow the agency to analyze 
information in these returns for enforcement and other analytic 
activities.
    We recommended that IRS consider the cost and benefits of 
converting this information. Although IRS disagreed with our 
recommendation for one of its business units, we still think 
this is worth doing and would help IRS with compliance efforts.
    Finally, we have conducted numerous examinations of IRS' IT 
management activities, including those related to its efforts 
to modernize its computer systems, which, as others have noted, 
some of which are based on programming languages more than 50 
years old.
    In May 2016, we reported on IRS' use of older programming 
languages for key computer systems, most notably its individual 
master file, which is the core individual tax processing 
system. We recommended IRS develop a plan with timelines to 
replace IMF. IRS does have an effort called CADE 2 under way, 
which will replace core parts of the IMF, but does not yet have 
a plan for replacing the overall system.
    Recently, IRS' acting CIO told us that IRS is beginning to 
develop such a plan. In June 2016, we reported on IRS' process 
for prioritizing its IT investments, both for ongoing 
operations and modernization activities. For modernization 
activities specifically, we found that IRS had not fully 
developed and documented a prioritization process. IRS' acting 
CIO has told us the agency hopes to have this process fully 
implemented for Fiscal Year 2022.
    In June 2018, we looked at IRS management of several 
operations and modernization investments. We found that IRS did 
not fully address a number of assessments and risk-management 
activities that were needed around those investments.
    We also identified several weaknesses in IRS work force 
planning activities. From this report, we made 21 
recommendations. As of today, IRS has addressed three of these 
recommendations and taken steps to address others. And we've 
recently started work where we're going to update this 
assessment.
    Every aspect of IT, including cybersecurity operations and 
modernization efforts, is critical to IRS' mission and service 
to the American taxpayer. Going forward, continued attention to 
the issues we have identified is important to IRS' ability to 
meet the challenges it faces. Also important, as others have 
noted, is stable and consistent funding for IRS' efforts.
    Mr. Chairman and Mr. Ranking Member, this concludes my 
statement. I'm happy to answer any questions you have.
    Mr. Connolly. Thank you very much, Mr. D'Souza.
    Just a clarification: In your testimony, you referred to 
the fact that the IRS budget has been relatively flat. Do you 
consider a 20-percent cut in its budget relatively flat that 
resulted in a 22-percent reduction in its work force?
    Mr. D'Souza. So, I was specifically talking about the IT 
budget, not the overall budget. There's definitely a 
difference.
    Mr. Connolly. Oh. Oh. Right. I just want to clarify. Thank 
you.
    The chair now calls on the distinguished Congresswoman from 
the District of Columbia, Ms. Norton, for her five minutes of 
questions.
    Ms. Norton. I thank my good friend from Maryland 
particularly for this hearing. I think the average taxpayer----
    Mr. Connolly. Excuse me. I am from the great Commonwealth 
of Virginia, not from Maryland.
    Ms. Norton. What a terrible mistake. And I see my friend 
from Maryland is on the committee.
    Mr. Connolly. We love Maryland, but we love Virginia more.
    Ms. Norton. But I want you to know that the District was 
formed out of both Maryland and Virginia, so I thank you for 
that too.
    Mr. Chairman, I think if people have been listening to this 
testimony that the average taxpayer and the statistics are that 
the American people are extraordinary compliant, but they are 
astonished by what they have learned about the state of the 
IRS.
    I'm particularly interested in economic impact payments. 
They go to people who don't pay their income taxes because 
their earnings are not enough.
    Now, according to the statistics I have, on September the 
18, the IRS said it was going to start mailing letters to these 
9 million Americans who don't pay income taxes but are due to 
get this economic impact payment. These are people who have 
very low incomes, but I do want to say how happy I am that the 
IRS has just extended the registration deadline for these 
nonfilers, these low-income people to claim this economic 
impact payment to November the 21, 2020.
    I'm asking all members to email--consistently email your 
constituents to let them know these people, you know that they 
are Democrats and Republicans, that they can still get an 
economic impact payment up to November 21. I think that's our 
obligation.
    Mr. Rettig, this is my question for you. How many of these 
roughly 9 million people were eligible to get these funds, this 
economic impact payment, have yet to register a claim for an 
economic impact payment, these low-income filers people?
    That's for Mr. Rettig.
    Mr. Rettig. Yes. How many people have not received EIP, is 
that the question?
    Ms. Norton. Of the roughly 9 million have not yet 
registered to claim an economic impact payment, how many of 
these low-income people have not tried to claim?
    Mr. Rettig. That--our pool is not necessarily low income. 
That pool was put together through a variety of indirect 
methods by a variety of Federal agencies and then tried to 
match it to our system. So, I would not wrap that with--it's 
about 8.4 million. The letters have not gone out----
    Ms. Norton [continuing]. But how many--OK. Thank you.
    It's 9 million people. I just want to know how many have 
yet to claim their economic impact payment.
    Mr. Rettig. I'm having difficulty hearing you. Is the 
question, how many people have not claimed the payment? We are 
not able to quantify the number of individuals who have not 
been identified.
    Ms. Norton. Mr. Chairman, Mr. Chairman, I ask that that 
number be required to be later given to the committee.
    Mr. Rettig, is it possible that an eligible income 
individual not receive a payment? Is everybody going to receive 
it?
    Mr. Rettig. We intend for everyone to receive it. We're 
holding over seven outreach events this week, pretty much every 
week. We have provided tool kits to 535 Members of Congress to 
be distributed to all of their local offices. We have 
interacted with 137 different ethnic media outlets around the 
country, hundreds and hundreds of homeless shelters. I have 
participated in person at homeless shelters around the country 
and other similar events----
    Ms. Norton. Well, thank you very much. I'm sorry. My time 
is so limited. My time is so limited. I've got to go on to the 
next question, but that's very good to hear.
    Mr. Rettig, the CARES Act says that provisions regarding 
the stimulus should be directed--that's $1,200 to every 
eligible individual. There's no language in the statute that 
directly or even indirectly suggests that incarcerated people 
are not eligible.
    Why were incarcerated people not receiving their $1,200?
    Mr. Rettig. That's an issue to present to Treasury, and 
it's an issue that is actually in litigation, and it would be 
inappropriate for me to comment upon litigation.
    Ms. Norton. Mr. Chairman, I just want to say that many of 
these are joint filers. They have families. They have child 
support payments, and I ask the committee to followup on why 
incarcerated people do not receive these payments which says, 
according to the statute, every eligible--the CARES Act says 
every eligible person may receive.
    And I thank you very much for the time given to me.
    Mr. Rettig. Thank you.
    Mr. Connolly. I thank the Congresswoman, and I assure her 
we will followup on that because there is no language 
prohibiting such payments.
    The chair now calls on the distinguished ranking member, 
Mr. Hice, who looks very relaxed and very comfortable, for his 
five minutes of questioning.
    Mr. Hice.
    Mr. Hice. Thank you, Mr. Chairman. And I am very relaxed, 
but it's good to be part of this hearing. I do want to 
respond--Ms. Collins brought up some interesting issues during 
her opening statement, and one of which has been said by some 
others here today about the IRS starving in terms of fund.
    I would just, for the record, bring back to reality that, 
in 2010, that was kind of a watermark year for IRS funding, and 
what did they do when they had that kind of funding? There were 
lavish conventions. There were ridiculous videos. There were 
targeting of conservative groups. And I think it's important 
for these types of things to not be repeated.
    Commissioner Rettig, we're hopeful and trustful that you 
will be able to make sure that this type of wasteful spending 
does not happen again, but also as mentioned, I believe it 
was--and I think I've got these numbers correct. I was trying 
to write them down: 18 million paper filings of tax returns for 
this past year, 5.5 million in backlog, and I believe it was 
2.8 million that were unopened.
    As it relates to the paper filings, those that were mailed 
in, that is certainly nowhere near 90 plus percent of 
completions. 18 million filed and 5.5 million backlogged and 
nearly 3 million unopened is, frankly, an unacceptable amount. 
We are hearing from our constituents right and left why their 
tax returns have not come back. So, really, I just, on behalf 
of those constituents, not only in my district but across the 
country, when can they expect those mailed in returns to be 
opened, dealt with, and then to receive their refunds?
    Mr. Rettig. Sir, as of September 25, we've received 12.9 
million paper returns. We had a current paper backlog of 
approximately 5.3 million of which we estimate that 
approximately 2.5 million is returns. We are processing our 
backlog at the rate of about 1.3 million per week, which I 
think is exceptional. In March/April timeframe, we were at 
about a 23 million backlog. So, we have about 1.3 million we're 
going through per week keeping in mind that we average 
somewhere between 3 to 500,000 pieces of mail each week, and so 
we need to open the mail to determine, is it a return, or is it 
some other type of correspondence?
    So, we do prioritize the returns in terms of the processing 
of the paper mail, including correspondence that is received. 
We process the returns on a priority basis, and of that, we 
process refunds on a priority basis. And so I can certainly 
tell you, sir that our people are----
    Mr. Hice. With those kinds of numbers, it sounds like----
    Mr. Rettig. working really hard. We're doing----
    Mr. Hice [continuing]. Sounds like----
    Mr. Rettig. Two shifts and have offered overtime to all of 
our people to get through this.
    Mr. Hice. OK. So, it sounds like to me from what you're 
saying is that most of those, the backlog, should be pretty 
much dealt with by the end of this month. Is that correct? 
Ballpark?
    Mr. Rettig. I can't say that because it depends upon what 
they open. Sometimes they open something that's complex and it 
takes a particular period of time. If the straight averages 
work, we are going through 1.3 million per week. We have 5.2-, 
5.3 million pieces total, but keeping in mind 3-to 500,000 come 
in on top of that. So, it's a process.
