[Senate Hearing 116-498]
[From the U.S. Government Publishing Office]




                                                        S. Hrg. 116-498
 
                          2020 FILING SEASON AND 
                           IRS COVID-19 RECOVERY

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

                                HEARING

                               before the

                          COMMITTEE ON FINANCE
                          UNITED STATES SENATE

                     ONE HUNDRED SIXTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             JUNE 30, 2020

                               __________
                               
                               
                               
                               
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


                                     
                                     

            Printed for the use of the Committee on Finance
            
            
            
            
                             ______                       


             U.S. GOVERNMENT PUBLISHING OFFICE 
 45-917-PDF           WASHINGTON : 2021 
 
            


                          COMMITTEE ON FINANCE

                     CHUCK GRASSLEY, Iowa, Chairman

MIKE CRAPO, Idaho                    RON WYDEN, Oregon
PAT ROBERTS, Kansas                  DEBBIE STABENOW, Michigan
MICHAEL B. ENZI, Wyoming             MARIA CANTWELL, Washington
JOHN CORNYN, Texas                   ROBERT MENENDEZ, New Jersey
JOHN THUNE, South Dakota             THOMAS R. CARPER, Delaware
RICHARD BURR, North Carolina         BENJAMIN L. CARDIN, Maryland
ROB PORTMAN, Ohio                    SHERROD BROWN, Ohio
PATRICK J. TOOMEY, Pennsylvania      MICHAEL F. BENNET, Colorado
TIM SCOTT, South Carolina            ROBERT P. CASEY, Jr., Pennsylvania
BILL CASSIDY, Louisiana              MARK R. WARNER, Virginia
JAMES LANKFORD, Oklahoma             SHELDON WHITEHOUSE, Rhode Island
STEVE DAINES, Montana                MAGGIE HASSAN, New Hampshire
TODD YOUNG, Indiana                  CATHERINE CORTEZ MASTO, Nevada
BEN SASSE, Nebraska

             Kolan Davis, Staff Director and Chief Counsel

              Joshua Sheinkman, Democratic Staff Director

                                  (ii)


                            C O N T E N T S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page
Grassley, Hon. Chuck, a U.S. Senator from Iowa, chairman, 
  Committee on Finance...........................................     1
Wyden, Hon. Ron, a U.S. Senator from Oregon......................     3

                         ADMINISTRATION WITNESS

Rettig, Hon. Charles P., Commissioner, Internal Revenue Service, 
  Washington, DC.................................................     5

               ALPHABETICAL LISTING AND APPENDIX MATERIAL

Grassley, Hon. Chuck:
    Opening statement............................................     1
    Prepared statement...........................................    41
Rettig, Hon. Charles P.:
    Testimony....................................................     5
    Prepared statement...........................................    42
    Responses to questions from committee members................    48
Wyden, Hon. Ron:
    Opening statement............................................     3
    Prepared statement...........................................    71

                             Communication

Center for Fiscal Equity.........................................    73

                                 (iii)
                                 


                        2020 FILING SEASON AND 
                         IRS COVID-19 RECOVERY

                              ----------                              


                         TUESDAY, JUNE 30, 2020

                                       U.S. Senate,
                                      Committee on Finance,
                                                    Washington, DC.
    The WebEx hearing was convened, pursuant to notice, at 
10:15 a.m., in Room SD-215, Dirksen Senate Office Building, 
Hon. Chuck Grassley (chairman of the committee) presiding.
    Present: Senators Thune, Portman, Scott, Cassidy, Lankford, 
Daines, Wyden, Stabenow, Menendez, Carper, Cardin, Brown, 
Bennet, Casey, Warner, Hassan, and Cortez Masto.
    Also present: Republican staff: Mark Warren, Chief Tax 
Counsel; and Jeffrey Wrase, Deputy Staff Director and Chief 
Economist. Democratic staff: Tiffany Smith, Chief Tax Counsel.

 OPENING STATEMENT OF HON. CHUCK GRASSLEY, A U.S. SENATOR FROM 
              IOWA, CHAIRMAN, COMMITTEE ON FINANCE

    The Chairman. Commissioner Rettig, thanks for coming to 
testify on the 2020 tax filing season and the IRS's handling of 
challenges posed because of the pandemic.
    The 2020 filing season got off to its typical start at the 
end of January. However, since then this filing season has been 
anything but typical. As a result of the national health 
emergency stemming from the ongoing pandemic, almost all 
regular tax filing and tax payment deadlines have been 
extended. This includes the individual and corporate income tax 
filing and payment deadlines, which were pushed back from the 
normal April 15th to July 15th, and there are some rumors they 
might be extended again. I do not know--I have heard that at 
least once.
    Despite these extended deadlines, the tax filing season 
continued, with many taxpayers still filing their taxes as 
usual to get their tax refund. At the same time, consistent 
with government shutdown orders and CDC guidance, the IRS 
limited much of its work to essential services, closed a number 
of facilities, and instituted telework policies where 
practicable.
    This left the IRS short-staffed during the busiest time of 
the year. Understandably, that meant taxpayers experienced 
longer wait times to get their tax questions answered. It meant 
more calls than usual went unanswered. And mail, including 
paper returns, went unprocessed. Over the last couple of weeks, 
the IRS has begun to reopen facilities and start back to normal 
operations.
    So, Commissioner, I will be interested to learn more from 
you on how the reopening is proceeding and what actions are 
being taken to clear the backlog of taxpayer correspondence. 
While the IRS has worked to keep up with its filing season 
duties, it also has been tasked with implementing a number of 
tax measures enacted by Congress to provide relief for 
individuals and businesses.
    IRS and Treasury have worked nonstop to put out necessary 
guidance to help taxpayers navigate important provisions 
designed to help families make ends meet and provide businesses 
with needed liquidity to keep the lights on and the employees 
on the payroll. But even more daunting was the implementation 
of the rebates for individuals, often referred to as ``Economic 
Impact Payments.'' IRS and Treasury worked at unprecedented 
speed to get the payments out the door and in the hands of 
individuals and families forced to stay home through the 
pandemic. Over about a 2-month span, nearly 160 million 
stimulus payments totaling almost $267 billion were delivered 
by direct deposit check or prepaid debit card.
    The IRS took steps to get payments to as many eligible 
individuals as possible. This included working with the Social 
Security Administration and the Department of Veterans Affairs 
to get payments to seniors, veterans, and individuals receiving 
certain Federal benefits, with no need to file a tax return. 
For others who typically do not file a tax return, the IRS 
established an online tool to register for the payments. Over 6 
million individuals and families took advantage of that tool.
    Commissioner Rettig, you ought to be thanked, and I do 
thank you and your staff for working around the clock to get 
this much-needed assistance in the hands of taxpayers during 
difficult times that were no fault of their own. Because, for 
the first time in 244 years, our government took the step of 
actually shutting down the economy and a lot people were 
unemployed, that help was badly needed.
    When you consider all this, I would say the IRS performed 
exceptionally well under the circumstances. Of course when you 
are tasked with processing 160 million payments in an expedited 
fashion, there are bound to be some hiccups. But there will 
always be Monday morning quarterbacks eager to criticize, even 
though we all know they could not have done it any better.
    I am interested in getting your perspective on how the 
process has worked, what the IRS has learned, and what 
improvements could be made should this or a future Congress 
once again task the IRS with administering stimulus payments.
    Beyond the current filing season and the challenges posed 
by the pandemic, the IRS has been working to implement the 
Taxpayer First Act, which was enacted last year to modernize 
the IRS and beef up taxpayer protections. The Taxpayer First 
Act calls for the IRS to institute a comprehensive customer 
service strategy, modernize its organizational structure, and 
implement an information technology strategy.
    I look forward to hearing how the IRS has proceeded with 
those reforms. We thank you once again.
    Now I turn to Senator Wyden.
    [The prepared statement of Chairman Grassley appears in the 
appendix.]

             OPENING STATEMENT OF HON. RON WYDEN, 
                   A U.S. SENATOR FROM OREGON

    Senator Wyden. Thank you very much, Mr. Chairman. And, Mr. 
Chairman and colleagues, on behalf of the chairman and I, I do 
have some sad news to begin this morning's hearing with.
    Ed Kleinbard, who was the Chief of Staff for the Joint 
Committee on Taxation, has passed away. And he was a truly 
extraordinary person. He accomplished the rare trifecta of 
making his mark as a respected expert in tax law in business, 
in government, and in the academic world. He was always 
professional--I see my friend Senator Thune here. We all 
remember him, always professional, always fair to both sides.
    And he became a personal friend of mine, a man of 
exceptional warmth and good humor. I always thought of him as a 
mensch. This was a man with exceptional character, and I just 
wanted to make those remarks, and the chairman said I should 
express our sorrow on behalf of both of us today for the 
passing of Ed Kleinbard.
    Now as the chairman noted, we meet for our annual oversight 
hearing. This year of course, it is intertwined with the COVID-
19 response, as the chairman mentioned. I want to start with 
COVID-19, because I think we are all seeing spikes now across 
the country, tens of thousands of newly identified cases every 
day. ICU beds in hot spots are running dangerously low.
    The President says out in the open that he wants less 
testing, and he has reportedly gone weeks without speaking to 
our top public health officials. I think that is particularly 
unfortunate, because I think what happens is, it causes 
Americans to say that some of their elected leaders have just 
given up. And in my view, that just defies common sense, 
because it is an absolute certainty jobs in the economy cannot 
come to full strength as long as the pandemic continues, with 
these kinds of spikes and so many communities so hard-hit.
    This committee is going to have to do more. We are going to 
be in the center of key economic discussions in the next few 
weeks. I strongly feel, as all my colleagues here know, that 
the top priority has got to be to extend super-charged 
unemployment benefits for as long as it takes to get the 
economy back to normal. And I see my friend Senator Thune 
here--and colleagues know that what this means is you have got 
to have these benefits so that people can pay their rent and 
buy groceries. And then of course as unemployment goes down--
and the Senator from South Dakota calls it tapering off--now of 
course when unemployment goes down, then you are in a different 
situation. But we cannot leave people, August 1st, not being 
able to pay their rent or afford groceries, because they are 
going to just be in a position where we will probably have a 
tsunami of evictions and people who will just be desperate when 
they cannot feed their families or put groceries on the table. 
And tens of millions of folks are out of work, and more and 
more of these temporary furloughs are becoming permanent 
layoffs.
    So I am very hopeful that as we go into those negotiations, 
we can get super-charged benefits that are tied to conditions 
on the ground--the kind of marketplace conditions we have out 
there in the real world.
    Now on the subject of IRS oversight, I am going to touch 
first on a stunning new report that shows how years of 
Republican budget cuts have led to wealthy tax cheats getting 
off scot-free. A new report by the Treasury Inspector General 
showed that over a 3-year period the IRS failed to audit almost 
900,000 wealthy taxpayers who skipped out on filing tax 
returns. Together, these wealthy taxpayers owed nearly $46 
billion in taxes. And, colleagues, think of what we could do 
for hard-hit communities, if you are talking about having that 
money--$46 billion in taxes that was owed to the American 
people.
    In nearly 370,000 of those cases, taxpayers have failed to 
respond to more than one delinquency notice from the IRS. Those 
individuals owed nearly $21 billion. And let us be clear: this 
is not about shadowy networks of hard-to-trace shell companies. 
It would not take a lot of complicated forensic accounting to 
start cracking down on tax cheats. Because we are talking, 
colleagues, about people who simply would not file their 
return.
    Now, two issues stick out. First, Donald Trump says he is 
pro-law enforcement, but his administration has not taken any 
steps to crack down on these wealthy tax cheats who have stolen 
tens of billions of dollars from American taxpayers. After 
years of Republicans bullying and gutting the IRS, audits of 
wealthy taxpayers are way down.
    So maybe it does not come as a surprise that Donald Trump 
is not doing anything about it, given what we know about this 
President's long record of tax dodging and, in my view, 
outright fraud.
    Second, in my view it is past time for Congress to 
reconsider how the Federal Government fights against tax 
cheating. Over a decade of Republican budget cuts, the IRS has 
lost a third of its enforcement personnel and more than half of 
its revenue officers.
    This new Inspector General report shows, colleagues, how 
easy it is, after these enforcement cuts, to rip off taxpayers, 
for the wealthy to get away with cheating, and even those who 
do not bother to file their tax return. The burden of painful 
tax audits has been shifted unfairly onto those hardworking 
Americans who work for a living.
    So years of Republican budget cuts have made this a good, 
good, good time to be a rich tax cheat, and the Congress ought 
to change it. You do not actually believe in law and order if 
you advocate for cuts that allow wealthy tax cheats to get away 
with breaking the law.
    Commissioner Rettig, thanks for joining us this morning.
    And, Mr. Chairman, I look forward to our questions and 
answers after we hear from the Commissioner.
    [The prepared statement of Senator Wyden appears in the 
appendix.]
    The Chairman. Before I give the introduction, there was 
something I was wondering about: whether or not we were going 
to extend the time beyond July 15th for filing. And I have just 
been informed that last night Secretary Mnuchin announced that 
he would not be extending that filing. And he has the authority 
under law to do that.
    Now to introduce our witness, the Commissioner of the 
Internal Revenue Service, Mr. Rettig. Prior to his present 
position, Mr. Rettig was a highly respected law firm partner in 
California for more than 36 years. There he represented 
thousands of individuals, businesses, and corporate taxpayers 
before the IRS, the Department of Justice Tax Division, Federal 
and State courts, and State taxing authorities.
    He has served as a member and Chair of the IRS Advisory 
Council 2008 to 2011. He chaired the Taxation Section of the 
Bar of California and served on advisory boards of both the 
Franchise Tax Board and the Board of Equalization in 
California.
    He has received numerous professional honors--and I will 
not go through that list. He has been a featured speaker at 
many tax conferences, both domestically and internationally. He 
has authored numerous tax-related articles. He has a B.A. in 
economics from UCLA as well as a J.D. with honors from 
Pepperdine University, and a master of law from New York 
University.
    Commissioner Rettig, we are pleased to have you here, and 
we will have your opening statement. And then we will have 
questions.

