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tv   Washington This Week  CSPAN  April 5, 2015 3:36am-4:46am EDT

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amazingly a solid in go. -- eg theyo were very sure of. themselves and that was important. but he was human. that is part of the story. so good, the bad, and the ugly. there are many things. first and foremost, he was an oil man. >> watch all of our events from tulsa at 2:00 p.m. on american history tv on c-span 3. chris irs commissioner john koskinen says his agency is taking concrete steps to address problems of the past including spending on conferences, irs videos, and the application backlog that he made the comments tuesday at the national press club in washington, d.c.. this is one hour.
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professional for journalism. we are committed to our future through programs such as this. we work for free press worldwide. for more information, visit our website, press.org. to donate to programs offered by our institute, visit press. org/institute. on behalf of our members worldwide i would like to , welcome our speaker and those attending the event. our header table includes guest of the speaker and working journalist for club members. members of the public attend our lunches so applause you hear is not evidence that journalistic objectivity is lacking. i would also like to welcome our
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c-span and public radio audiences. you can follow the action on twitter. after our guests speech, we have a question-and-answer period. i will ask as many questions as time permits. it is time to introduce our head i would like -- digit is our head -- it is time to injured deuce our -- it is time to introduce our head table. i will like to introduce each person to stand as her name is announced. the senior association for kiplinger washington editors and treasurer of the national press club. senior business news editor for national public radio and a member of the board of governors. desk editor for the associate press. rosemary marcus, director research analysis and statistics for the irs. and a guest of the speaker. enterprise editor for the economy team. wife of our speaker and guest of
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our speaker. [laughter] host: chair of the speakers committee, washington bureau chief in buffalo news, and former president of the national press club. give-and-go of our speaker for a moment. -- skipping over our speaker for a moment. host freelance writer and the committee meeting member who arranged it is program. eric smith, an irs spokesman and guest of the speaker. mark camera, washington bureau chief for bank rate.com and former president of the national press club. kevin, editorial director of kiplinger washington editors. a reporter with investment news, and vice chair of the nbc publications committee. [applause] mr. hughes: welcome to tax
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season. americans have 16 days to get their federal returns filed, but for our speaker, mr. koskinen, every day is tax day. [laughter] mr. hughes: john koskinen oversees the collection mr. hughes of $3 trillion every year. he has been on the job for about 15 months. how has it gone so far? during the first half of his tenure, he testified frequently on capitol hill. questions revolved around allegations of the irs targeted conservative groups to deny them tax-exempt status. when he wasn't testifying, he was wrestling with budget cuts imposed by congress. the irs audited 0.57% of businesses in 2014. that was the lowest rate since 2005. money being used to enforce an
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-- and implement the affordable care act has attributed to reduced staff on the telephone helpdesk. at one point, koskinen said agency belt-tightening might result in a miserable 2015 filing season. koskinen is no stranger to challenges. he was the acting ceo of freddie mac. his very career has included stints as deputy director of the offices in management and budget and city -- for washington d.c., overseer of the federal government's y2k efforts, and president of the u.s. soccer foundation. no amount of irs trouble is going to put koskinen in a bad mood this week. he is a super fan of the duke
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basketball team that is appearing in the ncaa final four this coming weekend. ladies and gentlemen, please welcome john koskinen. [applause] commissioner koskinen: that was such a thorough introduction, that that's my speech, i'm ready to take questions. i appreciate the warm welcome, i'm delighted to back your the national press club. i was intrigued as i was last year by the desserts. my desert is a cookie that seems to be not quite the image i would like. it is a dollar with wings flying away. [laughter] commissioner koskinen: this one is a 1040. we are flexible, but you cannot file your returns on a cookie.
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there was some indication in a periodical that i had -- i was a super fan of duke and that i would no doubt regale you with stories of this year's final four. the way i did last year. to clear the record up, last year, i did note my affiliation with duke and apologized for the fact that we had ruined everybody's brackets by not quite making it at the final four and not making it beyond the first game. i thought that if i read your brackets, it was my fault. this year, if we ruined your brackets, you are going to get no sympathy from me, because should have had us going at least this far. in any event, the irs commissioner isn't always the hottest ticket in town, because everyone knows the subject is going to be taxes. i really do want to thank the press club for allowing me to have this return engagement. i promise to stifle normally my
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impulse to remind everyone as a public service announcement that april 15 is just around the corner. although it is. i hope everyone is doing well with their taxes, and i would remind you that the complexity of the tax code is not my fault. [laughter] commissioner koskinen: i am leading the irs and i have been for 15 months. it is certainly an interesting time, to say the least. and it has let me to conclude that i'm going to pay more attention to the fine print of the contract. especially the part about hearings running into the night with no breaks. today i want to share with use of observations and some insights about the irs. the problems of the past, and how we have dealt with them, the challenges of the present, and our strategies for meeting them. and the possibilities for the future, and what we would like to be able to do for taxpayers. first i would like to talk a little bit about what i've have learned about the irs in the past 15 months. when people hear irs, they usually think of tax enforcement.