    I can vouch for the effort, and I can certainly vouch for 
the desire and the sensitivity, and remember that our work 
force is reflective of the communities that they live in and 
the communities that they're processing these returns for----
    Mr. Hice. I get that.
    Mr. Rettig [continuing]. So, we get it.
    Mr. Hice. I thank you for your effort, but effort does not 
resolve the issue for those who are waiting. I do appreciate 
the effort, but we have a lot of people who are struggling.
    Let me hit on the IT question here. Congress has provided 
billions, as you well know, of funding for IT modernization and 
there's mixed results.
    We still are a long ways behind. If more funding is given 
for IT modernization, how can you ensure the fact that those 
funds are going to be effectively used and managed so that we 
actually have the end result of IT modernization rather than 
continually trying to maintain and support legacy systems?
    Mr. Rettig. Well, the appropriation earmarks what the 
funding would be for. And, within the separate appropriations 
and allocations, I think that we could cover that.
    Also, in terms of efficiency and IT efficiency, it should 
be noted that, filing season 2019, we set records for 
processing per second, per hour, and per minute. And we broke 
those records in filing season 20 during the COVID pandemic, 
with most of our facilities shut down, and we came to 2.275 
million returns processed per hour, 632 per second, without any 
technological errors.
    And the same group of IT folks who handle our filing season 
were also responsible for implementing the EIP payments, which 
was not only for individuals that we had information, but 
individuals we did not have information. And then we inherited 
the programming for the Veterans Administration as well as for 
Social Security Administration. And we created portals that 
more than 14 million people came in through a nonfilers portal. 
Our same IT folks took care of all of that at the same time.
    We did not have the luxury of onboarding hundreds or 
thousands of folks to help us in that situation. We had people 
who had to multitask. And these particular folks worked 15-to 
17-hour days, seven days a week from March through July. And I 
would say that our folks performed. I would suggest and request 
on an IT appropriation, oversight--specific appropriations for 
where we are.
    The Taxpayer First Act was passed--strong bipartisan 
support--has tremendous provisions in it for modernizing the 
systems of the Internal Revenue Service, but it does not yet 
have any funding associated with it. So, you know, in my mind 
set, these things come together.
    We take our responsibilities to Congress, to the American 
people, and to our employees and the neighborhoods that our 
employees live very seriously. We want to perform, and we want 
people to be proud of the Internal Revenue Service.
    Mr. Connolly. The gentleman's time has expired.
    Mr. Hice. Mr. Chair, that's a great answer, but I don't 
believe it fully answered my question. But I know my time has 
expired, so I yield back.
    Mr. Rettig. I'm available for all of you on a one on one.
    Mr. Connolly. Let me just say, Mr. Hice, I--I think it may 
be implicit in your line of questioning is, despite the 
accomplishments of the IRS under very adverse circumstances, 
remember that we also represent the community.
    Mr. Hice. Uh-huh.
    Mr. Connolly. And I think Mr. Hice is pointing out--and I'm 
certainly joining him. I gave some examples in my opening 
remarks. We're hearing from constituents who aren't being well 
served, who are panicking in some cases about their refunds or 
their direct payments still. And we need a better response, 
frankly, in terms of a liaison with Members of Congress to be 
able to serve those taxpayers, our constituents.
    And I hope you're hearing that because generally we hear 
from people when things aren't working. So, that may be a small 
percentage, but it's, you know, real human beings and real 
needs.
    So, I echo what my friend, Mr. Hice, has said. We need to 
really work on that, and I think, frankly, having a stepped-up 
liaison for us to be able to go to some kind of ombudsman who 
can help solve problems for taxpayers would be very welcome 
under these----
    Mr. Rettig. May I provide a brief comment?
    Mr. Connolly. Yes, of course.
    Mr. Rettig. In conjunction with that, you know, we had a 
phone line for Congress that got essentially overrun with the 
volume. So, we're sensitive and understanding. And then it was 
my bright idea to create an email box such that our folks could 
work it around the clock on emails received.
    We received, I think, over 100,000 emails from house.gov or 
senate.gov, and so my bright idea really overran us as well, 
but it was an effort to try to get there.
    I very--sir, I spent 36 years on the outside representing 
individuals with respect to the Internal Revenue Service and 
tax-related matters. I very much understand the concepts that 
each of you are there. I take these concepts to heart.
    And there have been some comments with respect to lower 
income individuals as well as different ethnic communities, and 
I have not been in front of many of you before, but I want to 
add into this two points that I'm very proud--and I'm closing 
here, but two points that I'm very proud.
    I am the first Commissioner in the history of the Internal 
Revenue Service whose spouse came into the United States as a 
refugee from a refugee camp and whose parents do not speak 
English but happen to now live in the United States.
    I'm also the first Commissioner to come to the Internal 
Revenue Service who has a son or daughter who is Active Duty 
United States military who has deployed twice, who has the 
privilege of wearing the flag on his shoulder, and I take that 
to heart. Those are the issues as to why I came on board.
    Mr. Connolly. Thank you, Mr. Rettig, and we certainly honor 
your personal history and commitment. Remember, Members of 
Congress are also patriots and committed to their constituents 
and trying to make----
    Mr. Rettig. I believe we are all serving.
    Mr. Connolly. Trying to make things work under very adverse 
circumstances.
    And thank you, Mr. Hice, for allowing me to piggyback on 
that.
    The chair now calls on the gentleman from Maryland, Mr. 
Sarbanes, for his five minutes.
    Mr. Sarbanes. Thank you, Mr. Chairman. Can you hear me?
    Mr. Connolly. Yes. We can hear you loud and clear.
    Mr. Sarbanes. OK. Terrific. Thanks for the hearing.
    Mr. Rettig--Commissioner Rettig, I want to give you credit, 
because you're certainly putting a brave face on in view of 
these dramatic cuts that the IRS has experienced over a period 
of years now. I mean, the numbers are breathtaking. The work 
force having been reduced by 22 percent since 2010 has 
obviously undercut the IRS' daily operations in a significant 
way.
    And I want to salute the frontline workers at the IRS, the 
rank and file, who are really engaged in acts of heroism every 
day trying to lift up a caseload that I think is drowning them.
    So, we have to get more resources to the IRS, and that has 
to be a number-one priority for Congress, and I think it ought 
to be a priority of any administration. Unfortunately, we have 
not seen that from the Trump administration.
    When the IRS doesn't have enough resources, the fact of the 
matter is that the rich get richer, high-end tax cheats get 
away with not paying their taxes, frauders are able to get away 
with their schemes, and those who ought to be on the receiving 
end of severe and significant enforcement by the IRS are not.
    Meanwhile, those average Americans out there who play by 
the rules and look to the IRS to engage with them in a 
straightforward way and get them their refunds, make sure the 
earned income tax credit is processed, make sure that these 
economic payments that come from these stimulus measures we've 
put in place are getting to them, they're the ones that are 
getting short shrift here.
    So, I think that's what's so offensive to many of us, is, 
when the IRS doesn't have the resources that it should, it 
can't do what's necessary to enforce against those who are 
trying to evade their tax obligations on the one hand, and it 
can't provide the kind of service to everyday Americans who are 
playing by the rules on the other hand.
    Ms. Collins, can you talk a little bit more with us about 
how adequate funding around enforcement can actually pay huge 
dividends for the IRS and clamp down on the kinds of schemes 
and efforts to avoid a tax payment that we know are going on 
out there every single day? Put some numbers behind that for 
us.
    Ms. Collins. Well, sure. As we all know, that our U.S. tax 
system is a voluntary tax system, and we depend on people 
willing every year to sit down, fill out that form, and pay 
their appropriate amount of taxes. So, I really think 
enforcement is a reward to those who voluntarily comply. And I 
think, if the public does not see that the IRS is enforcing the 
laws, we're going to be at risk of losing people continuing to 
voluntarily comply.
    Mr. Sarbanes. Well, I appreciate that because, you know, 
sometimes those who want to attack the IRS on ideological 
grounds, they sort of say, you know, ``Be afraid; the tax man 
cometh.'' But, when the IRS is coming for those who aren't 
paying their taxes, aren't playing by the rules, that's the 
appropriate kind of enforcement.
    And the resources that you can garner if you do that 
enforcement well can then be redeployed again to help serve 
those taxpayers out there that are playing by the rules, are 
looking for that refund, are looking for the benefits that can 
come when we use the IRS to distribute important stimulus 
payments in the midst of a pandemic like we're doing right now.
    So, that's the tradeoff we see. And we have an obligation 
to make sure that the IRS is funded in a way that it can do its 
job and do its job on behalf of that broad set of Americans 
that rely on this agency to make sure resources get distributed 
in a fair fashion.
    So, Mr. Chairman, thank you for this hearing. It, I think, 
emphasizes once again why we as a committee, why Congress needs 
to work hard to get the resources to this agency, but also why 
we need leadership from the top--and I'm not talking about 
Commissioner Rettig right now; I'm talking about the President 
of the United States--who understands the valuable service that 
the IRS can provide.
    And, with that, I yield back.
    Mr. Connolly. I thank the gentleman.
    Mr. Grothman, the gentleman from Wisconsin, is now 
recognized for his five minutes.
    Mr. Grothman, I see you.
    Mr. Grothman. Yep. There we are.
    Mr. Connolly. I hear you now.
    Mr. Grothman. Can you hear me? OK. Good.
    Mr. Connolly. We can hear you.