  STATEMENT OF HON. CHARLES P. RETTIG, COMMISSIONER, INTERNAL 
                REVENUE SERVICE, WASHINGTON, DC

    Commissioner Rettig. Thank you. Chairman Grassley, Ranking 
Member Wyden, and members of the committee, thank you for the 
opportunity to discuss this year's filing season and the IRS's 
efforts to help taxpayers during the COVID-19 pandemic.
    Before I proceed, I would like to also extend my personal 
sympathies, as well as on behalf of the Internal Revenue 
Service, to the family and friends of Ed Kleinbard. I was 
familiar with Ed through his tenure at USC out in Los Angeles, 
and a better person did not exist, and a more supportive 
person, I think, for tax administration, guidance, and getting 
it right probably did not exist. So we are equally saddened to 
learn of the passing of Ed Kleinbard.
    I remain extremely proud to be working with the Internal 
Revenue Service in my second year as Commissioner. Knowing that 
96 percent of the gross receipts of our country flow through 
the Internal Revenue Service has strengthened my belief that a 
healthy, functional IRS is critical to the success and well-
being of our country and our people. The IRS's rapid response 
to the pandemic 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 our 
country deserves.
    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. As stated by the chairman, so far 
approximately 160 million Economic Impact Payments have been 
distributed, totaling approximately $270 billion. However, 
there is more to do. The IRS remains focused on making sure 
every eligible American receives a payment.
    We are especially focused on getting payments out to 
historically underserved communities of our Nation, such as 
individuals experiencing homelessness. We realize how difficult 
the pandemic has been for so many Americans. For that reason, 
the IRS has also provided important administrative relief, 
postponing the filing and payment deadlines to July 15th. And 
as you stated, Mr. Chairman, they will not be extended beyond 
July 15th. But yesterday we issued a notice that had a variety 
of payment-related options that folks can look to. We also 
temporarily adjusted our processes to help people and 
businesses during these uncertain times under the IRS People 
First Initiative.
    With respect to filing season, while we had to adjust and 
redeploy resources during the pandemic, our employees have 
remained dedicated to delivering the 2020 filing season as they 
continue to process electronic payments, issue direct deposit 
refunds, and accept electronic payments during the pandemic.
    As of June 19th, we have processed more than 126 million 
individual returns, and we have issued more than 93 million 
refunds totaling more than $257 billion. We are in the process 
of a phased-in reopening of some of our operations when and 
where it is safe to do so. In this regard, we are processing 
paper returns. We are tackling the backlog of mail and 
reopening our phone lines and adding phone assisters.
    We are prioritizing refunds and customer service 
operations, as well as the health and safety of our employees 
and everyone that we interact with. We will continue to follow 
and, where possible, exceed applicable safety guidelines and 
measures.
    The IRS is also committed to delivering on the promise of a 
new IRS. We continue to be extremely grateful to Congress for 
last year's strong bipartisan support in passing the Taxpayer 
First Act. We will put forth comprehensive strategies for a 
newly envisioned taxpayer experience, operating through the 
eyes of the taxpayer.
    With respect to enforcement, the IRS is also committed to 
having a strong, visible, robust tax enforcement presence. 
During my tenure, we have shifted significant examination 
resources and technology to increase our focus on high-income 
taxpayers, especially those who have failed to file returns and 
those engaged in certain types of questionable transactions.
    With respect to the budget, by providing adequate funding 
Congress can help the IRS deliver on its mission and build a 
stronger IRS for taxpayers, as required by the Taxpayer First 
Act.
    The President's Fiscal Year 2021 budget requests an 
appropriation of $12 billion, as well as a program integrity 
cap. We are also asking for Congress's help legislatively by 
allowing the IRS greater flexibility to address correctable 
errors and improving the IRS oversight of paid tax return 
preparers.
    Chairman Grassley, Ranking Member Wyden, and members of the 
committee, this concludes my statement, and I would be happy to 
take your questions. Thank you.
    [The prepared statement of Commissioner Rettig appears in 
the appendix.]
    The Chairman. It looks to me like--what I got from the 
clerk here is, most people are going to be remote. So I do not 
know whether people who are remote have the timer or not, but 
if you do, then you know when you need to stop. But if you do 
not, and I see the 5 minutes time is up, finish your question 
and we will let it be answered and then we are going to quickly 
move on. Because I cannot see you folks face-to-face, that is 
the best way I can do it to keep things on time.
    Commissioner Rettig, last week the Government 
Accountability Office put out a report discussing the Federal 
Government's response to the COVID-19 crisis. That report 
included a review of the IRS's work on getting stimulus 
payments out to Americans. And one issue raised was that, due 
to a glitch with the IRS Non-Filer tool, some stimulus 
recipients did not receive the additional $500 for the children 
claimed on the form.
    The IRS estimated 450,000 stimulus recipients did not 
receive the correct amount. I understand the IRS now intends to 
send these tax filers any additional amount they are entitled 
to. So when can these tax filers expect to see these additional 
amounts?
    And then before you answer that, let me refer to a second 
part of the same subject. Senator Collins sent you a letter 
expressing similar concerns about those on Social Security with 
dependents missing out on an additional per-child amount due to 
the April 22nd deadline for this group to use the Non-Filer 
tool.
    As you go back to account for the dependents for other non-
filers, does the IRS intend to similarly send additional 
amounts due to any seniors who filled out the Non-Filer tool 
after the April 22nd deadline?
    Commissioner Rettig. Mr. Chairman, with respect to the 
first group, the individuals where the $500 payments were 
missed, I believe the figure is about 365,000. But in any 
event, we are going to be reissuing those $500 payments this 
summer.
    Similarly, we have an issue with respect to individuals who 
had filed Injured Spouse claims. And we are taking a look at 
those, and we anticipate reissuing those as well, sometime, I 
believe it is, during this summer, but we can verify that with 
you separately.
    With respect to the Social Security information folks, SSA 
folks, we are taking a look at that. We have some limitations 
on abilities and capacities to move things through, but we are 
sympathetic with trying to get as much funds out to as many 
people as possible as quickly as possible. So that I cannot yet 
commit on, but we are taking a look at it.
    The Chairman. The next point is, for much of the filing 
season, IRS has operated on short staff due to this emergency. 
This has resulted in backlog. We have IRS error resolution 
system claims waiting to be addressed. Many are returns filed 
by low-income taxpayers claiming the EITC and Child Tax Credit.
    What steps is the IRS taking to clear this backlog? And how 
is the IRS prioritizing returns that were flagged for error 
resolution?
    Commissioner Rettig. The EITC returns have an extreme 
priority, and as I think you are aware, we brought employees 
back on a voluntary basis initially. We have been bringing our 
people back week by week, with full staffing, given social 
distancing--a full staffing under the new procedures by July 
15th. And we expect to move through the EITC claims as quickly 
as we can, but they have priority on what we are doing.
    We have allocated priority to refunds. We have allocated 
priority to customer service calls, with our customer service 
representatives in the campus. Really, the taxpayer service 
side of the organization is what we have stood up first and, 
most importantly, what we are trying to address.
    The Chairman. There is a significant mail backlog for the 
same reason: that staff could not come to the office. We have 
even heard reports that you had to bring in tractor trailers, 
and even rent extra storage space to store the mail waiting 
processing.
    How long do you expect it to take for the IRS to address 
the backlog? And are there procedures in place to prioritize 
certain types of correspondence such as tax returns and audit 
requests?
    Commissioner Rettig. Paper returns are being prioritized in 
terms of going through the inventory, which I believe is 
currently around 12.3 million pieces of correspondence, which 
includes paper returns and other correspondence that we might 
have.
    We are focused on the paper returns, because many of those 
also obviously will have EITC refunds and otherwise, but that 
is another focus.
    The Chairman. Okay. With my 13 seconds left, I will say, 
could you explain the reasoning for not screening out payments 
to the deceased from the start? Also, what procedures were 
eventually put in place to limit such payments, as well as 
recover those that went out?
    Commissioner Rettig. With respect to the decedent payments, 
the Internal Revenue Service followed the practice with respect 
to the payments that went out in 2008 for the stimulus 
payments. And after 3 weeks of issuing payments, Treasury and 
counsel issued guidance indicating that decedents should not be 
receiving those payments, and so IRS changed the processing for 
that.
    Because there was no clarity in the CARES Act that 
decedents should not be receiving payments, the IRS 
administered the CARES Act as written. And then as Treasury 
came to the policy conclusion with counsel that decedents 
should not be receiving the payments, we adjusted our filters 
after the third day and then input the death file.
    The Chairman. Okay. Senator Wyden?
    Senator Wyden. Thank you, Mr. Chairman.
    Commissioner, let us go to the infuriating new report from 
the Inspector General that found that millionaires are getting 
away without paying the taxes they owe. Between 2014 and 2016, 
nearly 5,000 taxpayers who owed at least $500,000 in unpaid 
taxes did not file a return and were not audited by the IRS. 
The 5,000 scofflaws owed a cumulative $15.7 billion over 3 
years, and they got away with it.
    The report found that overall, hundreds of thousands of 
taxpayers with significant incomes were skipping out on filing 
tax returns and paying a cumulative $45.7 billion in taxes over 
3 years, with the IRS doing nothing about it.
    I think this is just infuriating, and I hope that you are 
as angry about this too. And so my question is, we confirmed 
you here in this room almost 2 years ago. I have to assume you 
learned about this outbreak of lawlessness I have described, 
and I want to know why you did not call up then-Chairman Hatch 
and me and say, ``Hey, this is what has happened. It is 
outrageous. I want to stop it now. Here is what I need from the 
Finance Committee.''
    And we never got such a call.
    Commissioner Rettig. That report addresses a time before I 
was confirmed, as you are aware----
    Senator Wyden. I understand that, Mr. Commissioner. But 
when you learned about it, why did you not call the chairman, 
then Chairman Hatch, and me and say, ``Let us stop this.''
    Commissioner Rettig. We are stopping it.
    Senator Wyden. No. You are doing various things with 
budgets and the like, and I am interested in hearing it. But I 
am asking you a specific question.
    When you learned about this--it seems to me this is 
priority business. We are talking about billions and billions 
of dollars, and you all sure can find time to go after folks 
who get the Earned Income Tax Credits. Why did you not call us, 
Chairman Hatch and I, and say, ``We have got to do something 
about it now''? And this, in my view, should have been a call 
made almost 2 years ago. Why did you not do that?
    Commissioner Rettig. Senator, can I tell you what we are 
doing?
    Senator Wyden. I want first----
    Commissioner Rettig. I will--I will call you, but I would 
like to tell you what we are doing.
    Senator Wyden. No, Commissioner; I want to know first why, 
when you saw this going on shortly after you were confirmed, 
why you did not say to this committee on a bipartisan basis, 
``I have got to stop this''?
    Answer that first, and then tell me what you are doing now.
    Commissioner Rettig. Shortly after I was confirmed, this 
issue was not brought to my attention. When this issue was 
brought to my attention----
    Senator Wyden. Okay; let us stop right there. So are you 
saying you and your staff did not know that 900,000 individuals 
skipped out on filing their returns and paying the $46 billion 
they owed? Is that what you are telling us?
    Commissioner Rettig. That report relates to tax years 2014, 
2015, 2016. Can I talk about what I did when I got on board, 
sir?
    Senator Wyden. I want to know--yes, absolutely. I want to 
know what you did when you learned about that.
    Commissioner Rettig. When I learned about that--a lot of 
this has been public--we changed certain folks with respect to 
certain positions in the Internal Revenue Service. We moved 
somebody from the Criminal Division at the Internal Revenue 
Service to be the Commissioner of Small Business and Self-
Employed. The Deputy Chief of Criminal Investigation is now the 
Commissioner of Small Business and Self-Employed.
    We created a fraud enforcement group headed by somebody who 
was a career IRS Criminal Investigation person. We created a 
promoter coordinator position. We recently added a significant 
counsel attorney to the fraud enforcement group.
    We have touched all non-filers that we are aware of with 
respect to 2017 and 2018. We will, with respect to 2019. For 
fiscal year 2019, we closed more than 364,000 Automated 
Substitute for Return matters, resulting in nearly $6.6 billion 
in additional assessments.
    We have a non-filer strategic plan----
    Senator Wyden. My time is essentially up, and I have given 
you an opportunity to respond. How much of the $46 billion, or 
close to it, has been recovered?
    Commissioner Rettig. I do not have those figures, but I am 
more than willing to meet with you or have our----
    Senator Wyden. When can we have those? Can we have those 
figures within a week? And the reason I want the answer, at 
least to the best of your ability, is because we always hear 
about things that are being done in the future, and we hear 
about changes with respect to policy, and new people being 
named and the like, but this is a brand new report.
    It is the latest report from the Inspector General, and it 
says that these scofflaws are making off with enormous sums of 
money that we need for priorities here at home. And I am still 
trying to figure out when you actually learned about this, and 
what you did to collect that money.
    So I am over my time, and I would like a written response 
to my question within a week. Okay? Thank you.
    The Chairman. Senator Thune? And then after that, by 
remote, Senator Stabenow.
    Senator Thune. Thank you, Mr. Chairman.
    Commissioner Rettig, during the pandemic, medical 
professionals from around the country have come to hard-hit 
areas to help, forming an essential part of our medical 
response and saving countless lives.
    I believe these front-line health-care workers are heroes 
and are deserving of our Nation's profound gratitude. However 
others, including some State leaders, believe that these 
individuals are deserving of something else--tax bills. I have 
introduced bipartisan legislation, along with Senator Brown, 
called the Remote and Mobile Workforce Relief Act, which would 
establish a special 90-day standard for health-care workers who 
traveled to another State to fight the coronavirus and help 
ensure that these workers do not face surprise tax bills for 
the critical assistance that they have provided.
    Our bill also addresses the possible tax complications that 
could face remote workers as a result of the pandemic, 
including State withholding and nexus issues. I know the safety 
of IRS workers is paramount to you, Mr. Rettig, and that much 
of your workforce has had to work remotely as well.
    As a large national employer with a footprint in many 
States, is it safe to assume that you too are having to 
confront many of these same State tax withholding issues 
presented by remote work?
    Commissioner Rettig. I believe that is accurate.
    Senator Thune. I would hope that we could make some 
progress on addressing that and provide certainty and clarity 
for a lot of these employees who are crossing State lines in 
many cases to provide assistance to help us defeat the 
coronavirus. So I am hoping that that legislation can ride on 
whatever the next CARES package is.
    Mr. Rettig, this year the President's budget once again 
proposes to improve clarity and worker classification 
requirements. As you know, for the past two Congresses I have 
introduced legislation that would do just that. My bill, the 
NEW GIG Act, addresses the classification of workers and 
creates a safe harbor based on objective tests for both income 
and employment tax purposes.
    What is new this year is just how much more important gig 
workers and gig work has become. During the pandemic, many of 
us have relied on these workers to deliver our food and 
groceries, among other necessities. But companies who have 
wanted to provide additional benefits to workers, from PPE to 
financial assistance, have hesitated to do so for fear that, as 
a result of their support, they could accidentally see these 
workers be reclassified from independent contractors to 
employees.
    Would you continue to work with me to add the much-needed 
certainty to our worker classification rules so that companies 
can provide support to workers to help them stay safe during 
the pandemic?
    Commissioner Rettig. Yes, sir.
    Senator Thune. I had introduced legislation in March. It 
was a bipartisan bill that allowed the tax filing deadline to 
be extended from April to July. Shortly after that, you 
proceeded to approve that request, or the Treasury Department, 
I should say, did. And yesterday, as the chairman noted, the 
IRS and Treasury announced the payment deadline of July 15th 
would not be postponed.
    Could you speak to whether this decision was made in 
response to feedback you received from States regarding their 
own fiscal concerns? Is it your impression that small and 
medium-sized businesses have enough liquidity presently to pay 
their tax bills? Could you talk a little bit about that 
decision?
    Commissioner Rettig. The decision ultimately was made by 
the Treasury, but we were interactive with various professional 
organizations, professional service organizations, both 
accounting law and otherwise. We were interactive with various 
States along the course of the path.
    So the decision was sort of a cumulative decision after, I 
think it was--you know, one of the organizations, I know, 
solicited 1,000 of its members to get input, and they were 
supportive of not postponing the July 15th. Basically the 
comment was that their businesses have started to settle into a 
degree of reality.
    But we also, in issuing the notice--the IRS issued a notice 
yesterday with a host of payment options for folks who might 
not be able to pay by July 15th.
    Senator Thune. Yes, and I was going to ask, would more 
separate deadlines be better or worse for taxpayers, would you 
say?
    Commissioner Rettig. You know, we are moving into--with 
respect to the IRS, we are always processing two filing seasons 
at once, and we are moving right into the next filing season 
that we have. So it becomes a little cumbersome for us, but 
that was not taken into account, and the IRS employees will 
rise to the challenge.
    But with respect to taxpayers, and particularly self-
employed or unrepresented taxpayers, too many dates begins to 
get a little confusing in the trenches. And so giving some 
degree of certainty that they can move to and having us 
exercise discretion on the back end, I think is the proper path 
forward.
    Senator Thune. Thank you, Mr. Chairman. My time has 
expired.
    The Chairman. Senator Stabenow--and for everybody else who 
is remote--I do not know whether you know when the 5 minutes 
are up. I do not intend to cut you off at the 5 minutes, but if 
you hear a little tapping of the gavel like that [indicating], 
it means that I should go on to the next person. We have a lot 
of people. We have 24 people who want to ask questions today.
    Senator Stabenow?
    Senator Stabenow. I understand, Mr. Chairman. Thank you and 
our ranking member for holding the hearing, and thank you, 
Commissioner, for joining us today. It is a really important 
discussion.
    Now I want to speak about the $1,200 Economic Impact 
Payments that have been so vital to stabilizing so many 
American families during this pandemic. And I think, along with 
those payments, unemployment insurance has really allowed 
millions of families just to attempt to survive through all of 
this.
    Families in Michigan have received more than 4.8 million 
payments, the $1,200 payments, the money helping people through 
the crisis, and I want to first thank you for working with the 
Social Security Commissioner and the Secretary of Veterans 
Affairs to ensure that people receiving Social Security and VA 
benefits would receive the EIPs without having to file tax 
returns.
    However, we have a lot of folks who still have not gotten 
those payments. In fact, last week the Center for Budget and 
Policy Priorities estimated that about 12 million families--and 
I know we have estimated more than 300,000 families in 
Michigan--that are eligible have not received them because they 
did not file tax returns, or have not used the IRS website.
    So these are likely to be low-income families, 
disproportionately people of color, and they are people who 
frankly right now--as you know, the $1,200 and $500 per child 
are extremely, extremely important.
    So my first question is really basic. Does the IRS have an 
estimate of how many people are eligible for EIPs but have not 
yet received them?
    Commissioner Rettig. Personally, I can tell you I think the 
12 million is significantly overstated, but----
    Senator Stabenow. Any ideas? Do you have any--what do you 
think the right number is?
    Commissioner Rettig. I am currently not at liberty to give 
a number, but I would say it is overstated multiple times. But 
part of the difficulty here is we cannot count people whom we 
cannot identify. And we cannot issue payments to people we 
cannot identify.
    So we have reached out--and personally I have reached out 
to numerous folks around the country, and thousands of 
different community organizations, including organizations 
involving homelessness and other arenas which have a 
significant contingent of folks who have the ability to operate 
off the radar screen, if you will, with respect to the Federal 
Government.
    Senator Stabenow. And I appreciate that. In the interests 
of time, I am going to pursue that just a little bit more, 
because when we are talking about another COVID package, one of 
the things on the table is an additional $1,200 payment, which 
I hope will actually happen.
    But given that, what should we be doing in the current 
round in terms of getting people the payments that they 
deserve; and in any future rounds, what should the strategy be 
with Congress? How should we write this? What can we do to 
support your efforts to make sure that the people who most need 
this help right now are able to get it?
    Commissioner Rettig. Well, there are some lessons learned, 
obviously, when you go through a process like this, including 
outreach to various State organizations that might be providing 
subsidies to members of a State that the Federal Government 
might not know of or be unaware of, and folks who do not 
otherwise have a filing obligation.
    Similarly, we have created what we refer to as toolkits. 
One is for members of Congress and the Senate, and then another 
one is for literally every type of organization you can 
consider. And we have a lot of information.
    We have actually put our information in more than two dozen 
different languages, because there are a lot of situations with 
respect to certain communities that are also not interactive. 
But we can provide some information on a go-forward basis.
    And, the people we have been able to identify now, we have 
and we can identify, and I think that that is hugely positive. 
But we have----
    Senator Stabenow. If I might, I am going to stop you, only 
just to finally--I just want to refer to the fact that a lot of 
what we are talking about are folks who are unbanked. They do 
not have bank accounts. They have difficulty opening bank 
accounts.
    I know that you sent stimulus payments via debit cards to 
some unbanked people. Unfortunately, they were not expecting 
them. A lot of people thought it was fraud, and basically threw 
them in the trash.
    And so, when we look at another round of stimulus--checks, 
using a debit card, which I think can make sense as a 
strategy--what mistakes can we avoid repeating? What problems 
can we avoid repeating with the people who did not know it was 
coming, and basically did not take it seriously?
    Are you reaching out to them as well? Because the debit 
card would make sense for people who do not have a bank 
account, but there needs to be a strategy somehow to 
communicate with them to let them know it is coming.
    Commissioner Rettig. Issuing payments by debit card was 
actually determined by the Bureau of Fiscal Services, rather 
than by the Internal Revenue Service. We were just instructed 
to provide a file in a certain manner, and they made the 
determination of how those payments went out, whether it was by 
check or by debit card for unbanked people.
    But I think certainly, marketing outreach, any kind of 
public service announcements, not only by the Internal Revenue 
Service but by a number of other Federal agencies, State 
agencies, and similarly Congress--I do not think we can do----
    Senator Stabenow. Thank you, Mr. Chairman. Thank you.
    Senator Portman, by remote.
    [Pause.]
    The Chairman. Are you there, Senator Portman?
    Senator Portman. I am here, Mr. Chairman. Can you hear me 
okay?
    The Chairman. Yes, I can hear you.
    Senator Portman. Commissioner Rettig, thank you so much for 
being with us today and, more importantly, for your service. 
Your last year as IRS Commissioner must feel like 10 years, and 
we appreciate all the challenges you faced and how you have 
handled them professionally.
    I am going to ask a few questions about some concerns I 
have. But overall, let me say that I am pleased you got those 
checks out as quickly as possible. There has been a lot of 
discussion of that this morning, but one data point that was in 
your testimony--in 2008 it took us 10 weeks to get the first 
check out. Ten weeks into this one, we had about 90 to 95 
percent of the checks out.
    And although I was hearing from a lot of my constituents 
about where is my check, I do think that that was one of the 
areas where we did best in terms of the legislation that we 
passed here in Congress in getting real help to people right 
away. It was needed.
    We may do it again, and so I think these questions are 
appropriate to ask. One is, what are you doing to correct some 
of the problems that were encountered, in particular those who 
did not have bank relationships, were unbanked, or did not have 
up-to-date personal information and had a tough time getting 
their checks? They log on to Get My Payment, which I have 
encouraged all of them to do in my tele-town halls and so on, 
and they find out their check has gone to another account they 
have never heard of, as an example.
    So these are folks who often are low-income and need the 
checks more than anybody. So what is the status of some of 
these incorrect or non-delivered payments? And what steps are 
being taken to ensure that incorrect checks are being processed 
and reissued right away?
    Commissioner Rettig. Reissuing checks is a priority for the 
Internal Revenue Service. We actually take it very seriously. 
The concept of trying to get these payments out to the eligible 
Americans as quickly as possible--you know, we put together 
those portals. The first portal with respect to the non-filers 
was put together on what was launched on April 10th. The portal 
Expect to Get My Payment was launched on April 15th.
    The Get My Payment portal, 14 million people successfully 
used it. The non-filers portal, 6.1 million people successfully 
used it. And 192 million people successfully verified the 
status of their payment on the Get My Payment portal.
    So we have moved forward with that information. But again, 
our focus is on the people who have--principally they are 
unbanked people, and the IRS is essentially unaware of their 
existence. So identifying people, and then trying to get 
payments into their hands, I think that is one of the reasons 
why BFS moved to using debit cards.
    And as far as distribution of payments, one of the 
limitations was the BFS capacity was about 5 to 7 million 
checks per week. The Internal Revenue Service was more or less 
ready to go by April 10th with the information we had to launch 
the payments, which is how 81 million payments launched on 
April 10th.
    Senator Portman. Well, I appreciate your focus on 
particularly those who are unbanked, because those are some of 
the folks who need it the most.
    The other question I have is about refunds this year. I 
have been surprised, frankly, to hear how many people filed 
prior to the deadline, or a couple of weeks before the 
deadline, and 138 million returns have been processed as of 
June 19th, which is on par with the 137 million last year.
    So basically, even though you delayed the filing, most 
people did not take advantage of that, in part because they 
wanted their refund. But I am concerned that even though people 
have filed, they have not had their tax returns processed. As a 
result, there are many individuals, I am told--as an example, 
nearly 5 million paper returns are sitting unprocessed at a 
processing center somewhere around the country, as well as the 
10 million difference in refunds processed this year compared 
to last year.
    So we are taking people's tax returns early, but we are not 
processing them. As a result, these refunds are sitting in the 
Federal Treasury rather than going out to people as they 
should. This, of course, would be a de facto second stimulus. I 
mean, it would be huge if we could get this money out the door. 
So it seems to me that should be our top priority right now.
    We have received hundreds of inquiries from constituents 
who did not have the means to file electronically who need 
their refund to just make it, financially--to make ends meet, 
to make their car payment, to make the rent.
    Can you tell us what your plans are to process this backlog 
of paper returns, in particular, and ensure the remaining 
refunds get out the door as quickly as possible?
    Commissioner Rettig. The paper returns are a high priority 
for the Internal Revenue Service in terms of processing. I 
think we are running through those about a million a week, 
reducing the backlog about a million a week. And so going 
through that and getting those out is a priority.
    Similarly, with respect to electronically filed returns 
that might have been called up in a fraud filter or identity 
theft situation, those are also priorities. So the refund side 
of the house is really the first thing for the customer service 
representatives. And I think currently we have around 8,300 
folks working those two issues.
    Senator Portman. Well, I would urge you to redouble your 
efforts there. Again, we are looking at what is happening right 
now in the economy. We have still got 10 million people out of 
work. We have still got ourselves in a recession, and getting 
these refund checks out is absolutely critical. And they are 
due to people. So we have the information; it is something that 
can be done. I would think that would be a high priority.
    With regard to the issue of IRS reform, I have a few 
questions for you I will submit for the record, because I want 
to keep to the chairman's time here. And I would just say that 
with regard to IRS reforms, we appreciate all you have done. We 
are looking forward to the restructuring report that is due by 
September 30, 2020. And the restructuring commission that I co-
led back in 1997 made a big difference, I think, in trying to 
improve the agency, and it is time to do it again.
    So we look forward to that restructuring report, and I look 
forward to sending you some additional questions on IRS reform 
and getting your answer in writing. And again, thank you for 
your service, Commissioner.
    The Chairman. Senator Cassidy, by remote.
    Senator Cassidy. Mr. Commissioner, thank you for being on--
can you hear me?
    Commissioner Rettig. Yes, I can.
    Senator Cassidy. Thank you very much. Listen, a couple of 
things right off the bat. I know Senator Menendez and I are 
collaborating. He is going to ask you a couple more questions, 
but I just want to quickly point out that our bipartisan bill, 
the SMART Act, attempts to revise State and local relief.
    Let me ask you, though, to set the stage for that. Do you 
agree that much of the current fiscal crisis facing the State 
and local governments is related to the pandemic that caused 
revenues to fall off a cliff, not mismanagement by that local 
city and that State government?
    Commissioner Rettig. I personally have not analyzed that. 
Quite frankly, we have been working 7 days a week, 12, 15 hours 
a day, since March. I am aware certainly that the private 
sector and the government sector being shut down is having an 
impact.
    Senator Cassidy. Sounds great. Okay. Senator Menendez will 
follow up with some more on that.
    Let me ask you this regarding conservation easements. There 
are neighborhoods in downtown New Orleans--and in Shreveport 
and Baton Rouge--which have been revitalized by the historic 
preservation easement.
    I know there has been a review of conservation easements, 
but it seems that the historic preservation easements are kind 
of caught up in that, which are a fraction of the conservation 
easements.
    So it does not seem like the IRS's evaluation of 
conservation easements has drawn a distinction between the 
historic property and the land conservation. Would the IRS be 
willing to create a safe harbor for those preservationists who 
wish to use the program with integrity, which is the way 
Congress of course intended?
    Commissioner Rettig. You know, this would be subject to 
Treasury with respect to policy on issues like that, but we 
would certainly be willing to take a look at it. A distinction 
between historic easements and the conservation easements is 
the syndicated conservation easements.
    The Internal Revenue Service is supportive of historic 
easements. It is supportive of legitimate conservation 
easements. In the syndicated arena, we have seen significant 
abuse, and that is where a significant part of our enforcement 
effort has been and will continue to be.
    Senator Cassidy. Got it. With that said, I am also saying--
I do not know if this is you or Treasury--but it seemed that 
sometimes the holdup seems to be that the easements are being 
denied over mandatory changes, for example, putting in an ADA-
compliant wheelchair ramp, which is a little bit of a Catch-22. 
You get busted if do not put it, and you do not do well if you 
do put it. And so that is, you know, of a concern.
    There is also an issue--I am sorry about my computers. I am 
trying to follow more than one computer right now, so I 
apologize for the delay. There is also the issue of 
administering the COVID-19 relief. I am interested in paid 
leave tax credits provisions which are contained within H.R. 
6201. Could you give your insights on the administration of 
these paid leave tax credits?
    My colleagues and I are contemplating other legislation in 
the paid-leave space, and we would love your thoughts on this.
    Commissioner Rettig. As tax administrators, on behalf of 
the country, we are doing our best to administer every one of 
these provisions. They are really relief provisions to provide 
relief for businesses in this context, and individuals and 
whatnot.
    So I can tell you, from our perspective we have prioritized 
this entire arena. And we are doing our best.
    Senator Cassidy. Has the program gone well? Or do you see 
hiccups? Or is there something which Congress needs to help you 
address?
    Commissioner Rettig. I am not aware of--today I am not 
aware of something that I would say is a hiccup, but we would 
relish the opportunity to meet with members of Congress and 
others who are looking at creating a bill and try to provide 
our assistance, to meet with staff, or anybody.
    Senator Cassidy. So I have one more question in my 
remaining time. We have some companies which have employees, 
U.S. employees, who work for foreign corporations overseas. 
Think of the guy who is working in the energy sector, and he is 
doing something off the coast of Israel with natural gas 
development. I am told the IRS released guidance saying that 
the activities of these foreign workers trapped in the U.S. 
right now because of travel restrictions would not result in 
the foreign corporation being deemed to have a U.S. trade or 
business, or having a permanent establishment in the U.S.
    I think the ask is: can you release more formal guidance? 
There is a little bit of concern about relying only on an 
online FAQ, and a formal IRS notice would be preferable. If 
that is impractical, can you update the FAQ to include the 
documentation necessary to approve of the travel impairment?
    Commissioner Rettig. It would be a--guidance would be a 
Treasury policy call, but I will take that back.
    The Chairman. Senator Menendez?
    [No response.]
    The Chairman. Senator Menendez? Okay; Senator Lankford?
    [No response.]
    The Chairman. Senator Lankford? Okay; Senator Carper was 
here in person, so I will go to Senator Daines by remote.
    [No response.]
    The Chairman. Do you suppose our system is broken down or 
anything? Senator Cardin?
    Senator Cardin. I am here.
    The Chairman. Go ahead, Senator Cardin.
    Senator Cardin. Thank you very much.
    Mr. Commissioner, thank you very much for your service and 
being here today to fill us in. First I want to thank you for 
figuring out a way that we can get checks out to those non-
filers or their dependents this summer, rather than having to 
wait to file for a refund in the next tax season. I know that 
would be a terrible inconvenience, and I thank you for your 
commitment to find a way to deal with this.
    I do want to talk a little bit about the Taxpayer First 
Act. The chairman mentioned it in his opening statement. We 
recognize that COVID-19 has challenged the implementation of 
that bill that requires the IRS to be more customer-friendly, 
that deals with training, that deals with several of these 
issues that we have been working on for a long time as members 
of the Senate Finance Committee.
    Can you just very briefly tell me how you have been 
impacted on implementing that act as a result of COVID-19?
    Commissioner Rettig. Unfortunately, Senator, we have been 
impacted. We had to redeploy resources, as you can imagine, in 
a number of different arenas. And I think somewhere within 2 to 
3 weeks ago we sent a letter up indicating that we probably 
will need to move the September date to later this year--
November, December.
    We are working very hard on it, and the IRS takes the 
experience of taxpayers quite seriously. I think you are aware 
of the fact that a significant purpose as to why I did come 
onboard was because of my experience on the outside and trying 
to make things better for everyone who interacts with the 
Internal Revenue Service.
    Every employee of the Internal Revenue Service wants to do 
more, wants to do their best. And the Taxpayer First Act is 
quite an opportunity and a privilege for us to actually move 
the Internal Revenue Service into the arenas where I think we 
are actually doing things through the eyes of the taxpayer, as 
opposed to through the eyes of the Federal agency.
    We are also looking at the organizational structure. We 
have had more than a thousand interactions in terms of focus 
groups, and direct interactions and comments and such, 
receiving information from all over. We do have [email protected] 
Anybody can submit a comment there in terms of that, but we are 
working very hard.
    We did get pushback with respect to COVID. We were doing 
really well, and----
    Senator Cardin. Mr. Commissioner, let me make this 
suggestion. There are lots of members of our committee who are 
very interested in this. I would suggest that we have an 
opportunity for briefings so that we understand exactly what 
you are trying to do. We certainly understand that COVID-19 
will impact the time schedule here, but we would urge you to 
keep us informed.
    I want to cover two other points, if I can, briefly. One is 
to deal with the employee retention credit. We know that there 
have been some credits that have been given. We would welcome 
your thoughts as to how that program has been implemented. We 
know the House is interested in modifying that program. We are 
going to be looking at legislation, I hope soon, in regards to 
the next stimulus package. The retention credit was one of our 
major IRS initiatives.
    What challenges have you found in trying to implement that 
law?
    Commissioner Rettig. Unfortunately, there has been a degree 
of fraud for folks who actually looked at it as an opportunity 
to take advantage of a really good program designed to help a 
lot of businesses, as well as employees.
    We think we are pretty good in terms of identifying the 
fraud. We have some indicators. We have some filters, but I 
think you have probably seen a number of the prosecutions. The 
quickest prosecution was within about 2 weeks; an individual 
was indicted within about 2 weeks of when they submitted some 
paperwork.
    That is an arena that we would like to have, I think, some 
input on in terms of maybe how we can limit that. In terms of 
the entire CARES Act, there have been quite a few scams, for 
lack of a better word, and we have devoted quite a few 
resources to that, as has Treasury and the Inspector General's 
office.
    So we would welcome the opportunity to meet with staff, or 
meet with members to explore options.
    Senator Cardin. Well, I will make sure that we follow up 
with our staff.
    The last point I want to mention is that the CARES Act did 
provide some relief in regards to retirement security by 
allowing relief from the required minimum distributions and 
some other provisions. These are temporary issues.
    We know that in regards to retirement security, it is going 
to be impacted by COVID-19. We are looking at some substantive 
changes. Senator Portman and I have introduced legislation that 
would provide additional help for small businesses, for part-
time workers, for low-income workers.
    I would just urge that we work together and get your 
experiences during COVID-19 as to how we can use the Internal 
Revenue Code to encourage more retirement security options for 
vulnerable workers.
    Commissioner Rettig. We would welcome the opportunity.
    Senator Cardin. Thank you, Mr. Commissioner. Thank you, Mr. 
Chairman.
    The Chairman. Thank you, Senator Cardin.
    Now, would the people from Menendez, Lankford, Carper, or 
Daines--if you want to be recognized, please tell the staff. So 
I skipped over you to go to Cardin.
    Senator Bennet would be next.
    Senator Bennet. Thank you.
    The Chairman. I am sorry. You were not here a little while 
ago, Senator Carper. Go ahead. I am sorry.
    Senator Carper. No, let me yield. Go ahead to whomever you 
were going to.
    The Chairman. Well then, let us go to Senator Bennet, and I 
will go back to Senator Carper.
    Senator Carper. Thanks so much.
    The Chairman. Senator Bennet, are you available?
    Senator Bennet. Yes I am, Mr. Chairman. Can you hear me?
    The Chairman. Yes, I can.
    Senator Bennet. Thank you, Mr. Chairman, for holding the 
hearing. Thank you to Senator Carper for yielding. Thank you, 
Commissioner Rettig, for all you are doing.
    As you know, the IRS created a non-filer portal allowing 
households to register for their $1,200 Economic Impact 
Payment. However, unbeknownst to its users, the portal seems to 
have created a limited tax return, or in effect filed a tax 
return as a formality for these households.
    Later, when these taxpayers attempted to file a full 2019 
return to receive their Child Tax Credit or Earned Income Tax 
Credit, they were prevented from doing so. And it is my 
understanding that they can still file a paper return. The IRS 
has a limited capacity to process paper, and until late June 
was not processing paper returns at all.
    And I suspect, if I understand this correctly, there are a 
lot of people who are going to become discouraged when unable 
to file online, and as a result as many as 5 to 10 million 
households do not have a clear way to file taxes and no way to 
claim the Earned Income Tax Credit and the Child Tax Credit.
    Until a suitable online system is put in place to deal with 
this filing trap created by the IRS's system, millions are 
going to go without the money they desperately need--for 
example, a mother of three who received $2,700 in Economic 
Impact Payments but could be eligible for double that amount, 
or about $5,200, in EITC but is unable to claim it because she 
is in this so-called ``filing trap.''
    So let me ask you. First, can you confirm that the non-
filer portal is filing tax returns on behalf of these taxpayers 
and the users of that portal?
    Commissioner Rettig. For those individuals, the purpose of 
the non-filer portal was for them to be able to provide us with 
dependent information, which was for the additional $500 per 
qualifying child--to get that in. And also we are about to 
issue guidance for these individuals to file a paper return. It 
will be marked ``amended EIP return.'' We will have specific 
guidance--amended EIP return, in paper. We will extract those 
from the mail and process those on an expedited basis.
    Senator Bennet. Can I ask--first of all, Commissioner, 
thank you for doing the outreach on the additional $500 
payment. You and I had a conversation about the importance of 
that payment. But is there no way to--is there a reason why 
this cannot be done in a more expeditious way, and online? 
Although I appreciate your saying that the payments are going 
to be prioritized, it feels like it is going to be slower than 
these people would need to get these payments.
    Commissioner Rettig. We are trying to get things to come in 
through certain portals, which actually expedites our ability 
to look at certain things. I cannot commit to another lane for 
having this come in. Right now this will be the lane that we 
will be announcing, and we will be expediting it.
    We also, I think you are aware, have specific email for 
members of the House and Senate at house.gov or senate.gov. And 
so if you have folks reaching out to you on these issues, you 
can forward that to us. And those emails are handled on an 
expedited basis as well, with respect to your constituents.
    We have truly tried, given the fact that our employees are 
dealing with the same thing everyone else in the country is, 
and we have around 56,000 employees currently teleworking. We 
have worked really hard to try to address as many issues as we 
can, and I continually keep saying ``this is a priority,'' 
``that is a priority,'' and those are accurate statements.
    And when I use the word ``priority,'' it is knowing that we 
have the human resources to back that up. We also have the 
employees who have the desire to make this happen. Our people 
care, and they care a lot.
    Senator Bennet. And I am sure that they do. I appreciate 
that.
    Let me just ask a final question for you to either answer 
or consider, whether there is anything preventing the IRS from 
automatically paying childless EITC benefits to households that 
are in this situation, using the W-2 data that the IRS already 
has on file? Or is there any other way that you think it could 
be expedited, or in a sense automated given the difficulty, the 
challenges that the agency is facing, but also the dire need 
that so many of our families are in?
    Commissioner Rettig. When I came onboard is when I learned 
a lot about the EITC. And interestingly, I was in a room with 
some IRS employees who had been there since 1975 and 1976 who 
have been working on EITC since then.
    About 98 percent of all refunds are processed accordingly 
and paid within 21 days. It is that 2 percent, and the 2 
percent get held up for a number of reasons. A large percentage 
of those would be in the EITC arena.
    We devote a lot of resources to trying to figure out, as do 
members of Congress and the Senate and others, how to make that 
program more efficient and quicker. Because at the end of the 
day, these are subsidies that need to get into the hands of the 
people who truly need them.
    The Chairman. Senator Carper?
    Senator Carper. Thanks, Mr. Chairman. Mr. Rettig, thank you 
for joining us today. Thank you for your service, and our 
thanks to the people who work with you, the folks that you lead 
across the IRS. It is a difficult job and a thankless job. We 
are grateful for all you do.
    If I could just give you a word of advice to follow up on 
Senator Wyden's questioning of ``why did you not call, why did 
you not call?'' I have said to the chairman and Senator Wyden, 
sometimes the folks who are new in jobs, like even your job, 
are reluctant to reach out as a human being and call and say, 
``By the way, I am new at this.''
    But this is something that I share with you: I would urge 
you to do that. Some folks are really good at it. Robert 
Lighthizer, Trade Rep, who was here a couple of weeks ago, he 
is really good at doing that. And I would just ask you to keep 
that in mind.
    A couple of things. One, with respect to the kind of 
resources that we provide, I have been looking at the numbers, 
and it looks like from 2010 to last year we saw, in terms of 
real resources provided to the IRS, a significant drop.
    I think the budget proposal for the next year, 2021, is an 
improvement--modest, but an improvement nonetheless. But John 
Koskinen, a former Commissioner, used to come here and plead 
with us for additional resources; plead with us for the 
authority to hire people with the kind of technical skills that 
are needed for some of these complex tax returns.
    Talk to us about the people, the human resources that are 
needed, and the folks with technical skills. Are you able to 
hire--to find them? Are you able to bring them onboard and put 
them to work?
    Commissioner Rettig. The Taxpayer First Act gave us 
streamlined critical pay, and we have been exercising that, and 
it is principally with respect to cyber and IT. That is a huge 
benefit to the agency. It allows us to get on a more even keel 
basis to compete for folks in that regard.
    All of the Federal Government has difficulty onboarding 
people. There is a time lag in onboarding people. So from when 
we meet them to try to get them onboard, they are approached by 
others.
    Senator Carper. It can take months, right?
    Commissioner Rettig. Yes.
    Senator Carper. Maybe even longer.
    Commissioner Rettig. I have actually taken to--in the town 
halls and interactions with our employees--referring to our 
employees as IRS ambassadors, that when you are out and about, 
either with private-sector folks or with folks from other 
agencies, let them know how great it is to work for the 
Internal Revenue Service, bring those people into our agency, 