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a letter in the mail or a knock on the door. well we are the nation's tax collector, that is not the whole picture. besides enforcement, another big part of our job is to help taxpayers fulfilled all tax obligations as quickly and easily as possible. when i arrived at the irs, it surprise me to learn the more than 1/3 of our employees work in taxpayer service. for example, we run one of the world's largest customer service phone operations. after seeing everything our employees do to keep the taxes are running in to help taxpayers, i'm no longer surprised by anything that they do. and to show you what i mean, courtesy of our excellent research division. the leader of that group rosemary marcus, has already been introduced to you and is here today on the dais. she will be retiring shortly and i want to thank her for more than three decades of wonderful public service at the irs, the bureau of economic analysis and the congressional budget office. consider some of these
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breathtaking numbers. this year, the irs has already processed more than 90 million tax returns from individual taxpayers. on the way to an expected total of 150 million. we have issued more than 70 million refunds to individual taxpayers so far. last year, the refunds we processed topped $330 billion. put another way, that is more than the gdp of entire nations such as delay -- chile and portugal, ireland, and finland. given my finish ancestry, i give better press in finland that i sometimes get here. -- i get better press in finland then sometimes i get here. but that's another story. the average refund check issued was nearly $2900. that's real money going back into the economy. in a way, you can blame the irs
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at this time of year for the annual surge in loud commercials selling furniture, flooring, and cars, all in pursuit of the biggest check many people will see all year. also this far in 2015, the irs is assisted more than 24 million taxpayers who called our hotline. we helped more than 1.3 million people who visited our tax payment assistance centers around the country, and our website, irs.gov, continues to grow more popular with more than 230 million visits already this year. our electronic tracking tool -- where is my refund -- is more popular than ever with more than 170 million hits this year already. but there's more. we routinely help people who are victimized by identity theft disputed tax liability, or face some form of hardship. in 2014, our appeals officers assisted more than 100,000 taxpayers while the taxpayer advocate service provided help to more than 200,000 taxpayers.
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our employees with special identity theft training work with victims to resolve more than 800,000 cases of tax related identity theft. and our tax collections continued as well. as noted, the economy improved in 2014, the irs collected a total of $3.1 trillion in federal revenues. that's $3.1 trillion, not billion dollars. we have been working hard to improve our operations, and one interesting figure that comes out of this is the cost of collecting this revenue. according to statistics gathered by the oecd, the irs spends less than half the amount to collect a dollar of revenue than the tax of ministrations of germany, france, england, canada, and australia. i could go on if there's any place that has numbers, it's the irs. we only have an hour, i won't. i hope this gives you a better
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idea of what the irs does year in and year out. i also want to mention the people behind these numbers. none of the work i just described could happen without the dedication, professionalism, and next matisse of our employees. my admiration for them continues to grow. i have never seen such a dedicated workforce in my entire career. the smooth filing season we are experiencing is a great testimonial to those employees. they've achieved an amazing degree of success when you consider the challenge of this filing season was to build into our system the backend of the affordable care act, the front end of the foreign tax compliance act, and the tax extenders passed in december. we often hear from people only when things go wrong, so i think it would be helpful to remind you of something significant that is going right. a great example of the caliber of our workforce is also sitting up here with us. eric was introduced to you and has spent nearly four decades of the irs working with reporters helping them put the complexities of the tax code into plain english. he shows no signs of slowing down.
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his dedication to public service is what you find with our employees in locations all across the country. i am pleased to be able to publicly thank eric for his years of dedicated service. i wanted to give you this picture of the irs today because i think it has been obscure is -- obscured by the intense focus on the problems of the past. you heard a lot about those problems. overspending on conferences, making ill advised videos, and inappropriate scrutiny of applications from groups seeking social welfare status. the criticisms of these areas is absolutely deserved. but what gets lost is that these mistakes occurred several years ago and we have taken concrete steps to address them. in the tax exempt area, we acted on all of the inspectors general's recommendations to fix the management problems they identified nearly two years ago. these problems should not have happened and we continue to work to make improvements to ensure
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that they never happen again. as for conferences, spending has been reduced by 80%. since 2010, when the conference took place that was the subject of all the scrutiny. not only that, but we require all conferences costing above $20,000 to get prior approval from the irs commissioner. otherwise known as me. and for any expense over $50,000, planners have to get my approval and the approval of the treasury department. and for videos, many of the ones we are making these days are aimed at helping taxpayers. the irs channel on youtube has more than 100 videos with nearly 9 million views to date. make no mistake, that we understand we will never compete with taylor swift, jimmy fallon, or funny animal videos, but our videos do help on very difficult tax topics. the subjects run the gamut from understanding how to claim various tax credits, to protecting yourself from identity theft and avoiding tax scams.
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what's more, the much criticized videos from years ago could not be made today. any irs division seeking to make a video must receive prior approval from an executive review board the agency created more than two years ago. not to miss anything, people may have listed to justify or budget, we no longer issue performance bonuses to employees who fail to pay their taxes. i would note, the tax compliance rate of irs employees is over 99%. we work to ensure that no former employee with a serious performance problem is rehired. i would stress that again, while these problems were important and needed to be addressed, and deserve your attention, the remedies we have applied we think will keep them from happening again in the problems to come from a prior era. we have addressed them, so we think they want happen again and it really does make it a new
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day at the irs. it's not the irs of 2010, 2011, or even 2012. i can't guarantee we want have any problems in the future, no one could, since we still have 87,000 employees who deal with 150 million individual taxpayers and administer the world's most complicated tax code. but i can assure you that our commitment is to find problems quickly, to fix them promptly, and to be transparent in the process. so how are we doing that? in the past, problems were not found fast enought or corrected right away. we are building a culture within the irs that is focused on risk management and encourages the flow of information from the front lines through the organization and encourages every employee to think of themselves as a risk manager responsible for reporting problems as soon as they see them. employees are beginning to believe that i mean it when i say the bad news is good news.