    Mr. Grothman. OK. First of all, I thank--I'd like to thank 
Mr. Rettig for being here. I think his agency is professional, 
and I think any implication that they are intentionally 
avoiding segments of the population, as it so frequently is, is 
misplaced and is insulting.
    That being as it's said, it's not a perfect agency. So, we 
have some questions for you.
    In Wisconsin, we had a lot of people who couldn't get their 
tax refunds, and at least we were informed part of the problem 
was that they had shut down the Fresno office. Now, that's 
unrelated as far as I can see to the quality of IT. It's, you 
know, just as deficient to apparently have a lot of tax returns 
sitting there unopened, and, as the result, people waiting, you 
know, months for their tax refunds. Maybe some still don't have 
it.
    I'm wondering if you could comment on the decision to shut 
down the Fresno center, and what was or is being done to make 
sure that people were getting their tax refunds? After all, 
here we have money that people here have already worked for and 
are waiting to have it come. And is it your belief that right 
now, all or almost all of the refunds that will end up in the 
Fresno center are paid off?
    Mr. Rettig. Well, the Fresno service center is scheduled 
for a closing. We've closed two other centers, and I think 
there is two others beyond that. That's actually part of a 
consolidation that's going on for the Internal Revenue Service 
for years as paper filings were reduced and electronic filings 
increased.
    And our current statistic on electronic filings is almost 
92 percent. So, it used to be 92 percent, let's say, in paper 
filings, and so we had campuses around the country, some 
dedicated to individual returns, some dedicated to business 
returns.
    So, the concept that Fresno would be in the process of 
closing--and it's about a year project from now--and we are 
working, you should know, very hard to get placement of our 
employees elsewhere within the Internal Revenue Service, and we 
are also working with the----
    Mr. Grothman. I don't mean to cut you off.
    Mr. Rettig [continuing]. Private sector doing career days 
to----
    Mr. Grothman. Yes.
    Mr. Rettig [continuing]. Place our folks on the outside. We 
are one family.----
    Mr. Grothman. I don't mean to--I don't mean to cut you off. 
I don't----
    Mr. Rettig. In terms of the----
    Mr. Grothman. Can you hear me?
    Mr. Rettig. I'm sorry. Yes.
    Mr. Grothman. Yes. I don't think you get the gist of the 
question. The problem is we are told that returns were sent to 
the Fresno office. And, whether it was your decision or the 
Governor of California, I don't know, but, after returns were 
sent to the Fresno office, they were never opened and sat 
there.
    It's not a matter of the long-term decision to shut down 
the Fresno office. I was told that the Fresno office was, as a 
practical matter, not working at all due to the coronavirus, 
and, therefore, people who sent tax returns there were not 
getting their refunds, and they just remained there unopened.
    Is that accurate? And, if so, is the office now up and 
running, or what has become of the refunds for people whose 
paper returns were sent to Fresno?
    Mr. Rettig. So, it was my decision to close almost 90 
percent of our 511 facilities around the country based on 
health and safety concerns for our employees. We did it 
procedurally with respect to local guidance, although we were 
exempt from guidance. But during March, April, May, our 
physical facilities were shut down. So, mail did create a 
backlog during that period of time.
    We have been working on that backlog, and I indicated 
earlier a belief that we're within a couple of million paper 
returns inside of a backlog, which is also why we would stress 
for people who have yet to file a return to file that return 
electronically because we are able to process it.
    We did--as we opened versus campuses around the country, we 
did shift physical mail from one campus to another when the--it 
was more of an ability to open based on health and safety in 
certain environments compared to others. So, we were moving 
physical mail around the country to where we had the customer 
service representatives and others to process the mail.
    Similarly, we did the same thing electronically, but 
electronically, we could actually do it within 30 minutes, 
shift entirely from one campus to another. Physical mail----
    Mr. Grothman. Yes. I just want to----
    Mr. Rettig [continuing]. Requires trucks.----
    Mr. Grothman. Yes. I don't mean to cut you off.
    Mr. Rettig. Right.
    Mr. Grothman. Have all of the returns, say, filed by April 
15 that went to Fresno, because, if you're in Wisconsin, I 
think, you know, you are supposed to mail to Fresno. Have they 
been processed all, as far as you know?
    Mr. Rettig. I will get back to you with specifics, but my 
understanding is we're already into July. So, if somebody filed 
a----
    Mr. Grothman. OK.
    Mr. Rettig [continuing]. Paper return in March or April----
    Mr. Grothman. I'll give you one more question because I'm 
running out of time.
    A lot has been said about people not being able to get 
these $1,200 checks. As I understand it, they were not supposed 
to go to people who were here illegally. Are you doing anything 
to make sure that those refunds are not going to people who are 
here illegally?
    Mr. Rettig. We have a series of filters and checks and 
markers that go into our system, which are based on the 
information that we have. We don't have complete information, 
as you can imagine, to every person, whether they're domestic 
or foreign. But, based on the information we have, our systems 
are in line with the information that we have as to who should 
or shouldn't get payments.
    Mr. Connolly. The gentleman's time has expired. I thank the 
gentleman.
    Mr. Grothman. Thank you.
    Mr. Connolly. The Congresswoman from the United States 
Virgin Islands, Ms. Plaskett, is recognized for her five 
minutes.
    Ms. Plaskett. Thank you very much for the time, Mr. Chair, 
and thank you to the witnesses for being here.
    Mr. Rettig, just before I go into my line of questioning, I 
don't want to leave that hanging out there as if there is a 
perception on the part of IRS that you have given checks to 
illegal aliens, as they are being called.
    There is no reason to believe that the IRS are giving 
checks to individuals who have not filed income taxes and are 
therefore permanent residents and should be here lawfully. Is 
that correct?
    Mr. Rettig. To my knowledge, we've followed the law as the 
law is written.
    Ms. Plaskett. OK.
    Mr. Rettig. That's correct.
    Ms. Plaskett. Thank you. Thank you. Thank you for that. 
Let's not begin thinking that these stimulus checks are being 
given out willy nilly and are not serving the purpose for which 
Congress intended them, that being to assist Americans and 
those who are qualified to receive them from receiving them.
    I wanted to ask you some questions with regard to how this 
funding is being--the COVID pandemic is panning out and your 
tremendous support to the people of the territories and to the 
Virgin Islands.
    In September, I wrote a letter to you, Mr. Rettig, 
Commissioner, and to Secretary Mnuchin requesting temporary 
waiver of requirement that bona fide residents of the Virgin 
Islands be hospitalized in order to maintain physical presence 
in the territory, for tax purposes, on days that are spent on 
the mainland for medical reasons.
    As you know, due to our tax structure and for some 
individuals who utilize our economic development program and 
receive tax benefits for being in the Virgin Islands, they have 
a certain number of days that they have to reside in the 
territory. However, due to COVID pandemic, many of those are 
still on the mainland or have medical purposes.
    Do you have a response, or do you have any status request--
status to give me on the update of my request to you?
    Mr. Rettig. It's my understanding that Treasury is 
responding and that that response will be coming. You know, I'd 
hate to use the term ``soon,'' but my understanding is soon, 
and let me say that, if it is--we have followed up, we will 
followup, and, if soon is not in the space of less than 10 
days, you'll hear from me or somebody on my behalf giving you a 
better timeline, but it's--Treasury is handling the response to 
you.
    Ms. Plaskett. OK. Thank you. And, you know, in Washington, 
you hate to hear the word ``soon.''
    Mr. Rettig. Yes, I know.
    Ms. Plaskett. But, you know, that's the kind of word that--
--
    Mr. Rettig. Right. I know.
    Ms. Plaskett [continuing]. I give my kids when I say maybe 
you can go somewhere. It usually means no.
    Mr. Rettig. You'll note my apprehension to it, I'm sure.
    Ms. Plaskett. Thank you.
    I also wanted to find out, you know, we had a terrible 
situation. IRS--you and Treasury were so good to support us in 
terms of when our Governors gave you the number of individuals 
that were going to be receiving stimulus checks. Rather than 
seeking reimbursement for the money under the Mirror Code, you 
gave money upfront, and that has been really helpful to us 
based on those numbers.
    However, you may be aware that there was a snafu that 
occurred in that primarily those individuals who received 
Social Security checks were given two checks, one from Puerto 
Rico, in form of a direct deposit, and the Virgin Islands.
    Many of these are elderly people. Some of them rely solely 
on Social Security. And they're really concerned because they 
have been told to write a check to the government of the Virgin 
Islands for the money that may have come from Puerto Rico, and 
the government of the Virgin Islands will then send that money 
to Puerto Rico for the double payments. The people are 
concerned that Puerto Rico will still, in turn, come after 
them, that that money hasn't been sent.
    Are you aware of this issue, and is there any clarification 
on what the correct procedure is for those individuals who 
receive those checks to take care of that?
    Mr. Rettig. Specific as to the Virgin Islands, that came to 
my attention this week, and I also am understanding of a 
situation where essentially there is a concern that a person 
might issue a check but also have the same amount removed from 
their account----
    Ms. Plaskett. Yes.
    Mr. Rettig [continuing]. In which case they essentially 
received zero.
    Our intention is that every eligible American receive their 
payment and receive their payment in the correct amount. So, I 
will actually personally look into that deeper, and, as far as 
the advice, we do have advice for people who have received 
duplicate checks. And some of those issues are because we 
received information from multiple sources.
    Ms. Plaskett. Multiple sources, uh-huh.
    Mr. Rettig. We are trying to do it as rapidly as possible. 
We did it to the best of our ability, but obviously there were 
situations where things happened, you know, because of certain 
programs who couldn't work together maybe and things like that.
