Internal Revenue Service commissioner Chuck Rettig testified Wednesday before a House oversight subcommittee about the IRS’s performance during the novel coronavirus pandemic, where he heard complaints from lawmakers about their constituents missing stimulus payments.
The hearing also focused on the financial condition of the IRS and the state of its aging technology systems.
Dan McAllister was elected San Diego County’s Treasurer-Tax Collector in November 2002 and re-elected to his fourth term in June 2014 by an overwhelming 99% majority of the vote. Not only is he responsible for the collection of more than $5.5 billion in property taxes each year, but his office also manages the Investment Pool which reached an all-time high of $10.1 billion in April of 2016, ensuring that these funds are wisely invested and safeguarded for entities such as the school districts and cities in the County.� Since assuming office, he has worked extensively to improve customer service, enhance communications and outreach initiatives, and has made numerous operational improvements. He is also a strong advocate for diversity.� This is reflected in his staff, which encompasses professionals from all walks of life and backgrounds. His office now delivers service in 16 different languages.Dan also serves as a member of the San Diego County Employees Retirement Association, which manages more than $10 billion of investments. Additionally, he is a former chairman of the Board of Directors of the internationally recognized San Diego Convention Center Corporation.� Prior to his election as San Diego County Treasurer-Tax Collector, Dan was a successful financial consultant and investment broker.Dan contributes considerable time and resources to community service, such as serving as Chair of the San Diego Unified School District’s Special Audit and Finance Committee and is a participating member of the Boards of Directors of the Jackie Robinson YMCA; Habitat for Humanity, San Diego; and New Americans Museum, San Diego. �McAllister’s strong commitment and involvement in the community dates back to his service as a U.S. Peace Corps volunteer in the Western Pacific country of Micronesia.A second-generation San Diegan, Dan holds a Bachelor’s degree (BA) from CaliforniaStateUniversity, Fresno, and a Master’s degree in Business Administration (MBA) from United StatesInternationalUniversity. He has also completed executive education programs in portfolio concepts and management at StanfordUniversity and the University of Pennsylvania’s WhartonSchool.
Mark Gongloff is an editor at Bloomberg News.
Ale Brown is founder and principal consultant at Kirke Management Consulting. She started her career as an IT professional working for large corporations such as Procter & Gamble and Johnson & Johnson. She also ventured into the entrepreneurial world working for boutique consulting firms when she moved to Vancouver. Her specialties at the time were the implementation and management of ERP systems and customer relationship management (CRM) strategies.
During her last corporate job with J&J, she partnered with various commercial groups in the organization, providing IT solutions in the area of sales force effectiveness and digital marketing. This is when she was thoroughly exposed to the world of privacy and data management.
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“IRS employees have worked around the clock since mid-March to develop new tools and deliver meaningful guidance to simultaneously deliver Economic Impact Payments in record time while still keeping the annual filing season on track,” Rettig said in his opening statement. “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. So far, more than 160 million payments totaling more than $270 billion have been delivered, most by direct deposit and some by paper check or prepaid debit card.”
He noted that in the IRS’s efforts to deliver the Economic Impact Payments, the agency balanced the statutory requirement to provide the payments as “rapidly as possible” with the need for accuracy and concern about potential fraud. He pointed to a report in June from the Treasury Inspector General for Tax Administration saying the IRS correctly computed the payment amount for approximately 98 percent of the more than 157 million EIPs issued as of May 21.
Subcommittee chairman Gerald Connolly, D-Virginia, praised the IRS’s ability to operate during the pandemic despite years of budget cuts and aging computer systems, but also pointed to the complaints about the stimulus payments that were never received.
“While our witnesses will testify that the IRS did what it could with the available resources, it’s what didn’t get done that is really troubling,” he said. “It’s the millions of taxpayers who were unable to get their refunds because they filed a paper return. It’s the millions of tax returns that hit a snag and the corresponding taxpayers couldn’t get assistance because IRS call centers were closed. It’s the 9 million people who have yet to receive their stimulus checks, primarily because the IRS does not have their information because their income is so low they don’t qualify to file a return. These are our nation’s most vulnerable. We have a duty to help.”
Rettig pledged to do more to help. “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,” he said. “We have remained 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. The IRS is taking every possible step to reach potential EIP recipients. We have extended our reach far 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 worked with our partners to distribute EIP outreach materials in 35 languages within these communities.”