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we don't shoot the messenger, we reward him or her, and the only problem we can't fix is the problem we don't know about. in trying to build for the future, one of the challenges we face involves our workforce, which has changed dramatically over the years. for years, we heard concerns about the brain drain confronting the federal workforce, as large numbers of workers head towards retirement. the irs has been dealing firsthand with that issue. the problem is aggravated by are steadily declining employee numbers, which in turn are driven by or budget cuts. the high water mark of the agency's workforce in terms of size was in 1992, since then we have lost more than 30,000 full-time employees and we are at the lowest level since the early 1980's. the drop has been accelerating between 2010 and 2014, the irs lost over 13,000 employees.
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these are not just positions in washington or one or two other cities. every state in the country now has fewer irs employees than they did a few years ago. meaning fewer people to help with taxpayer service and enforcement. we expect to lose, through attrition, another 3000 people or more by october 1 of this year. the resulting composition of the irs workforce also presents a challenge. the problem is simple -- given my age, i think i can diplomatic -- diplomatically say our workforce is maturing in a rapid rate. as highly skilled employees retire, we need to replace them with the next generation of talented dedicated people. that is becoming harder and harder to do, in large part as a result of the hiring freeze have been forced to maintain for the last several years to absorb the significant cuts budget since 2010. more than 70% of the budget is devoted to employee costs, so we had no choice but to constrain our hiring of new employees. as a result, a portion of our workforce over 50 years of age has been growing rapidly during
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the last several years. today, more than half of our employees are in that age group and we estimate that by next year, more than 25% of the irs workforce will be eligible to retire. by 2019, that number will be over 40%. meanwhile, the number of irs employees under 30 years old has been steadily declining and is now less than 30% of our workforce. we have only about 1900 employees out of the 87,000 under age 30 and about half of them are only part-time. we have only 650 employees out of 87,000 who are 25 years old or younger. essentially, the irs is facing its own version of the baby bust. the situation may seem extremely difficult -- makes it extremely difficult to develop the next generation of leaders. we estimate that 41% of our front-line managers and 61% of executives will be eligible to retire. with so many departures go
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knowledge and expertise that we will find difficult or impossible to replace. especially if our severe underfunding continues. for anyone who questions whether it really is a new day at the irs, let me share another piece of information with you about our workforce. since october 2011, 101 irs executives, or 46% of them have left. some of our business divisions have experienced an even higher rate of turnover. a good example is our small business self-employed division, where about 80% of the current leadership team is new since the end of 2010. the changes are so significant throughout the agency that you could hang a sign out at the front of the headquarters saying under new management. tax issues aren't simple, and neither are the core skills we need to run the irs. for our technical positions, it's not like hiring people for a fast food restaurant or
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grocery store. when we hire a tax auditor, it takes years for them to reach full productivity. it can take even longer for those auditing the largest most complicated corporate cases that involve complex issues spanning industries and national boundaries. it's one of the reasons we decided, even in this environment, that we have to continue to train our employees to ensure they are prepared as possible to deal effectively with taxpayers and their questions and problems. the negative impact of the budget situation on our workforce are generally overlooked in our funding discussions, and yet these issues are critical for the future of the agency and one that will only grow in importance in the months and years ahead. my term will end before the true magnitude of this problem is visible to outsiders. it would be irresponsible to just slide along without beginning to address the situation. we have a number of initiatives underway to deal with a specific challenge. with regards to the loss of
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insights and experience when employees retire, we initiated an agencywide knowledge management program, divined -- designed to capture the lessons learned along the way from employees at all levels of the organization. the business international division is leading the way in this area, the human capital organization's core dating similar activities across the agency. in addition, the office of personnel management has approved a phased retirement program, designed to have a retiree spend time transferring their expertise to ongoing employees. we are still studying now had a pit that program -- how to fit that in. with regards to the lack of younger employees, i've advised our senior leadership that this is the last year that we will deal with budget constraints by freezing or severely limiting new hires in the agency. we have interesting and exciting career opportunities to offer
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young people beginning their careers, and we need to encourage more of them to join the agency. in the days gone by, the irs had a reputation of being a great place to start your career because of everything you learned that made you attractive to accounting firms, businesses, and law firms. many of those who started with the irs and assumed they would move on after what sometimes was viewed as a postgraduate education discovered the challenge and satisfaction of the work here and stayed throughout their careers. we need to restore our reputation that regard. but i'm not here to talk just about the problems we face. we are also working to move the agency forward with new ideas and new initiatives, especially new ways of helping taxpayers. even with our budget constraints, many good things about happening at the agency recently that people may not be aware of and i would like to give you a couple of examples. one is our adoption last summer of a taxpayer bill of rights. we believe this is a cornerstone document that will provide
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clearer help for taxpayers. the taxpayer bill of rights consists of 10 fundamental rights that every taxpayer should be aware of, such as the right to receive quality service from the irs, the right to pay no more than the correct amount of tax, and the right to retain representation and when a taxpayer has a disagreement with the service. our employees believe in these rights and are doing their best to advise taxpayers about them and to support them in their day-to-day activities. given the complexity of the tax code, the majority of taxpayers these days seek professional help with their taxes. last year, more than half used a professional preparer. the irs has been taking steps to help taxpayers know where and how to get the help they need, and as part of that effort, we launched a new directory of tax return preparers on irs.gov earlier this year. for the first time, taxpayers could use this directory to find tax professionals with credentials and qualifications in their local area.
