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tv   NYC Bar Association - IRS Town Hall  CSPAN  August 19, 2019 3:58am-5:20am EDT

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professionals on taxpayer advocacy, irs modernization, tax enforcement, international partnerships, and the future of the irs. this portion is about one hour and 20 minutes. >> thank you for coming out tonight. it is an exciting time at the internal revenue service. as i mentioned, our commissioner is coming up on his one-year anniversary. we have a lot of people at 1111 constitution avenue. there are a lot of new people coming on and a lot of people that have been thinking about leaving in the past, are thinking about staying. they know it is a new day. we have some amazing speakers to discuss hiring, staffing, and current priorities. and what we can expect in the year or two years to come. let me get right to introductions.
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to my right is mary beth murphy, commissioner of small business, self-employment division. to my left, is the criminal investigation division at the irs and nina olson, national taxpayer advocate. their bios are online. i will leave you to review them but they are amazing individuals. they have done tremendous work on behalf of of the taxpayers in this country and it will be a great evening. let me start by having each of them talk a little bit about the state of the irs in their division. and then we will go into some q&a and open it up to the audience for any questions you might have. mary beth, can you kick us off? ms. murphy: i want to thank the aba, the new york city bar for inviting us today.
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i am in my sixth year. when i look around at our senior executive team i think nina and , i -- nina for sure has the longest tenure. what are we doing? we have a really interesting role. we are charged with a mission to help small businesses and self-employed taxpayers as well as 40 taxpayers. help them understand how to meet their tax obligations. nd doing it with fairness, integrity to all taxpayers. when you think about the number of taxpayers that we serve, our customer base is huge and it is such a diverse work group. as i go around the country and see the work that we do, sometimes, i think -- i cannot believe that we do all that we do whether it be specialty tax, employment tax, excise tax.
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and on the collection side, we have seen a lot of changes in collection. we are responsible for 57 million returns filed annually. 6.8 million corporate returns. 7 million employment tax returns. 75,000 excise tax. 249,000 estate and gift tax returns. and then trust returns as well. about 35,000. we have a big job in small business. caroline mentioned the modernization plan and the new commissioner and i think they go hand in hand for us. we really need to increase the use of technology to really change the way we do business. especially in small business -- self-employment. we have to empower our employees. the modernization plan lays out some great foundations and then one of the things we will be
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working towards over the next couple of years -- i will talk about a few of them -- but you will hear some common themes and one of them is an appropriate balance of enforcement and customer service. and we cannot do that without engaging our employees. they meet face-to-face. they are the face of the irs. a face-to-face contact or over the telephone. we have been working hard. a couple of years ago, one of our big pushes was our future state which has involved into our modernization plan as well as our strategic goals. getting our employees focused on those and listening to them going forward. this last year has been really big. first and foremost for us, our biggest priority was tax reform. we were responsible for 29
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provisions in small business. we did not get any extra staffing to do it and i think we had a great team. we are on track. on target. we are in the process of getting ready to train and our commissioner has said we will put out our training so you can see that. it is not yet online but we are working with our communications folks as we finalize all of our training so you know what we are training our folks as it relates to tax reform. and the 29 provisions we are responsible for. other priorities for us -- the passport program. it has been hugely successful for us. it is a great program. taxpayers come to us. it amazes me the number of full paid taxpayers we see on a weekly basis. and these are taxpayers that have large balance due as well as small. that is working well with the department of state. and we really have not had any problems.
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i like to add -- does anyone here have any taxpayers with a passport case? a couple. we are continuing to work that program. you have had some? hopefully, it went well and you were able to get it esolved. in the process? ok. our non-filer strategy -- with a reduction of staffing, we have taken a hard look at non-filers. that is an area where we are looking for stakeholders to help us to figure out the best way to get these people to file again. we are looking at test and learn. many of you know some of the programs we have had -- the substitute for return program. that is a labor-intensive program for us as well as for the taxpayer as well as for the practitioners. we are looking at the refund hold program and how we can make better decisions using data. looking at data instead of doing the same things we have.