particularly the ones we can get onboard quickly.
    We do have resource issues from the human perspective. A 
significant percentage of our employee base is eligible to 
retire over the next few years. We had essentially no real 
hiring from 2011 to 2018. We were able to hire last year. We 
are hiring this year. But it is difficult to replenish on the 
attrition. So we go up--I think our enforcement side of the 
house went up about 1 percent, even with some considerable 
hiring.
    This also brings in the----
    Senator Carper. I am going to ask you to stop right there. 
I think the point is well made. I want to refocus a little bit, 
if I can, on Free File. When I was a Congressman a million 
years ago, I used to hold town hall meetings, hundreds of them. 
And every year, along about the middle of March--I only had 
three counties in Delaware--I would host town hall meetings in 
all three counties about mid-March, a month before the filing 
deadline.
    We would invite IRS to counsel people. We would invite the 
Delaware Division of Revenue to counsel people. We would 
literally help people with their taxes, with help from the 
experts. And we did that--I was in Congress on the House side 
10 years--we did it for almost 10 years.
    As it turns out, there is a better way to do that now in 
terms of providing assistance and advice, and it is something 
called Free File--Free File, which most people do not even know 
exists. And I think in the country there are close to 100 
million taxpayers--close to 100 million taxpayers--who could 
actually take advantage of this help in filing their taxes, and 
it is free. But relatively few people, just a couple million 
actually, use that.
    Senator Rob Portman, who was questioning you just a few 
minutes ago, he and I are the leads on this Permanent 
Subcommittee on Investigations in the Senate. And one of the 
things we have delved into over the last year is what is going 
on here. How can we make sure that this advantage is public and 
is there to help people?
    I would like to say, if there is a tree that falls in the 
forest and there is nobody there to hear it, is there really a 
noise? Well, if there is a good program, a very helpful program 
that is free, like Free File, why aren't more people using it? 
What can you do? What can the IRS do, and what can we do to 
help enable you to provide better access to that kind of 
information?
    Commissioner Rettig. The IRS promotes it to the extent that 
the IRS can. It has not had a marketing budget, essentially 
since 2001, I think, when it started. You know, IRS resources 
and the allocation of those resources, there is a lot of effort 
that goes into where a dollar should go. And a dollar for 
marketing versus a dollar for answering a phone call, or the 
equivalent, or cyber--you know, we have to be aware of a lot of 
different things.
    I am a huge proponent of Free File. It helps the right 
people. Free File, combined with VITA, tax counseling for the 
elderly, military VITA, I think make a huge difference. If I 
had to--and I know the report that came out, and I agree with 
this, calls for more outreach and knowledge.
    When IRS issues guidance, or issues a press release, it 
does not necessarily get to the person at the corner grocery 
store, et cetera, et cetera, right? So having people become 
aware of it is a significant issue.
    If you do not know of Free File, you are not going to use 
it. So I think that is a hurdle to it. But this year it had, I 
think, so far, a 27-percent increase in usage, not including 
the non-filers portal. But the Free File Alliance was 
instrumental in helping us launch the non-filers portal for 
EITC by April 10th. The CARES Act came out March 27th. We 
launched that portal April 10th. And the Free File Alliance was 
a significant help to us in getting that done.
    Senator Carper. Thank you, Mr. Chairman.
    Mr. Chairman, there is something we can do about this, and 
I am very, very encouraged by what the Commissioner said. This 
is a good program, and we need to make sure people know about 
it.
    The Chairman. Senator Menendez now, by remote.
    Senator Menendez. Well, thank you, Mr. Chairman.
    Commissioner, earlier this year the Treasury Inspector 
General for Tax Administration concluded an investigation that 
I requested into potential abuses of the 45Q credit for carbon 
capture and sequestration by big fossil fuel companies. The IG 
confirmed that these companies had in fact incorrectly claimed 
almost $900 million in 45Q credits. Of the 10 companies 
claiming 99.9 percent of the 45Q credits, the IG found that 
only 3 had the required monitoring, reporting, and verification 
plans in place with the EPA.
    I subsequently wrote a letter to you urging the IRS to take 
a number of steps to both ensure that companies that had 
previously incorrectly claimed the credit are held accountable, 
and to ensure that these abuses do not continue moving forward. 
I sent that back on April 29th. And last night at 6 p.m., I got 
an answer to my April 29th letter.
    I understand that the IRS has examined a portion of the 
incorrectly claimed credits and retroactively denied them, and 
that some additional portion may be currently under order, or 
could come under orders in the near future. However, in your 
response you also declined to commit to auditing all previous 
claimants of the 45Q credit to ensure that they are in 
compliance. And you would not commit to implementing a campaign 
to examine claimants going forward.
    You said, quote, ``The IRS cannot initiate examinations on 
a select group of taxpayers without proper justification, 
documentation, and approval.''
    But, Commissioner, if the facts that I have discussed here 
today supported by an investigation of the Inspector General do 
not constitute proper justification and documentation, I do not 
know what does. I understand that the IRS has limited 
resources, but it seems clear to me that ensuring compliance 
with the 45Q carries a significant return on investment for the 
American taxpayer.
    So let me ask you again in person. Will you commit to 
auditing all previous claimants of more than $10,000 in 45Q 
credits and initiate a campaign to examine future claimants to 
ensure compliance?
    Commissioner Rettig. Senator, we are exercising our best 
efforts with respect to the 45Q credit. We take compliance 
seriously. We continue to apply significant audit resources in 
this arena. And, as I believe that TIGTA report also states, 
the IRS examiners have consistently denied the credit, and I 
think of the pool that they were looking at, the examiners 
denied about 60, 6-0, percent of those credits.
    And we are--I will commit to trying to exercise our best 
efforts there, but we have to balance that. We have similar, as 
Senator Wyden opened with, we have similar areas that we need 
to also devote resources to. We only have 6,430 revenue agents. 
We lack the ability to do that.
    Senator Menendez. I appreciate that, and I have been 
someone who has supported resourcing the IRS so you can do your 
job.
    Commissioner Rettig. We appreciate that.
    Senator Menendez. But the bottom line is, 45Q was put in to 
incentivize cleaner energy production and innovative new 
technologies. And if $900 million is what we have got back 
already, I can just imagine what is available. So it is well 
worth it.
    Let me quickly turn to one other question, though. The 
COVID pandemic has devastated our cities and local communities, 
which have been forced to set up and provide an unprecedented 
level of services. The consequences have had a real drain from 
Texas to Colorado, from South Carolina to New Jersey. No State 
is immune.
    We have had 1.4 million American workers affected, 
ultimately all in the public service field, the people whom we 
need the most on the front lines. You are our Nation's top tax 
official. Do you think that State and local governments would 
be facing the immediate fiscal crisis they are experiencing if 
it were not in the middle of a pandemic and recession that 
caused revenues to fall off the cliff?
    Commissioner Rettig. Senator, I think I answered this 
question earlier; it came out in a different format. But I have 
not been focused on the State and local governments. I am aware 
of the impact universally on the public and private sectors by 
having so many individuals out of work, businesses shut down, 
and people home, as well as the consequences for the health and 
safety side, which obviously increases expenses for a lot of 
individuals. And, you know----
    Senator Menendez. Let me ask you this. If we have 3 or 4 
million public employees laid off, we are going to have a lot 
less Federal revenue come to the Nation's Treasury because 
those people are not going to be paying, right?
    Commissioner Rettig. So we are--we are in that mode of, you 
know, we have 56,000 employees teleworking. The balance of the 
employees, the ones who have nonportable work who need to come 
in, we need to be socially distanced and the rest. And we are 
trying to accomplish, for example, examinations, telephones, 
processing returns, and whatnot, with a limited----
    Senator Menendez. I was referring to if you have 3 or 4 
million people laid off--not furloughed, working remotely--that 
at the end of the day the consequence is going to be millions 
of people who are not paying their Federal taxes who are going 
to cost a lot more to the Federal Treasury.
    The Chairman. Senator Warner?
    [No response.]
    The Chairman. Senator Warner, I was told you were 
available. Senator Warner?
    Senator Warner. Yes, I am here. Thank you, Mr. Chairman. 
Commissioner Rettig, I want to thank you for your testimony 
today.
    Echoing what a number of the other members have said, I 
want to thank you--and particularly the men and women of the 
IRS for what they have been doing to implement the CARES Act. 
That really is extraordinarily significant.
    I want to start my questions today on one of the tools that 
was in the CARES Act, the Employee Retention Tax Credit, what's 
been called the ERTC. I think this is an extraordinarily 
significant addition to the legislation and something I was 
personally involved with with Secretary Mnuchin, and it has 
gotten a very favorable response from Treasury.
    I know in the House, the next version of CARES, there is an 
enormous expansion of the ERTC. And I have been working with a 
number of my Democratic colleagues, although there is a 
Republican parallel effort that would further utilize the ERTC. 
Our effort is called The Paycheck Security Act, which would 
again greatly expand this tool.
    As you know, Commissioner, one of the key components of the 
ERTC is it allows companies to, in a sense, keep their payroll 
tax deposits to be applied against the ERTC. So it helps them 
with their cash flow. If their ERTC credit is greater than 
their payroll tax deposits, they would file a new form, which I 
appreciate you guys creating very quickly, Form 7200, that 
advances future payroll tax payments so it becomes this 
refundable credit.
    Now we know, so far, there have not been that many firms 
that have filed the 7200, so they have not--the current credit 
is fairly modest. So we do not know the full take-up rate, 
because there may be a number of people who simply withhold 
their payroll taxes and have not had to use the Form 7200.
    But as we are looking at expansion of this tool, one of the 
things I am really concerned about is that, so far at least, 
the IRS has only utilized a fax-filing form of Form 7200, 
rather than an e-filing form. And I just would like to know, 
why is that the case? And if we are looking--if Congress is 
looking at a major expansion of the ERTC, it seems to me that 
we need you to focus on updating the filing. I imagine you have 
to take that fax form and convert it to an online form. Why not 
have that online form available from the outset?
    Can you address that and tell me when we might get that 
updated?
    Commissioner Rettig. We actually were quite proud of the 
fact that we got the paper form out for e-fax as quickly as we 
did on the 7200. We are taking a look at all options to try to 
streamline all interactions with us going forward. And it is 
probably best that I get back to you on the ability to do that.
    I think you are aware, we just created the ability to 
electronically file amended income tax returns. It takes quite 
a bit of programming, and our IT department, our IT individuals 
are spectacular, but we have quite a few projects. Not to 
lessen the importance of this by any stretch of the 
imagination.
    Senator Warner. Commissioner, I would simply say, I do 
appreciate the fact that you got 7200 out. It is a new form. 
You got it out. But I think this is one of those unique spots 
where you have the administration and Treasury thinking ERTC is 
very important. You have the House already doing a greatly 
expanded version. You have a number of us on the Democratic 
side who have an expanded use they hope to get into the next 
COVID package. A number of my Republican colleagues, like 
Senator Hawley and Senator Gardner, have a variation on this, 
which also uses the ERTC.
    So I really hope you will bump this up higher on the list.
    Let me move in my last couple of seconds to another area. I 
would ask--I have been focused for a long time on gig workers, 
and easing their tax compliance. I asked the GAO to publish a 
major study. They did come back. For example, the GAO team 
suggested that IRS make several changes to update instructions 
for both Form 1040 and include a reference to form 1099-K.
    Just generally speaking in the last few seconds, gig 
workers are not going away. We have to make tax compliance 
easier. Can you talk about what you hope to do to ease the gig 
workers' tax compliance issues?
    Commissioner Rettig. Yes. We are looking at a lot of 
different facets of the gig workers. I think there is a study 
out there that says that a significant portion of their 
receipts go to expenses. And so the net probably is not what we 
would think it might otherwise be, but we are looking at a lot 
of different options to ease their ability to comply. And it is 
not limited to gig workers. It is actually pretty pervasive to 
all folks who might be in the realm of an independent 
contractor.
    Senator Warner. Thank you, Mr. Chairman.
    Commissioner Rettig. But I just really want to keep working 
with you on this. This is going to be an area that is only 
going to grow, and again we appreciate your cooperation.
    Senator Warner. I look forward to the opportunity. Thank 
you, Mr. Chairman.
    The Chairman. Senator Cantwell?
    Senator Cantwell. Thank you, Mr. Chairman. Thank you and 
the ranking member for holding this hearing.
    Many of the activities that must take place to keep the 
housing credit production on schedule have been impacted by the 
steps that States and local governments have taken in response 
to the coronavirus. And over the last few months, we have seen 
significant interruptions to construction activities, shortages 
of materials, and delays.
    As a result, many properties will be unable to meet certain 
programmatic deadlines. The National Council of State Housing 
Agencies sent the IRS and Treasury a letter in March asking the 
IRS to extend programmatic deadlines and provide other 
flexibilities needed in these current circumstances. It was 
signed by over 200 organizations.
    The IRS has not yet given guidance on this, so I am 
concerned that if we do not act soon, we are going to really 
impact the affordable housing market even more than it already 
is.
    So is that guidance forthcoming?
    Commissioner Rettig. Let me get back to you as to whether 
that is going to be forthcoming. I believe it is on the 
Treasury side that the response is coming, but let me get back 
to you on that. And I will look into it.
    Senator Cantwell. Do you understand how important----
    Commissioner Rettig. For sure.
    Senator Cantwell. We do not have enough housing, affordable 
housing, period. Now the problem is going to be exacerbated by 
the COVID crisis. And a little guidance could help us keep some 
projects. Because every project is valuable for helping us 
solve this problem.
    I noted from some of my colleagues how hospitals are now 
paying for affordable housing, just to keep people out of the 
emergency room, because if they can keep them in affordable 
housing, then they are not going to show up in the emergency 
room every day. So this is a pervasive problem.
    I wanted to ask you about, according to the National 
Taxpayer Advocate--well, in March, as a result of the 
coronavirus, IRS closed its offices. And so I want to ask about 
taxpayer assistance.
    According to the National Taxpayer Advocate, the only 
resources readily available are at the IRS.gov website and 
automated phone line. Many Washingtonians rely on in-person 
assistance, including the elderly.
    So what are the steps being taken to serve those who 
require that kind of assistance?
    Commissioner Rettig. All phone lines are open. Our TACs 
will be open by mid-July--Taxpayer Assistance Centers will be 
open by mid-July. We have 358 Taxpayer Assistance Centers; 31 
are not staffed full-time, but we do rotate folks in there. And 
we have people doing a circuit.
    We also, not only IRS, but a lot of folks use VITA sites 
for a variety of different things, and 10,500 of 11,000-and-
change of the VITA sites shut down. All of the AARP VITA sites 
shut down.
    So we have been really working as hard as we can, and we 
are trying to ramp up as quickly as we can, maintaining, you 
know, safety and health for our employees, as well as for 
people interacting with us.
    We had to modify our TACs in terms of--you know, normally 
it is ``come in and sit down at a desk.'' The TACs that are 
opening will handle matters by appointment only. But their 
history is that over 50 percent, 5-0, who contact the TAC for 
an appointment, their matter is handled actually on that call. 
So we are----
    Senator Cantwell. But they are not getting caught in some 
automated system that is----
    Commissioner Rettig. There is a person who answers the 
phone for a TAC----
    Senator Cantwell. That they can get to?
    Commissioner Rettig. They answer the phone. Then the TACs 
are local. They are retail. They are right out there.
    Senator Cantwell. Okay. And what steps are we taking to 
serve people who are filing for the Earned Income Tax Credit?
    Commissioner Rettig. The EITC--one, for about 98 percent of 
the folks who file for that, it goes through. And the 2 
percent, we have a lot of complexities involved there in terms 
of--if Congress, with the Internal Revenue Service, with 
Treasury, with everybody else, could take a hard look at the 
statutory authority there and the definition particularly of a 
qualifying child. That is where we launch--we get claims for 
EITC. The claims essentially are for people who, for one or 
many reasons, are deserving of the funds that are coming, but 
there are a tremendous amount of problems for us to be able to 
verify a qualifying child when there is no link in the system. 
It does not need to be the parent of a child to be a qualifying 
child.
    Similarly, over 51 percent of EITC claims are done by 
return preparers. And we have continually asked for oversight 
of return preparers.
    Similarly, we have continually asked for correctable error 
authority. We cannot adjust any EITC claim on our own with 
information we otherwise have in our system, which would allow 
us to not have to go through a deficiency-type procedure----
    Senator Cantwell. I see my time is expiring, so can we show 
you language and have you tell us whether you think that would 
give you the flexibility you need?
    Commissioner Rettig. I am available after this hearing.
    Senator Cantwell. Thank you. Thank you. Thank you, Mr. 
Chairman.
    The Chairman. Senator Hassan?
    Senator Hassan. Well, thank you, Mr. Chairman, and thank 
you, Commissioner, for being here, and for all of the work that 
you and your staff are doing on recovery efforts underway at 
the IRS.
    I want to start first by just thanking you for heeding the 
calls of my committee colleagues and myself to deliver stimulus 
payments automatically to the millions of Social Security and 
VA beneficiaries who do not file tax returns. And towards that 
end, I want to follow up on something that Chairman Grassley 
asked you about. Unfortunately, many of these beneficiaries 
missed out on $500 payments for their children because of short 
deadlines to provide the IRS with dependent information. And 
the IRS has said that these families will need to wait until 
2021 to get their payments.
    Along with colleagues on this committee, I sent you a 
letter in April urging you to provide these payments as quickly 
as possible before 2021. You just referenced in your answer to 
the chairman that you were considering doing that, but there 
were some limitations.
    So could you tell us, please, what specifically you are 
considering, and what specific limitations the IRS is facing 
with regard to getting these payments to people before 2021?
    Commissioner Rettig. We have a pool of individuals who used 
our non-filers portal who should have actually received that 
additional $500 payment. We had that information. It just, for 
a limited period--remember, that portal was--you know, I am 
very proud of the effort of our employees, but we built several 
airplanes while we were flying two other airplanes.
    Senator Hassan. I understand.
    Commissioner Rettig. And then we had to adjust those as we 
were monitoring them. And one of the things we found was, we 
had a gap where it was not picking up those $500 payments, and 
we had that information.
    So we are going to be, between those payments to that 
pool--and I believe the number is 365,000 individuals, and I 
believe it is substantially SSA and RRA recipients. So that, I 
believe, is going to happen sometime around July, by the end of 
July. That is my understanding. And if that date changes, we 
will get back.
    Similarly, the individuals who filed injured spouse claims, 
there was a difficulty connecting that. You know, get the 
payments out as rapidly as possible, find information that 
might not be front and center, so we did our best. And I am 
very proud of how we did.
    Lessons learned going forward: we know certain areas to 
look into. And the limitations are, we are actually also in the 
middle of programming, or starting to program now, the 2021 
filing season. We constantly have two filing seasons that our 
IT Department are working on.
    Senator Hassan. Okay, so----
    Commissioner Rettig. We are sympathetic to these issues, 
trying to figure out a way to get the money out as quickly as 
possible.
    Senator Hassan. And when can you get this information then 
to this committee about what that timeline looks like? I mean, 
we have constituents who need these dollars. They are entitled 
to them. They are trying to get them. They have been trying to 
do their best. So when can you give us a timeline of what the 
windows look like for them and when they might get the $500?
    Commissioner Rettig. We will not be able to issue what I 
might now refer to as ``secondary payments'' for everyone who 
might have a change in circumstances. Some people were married. 
Some got divorced----
    Senator Hassan. I am not talking about that. I am talking 
about----
    Commissioner Rettig. Those----
    Senator Hassan. Commissioner, hold on. I am talking about 
the people--you put up a very short window for people who were 
nonfilers to put in information so that they could get those 
$500 payments. You now are saying that, for the people you 
missed who did submit information in those 48 hours, you are 
going to be able to get them out.
    So now what I am asking is, the people who were not able to 
get into that 48-hour window, if they give it to you now, how 
could they get it before 2021? What is the plan? And when will 
you share the plan with us?
    Commissioner Rettig. Let me get back to you. It is not an 
easy thing for us to accomplish. And can I address the 48-hour 
window?
    Senator Hassan. Yes, I understand that it exists, and I 
have another question, so why don't we take that offline?
    And again, I appreciate how hard everybody is working. 
People need these dollars, right? So another question is, 
employers can claim new tax credits to help stay afloat during 
the COVID-19 crisis, including credits for providing paid leave 
and retaining employees.
    In order to rapidly provide this assistance, the Treasury 
sends advance payments for these tax credits to employers that 
file requests with the IRS. However, although the IRS has said 
these payments will be delivered to employers within 2 weeks, 
reports indicate that these payments may be taking 
significantly longer.
    So could you tell us, please, Commissioner, how quickly the 
IRS is delivering advance payments to employers, and is the IRS 
proactively planning for a possible increase in requests for 
these payments as States partially reopen their economies?
    Commissioner Rettig. I will get back to you with some 
specifics, but I believe that we have actually processed about 
a third of those so far that have come through, and then, on 
some, we have asked for additional verification.
    Senator Hassan. And again, this is a matter of cash flow 
for businesses that are just desperately struggling.
    Commissioner Rettig. We appreciate that, but we are trying 
our best.
    Senator Hassan. Thank you very much. Thank you, Mr. 
Chairman.
    The Chairman. Senator Lankford?
    Senator Lankford. Mr. Chairman, thank you. Thanks for the 
conversation today. It is exceptionally important to be able to 
walk through this, and I do appreciate your testimony very much 
today.
    I have talked to some of my caseworkers back in the State 
who talked to me about the Taxpayer Advocate Service and some 
of the work that is happening there and their interactions with 
the IRS staff. Because of COVID-19 and the downsizing, it has 
been very, very difficult to be able to get answers to 
questions, and to be able to go through this process and to be 
able to help some taxpayers at this point.
    Walk me through the closures of IRS offices, the re-
engagement of employees, what lessons that can be learned. And 
I would also be interested to be able to know how and when we 
are going to get things back going again so people can get 
answers to questions.
    But what can be done for the future, protecting private 
information of individuals, but knowing that we have to be able 
to work remotely and we can actually get the work done again?
    Commissioner Rettig. For good or bad, I am the person who 
started shutting down our facilities. And at one point, over 90 
percent of our facilities were closed. We took the health and 
safety of our employees as a significant priority, and that 
created a lot of difficulty for others.
    We worked closely with NTEU throughout. I myself worked 
closely with NTEU as well as others in the IRS. We are now--by 
July 13th, essentially all of our processing facilities will be 
open. All of our call centers will be open, understanding that 
``open'' is a relative term with social distancing, working 
different schedules, working different shifts, having folks 
spread out.
    We have people on the ground in each of our facilities 
essentially monitoring the issues to keep our employees safe. 
But you know, like everybody else, we are worried about 
interactions that might happen and a potential spike at a 
facility.
    So we are doing everything we can to get back online. We 
had 56,140 individuals teleworking. We processed about 14,000 
laptops for people who have telework work but were not 
telework-eligible, did not have the facilities and whatnot. So 
we were able to get laptops.
    There is a training session that goes on with respect to 
that, certainly with respect to security. And a large portion, 
as you can imagine, of the work we do is not telework-eligible, 
for security and other similar matters.
    I can with confidence say that our IT folks are as good as 
it gets. They are tremendous. They care. They work really hard, 
and they have moved mountains to get us as efficient as we 
possibly could be in this unprecedented pandemic.
    Senator Lankford. I appreciate that very much, to reengage 
into that. Are there lessons that can be learned that, if we 
have to have more folks teleworking, can carry over from what 
we have faced right now into the future in ways to be able to 
protect our private information but still get the work done?
    Commissioner Rettig. And significantly, the folks on the 
phone, customer service representatives, to get a large portion 
of them able to handle the work remotely, I think would help 
significantly, let me just say that. And we are headed in that 
direction.
    Senator Lankford. Thank you. Let me know what we need to do 
to be able to help head in that direction, because that will be 
a significant gain for the future. As we not only look at space 
and cost, there will be greater use of telework, I would 
assume, in the future, but if there are other issues that come 
up, we will want to be able to make sure that we continue----
    Commissioner Rettig. I have to express my appreciation. You 
have--you all have been incredibly supportive of us. And we 
realize there are issues, and unfortunately there are issues 
that come out of this, but I think that, universally, you all 
have been incredibly supportive.
    And, as important as it is to the country and to the IRS as 
an agency, it is important to our people. Our employees are the 
strength of our agency, and they hear when you make comments. 
And sometimes Senators and members of the House have made 
comments that I have circulated in all employee messages, 
because during this time, that is about all we can give our 
people in terms of a pat on the back.
    They are working really hard.
    Senator Lankford. And we are exceptionally grateful to 
them. They are under enormous pressure, having to be able to 
shift in ways that they had never anticipated and the rest of 
the country had not anticipated. As we move closer and closer 
to the July 15th deadline, there is more and more pressure for 
answers and solutions, and they are feeling the weight of that 
as well. So definitely tell them that we appreciate the work in 
the transition. And what we can provide in the days ahead, we 
want to be able to do that.
    On charitable giving, I just want to be able to give you a 
heads-up. You and I both know that when you alter the tax code, 
it also alters behavior in multiple ways. There are six of us, 
three Republicans, three Democrats, who are working together to 
try to resolve some of the issues on charitable giving.
    It will be something that we will come back and have longer 
conversation with you about in the future, how we can continue 
to encourage engagement on charitable giving in the future.
    So, thanks again for the service.
    Commissioner Rettig. Thank you.
    The Chairman. Senator Cortez Masto by remote, if you are 
available.
    Senator Cortez Masto. I am here. Thank you, Chairman 
Grassley, and to the ranking member for convening this 
important hearing today.
    Commissioner, thank you for joining us. I do want to 
associate myself with the comments of Senator Lankford on the 
workers and employees at the IRS. They are truly also heroes in 
the sense that they are working all the time and trying to get 
the payments out, and doing everything they can in our 
community. So I too, like my colleagues, support them. Whatever 
resources you need, please make us aware of it. I think it is a 
challenging time right now.
    I do want to address a concern that I am hearing in my 
State, but also across the country. I have talked quite often, 
and have worked in the domestic violence prevention area for a 
good part of my career, and I have worked with our legal aid 
centers.
    I am hearing from survivors of domestic violence who have 
fled their abusers, often with their children, but whose 
abusers have walked away with their Economic Impact Payment. In 
other words, the survivors are not getting their EIP. And in 
some instances, the IRS is issuing Economic Impact Payments 
based on jointly filed tax returns, but it is not following 
accompanying Form 8888 to split the Economic Impact Payment in 
the same manner that refunds were split.
    I sent to you, Commissioner, a letter, along with Secretary 
Mnuchin, about this a couple of weeks ago. It was joined by 35 
of my Senate colleagues. I have not received a response yet. 
So, since I have you here, I would love to ask you, what is the 
IRS doing to get replacement checks out to victims of domestic 
violence who are in desperate, desperate need right now because 
they are not getting their EIPs? And how do we get them those 
payments, and take into consideration their safety and 
financial stability away from their abusers as well?
    Commissioner Rettig. I have your letter. Your letter is 
actually on my desk. The process of getting a response back to 
you is in process. I think your letter had some actually really 
great suggestions. I think they were listed under a ``Request'' 
section near the back of the letter. And there are things that 
we are taking under consideration.
    We take advice from everybody, and we take good advice from 
everybody as well. The individuals, particularly with respect 
to domestic violence, who filed an injured-spouse claim, I 
indicated in a response earlier that we are going to process 
those separately.
    And so I would like to say that is going to happen in July. 
If it is going to be later than July, I will reach back out to 
you and give you a timeline on that. But I think that every 
person at the Internal Revenue Service is very sympathetic and 
understanding and would like to assist any victim of domestic 
violence. And you know, our people care, and they care a lot, 
and this is a particular type of an arena where we can actually 
provide significant assistance.
    And so to have a victim of domestic violence also not be 
able to receive the payment, particularly at this time of need, 
does not sit well with us. So it is a priority and a focus for 
us. And again I would like to thank you for your letter, and 
particularly, the suggestions in your letter were quite 
helpful.
    Senator Cortez Masto. Yes, Commissioner, thank you. And I 
appreciate that. Those suggestions were put together by many 
across this country who work to really help and support and get 
resources to our survivors of domestic violence.
    So as you look at that list--because it is really common 
sense, and also I think, not only helpful during this pandemic, 
but in the future, how the IRS can work with, just support and 
make sure our survivors of domestic violence are accessing the 
funds that they are entitled to.
    So as you look through this--I know that the 
recommendations are a dedicated phone line, create a process 
with an online PIN, utilize existing prepaid cards tied to 
government benefits, on and on and on. There are some great 
suggestions.
    If you need resources to implement these suggestions, I 
would hope that you would also let us know so that we can make 
sure we are giving you the resources so that you can implement 
these tools to get the money to our survivors of domestic 
violence.
    So please know that. I am running out of time, but I will 
submit the rest of my questions for the record. Again, 
Commissioner, thank you for being here.
    Commissioner Rettig. Thank you.
    The Chairman. Thank you. I have been told that Senator 
Brown is remote and would be the next one for me to call on.
    Senator Brown. Thank you, Mr. Chairman; I am here. Thank 
you very much, Mr. Chairman, Senator Wyden; thank you for this 
hearing.
    Commissioner, thanks for your public service. In the midst 
of a pandemic, our country reckons with the murders of Mr. 
Floyd and Ms. Taylor and too many other black Americans at the 
hands of police. Communities across this country are calling 
for justice, reinvestment of resources, and, as you know, an 
end to systemic racism.
    Many of us rightly examine the ways racism is baked into 
almost every facet of public policy. We must do better. One 
area that has not been closely examined, Mr. Chairman, through 
a lens of racial justice is our tax policy.
    Over a trillion dollars moves through the IRS each year; 
150 million households file taxes. The American people deserve 
to know that taxpayers are treated fairly by our tax laws and 
by our tax enforcement agencies.
    Congress writes the tax laws. If there are ways our current 
tax code exacerbates racial inequity, then it is our job to fix 
it. And it is your job, Commissioner, to enforce the tax laws 
we write. So you and Congress, all of us around this table, 
virtually or in person, are responsible and partners in this.
    So, Commissioner, will you work with Congress and have your 
staff with the Statistics of Income division help us determine 
ways in which our tax code contributes to racial wealth 
disparities?
    Commissioner Rettig. Sure, sure. As I think you are aware, 
I am a huge proponent of inclusiveness, diversity, and I think 
you are aware of the fact that I am the first Commissioner 
whose spouse came to this country as a refugee. And so I 
understand how people are treated, and I appreciate them.
    Senator Brown. That was the answer I figured you would 
give.
    Commissioner Rettig. Thank you.
    Senator Brown. Research shows that employers often 
discriminate against job applicants based on their first or 
last names. The Form 1040, our basic income tax form, asks for 
first and last names. The IRS is the agency responsible for tax 
enforcement, and it has access to first and last names as it 
carries out its enforcement responsibilities.
    Do you have safeguards in place to ensure that enforcement 
actions do not target filers based on first or last names?
    Commissioner Rettig. That is correct. We do.
    Senator Brown. Does the IRS study racial disparities in its 
enforcement efforts?
    Commissioner Rettig. There are no race or geographic issues 
that come up with respect to audit selection, which is what 
most people consider to be the enforcement side of----
    Senator Brown. Well, can you--I understand that. I am glad 
to hear that in one sense. But can you assure me, and assure 
the American people, that IRS audit rates do not 
disproportionately--not by intention but by commission, 
perhaps--that IRS audit rates do not disproportionately hit 
black and brown people? Can you assure us that that does not 
happen?
    Commissioner Rettig. Yes.
    Senator Brown. I want to ask you about the tool--and I want 
to work with you on all of that. Thank you for your offer, 
and----
    Commissioner Rettig. Senator, I would like to add, we have 
a zero tolerance in the Internal Revenue Service for issues of 
discrimination. And that comes from me. And every employee of 
the Internal Revenue Service has heard that. And I would also 
like to say that the fact that we have a quite diverse employee 
base, we are stronger because we come into the room from 
different doors, and we work together, and we care about each 
other, and we care about this country.
    Senator Brown. Thank you. As my office does, and as my 
committee staff does in terms of racial diversity and making us 
better.
    There is implicit racism of course, as you know, in this 
system, and that is what I am trying to dig down into. There 
are no accusations certainly against you that way.
    I want to ask you one other thing about the tool the IRS 
developed this year to help people who do not normally file a 
return, to get their stimulus check. You called it the Non-
Filer tool.
    One in five people eligible, as you know, for EITC do not 
get it. This is a key anti-poverty tool. It puts money directly 
into people's pockets. I know the chairman supports it. I know 
Senator Wyden supports it. Too many filers leave that money on 
the table. Eighty percent take-up is a place to start, but we 
can do better. That is why I wrote you earlier this year asking 
you to act on the recommendations to implement automatic EITC 
for childless adults.
    I appreciated your response. You said you could not make 
automatic EITC work even for childless adults because you are 
still missing information. It seems to me though, Commissioner, 
the IRS can repurpose the tool you have already developed, the 
Non-Filer tool, and turn it into a Get My EITC tool.
    The response to me said there was missing information 
stopping you from sending an automatic EITC return. You could 
easily ask for this basic information using the Non-Filer tool.
    So my question is, Commissioner, my last question, will IRS 
use this tool to increase EITC take-up moving forward?
    Commissioner Rettig. Senator, I think you are going to see 
a replication of a couple of tools that came out during this, 
and you should know that the Get My Payment tool was a 
replication of the Where's My Refund? tool. That allowed us to 
get these tools up, one within 10 days, one within 2 weeks. And 
we are looking at--this is the future of the Internal Revenue 
Service.
    Senator Brown. So you are open to an EITC automatic tool?
    Commissioner Rettig. We are looking at that, yes, sir.
    Senator Brown. And we will work with you, and we really 
appreciate it.
    Mr. Chairman, thank you for this hearing.
    The Chairman. Senator Daines?
    Senator Daines. Thank you, Mr. Chairman and Senator Wyden; 
much appreciated.
    Commissioner, these are tough times, and I have worked hard 
to provide relief to help many struggling Montana families, 
workers, small businesses, who are facing economic hardships as 
a result of this pandemic. Much of that relief getting to 
Montanans has been through the tax code. So I want to thank you 
for all that you and your agency have done to facilitate that. 
I look forward to continuing to work to provide more relief to 
Montanans as our economy begins to recover.
    In the past 3 months, Congress has approved trillions of 
dollars in relief for the American people. Unfortunately, 
pushing out huge amounts of money so quickly can present 
opportunities for criminals to prey on the most vulnerable, who 
often are senior citizens.
    My question is, could you discuss the actions that the IRS 
has taken to uncover and combat criminal activity targeting our 
senior citizens and other vulnerable populations?
    Commissioner Rettig. Senior citizens and vulnerable 
populations tend to get--the terminology used in the field is 
``scams.'' And it is people either impersonating--or ``I can 
help you with respect to the EIP payment, pay me a fee,'' and 
this and that.
    Both IRS Criminal Investigation and folks on the civil side 
of the Internal Revenue Service, as well as the Treasury 
Inspector General's office, have been extremely aggressive in 
those arenas. We think we have been quite successful, but you 
know that your success is only based on the ones that you find, 
not the ones that you do not find. But there are numerous 
criminal prosecutions that have been pursued, and what we do 
is, we investigate and turn it over to the Department of 
Justice, the U.S. Attorney's Office, for prosecutions.
    We are very active there. And if you look at the data book, 
you will see the Internal Revenue Service's high degree of 
focus in the arena, particularly for vulnerable individuals. 
And that will continue.
    Senator Daines. That is much appreciated, Mr. Commissioner.
    I am going to shift gears and talk about conservation 
easements. And I want to applaud the work that you and the 
Internal Revenue Service have done in stepping up enforcement 
efforts in these abusive syndicated conservation easements. I 
also want to applaud Chairman Grassley and Ranking Member Wyden 
for their investigation of these transactions. And I look 
forward to reviewing the findings of their investigation very 
soon.
    Recent decisions by the U.S. Tax Court demonstrate what we 
have long known: that abusive syndicated conservation easement 
deals are costing taxpayers billions and tarnishing the 
reputation of this very valuable conservation tool.
    In fact, in one recent case the Court noted that property 
valued at $30 million had, within 3 days, an easement with a 
claimed value of $155 million. Honest, charitably motivated 
actors deserve strong rules to protect against this clear 
abuse, and taxpayers should not have to foot the bill for 
profit-motivated tax shelters.
    This is why I introduced the Charitable Conservation 
Easement Program Integrity Act with Senator Stabenow, which 
would help to weed out some of the worst actors in this space 
by denying the charitable tax deduction, when investors claim a 
tax benefit that is more than 2\1/2\ times their investment.
    My question is, does the IRS have the time, the personnel, 
and the resources to prosecute all known abusive syndication 
cases?
    Commissioner Rettig. The IRS would welcome legislation with 
respect to syndicated conservation easements, the abuse of 
transactions. Under this Commissioner, the IRS will 
aggressively go after everybody involved in one of those 
transactions. I think the people who are in compliance need to 
know that the folks who take advantage in that manner are at 
risk, and we intend to maintain a presence in that 
neighborhood. And I think the Tax Court has ruled in our favor, 
even a 40-percent penalty. We had three cases last week. I 
think you will see a number of compliance actions surface over 
the course of the next month or so.
    Senator Daines. So, given the amount of taxpayer resources 
being put to use on this, how helpful would it be to have this 
bill, Senate Bill 170, enacted into law?
    Commissioner Rettig. It would help us significantly.
    Senator Daines. Thank you.
    I want to note my support for modifying and expanding the 
Employee Retention Tax Credit which we enacted as part of the 
CARES Act. The worker-focused design of the credit, coupled 
with the requirement that a business has to have experienced 
significant negative impact to be eligible, makes a good fit 
for the targeted type of relief we are looking to enact in this 
next package.
    I hope my colleagues join me in pushing to expand this tax 
credit as part of the next relief package. My question, as I am 
wrapping up here, Mr. Commissioner: from an administrative 
perspective, how has the advanced refund process using Form 
7200 worked so far?
    Commissioner Rettig. I think that what we are seeing is 
that the process is working smoothly. There is--you know, I 
dealt with an issue with another Senator about e-fax as opposed 
to maybe can we get an online portal, or other ways we can 
streamline it. But I would say that, overall, we think it is 
working smoothly.
    Senator Daines. Any idea how long it takes for a business 
claiming the credit to get reimbursed?
    Commissioner Rettig. About a third of the people who filed 
7200s have received it. So on that basis, we are probably 
talking 6 weeks, give or take; 4 weeks, give or take. I do not 
really have--I do not know that we have the study. We will know 
more, actually, in terms of the program itself once the second 
quarter returns are filed, and we should be able to provide 
some data based on that.
    Senator Daines. Thank you. Thanks, Mr. Chairman.
    The Chairman. I think we are to a point where the Senator 
from Oregon has one follow-up question. That will be the only 
second round we have.
    So if there is anybody--there are still a couple of people 
I have not marked off the list yet--if you want to ask 
questions after Senator Wyden, you had better let me know very 
soon. Otherwise, we are going to shut down.
    Senator Wyden?
    Senator Wyden. Do you want to see if there are any people 
waiting right now before I go, Mr. Chairman?
    The Chairman. Well, I think there would only be one, which 
is Senator Young.
    [No response.]
    Senator Wyden. Thank you, Mr. Chairman, and I will keep 
this to one question.
    Commissioner, just a question with respect to small 
businesses, because my State is overwhelmingly a small-business 
State. These are people who are just walking an economic 
tightrope right now every single day, and they are maxing out 
their credit cards and the like.
    The question really I want to get into is this question of 
the most efficient way to help them. And I have thought in 
particular the concept of their getting a rebate similar to the 
individual rebate is a constructive idea to look at.
    You all have been helpful to us--thank you. Would it not be 
easier for both the taxpayer and the IRS to rely on previously 
filed information that the IRS has in its system, rather than 
having these laborious processes that include massive influxes 
of new tax filings, and using fax machines and the like? Would 
it not be better to use what you already have?
    Commissioner Rettig. We used what we already have with 
respect to EIPs, and there was a segment, obviously, of the 
population that does not file tax returns. And so we needed to 
come up with a different variation of that.
    I think that one of the ideas with respect to the retention 
credits was that the funds essentially are already there in the 
possession of the business owner. And I think, as I know you 
are aware, I come from a small business family, and I have 
current members of my family who are involved in small 
businesses. I am very sensitive to the issues, but we are 
certainly more than willing to work with you and your staff on 
the processes and ideas.
    Senator Wyden. I will wrap up on this, because we have a 
clean-up in terms of getting some follow-up materials. I think 
we do want to know--and Senator Warner has touched on this--
what the IRS needs to continue to fight fraud so that taxpayers 
can get those advance credits electronically instead of by fax. 
So let us say we would like that information within a week.
    And second, as we talked about earlier, I am particularly 
concerned about the millionaires skipping out on paying their 
taxes. Officials come--and we understand that this did not 
happen on your watch--and we cannot find out exactly what was 
done to follow up. Then we hear that there are going to be 
changes made in the future, and then this cycle just repeats 
itself again and again and again, as the wealthiest taxpayers 
figure out how to just escape their obligations that the small 
business people have to comply with.
    So I would like answers in a week to the questions I asked 
earlier with respect to the millionaires skipping out. And then 
this question that I think we agree is a serious matter with 
respect to fraud associated with the advanced credits, I would 
like that within a week too.
    Okay; thank you, Mr. Chairman.
    The Chairman. I want to clear up something. I am not really 
asking a question, Commissioner, but if I am wrong--I am seeing 
some of these statistics--I want you to correct me.
    It is in regard to appropriations, because we have had some 
people on the committee claim that the IRS's enforcement 
efforts are not being funded sufficiently. I think that is not 
true.
    When the administration put out its budget request about 16 
months ago for the current fiscal year, it asked for $4.7 
billion for IRS enforcement. Last December, Congress funded IRS 
enforcement by more than what it had asked for. IRS enforcement 
ended up getting $300 million more, for a total of $5 billion.
    In its latest budget request, the IRS is asking for $5.1 
billion, which is a 2-percent increase from what it is getting 
this year. Basically the IRS is asking for an enforcement 
budget that Congress is giving to it. There is no shortfall in 
the funding of the IRS enforcement efforts.
    You do not have to respond to that, unless I said something 
that was wrong.
    [No response.]
    The Chairman. So I will close with this. First of all, 
thank you for sitting here for 2\1/2\ hours to answer our 
questions. I appreciate the hard work you and your agency are 
doing during this tax season, a very difficult tax season. And 
we look forward to having you testify before the committee in 
the future.
    I will close by identifying that any written questions 
members may have for the record need to be submitted by the 
close of business on Wednesday the 14th.
    With that, we will adjourn.
    Commissioner Rettig. Thank you very much.
    [Whereupon, at 12:18 p.m., the hearing was concluded.]