He pointed to the IRS’s efforts to offer tax information in Spanish and other languages, noting his wife is an immigrant for whom English wasn’t her first language. Rettig said the IRS has also been getting assistance from hundreds of local community groups and religious organizations and has developed a special online toolkit containing helpful information for them to use in identifying and getting the word out to people who qualify for EIPs. He said the IRS is also mailing out letters to approximately 9 million Americans who either haven’t received an EIP yet, or haven’t filed a tax return for 2018 or 2019, as the stimulus payments initially went out to those who had filed returns for those prior years, using their direct deposit information on file with the agency.
Lawmakers pressed Rettig to provide more specific data about who was still owed the payments and to allow incarcerated people to receive the stimulus payments as well. The CARES Act did not specify that incarcerated individuals couldn’t receive the payments, but the IRS and the Treasury Department later made that interpretation. Some lawmakers argued the exclusion of incarcerated people from receiving the payments also leaves out those who are joint filers, exposing their spouses and families to further economic hardship during the recession. Rettig refused to commit to rectifying the situation, citing ongoing litigation, although a judge in California ordered the IRS last month to stop withholding the stimulus funds from incarcerated individuals and their families.
The hearing also covered other matters, such as the IRS’s relatively high audit rate of low-income taxpayers who receive the Earned Income Tax Credit compared to wealthier taxpayers. Rettig bristled angrily at accusations of improper bias at the agency.
“According to studies out of the University of Pennsylvania, by simply beefing up the auditing capacity of the IRS to allow for more oversight of the super wealthy — those claiming more than $10 million in adjusted gross income — our government would collect more than $7.5 trillion over the next decade,” said Connolly. “Because that’s the size of the tax gap that the wealthy — who fear little consequence from a beleaguered IRS — have left in our nation’s coffers.”
Connolly said he was pleased with reports this week that the IRS is finally investigating allegations of criminal tax fraud at the National Rifle Association. “I have long led congressional efforts asking the IRS and the Department of Justice to investigate the NRA and its CEO Wayne LaPierre,” he said.
The hearing also looked at the IRS’s aging computer systems. In conjunction with the hearing, the Government Accountability Office released a report that found problems with those systems.
Vijay D’Souza, director of information technology and cybersecurity at the GAO, also testified at the hearing. “Effective IT is essential to IRS’s operations and was important to the distribution of millions of economic impact payments dispersed as part of the CARES Act,” said D’Souza. “IRS’s IT budget has been fairly flat over the last 10 years.”
Rettig said the IRS has been working on improving its technology in response to the Taxpayer First Act, which Congress passed last year in an effort to reform IRS operations. He also outlined the ways the IRS has been using technology to respond to the pandemic.
“During this time, the IRS has been using innovative approaches to make sure our employees can deliver on the agency’s mission,” he said. “We have set records for the number of IRS employees teleworking, thanks to the continued support of our Information Technology division. Our IT systems continue to perform at a high level. Our internal networks are supporting approximately 57,000 employees online at the same time, all in a secure environment.
He noted that the IT department provided the equipment necessary to allow thousands of IRS customer service representatives to telework, and the IRS was able to continue bringing on new employees through the use of a virtual onboarding process.
“We have also been continuing the agency’s ongoing work to find new ways to serve taxpayers, including our efforts to expand online and other options for them,” Rettig added. “For example, this summer for the first time we began offering an electronic filing option for taxpayers who need to amend their income tax returns. 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. Electronically accepting Form 1040-X posed a number of unique challenges, but we succeeded thanks to a great deal of hard work by employees across the agency.”
Some lawmakers agreed with Rettig that the IRS could use a bigger budget to update its computer systems, some of which date back to the Kennedy administration.
“We need to be asking what the IRS could have done to help our country if it had been properly funded and adequately staffed, instead of being subjected to years of bitter Republican abuses,” said Rep. Carolyn Maloney, D-New York.
National Taxpayer Advocate Erin Collins said the IRS could use some help with its technology to deal with the pandemic and just the regular tax season. “In the best of times, the filing season presents challenges for the IRS,” she said. “Considering the additional challenges the pandemic has presented, the IRS has performed admirably. Yet despite the IRS’s best efforts, some taxpayers experienced unusual difficulties in their dealings with the IRS. While a portion of those difficulties is attributable to the impossibility of anticipating and planning for the impacts of a national shutdown, some of the difficulties would have been substantially lessened if the IRS had better technology and more staff to meet the needs of taxpayers.”