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we're also trying new ways of doing business in the taxpayer assistance centers. we remain deeply concerned about helping people at these walk-in sites given our resource imitations. we are aware of taxpayers lining up outside some of our offices many hours before the open. -- before they open. you would think, in fact, we we must be selling something like the apple watch when you look at the lines. this is not a new story, just gotten worse than we are working to find a better approach for taxpayers. to help cut down the long lines, one approach we're trying is simple. let people make appointments in advance rather than wait in line for hours. he began doing this at 10 centers in february and recently added 34 more. if this works, we will consider expanding the approach to all of our taxpayer assistance centers next year. we already discovered one major advantage to this new system, the irs employee setting the appointment time is often able to determine what the taxpayers problem or question is, and as a result, what information the
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taxpayer needs to bring with them to their appointment. this saves the taxpayer the aggravation of having to make a return trip later. the pilot program is a great example of a commonsense change that increases the level of customer service we can provide while minimizing pointless burdens on taxpayers. another good example of a new initiative is in the tax exempt. area where 15 months ago we had a backlog of applications from groups seeking status as private nonprofit organizations. those applications come in at the rate of 70,000 a year, and at one point, the backlog exceeded 60,000. this cap groups in limbo for -- this kept groups in limbo or months or years. so our tax exempt organization group got to work trying to come up with ways of attacking the problem before got further out of hand. these efforts led to new processes and the development of a simpler application form for small groups, the 1023 easy. that form debuted last year, the
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result is that our inventory of applications is now current. that is a huge accomplishment. a change that is helping all applicants, including larger organizations. these are just a few of the new, innovative initiatives we have been working on to help taxpayers and in prove tax administration. all of these efforts are important, but we want to do still more. in the time remaining, i want to talk about the irs of the future and some of the things we're , looking at. i would like to talk more generally, just for a minute about our current budget and technology challenges. by now, some of you, especially my newfound friends in the press, have to wonder why i don't get tired of talking about the subject of our budget. the simple answer is the underfunding of the agency is the most critical challenge facing the irs today. as a serious ramifications of five years of budget cuts become increasingly visible, i don't want anyone to say that we didn't warn you in advance.
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so consider this your warning. in case you missed it, the irs budget for fiscal 2015 was set at about $10.9 billion which is $1.2 billion less than five years earlier. the irs is now the lowest level of funding since 2008. if you adjust for inflation, our budget is comparable to where we were in 1998, and despite that we've taken on many new additional responsibilities like the aca, while the taxpayer base continues to grow by millions. as a result, we reach the point to making performance trade-offs. for enforcement, budget cut means we will close fewer audits and collection cases. we estimate the reduced closures this year will translate into a loss for the government of at least $2 billion in revenue that otherwise would have been collected. it's a classic example of being penny wise and pound foolish. we are also seeing a noticeable negative impact on taxpayer service. this year we were forced to
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substantially reduce hiring of extra seasonal help we usually bring in during the filing season. as a result, the phone level of service is now below 40%. that means that six out of every 10 people who call can reach a -- cannot reach a customer service representative. this truly is an abysmal level of service. it's troubling to me that these cuts prevent us from fully modernizing our support. it hurts taxpayers and the entire committee. we are operating with an antiquated system that is increasingly at risk as we continue to fall behind in upgrading both hardware and software. despite more than a decade of upgrades in the agency's core business systems, we still have very old technology running alongside the more modern systems. we have many applications running when jfk was president. the only good thing you can say about them is that the code they use has been out of date for so long that it has the unintended effect of creating problems for
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any hackers who might try to figure out how the system actually works. but this ancient technology compromises the stability and reliability of our information systems and leaves us open to more system failures and potential security breaches. while irs systems have held up well, it's a continuing area of major concern for us. in this era of daily headlines of major companies and institutions seeing security breaches. so there you have it. there is no doubt the irs has budget and i.t. challenges. but where does that leave us? simply providing additional funding solve these problems? if the irs needs to do more and take a different approach, one that doesn't just rely on funding. as i told our appropriations committee in the last few weeks, the irs can't keep doing business in the old ways. if we get additional funding
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we're not going to build the irs back to where it was in 2010. we need to be looking forward to a new improved way of doing business. the world is changing, taxpayers are changing, and so too must the irs. we need to look at the future in a more comprehensive way, and consider how we can take advantage of the latest technology to move the entire taxpayer experience in a way that's more cost-effective. we are focused on how best to use our limited technology resources for the benefit of taxpayers. the goal is for taxpayers to have a more complete online experience for all their transactions with the irs. the online experience should give everyone confidence in knowing they can take care of their tax obligations in a fast, secure, and consistent manner. the goal is not unrealistic. we are not trying to go to the moon. we are simply saying that people should expect the same level of service when dealing with the
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irs in the future as they has now, with their banks brokerages, and mortgage companies. the idea is that taxpayers would have an account of the irs where they and their preparers can login securely, get all the information about their account, and interact with the irs as needed. things taxpayers need to do to fulfill their obligations could be done virtually and there would be much less need for in person help either by waiting in line at an irs assistant center, or calling the irs. improving service to taxpayers in this way can also help us on the compliance side of the nation. -- equation. we need to be faster and smarter with a more modern system, the irs could identify problems. in tax returns when a return is filed, rather than coming back to taxpayers years after the fact. while the meter is running on potential interest and penalties. the want to interact with taxpayers as soon as possible on these issues so they can be corrected without costly follow-up, contact, or labor intense issues.