                            A P P E N D I X

              Additional Material Submitted for the Record

                              ----------                              


              Prepared Statement of Hon. Chuck Grassley, 
                        a U.S. Senator From Iowa
    Commissioner Rettig, thank you for agreeing to testify on the 2020 
tax filing season and the IRS's handling of the challenges posed by the 
ongoing pandemic. The 2020 filing season got off to its typical start 
at the end of January. However, since then this filing season has been 
anything but typical.

    As a result of the national health emergency stemming from the 
ongoing pandemic, almost all regular tax filing and tax payment 
deadlines have been extended. This includes the individual and 
corporate income tax filing and payment deadlines, which were pushed 
back from the normal April 15th date to July 15th. Despite these 
extended deadlines, the tax filing season continued, with many 
taxpayers still filing their taxes as usual to get a much-needed tax 
refund.

    At the same time, consistent with government shutdown orders and 
CDC guidance, the IRS limited much of its work to essential services, 
closed a number of facilities, and instituted telework policies where 
practicable. This left the IRS short-staffed during its busiest time of 
the year. Understandably, that meant taxpayers experienced longer wait 
times to get their tax questions answered; more calls than usual went 
unanswered; and mail, including paper returns, went unprocessed.

    Over the last couple of weeks the IRS has begun to reopen 
facilities and start back to normal operations. Commissioner, I will be 
interested to learn more from you on how the reopening is proceeding 
and what actions are being taken to clear the backlog of taxpayer 
correspondence. While the IRS has worked to keep up with its filing 
season duties, it also has been tasked with implementing a number of 
tax measures enacted by Congress to provide relief to individuals and 
businesses.

    IRS and Treasury have worked nonstop to put out necessary guidance 
to help taxpayers navigate important provisions designed to help 
families make ends meet and provide businesses with needed liquidity to 
keep the lights on and employees on the payroll. But even more daunting 
was the implementation of the rebates for individuals, often referred 
to as Economic Impact Payments.

    IRS and Treasury worked at unprecedented speed to get payments out 
the door and in the hands of individuals and families forced to stay 
home due to the pandemic. Over about a 2-month span, nearly 160 million 
stimulus payments totaling almost $267 billion were delivered by direct 
deposit, check, or prepaid debit card. The IRS took steps to get 
payments to as many eligible individuals as possible. This included 
working with the Social Security Administration and the Department of 
Veterans Affairs to get payments to seniors, veterans, and individuals 
receiving certain Federal benefits, with no need to file a tax return.

    For others who typically do not file a tax return, the IRS 
established an on-line tool to register for the payment. Over 6 million 
individuals and families took advantage of this tool to receive their 
Economic Impact Payment. Commissioner Rettig, I want to thank you and 
your staff for working around the clock to get this much-needed 
assistance in the hands of taxpayers during these difficult times.

    All in all, I would say the IRS performed exceptionally well under 
the circumstances. Of course, when you're tasked with processing 160 
million payments in expedited fashion, there are bound to be some 
hiccups. And there will always be Monday morning quarterbacks eager to 
criticize, even though we all know they couldn't have done it any 
better. I am interested in getting your perspective on how the process 
has worked, what the IRS has learned, and what improvements could be 
made should this or a future Congress once again task IRS with 
administering stimulus payments.

    Beyond the current filing season and the challenges posed by the 
pandemic, the IRS has been working to implement the Taxpayer First Act, 
which was enacted last year to modernize the IRS and beef up taxpayer 
protections. The Taxpayer First Act calls on the IRS to institute a 
comprehensive customer service strategy, modernize its organizational 
structure, and implement an information technology strategy.

    I look forward to hearing how the IRS is proceeding with these 
reforms and how the recent challenges may be informing your efforts.

    Commissioner, thank you again for appearing before us today. I 
appreciate your and your staff's commitment and hard work during these 
trying times.

                                 ______
                                 
             Prepared Statement of Hon. Charles P. Rettig, 
                 Commissioner, Internal Revenue Service
                              introduction
    Chairman Grassley, Ranking Member Wyden and members of the 
committee, thank you for the opportunity to provide you with an update 
on the 2020 tax filing season and IRS operations.

    I remain extremely proud to be working for the IRS in my second 
year as Commissioner and am excited about the future of our agency. My 
experiences as Commissioner have strengthened my belief that a fully 
functioning IRS is critical to the success of our Nation. In Fiscal 
Year (FY) 2019, the IRS collected $3.56 trillion in taxes and generated 
almost 96 percent of the funding that supports the Federal Government's 
operations. We serve and interact with more Americans than any other 
public or private organization.

    The importance of the IRS to every American has become especially 
apparent over the last several months as our Nation has faced 
unprecedented challenges, and the IRS has responded admirably by 
quickly facilitating financial assistance to millions of deserving and 
needy Americans. IRS employees continually demonstrate just how much 
they care, and how important the agency is to our country, by their 
heroic response to the crisis our country is facing during the 
pandemic.

    At the same time, the IRS continues to remain focused on its core 
mission, striving to serve taxpayers in a manner that facilitates 
voluntary compliance by providing meaningful guidance and proper levels 
of staffing and support at points of significant taxpayer interaction. 
Our modernization efforts will not ignore traditional methods of 
communication, including meaningful opportunities for local and in-
person interactions whenever possible.

    In the year ahead, the IRS has many important changes on the 
horizon. We have embarked on a journey about how best to provide our 
services and how we are currently organized as we work toward 
implementation of the Taxpayer First Act. We want to earn the trust and 
respect of every American and improve our working relationships with 
taxpayers and others in the tax community. We will also continue 
implementation of the IRS Integrated Business Modernization plan 
released last year.