    But, as far as that, there is a payment provision on our 
site where people can send checks. As far as sending them to 
the Puerto Rico--the Virgin Islands folks sending it to Puerto 
Rico, I need to look into that because I'm not sure if--
personally of that connection. We do have people there.
    But our intention, desire, and support is as strong for the 
people in the territories around the world as it is for people 
in downtown Washington, DC, New York, or wherever. We 
understand the need and purpose of these payments, and we are 
trying our best.
    You will hear back from me, and----
    Ms. Plaskett. Thank you.
    Mr. Rettig [continuing]. If not, I encourage you to again 
reach out to me. Something you sent or forwarded yesterday did 
get on my desk, so----
    Mr. Connolly. OK.
    Mr. Rettig [continuing]. You have the right channel.
    Mr. Connolly. The gentlelady's time has expired.
    Ms. Plaskett. OK. Thank you very much, Mr. Chair.
    Mr. Connolly. We'll take you at your word that you will get 
back to the gentlelady in terms of that inquiry. I thank the 
gentlelady.
    The gentleman from Alabama, Mr. Palmer, is recognized for 
five minutes.
    Mr. Palmer. Mr. Rettig, we had a hearing before the 
Oversight Committee--I don't know--a few years ago, and I asked 
then Commissioner Koskinen about a problem that Chairman 
Connolly brought up, and that is the tax gap. And his--I asked 
him why it is that we're failing to collect about $450 billion 
a year, and his response was the complexity of the Tax Code.
    I know our whole focus has been on the IT issue, and 
certainly that's a major issue, but isn't that part of the 
problem?
    Mr. Rettig. Complexity is always a problem. The tax gap is 
sort of multifaceted. It runs from guidance to a strong visible 
enforcement presence. It runs to information reporting, 
information reporting with withholding. It runs to the ability 
to--for the IRS to require electronic filing of returns, which 
are obviously quicker for us to process, and paper returns, a 
lot of issues with respect to tiered partnerships.
    We have ramped up over the course of the last year our 
Office of Fraud Enforcement, which is extremely visible. We 
ramped----
    Mr. Palmer [continuing]. Just to----
    Mr. Rettig [continuing]. Up an office of promoter 
investigations with respect to individuals who participate in 
certain abusive transactions.
    Mr. Palmer. Mr. Rettig?
    Mr. Rettig [continuing]. So, trying to maintain a visible 
presence on that side----
    Mr. Palmer. Mr. Rettig?
    Mr. Rettig. Our criminal investigation force has been----
    Mr. Palmer. Mr. Rettig, I'm----
    Mr. Rettig [continuing]. Extremely visible.
    Mr. Palmer. Mr. Chairman, I need to move on.
    Mr. Rettig. Sorry.
    Mr. Palmer. I would like for you to respond to that in 
writing if you don't mind because I do think that's an issue.
    There is another issue that I would like to discuss, and 
it's something that I think the chairman has been supportive 
of, and that's our work on dealing with improper payments, and 
a lot of that has to do with technology issues in other 
agencies, including the IRS.
    One of the suggestions that I've made and we're trying to 
get into a legislative format to introduce is to allow 
agencies, as they reduce their improper payments, to take part 
of the funds that they save for use to modernize their IT 
systems.
    Is that something, Mr. Rettig, that you think would be 
helpful to the IRS?
    Mr. Rettig. The IRS is all in on issues that lead to 
funding for the Internal Revenue Service, assuming they're 
approved by Congress and appropriately appropriated.
    Mr. Palmer. Well, then, my next question would be: With the 
realization that you've got these major IT issues, does the IRS 
have a modernization plan that has clearly defined objectives, 
an achievable schedule, because there are issues that have been 
raised about the achievability of a schedule, and a realistic 
budget for replacing the IT systems?
    Because I've heard that some of these legacy systems still 
operate on the old COBOL system. Is that true? And do you have 
clearly defined objectives for modernizing your IT systems?
    Mr. Rettig. We do. We don't have hardware that goes back to 
the 1960's, but we do have language that goes back to the 
1960's. And we have a modernization plan that was launched 
April 2019. We also have modernization coming forth under the 
Taxpayer First Act. Both of those are running together but 
independent so that there is not overlap between those.
    And we'd be pleased to have our folks come up and do a 
briefing for you or for your staff, however it is appropriate, 
to show you exactly where we are and where we're headed.
    Mr. Palmer. Well, I want to get back to the funding for 
this. So, I would propose that Congress amend the Payment 
Integrity Information Act to allow agencies to direct a portion 
of recovered improper payments into a fund for modernizing 
their IT systems. And this is not just an IRS problem, as I 
said earlier. It is throughout the Federal Government. And it 
includes some of the states as well.
    So, I would like to, Mr. Chairman, work with the committee 
if we can in the time that's left in this Congress on an 
initiative like that.
    In the last few seconds that I have left, I'm going to go 
off topic here, but I do want to congratulate the Department of 
Justice, the FBI, and our intelligence services in the arrest 
today of Alexander Kotey and Elsheikh. These are the alleged 
kidnappers of James Foley, Peter Kassig, Steven Sotloff, and 
Kayla Mueller. They are alleged to have kidnapped, tortured, 
and murdered these people. And, while we have been in this 
hearing, it was announced that they've been arrested.
    I hope this brings some peace and closure for those 
families who have been involved in that.
    And, with that, Mr. Chairman, I yield back.
    Mr. Connolly. I thank my friend from Alabama, and I welcome 
his comments on the need to systematically develop a plan for 
modernizing the IRS and bringing it into 21st century 
technology, and I pledge to work with my good friend on 
developing such plans here on the subcommittee.
    Mr. Palmer. I know you mean that, and I thank the chairman.
    Mr. Connolly. I thank my friend.
    The gentleman from Maryland, Mr. Raskin, is recognized for 
his five minutes.
    Mr. Raskin. Thank you, Mr. Chairman.
    Mr. Rettig, greetings. Last week, I sent you a bipartisan 
letter from more than a hundred different Members asking you to 
ensure that victims of domestic violence, rather than their 
abusers, get their stimulus checks. As you know, domestic 
violence has soared during the pandemic. But the IRS response 
has often been to tell abused spouses to get their money 
through a divorce settlement, which is callous and 
irresponsible.
    Will you establish a process for domestic abuse survivors 
to notify the IRS that their payment has been stolen away by 
their abuser, and will you issue catchup payments to those who 
have had their payments stolen?
    Mr. Rettig. As tax administrator, we do not have the 
discretion to issue payments other than as provided in the 
CARES Act. The CARES Act requires the IRS to use tax return 
information to the extent we have it.
    So, in a situation involving a domestic violence, if a 
joint return was filed, the IRS is required to issue, in that 
context, $2,400 plus $500 for if there're dependents to the 
joint filers. And, if there is banking information, it's 
required to be deposited into that account.
    The CARES Act does not provide the Internal Revenue Service 
with discretion to add an additional, say, in this context, 
$1,200 to the victim of domestic violence.
    Mr. Raskin. Excuse me, Mr. Rettig. Didn't the IRS chief 
counsel conclude----
    Mr. Rettig. We, as people, are very sympathetic.
    Mr. Raskin. Excuse me. Didn't the IRS chief counsel 
conclude in 2009 that, if a stimulus payment is stolen or not 
received, the IRS can issue a replacement payment? Why wouldn't 
that apply in this circumstance?
    Mr. Rettig. That's completely unrelated. If you'd like to 
get into specifics, we can do it, but there were a lot--some 
people are relying on the wrong issue there.
    When we make a payment into a joint account the way that 
the statute requires us to make that payment, it goes into that 
joint account.
    Mr. Raskin. OK.
    Mr. Rettig. What happens to it once that payment gets 
there----
    Mr. Raskin. I'll followup with you later. Thank you. I'm 
just running out of time.
    Mr. Rettig. We can work with you specifically.
    Mr. Raskin. But I wrote to Senator--I wrote to Secretary 
Mnuchin on September 9 expressing concern about the President's 
plan to require Federal employees to accept a payroll tax 
deferral. This move is a political ploy to make it seem as if 
Federal employees are earning more money than they're actually 
earning, only to reach the end of the deferral period next 
year, when suddenly they'll have a significant back tax 
payment.
    During a recent Senate hearing, I was encouraged to hear 
Secretary Mnuchin agree with my Senator, Chris Van Hollen, that 
it would be reasonable to give Federal employees a choice in 
this matter.
    Mr. Rettig, do you agree with Secretary Mnuchin, and will 
the Federal Government indeed allow employees to opt out of 
this tax deferral? If not, why not?
    Mr. Rettig. The Internal Revenue Service is a bureau of the 
Department of Treasury, and Secretary--I report to Secretary 
Mnuchin, so the way that he indicates for us to go on policy 
and other issues is the way that the Internal Revenue Service 
will go.
    Mr. Raskin. All right. My constituents have been calling to 
voice opposition to this plan. Federal employee groups are up 
in arms about it, and we should not be using Federal workers as 
pawns.
    Ms. Collins, I'd like to turn to you. In April, you told me 
that your office could not help the public with certain EIP 
payment issues. You updated that guidance in August and 
announced you could help with some, but identified four 
categories where the office couldn't help. This includes if the 
EIP was determined based on the wrong tax year. Your response 
has been that those taxpayers will have to wait till sometime 
in 2021 to receive the money they're owed. That is baffling to 
me for funds that were intended to provide immediate relief in 
an emergency.
    Ms. Collins, why isn't your office advocating for people in 
that position?
    Ms. Collins. We are advocating for those people, but the 
challenge we have is, at the time the payments were issued, the 
IRS relied on the CARES Act, which said that they had an option 
to rely on the 2018 return if the 1919 return wasn't filed.