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-- audits. this could also help in other areas such as the ongoing battle over the use of stolen identities to file fraudulent tax returns. we must provide greater security in the future. we need to find more ways to protect taxpayers' private information. at tax time we need to be sure we are interacting with the right person. improving identity authentication is a major gold -- going forward. we have taken a number of steps in the identity theft area, the most recent occurred earlier this month and we held an unprecedented sitdown meeting with the leaders of the software and tax industry and state taxes -- tax administrators. we agreed to build a cooperative effort of the past into a new way to leverage this public-private partnership to help battle identity theft. we agreed to form three working groups to come up with short-term solutions to help taxpayers in the next tax season and to work on longer-term efforts to protect the integrity of the nation's tax system. you could say that if i find it
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exciting to talk about the possibility of taxpayers being able to conduct all of their communications with the irs electronically, i may need to find a way to put a little more balance in my life. but i do look forward to talking more about the future vision of the irs in the months ahead. many of our efforts to improve taxpayer service will take years to fully implement. our progress will be affected by many factors, including changes in the tax law, the continuing evolution of refund fraud, the demographics of our aging workforce. and of course, how quickly we can deliver on this concept will depend on future levels of funding. but we will continue to find some funds to support these efforts to build towards the future, even at the expense of other areas of operation. otherwise, if we just wage a guerrilla style fight every year through the continuing funding challenges, focusing only on the present, we will wake up in five years and be no further ahead than where we are today, and in fact, we will be five years
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farther behind. so it gives you an idea of where the irs stands today how we , change from the past, and will want to go in the future. i took this job 15 months ago because i understand the critical role the irs plays in the lives of taxpayers in the collection of the revenues that fund the government. i know i speak for the thousands of professional, dedicated employees at the irs when i say that we are committed to continuing to do all we can to build for the future in the interest of serving the american taxpayer. i hope all of you filed your taxes now, and had a good experience. for those of you who have not filed yet, remember the clock is ticking. [laughter] which means you have the benefit of three public service announcements for the price of one. the irs serves all taxpayers and therefore we also include in that group procrastinators. if you can make the april 15
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-- if you cannot make the april 15 deadline remember everyone , can file for a six-month extension. thank you very much. [applause] mr. hughes: thank you, mr. koskinen. you talked about budget cuts. if there are only sony people -- if there are only so many people who can perform audits and resources for audits, how do you determine who gets audited? it would seem to people who own -- oh -- owe the most money would be the higher on the priority list, but that is not always the case. commissioner koskinen: for those of you not at the top of the food chain making a lot of money, not rest comfortably that we are not coming after you as well. our audits serve an important function, which is to have taxpayers, as they pay their taxes, feel comfortable that everybody is paying their fair share. if you're trying to cut corners we are going to notice that, find it, and we will be unhappy about it. so we need to actually demonstrate our focus on
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taxpayers across the entire income spectrum. because tax preparers are very quick on their feet and they will notice if they have taxpayers in certain income brackets you don't get audited very often at all. that will simply encourage people to take risks that they otherwise shouldn't take. every year we review our exam plan to see how to make it most effective, obviously we do on a -- we do audit a higher percentage of people at the top of the income stream and collect significant amounts of revenue from them, but i would stress that we always have and always will audit people across the entire spectrum. as i have said, even as the exam process slows down, because of the funding constraints, the roulette wheel keeps turning and you don't want the white ball landing on your number, because we will not be too happy about that. i would also say, there is been a question often raise about how we select within that exam and how we select returns for review.
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that process is basically automatic. it's done by computer filters to look a returns and identify those that seem to have issues or questions in them. no individual in the irs can cause any taxpayer to be audited or reviewed. there are at a minimum, it takes a group of three to take a look at any particular issue, but the vast majority of audits and exams are determined by a set of computer programs that don't know who they are looking at. i think it's important for all taxpayers to understand that even with the limitations, we will go over a million audits. everyone should understand that when you hear from us by letter the first time, it's because of something in your return. taxpayers need to be comfortable, they are all going to get treated fairly no matter who they are. no matter what political party they belong to, no matter who they voted for in the last election. if you hear from us, it's
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because of something in your return. if someone else has that issue in their return, they are likely to hear from us as well. mr. hughes: with these budget cuts, is it easier to cheat? commissioner koskinen: even the best of days, we might be auditing 1.2%. on the high-end, 15% to 20%. those percentages would make you say it's only 98, 99 chances of a hundred that i won't be in the 2%. over time, as i said, it's all done by computers. to the extent you start taking shortcuts that other people aren't taking, it's going to show up. we talked to a revenue agent once, who said we should and we do divide the world into those trying to be compliant and those trying to avoid their taxes. if you are trying to be compliant, even if you have trouble paying, we will work with you. we are anxious to help
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taxpayers. if you are actually trying to dodge your obligation to pay her -- to pay your taxes, we will not be happy about that. i think that's important for people to know as well. mr. hughes: as someone who is involved in implementing tax law and tax code, what would be the best thing that congress could do to improve the tax code? commissioner koskinen: i always preface my answer by saying tax policy is the domain of the treasury department, the administration, and the congress. we are involved in taxing administration. having said that, the best thing they could do would be simplify the tax code. it is beyond being impenetrable, i don't know how anybody understands all the ramifications of it. congressman camp when he was , chairman of the ways and means committee and took out his tax reform proposal last year said the irs code is longer than the bible with none of the good news.