    We respect and serve every taxpayer, none more or less so than any 
other. We must operate from their perspective, enhancing their 
experiences while striving to provide clear language, wherever 
possible, in our guidance and services. In support of compliant 
taxpayers, we must aggressively pursue non-compliant taxpayers by 
maintaining robust, visible civil and criminal enforcement efforts. We 
are making a difference, and we will not stop in the successful pursuit 
of our mission on behalf of the greatest country in the world.
       providing relief to taxpayers during the covid-19 pandemic
Delivering Economic Impact Payments
    IRS employees have worked around the clock since mid-March to 
develop new tools and deliver meaningful guidance to simultaneously 
deliver Economic Impact Payments (EIP) in record time and still keep 
the annual filing season on track. In fact, millions of Americans 
started seeing EIPs show up in their banking accounts within 14 days 
after the CARES Act was enacted on March 27. By comparison, for the 
last stimulus payments in 2008, the first 800,000 payments did not 
start reaching taxpayers for 75 days.

    So far, approximately 160 million payments totaling approximately 
$270 billion have been delivered, most by direct deposit and some by 
paper check. Working with the Bureau of the Fiscal Service, nearly 4 
million payments were delivered by prepaid debit card. Some payments 
represent a single individual; some represent funds for more than one 
individual, such as a married couple or people with eligible 
dependents.

    The vast majority of people did not need to take any action to 
receive an Economic Impact Payment. The IRS calculated and 
automatically sent the payments to those eligible. This included many 
people who may not normally file a return, such as senior citizens and 
others receiving Social Security retirement, survivors or disability 
benefits and railroad retirees. It also included those whose only 
income is from Supplemental Security Income payments and people 
receiving disability compensation, pension or survivor benefits from 
the Department of Veterans Affairs (VA).

    The IRS worked cooperatively with the Social Security 
Administration and the VA and other government agencies to pull more 
information into our systems so that we could send payments to these 
groups of people without requiring them to file a return or take any 
other action. These agencies provided critical help that allowed us to 
reduce the burden for these individuals including reducing the need for 
them to seek tax return preparation to file a return. This is a step 
beyond anything the IRS was able to do during previous stimulus 
efforts.

    The IRS designed, created, and built two online tools to help us 
quickly deliver the Economic Impact Payments:

        The Non-Filer tool launched on IRS.gov on April 10th--
available in both English and Spanish--allows people who normally don't 
have a filing obligation to enter basic information so that they 
receive their payment.
        The Get My Payment tool launched on IRS.gov on April 15th--
which is also available in English and Spanish--allows many taxpayers 
to check the status of their payment or enter their bank account 
information to receive their payment electronically.

    So far, there have been more than 200 million successful status 
checks. And more than 14 million people have successfully provided 
their banking information, meaning they received, or will receive, 
their payments much more quickly.

    Although the IRS has sent out the vast majority of these payments, 
it continues its extensive outreach efforts into the historically 
underserved communities of our Nation. We are especially focused on 
getting payments out to people who are homeless, who don't normally 
have a return filing obligation, or who otherwise live their life 
outside normal lines of communication, etc. We have been reaching out 
beyond our normal contacts to many lower-income, military, veterans, 
retired, older, limited English proficient, and homeless communities 
around the country. In fact, we have distributed EIP outreach materials 
in more than two dozen languages and within each of these communities. 
We have also been asking for help from local community groups and 
religious organizations as well as the national associations to which 
they belong and numerous others to reach into their respective 
communities. The deadline for people in this group to register using 
the Non-Filer tool is October 15th, and we encourage everyone to share 
this information so the IRS can get Economic Impact Payments to people 
in need.
Providing Administrative Relief and Protecting Taxpayers
    Along with implementing the CARES Act, the IRS is providing 
administrative relief to ease the burden on people facing tax issues:

        A postponement of the deadline for individuals to file and pay 
Federal income tax from April 15, 2020, to July 15, 2020. This relief 
covers all taxpayers with a tax return filing deadline or payment due 
date between April 1, 2020, and July 15, 2020.
        The IRS People First Initiative, under which we have 
temporarily adjusted our processes to help people and businesses during 
these uncertain times. This includes limiting certain collection and 
examination activities.

    It is also important to note that the IRS has been diligently 
working to alert taxpayers and tax professionals to scams related to 
COVID-19, especially calls and email phishing attempts tied to the 
Economic Impact Payments. The IRS and its partners have been making 
every effort to get the word out about these contacts, which can lead 
to tax-related fraud and identity theft.
IRS Operations During the COVID-19 Pandemic
    The IRS's efforts to provide relief to taxpayers have come during a 
time when the agency has had to temporarily scale back operations to 
protect the health and safety of both IRS employees and taxpayers. Even 
with our reduced operations, the IRS has continued to deliver the tax 
filing season, continuing to process electronic tax returns, issue 
direct deposit tax refunds and accept electronic payments. A more 
detailed discussion of the 2020 tax filing season is provided below.

    We have also been continuing the agency's ongoing work to find new 
ways to serve taxpayers, including our efforts to expand online options 
for them. A good example is our recent announcement that, later this 
summer, taxpayers will for the first time be able to file amended 
income tax returns electronically using available tax software 
products.

    Providing an online filing option for the amended return--also 
known as Form 1040-X--has been an IRS goal for many years, and is a 
major milestone for us. Achieving this goal wasn't easy--the 1040-X 
posed a number of unique challenges--but we succeeded thanks to a great 
deal of hard work by employees across the agency.

    Recently, we announced we were beginning a phased-in resumption of 
our operations for non-portable services, as more States and local 
areas also begin reopening. Throughout this crisis, our main concern 
has been protecting the health and safety of taxpayers and IRS 
employees, and that will continue as our operations resume. We have had 
more than 50,000 employees teleworking and don't anticipate significant 
changes in the foreseeable future. We are actively monitoring these 
operations on the ground and will continue to follow--and, where 
possible, exceed--applicable safety guidelines and measures. We 
appreciate the patience and understanding of taxpayers and tax 
professionals as we work to expand the scope of our operations. The 
entire IRS workforce cares about our people and our country, and they 
are committed to helping improve this situation.
                    update on the 2020 filing season
    I am pleased to report that the 2020 filing season opened on time 
on January 27th. On that first day, we set records by processing more 
than 2.275 million e-filed returns in an hour and at a rate of 631 
submissions per second, without error. The previous records were set 
last year at the rates of 1.9 million submissions in an hour at 536 per 
second on January 28, 2019.

    Notwithstanding obvious concerns about the spread of COVID-19, our 
employees have remained dedicated to delivering the filing season for 
taxpayers. As of June 19th, the IRS received more than 138.2 million 
individual returns, and we have issued more than 93 million refunds for 
more than $257 billion.

    A critical component of the tax filing season is the help IRS 
provides taxpayers to ensure they can fulfill their filing obligations. 
The IRS must be focused on enhancing the experience of all taxpayers, 
including those who are unrepresented, lower-income, or have limited 
English proficiency. This focus dictates we maintain appropriate levels 
of staffing, training and systems modernization to be successful.

    This year's filing season has been particularly challenging in that 
taxpayers cannot depend on many of the usual outlets for assistance. I 
am proud of our past and look forward to future efforts to support the 
Volunteer Income Tax Assistance (VITA) and Tax Counseling for the 
Elderly (TCE) programs. Unfortunately, due to the current COVID-19 
situation, most of these partners had to suspend their operations. In a 
normal year, the IRS supports approximately 11,000 VITA/TCE sites 
(including military bases) around the country, which are staffed by 
more than 82,000 volunteers, many of whom are current IRS employees and 
retirees. During this filing season, before sites were closed, 
volunteers at VITA and TCE sites helped prepare more than 2 million 
individual returns.

    An important way the IRS serves diverse communities, during the 
filing season and throughout the year, is by communicating with them in 
their own language. The IRS has had a long history of providing major 
communications products in Spanish. Additionally, we are now able to 
provide tax information and free products and services in six 
additional languages. Examples include the Taxpayer Bill of Rights and 
key products related to the Tax Cuts and Jobs Act. And the IRS has 
expanded its efforts to use multiple languages on social media 
platforms, including Twitter and Instagram.

    But we realize we need to do more. We are increasing our efforts to 
reach out to taxpayers in diverse communities, to be in their 
communities and share information with them in their languages to help 
them comply with the tax laws. For example, our Stakeholder Liaison 
employees work continuously around the country and throughout the year 
in this regard, and in the current fiscal year have held numerous tax 
information seminars and other events for taxpayers and tax 
practitioners in diverse communities.
                        ensuring tax compliance
    The IRS is committed to having a strong, visible, robust tax 
enforcement presence to appropriately support taxpayers who comply 
voluntarily. When taxpayers file their returns, they should feel 
confident others are doing the right thing too. Enforcement of the tax 
laws is critical to ensuring fairness in our tax system. IRS employees 
who collect taxes, audit returns and investigate fraud as well as tax-
related identity theft work hard throughout the year to enforce the tax 
laws while treating taxpayers fairly and respecting their rights.

    The IRS remains extremely active in the enforcement area. This is 
true across our agency--in our divisions that deal with individuals, 
large businesses, small businesses and exempt organizations are highly 
coordinated. In all our enforcement efforts, the IRS must emphasize the 
use of technology to develop new enforcement tools. Our advanced data 
and analytic strategies allow us to catch instances of tax evasion that 
would not have been possible just a few years ago.

    We realize when the public thinks of compliance, they think of 
audits, but there is so much more to our work to ensure compliance with 
the tax law and serve the Nation. This includes the important work of 
our Criminal Investigation division to uncover tax fraud, and the 
millions of notices the IRS sends each year to taxpayers when issues 
are discovered on their returns.

    To help increase tax compliance, the IRS has been focusing on a 
number of special areas in our enforcement activities. For example, the 
IRS will continue to pursue offshore tax noncompliance by all available 
methods. We are also committed to pursuing those who promote and make 
use of abusive tax shelters, and are especially concerned about certain 
variations, including syndicated conservation easements and micro-
captive insurance shelters. And we continue to be very active in 
emerging areas such as virtual currency. The IRS has been working to 
ensure taxpayers with virtual currency transactions understand the tax 
laws governing virtual currency and meet their tax obligations.

    Taxpayers should remember the IRS is committed to pursuing those 
who would intentionally evade their tax obligations. We continue 
working toward the goal of having a presence in every neighborhood, on 
each type of tax issue and at every level of income, to ensure fairness 
for all taxpayers. For example, a coordinated IRS initiative announced 
in February of this year involves improving tax compliance among high-
income taxpayers by increasing visits to those generally with incomes 
above $100,000 who failed to file tax returns in 2018 or previous 
years. Similar initiatives include a significant shift in examination 
resources and technology focused on high-income/high-wealth taxpayers 
as well as certain types of questionable transactions typically engaged 
in by such taxpayers.
              taxpayer first act: update on implementation
    During 2019, Congress helped the IRS in its efforts to enhance the 
taxpayer experience by passing the Taxpayer First Act (TFA). 
Implementation of the TFA gives the IRS an incredible opportunity to 
make significant improvements in the way we serve taxpayers, continue 
to enforce the tax laws in a fair and impartial manner, collaborate 
across the agency and train IRS employees.

    Along those lines, in the fall of 2019, the IRS launched its 
Taxpayer First Act Office (TFAO). This was an important step, because 
the TFAO ensures our implementation efforts are focused and well-
coordinated throughout the agency.

    The TFAO has spent several months holding ``listening sessions'' 
with stakeholders inside and outside the tax administration universe. 
We are continuing to analyze this information and have begun drafting 
the various components of the TFA Report to Congress.

    The TFAO has thoughtfully considered thousands of pieces of 
feedback, largely centering around six major themes, which helped us 
shape the foundational components of a holistic taxpayer experience:

        Expanded Digital Services: An improved experience through 
self-service digital channels by building upon existing online accounts 
and introducing online accounts for tax professionals and business 
taxpayers. However, the IRS will not ignore traditional channels of 
communications.
        Seamless Experience: Taxpayers should be guided to the 
resources and communication channels that will resolve their issues 
most effectively and efficiently.
        Proactive Outreach and Education: Educate the taxpayer 
community by proactively providing information in the language, timing, 
and method taxpayers need or prefer.
        Focused Strategies for Reaching Underserved Communities: To 
establish a consolidated program to engage with historically 
underserved communities to address issues of communication, education, 
transparency and trust, as well as access to quality products and 
services.
        Ecosystem of Partnerships: Establish, shepherd, and facilitate 
a collaborative and interactive network of partnerships across the 
entire tax ecosystem and bring together existing efforts.
        Enterprise Data Management and Advanced Analytics: That is an 
Enterprise Data Management strategy that includes a cross-enterprise 
understanding of the customer experience, emerging needs and 
expectations, and operational data. The strategy should rely on a 
central repository of data from IRS systems that can be used to create 
reports to enable more-informed decisions.

    These components will continue to be refined as we finalize our 
recommendations in the TFA Report to Congress.

    Due to the IRS's intense focus and shift in IRS resources to our 
COVID-19 response, we have been modifying timelines and activities for 
our TFA Report to Congress, which was originally planned for submission 
in July 2020. We're working with Congress to adjust that timeframe, and 
plan to submit the report in December.

    Meanwhile, the IRS is continuing to solicit feedback from 
stakeholders: taxpayers, tax professionals, tax software companies, 
advisory groups, financial industry stakeholders and other partners 
inside and outside the tax administration universe. We have a special 
email address for this feedback: [email protected].
                     the president's fy 2021 budget
    The President's FY 2021 budget proposal for the IRS provides $12 
billion to administer the Nation's tax system fairly, collect more than 
$3.6 trillion in gross taxes to fund the government, and strengthen tax 
compliance. In addition to the base appropriations request, the budget 
proposes a program integrity cap adjustment that would provide an 
additional $400 million in FY 2021 to fund investments in the IRS tax 
enforcement program. These investments will generate $79 billion in 
additional revenue over 10 years and cost $15 billion, for net revenue 
of $64 billion over 10 years, which will help reduce the net tax gap of 
$381 billion. The IRS funds our country and is one of the best 
investments in the Federal Government with an overall return on 
investment (ROI) of about $5 for every $1 invested, excluding 
significant deterrence effects. The FY 2021 request provides:

        $106 million to implement the TFA, which will revamp customer 
service, introduce new taxpayer protections, and deliver new online 
service platforms to facilitate filing and payment for individuals and 
businesses. This investment will provide for creation of a new IRS 
website that allows taxpayers to prepare, file and distribute Form 1099 
information returns online; electronic filing of statements and returns 
in the Form 990 series or Form 8872, Political Organization Report of 
Contributions and Expenditures; and increased staffing so that the 
Independent Office of Appeals can share files with taxpayers prior to 
conferences and the IRS Whistleblower Office can provide periodic 
updates on referral status.

        $300 million for systems modernization to transform the 
taxpayer experience with new digital communications, online payment 
tools and reminders for individuals and tax professionals, and stronger 
data encryption to protect taxpayer information from billions of 
cyberattacks each year. Modernization must always remain priority for 
our country, is an IRS priority and also a key driver of the 
President's Management Agenda. The modernization funding request 
includes an increase of $113.8 million to continue implementing the 
IRS's Integrated Modernization Plan in FY 2021. This plan will enable 
the IRS to provide consistently superior service to taxpayers and 
deliver long-term budget efficiencies as the IRS modernizes 
capabilities currently provided via legacy applications.

        $452 million for inflation and labor investments to fund 
current activities and annualization of the 3.1 percent pay increase 
from Congress.
        legislative proposals in the president's fy 2021 budget
    Along with the funding requested in the President's FY 2021 budget, 
we are also asking for Congress's help legislatively in several 
important areas that would improve tax administration and support the 
IRS in fulfilling its mission, including the following.

    Greater Flexibility to Address Correctible Errors. The budget would 
expand the IRS authority to correct errors on taxpayer returns. Current 
law only allows the IRS to correct errors on returns in certain limited 
instances, such as basic math errors or the failure to include the 
appropriate social security number (SSN) or taxpayer identification 
number. This proposal would expand the still limited instances in which 
the IRS could correct a taxpayer's return to situations where: (1) the 
information provided by the taxpayer does not match the information 
contained in Government databases or Form W-2, or from other third 
party databases as the Secretary determines by regulation; (2) the 
taxpayer exceeded the lifetime limit for claiming a deduction or 
credit; or (3) the taxpayer failed to include with his or her return 
certain documentation that is required to be included on or attached to 
the return. This proposal would lessen taxpayer burdens and make it 
easier for IRS to correct verified taxpayer errors, directly improving 
tax compliance and reducing EITC and other improper payments and 
freeing limited IRS resources for other compliance activities.

    Increase Oversight of Paid Tax Return Preparers. Paid tax return 
preparers have an important role in tax administration because they 
assist taxpayers in complying with their obligations under the tax 
laws. Incompetent and dishonest tax return preparers burden 
unsuspecting taxpayers, increase collection costs, reduce revenues, 
disadvantage taxpayers by potentially subjecting them to penalties and 
interest because of incorrect returns, and undermine confidence in the 
tax system. To promote high quality services from paid tax return 
preparers, the proposal would explicitly provide that the Secretary of 
the Treasury has the authority to regulate all paid tax return 
preparers.

    Improve Clarity in Worker Classification and Information Reporting. 
The budget proposes to: (1) establish a new safe harbor that allows a 
service recipient to classify a service provider as an independent 
contractor and requires withholding of individual income taxes to this 
independent contractor at a rate of 5 percent on the first $20,000 of 
payments; and (2) raises the reporting threshold for payments to all 
independent contractors from $600 to $1,000, and reduces the reporting 
threshold for third-party settlement organizations from $20,000 and 200 
transactions per payee to $1,000 without regard to the number of 
transactions. In addition, Form 1099-K would be required to be filed 
with the IRS by January 31st of the year following the year for which 
the information is being reported. Significant information reporting 
and withholding can result in a 90-percent effective rate of voluntary 
compliance. The proposal lessens worker classification disputes with 
service recipients, increases clarity in the tax code, reduces costly 
litigation, and significantly improves tax compliance.

    In addition, the President's FY 2021 budget request also includes 
these two provisions related to tax administration.

    Fund the Federal Payment Levy Program via collections: This 
proposal would allow the Fiscal Service to retain a portion of the 
funds collected under the bureau's Federal Payment Levy Program (FPLP) 
which processes and collects delinquent tax debts through the Treasury 
Offset Program (TOP). TOP currently recoups its costs from retained 
amounts from collected amounts for all its programs except for the FPLP 
but under current law, the IRS must pay these costs through annual 
reimbursement agreements under the Economy Act. This proposal would 
make the FPLP consistent with other TOP programs. Delinquent taxpayers 
will not be impacted by the proposal, because they will receive credit 
for the full amount collected. This proposal creates efficiencies, 
because it allows the Fiscal Service to recover its FPLP costs from the 
IRS in the same manner as other TOP programs.

    Require a Social Security number (SSN) that is valid for work to 
claim Child Tax Credit (CTC), Earned Income Tax Credit (EITC), and 
credit for other dependents (ODTC): The administration proposes 
requiring an SSN that is valid for work to claim the EITC, CTC (both 
the refundable and non-refundable portion), and/or the ODTC for the 
taxable year. For all credits, this requirement would apply to 
taxpayers (including both the primary and secondary filer on a joint 
return) and all qualifying children or dependents. Under current law, 
taxpayers who do not have an SSN that is valid for work may claim the 
CTC if the qualifying child for whom the credit is claimed has a valid 
SSN. Furthermore, the ODTC, created by the Tax Cuts and Jobs Act, 
allows taxpayers whose dependents do not meet the requirements of the 
CTC, including the SSN requirement, to claim this non-refundable 
credit. This proposal would ensure that only individuals who are 
authorized to work in the United States could claim these credits by 
extending the SSN requirement for qualifying children to parents on the 
tax form for the CTC and instituting an SSN requirement for the ODTC. 
While this SSN requirement is already current law for the EITC, this 
proposal also would close an administrative gap to strengthen 
enforcement of the provision.
                               conclusion
    Chairman Grassley, Ranking Member Wyden, and members of the 
committee, thank you again for the opportunity to provide you with an 
overview of the filing season and budget request, and update you on our 
responses to the COVID-19 situation. The IRS is dedicated to improving 
service to taxpayers, modernizing its systems and maintaining the 
integrity of the tax system, while also protecting the health of its 
workers and American taxpayers.

    We believe we have made great strides over the past year, but we 
want to do more. The entire IRS workforce wants to do more in every 
area. With the help of Congress, we will continue improving, as we move 
the agency forward into the future. This concludes my statement, and I 
would be happy to take your questions.

                                 ______
                                 
      Questions Submitted for the Record to Hon. Charles P. Rettig
               Questions Submitted by Hon. Chuck Grassley
    Question. It's been reported that about 44,000 taxpayers may have 
accidentally thrown out the stimulus money sent to them on pre-paid 
debit cards because they thought it was junk mail. This suggests a poor 
job was done in alerting individuals of the possibility of receiving 
their payment by pre-paid debit card and how to identify it. Prior to 
the pre-paid debit cards being sent out, did the IRS engage in any 
public outreach intended to inform individuals about payments being 
sent by pre-paid debit card? If so, please provide details of such 
outreach. Once it became clear there was significant public confusion 
about the pre-paid debit cards, what efforts did the IRS make to 
educate the public on the pre-paid debit cards?

    Answer. The IRS has engaged in an extensive effort to educate the 
public about debit card distribution related to Economic Impact 
Payments.

    The Treasury Department made the decision to issue debit cards and 
the Bureau of the Fiscal Service (BFS), our sister bureau, handled 
payment delivery and used a contractor to deliver the debit cards.

    The IRS worked closely with Treasury and BFS on communicating this 
decision, which did not involve much lead time. Treasury initiated the 
announcement about the debit cards on May 18th when they issued a news 
release announcing the debit cards were being mailed. The IRS posted 
the Treasury news release (https://home.treasury.gov/news/press-
releases/sm1012) to IRS.gov and shared the news release with the press 
as well as partners inside and outside the tax community.

    In addition to the initial announcement, the IRS conducted 
extensive follow-up communications in the days and weeks following. IRS 
social media, including Twitter, highlighted the debit cards starting 
May 19th. On May 26th, the IRS also issued a special Tax Tip (https://
www.irs.gov/newsroom/millions-of-people-will-get-their-economic-impact-
payment-by-prepaid-debit-card). Frequently Asked Questions and other 
information continued to be posted and updated on IRS.gov.

    When reports began surfacing that people were mistaking the plain 
envelope mailings as junk mail, the IRS responded with a May 27th news 
release (https://www.irs.gov/newsroom/economic-impact-payments-being-
sent-by-prepaid-debit-cards-arrive-in-plain-envelope-irsgov-answers-
frequently-asked-questions) to highlight details about the mailing to 
alert people to watch their mail carefully.

    The IRS reinforced these communications in social media, through 
IRS email listservs reaching millions of subscribers and more than 
10,000 contacts with partner groups across the Nation.

    The IRS has not previously dealt with debit cards delivering 
refunds or stimulus payments. If debit cards are used for any future 
efforts, the IRS will incorporate components learned during this period 
to help avoid taxpayer confusion.

    Question. At the end of 2019, Congress passed a funding bill, which 
included a provision that made certain IRS deadlines automatic in areas 
that the President declares to be disaster areas under the Stafford 
Act. Then, on March 13, 2020, the President declared the entire country 
a disaster area because of the COVID-19 pandemic. However, the IRS took 
the position that the automatic deadline extensions enacted into law at 
the end of 2019 did not apply because the President's declaration was 
not the sort of declaration that the law had in mind. This raises two 
questions.

    Does the IRS have the discretion to determine whether automatic 
deadline extensions required under a statute apply differently 
depending on the Stafford Act disaster declaration?

    Answer. The IRS does not interpret section 7508A(d) as allowing 
discretion to determine whether the 60-day period applies when relief 
is granted under section 7508A with respect to any federally declared 
disaster. The nationwide scope and unknown duration of the COVID-19 
disaster is unprecedented and could not have been contemplated at the 
time that section 7508A(d) was drafted. The pandemic highlighted 
ambiguities in the application of section 7508A(d). The IRS applied 
section 7508A(d) to the COVID-19 disaster consistent with its view of 
the text and intent of the statute.

    Question. One of the reasons for the automatic deadline extensions 
passed into law at the end of 2019 was so that taxpayers across the 
country could be certain that if they lived in a presidentially 
declared disaster area, their tax deadlines automatically would be 
extended without waiting for IRS affirmation on the matter. If a 
taxpayer is busy securing the safety of his or her family or property 
because of a pending disaster, he or she should not have to pause to 
think about imminent IRS deadlines. Unfortunately, this intended 
purpose of the law did not happen back in March, and members of 
Congress heard from taxpayers and their accountants about the 
difficulties they were having with getting tax returns completed just 
as everybody was making arrangements for social distancing and staying 
at home.

    Going forward, can a taxpayer living in a presidentially declared 
disaster area count on tax deadlines being automatically extended? Or 
does the IRS still have to issue guidance to effectuate the extension?

    Answer. The IRS will continue to issue guidance to explain to 
taxpayers the relief to which they are entitled under section 7508A in 
the event of federally declared disasters. Such guidance is essential 
for communicating to taxpayers the acts for which additional time is 
available because section 7508A(d) does not explicitly identify 
specific acts for which relief is provided, with the possible exception 
of certain pension-related acts listed under section 7508A(d)(4).

                                 ______
                                 
                Question Submitted by Hon. Bill Cassidy
         helping taxpayers make conservation easement donations
    Question. As you are aware, Congress provided conservation easement 
tax incentives to encourage taxpayers to preserve land for future 
generations. The National Taxpayer Advocate's annual report to Congress 
released in January identified conservation easements as one of the 
``most litigated issues.'' The report recommended that the IRS should 
``[d]evelop and publish guidance to provide safe harbors . . . and 
prevent unnecessary litigation.'' Would you and your team at the IRS be 
willing to work with me and my team to explore the feasibility of safe 
harbor guidelines for preservationists who wish to use the program with 
integrity?

    Answer. The IRS is happy to work with your office and the Treasury 
Department, on a solution that addresses all parties' concerns, 
conforms to the law, and is administrable.

                                 ______
                                 
                 Questions Submitted by Hon. Todd Young
    Question. On June 1st, the Treasury Inspector General for Tax 
Administration released an audit report on the IRS, which found that 
there were significant instances of noncompliance in fiscal years 2014 
through 2016.

    It's easy to notice that audit rates have declined the past decade. 
According to the Tax Policy Center, between 2010 and 2018, the overall 
audit rate for individual tax returns dropped 47 percent from 1.1 
percent to 0.6 percent.

    With that said, it is important to note that in March--when the IRS 
announced the tax filing extension--it further stated that ``field 
revenue officers will continue to pursue . . . non-filers and perform 
other similar activities where warranted.''

    Can you explain how the IRS has and plans to pursue audits during 
the pandemic?