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we are looking right now at educational letters for taxpayers that may have stopped filing. we have nonfilers, stopped filers -- how do we get those taxpayers back into compliance? another priority for us is disaster relief. we have been lucky. we have not had any fires or bad storms but we are responsible for those programs as well across the irs as well as penalties and interest. we do service wide penalties. another area we are looking at as well is taxpayer digital communications. it is in its infancy that we have been doing unauthenticated -- hopefully, in the future we can use automated responses to give taxpayers basic answers to questions a half. we are doing text chats and a small number of single issue audits in our correspondence examination area. we hope to grow that. taxpayers are adopting it. they have to authenticate
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themselves and there are some challenges. security is paramount. we hope to increase the number of digital communications we can do with taxpayers. that is our state. we are hiring revenue officers and revenue agents. we are currently at about 18,200 in small business and our goal is to get up to a thousand or 22,000 the end of september. tor 22,000 the end of september. we have had challenges. i just mentioned to don that we have seen a number of folks -- we have made offers. it is tough for us in the job market. it is really expensive to live job
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market. it is really expensive to live in new york city, california, the boston area. had some have challenges but we are on track to hire about 750 revenue officers and 1200 revenue agents. new hires. we are excited about that. we have already started with the revenue officers who are in their first week of training. we will be on boarding revenue agents by the end of the september. the lapse of funding of the government slowed us down so we are catching up but we are really excited to get those new folks on board. thank you,ned --
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mary beth for the update. let me turn it to nina. can you tell us about what is happening in the advocate office? know, this isyou on the clock, running down. i will be retiring july 31 after 18 years. this will be one of my last public appearances. i have been spending a lot of my time trying to think about how to prepare my office to hand it off and to ensure the work we are doing, protecting taxpayer rights, continues. that is my focus. and i have a very short list of some issues i feel i need to tidy up before leaving. one of the things that is happened to us over the years -- when i came in 18 years ago, we 2200 employees in 74 offices
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1000 650e are down to employees spread out over 79 offices. we have been shrinking our offices over the last five years. so that we can open up more offices. irselieve that as the becomes more centralized and disappears from having a geographic footprint around the nation, that we need to be there. --gress has said in the law my position is described in the internal revenue code. that i have to have at least one office in each state. we have been opening more offices that are smaller. one is in elnt paso, texas which i will visit before i leave. we are trying to get out there in the community with fewer employees which is difficult. ci, or anyone else that gets to decide how many cases they will start in a given year, we do not.
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if a taxpayer is experiencing significant hardship, they call us and the case comes in. sometimes, my offices try to reject a case but then they email me. they let me know my office is rejecting them and then they get back into the system. congress has told us that where taxpayers are experiencing significant hardship as a result of the irs, they get through the door. i do not know how to say -- you are experiencing significant hardship but you do not get through the door. i don't know how you do that. it has been difficult juggling the cases. some have been brought on by systemic problems in the irs to verrilli simple cases but they take up people's time. -- that is whyng we are concentrating on some fixes in the fraud detection system. as you file returns and are asking for a refund, you go to the fraud detection system.