    So, the challenge these taxpayers have is the amount when 
it was issued was correct based on 1918, but the 1919 return--
for example, someone had a child, so now they have a qualifying 
child. They're entitled to another $500.
    That would have to be manually processed by someone within 
the IRS. That's our challenge, is that the IRS does not have 
enough staff to potentially do 3 million individual entries for 
those individuals.
    So, we are continuing to advocate for those people, but I 
do understand the problems that the IRS has in working these 
cases. It's not something that they can automate.
    Mr. Raskin. OK.
    Ms. Collins. They would have to go through----
    Mr. Raskin. Well----
    Ms. Collins [continuing]. Potentially 160 million returns 
to see what changed between the two years.
    Mr. Raskin. Mr. Rettig, let me ask you, then. When will the 
IRS set up necessary procedures and processes to allow Ms. 
Collins to assist all taxpayers who have not yet received their 
EIP funds?
    Mr. Connolly. The gentleman's time has expired, but the--
Mr. Rettig may respond.
    Mr. Rettig. We currently have 11,300 customer service 
representatives available on phone. Obviously, we get more 
calls than that, so we don't--we aren't--we don't have the 
ability and the staffing to answer all the calls, but we are 
doing our best. And I can vouch for the fact that the taxpayer 
advocate has advocated for the issues presented.
    The Internal Revenue Service is in the scenario of needing 
to prioritize quite a few issues that, when looked at 
individually, clearly come across as an extreme high priority, 
and then, when you look at it and you look at the volume of 
individuals in this country and provisions in the CARES Act, we 
have to prioritize those based on our resource availability.
    We are doing our best, but we--certainly the CARES Act 
itself provided for a true-up of amounts based on a 2020 
filing, and that's where the language comes to, to filing the 
return in 2020.
    And, on the comments about extending the portal date to 
November 21 from October 15, I would hope that folks would take 
to heart the fact of our announcement on that called into the 
fact that any further extension of that would jeopardize our 
ability to handle the 2021 filing season. We are really trying 
to be cognizant of many, many issues.
    So, I thank you for the additional time, sir.
    Mr. Connolly. Thank you.
    The gentleman from Florida, Mr. Steube, is recognized for 
five minutes.
    Mr. Steube. Thank you, Mr. Chairman.
    My questions are for Mr. Rettig.
    First, I want to thank you for your service to our country 
and for being here today, and also for your son's service to 
our Nation in the armed services.
    It's been reported in the media and GAO has provided 
information that the IRS sent more than 1.4 billion in payments 
to deceased or incarcerated individuals. I got a lot of people 
in my district who received checks whose family members were 
deceased, and a lot of people want to know how this could 
possibly happen.
    So, that would be my first question, is, how did that 
amount of money go to people who are deceased?
    Mr. Rettig. If you look at the stimulus payments that went 
out in 2008, you'll see that the process for payments to 
deceased individuals, and then Treasury looked at the specific 
issues on decedents about the third week in May and determined 
that deceased individuals were not eligible to receive 
payments, and so, from the third week of May forward, those 
payments did not occur. But those were calls made outside of 
the Internal Revenue Service.
    Mr. Steube. Well, is there efforts being----
    Mr. Rettig. The vast majority of those funds have been sent 
back or payments not sent out, actually.
    Mr. Steube. OK. So, that was my followup question, was how 
much of that, and what are you guys doing to recoup those 
funds?
    Mr. Rettig. I have the statistics. It would take me a 
moment to get to it, but I believe something on the order of 
one--and I'll get specifics. This is off the top of my head, 
but I think that something on the order of the 1.1 billion of 
the 1.4 billion or 800 million of the 1.1 billion, something 
along those orders have been either returned or not sent out. 
And so the net figure, I believe, is approximately 300 million.
    Mr. Steube. OK. Yes. If you can get me those exact numbers, 
I'd appreciate it, at your convenience.
    What other changes has the IRS made to prevent improper 
payments of existing funds or if there is future stimulus 
payments? Is there parameters in place to prevent that from 
going out?
    Mr. Rettig. Well, certainly there's lessons learned anytime 
an agency undertakes a massive responsibility like we did 
through the CARES Act and the issuance of these payments. And 
keep in mind there were business provisions incorporated within 
the CARES Act as well that--and our folks were there.
    So, we constantly monitor for lessons learned in terms of 
our ability. And if there was to be another round--I know there 
has been discussions, but, if there was to be another round, we 
are confident that we are able to do so, and it shouldn't go 
unnoticed that we issued about 81 million payments for $147 
billion within less than two weeks when the CARES Act was 
enacted, and that required substantial programming by us, so we 
are as prepared as we can be, but we are better prepared than 
we were the last time, and I think we did admirably the last 
time.
    Mr. Steube. What--in your expertise and in your position, 
what specific legislative reforms do you think that Congress 
and this committee should be looking at?
    Mr. Rettig. Well, since 2011, every administration has 
proposed the program integrity cap, which is funds directed to 
enforcement. There is a pending--this year, it's about $400 
million for enforcement. And the last program integrity cap 
actually approved by Congress was in 2010. I think that's 
significant.
    In a lot of the areas--you know, in terms of like EITC 
payments, giving the Internal Revenue Service--and this is 
congressional--correctable error authority would be 
substantial, would lessen the burdens on individuals. Giving 
the Internal Revenue Service the ability to regulate return 
preparers would be substantial. Enhancing the requirements for 
electronic filing of forms would be substantial. Accelerating 
the electronic filing of W-2 forms to the Internal Revenue 
Service would be substantial.
    There is a lot of issues that would come together to assist 
us both from a guidance perspective as well as an enforcement 
perspective, and, in my mind, those two go hand-in-hand. The 
person who is up late at night trying their best needs to 
understand what it is their requirements are, which is why 
we've gone wholesale into assisting people who either are not 
comfortable in the English language or do not speak English.
    We've also tried to simplify the languages. We've got Q 
codes on things that lead them directly to points on our 
website and such. But, similarly, we've got to go out on the 
enforcement side and maintain a visible presence.
    Mr. Steube. Yes, and I agree with that. And, if there is--
if you can send those specifics that you just referenced, if 
you have more specifics and information on that, to my office, 
I would love to look at those issues.
    Thank you for your time today, and my time has expired. 
Thanks for being here.
    Mr. Connolly. Thank the gentleman.
    The gentleman from California, Mr. Khanna, is recognized 
for his five minutes.
    Mr. Khanna. Thank you, Mr. Chairman.
    The IRS is responsible for collecting about $3.5 trillion 
in revenue. One of the things that I kept hearing from my 
constituents is, why are people not getting the checks in time? 
Why is it taking so much time for the IRS to deliver stimulus 
checks or to process the payments or collections?
    It turns out that the IRS is still reliant on legacy 
systems, some dating back all the way from the Kennedy 
administration. And, you know, in Silicon Valley, they just 
don't understand this. How is it that we haven't had software 
updates since then?
    So, as you know, in 2019, the IRS paid almost $3 billion to 
operate its current information technology, and yet 2.3 billion 
of that was on legacy IT systems.
    Mr. D'Souza, could you describe the impact that the legacy 
IT systems have on the IRS' ability to deliver services to its 
taxpayers and fulfill its overall mission?
    Mr. D'Souza. Sure. Thank you. I'd be glad to.
    So, I do want to make sure folks know that, although the 
systems rely on older technology, the underlying hardware, much 
of it has been updated. But what the limitations are of using 
these older technologies is--one most notably, it's hard to 
find staff that know these skills. Programmers today aren't 
coming out of school learning how to program in languages that 
are 50 years old.
    Second, it makes it harder for IRS to implement more online 
services because, to the extent it can use contemporary 
technologies, it's easier for it to implement those.
    Relating to your point about the time it takes to do 
things, you know, one of the biggest things that makes it 
easier for the IRS to do things more quickly is for people to 
do things electronically versus on paper. So, we have issued--
where--for example, where we've identified recommendations for 
IRS to look at implementing more online services, and those 
kinds of things will help speed things along.
    Mr. Khanna. And why did it take so long for the economic 
impact payments, the stimulus payments, to go out, and how is 
that connected to the IT systems?
    Mr. D'Souza. So, the vast majority of the payments did go 
out, I think, fairly quickly. I think--you know, I think any of 
the issues that we've talked about related to the payments had 
more to do with sort of policy and procedural issues versus the 
underlying technology actually.
    I think the one outstanding issue is sort of identifying 
the remaining people who haven't been able to claim their 
payments and getting them access to the online portal that we 
talked about.
    Mr. Khanna. How have the technology systems limited the 
ability to operate during the pandemic, and what are one or two 
main things you would recommend needs to be changed?
    Mr. D'Souza. Well, a lot of IRS' operations--sorry. Let me 
back up a second.
    Many of IRS' employees do have the ability to work remotely 
already, but some of them didn't. So, for example, those in 
customer service positions, those obviously opening mail, you 
can't do that work remotely. To the extent that we can change 
work processes to allow more of those IRS folks to do work 
remotely, I think that would have longer term benefits beyond 
the pandemic.
    So, that's a primary area for them to focus on.
    Mr. Khanna. Mr. Rettig, two questions for you.
    First, the CIO of the IRS does not report to you directly. 
Is that correct?
    Mr. Rettig. Not--the CIO does not report directly, but I 
talk to the CIO at least once a week, and many times seven days 
a week.
    Mr. Khanna. That----
    Mr. Rettig. But that's a provision that is in the Taxpayer 
First Act, and the IRS is being reorganized going forward. So, 
I think you'll see that addressed.