    Answer. Under the IRS's People First Initiative, the IRS paused 
most collection enforcement activities during a suspension period that 
ran from April 1st through July 15th. During this period, the IRS 
generally did not initiate new examinations, send notices of Federal 
tax lien or levies, or conduct property seizures. We also allowed 
taxpayers who were paying their tax liabilities under installment 
payment agreements to skip their payments during those months without 
the agreements being defaulted. Our field functions did continue to 
assign and work nonfiler, egregious balance due cases, and audits 
related to abusive transactions during this time.

    As you mention, limited resources have affected our ability to 
conduct audits at similar rates to prior years. In fact, the IRS's 
Revenue Officer and Revenue Agent staff, who typically perform these 
activities, has decreased by over 40 percent since 2011. To address 
declining resources, the administration's budget request included the 
Program Integrity Cap adjustment to secure funds for new and continuing 
investments in expanding and improving the effectiveness and efficiency 
of our overall tax enforcement programs. We appreciate the support from 
Congress and the administration. Recent budget increases enabled the 
IRS to hire enforcement personnel in FY 2019. However, we have an aging 
workforce, and retirements and attrition mean we've only had a net gain 
of approximately 1 percent to our compliance employee staffing.

    Our plans for Tax Year 2018 also include a significant number of 
examinations among the highest income taxpayers, and we will be 
deploying an additional 200 agents over the coming months to initiate 
examinations of these taxpayers. In addition to our examination 
efforts, we did send all High Income Nonfiler (HINF) cases for tax 
years 2016, 2017 and 2018 a notice, and we intend to continue selecting 
all HINF cases for tax years 2019 and beyond. Earlier this year, we 
initiated ``issue based'' Revenue Officer Compliance Sweeps (ROCS) on 
High-Income Delinquent Filers (HiDeF ROCS) to work these cases across 
the country. Experienced revenue officers perform these compliance 
sweeps, working in-person with the affected taxpayers and their 
representatives. To increase the effect, we promoted our strategy 
through the national media to address HINF delinquencies and improve 
future voluntary compliance. While the pandemic has affected the IRS's 
current ability to work these cases in such a manner, IRS Field 
Collection is working to identify HiDef ROCS that can be worked 
remotely.

    With the expiration of the People First Initiative on July 15th, we 
resumed a number of compliance activities, while continuing to consider 
the wide-ranging effect of COVID-19 on taxpayers. In addition, the 
health and safety of taxpayers and IRS employees remains an important 
consideration. Our field and campus examiners have started to initiate 
new examinations which includes sending out appointment letters. 
Examiners will continue examinations virtually, and while there may be 
a need to make in person visits with taxpayers, this action would be 
the exception and not the norm. The Collection Operation has returned 
to assigning a variety of types of cases to revenue officers, but we 
directed employees to be mindful of the economic and personal effects 
of the pandemic on the taxpayer when making enforcement action 
decisions. We have allowed manual collection enforcement processes, 
such as the issuance of levies and summonses by revenue officers, to 
resume. Automated programs, such as levies issued by the Automated 
Collection System, will remain idle while IRS works through the backlog 
of incoming correspondence and outgoing notices.

    Our resumption guidance memorandums can be found on the IRS.gov 
COVID-19 site, which includes guidance from several business operating 
divisions.

    Question. Furthermore, how is the IRS using technology to pick up 
some of the slack to prevent, prepare for, and respond to tax 
discrepancies?

    Answer. We are continuing the temporary procedures that allow IRS 
employees to accept images of signatures (scanned or photographed) and 
digital signatures on documents related to the determination or 
collection of tax liability. We also implemented a temporary procedure 
that allows IRS employees to accept documents via email and to transmit 
documents to taxpayers using SecureZip.

    We are expanding the use of Taxpayer Digital Communications, which 
provides a secure portal for taxpayers and tax professionals to 
communicate and submit documentation to IRS employees. We will also 
continue to use digital transmissions to accept digital signatures on 
certain documents pursuant to Memo NHQ-01-0620-002 issued by the Deputy 
Commissioner, Services and Enforcement, on June 12, 2020.

    Within the SB/SE division, which handles most field examination and 
collection activities we made significant progress in equipping our 
employees to work in a virtual environment. Our telework-ready 
workforce increased from 50 percent to 91 percent of employees, and we 
will continue those efforts by procuring the necessary equipment, 
laptops, and headsets to enable our employees to efficiently work in a 
virtual environment.

    Question. Besides processing returns, what critical tasks are you 
unable to perform because of restrictions related to the pandemic, and 
what is your path forward to accomplish them. Is there any assistance 
Congress can provide to help you complete this vital mission?

    Answer. We are only conducting field contacts with taxpayers, 
powers of attorney, and third parties in exceptional circumstances with 
managerial approval, in order to protect both IRS staff and the public. 
Field examiners normally conduct a physical tour of the business, 
onsite review of books and records of money services business, onsite 
reviews with casinos, and onsite inspection of fuel terminals. These 
regular onsite visits will resume when operations fully resume once it 
is safe to do so.

    Question. Since late March, countless businesses in the private and 
public sectors have complied with local stay-at-home orders via 
teleworking. For some businesses and government agencies, this ``new 
normal'' was relatively painless due to the growing trend of flexible 
working. For others, significant adjustments in technology and 
infrastructure were required.

    Can you elaborate on the IRS's performance on handling ``mission-
critical work'' while your agency has been teleworking?

    Answer. The health and safety of our employees and of taxpayers is 
our top priority, and during the early phase of the COVID-19 national 
emergency, we were forced to significantly rescale IRS operations due 
to the closure of more than 90 percent of our buildings. As of July 13, 
2020, the IRS reopened all our facilities, recalling only those 
employees who have mission-critical, non-portable work to ensure proper 
social distancing. As of October 30th, more than 12,000 Customer 
Service Representatives are taking calls on IRS toll-free lines and 
more than 8,000 employees are opening mail and processing paper tax 
returns (combination of telework and in-office). As of pay period 14 
(ending on July 18th), approximately 93 percent of the IRS workforce is 
either teleworking or reporting to an IRS facility, including 13 
percent who are reporting to an IRS facility on a full-time basis.

    Question. Last year, I reintroduced the DRAIN Act, which would 
require Federal agencies to relocate their headquarters outside of 
Washington, DC and closer to the communities they serve throughout the 
United States.

    Using the IRS as an example: can the agency's mission support 
reducing its personnel footprint in DC by co-locating staff with 
regionally applicable offices around the country? In other words, if 
the headquarters remain in DC, could the agency support smaller 
operations in its HQ while spreading employees throughout the country?

    Answer. The IRS personnel footprint in Washington, DC numbers 
approximately 2,700 employees, approximately 3 percent of the current 
IRS total staff, and more than 700 fewer employees than 10 years ago. 
Some of the DC-based employees service Washington, DC area taxpayers 
(appeals, examination, filing assistance, and Tax Court litigation 
functions, for example). Four percent (4 percent) of DC employees are 
executives who, along with their staff, commonly interact with the 
Department of the Treasury and its bureaus on strategic initiatives. 
Typical headquarter functions such as the Chief Financial Officer (CFO) 
and the Human Capital Office (HCO) already have many more employees 
dispersed around the country in locations other than Washington, DC. 
Approximately two-thirds of the CFO staff are located outside 
Washington, and 90 percent of the HCO staff are located elsewhere. Our 
taxpayers are in every community, and the IRS is well represented 
throughout the country serving those taxpayers. Taxpayer Assistance 
Centers are in many communities throughout the United States and Puerto 
Rico, and the IRS Taxpayer Advocate Service has a presence in all 50 
States. The IRS has no plans currently to relocate more staff and 
functions out of Washington, DC.

    Question. Last February, the GAO reported that the IRS could be 
doing more to help taxpayers who own Bitcoin and other forms of 
cryptocurrency to comply with their tax obligations.

    Notably, the GAO recommended that the IRS should look into 
improving information reporting--such as issuing W-2s--because it 
naturally leads to higher compliance.

    Can you speak to the status of additional guidance for taxpayers, 
including methods for calculating the fair market value and determining 
the cost basis of disposition?

    What actions has the IRS taken to develop a unified approach 
between enforcement agencies--while also remaining publicly 
transparent--to counter bad actors in response to this rapidly evolving 
technology?

    Answer. The IRS, working closely with Treasury, is developing 
guidance requiring U.S. cryptocurrency exchanges and other U.S. 
businesses to provide third-party information reporting for certain 
taxable transactions involving virtual currency under section 6045, 
much like that which is provided by our current Form 1099-B reporting 
system. The current focus on developing guidance for third-party 
reporting is due to the significant role U.S. exchanges and other U.S. 
businesses play in virtual currency transactions carried out by U.S. 
taxpayers. This effort will complement Notice 2014-21, the Revenue 
Ruling, and FAQs the IRS has already published, which address many 
questions relating to the taxation of cryptocurrency transactions. We 
are also considering issuing additional guidance that would address 
methods for determining the fair market value and basis of 
cryptocurrency, as well as the tax treatment of tokens resulting from 
cryptocurrency forks. However, no decisions have been made at this 
point regarding the specifics or form of that guidance.

    We are also working diligently on an enforcement campaign to 
address noncompliance related to individual taxpayers' use of 
cryptocurrency through multiple education and enforcement actions, 
including outreach and examinations. In the summer of 2019, the IRS 
sent more than 10,000 letters to taxpayers who engaged in 
cryptocurrency transactions informing them where they could obtain 
information regarding the proper reporting of cryptocurrency 
transactions. Because the lack of information can hamper tax 
compliance, we have set up a web page on our website providing 
information to taxpayers on the taxation of virtual currency 
transactions. That web page can be found at: https://www.irs.gov/
businesses/small-businesses-self-employed/virtual-currencies.

    We have also taken steps to unify enforcement initiatives among 
U.S. and international law enforcement agencies. For example, in March 
of this year, we hosted a ``Virtual Currency Summit'' that included 
stakeholders in the cryptocurrency industry as well as officials from 
the IRS, DOJ, Treasury's Office of Tax Policy, and FinCEN involved with 
enforcement and guidance. The goal of the summit was to provide a forum 
for the business community to share information with government 
officials about the cryptocurrency industry and to ask questions and 
share concerns regarding information reporting and tax treatment of 
cryptocurrency transactions.

    Finally, IRS Criminal Investigation (IRS-CI) participates in the 
Joint Chiefs of Global Tax Enforcement (known as the J5) to combat 
transnational tax crime through increased enforcement collaboration. In 
addition to IRS-CI, the J5 is comprised of the Australian Taxation 
Office (ATO), the Canada Revenue Agency (CRA), the Fiscale 
Inlichtingen- en Opsporingsdienst (FIOD), and HM Revenue and Customs 
(HMRC). J5 members collaborate to gather information, share 
intelligence, conduct operations, and build the capacity of tax crime 
enforcement officials in order to reduce the growing threat to tax 
administrations posed by cryptocurrencies. As part of this 
collaboration, IRS-CI and the World Bank hosted an educational and 
intelligence sharing conference during June of 2019, which brought in 
more than 120 international and domestic law enforcement partners from 
approximately 20 countries to address emerging areas associated with 
cybercrime, including topics on cryptocurrency, the blockchain and the 
dark web. IRS-CI continues to participate in numerous law enforcement 
task forces and public-private partnerships relating to cryptocurrency 
and cyber-crime enforcement.

    Question. I would like to take this opportunity to commend the 
IRS's work in reviving the Compliance Assurance Process (CAP) at Large 
Business and International after a hiatus of several years. This 
program provides a significant value for taxpayers who are willing to 
work closely with the IRS to achieve a more efficient tax compliance 
review process versus traditional audits.

    Traditionally, many participants in CAP have been the U.S. 
subsidiaries of internationally based companies. These companies have 
often been successful CAP participants, receiving yearly full 
acceptance letters from their CAP teams and successfully operating in 
CAP maintenance.

    I understand that applicant eligibility must be limited to ensure 
resources are properly available; however, I am concerned that new 
program criteria and robust requirements will deter taxpayers of U.S. 
subsidiaries.

    Is there another approach IRS could take to ensure these American 
taxpayers have access to CAP?

    Answer. The Compliance Assurance Process (CAP) differs from a 
traditional audit in that the IRS completes most examination work 
before the tax return is filed. Without a tax return, CAP relies on the 
review of quarterly and annual financial statements to identify and 
verify that the correct material tax issues are being reviewed.

    U.S. publicly traded corporations are required to prepare financial 
statements in accordance with United States Generally Accepted 
Accounting Principles (US GAAP), but the U.S. subsidiaries of 
internationally based companies generally prepare financial statements 
using International Financial Reporting Standards (IFRS). In order to 
ensure consistency in approach and the most effective use of CAP 
resources, the IRS determined to limit CAP participation to U.S. 
publicly traded Corporations with a legal requirement to prepare US 
GAAP financial statements.

    However, the IRS gave U.S. subsidiaries of internationally based 
companies that were currently in the CAP program the opportunity to 
remain in the program if they made the commitment to prepare US GAAP 
quarterly and annual financial statements. Some U.S. subsidiaries of 
internationally based companies made this commitment and remain a part 
of the CAP program, while others were unable to make this commitment 
and are no longer eligible to be in the CAP program.

    The IRS periodically evaluates the CAP eligibility criteria and 
makes adjustments consistent with resource constraints and the need to 
ensure the effective and efficient execution of the CAP program. We 
continue to engage with stakeholders and invite suggestions on viable 
alternatives in bridging and reconciling the disclosure gap between US 
GAAP and non-US GAAP reporting.

                                 ______
                                 
                 Questions Submitted by Hon. Ron Wyden
    Question. On May 8, 2020, IRS updated FAQs online via the Economic 
Impact Payment Information Center to acknowledge that IRS is aware that 
``in some instances a portion of the payment sent to a spouse who filed 
an injured spouse claim with his or her 2019 tax return (or 2018 tax 
return if no 2019 tax return has been filed) has been offset by the 
non-injured spouse's past-due child support.'' This is not what 
Congress intended in the CARES Act. The COVID-19 public health 
emergency continues to take a massive economic toll on families across 
the country, and this direct assistance is needed now to help cover 
necessary expenses. Information in the IRS's FAQs goes on to say that 
injured spouses will receive their unpaid half of the total payment 
when the issue is resolved.

    What steps is IRS taking to resolve the issue? When can injured 
spouses and their families expect to receive their stimulus payment?

    Answer. The Injured Spouse payments were stopped in the Treasury 
Offset Program. The IRS coordinated with the Bureau of the Fiscal 
Service to recover and reissue these funds on September 27, 2020, to 
the Injured Spouse.

    Question. The COVID-19 pandemic has resulted in the IRS limiting 
its operations. As a result, lawmakers have relied on the IRS Free File 
Alliance to provide taxpayers earning less than $69,000 with free tax 
preparation services. However, earlier this year, the Free File 
Alliance was embroiled in a scandal where member companies were 
charging low-income taxpayers, including members of the military, for 
tax preparation services that should have been free. Since the scandal, 
as recently as June 9th, a bipartisan congressional staff memo 
indicated that there is still little oversight over the Free File 
program. This means that taxpayers who are eligible for the program may 
not be aware of it or take advantage of it. How is the IRS working to 
ensure that in other programs where it partners with the private 
sector, such as the Volunteer Income Tax Assistance (VITA) program and 
the AARP Foundation Tax Aide's Tax Counseling for the Elderly (TCE) 
program, it is not partnering with unscrupulous companies that have a 
track record of taking advantage of low-income taxpayers?

    Specifically, has the IRS recently reviewed which companies it 
partners with to ensure such partners meet fundamental suitability 
requirements, including no conflicts of interest and a primary focus on 
providing low-income taxpayers, including members of the military, with 
free tax filing services? Has the IRS reviewed overall return/filing 
volume, for programs such as VITA and TCE, over the past 5 years to 
ensure that volume is directly correlated with the increased need and 
demand for such free services?

    Answer. The IRS believes that taxpayers should have a choice in 
filing options and should be educated in those options. The IRS 
promotes options that result in accurate tax return filing. We are 
committed to providing taxpayers with viable options and tools for tax 
return preparation and filing, including free services, that help them 
effectively meet their tax obligations--whether online, as currently 
supported by Free File, or in-person, as supported by the Volunteer 
Income Tax Assistance.

    The IRS Free File team tests each Free File Alliance member's tax 
preparation software every filing season, once before the filing season 
starts and once mid-year to ensure all software is in compliance with 
the Free File Memo of Understanding (MOU) agreement.

    Our communications emphasize that IRS Free File eligible taxpayers 
must access the IRS Free File tax preparation software from the IRS.gov 
website to ensure they receive the benefits of the protections built 
into the Free File program. However, some taxpayers may start their web 
search on commercial tax preparation sites where charges for preparing 
and filing a Federal and a State tax return do not fall under the MOU.

    The MITRE Corporation was tasked with completing the review using 
the Federally Funded Research and Development Center, an existing 
Federal Government platform, as a best practice. The statement of 
objectives includes a review of the current Free File memorandum of 
understanding (MOU); a review of compliance and oversight activities; a 
review of prior IRS Advisory Committee (IRSAC) recommendations; and the 
provision of recommendations to strengthen the MOU and the IRS free 
file program.

    The IRS views the Free File program as a viable option for eligible 
taxpayers to receive individual tax return preparation and electronic 
filing at no cost. As stated in its 2019 public report, the IRSAC 
continues to view the Free File program as viable and has developed a 
list of recommendations for the MOU and for the IRS to improve 
oversight. We are using the IRSAC's findings and recommendations to 
improve and strengthen the program.

    Upon receipt of the MITRE report in October 2019 we incorporated 
the recommendations into our discussions with stakeholder members of 
Free File Inc (FFI).

    Taxpayers must qualify to use traditional IRS Free File software 
offered by the Free File partners. The qualification occurs through the 
tax return data the filer enters on their Federal tax return. If the 
filer qualifies, they are not charged for tax preparation and can 
proceed to electronically file. If the filer does not qualify (for 
example, the filer enters an Adjusted Gross Income that is too high for 
that Free File member's services), they are given two choices: either 
return to the IRS Free File landing page to find another offering to 
fit their specific tax situation or proceed (knowing the specific fee 
they are electing to pay in order to proceed with that software). 
Please note: IRS Free File reported volumes represent qualifying 
taxpayers only, not those that opt to continue for a fee. This concept 
is formalized in the ``Addendum to the Eighth Free File MOU'' signed 
December 2019 which stipulates that all Free File members shall provide 
``non-qualifying'' filers the option to return to the IRS Free File 
landing page as the first option, presented at the earliest feasible 
point.

    The IRS and the Free File Alliance included language in the 
December 2019 MOU Addendum which states: ``FFI members are prohibited 
from engaging in any practice that would cause the member's Free File 
Landing Page to be excluded from an organic Internet search.''

    In regard to assisting the military filers, our Stakeholder 
Partnerships, Education and Communication division leads a coordinated 
partnership with the Armed Forces Tax Council (AFTC), which is the 
governing body for the military Volunteer Income Tax Assistance (VITA) 
Program. AFTC consists of members from each branch of the U.S. military 
(Air Force, Army, Coast Guard, Marines, Navy, and Public Health 
Service), as well as from the Defense Finance and Accounting Service. 
In preparation for Filing Season 2020, the IRS provided five overseas 
instructors to teach VITA at 10 installations. Through the Adopt-A-Base 
Program, 35 domestic bases received VITA training. VITA volunteers also 
help with military tax topics, such as special rules and tax benefits 
that apply to those serving in combat zones. Lastly, Military 
OneSource, a Department of Defense program that provides resources and 
support to active-duty military, partners with VITA as an option for 
service members who decide to prepare their own return through a 
Facilitated Self-Assistance method at the VITA site.

    The IRS provides oversight of the Volunteer Income Tax Assistance 
(VITA) and Tax Counseling for the Elderly (TCE) programs, both of which 
provide underserved communities with free tax filing assistance, using 
IRS-certified volunteers. The IRS regularly compares the demand for 
services for our VITA and TCE programs year over year. The IRS is 
continuously focused on growing the VITA/TCE program by determining 
ways to increase access to low-and-moderate income taxpayers, as well 
as increasing volunteer tax return preparation for individuals in rural 
communities, those with limited English proficiency, seniors and the 
military. This includes a focus on self-preparation, virtual, or other 
remote processes that facilitate limited-contact or contactless client 
service.

    Question. Has the IRS taken steps to ensure that companies that 
were involved in the Free File scandal do not have access to taxpayers 
through other Federal programs?

    Answer. The Free File MOU narrowly governs only the Free File 
program. The MOU does not constrain any member companies from offering 
services through any other channel or program.

    Question. Has the IRS worked to ensure that these companies are not 
able to profit off other Federal Government contracts? Have any 
research contracts, VITA contracts, etc. been revoked for these 
companies?

    Answer. The Free File MOU narrowly governs only the Free File 
program. The MOU does not constrain any member companies from offering 
other services through any other channel or program.

    The IRS currently has a contract with a single software provider 
for VITA/TCE tax software licenses. Thousands of VITA/TCE partner sites 
use this IRS provided software for volunteers to deliver free tax 
return preparation for qualifying taxpayers.

    In addition, the VITA/TCE program works with other tax software 
companies that voluntarily provide their products at no charge for 
partner use. About 12 percent of all VITA/TCE partner prepared returns 
are completed with software other than IRS provided software. There are 
restrictions on free taxpayer use of these offers (that typically match 
the offer restrictions on Free File, such as income limitations or out 
of scope complicated tax items).

    Question. Protecting taxpayers is important to maintaining our tax 
system. There are always reports of tax return preparers preying on 
vulnerable taxpayers and pocketing the money--tax return preparer fraud 
routinely makes the IRS ``Dirty Dozen'' list of tax scams each year.

    What have you been seeing on this front during this tax season?

    Answer. Tax return preparer fraud is a tax administration issue. 
Incompetent and dishonest tax return preparers increase collection 
costs, reduce revenues, disadvantage taxpayers by potentially 
subjecting them to penalties and interest because of incorrect returns, 
and undermine confidence in the tax system.

    Question. Do you agree that legislation setting minimum standards 
for tax return preparers, similar to what Senator Cardin and I have 
proposed (S. 1192, Taxpayer Protection and Preparer Proficiency Act of 
2019), would help reduce fraud and incompetence among tax return 
preparers?

    Answer. The President's Budget for the past 3 years has included a 
legislative proposal to increase oversight of paid tax return 
preparers. To promote high-quality services from paid tax return 
preparers, legislation is required to grant authority to regulate all 
paid tax return preparers.

                                 ______
                                 
              Questions Submitted by Hon. Thomas R. Carper
    Question. In addition to serving on the Finance Committee, Senator 
Portman and I also head the Permanent Subcommittee on Investigations 
(PSI), which recently conducted a bipartisan review of the IRS Free 
File program. As you know, Free File is a partnership created in 2002 
between the IRS and online tax preparation companies that allows 70 
percent of Americans to file their taxes for free. Unfortunately, the 
Treasury Inspector General for Tax Administration (TIGTA) found in a 
recent report that only 2.4 percent of eligible taxpayers used the Free 
File program last year. What's more, 14 million taxpayers could have 
filed their taxes completely free but instead paid a fee. These 
statistics show pretty clearly that the Free File program is not 
operating as it should. In addition, we just learned recently that one 
of the biggest Free File members--H&R Block--is leaving the program 
after this tax season.

    The non-partisan Government Accountability Office (GAO) has 
recommended that the IRS conduct a comprehensive analysis of the costs 
and benefits of the Free File program versus alternatives before making 
decisions on renewing the agreement. The IRS has agreed to this 
recommendation. With the current agreement expiring in October of next 
year, that deadline is coming up fast.

    Can you share with us the IRS's plans and timeline for conducting 
this cost-
benefit analysis?

    Answer. In addition to the input from TIGTA, PSI and GAO, the IRS 
contracted with MITRE to conduct an independent assessment of the IRS 
Free File program. MITRE provided recommendations to ensure the 
continued integrity of the program. The IRS Free File team has moved to 
implement many of these recommendations, including those covered by the 
December 2019 Addendum to the MOU, those that are currently in-flight, 
and, those that will require a longer timeline to assess and complete. 
We will continue to assess and implement more of the complex 
recommendations throughout the 2020 calendar year and beyond.

    Any cost-benefit analysis of alternatives such as expanding IRS 
capabilities to allow complete tax return filing directly with the IRS 
would require a large commissioned study (such as the Advancing eFile 
Study conducted by MITRE in 2010) that would require significant 
funding.

    The IRS is invested in creating a modernized tax administration 
agency and continues to invest in systems and processes for taxpayers 
based on our appropriated funding. Our current modernization plan does 
examine alternatives to filing and the IRS last reviewed this concept 
in 2010. The IRS currently has no efforts under development for a new 
electronic filing system, but we will continue to look at innovative 
ways to serve taxpayers.

    Question. Reports by PSI, GAO, and TIGTA all note that the Free 
File program has suffered from a lack of marketing funds and IRS 
oversight for many years.

    Does the IRS have the resources it needs to conduct marketing and 
oversight for the Free File program, or does Congress need to provide 
additional funding for these purposes?

    Answer. Although the IRS Free File program has no marketing budget, 
we took many steps to increase taxpayer awareness of Free File during 
the 2020 filing season. Our annual communication plan included efforts 
to target specific audience groups such as first-time filers, web-savvy 
seniors, families with children and the military among others. This 
effort included daily news releases, social media outreach and 
leveraging various stakeholder partnerships. We are aware of the 
interest in increasing the use of the program and note the House 
included language in the FY 2021 appropriations report accompanying the 
Financial Services bill to continue and expand these promotion efforts 
``via press releases, press outreach, social media, and other 
communications with taxpayers.'' We will continue these outreach 
efforts in 2021 as Free File will be a critical tool for taxpayers 
seeking additional tax credits for children and non-filers who may have 
been missed this spring. Additionally, Free File maintained a prominent 
position on the IRS.gov homepage and additional changes are being made 
to make it easier for taxpayers to find the products that best match 
their situations. Through November 13, 2020, free filed returns were up 
49 percent to 4.2 million in 2020 over the 2.8 million who used it 
2019. Additional funding to market the Free File program would require 
specific funding from Congress.

                                 ______
                                 
               Questions Submitted by Hon. Sherrod Brown
                    irs activities and racial equity
    Question. During the hearing on June 30th, I asked, ``Can you 
ensure me and ensure the American people that IRS audit rates don't 
disproportionately--not by intention but by commission perhaps--that 
IRS audit rates don't disproportionately hit black and brown people? 
Can you assure us that that won't happen?'' You responded: ``Yes.''