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it has a high false positive rate. 81% of the returns last year identified for questionable related to identity theft, but like inflated wages or a mismatch of information, 81% of the returns the irs stopped were legitimate. high falseabominably positive rate. we have been really focusing systemically on getting that fixed because that has been a large portion of our cases. 287% last yearby from the year before and if we could get them cleared out of our system, we could do a lot of good things. mary beth mentioned the modernization plan. this is something in my annual report to congress. i made the number one legislative recommendations that the irs needed multiyear funding in order to replace its archaic
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1960's based databases. has the two oldest databases in the federal government according to the government accountability office and they happen to be the individual master file and the business masterfile which are the two official records of the taxpayers account. let us stop and be afraid of that. we really need to modernize those databases. butjust lift them up actually replace them. and all of the plans on the digital and modernization plan hinge on us getting into 21st century technology and if we cannot, we will not be able to deliver meaningful digital accounts to the taxpayers. times that the employee says i cannot see that because theit is systems do not talk to one another. all of that needs to be changed and congress needs to fund that
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with a multiyear stream so we do not start and stop and start and stop and never get ahead. but on the topic of digital -- and this is something i have been focusing on a lot with all of the commissioners i have worked under, all 5, 6, or seven depending on if you count of the acting was -- 41 million taxpayers in the united states, taxpayers, people that have filed a return in the last three on ourbased statistically representative survey that we did two years ago -- 41 million do not have broadband access in their home. 49 million of the 150 million taxpayers that we have filing returns each year. strategy thation does not understand that you personalrovide in service for taxpayers, person-to-person service, and on the phones as well is moving them to digital is going to not serve the taxpayers. it will create harm to them that
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mary beth mentioned and that they will have to deal with the downstream consequence. one of the things i have been thinking about in terms of the digital future and i will throw this out and then turn it back over to caroline is i have been noodling about and i will probably write it in my report, is something i am calling the taxpayer anxiety index. and that is that that is a way to think about how you want to communicate with taxpayers from perspective.s let us say they are perfectly comfortable when they filed their return. they are willing to check online. you can do an analogous situation to you. you send something in and you can be be checked to see that the document has been received. you are fine about that. you go in. that is great. it saves you a phone call. but let us say you are waiting for a response? checko back in online to
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and the message has changed. or the message is the same. or the message goes -- we are , check at your return back in two weeks. suddenly, that clutching feeling in the thread of the taxpayer -- your anxiety has just increased. and you may even be willing to check back in two weeks but another time, if you don't get an answer, you are going to pick up at the phone and try to force people to digital. while their anxiety is increasing all of along the way which will undermine what you are trying to do in driving compliance. the practitioner an elegy is you get in there and you can see a document has been received. and now you're waiting for a response. you get no response. you are going to want to call. you have a paying client. you also want to know what the irs is thinking about that document. if you are getting pushed online and cannot get to a live human frustration may be
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because there is not a meeting of the minds. understanding where anxiety levels are and where you need to have that person-to-person interaction should be the driver of our modernization plan. and i fear that with the budget the wet -- the budgets of the way they are, it puts the driver of the modernization plan to how many people we can get on my because it is cheaper and eliminate some employees that would be answering the phones etc. i am watching that like a hawk. whether i am inside or outside the irs. i can talk more about the passport program. i do not have the same sanguine view of it. offshore issues. international issues. people trying to resolve multiple international tax issues with regimes that have very different concepts of taxpayer rights and dispute resolution. those are all things i have been looking at.
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mentioned this is her last appearance in her tenure and it has been an amazing tenure. we are extremely grateful to have you here tonight. questions so i hope you brought them with you. there is a treasure trove of information out there for the taxpayer advocate see -- advocacy office. speaking of taxpayer anxiety, he is aurn to don. career agent. the eight years. time flies. with the service. he does.ows ci like we are so lucky to have him as chief and his deputy chief, erik kelton, tony is in the audience. be thesereat place to days. not as a target but as an agent
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under this leadership. tell us what is going on. a -- wewill start with will start with the fact that i'm not a morning person. and add to that, i just came back from a 10 day trip to scotland and ireland so it feels like it is about 1:00 a.m. in the morning. be here.o and honored to be here with my colleagues. with nina and mary beth. we don't do this enough. this is a good and diverse panel. and caroline, i have had the pleasure of working with and the doj. i am 28 years with ci. i am a cpa as well and have had the unique experience of basically having almost every position within ci. knowingxperience basically every corner of the organization and all the work that we do. it is an exciting time.