    Mr. Khanna. That's good.
    And what do you think we need to do to modernize the IRS 
and to help deal with these legacy IT systems, and what is the 
plan to do that?
    Mr. Rettig. We actually have a plan independent of the 
Taxpayer First Act, and I think, given the interest--I'm very 
familiar--you know, I'm from California--very familiar with the 
valley, and I have three brothers-in-law who are in IT in the 
valley. So, I'm understanding of, you know, where IT is, let's 
say, in the valley compared to where IT might be in terms of 
the Internal Revenue Service, and I have--had visits up there.
    The Internal Revenue Service needs to come of age, and it 
needs to come of age to be able to serve the people of this 
country in a manner that the people of this country deserve to 
be served. I think that, you know, universally, we all support 
that. And, you know, we want the best for our people. We don't 
want a tax administrator that is behind the times, and so we 
have to earn that trust and respect through providing that 
information to them.
    I would welcome the opportunity for myself and others to 
meet with you or your staff to give you the details of two 
separate plans. They're independent. There is no overlap, but 
because tax--one came on the scene first, but we are looking at 
them somewhat jointly.
    But we have a modernization business plan that was launched 
April 2019. We have yet to receive the funding requested on an 
annual basis, but it's a six-year plan for that.
    And then the Taxpayer First Act has modernization in it as 
well, but I think, as you're all familiar with, there are no 
funding appropriations associated with the Taxpayer First Act.
    We need both of those.
    Mr. Connolly. I thank the gentleman. I thank the gentleman.
    Mr. Pascrell, the gentleman from New Jersey, is recognized 
for five minutes. Welcome.
    Mr. Pascrell, you need to unmute yourself.
    Mr. Pascrell. Are we OK now?
    Mr. Connolly. There you go.
    Mr. Pascrell. Thank you.
    I want to thank you for this opportunity. As chair of the 
Oversight Subcommittee of Ways and Means Committee, I am very 
interested in the IRS' operations.
    This pandemic and economic crisis has been brutally hard on 
a lot of our communities and constituents. We've heard some 
very, very good questions from both sides of the aisle today. 
There's still neighbors in our cities and towns without 
economic impact payments or the IRS refunds that could help 
make ends meet.
    So, I'm pleased the Commissioner is here to answer 
questions.
    It must be said that he's utterly ignored the Ways and 
Means Committee in the 116th Congress.
    Mr. Commissioner, how can a Congress and the American 
people be assured that the audits of the President's tax 
returns are being conducted in a fair and scrupulous way and 
without political interference? How can we be assured of that?
    Mr. Rettig. Sir, as you know, I cannot speak to specific 
matters as to any taxpayer as to whether or not issues 
prospective to a return, to an examination of a return, to what 
might be in the return, to what might be in the examination--
earlier, there was a reference with respect to a criminal 
investigation of an organization. That reference did not come 
from the Internal Revenue Service and the information in any 
way associated with that did not come from the Internal Revenue 
Service. I cannot confirm or deny that information.
    Every taxpayer in this country is assured a confidentiality 
and privacy with respect to their tax matters.
    Mr. Pascrell. I don't want you to--I don't want to----
    Mr. Rettig. So, as you know sir, I cannot--6103 and 
otherwise--I cannot speak to that.
    Mr. Pascrell. I don't want to get into a debate about 
privacy. That was part of 6103 in the Code. I understand that. 
Privacy is very critical to me. My record is my record.
    But the point of the matter is it would seem that we've put 
that aside when, under the investigation of Commissioner 
Lerner--I believe it was 10 taxpayers who belonged to certain 
organizations were made public without any apology because they 
found nothing wrong. So, that answer is unacceptable.
    The recent revelations of the President's lifetime of tax 
abuse and malfeasance threatens public confidence in the IRS. 
I'm talking about the very legitimacy of our Federal tax 
system. I'm not sure you understand or appreciate that, sir.
    To begin to restore this trust, you must fulfill the Ways 
and Means Committee's legally binding request for the 
President's tax returns--his business and personal tax returns 
under 6103(f).
    You have been illegally withholding them for the last 500--
and today, 407 days--547 days. Will you lawfully fulfill 
Chairman Neal's request?
    Mr. Rettig. Sir, as you know, that issue is pending 
litigation, and it's not appropriate for me to discuss pending 
litigation, and we have made--the committee is aware of that.
    Mr. Pascrell. Mr. Rettig, you admitted in a recent report 
that the IRS audits low-income taxpayers disproportionately 
over wealthy tax cheats because it's easy to pick on regular 
Americans.
    This is, in part, a funding issue. But this is also a 
leadership issue. Do you have an immediate plan to end this 
shameful disparity? I call it shameful. How on Earth can any 
American----
    Mr. Rettig [continuing]. That report is absolutely false. 
Let me repeat it for people who didn't hear it the first time--
absolutely false. For taxpayers who have more than $10 million 
in total positive income per year, we audit at the rate of 8.16 
percent. For the EITC community, we audit at the rate of 1.129 
percent. Those facts are in our data book that was issued for 
Fiscal Year 2019.
    Mr. Pascrell. Well, this is----
    Mr. Rettig. So, the earned income rate is 1.1 percent. 
Taxpayers over $10 million, it is----
    Mr. Pascrell. Mr. Chairman----
    Mr. Rettig [continuing]. Eight-point-sixteen percent, and 
taxpayers over $5 million----
    Mr. Pascrell [continuing]. This is exactly why we wanted 
you to come before the Ways and Means Committee.
    Mr. Rettig [continuing]. About four-point-something percent 
and taxpayers between $1 and $5 million, it's something on the 
order of about three percent.
    So, those numbers are disparate. The issue with respect to 
the earned income tax is there is a $17 billion improper 
payment associated with that per year that the IRS does all it 
can do to get those payments out to the individuals as rapidly 
as possible. 98 percent of the EITC payments are issued within 
21 days. Two percent get pulled for issues with respect to the 
fraud filters and ID theft and other issues that require a 
manual look by a person, and we process those in a priority 
fashion.
    So, anybody who is going to be assert that the Internal 
Revenue Service is in any way insensitive to any lower income, 
ethnic community, geographically diverse community, rural 
community, is absolutely wrong, and that should never come up. 
Those comments taint the hardworking, dedicated, career 
employees of the Internal Revenue Service who create our audit 
plans, and that is not what the Internal Revenue Service is 
about.
    And I take obviously extreme discomfort in anybody 
asserting the contrary----
    Mr. Pascrell. Well----
    Mr. Rettig [continuing]. And we would meet with any and 
every of you to go through that in detail to back it up.
    Mr. Connolly. The gentleman's time has expired.
    Mr. Pascrell. Mr. Chairman, thank you for allowing me----
    Mr. Connolly. Let me say, on behalf of Mr. Pascrell, I 
think the question was not to disparage the IRS; it was to 
ascertain whether reports about a discrepancy between the 
percentage of audits of people receiving the EITC was on par 
with the percentage of audits of people making more than or 
reporting more than $10 million of disposable income. You have 
vigorously denied that report.
    Mr. Rettig. I respect Congressman Pascrell. There is 
chatter outside of our buildings that implicate what I'm there 
for or implicate where I went with respect to that, and it's 
unacceptable to the IRS----
    Mr. Connolly. I understand that, but it's not unacceptable 
for a distinguished Member of Congress on the Ways and Means 
Committee waived onto this subcommittee to ask that question.
    Mr. Pascrell. Thank you.
    Mr. Rettig. No, sir, and I agree. And I said I respect 
Congressman Pascrell considerably, and I appreciate his 
question.
    Mr. Connolly. Well, good. Then we are in agreement on that. 
We both respect Mr. Pascrell.
    Thank you, Mr. Pascrell, for joining us.
    The chair now recognizes the gentlewoman from California, 
Ms. Porter, for her five minutes.
    Ms. Porter. Commissioner Rettig, we are going to start with 
a couple yes-or-no questions just
    [inaudible] this go smoothly.
    You have a responsibility to remain impartial and unbiased 
in your role as IRS Commissioner, correct?
    Mr. Rettig. Correct.
    Ms. Porter. And, as IRS Commissioner, do you believe that 
it's important to hold criminals accountable for tax fraud, 
evasion, or other violations of the Tax Code?
    Mr. Rettig. If this is--the Internal Revenue Service has a 
very aggressive----
    Ms. Porter. Reclaiming my time. Mr. Rettig, let me make 
sure you can hear me because I don't think you want to waffle 
on this part.
    Mr. Rettig. I am having difficulty hearing you, ma'am.
    Ms. Porter. OK. As IRS Commissioner, do you believe it is 
important to hold criminals accountable for tax fraud, evasion, 
and other violations of the Tax Code?
    Mr. Rettig. The enforcement efforts----
    Ms. Porter. Yes or no?
    Mr. Rettig. The enforcement efforts of the Internal Revenue 
Service are there to pursue those who do not comply with the 
tax laws.
    Ms. Porter. Reclaiming my time.
    Commissioner Rettig, I'm not trying to be difficult here. 
Do you believe in holding criminals accountable? Yes or no?
    Mr. Rettig. That's what criminal investigation in the 
Internal Revenue Service does.
    Ms. Porter. All right. And holding those criminals 
accountable----
    Mr. Rettig. Actually, we investigate--they investigate. We 
do not prosecute.
    Ms. Porter. And holding those criminals accountable through 
investigation stems from your sworn commitment to upholding the 
Constitution, correct?
    Mr. Rettig. That's correct.