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[laughter] commissioner koskinen: i told him i would give him credit for that for a year, and i'm stealing it as my own line. clearly the burden on taxpayers individually and corporate by by the tax code makes no sense. the best thing that congress could do and which we are happy to help on a technical basis the policy issues are there is. but on a technical basis anything we could do to help simple five tax code, would be delighted to do. mr. hughes: on a scale of one to 10 how likely is it that we will see comprehensive tax reform in the next five years, and along with that, someone is asking about your relationship with paul ryan, the chairman of the house ways and means committee and whether it you will be able to work with him in getting some tax reform done? commissioner koskinen: on a one to 10 scale over five years is people who are working on this
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in great detail, i would simply say that it's instructive if you look at both the house and the senate, at the number of individual congressmen and senators who have taken a position that tax reform is important, either for corporations or corporations and individuals as well, you would almost think there is a quorum if you would pull them all together for it. i think obviously, as people on the hill have said, if it doesn't get done this year, next year will be difficult because it's a presidential election year. but over five years, i think the pressure is building from the public to do something about the complexity of the tax code, in particular, i have spent some time internationally, i work with tax administrators and commissioners around the world. on the international front progress is moving quickly to try to attack zero taxation by international companies. the result is going to be that is going to be that the first
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platform for the exchange internationally have tax information focused on individuals. the next move will be to get to country by country reporting. as you move in that direction, the complexities of our corporate tax code will come back to create great problems for corporations in this country. i think the political pressure from individuals and corporations will build over the next five years. with regard to chairman ryan chairman of the ways and means committee, who has been a vigorous supporter of tax reform, i have had good discussions with him. we are actually working with the staff trying to provide the many -- any support they need in this area. i think the tax policy issues are going to be discussions between the administration and the congress. but in terms of the implementation and implications of any policy change, we already are having positive discussions and stand ready with both the house ways and means and the senate finance committee and chairman hatch who also has taken a strong stance in supporting tax implementation and tax reform.
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we stand ready to help them all. mr. hughes: you made reference to the issue of targeting groups in a 501(c)(3) area based on political beliefs. changes that have been put in place. do you really believe, from your position atop the agency that that issue is totally in the past and what gives you confidence that this issue will -- will not creep up again? commissioner koskinen: the use of improper criteria to screen companies or organizations trying to get the seat for status. the reason i'm confident is that first, we have taken all the recommendations thus far from the ig to provide better training and review, of the entire process. i do think it's important to understand that even the best controls don't self execute. it is important for every
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employee in the irs to feel, as i said, it's their responsibility and they are empowered to let us know when things are not going the way they thought they should go, or the way they are supposed to go. but the way they predicted it would go. the only way any organization, but certainly a large organization, can effectively function and deal with problems that occur is if there is a free flow of information. i'm confident with the dedication and professionalism of our employees, that if anything looks like it's creating a problem or is about to, we will hear from them the next time around, and people understand it's important for that issue not to be raised just in the middle of the organization, it's important for everyone at the top, especially commissioner, to know about it. i think there has been a rededication to the long-standing commitment of the irs, to be involved in taxing administration and not be involved in politics. the final recommendation of the inspector general is the fact the fact and circumstances test
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used to sort through who is eligible to be a tax-exempt organization and not needs to be clarified. i've said from the start, we need a process that is clear fair to everyone, every organization that applies, and easy to administer. we're working on that as well. mr. hughes: there has been interest in the issue of using private e-mail accounts as government officials. have you ever discussed irs business on a private e-mail accounts or used a private e-mail server to store e-mails that stored government records. did you use anything to make sure the people weren't using private e-mail for public discussion? commissioner koskinen: the long-standing irs policy is employees are not to do business on their private e-mail system. we monitor our systems regularly for security purposes, and i discovered early, very early in my career when i was preparing
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testimony and i wanted to work at home, i sent the testimony home to my home computers like -- so i could print it out and edit it within a couple of days, , i had a visitor from i.t. security noting that i had been sending a couple e-mails to my home computer. they assumed, correctly, i was trying to edit my testimony. they therefore gave me a computer and a printer for home from the irs so that i would have my account available to me at home, because in fact, our strong policy is you can't do personal business on your personal e-mail account. back to the first part of the question, other than sending a couple of people of draft testimony to my e-mail accounts, i have certainly never discussed irs business on my own personal account. i'm confident that we continue to enforce and remind people about that policy across the agency. we have 87,000 people, does that mean no one is doing it? i can't guarantee that. but i can guarantee we are