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we will talk about some of the priorities and initiatives. it is a great year for us. we celebrated our 100th anniversary as a law enforcement agency. not many law enforcement agencies can say this. oneting with six agents hundred years ago, and tradition within ci. -- to leadis agency this agency is incredible. in my 28 years, there are not many where we were not led by a career agent. i think some of you are familiar with us. i will give you a quick overview of the work that we do. that hase only agency jurisdiction over federal tax crimes. i like to say that if you hear about or read about any federal criminal tax case, there is 100% were involved in that. we have a much broader
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jurisdiction than that. i also like to say that if you hear of any significant financial investigation, money laundering, cyber chase -- cyber case, there is a very good innce that ci was involved that as well. i always say that i believe we have one of the largest and broadest jurisdictions of any federal agency because of the ability that has the text restriction. having jurisdiction over money laundering opens up our ability to be involved in literally hundreds of predicate offenses. we are also heavily involved in bank secrecy cases. that being said, my priority is to make sure that we have our core mission coverage. the tax cases. we are the only agency that can do that. staffing, we have about 2100 special agents down from about 3600. about 20 years ago. i have been here for the height
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and for the level we are at now. it is where we were at about 50 years ago. some of your not old enough to think about what the world was like 50 years ago but if you are, think about how many more people, how many more tax returns are filed, how much more complicated the system is with fewer people. substantial declines, we will talk about the good news, but the decreases create challenges. it is a perfect storm. a 5-6 yearhave over period, you have 1000 agents leaving. and that is leaving for optional retirement.
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1000 of your most experienced employees are leaving. have only hired about 250. two or three classes of 24 agents each year over the last five or six years is not enough to keep pace. we are no different than any other operating division. nina and mary beth both talked about their staffing. we are all competing for limited resources. the hiring -- there are brighter days ahead. we talked about the operating divisions hiring. for us, we have unique challenges. we do not have complete control over the hiring system. we set the parameters and the bar for who we will hire but all of our agents go through the federal agency in georgia. to 100 federal agencies competing for space at that academy. almost every federal agency is hiring so there is intense
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competition. it is ironic that we are in about mode and worrying getting our agents through it. i spend a lot of my time -- i talked about the first priority being the protection of the core tax mission but the second is the hiring. getting them in and getting them trained. our agents go to training for six months before we release them into the field. and then there is an extensive on-the-job training program. we are open to hire between now and the end of fiscal 2020, we hope to bring on 300 special agents. a significant uptick. also recognizing the reality is 140-150lose about agents a year through optional retirement. not as great as it sounds that still fantastic news given the recent climate. i enjoy doing the panels with other folks from other operating
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divisions. talkf the things i like to about is our role in tax administration and that ci is part of that role in tax administration. the commissioner has reinforced that message repeatedly. but i think about -- i heard and have heard the former deputy attorney general rod rosenstein speak a number of times in one of the things he spoke about a year or so ago that really resonated with me in terms of federal law enforcement and law enforcement in general is this idea of deterrence. i will get the quote exactly right that the idea was -- it is not so much the cases -- the number of cases that we prosecute but the number of crimes we prevent. cinking about how critical is to the overall ecosystem in tax administration really being the backbone of voluntary compliance. theof the things that sets u.s. tax system apart from other
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countries as having a really strong criminal tax component and recognizing that for those taxpayers that are compliant, that there are avenues for them, service avenues that nina and mary beth talked about but equally important for the thaton of the population is criminally noncompliant, that there are repercussions for that and the knowledge that you can go to jail for those criminal actions. and that the general public understands that there are ramifications for that and they see that there is fairness in the system. i talked about -- and a couple of folks have talked about the new commissioner coming in. he is a -- if you have heard him speak or knew him before, you know he is a huge fan of enforcement. he talks about enforcement. he talks about criminal enforcement repeatedly. and one of the things that again resonates with me is -- and he the criminal
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enforcement is a service to those who are doing it accurately and correctly. and i think that resonates with me. that deterrence impact we have. but he does talk about the importance of the criminal tax system. and also making sure that we are a part of the team. that it is one irs. ci is not a separate entity. we are part of one tax administration. we are hugely thankful to have a commissioner that is supportive of both ci and look forward as caroline said it is fast approaching a year here. a couple of priorities. hiring asbout tax being more on the tax focus. 75% ofow, we are running our investigative time on tax work which is at or near an all-time high for us in terms of
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the percentage of time we spend on tax cases. come ifother thing you're not that familiar with the criminal tax work is we do not control -- we do not have complete control over our cases. we have a lot -- we take a lot of information in, information comes a lot -- from a lot of but at the endes of the day it is a partnership with the department of justice. there is not one case that we cannot bring without doj whether ,t is a tax case, a nontax case and that means we spend a lot of time and effort with those relationships with doj and aligning the priorities of the department of justice and all of the judicial districts with the work that we do. and the other thing that i talk about is the goal is really balanced enforcement. we have many priorities.