    How does the IRS define disproportionate?

    Answer. Please see combined response below.

    Question. Who at the IRS is tasked with applying that 
nondiscrimination review?

    Answer. Please see combined response below.

    Question. How is it documented and verified?

    Answer. Please see combined response below.

    Question. How does the IRS retrieve the race data necessary to 
conclude that audit rates don't disproportionately affect black and 
brown Americans?

    Answer. Please see combined response below.

    Question. Does the IRS match race data with the Census Bureau?

    Answer. Please see combined response below.

    Question. Aside from the IRS's auditing functions, what steps does 
the IRS take to assure other actions--for example, offers and 
compromise or other IRS settlement actions--are not disproportionately 
applied along lines of race?

    Answer. The IRS administers tax laws established by Congress. The 
IRS does not have, nor does it collect, any information or data related 
to the race and ethnicity of taxpayers. For example, the Form 1040 does 
not ask for the race or ethnicity of the taxpayer, and, therefore, the 
IRS cannot track any of this information. Thus, the IRS does not base 
any tax administrative actions and procedures on race or ethnicity. 
Because the IRS does not collect such data, the IRS cannot evaluate 
administrative actions with respect to race or ethnicity.

    Policy Statement 1-236 states that enforcement selection processes 
``operate under a comprehensive set of checks and balances and 
safeguards to identify the highest potential noncompliance, using 
scoring mechanisms, data driven algorithms, third party information, 
whistleblowers and information provided by the taxpayer.''

    The IRS does release income and tax data to the public showing the 
actions of the IRS as it relates to certain income groups and filing 
statuses. The IRS routinely publishes studies which provide statistics 
on income, deductions, tax, and credits reported on individual Form 
1040 income tax returns and associated schedules. The IRS redesigned 
the FY 2019 IRS Data Book, released in June 2020, to better reflect the 
compliance and enforcement activities that the IRS takes to ensure 
fairness in our tax system. The data on audit rate coverage in this 
most recent Data Book was also updated to more accurately reflect audit 
coverage over time. While audit rates have declined over the last 
decade across all segments, it is important to note that based on the 
total returns filed in each tax year, the IRS audits high income 
taxpayers at a greater percentage rate than low income taxpayers in 
that tax year.

    The IRS does not receive Census data. U.S.C. Title 13, which 
restricts the use to statistical purposes that meet the mission of the 
Census Bureau, governs census data for race and ethnicity. It is our 
understanding that current law will not permit the Bureau to share any 
information with the IRS that would be used as part of the IRS's 
program administration.

    Ultimately, our goal is to run a tax system that is fair, 
equitable, and follows the Nation's laws for all taxpayers. We follow 
this for all our service and enforcement channels.
                  the non-filer tool and eitc take up
    Question. At the June 30th hearing, regarding the prospect of 
repurposing the non-filer portal to expand access to the EITC in coming 
years, you stated that ``you're going to see a replication of a couple 
of the tools that came out during this'' and that ``this is the future 
of the Internal Revenue Service.'' This is encouraging.

    What steps will the IRS be taking in the coming months to repurpose 
the non-filer portal, and ensure it can be used as a ``Get My EITC'' 
tool for families below the filing minimum beginning in TY 2020? When 
do you expect the ``Get My EITC'' tool will launch?

    Answer. The non-filers portal, used to register for Economic Impact 
Payments, was a modification of the Modernized eFile System used by 
taxpayers to electronically file tax returns. The IRS developed the 
utility in partnership with the Free File Alliance (at no charge) and 
rapidly put it in place in response to the immediate specific needs of 
the Economic Impact Payment program. The non-filers portal is only 
available in English. A Free File member stepped forward to provide a 
Spanish version.

    Taxpayers today can use the Free File Program to file a tax return. 
Based on recommendations from digital experts, the IRS is making many 
changes to improve and enhance the Free File experience on IRS.gov for 
2021. As part of these improvements, the IRS made significant changes 
to the ``look-up'' tool that taxpayers can use to identify those 
products for which they are eligible. Improvements to the ``look-up'' 
tool include the addition of Earned Income Tax Credit (EITC) 
eligibility questions to the overall user flow to ensure that working 
families not only receive the benefits to which they are due but find 
the free product best for them. Once the user chooses a Free File 
partner, the return preparation includes guiding the user through 
claiming the EITC. The IRS heavily promotes Free File and EITC through 
several communication and outreach campaigns (many with a focus on the 
underserved) each year including the fall Get Ready campaign, EITC 
Awareness Day, Free File Opening and EITC Awareness Day in addition to 
regular reminders throughout each filing season.

    The IRS plays a critical role in providing financial help to low-
income households. Each year, over 9 million individuals--half of them 
children--are lifted above poverty level because of the EITC. During 
tax year 2017, over 26 million taxpayers received over $64 billion in 
EITC benefits, making the credit one of the largest anti-poverty 
programs in the United States.

    In administering the EITC, we have two goals--increasing 
participation and reducing errors that lead to improper payments. The 
participation rate is high (nearly 80 percent, or four out of five 
people eligible for EITC claim it), and the administrative costs are 
low (less than 1 percent of the credit paid). Mainly, this efficacy is 
due to the reliance on taxpayers' self-assessment of eligibility for 
EITC as part of our voluntary tax system, which often makes it 
difficult to prevent improper payments.

    The refundability of the credit attracts fraud and other 
noncompliance, while the complexity of the criteria for eligible 
dependents often leads to unintentional errors, both of which may 
result in improper payments. The National Research Program estimates 
that approximately 50 percent of EITC claims have errors, and for 
fiscal year 2018, the EITC erroneous payment rate is estimated to be 
25.1 percent of all EITC payments. The rate is nearly the same as the 
historical average error rate of about 25 percent, and the resulting 
roughly $18.4 billion in improper payments accounts for almost half of 
the $40 billion portion of the tax gap attributable to credits.

    Anyone who qualifies for the EITC also qualifies for free tax help 
from a trained community volunteer. Again, VITA and TCE sites offer 
free assistance with return preparation around the country, and 
historically returns prepared by IRS-sponsored VITA and TCE have a very 
low error rate for EITC claims. During the filing season, taxpayers can 
find VITA/TCE sites in the local area on IRS.gov. They may also check 
the IRS2Go mobile application. This app also allows taxpayers to check 
their refund status, make a payment, find free tax preparation 
assistance, sign up for helpful tax tips, and more. IRS2Go is available 
in both English and Spanish.

    Addressing EITC improper payments is an ongoing effort for us. We 
do this work with a balanced approach, delivering outreach and 
education and conducting compliance activities for both taxpayers and 
preparers.

    Question. The non-filer portal this year was an invaluable proof of 
concept, and provides a solid foundation to build upon. Will the IRS 
seek to work with an agile tech team--either inside (e.g., 18F or USDS) 
or outside the government--to build a new front end for the tool, and 
test it with users?

    Answer. See response to question above.

    Question. Do you expect the non-filer portal will be available in a 
variety of languages?

    Answer. See response to question above.

    Question. What outreach will the IRS perform to ensure that 
prospective claimants are aware of the portal, and know that they can 
use it?

    Answer. See response to question above.
                        economic impact payments
    Question. Please describe the outreach activities the IRS is 
conducting to reach marginalized communities who do not typically file 
taxes--including the homeless and housing-insecure populations--who are 
eligible for the EIP and would substantially benefit from receiving it. 
What steps is the IRS taking to measure its own success at reaching 
these populations? How successful has the IRS been so far?

    Answer. In April 2020, we created the Economic Impact Payment (EIP) 
Initiative to nationally distribute communications to stakeholders and 
community organizations serving individuals experiencing homelessness. 
These communications provided information about the availability of the 
EIP for individuals experiencing homelessness and the free Non-Filers: 
Enter Payment Info Here online tool. The organizations contacted 
included homeless shelters, Legal Aid offices, religious ministries and 
numerous other community-based groups. We also leveraged existing 
partnerships through the Volunteer Income Tax Assistance/Tax Counseling 
for the Elderly (VITA/TCE) program to inform underserved communities 
regarding the availability of the EIP.

    As part of our efforts, we have undertaken a sweeping outreach and 
education campaign to help people understand the payments and ensure 
those who normally don't file tax returns are aware they are eligible 
for these payments, too. We shared this information nationwide, with 
stakeholders inside and outside the tax community. Our outreach 
includes organizations working with the homeless and others in 
transition, and we have worked closely with social service 
organizations and other Federal Agencies that help these populations 
across the country. The IRS also worked with the Social Security 
Administration (SSA), Veteran's Administration (VA) and Department of 
Housing and Urban Development (HUD), all of which have some homeless 
beneficiaries. Our EIP Initiative included researching potential 
organizations nationwide that might assist homeless individuals and 
share IRS-related EIP resources with them, including information on 
claiming the EIP. Over 300 organizations agreed when asked if they 
would act as a ``trusted partner'' allowing homeless persons to use 
their physical address to receive the EIP. If an organization agreed, 
the IRS performed a series of checks to determine if the organization 
could be considered a trusted partner. We continue to identify trusted 
partners. In addition, we continue to leverage our existing partnership 
with HUD. We hosted a webinar titled ``Overview of IRS's Free Tax 
Preparation Services'' on April 30, 2020. The webinar covered various 
topics including EIP resources available on IRS.gov. The session was 
attended by numerous HUD staff nationwide, including representatives 
from the Continuum of Care Program. We continued to share resources 
with HUD as they were made available. We made extensive efforts to 
share EIP information with people in these and other vulnerable and 
underserved communities, and we continue to do so.

    In addition to sharing extensive material with the news media and 
on social media and websites, this extensive national public awareness 
campaign has included partnering with a wide spectrum of community and 
professional groups. This effort includes sharing outreach materials 
and working with homeless organizations, food banks and social service 
groups as well as national, State and local organizations (and 
associations to which these organizations belong). We've already shared 
information with more than 10,000 contacts with groups across the 
country that represent and interact with millions of individuals. We 
have distributed and continue to distribute EIP outreach materials in 
more than two dozen languages, including materials specifically focused 
on individuals experiencing unique circumstances. Further, we have also 
worked closely with State and local government agencies to raise 
awareness and have provided ``EIP Toolkits'' assisting them in their 
own outreach efforts; this toolkit is designed for use by groups 
dealing with the homeless and other non-filer populations.

    For those who don't normally file tax returns, we have worked to 
highlight and provide local assistance through the Non-Filers tool on 
IRS.gov, a tool provided through the close working relationship between 
IRS and Free File, Inc. via a public/private partnership. This 
partnership included a member company that stepped forward to provide a 
Spanish option for non-filers. In addition, the IRS also worked with 
the Free File software partners who wished to support this effort by 
ensuring they were also able to submit this information on behalf of 
eligible non-filers.

    The IRS recognizes the special needs of the homeless and others. As 
our Nation and IRS facilities continue to reopen, we will keep raising 
awareness about EIPs and assist taxpayers. These efforts will include 
continued engagement with local community organizations as we determine 
what eligible individuals need as we return to full operations.

    A key metric for us on this effort involves the number of people 
who have used the Non-Filers' tool on IRS.gov or otherwise submitted a 
tax return solely to request their EIP. Through November 21, 2020, more 
than 8.5 million individuals who normally would not be required to file 
a tax return filed to request their EIPs.

    Question. Please describe the steps the IRS is taking to release 
the portion of an injured spouse's EIP that was wrongly offset. When 
can these individuals expect resolution?

    Answer. The Injured Spouse payments were stopped in the Treasury 
Offset Program (TOP). The IRS coordinated with the Bureau of the Fiscal 
Service to recover and reissue these funds on September 27, 2020, to 
the Injured Spouse.

    Question. Please explain why Notice 1444--mailed to millions of EIP 
recipients--did not provide instructions on how to report a ``failure 
to receive the payment'' as the IRS website suggests it would.

    Answer. At the time the IRS wrote Notice 1444, Economic Impact 
Payment 2020, the IRS campuses and toll-free customer assistance lines 
were closed due to the pandemic. The guidance related to performing a 
payment trace requires an IRS assistor to complete. Once these IRS 
operations resumed, we provided information through a series of 
Frequently Asked Questions (FAQs) for handling EIP related issues, 
including not receiving an EIP.

    For individuals who encounter an issue with their payment, we added 
FAQs that provide detailed information on necessary steps for missing, 
lost, stolen, or destroyed payments, and how to request a Payment 
Trace.\1\ If recipients did not receive the full amount to which they 
believe they are entitled, recipients can also claim the additional 
amount when they file their 2020 tax return.
---------------------------------------------------------------------------
    \1\ See https://www.irs.gov/coronavirus/economic-impact-payment-
information-center (FAQs #46, 47, and 48).

    Question. What steps is the IRS taking to ensure that staff are 
readily available to answer calls from taxpayers who have questions 
---------------------------------------------------------------------------
about their EIP?

    Answer. The new EIP line staffed by contractors has added 
additional assistors since debuting on May 18, 2020. As of mid-July, 
the EIP line has been operating at 100-percent capacity with 1,355 
contracted agents and taken over 1.8 million calls. These agents answer 
basic EIP questions that do not require taxpayer account access and 
research. We continue to perform quality reviews to ensure that the 
contractors are connecting taxpayers with IRS assistors when they 
require more in-depth assistance and tax account related research.

    As of August 6, 2020, more than 11,000 customer service 
representatives are taking calls on all toll-free lines and/or working 
priority paper inventory. We hope to see this number increase as we 
work to reopen our offices and call sites as State and local health 
guidelines ease restrictions.

    Question. How will the IRS ensure that taxpayers who were recent 
victims of tax fraud (i.e., returns were filed in their names or 
someone claimed them as dependents fraudulently) can still receive 
their EIP as soon as possible?

    Answer. As identity theft cases are resolved, the IRS will consider 
and issue the EIP per eligibility requirements.
                           vita and covid-19
    Question. For over 50 years, the Volunteer Income Tax Assistance 
(VITA) program at the IRS has been providing free tax preparation 
services to millions of taxpayers, including low- and moderate-income 
households, the elderly, people with disabilities, people with limited 
English proficiency and members of the military. During the current 
pandemic, many VITA sites are creatively continuing to serve taxpayers 
through alternative means, such as virtual preparation or drop off, 
until the extended tax filing deadline of July 15th--some even through 
the end of the year. Sites are receiving an influx of clients who need 
help, not only with filing their tax returns, but also with submitting 
key information to the IRS so they can receive their Economic Impact 
Payments.

    Please describe how the IRS has assisted the VITA network in 
adapting to and overcoming the challenges associated with the COVID-19 
pandemic so that it can continue to fulfill its critical mission.

    Answer. To assist VITA/TCE partners, the IRS took several actions 
to expand virtual offerings of free tax preparation. The IRS created 
general guidelines for partners to serve their clients safely and 
efficiently, while complying with previously established quality 
requirements.

    The IRS worked with the current software vendor for VITA/TCE to 
increase flexibility, allowing partners to prepare and file returns 
remotely, while receiving assistance on tax law questions through 
virtual means (telephone/email/chat). The IRS implemented temporary 
Virtual VITA/TCE procedures to support partners with completing tax 
returns in their TaxSlayer system that were unfinished due to the 
unexpected closing of partner sites.

    The Scanned Document pilot allowed VITA/TCE sites to securely 
upload taxpayers' supporting tax documentation electronically for the 
purpose of preparing tax returns in a contactless environment. The IRS 
expanded the pilot adding about 70 additional locations (the initial 
pilot was nearly 100 sites).

                                 ______
                                 
             Questions Submitted by Hon. Michael F. Bennet
    Question. As mentioned in the hearing, the IRS's ``non-filer 
portal''--which households use to register for their $1,200 economic 
impact payment--seems to have filed a narrow tax return as a formality 
for its users.

    When these taxpayers later attempted to file a full 2019 return to 
receive their Child Tax Credit or Earned Income Tax Credit, they were 
prevented from doing so. Though they are able to file a paper return, 
the IRS has limited capacity to process paper and until late June was 
not processing paper returns at all.

    I suspect many became discouraged when they were unable to file 
online. As a result, as many as 5 to 10 million households do not have 
a clear way to file taxes, and no way to claim the Earned Income Tax 
Credit and Child Tax Credit.

    For example, a mother of 3 would have received $2,700 in economic 
impact payments, but could be eligible for double that amount--or about 
$5,200--in EITC that she is unable to claim because she is in this so-
called ``filing trap.''

    Until a suitable online system is put in place to deal with this 
filing trap created by the IRS's system, millions will go without the 
money they desperately need.

    Can you confirm that the Non-Filer portal is filing tax returns on 
behalf of its users?

    Answer. Use of the Non-Filer utility on IRS.gov will result in a 
tax return being processed for the filer(s).

    In order to assist taxpayers who need to file a subsequent return, 
we provide information on how to submit a claim in the EIP FAQs:

    Taxpayers who used the Non-Filers: Enter Payment Info Here tool to 
register for an Economic Impact Payment and need to file a 2019 tax 
return must file a paper 2019 Form 1040 or 1040-SR tax return by mail 
with ``Amended EIP Return'' written at the top and pay tax owed by July 
15th.

    The Economic Impact Payment's Non-Filers tool was not intended to 
be used by a taxpayer who also needed to file a tax return with the IRS 
for tax year 2019. If you used the tool to register for a payment, you 
cannot file your tax return electronically. You must complete and print 
a paper 2019 Form 1040 or 1040-SR tax return, write ``Amended EIP 
Return'' at the top, and mail it to the IRS by July 15th. If you owe 
tax, you should pay it in full by the July 15th due date. Interest will 
be charged after July 15th on any amounts that are not paid by July 
15th.

    These same instructions apply if you registered for your Economic 
Impact Payment using the IRS Non-Filers: Enter Payment Info Here tool, 
tax software, or a paper tax return indicating $0 or $1 of adjusted 
gross income. If you have a copy of the document that registered you 
for the Economic Impact Payment, you can include it when you file Form 
1040 or 1040-SR.

    Question. What concrete steps will the IRS take to ensure that 
portal users are aware of the processes they must follow to file taxes, 
in order to obtain additional tax benefits like the CTC and EITC?

    Answer. The IRS has encouraged the public to research and check the 
Frequently Asked Questions (FAQs) on IRS.gov for updates regarding 
current information about the EIP and related IRS tools. The IRS had 
communicated these FAQs frequently and broadly as the best EIP resource 
for the public.

    The FAQs include who should not file using the Non-filers portal as 
well as specific instructions for filing a 2019 tax return after using 
the tool (emphasis added).

        Question. Do I need to use the Non-Filers Enter Payment 
        Information Here Tool? (Updated October 21, 2020)

        Answer. If you already filed a 2019 tax return, you don't need 
        to do anything to get your Economic Impact Payment. You will 
        automatically get your payment deposited directly into your 
        account if we have your direct deposit information on file.

        If the direct deposit account is no longer active, the IRS will 
        automatically mail your payment to your address of record (this 
        is generally the address on your last return or as updated 
        through the United States Postal Service (USPS)).

        If you filed a tax return for 2019, do not use Non-Filers: 
        Enter Payment Info Here.

        Do not use the Non-Filers: Enter Payment Info Here tool, if you 
        are required to file a 2019 tax return and have not filed yet. 
        Doing so may delay your Economic Impact Payment, processing 
        your tax return and any tax refund you may be owed.

        However, if you do not have a filing requirement and did not 
        already receive an Economic Impact Payment, you should use the 
        Non-Filers: Enter Payment Info Here tool, provided you:

        1. Are not claimed as a dependent of another taxpayer, and
        2. You have a Social Security number valid for employment.

        Most individuals who receive Social Security retirement or 
        survivor benefits, Social Security disability (SSDI), 
        Supplemental Security Income (SSI), Department of Veteran 
        Affairs benefits or Railroad Retirement benefits were already 
        issued a payment. If you are a benefit recipient and have not 
        received a payment, we may not have enough information for you. 
        If you are not required to and do not plan to file a 2019 tax 
        return and you cannot be claimed as a dependent, you should use 
        the Non-Filers: Enter Payment Info Here tool by November 21st 
        to register for your payment.

        The IRS will use the information you provide to determine your 
        eligibility for the Economic Impact Payment.

        The IRS won't have the information necessary to issue you a 
        Payment unless you provide some basic information about 
        yourself, your spouse, and any qualifying child under age 17. 
        Entering your bank account information will allow the IRS to 
        deposit your Payment directly into your account. Otherwise, 
        your Payment will be mailed to you.

        The Non-Filers tool will be available until November 21, 2020. 
        This deadline allows the IRS enough time to process this 
        information and, for most individuals, issue the Payment before 
        December 31, 2020.
        Question. Can I file my 2019 tax return electronically if I 
        used the Non-Filers: Enter Payment Info Here tool to register 
        for an Economic Impact Payment? (updated October 21, 2020)

        Answer. The Economic Impact Payment's Non-Filers tool was not 
        intended for use by taxpayers who also needed to file a tax 
        return with the IRS for tax year 2019.

        If you used the Non-Filers tool to register for an Economic 
        Impact Payment, you cannot file your tax return electronically. 
        You must complete and print a paper 2019 Form 1040 or 1040-SR 
        tax return, write ``Amended EIP Return'' at the top, and mail 
        it to the IRS. If you owe tax, you should pay it in full as 
        soon as possible. See the IRS Pay tab for payment options. 
        Interest will be charged on any amounts that were not paid by 
        July 15th. For more information, visit the Amended EIP Return 
        page.

    The addition of a previous and related Q&A was shared through an 
eNews for Tax Professionals and with key partners who help taxpayers. 
Note that most, if not every, mention of the Non-Filers tool in IRS 
communications includes a warning that this tool should not be used by 
people who usually file an income tax return.

    The Amended EIP Return page FAQ explains how a taxpayer can file a 
paper amended return and claim tax credits.

        Taxpayers who used the Non-Filers: Enter Payment Info Here tool 
        to register for an Economic Impact Payment and need to file a 
        2019 tax return must file a paper 2019 Form 1040 or 1040-SR tax 
        return by mail with ``Amended EIP Return'' written at the top 
        and pay tax owed by July 15th.

        The Economic Impact Payment's Non-Filers tool was not intended 
        to be used by a taxpayer who also needed to file a tax return 
        with the IRS for tax year 2019. If you used the tool to 
        register for a payment, you cannot file your tax return 
        electronically. You must complete and print a paper 2019 Form 
        1040 or 1040-SR tax return, write ``Amended EIP Return'' at the 
        top, and mail it to the IRS by July 15th. If you owe tax, you 
        should pay it in full by the July 15th due date. Interest will 
        be charged after July 15th on any amounts that are not paid by 
        July 15th.

        These same instructions apply if you registered for your 
        Economic Impact Payment using the IRS Non-Filers: Enter Payment 
        Info Here tool, tax software, or a paper tax return indicating 
        $0 or $1 of adjusted gross income. If you have a copy of the 
        document that registered you for the Economic Impact Payment, 
        you can include it when you file Form 1040 or 1040-SR.

        Tax Professionals please note that returns labeled ``Amended 
        EIP Return'' will be processed as superseding returns if 
        submitted before July 15th or, with a valid extension, before 
        October 15th.

    We will also be reviewing the Amended EIP Return FAQs to add links 
to specifically reference refundable credit information for EITC and 
CTC.

    Additionally, we have outreach awareness strategies for refundable 
credits including:

        CP09/27 Notices, You May Be Eligible for the Earned Income 
        Credit (EIC)/Complete EIC Worksheet
        IRS issues CP 09/27 notices to potentially eligible EITC 
        taxpayers who file returns but do not claim the credit. CP 09 
        is issued to taxpayers who may be eligible to claim EITC based 
        on qualifying children. CP 27 is issued to taxpayers who may 
        claim EITC without qualifying children.

        CP08 Notice, You May Qualify for Child Tax Credit (CTC)
        IRS issues CP 08 notices to taxpayers who file returns with one 
        or more dependents and are potentially eligible for the 
        Additional Child Tax Credit (ACTC) but do not claim it on their 
        returns.

        EITC Assistant
        The EITC Assistant is an online tool in English and Spanish 
        that allows taxpayers to determine if they are eligible for 
        EITC and for what amount they are eligible. The IRS informs the 
        public of this valuable tool through News Releases, Twitter and 
        IRS YouTube videos.

        EITC Awareness Day
        The IRS hosts an annual ``EITC Awareness Day,'' which is a 
        nationwide collaboration with national and local partners to 
        increase awareness of refundable credits. Concentrated 
        traditional and social media activity helps us to reach the 
        broadest possible range of eligible taxpayers, including 
        underserved populations and newly eligible taxpayers. The 14th 
        annual EITC Awareness Day was held on January 31, 2020.

        Refundable Credits Summit
        We also hosted our third annual Refundable Credits Summit in 
        September 2019. The goal of the Summit is to identify methods 
        to improve administration, reduce overclaims and improve 
        participation for taxpayers eligible to claim the EITC, as well 
        as the Additional Child Tax Credit (ACTC) and the American 
        Opportunity Tax Credit (AOTC). Twenty-five participants from 19 
        external organizations or agencies attended the Summit, 
        including representatives from AARP Foundation Tax-Aide, 
        Prosperity Now--Taxpayer Opportunity Network, Congressional 
        Research Service, Council for Electronic Revenue Communication 
        Advancement, and the National Association of Enrolled Agents. 
        We formed a Refundable Credits Participation Working Group 
        comprised of Summit attendees that will focus on identifying 
        fresh approaches to expand participation in EITC, ACTC and 
        AOTC.

    Question. Will the IRS waive late fees for portal users who are 
blocked from filing taxes and cannot learn of alternate processes in 
time?

    Answer. The IRS will not systemically assess a failure to file 
penalty on the Non-filers portal users who submit a paper amended 
return as instructed in the EIP FAQ.

    Question. Will the IRS commit to processing electronic Forms 1040-X 
from portal users on a priority basis?

    Answer. The IRS is committing to processing all Forms 1040-X, both 
paper and electronically filed. The vast majority of Forms 1040-X are 
refunds for taxpayers who have waited patiently for processing. The IRS 
is committing to being fair and equitable by processing returns on a 
first-in, first-out basis and applying resources that are permitted 
while following CDC social distancing guidelines.

    Question. You committed to prioritizing the paper returns coming in 
from portal users who cannot e-file. Can you report to us regularly 
regarding how many of these forms have been received, and any backlog 
that builds up in these forms?