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keeping a close watch on it, and if someone is doing it, they will hear from of soon. -- from us soon. mr. hughes: several questions on cyber security and tax scams. a recent report reviewed i.t. security and found a significant deficiency in its financial reporting systems. how vulnerable are taxpayers because of the i.t. system, and if you could comment in general on how challenging it is to keep up with the scammers and that kind of activity as it seems to be on the increase. commissioner koskinen: the report that's been ongoing is about our financial systems not individual taxpayer information. and that's not a security problem so much as we just have a complicated financial system. because we process all of these funds and activity. we are working to correct that weakness, but it isn't just our financial management side and
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it's really in the reporting of funds the flow of the irs. it is not connected with our day in and day out processing of taxpayer information. as i said in my talk, it's a high priority for us to not only protect taxpayer information to do whatever we can to increase and have the ability of those security systems to ensure us that there won't be any breaches of taxpayer information. clearly, identity theft and refund fraud are an ongoing challenge for us. we have thrown almost 2000 people in jail over the last two or three years as we have increased significantly our policing of this area. we have gotten a lot of the amateurs off of the street, but we are clearly dealing with organized crime syndicates here and around the world. particularly, one of the stamps -- one of these scams that has surprised me with its longevity was about a year ago, we began to hear that there were people on the phone and calling people
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impersonating irs agents and threatening people if they didn't immediately give up their personal information or make a payment with jail, with criminal prosecutions, with seizures of their houses. we have tried to make it clear that as a general matter, as i've said for the last year, if you were surprised to be hearing from us, you are not hearing from us. our way of contacting you with letter. if we ever talked to on the phone, the last thing you'll overhear hear from an irs agent of any kind is threats that we are about to throw you in jail unless you pay us immediately or put money into a particular account. the good news about that -- the inspector general collects all of those reports and i get a weekly report from the aig. the number of reported calls is going up, the number of people who have fallen prey to this scam is down significantly. the ig has a record of over 400,000 reported scam phone calls. that's obviously not all of them, a lot of people don't call. it's part of our efforts, whether it's youtube videos for information or tax tips to
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remind taxpayers of the way that people will try and take advantage of them. last year we put out the dirty dozen, of the tax scams. this year to try to get more visibility about that, they put them out one a week so we would get people focusing on not only the people calling you impersonating the irs, but fishing expeditions where you get an e-mail and it looks like an irs website to go up to the details you will see it's not from the irs. the people again reaching out to try and get information from you that will allow them to still -- allow them to steal your identity. there are unscrupulous tax preparers, we said if anyone says just sign a blank form and i will take care of it, you should go find another tax it's an ongoing issue, this year our filters things to our -- thanks to our expenditures of some of the constrained resources on approved data theft are catching more refunds at the door. more people are getting letters from us questioning their 1040
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filing who didn't file yet. i told them the good news is that means we stopped the refund at the door, not paid the refund, and haven't contended -- have not contaminated your account without false information. we will continue, it's a major issue for us. we get millions of attacks on the system every year. thus far, knock on wood, we have been able to defend against those. it's one of my concerns about funding constraints, that we could become even more secure with more funding in those areas. but it is a high priority and we will continue to do whatever we have to do to secure taxpayer information from any threats of breach or theft. mr. hughes: what has been the impact so far on the affordable care act? americans now either have to have insurance or pay a tax penalty, so has the administration and the tax penalty proven to be a burden so far?
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commissioner koskinen: the filing season has gone swimmingly. you could've made a lot of money betting last january 15 months ago that result. the ability to implement all of the new statutory requirements and changes and how the season run smoothly has surprised almost everybody. we are delighted with it. part of the reason is i think that about last year, 91% of people used software to fill in their returns. 85% of people filed electronically. we worked very hard for the last couple of years with software producers and tax preparers to make sure that those systems worked appropriately. for the average taxpayer, the affordable care act is just another item in their questions that they get asked by the software. this year, 77% of people have just checked the box that said they had insurance. for the vast majority of people filing the affordable care act has been no problem whatsoever.
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thus far as well, the people seeking exemptions, the people making the shared responsibility payments do not appear to have a problem with that. we monitor the questions that come in on our call centers, we monitor the questions in our walk-in sites to make sure we catch any questions that were not covered adequately in our website. generally or the aca portion of it. we've not seen any indication that the information out there doesn't answer the bulk of the questions. we still get calls with people asking questions, but there are no gaps that we have found. the test of it is thus far, the system has worked flawlessly, it has gone smoothly, and everyone seems to be comfortable, preparers and taxpayers, in preparing the returns. low income taxpayers can go to any one of our 12,000 sites staffed by over 80,000 trained volunteers. last year they prepared 3 million returns.
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it a lot of people use free file on our website. 3 million returns were prepared that way as well. there is a of assistance available to taxpayers no matter the complexity of their particular situation is. mr. hughes: we are almost out of time, but before i close, i would like to remind everyone about upcoming speakers. ion ali, a best-selling author and outspoken critic of radical islam will address a luncheon next tuesday. ban ki-moon, secretary-general of the united nations, will speak on april 16. and navy secretary, ray mavis will address the club on april 30. we might have time for a couple more questions come up the irs is considering including section 527 organizations in its upcoming guidance on 501(c) exempts. what form with this guidance take?