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if you just take that tax jurisdiction that we have, you have employment tax, international tax issues, return preparer, identity theft -- the list goes on and on and on. many priorities. all of our time on any one of those areas. take employment tax. we could deploy everyone of our agents on those cases but our job is broad enforcement. we are responsible for every one of the program areas. the threats in terms of money laundering, counterterrorism isk, things like that and it all about selecting the right cases. broad program coverage. our cases take on average about 18 months to investigate. and that is not counting the time where it then goes to the department of justice where it requires additional work. it really behooves -- case
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on theon is critical front end for us. hiring -- iut the won't spend much more time on that other than you bring 300 agents to-- a critical component our hiring process is an on-the-job training phase. these cases take a long time to work. when an agent graduates, we pair them up with an experienced agent for their first case. you think about the impact of taking 300 agents, not completely off-line, but part of their time to make sure we are properly training the future agents of ci. we are no different from the other operating divisions. we put a lot of time and effort into the training. what comes with that is we have a staff -- we have to have many people involved in the training. to deliver the training. to service on-the-job
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instructors. -- a lot of my time and effort goes into that process. prioritiestigative -- employment tax. this will be news to the ears of caroline. we work closely -- when she was bolstering and looking at our employment tax program both civilly and criminally. about 10% of our investigative time spent on employment tax cases which is a significant uptick for ci. we have more than doubled in terms of our investigative time. definitely a bright light in terms of fraud referrals -- a reduction of revenue officers and special agents. we have seen an uptick in fraud referrals. we have also been able to self develop through data analytics tax cases.employment
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a lot of cases are in inventory and a lot of great sentences in the last few years in terms of the employment tax. international tax enforcement. the last 10 years, we have done incredible work going back to the ubs case. facilitators, financial institutions over that 10 year period. we have had a lot of success. up through the swiss bank program. we continue our efforts. we are constantly refining and looking for new rap -- new avenues for whatever not test a program where we are the only that stationss employees overseas and we are adding to that. we are in the process of adding --attaché to dubai constantly looking at the footprint where the flows of money are. that is a huge financial obligation when we put someone
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overseas representing the u.s. government. and to increase that is a significant signal to us and the importance of international tax enforcement. we also have an innovative approach in the international tax arena called the joint chiefs of global tax enforcement. five.l it the j we have counterparts in the u.k., the netherlands, australia -- an outgrowth of oecd. getting our employees to work more closely together. sharing training and methodologies looking at particular threat areas. we have been up and running for about a year. i mentioned that cases take about a year and a half. we do not have any public successes but an incredible amount of cooperation, training. hosting bute are the world bank in washington,
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d.c., a cyber summit which is really focused on the methods and techniques of looking at cyber crimes and cryptocurrencies and things like that and we will be hosting many countries that we have invited to that training. we have done a lot of work traveling around the world in training our counterparts in how to investigate those crimes. cyber crimes in cryptocurrency are probably next to data analytics that i talked extensively about. we have put a lot of resources into investigating cyber crimes. whenever there is a lack of visibility and transparency into a financial transaction, the risk of fraud goes up. what level of fraud we will see in cryptocurrency -- i don't know. i can tell you that we have criminal cases in the field right now. inget a lot of information about noncompliant taxpayers in
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that area. we are looking at it. we have trained our workforce and mandated that all of our agents do some basic cyber training. i can put it this way -- i think it is similar to how international cases were a decade ago. some cases had an international component but you did not see it in every case. now, it is rare to have a case that does not have some type of international component. the reason i think this area is so important is i think it is not going away. --m not saying that we will that it is going to be the sole part of a criminal tax case or a financial crime case but i think more and more coming you will see cryptocurrency transactions and cyber elements to every one of the cases that we work. and i want to be in a position where our agents are suited and trained to be able to investigate those types of crimes. we are on the cutting edge of this. we have been involved in every major nontax cases -- the
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irsnet takedowns had special agents involved. all of these cases involve the filing of the money. we have put in a lot of time and effort into that area. data and technology. every part of this service is working on this. i don't think there is a private or government entity that is not putting a lot of resources into this area. but we have had a lot of success in ci. we have an unbelievable amount andich data within the irs it would take the smartest group of agents and employees that i have years to make the connections just by looking through terabytes of information that we have. it is the combination of really strong analytical tools with really smart people and that is agents and data scientist.