    Ms. Porter. I ask that because, in addition to the salary 
you receive as an IRS Commissioner, you also earn between 
$100,000 and $200,000 per year from your ownership of two units 
at Trump International-Waikiki. You have continued to earn this 
additional income while in office, correct? Yes or no?
    Mr. Rettig. Correct. And all of that was approved before I 
came on board, and each year----
    Ms. Porter. Great. Reclaiming my time.
    Mr. Rettig--and that was approved
    Mr. Rettig [continuing]. By the ethics officials in the 
Internal Revenue Service and other agencies, ma'am.
    Ms. Porter. Mr. Rettig, did you disclose that information 
to the Senate Finance Committee when you were nominated for the 
position?
    Mr. Rettig. Absolutely. And anybody who asserts in any way, 
shape, or form that there was a concealment is absolutely 
wrong. During my confirmation process, the Senate committee 
received over 80 pages of invoices that specifically identified 
that property.
    The instructions for that property specifically say to put 
the city and state where all properties are located. That is 
exactly what transpired with respect to those properties and 
other properties that I own, and anybody who asserts to the 
contrary----
    Ms. Porter. Reclaiming my time.
    Mr. Rettig [continuing]. Really does not know what they're 
talking about or the process.
    Ms. Porter. OK. Commissioner Rettig, there is no need to 
get upset or to disparage me----
    Mr. Rettig. Ma'am, I've been dealing with that since I came 
on board, and I do not take lightly anybody----
    Ms. Porter. Reclaiming my time.
    Mr. Rettig [continuing]. Trying to disparage my reputation 
or my family's reputation.
    Ms. Porter. Reclaiming my time.
    Commissioner Rettig, I do not take lightly people attacking 
the members of this committee who are simply trying to get----
    Mr. Rettig. I do not intend to attack you. And, if so--if 
it seemed that way----
    Ms. Porter. Reclaiming my time.
    Mr. Rettig [continuing]. I apologize to you and others.
    Ms. Porter. Mr. Chair, would you please remind the witness 
the time belongs to the gentlelady.
    Mr. Connolly. The gentlelady commands and controls the 
time.
    Ms. Porter. Mr. Chairman----
    Mr. Connolly. Ms. Porter?
    Ms. Porter [continuing]. The time belongs to me.
    Mr. Rettig, since you're getting upset about that line of 
questioning, I'd like to try another one.
    How many economic impact payments--how many people are 
still waiting on their economic impact payments?
    Mr. Rettig. First, let me apologize to you. If you took 
that as an attack, ma'am, I have to indicate that that issue 
has been out there, and, if it came across as hostile or 
aggressive toward you, I do apologize. That is not who I am, 
and I certainly would not imply that to you or other members of 
the committee. So, I would hope that you would accept my 
apology with respect to that.
    With respect to individuals and payments that we are 
struggling to issue, it's very difficult for us to identify 
people who do not interact with the government, with the 
Internal Revenue Service, with the homeless shelters, and 
whatnot. We don't have a figure for you. I have been asked 
earlier today to provide a figure.
    Ms. Porter. OK. Mr. Rettig----
    Mr. Rettig. I can tell you we're currently----
    Ms. Porter [continuing]. Let me--let me reclaim my time 
here. It's about 9 million, and, since you said that some of 
these people haven't reached out to the government, I just want 
to share our experience in our office where we have had 114 
people reach out--114 constituents in my district alone, and we 
have worked tirelessly, our casework team, to get answers for 
those people for months and months and months.
    At this point, we have answers for 13 of them. That is, as 
you know, 11 percent. So, these other people, we have no 
information. Fifty cases of these 114, we have not been able to 
get any response at all from the IRS.
    So, I would respectfully ask you to please communicate with 
your team about responding in a timely way to congressional 
inquiries because, for every American who is reaching out to 
our office and is asking for help, one, we're not able to get 
them help because the IRS doesn't respond to us in almost half 
the cases, and, two, for every American who does reach out to 
us, there are literally hundreds of thousands of more who are 
just waiting and don't have that information.
    So, I would really appreciate your going back to your team 
and getting the committee a clear answer of the estimated 
number of people who have not received economic impact payments 
who are waiting and how many outstanding and unresponded-to 
congressional inquiries you have on both sides of the aisle.
    Thank you very much.
    With that, I yield back.
    Mr. Connolly. Thank you. And let me just say to Ms. Porter, 
before she joined the hearing, I made the same point that there 
are a number of constituents in all of our respective offices 
who have not heard, who have confused instructions, have not 
received payments, and we represent those constituents. And the 
numbers you've shown are probably reflective of so many of us. 
And I might add it's a bipartisan issue.
    Mr. Hice, the ranking member, made the same point about his 
constituents in Georgia, and what the chair asked Mr. Rettig to 
do was to go back and look at the liaison functions with 
Members of Congress because when somebody contacts our office, 
it means everything else has failed, and so we've got to have 
more responsive reactions from the IRS and Mr. Rettig, I would 
say, Ms. Porter, I believe committed to doing just that. And we 
will followup on that, but Ms. Porter raises a very good issue 
and it is, I think, universally shared by Members of Congress.
    Thank you, Ms. Porter, for bringing that up and using that 
handy dandy white board you're so adept at. Thank you.
    Mr. Rettig. And, once again, Congresswoman, I do apologize 
if it was received as hostile, but it's obviously a personal 
issue, so thank you.
    Mr. Connolly. Thank you.
    The chair now recognizes himself for five minutes.
    Ms. Collins. Chairman, can I interrupt for one sec?
    Mr. Connolly. Yes, of course, Ms. Collins.
    Ms. Collins. I just wanted to point out you had talked 
about a liaison and an ombudsman. That is what we do. That is 
what our function is that Congress created the National 
Taxpayer Advocate solely for that purpose. So, if our local 
offices do have contacts with various staff members, and we're 
happy to help in all these cases that we can help----
    Mr. Connolly. And we appreciate that, but when a Member of 
Congress calls a Federal agency that falls under our purview, I 
expect an answer--not through a third party. Directly. When I 
write a letter, I expect that letter to be answered. I think, 
for the record, I presented a letter I sent three weeks ago 
that has not yet been responded to. And, again, there's a 
certain urgency here. These aren't just idle thoughts coming 
from Members of Congress; we're trying in real time to help 
constituents for whom for whatever reason the system has not 
worked.
    So, you're quite right to remind us you're a resource and 
you're an asset that we should not overlook, but I think we 
were talking directly about communication with the agency and 
trying to get a better line of communication that works for 
everybody.
    Mr. Rettig.
    Mr. Rettig. Sir, we accept that the taxpayer advocate is 
housed within the Internal Revenue Service, and we have a 
shared responsibility that when things come in through 
legislative affairs, certain items are automatically routed, 
certain items obviously are not. We accept and appreciate that 
we could do a better job. We will not give you excuses for 
staffing and funding and whatnot. I will only vouch for the 
dedication and desire of, I think, one of the most hardworking 
dedicated work forces in the entire Federal Government.
    Mr. Connolly. We will stipulate that, but, again, 
remember----
    Mr. Rettig. Appreciate it. I'll take that back, sir.
    Mr. Connolly. Yes. We operate in real time, too, and----
    Mr. Rettig. Sir, if you're not happy, we're not doing our 
job.
    Mr. Connolly. All right.
    Mr. Raskin. Mr. Chairman, point of order.
    Mr. Connolly. Now my line of questioning.
    Mr. D'Souza, I'm going to give Mr. Rettig a little bit of a 
break. What do we know about the scope of the IT challenge at 
IRS? I mean, we talk in generalization about legacy systems, do 
we know how many legacy systems there are?
    Mr. D'Souza. I think we actually had a finding that IRS 
didn't have a complete inventory of its legacy systems, but I 
think, you know, generally we do. I think that as----
    Mr. Connolly. Can you give a number to that, generally?
    Mr. D'Souza. I would have to get back to you.
    Mr. Connolly. Are we talking about hundreds of systems, 
dozens of systems, what?
    Mr. D'Souza. I think on the order of hundreds.
    Mr. Connolly. Hundreds?
    Mr. D'Souza. But part of the thing I guess to keep in mind 
is it depends a little bit on how the agency defines a system. 
So, that's why I have to--I'll get back to you with a more 
exact number.
    Mr. Connolly. I would appreciate that. In fact, this 
subcommittee is going to formerly request GAO for a 
comprehensive inventory of the scope of the problem and 
challenge.
    And, by the way, what's wrong with a legacy system?
    Mr. D'Souza. Well, as we discussed, they rely on older 
technology----
    Mr. Connolly. Yes.
    Mr. D'Souza.--and it would be harder to find people to 
employ to keep it up to date. You have a limited range of 
vendors that support that technology. Over time----
    Mr. Connolly. But I'm more interested--that's all 
interesting.
    Mr. D'Souza. OK.
    Mr. Connolly. But I'm interested in how it affects 
capability. So, a system that's 40 years old does not have the 
same capability of handling the mass volume Mr. Rettig has to 
handle than a contemporary system.
    Is that correct?
    Mr. D'Souza. So, I would say that actually the IRS' systems 
do handle a very large volume----
    Mr. Connolly. That wasn't my question. My question was, 
when you compare a legacy systems capability to a system we 
would deploy today, the former is inadequate compared to the 
latter.
    Mr. D'Souza. It is, but it's not in terms of volume. It's 
probably in terms of capabilities it provides. We talked about 
the ability to provide services online, provide information 
more quickly to taxpayers.
    Mr. Connolly. Well, is it more costly to maintain?
    Mr. D'Souza. Yes.
    Mr. Connolly. Yes. Any idea what percentage of the IT 
budget Mr. Rettig oversees is devoted simply to maintaining 
legacy systems?