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commissioner koskinen: one of our goals is to treat everyone fairly. there are 501(c) threes which are the normal charitable organizations, 501(c) fours are organizations which have been the focus of most of the discussion. and you have c5's, and others. congress established 527 organizations to be organizations that basically can spend all of their money on politics. one of the things we have been doing is looking at how all of those provisions of the 501(c) section of the code plus the 527 organizations fit together in terms of creating a pattern created by congress to rationalize your choices to whether you want to be. we're not going to regulate five
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27th any more than they already are regulated. the reference to it has been that you need to understand that that is a possible place an organization could decide to go or end up if it spent more than half of its money on politics, and of being regulated. the goal here is to include the 527's in the review of all of the other exempt organizations not to provide a new set of regulations or constraints on the 527's themselves. mr. hughes: your final question will do when it's game this -- will duke win its game this coming weekend? commissioner koskinen: with any luck, we'll have two games. i grew up in kentucky, i've had mixed emotions about how to deal with kentucky in their success. they are the favorites.
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people say you can take kentucky against the field for a 5050 that. -- bet. i am told they will have an interesting set of games. wisconsin is a great team. the first game, duke and michigan state of had a series of games. at this stage, they are all great and they are all playing well. anyone predicting is probably to some extent rowing darts against the wall. i think if you step back, you have to say that kentucky still seems to be the favorite as they go forward. there are those of us who think the other boys in blue, known as duke will do well. we will see. as i tell my son, it's why they play the games rather than letting you just mail in the results. [laughter] commissioner koskinen: thank you for your time. [applause] mr. hughes: thank you, mr. koskinen. i wanted to present you with the honorary national press club mug, i think it falls under the
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limit for it needing to disclose it on a tax form. so you are good in that regard. commissioner koskinen: you can either get a gift you can eat or share with people is under can't $25. eat this, but i'm assuming is less than $25. [laughter] mr. hughes: thank you so much for coming. i would also like to thank the national press club staff and broadcast center for organizing this event. if you would like a copy of today's a copy of today's program or to learn more about the national press group go to our website, press.org. thank you. we are adjourned.
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[indiscernible] announcer: during this month c-span is pleased to present the winners of the student cam competition. student cam is c-span's annual competition that encourages students to think about issues that affect the nation. students were asked to create a
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documentary based on the theme the three branches and you. eli kirzner ricardo marino, and arden siegal are our second prize winners. their entries focused on education. >> from this day forward, all students will have the a better chance to learn, excel and live out their dreams. [applause] >> in january 2002, something unique happened. amidst political controversy and the war on terror, the a bipartisan act of legislation went into place to bring all children up to reading and
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and mathematics by 2014. the year is now 2015. all children have brought -- been brought up to grade level right? >> we need to make sure students are measured. the means to measure performance are lacking. >> the question, did they succeed is complicated. in short, it depends. and what it depends on is where you live. >> it is true that future is already here, but it is not evenly distributed. we don't have those same resources in every community. >> here is a snap shot in two cities in southeast michigan. less than 40 miles apart detroit and ann arbor.
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they offer a striking contrast in their results to the federal mandate. of the 21 largest trial urban assessment measures, dps performed the lowest on fourth and eighth grade reading and math seeing the lowest did in the country. -- dip in the country. in 2013 only 13% of the nations first graders were proficient. in june 2011, governor rick snyder, with secretary of education i his side introduced , a revolutionary new experiment to improve michigan's lowest performing schools. taking the bottom 5% and consolidating them into a state run district. as a result formerly part of the
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the 15th goals formerly part of the detroit public school system are now in the hands of the educational achievement authority. >> during the time when the state had control over dps, they went even more in deficits, and were hemorrhaging students. >> many cited the lack of a democratic process to elect the board of trustees. seven out of 11 of whom are appointees of the governor himself. >> whenever you have someone who says i can decide on behalf of all, that is problematic. you are diminishing diversity you are diminishing different views, perspectives, ability to weigh in and have their voice heard. >> while the responses have been controversial at best in the
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decade after no child left behind, and arbor has charted a different path. >> we often do not have in our picture of ann arbor that one in four of our students come to us with economic need. >> with an array of financial pre-k, literacy afterschool and nutritional resources, the , ann arbor public schools has been able to approach the problem in a multitier fashion. >> it creates an environment where kids who are not at grade level have the opportunity to see success and know they are more than capable of being a successful student. >> the goal is to close the opportunity cap. -- gap. without the opportunity to go to museums code --, to go on trips
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our students are going to be somewhat behind. >> ultimately, the sanctions that the legislation threatened for schools who did not make sufficient progress in test scores created a sense of urgency in ann arbor, which has had the advantages of an affluent tax base and abundant resources. what have we learned in the last 13 years? what can we do better? >> when you do something on a major scale like this involving public education, it is critically important to break -- bring parents along. to bring the community along to have them understand what you are trying to achieve. what will be the outcome of this consolidation. that it will be somewhat better than what was. >> we have to think about the fact that these are communities that have been disenfranchised. they are economically stressed. they need all sorts of economic
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support, if in fact the schools and they are to thrive. >> in places like finland, they have a much narrower achievement gap, because they put additional resources into the school. they try to bring the kids at the level that they need to. they try to close the financial gap for the families. we are certainly not doing that here in michigan. we're almost doing the opposite. >> there are under flyers for everyone to pick up a bucket. if you expose the child to the education to make the connection between those who have and have not, everybody has a role to play.
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>> to watch all of the winning videos and learn more about our competition, go to c-span.org and click on student cam. >> next, larry summers and others discuss the effect of technology on the economy and workforce. congressional leaders gathered at the capital recently to honor retired golfer, jack nicholas for his public service. among the speakers was house speaker john boehner.

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