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we have had some great success in developing models, algorithms, and partnering -- seeing what other law enforcement agencies have our other with operating division counterparts within the irs. looking at academia to help us out and maybe contribute as well as internationally. there are a lot of incredible tools out there. looking to diversify our data and in terms of analytics. i often say that data and data analytics is the least law enforcement thing you can talk about. you won't hear anybody else in law enforcement talk that much about it. but when the work you do is financial crimes and it is tracing money and it is financial transactions, it is incredibly conducive to the work that we do. and we have had some incredible success and we are investing heavily trying to higher data
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scientist. i say trying to because everyone is trying to hire data scientist. finding them and trying to entice them to work for the government is sometimes a challenge but we see huge potential in the leveraging technology. it is an exciting time. a lot of great stuff going on. with that, i turn it back to you, caroline. caroline: thank you. i'm going to ask the first question because it is a question i get when we go to conferences together. can you tell us what is the data scientist and what do they do in criminal investigations? don: geez. we do have some. trained -- the first part of the training is eight or nine weeks in constitutional law and how to use firearms and defensive
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tactics and the use of force. and then how to investigate a case. the data scientist know how to useate the system's and we palantir. it the agents have access to and are expected to use it but some of these more sophisticated tools require a data scientist. and it is not just data scientist. it is folks in those analytical fields. statistics, economics, mathematics, modeling. iton't want to pigeonhole just to data scientist. ci idea is in the future of and the future of the irs is more than just special agents. usis folks that can help leverage technology and work hand-in-hand with the agents to leverage technology to the best of their abilities. one of my concerns about the
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focus on data -- i really applaud the investigation for its work in that. is that the irs is focused on data to identify the noncompliant taxpayers and they have not used all of those very tools to help the taxpayers who are trying to comply. and when of the areas i have been focusing on and this is my short list before i leave is to agree to create an economic hardship filter. we have a time of data about people's financial situation. we know, based on their last filings or other databases that we have access to come in even what their family structures are etc. what assets they own. of we have all sorts collection powers where we do not have to go to a judge and ask them to let us levy against the bank account or to garnish
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their wages. we are required by law, by law, required -- if the taxpayer has economic hardship meaning they cannot pay their basic living expenses, we must release that levy. we have identified all sorts of processes including allowable living expenses to identify what the level is based on family size where a taxpayer cannot afford to pay their basic living expenses. i just described a formula. we have all of the data on income. we may not know cash income but we have a lot of data about income. we know family size. and we know the threshold for economic hardship. that is a formula. an out the rhythm. my office has created an algorithm that we applied towards or against the taxpayers into we found that 40% of the , of the taxpayers
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who entered into streamlined installment agreement which is about 70% of our installment agreements -- 40% of them had incomes below their allowable living expenses meaning they could not afford to pay the debts they were paying. and in fact, it has proven that we saw that 39 percent of those 40% actually defaulted on their installment agreements. we set them up to fail. why we are spending our valuable resources dealing with those folks when we could be looking at folks that do have the ability to a -- we are getting the low hanging fruit into making payments that by law they should not be paying and we are not using our data in order to identify those taxpayers. but an indicator on their account so when they call us we can say to them -- let us spend some time talking about your finances so we can find out whether they cannot afford to pay really. that is all i am asking. we could also use that to screen
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them out of the private debt collection program which also has 40% of its installment agreements, the taxpayers are at or below their allowable living expenses. and so, that is on my list. we avert shown it can be done. we published a blog this week that said -- ok, the irs or the commissioner has come back and said is there a federal poverty level that could screen these people out? and i have published the data showing that the poverty level is a pretty good measure. what i am looking at for the irs in the future is that they not only used data to nab the bad actors but they also use data to assist the taxpayers who may even be making mistakes but are trying to comply. and if you do not do that, then you lose trust of all of those taxpayers in your system. and a colleague and friend of mine in the audience here from the university of vienna, and economic psychologist said if
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you do not have trust then you're going to have to control. meaning you are going to have to go after these people. and we don't have the resources to go after these people so we really have to think about the ours to build trust from taxpayers. and some of that is using data in a proactive way to assist them. that is a good point and maybe a good segue to mary beth in terms of sdsd. how are they using data in new ways these days? example of where we are using data is the employment tax. as you know, the employment tax -- we did not get to taxpayers for a year or sometimes a year and a half after they had accrued what we called pyramid employment tax and now we are using data. we are running data runs to see
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when the deposits were made. do we see any indicators that they were having trouble paying? were they late? and now, within eight weeks we ae getting out from when taxpayer misses a deposit and sometimes earlier. we are seeing great improvements there. and we are also using data in the non-filer programs. we have a program assessment model so we using models to run through different scenarios to see how we can help taxpayers in filing returns. what is the best model? and we are partnering with nina on some notices -- traditionally, we send one type of notice to taxpayers. we have what we call the calming notice. we cannot answer the phones. we cannot control how many taxpayers have balance due and we have seen a record number of taxpayers call.
