Internal Revenue Service Commissioner Charles Rettig testified before the Senate Finance Committee on Wednesday about the 2019 tax season, his first as head of the IRS, as the agency managed to open filing season on time despite the recent government shutdown.
“I am pleased to report that the 2019 filing season opened on time on Jan. 28,” he said in his opening statement. “On that first day, we saw an hour when taxpayers e-filed more than 1.9 million returns, at a rate of 536 submissions per second. This set a one-hour record for our systems, breaking the previous record of 1.6 million submissions in an hour at 443 per second on Jan. 29, 2018. The filing season continues to go well in terms of tax return processing and the operation of our information technology systems. As of March 22, the IRS received more than 84 million individual returns, and we have issued more than 65 million refunds for more than $191 billion.”
He noted that while the tax-filing deadline for individuals is less than two weeks away, the work of the filing season is continuing well past the deadline, as IRS employees continue to process tax returns, including amended returns.
Besides being the first tax season under Rettig’s command, this was also the first tax season in which the IRS had to deal with filings under the revamped tax code after passage of the Tax Cuts and Jobs Act at the end of 2017.
“During my first few months here, I have been extremely impressed by how hard IRS employees all across the agency have worked to make sure taxpayers have a smooth filing experience this year,” said Rettig. “This is especially impressive given the need to implement so many major changes made by the Tax Cuts and Jobs Act. With hundreds of provisions providing relief to American families and making America’s businesses more competitive, the TCJA required extensive work by the IRS to ensure taxpayers would be able to meet their filing obligations this filing season.”
The extensive efforts, which continued into this year, included creating or revising more than 500 forms and publications; reprogramming information technology systems with special focus on return processing, payment and fraud detection systems; and providing guidance to taxpayers and tax professionals, an effort that Rettig said would continue throughout 2019. The IRS also needed to train IRS employees to help the public understand how the tax law changes applied to them, and provide education and outreach to taxpayers and tax professionals to increase their understanding of the various tax changes, he added.
Senate Finance Committee chairman Chuck Grassley, R-Iowa, praised the IRS’s efforts to implement the new tax law and open the filing season in time only days after the end of the 35-day shutdown. “It’s the first filing season after our tax code received the largest overhaul in three decades,” he said. “The IRS has worked to update forms, publications, and systems on top of all the new guidance the agency has provided in conjunction with the Treasury Department, all to be ready for the filing season. And if that was not enough, this filing season began shortly after our government experienced the longest shut down in history.”
Sen. Ron Wyden, D-Ore., the ranking Democrat on the committee, discussed the request by House Ways and Means Committee chairman Richard Neal, D-Mass., for President Trump’s tax returns, which White House attorneys have indicated they would block. “With respect to Chairman Neal’s request, the law says the tax returns 'shall' be provided,” he said. “The law does not give anyone — not the Treasury Secretary, not a White House official — the power to interfere. The administration has responded to Chairman Neal’s request by launching a campaign of blatant political intimidation. I recall in the very recent past when the prospect of political interference in the IRS mattered to both sides of this committee. So here’s the bottom line. Chairman Neal’s request is based on legal authority our two committees exercise regularly, and the process of obtaining and reviewing tax returns is routine. I believe this committee ought to make the same request for the president’s tax returns. This committee must not punt on oversight and cede that role to the House.”
Wyden also complained about the high rate of audits of low-income taxpayers who claim the Earned Income Tax Credit, in contrast to corporations and high-income taxpayers, whose audit rates have plunged, as uncovered by a recent series of articles on the investigative journalism site
“According to newly released data, the audit rate of corporations and those at the top is in free fall,” said Wyden. “Audits of those with more than a million dollars in income — cut in half over a decade. Audits of the largest corporations — again, cut in half over a decade. A new report from ProPublica showed one clear example of how that came to pass. A decade ago there was an effort to bring together skilled investigators to crack down on tax cheating by the mega-wealthy. The mega-wealthy fought back with an army of lobbyists and lawyers. The effort to get the tax cheats to pay a fair share fizzled. So the most fortunate are off the hook. What about people who work for a living? Another ProPublica report showed that Humphreys County, Mississippi, has a higher audit rate than any other county in America. It’s not because it’s packed to the county line with money launderers or shell corporations. It’s because Humphreys County is poor, and most of them claim the Earned Income Tax Credit. I take a backseat to nobody when it comes to working against improper payments or abuse. But how can the Congress stand by a tax enforcement system that punishes working people and gives the wealthy a green light to cheat?”
He said he and Sen. Ben Cardin, D-Mass., plan to introduce legislation Thursday to require minimum standards for paid tax preparers. “The idea is, if working people are less likely to run into a crooked or incompetent tax preparer, they’re less likely to face an audit,” said Wyden. “Passing our bill would be a good first step, but this issue is going to take a lot more work.”
Grassley pointed to another piece of legislation that he and Wyden have introduced in the Senate, the Taxpayer First Act, which passed in the House on Tuesday (see
“The Taxpayer First Act covers a wide range of issues intended to increase taxpayer protections, improve customer service, address identity theft and cybersecurity, update IRS information technology, and modernize the agency,” said Grassley. “Some of the more prominent provisions include codifying the independent appeals process to strengthen its independence so taxpayers are on equal footing with the IRS; requiring the IRS to develop a long-term plan to improve customer service, modernize the IRS, and implement an information technology strategy; providing the IRS with streamlined critical pay authority for I.T. positions to help the IRS compete with the private sector for top-notch I.T. personnel; and codifying the “Security Summit” to ensure the IRS continues to be able to fully participate in a partnership with state tax agencies and private-sector tax industry to combat tax ID theft and cybersecurity threats. There are dozens of additional provisions that are just as important.”
Grassley said the Senate Finance Committee received feedback from Retttig’s team at the IRS about this legislation, which was valuable in putting it together. “I am pleased that the House passed the bill yesterday after several years of work in both chambers,” he added. “We’re working with our leadership now to try to clear it in the Senate so the president can sign this bill into law. The Taxpayer First Act is an important first step toward reforming the IRS and strengthening taxpayer protections.”
During the hearing, Sen. Rob Portman, R-Ohio, asked about the IRS's antiquated computer systems. "This outdated IT infrastructure is costing taxpayers money," he said. "It’s costing you to have to go back and correct taxpayer information. Maybe you can talk a little about the need for you to have better IT infrastructure and what’s that going to take in terms of funding.”
Rettig pointed out that some of the systems are decades old. “It’s the code that goes back the Kennedy administration and the hardware is somewhat newer than that, but nevertheless we have systems that need to be updated that they’ve been patched throughout the years and the IRS systems have been asked to take on more and more tasks," he said. "We have about 60 different applications. I think we have about 12,000 or 13,000 servers on 12 mainframes. It’s difficult to continually patch. At some point, we need to replace and we’re definitely at that point. We’re as well posed as I think we’ve ever been to — and I was somewhat familiar with this when I was on the outside — but ours is as well posed as it’s ever been to be able to modernize both the infrastructure as well as the language so we’re moving forward with the ability to be agile and flexible as newer technologies come along.”