    Mr. D'Souza. So, 80 percent of the budget goes for ongoing 
operations. The exact percentage of that, that's for legacy 
systems. Again, I would need to get back to you on that.
    Mr. Connolly. So, what is your estimate of what it would 
cost to update completely the IT systems, both hardware and 
software, and retire these legacy systems at the IRS?
    Mr. D'Souza. I don't have an exact number, but what I can 
say is that the modernization plans that we've talked about are 
good first steps, but they actually don't fully address what it 
would take to retire these legacy systems. One of the things we 
ask the acting CIO is whether or not they had a full plan to 
retire IMF, which is one of the biggest legacy systems. And 
they said they were working on that. I think over time they've 
taken various attempts at it, and they haven't been successful, 
so, you know, we'll have to see----
    Mr. Connolly. Wait. Wait. Mr. D'Souza, that's not an 
adequate answer. They haven't been successful. Why have they 
not been successful? To what extent--this hearing's about 
resources to the IRS to make sure it as responsive as it can be 
to the American people, and we've documented how they were 
starved of resources and, in fact, vilified by this very 
committee, I might add, for 10 years at the cost of 
reinvestment. So, how has this affected capability?
    Mr. D'Souza. Sure. So,, as the budget for these 
modernization activities has been cut or as we've had 
situations like a lapse in appropriations or continuing 
resolutions, IRS has continually had to replan and reprioritize 
its efforts. That takes time. It slows things down. They have 
to move staff around. If they don't have enough staff, then 
they have to triage and focus on high priority activities. 
They're not able to do certain things.
    One of the things we reported on indirectly answers your 
question, though, is with this most recent--the Tax Cut and 
Jobs Act, IRS had to shift its IT resources to implement those 
changes versus some ongoing activities that it planned to do to 
enhance its systems. So, those are all some examples of 
tradeoffs the IRS has to make when it doesn't have resources.
    Mr. Connolly. You say tradeoffs. Somebody might use a 
different image, cannibalization.
    By the way, it's not just legacy systems, is it? I remember 
a few years ago when this committee was vilifying your 
predecessor, Mr. Koskinen, whom I considered an exemplary 
public servant, but nonetheless, members of this committee 
vilified Mr. Koskinen because of crashes with hard drives 
throughout the agency. And one of the things not discussed, of 
course, because that would have been inconvenient, was the age 
of the hardware we're talking about. I mean, PCs.
    So, in the private sector, when I was in the private sector 
for 20 years, we kind of replaced our PCs about every three 
years. What is the replacement rate, what is the age and 
replacement rate of PCs for IRS employees currently?
    Mr. D'Souza. So, I don't have a current rate. What I can 
say is when we did look at this issue a few years ago we found 
that the majority of IRS IT equipment was outdated. Since that 
time, we do know----
    Mr. Connolly. Mr. D'Souza, outdated. How many years? How 
old?
    Mr. D'Souza. Again, I'd have to get back to you with the 
specifics on that.
    Mr. Connolly. Mr. Rettig, do you know?
    Mr. Rettig. We're making--to the extent we get funding, 
we're making real inroads into updating our systems. Most of 
our systems are far beyond their useful life, and we have--for 
most of those systems, we have extended the useful life on 
things--like laptops and such. So, we extend the useful life 
with warranties and whatnot. And then we end up having to go 
beyond that because we don't have the ability to replace. One 
comment just quickly in terms of efficiency as we were to 
update our systems, something that has always stayed in my head 
and it's pretty simple is, as we modernize and bring in chat 
bots for people who call in, one employee can handle one 
telephone call, but one employee can handle four chat box at 
the same time.
    So, that's a 4-to-1 leverage. We have 11,500 customer 
service representatives. In theory, if it was direct math, it 
would put us up to 40,000 by getting us there. Our ability to 
leverage resources through a modernized system, which includes 
both language--it includes software, it includes hardware--
would be greatly received by every employee at the Internal 
Revenue Service, as well as I think by every American.
    Mr. Connolly. Let me just say, Mr. D'Souza, we need more 
from GAO than what we got here. We need a comprehensive 
inventory of the nature of the IT systems, legacy systems, 
hardware, software, Zoom capabilities, whatever, so that we 
understand the scope of the problem, and we need dollar figures 
assigned to that so we understand the investments that are 
going to be required.
    The other thing we need is an assessment from you and with 
cooperation with the IRS, what's the return on investment? I 
mean, we talk about GAO, the agency for which you work, that 
roughly every dollar we invest in GAO, we get at least an $8 or 
$11 return. Well, what's the comparable figure for the IRS? If 
the IRS can do double the audits it does currently, presumably 
the return on that is quite considerable especially when we 
know at least $450 billion is left on the table, taxes owed but 
not paid because of capability, capability of auditing, 
tracing, collecting, enforcing.
    And so those are important considerations, in addition to 
we're in a pandemic, and while I think Mr. Rettig and Ms. 
Collins have both indicated that they've done a very credible 
job in trying to respond under the most adverse circumstances 
with a history of disinvestment for 10 years. Nonetheless, we 
know things are on the table.
    With all of that, we know that millions of Americans still 
haven't gotten their direct payment. Millions of Americans are 
still complaining about a responsiveness from IRS in terms of 
refunds or filing or processing a claim or making an appeal or 
dealing with an audit.
    So, these--the relationship between the investment in IT 
and the capability of the IRS to do its job on behalf of the 
American people--and, by the way, part of its job because of 
voluntary compliance, which is so high in America compared to 
other places, is based on the fact that I perceive the system 
to be fair, that it's going to treat me the same way it treats 
anybody else, rich or poor. They're going to hold that person 
and me accountable.
    And if that trust is damaged, compliance will fall and that 
will hurt the ability of the U.S. Government to fund itself and 
the services it provides people, especially during this period 
of time, which is so challenging.
    So, we need the GAO to really look more closely and provide 
us with more comprehensive data in terms of the scope of the 
problem and what it will take to address that problem.
    Mr. D'Souza. We do have work under way that's looking at 
some of these issues, and we'll be glad to update your staff.
    Mr. Connolly. Well, we want you to expand that so that it's 
not some of these issues; it's everything we've just described. 
That's why we're having this hearing. And we need GAO as a 
resource to help us understand the analytics and the boundaries 
of those analytics.
    Yes, Mr. Rettig.
    Mr. Rettig. We obviously will cooperate with GAO in that 
regard. I just wanted to add on one thing about the compliance 
side of the house. We look at service and compliance together. 
We look at the desire of the IRS to earn the trust and respect 
of every American. I made the comments about getting into 
different languages, lower income communities, expanding vital 
resources, expanding resources to low-income taxpayer clinics. 
When you consider that fiscal 1919 our gross receipts were 
$3.56 trillion, which is 96 percent of the gross receipts of 
the United States of America, and that part of a tax gap, the 
voluntary compliance rate hovers around 83 percent and that's 
for Americans who timely file and pay essentially and maintain 
compliance; if we can help the folks who are trying to get it 
on their own by in language, simple language, understandable 
things, open up those avenues, answer the phones when they 
place those calls and we're only to bump the voluntary 
compliance rate one percent, sir, that's $35 billion a year 
from Americans who want to get it right, who are proud to be 
Americans, who are proud to file tax returns. And there's a lot 
of people there.
    This is the first time, to my knowledge, in the history of 
the Internal Revenue Service that we've done such an expansion 
into languages. I'm very proud to be the son of an immigrant 
and the husband of an immigrant. Very respectful for the 
challenges people have who come here and its incumbent upon us 
collectively, sir, to make sure they have the ability to get it 
right.
    Modernization helps us significantly in that regard. It 
also helps our enforcement component. So, we welcome the 
assistance of Congress.
    Mr. Connolly. Well, thank you, and the fact that you are 
the son of immigrants, I'm a grandson of an immigrant, and you 
married a refugee, I think just gives living proof to the fact 
that immigration rewards and enriches America; it doesn't 
detract from it.
    And, by the way, with respect to refugees, I will just say 
editorially, curbing the number of refugees, people fleeing 
violence, is a very un-American thing from this Member's point 
of view and we ought to be doing exactly the opposite, opening 
our welcoming arms to people who are suffering violence and 
persecution abroad. That's what refugee means, and that's what 
the refugee program is designed to provide.
    Mr. Rettig. Sir, to help you with perspective, my wife was 
born and raised in Vietnam. After the fall of Vietnam, April 
30, 1975, her father was taken away to a reeducation camp for 
three years, nine months. She, in 1982, fled by boat. She's a 
boat person for the term--I don't mean it in a derogatory 
sense. I'm hugely proud of her.
    Mr. Connolly. Sure. As you should be. And that's the story 
of America. I know we're digressing, but the idea that we would 
cap the number of refugees who are--who perhaps worldwide are 
now at a record number, at 15,000, is disgraceful and, from my 
point of view, un-American.
    At any rate, on to IRS. We need more progress. We need more 
help from GAO in broadening the scope, Mr. D'Souza. We'll be 
glad to work with you and Mr. Dodero on that.
    And, Mr. Rettig, hopefully you and Ms. Collins, who's new 
on the job, will be creating mechanisms to be more responsive 
to congressional inquiries because, remember, we're also 
representing taxpayers, but taxpayers who have found for 
whatever reason the system doesn't work.
    With that, we have five days for additional questions that 
may be submitted to our witnesses, and we would ask for a 
speedy and expeditious response in writing should you get those 
questions through the chair.
    And, with that, this hearing is concluded. Thank you.
    [Whereupon, at 12:24 p.m., the subcommittee was adjourned.]

                                 [all]