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after the last funding, we saw backup demand. april 15 we had an 82% increase in the number of calls from last year. we are using data to look at what kind of notices -- we developed a notice, five different ones. what we ended up with is using because different taxpayers respond to different kinds of notices. looking at their behavior, howraphic location, to see we can get the attention of a taxpayer. we use different language, color, different fonts. looking at taxpayer behavior. that is a huge indicator of whether someone is going to pay and what prompts them to pay. and then on the exam side, we are constantly looking at our business rules and filters and applying more data to that. to see howh lb and i
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we get the best case election. caroline: we have heard from field collection in the last year years about hiring new gsenue officers, at higher levels. more training. and a focus on behavior modification. with the datalong analytics and trying to do taxpayer service in the collection field? >> it is a balance with enforcement and customer service. we increased the grade level for revenue officers. the journey level is now a gs 11. it was a gs nine. revenue agents are now gs 12. training is going to be challenging. 750 revenuee officers, we have to take people off line to train them. rehirear, we will try to folks. we sent letters to folks that retired. what they want to come back?
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try to get some of our past trainers. wantas a concern that we to go out with the best people and it takes a while to get up to speed. for ae been with oji year. the commissioner has asked us to look at the collection work and so we have a lot of activities around how data can help us get to the best case. don't nina's point, we want to be pursuing cases that result in a non-collectible status. and i'm going to throw this open to everyone. there is a lot of tax in the news these days. what did not get a lot of attention in the news is the near flawless filing system that irsust experienced with the . we went through a time where tax reform was an act did at the 11th hour in 2017.
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mary beth talked about her team having 29th provisions with no additional staffing. having 29 provisions with no additional staffing. answering questions from every income level. i think there is somewhat of a misconception that the taxpayer advocates are focused on --. that is not the case. endurance and the the long shutdown that had a significant impact on the employees of the irs and their personal lives, they came through that filing says dumb essentially with chaim -- that filing system essentially with high marks. now that we have gotten through that filing season and may be focused a little more on enforcement, we have heard a little in the news about the high wealth audits.