    Answer. The IRS is working all paper returns and other 
correspondence in the order received. The IRS posts regular updates to 
IRS.gov on the status of its operations. We are processing refund 
returns first (which would include those from the portal users who 
cannot e-file), followed by balance due returns. Our IRS Submission 
Processing function's employees are working day and swing shifts to 
address the mail backlog. In addition, we are offering overtime and 
weekend shifts to open the mail and process tax returns.

    Question. Even if the filing process is made much easier for 
households, I am concerned this will not be enough. The IRS must 
proactively reach out to the households who have already been blocked 
from claiming the EITC?

    Would the IRS be willing to automate EITC payments consistent with 
the levels for workers without dependent children for portal users? 
What authority, if any, would the IRS need from Congress to fully 
automate these payments?

    Answer. The IRS cannot determine at the time of filing if the 
taxpayer has met certain key eligibility requirements for claiming the 
EITC without a qualifying child without obtaining additional 
information from the taxpayer. For example, based on the information on 
the Form 1040, the IRS cannot determine if a taxpayer can be claimed as 
a dependent on another return or if the taxpayer lived in the United 
States for more than 6 months. Therefore, issuing the EITC 
automatically, based solely on return information, could lead to 
erroneous refunds which would hinder the IRS's ongoing efforts to 
reduce improper payments.

    Without legislative and policy changes, current processes do not 
allow for accurate determination of automatic taxpayer eligibility for 
the credit at the time of filing. The IRS will continue to send notices 
to taxpayers who appear to be eligible for the EITC and ask them to 
provide additional information.

    Question. Does the IRS plan to send Forms CP-27 and/or CP-09 to all 
portal users to make these taxpayers aware of their eligibility for the 
EITC? What further resources would the IRS need from Congress in order 
to do so?

    Answer. The IRS is committed to identifying innovative approaches 
to increase EITC awareness and to encourage all eligible taxpayers to 
claim the EITC on their tax returns and will consider this suggestion.

    Question. Less than 2 weeks ago, the Taxpayer Advocate reported 
that about 3.7 million \2\ people had used the non-filer portal, but 
during the hearing, you stated that ``6.1 million people have 
successfully used the non-filer portal.'' I assume these reflect total 
users as of different dates, but could you please address the following 
to clarify the reasons for the discrepancy?
---------------------------------------------------------------------------
    \2\ https://taxpayeradvocate.irs.gov/Media/Default/Documents/2021-
JRC/JRC21_SAO_03.pdf (51).

    Please clarify the number of people who have successfully used the 
portal to date, as well as how many of those successful users might 
---------------------------------------------------------------------------
have been eligible for CTC or EITC.

    Answer. Through November 21, 2020, more than 8.5 million 
individuals who would not normally be required to file a return, filed 
to request an Economic Impact Payment. Eight million of those 
individuals used the non-filer portal.

    Question. Will the IRS publicly provide this statistic on an 
ongoing basis, so as to help us keep track of the number of unreached 
households?

    Answer. This is not information that the IRS is able to track.

    Question. According to a GAO study \3\ released in late June, 
450,000 people who managed to meet very tight timelines to register 
their dependents through the non-filer tool still didn't get the $500 
dependent payment they were also due for their kids.
---------------------------------------------------------------------------
    \3\ https://www.gao.gov/reports/GAO-20-625/#TOC_Letter_Findings.

    Despite the IRS claiming that after May 17th, qualifying children 
were correctly accounted for and were included in payment computations, 
---------------------------------------------------------------------------
many have still yet to receive appropriate dependent payments.

    What is your plan to make sure that the 450,000 plus Americans who 
filed on time receive the payments they need to support their families?

    Answer. Recipients who added qualifying child dependent information 
through the Non-Filers tool before May 17, 2020, do not need to take 
any action. Treasury has issued payments and recipients should have 
seen the $500.00 per dependent child direct deposited to their bank 
accounts on August 5th. Treasury mailed paper checks on August 7, 2020.

    Question. For Social Security beneficiaries, the IRS issued an 
alert that dependents needed to be registered only 2 days before the 
deadline (notified on April 20th of April 22nd deadline)--following a 
little reported deadline of April 15th.

    What about those beneficiaries who originally missed the tight 
timelines to declare dependents: is there something preventing the IRS 
from allowing them to enter that data now and paying them later in 2020 
as well?

    Answer. The IRS reopened the registration period until November 21, 
2020, for individuals who receive Social Security, Supplemental 
Security Income (SSI), Railroad Retirement or veteran's benefits, but 
didn't receive $500 per child earlier this year when they received 
their own Economic Impact Payment.

    Federal benefit recipients can use the Non-Filers: Enter Payment 
Info Here tool to get a catch-up payment for a qualifying child if they 
have NOT done one of the following:

        Already used the Non-Filers tool to provide information about 
their qualifying child ; and
        Filed their 2019 or 2018 tax return.

    The Non-Filers tool was available on IRS.gov in both English and 
Spanish. Eligible individuals could use the tool until Saturday, 
November 21st to enter information about their qualifying children to 
receive a catch-up $500 payment per child. The IRS will issue payment 
once the Non-Filers registration has been processed.

    Those people unable to access the Non-Filers tool, may file a 
simplified paper return following the instructions in this FAQ on 
IRS.gov.

    Anyone who missed the November 21st deadline will need to wait 
until next year and claim the payment as a credit on their 2020 Federal 
income tax return.

    Those people who received their original Economic Impact Payment by 
direct deposit will also have any catch-up payment direct deposited to 
the same account. Others will receive a check.

    Federal benefit recipients who used the Non-Filers tool after May 
5th don't need to take any further action.

    Social Security, SSI, Department of Veterans Affairs, and Railroad 
Retirement Board beneficiaries who have already used the Non-Filers 
tool to provide information on children don't need to take any further 
action. The IRS automatically sent a payment in October.

    Question. Why not let these beneficiaries use the non-filer portal 
today to declare dependents?

    Will the IRS pay them this summer?

    If the IRS is already planning to retroactively provide dependent 
payments during July, what is stopping you from reopening applications 
for those who missed initial deadlines and providing these by the end 
of July as well?

    Answer. See above.

    Question. Nearly 9 million people that didn't file in 2018 or 2019 
and don't receive Federal benefits have yet to receive their $1,200 
payments. One analysis found that 27 percent of this group are Black, 
while 19 percent are Hispanic.\4\ What is your agency doing to increase 
take-up of these programs among States who have not yet adopted them?
---------------------------------------------------------------------------
    \4\ https://www.cbpp.org/research/federal-tax/aggressive-state-
outreach-can-help-reach-the-12-million-non-filers-eligible-for.

    How is the IRS planning to increase outreach to this group that 
disproportionately includes low-income individuals of color to make 
---------------------------------------------------------------------------
sure that they file and apply by the October 15th deadline?

    Answer. The IRS has undertaken a sweeping outreach and education 
campaign to help people understand the payments and ensure those who 
normally don't file tax returns are aware they are eligible for these 
payments too. We are sharing this information nationwide, with partners 
inside and outside the tax community. Our outreach includes 
organizations working with groups across the Nation, including work 
with State organizations and local groups, as well as sharing material 
extensively in Spanish and other languages. We continue to make 
extensive efforts to share EIP information with people in vulnerable 
and underserved communities with a special focus on the November 21st 
deadline for registering for a payment by using the Non-Filers tool.

    In addition to sharing extensive material with the news media and 
on social media and websites, this extensive national public awareness 
campaign has included partnering with a wide spectrum of community and 
professional groups. This includes sharing outreach materials and 
working with State and local agencies, homeless organizations, food 
banks and social service groups as well as national, State and local 
organizations (and associations to which these organizations belong). 
We've already shared information with more than 10,000 contacts with 
groups across the country that represent and interact with millions of 
individuals. We have distributed and continue to distribute EIP 
outreach materials in Spanish and more than two dozen other languages, 
including materials specifically focused on individuals experiencing 
unique circumstances. Further, we have also worked closely with State 
and local government agencies to raise awareness and have provided 
``EIP Toolkits'' assisting them in their own outreach efforts.

    For those who don't normally file tax returns, we have worked to 
highlight and provide local assistance through the Non-Filers tool on 
IRS.gov.

    This effort included a special mailing in September to nearly 9 
million people we identified as potentially eligible to use the Non-
Filers tool.

    Work to reach these groups will continue through the November 21st 
deadline as well as continue in anticipation of the 2020 filing season, 
when taxpayers will have another opportunity to claim any Economic 
Impact Payments that they are entitled to.

    Question. With regards to non-filers who have not yet used the non-
filer portal, do you have any estimate of how many people have used the 
non-filer portal? How many who are eligible have not yet used it?

    Answer. Through November 21, 2020, more than 8.5 million 
individuals who would not normally be required to file a return, filed 
to request an Economic Impact Payment. Eight million of those 
individuals used the Non-filers portal.

    For those eligible who have not used it, this is not data that we 
have available or are able to track.

    Question. What is preventing the IRS from automating economic 
impact payments to these non-filers, using W-2 and 1099 data that the 
IRS already has on file?

    Answer. There are significant problems in relying upon 1099 and W-2 
information.

        Data provided by Forms W-2 and Forms 1099 do not provide 
enough information for the IRS to issue payments directly to taxpayers 
without additional confirmation from the taxpayers. Non-filers could 
have other tax considerations that are not obvious based on Forms W-2 
and Forms 1099 data, including qualifying children.
        The IRS may not have any current address or direct deposit 
information on non-filers who only have income data reported to us once 
per year, creating a substantial risk for incorrect payments or 
payments sent to incorrect locations.
        The information returns filed by third parties that are not 
government agencies may not be accurate, and the Service wants to 
minimize any chance of issuing erroneous EIPs that may be difficult, if 
not impossible to recover.
        Some of the Forms W-2 or 1099 could involve employment related 
ID theft or other fraud. Excluding these bogus information returns 
would be labor intensive and might not be able to be completed in 
advance of the year-end deadline for making advance payments.

    Rather than risk sending a check to an address that may or may not 
belong to the taxpayer identified on a Form W-2 or 1099, the IRS sent 
letters to an estimated 9 million taxpayers to provide information 
about using the Non-Filers tool or submitting a simplified 2019 return 
in order to receive an EIP. We used Form W-2 or 1099 information to 
compile this list of 9 million taxpayers. This strategy allows the IRS 
to reach potentially affected taxpayers without the risk of sending 
checks to unverified recipients at questionable addresses. In addition, 
if the individual provides the IRS with information, the IRS can 
properly calculate the amount of the EIP and either deposit it directly 
into the taxpayer's account or send the payment to the taxpayer's 
correct address.

    Question. We've heard from a lot of Coloradans that they have yet 
to receive their economic impact payments, and we understand that 
there's a backlog of approximately 10 million pieces of mail currently 
at the IRS.

    With so many households and taxpayers caught up in the backlogged 
system and waiting for their tax refunds, what are you doing to address 
the mail backlog?

    Answer. As of July 13, 2020, the IRS reopened all our facilities to 
many employees with nonportable work, with protective measures in place 
for social distancing, including flexible work schedules. Our 
Submission Processing function employees are working day, night, and 
weekend shifts to open the mail and process tax returns as quickly as 
possible.

    As of October 30, 2020, there are approximately 7.2 million 
individual paper returns, in various stages of the Submission 
Processing pipeline, waiting to be processed at the four Submission 
Processing Centers. In addition, there are an estimated 1.5 million 
returns in the unopened mail at these four locations.

    Question. Do you have a sense of how many taxpayers have either 
filed taxes or used the non-filer portal but have not yet been paid?

    If not, how do you reconcile this with widespread reports of 
families who say they have filed but not yet received payment?

    Answer. The IRS is committed to providing fiscal relief to 
Americans affected by the coronavirus pandemic. We are assigning 
additional experienced Customer Service Representatives who are trained 
in account resolution to respond to EIP related inquiries.

    Question. When can you commit to moving through the mail backlog?

    Answer. The IRS is working paper returns and other correspondence 
in the order received. The IRS is processing refund returns first, 
followed by balance due returns. Our IRS Submission Processing function 
employees are working day and swing shifts. In addition, we are 
offering overtime and weekend shifts to open the mail and process tax 
returns.

    Question. The IRS recently announced that it will pay interest on 
individual income tax refunds issued after April 15th.\5\
---------------------------------------------------------------------------
    \5\ https://www.wsj.com/articles/irs-will-pay-interest-on-late-
refundseven-for-those-who-havent-filed-yet-11593024177.

    Is it true that these interest payments will count as taxable 
---------------------------------------------------------------------------
income in 2020?

    Answer. Yes, the interest payments must be considered in 
determining taxable income. The Internal Revenue Code defines gross 
income to include all income from whatever source derived, including 
interest.

    Question. Would you be willing to exclude these interest payments 
from being counted as income, given the unique circumstances due to 
COVID-19 and the hardship that many taxpayers have endured as a result 
of the delays?

    Answer. The Internal Revenue Code does not give the IRS the 
authority to exclude interest payments from being counted as income. An 
act of Congress would be needed.

    Question. With a very limited and busy IRS phone line, many 
Americans are stuck talking to automated call voices that can't always 
answer the questions they have about receiving their EIPs. Many are 
getting automatically hung up on because they don't have the right 
information and the phone lines don't give them opportunities to move 
on and talk to a representative because of busy lines. Without an 
efficient IRS phone line, Americans will be left wondering what else 
they need to do to obtain their payment.

    Do you have data on what percentage of calls to the IRS are about 
economic impact payments?

    Answer. For the period of May 18th thru September 30, 2020, the 
percentage of EIP calls to the IRS, including those to our EIP 
contractor staff, is 37 percent. The percentage of calls going to our 
Account Management customer service representatives is 16 percent.

    Question. Why does the IRS website instruct taxpayers not to call 
the IRS with questions about EIPs?

    Answer. Since IRS operations have largely resumed, the IRS removed 
the statement not to call the IRS from IRS.gov.

    Question. Does the IRS have sufficient capacity to field questions 
about EIPs? If not, what further resources would be needed?

    Answer. Many of the EIP inquiries include highly complex and 
account-specific concerns that require in-depth account research which 
requires assistance from an experienced Customer Service Representative 
(CSR). These CSRs are also responsible for assisting taxpayers through 
the toll-free helpline, responding to correspondence in connection with 
notices that were delayed due to the COVID-19 closures, and providing 
disaster relief to support the Federal Emergency Management Agency 
(FEMA). To overcome these challenges, we have added staffing and 
developed procedures to expedite inquiries. The IRS is also assigning 
more frontline, experienced CSR's, who are trained in account 
resolution, to respond to the inquiries.

    Question. Which services can callers expect from the phone line?

    Answer. The new pilot EIP toll-free telephone line is staffed by 
contractor agents who answer general EIP questions that do not require 
taxpayer account access and research, e.g., EIP eligibility, lost/
stolen or destroyed payments and EIP address changes. All incoming 
calls will initially play an automated informational message. Callers 
that require in-depth assistance and account related research are 
transferred to an IRS assistor, who will assist with reviewing the 
accounts.

                                 ______
                                 
           Questions Submitted by Hon. Catherine Cortez Masto
                     survivors of domestic violence
    Question. What are you doing to get replacement checks out to 
victims of domestic violence who are in desperate need of their EIPs to 
ensure their safety and financial stability away from their abusers? 
What is the procedure the victims will need to follow to get a 
replacement check? When will you be releasing information about this 
process, and when can they expect to receive their replacement check?

    Answer. Survivors of domestic violence present a unique challenge 
in that the IRS properly made the payment to the taxpayer(s) listed on 
the return, but that payment was misappropriated after the taxpayer 
received it. For the IRS to address this issue, it would need to send a 
second, duplicate payment (or partial payment) which we do not believe 
we have the legal authority to do.

    While the IRS is sympathetic to the plight of survivors of domestic 
violence, the IRS is required to follow express statutory authority and 
that authority does not exist in this context. The CARES Act does not 
provide the IRS with discretion to cause a second, duplicate, EIP to be 
issued when the initially issued EIP was properly issued absent 
additional circumstances (e.g., identity theft or a forged or 
unauthorized endorsement). More specifically, where the IRS issued the 
payment to the correct taxpayer and the correct taxpayer received it, 
various provisions of Title 31 would generally prevent the IRS from 
issuing a second payment.

    Question. What systems are you putting into place to identify 
victims of domestic violence who have been denied access to their 
Economic Impact Payment by their abusers to make sure that this does 
not happen again if the IRS issues a second round of Economic Impact 
Payments?

    Answer. See response to question above.
                   determining need and distribution
    Question. How can Congress better determine actual need and target 
distribution of payments in any future Economic Impact Payments that 
may be considered?

    Would it make more sense to self-report current income and then 
reconcile at the end of the year?

    Answer. Our job is to administer the tax provisions approved by 
Congress, and we have learned how to better serve our customers from 
our quick implementation of EIPs following enactment of the CARES 
provisions.

    We were able to deliver EIP payments quickly due to the information 
we had in our systems from tax filings in 2018 and 2019. The IRS has no 
process in place for individuals to self-report current year income for 
2020 and reconcile it at year's end; unfortunately, this isn't a 
workable option for the way our operations are configured.

    Question. Should Congress provide more stimulus payments? What are 
some of the lessons learned to ensure we effectively target and 
distribute aid to those who need it the most as quickly as possible?

    Answer. In our role as tax administrators, the IRS stands ready to 
implement laws approved by Congress, such as delivering stimulus 
payments, and we continue to closely monitor the situation regarding 
Economic Impact Payments.

    We have learned several important lessons from the 2020 stimulus 
effort that helped us refine our processes and make improvements. These 
items all will come into play if an additional round of Economic Impact 
Payments or other wide-spread stimulus initiative is agreed to in the 
future:

        The Get My Payment tool, which was quickly developed to help 
implement the EIP provisions, has had several programming improvements 
since its initial launch. A key element of this tool involved the 
capability for some taxpayers without direct deposit information on 
file to add bank account information to speed up the receipt of their 
payment. The IRS added new functionality to the tool to allow some 
people who received their EIPs by paper check to add banking 
information that would allow for direct deposits in the future.

        With additional information received from SSA, VA and RRB, the 
IRS has more information in our systems about potentially eligible 
individuals.

        Expanded outreach efforts. Our work in this area laid 
important groundwork that can be quickly used to assist with any future 
stimulus effort. To get the word out about the Economic Impact 
Payments, the IRS expanded our outreach contacts across the country as 
part of an extensive national public awareness campaign. This 
partnership with a wide spectrum of community and professional groups 
is available for any future efforts. This includes homeless 
organizations, food banks and social service groups as well as 
national, State and local organizations (and associations to which 
these organizations belong). We've shared information with more than 
10,000 contacts across the country that represent and interact with 
millions of individuals. For EIP, we have distributed and continue to 
distribute EIP outreach materials in more than two dozen languages, 
including materials specifically focused on individuals experiencing 
unique circumstances. Further, we have also worked closely with State 
and local government agencies to raise awareness and have provided 
``EIP Toolkits'' assisting them in their own outreach efforts. These 
will help IRS communication and outreach efforts on future initiatives.

    Question. The IRS has evolved the Economic Impact Payment 
distribution verification and distribution system over time.

    What best practices can Congress prescribe moving forward to ensure 
that people get the assistance they need as quickly and efficiently as 
possible? What are the gaps that you need filled from Congress to make 
sure people are getting their payment?

    Answer. The IRS has undertaken a sweeping outreach and education 
campaign to help people understand their eligibility for an EIP and 
ensure those who normally don't have a tax return filing obligation are 
aware of their eligibility. We continue to share this information 
nationwide, with stakeholders inside and outside the tax community. In 
particular, we made extensive efforts to share EIP information with 
people in vulnerable and underserved communities.
                       miscalculated aid payments
    Question. Next year is too long to wait for people that need to pay 
rent today. Will you commit to ensure that those still waiting on their 
full payment are made whole right away instead of making them wait 
until the 2021 filing season?

    Answer. Though most Americans have already received their Economic 
Impact Payments, the IRS reminds people with little or no income and 
who are not required to file tax returns that they remain eligible to 
receive an Economic Impact Payment.

    People in this group would have needed to use the Non-filers tool 
by November 21, 2020, to receive their payment this year.

    We also have undertaken a sweeping outreach and education campaign 
to help people understand their eligibility for an EIP and ensure those 
who normally don't have a tax return filing obligation are aware of 
their eligibility. We continue to share this information nationwide, 
with stakeholders inside and outside the tax community. In particular, 
we made extensive efforts to share EIP information with people in 
vulnerable and underserved communities.

    Anyone who missed the November 21st deadline will need to wait 
until next year and claim it as a credit on their 2020 Federal income 
tax return.

    Question. How can Americans reconcile miscalculated aid payments? 
What is the timeline and what kind of penalties will they face if the 
IRS got their information wrong when determining and distributing aid 
payments?

    Answer. People with miscalculated Economic Impact Payments will be 
able to claim the difference on their 2020 tax return. The IRS will not 
assess penalties for incorrect EIP payments.
                 2020 filing season/irs responsiveness
    Question. What can taxpayers expect from their IRS for 
responsiveness to their questions for who may still be seeking answers 
from the IRS to accurately comply with their tax obligations by July 
15th?

    Answer. As of October 30, 2020, more than 12,000 customer service 
representatives are taking calls on all toll-free lines and/or working 
priority paper inventory.

    Question. How long do you anticipate the process to be to 
distribute refunds for those who have filed?

    Answer. The IRS is working paper returns and other correspondence 
in the order received. The IRS is processing refund returns first 
followed by balance due returns. Our IRS Submission Processing function 
employees are working day and swing shifts. In addition, we are 
offering overtime and weekend shifts to open the mail and process tax 
returns. The refunds will systemically issue once the returns are 
processed.

    Question. As people need assistance more than ever to get their 
taxes submitted timely and correctly, what more can Congress do to help 
ensure that the IRS has the ability to respond to constituent's 
questions and needs efficiently and as quickly as possible?

    Answer. Additional funding could be used to hire and train 
additional employees, although any new hire processes take a certain 
length of time to train and prepare the employees to provide services. 
Funding to update, upgrade, or purchase replacement equipment or allow 
for updated programming is always helpful for improving customer 
service capabilities.

                                 ______
                                 
                 Prepared Statement of Hon. Ron Wyden, 
                       a U.S. Senator From Oregon
    Today the Finance Committee meets for its annual oversight hearing 
on the tax filing season. This year it also involves the COVID-19 
response. I want to start on that issue, because when it comes to 
active cases, this country appears to be right back where it was in the 
spring: tens of thousands of newly identified cases every day. ICU beds 
in hot spots are running dangerously low. The Trump administration has 
made the astoundingly poor decision to pull back its support for 
testing in a lot of areas. The President says out in the open that he 
wants less testing, and he has reportedly gone weeks without speaking 
to our top public health officials.

    To a lot of people, it probably looks like their elected leaders 
have given up. And in my view, it's an absolute certainty that jobs and 
the economy will not come close to full strength for as long as the 
pandemic continues at this uncontrolled spread.

    The Senate needs to do more. Members of this committee will 
obviously be in the center of negotiations on key economic issues. Step 
one in my view is extending supercharged unemployment benefits for as 
long as it takes to get the economy back to normal.

    I've also got a proposal to send financial support directly to Main 
Street small businesses. Leader McConnell may disagree, but in my 
judgement, these negotiations cannot wait. Tens of millions of 
Americans are out of work. More and more temporary furloughs are 
becoming permanent layoffs. So I hope we're able to get more help out 
the door to struggling Americans and our public health workers as soon 
as possible.

    Now on to the subject of IRS oversight. I want to begin with a 
stunning new report that shows how years of Republican budget cuts have 
led to wealthy tax cheats getting away scot-free. The report by a 
Treasury Inspector General showed that over a 3-year period, the IRS 
failed to audit almost 900,000 wealthy taxpayers who skipped out on 
filing tax returns. Together they owed nearly $46 billion in taxes. In 
nearly 370,000 of those cases, taxpayers had failed to respond to more 
than one delinquency notice from the IRS. Those individuals owed nearly 
$21 billion.

    Let's be clear that this isn't about shadowy networks of hard-to-
trace shell corporations. It wouldn't take a whole lot of complicated 
forensic accounting to start to crack down on this tax cheating, since 
it's a matter of people who simply do not file.

    Two issues here stick out to me. First, Donald Trump says he's pro 
law enforcement, but his administration hasn't taken any steps to crack 
down on these wealthy tax cheats who have stolen tens of billions from 
American taxpayers. After years of Republicans bullying and gutting the 
IRS, audits of wealthy taxpayers are way down. Maybe it shouldn't come 
as a surprise that Donald Trump isn't doing anything about it, given 
what we know about this President's long record of tax dodging and 
outright fraud.

    Second, in my view it's past time for the Congress to reconsider 
how the Federal Government fights against tax cheating. Over a decade 
of Republican budget cuts, the IRS has lost a third of its enforcement 
personnel and more than half of its revenue officers.

    This new Inspector General report shows how easy it is, after all 
those enforcement cuts, for the wealthy to get away with cheating--even 
those who don't bother to file tax returns. The burden of painful tax 
audits has been shifted unfairly onto people who work for a living.
    Bottom line, years of Republican budget cuts have made this a good 
time to be a rich tax cheat, and the Congress ought to change that. You 
don't actually believe in law and order if you advocate for cuts that 
allow wealthy tax cheats to get away with breaking the law.

                                 ______
                                 

                             Communication

                              ----------                              


                        Center for Fiscal Equity

                        14448 Parkvale Road, #6

                       Rockville, Maryland 20853

                    Statement of Michael G. Bindner

Chairman Grassley and Ranking Member Wyden, thank you for the 
opportunity to submit our comments, which reflect those previously made 
in this topic in the other body. The SARS-CoV-2 crisis gives the nation 
another chance to consider these issues.

Please ask Mr. Rettig two questions.

First, what is the income profile of returns expected v. returns 
received. We would assume that almost all lower-income filers (those 
making under $145,000 per year) have already filed. If this is the 
case, the filing deadline should not be extended, as it would primarily 
benefit higher-income households. Giving such households a later filing 
date deprives the United States of much-needed interest revenue from 
late filers.

The second question should be, where are the President's tax returns as 
requested by the Chairman of the Ways and Means Committee, preceded by 
the statement ``You have the right to remain silent. Do you understand 
these rights as I have explained them to you?'' The Sergeant at Arms 
should then take him into custody, detain him at the Marriott and 
release him only when the tax returns arrive.

Thank you for the opportunity to address the committee. We are, of 
course, available for direct testimony or to answer questions by 
members and staff.

                                   