FROM THE OFFICE OF PUBLIC AFFAIRS

Mr. Chairman, I welcome this opportunity to testify on the recent attempt to lure taxpayers into needlessly paying for information about their advance payment checks. The IRS will provide this information free of charge to all taxpayers in a series of mailings that began on Saturday.

I fully share the subcommittee's concern and outrage about this brazen attempt to prey upon unsuspecting taxpayers. And I applaud your efforts, Mr. Chairman, to expose this unscrupulous activity through this hearing. As Justice Brandeis often remarked, "Sunshine is the best disinfectant." We will work with you, the Department of Treasury and all interested parties to help raise public awareness about the problem. We have placed an alert on our web site and we certainly would welcome any suggestions you might have.

The IRS is concerned about any scheme or fraudulent solicitations, particularly those that might rise to the level of criminal activities, such as mail or wire fraud. While the IRS does not have independent jurisdiction to investigate mail and wire fraud, we will work with the appropriate federal law enforcement agencies that do, such as the Postal Service, to ensure that any such conduct is addressed.

Mr. Chairman, long before this scam appeared, we anticipated that there would be enormous interest in the payments. We took great steps before and immediately following enactment of the Economic Growth and Tax Relief Reconciliation Act of 2001 to help taxpayers understand the process and to provide them legitimate and free information through a variety of channels.

After passage of the conference report to the legislation, we began to receive taxpayer calls. On May 31, 2001, in response to these calls, we provided on our toll-free lines the following general announcement before the prompts:

"If you are calling about the recently passed tax refund, there is nothing you need to do to receive this check. The Internal Revenue Service will send you a letter by the middle of July telling you the amount of the check you will receive and when you will get it.

The IRS will begin mailing these checks by the third week in July. Please note all payments will be made by check and direct deposit is not available. Again, there is nothing that you need to do to get the check." Our representatives on the toll-free telephone lines were also provided helpful scripts and answers to frequently-asked-questions to assist taxpayers.

As the President was signing the bill on June 7, IRS' Communications and Liaison Division began issuing a nationwide press release and accompanying fact sheets with the details of the advance payments checks. In the release, we stated that the IRS wanted to make this process as simple as possible. Taxpayers would receive a letter describing the check amount and the week it would be sent. We would also send a letter of explanation for taxpayers not eligible for the advance payment.

We emphasized throughout our communications that taxpayers did not need to call, fill out special forms or do anything else to receive the check. Commissioner Rossotti was quoted as saying, "All you need to do is open your mailbox. We'll take care of everything else. You don't need to do anything else to receive the check."

By our calculations, as of July 6, IRS staff across the nation answered 168 media inquiries, initiated nearly 400 media contacts to interest reporters to cover the story and participated in almost 370 interviews with television, radio and print reporters. It was front-page news or the lead story for many broadcasts.

IRS National Public Liaison also shared the fact sheets and releases with their key practitioner contacts. The Government Liaison Division staff in the field began briefing state tax administrator and local congressional offices using the prepared materials. At the same time, we posted on the IRS web site, the Digital Daily, a cover story on the advance payment checks as well as a special page on the advance payments.

On June 27, taxpayers calling on the toll-free telephone lines were able to automatically receive information both on eligibility for the advance payments as well as the check mail-out schedule. The information is available in both English and Spanish. Clearly, we have worked very hard to get the message out about the checks.

Mr. Chairman, as the subcommittee is aware, of the 112 million advanced payments notices printed, approximately half of one-percent or 500 thousand, contained incorrect information on the amount of the check taxpayers would receive. The incorrect information was the result of human error that failed to limit, in some cases, the tax relief amount. This was not an error in our systems. In order to reduce the confusion, the IRS will send corrected notice as soon as possible to the affected taxpayers.

Let me stress, Mr. Chairman, that the error was quickly detected and corrected prior to any information being sent to FMS for the printing of checks. Taxpayers will receive a check for the correct amount. We apologize for any confusion the incorrect notices caused.

Mr. Chairman, in conclusion, we want to ensure that taxpayers do not fall prey to the solicitation schemes. One of the best ways to attack this problem is by providing taxpayers with the specific information they need about their advance payment checks. Therefore, the IRS will continue to provide this information through a variety of channels and we look forward to working with you and the Subcommittee to address this problem. Thank you and I would be happy to answer any questions you have.