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and whether such audits will continue. i toss that to you mary beth. can you tell us about what is in store in that area? >> yes, those audits will continue. we identifiedid, our work through an audit selection process of across all different -- different income levels. to all returns to identify potentially noncompliant taxpayers. and so, in addition to these -- ourorked in threshold is $10 million and below. those will continue. i am sure you have heard the commissioner speak employment taxes something we are pursuing. there are several other programs that we are working across the irs. caroline: we should
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expect those to continue? >> absolutely. the perception that the taxpayer advocate may be focused on low income taxpayers. that is not been my experience. ms. olson: we have a lot of individual taxpayers coming into our cases but they are taxpayers of all income levels. and certainly, the filing season results in people's refunds being held up and they are desperate. we also get very wealthy taxpayers or corporations that are desperate for their refunds as well. we have in recent years with the uptick in looking at offshore theinternational taxpayers, taxpayer service to international taxpayers is a standing will he poor. there is no toll-free line. you cannot email the irs and get
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a response. therefore, you have to go on a whole line or mail them a letter. good luck with that. unlike criminal investigation, the irs a few years ago eliminated, about the time that -- was enacted, the -- there is no one on the service side even as we have ramped up passport programs and offshore initiatives. a lot of those cases come to us to resolve. i have been looking at establishing local taxpayer advocate offices overseas. i figure we will get some candidates for paris. would be something, even if we had just one person and a secretary over there and worked at the cases in the u.s., we would at least be able to assist
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and educate and find out the kinds of systemic problems people are having. we really do get all sorts and i do want to say this -- i don't know how many of you have tried to bring a case to the taxpayer advocate service and maybe you have had success and maybe you'll have not that congress has recognized that the cost of representation can create a significant hardship. that is one of the statutory thenitions in 78, 11 of code to define hardship. if you are working on a case and it could be something as simple as you cannot find the person that you need to in the organization. it is a simple problem. but you are spending hours and hours trying to find the person. that is something you should go to the taxpayer advocate service about. we can find the person or send the case and tell someone to work the case. and then, we have many more complex issues that often raise
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to my level and i have attorney advisors on my staff and some of you may have worked with them and may have had cases in my office. worked together were issued a taxpayer assistance order ordering the irs to do something or not. it really is a grab bag of issues. right now, one of my major issues is looking at the amish. the internal revenue code was changed in tax reform to require social security numbers for the amishtax credit and the do not believe in participating in the social security system because they depend on themselves and not the government for assistance. they also do not claim the earned income tax credit. dependency had exemptions come there was a process that the irs has used for about four decades with the amish would come in, prove they were amish to the social security department, the social
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security agency would tell the irs that they are approved and every year they would file their return and before the return was processed, the irs would have them file paperwork to show that their children existed and that we would file their returns. the iris has refused to do that this year because the child tax credit requires a social security number. a vigorousg response. i have already raised this in congressional testimony. i think this is a violation of the religious freedom restoration act. and several other provisions. we will see where we go with that. it is rare you get a constitutional issue and tax but we will see where we go with that. i'm doing my best. caroline: if you are sitting there thinking that your client would not benefit from a 911, think again. in murphy: we worked on
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international case, a multimillion dollar case, it just came to resolution. and we worked for many months on a very complex case. ms. olson: it was a difficult case. without giving details -- the relationships had really melted down. and the intervention of our office -- i kept saying to people -- i don't know the right answer on the case that we need to keep working to get to the right answer. and it took -- i think you can say that the intervention, and it really was one of my direct reports who was able to keep trust going on between the different parties so that you could get an answer that nobody was happy about but that everybody could live with. ms. murphy: that is usually a sign of a successful sediment -- settlement.
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caroline: we saw lot of intervention in the offshore voluntary disclosure program. which leads me to the new voluntary disclosure practice that was announced at the end of november, 2018. i am sure most of you in the audience are aware that the offshore voluntary disclosure program that was first announced --2009 and went for about went through about four iterations came to an end in september, 2018. we all waited anxiously to see what was coming next. it came out on november 29 in a memo dated november 20 with provisions and procedures for the practice. a practice not a program. it is not a program in the sense that you're familiar with. it is still in its early stages. i thought the audience, and i know i, and very interested in hearing how things are going. let us start with where we walk
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into the voluntary disclosure practice with ci. can you tell us what you are seeing with pre-clearances? odpd.ft over is from don: i know whenever i do a panel with caroline that i will get voluntary disclosure questions. i cannot speak specifically. but the downward trend of the voluntary disclosures continues. turnaround time on 30-60earances is running days. there may be some outliers in that area. volume.ot seeing a huge -- continuendle the to handle the intake process. the numbers significantly lower than they were a few years ago with obdp.
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those numbers have not been publicly released. there is not a lot i can be specific with their caroline: are you seeing an increase in domestic related disclosures versus international? don that 75% domestic a couple of so definitely an uptick involuntary disclosures. >> the numbers that have come directly to you, but the ones that have actually -- the 2009 and the 2011, we publish those numbers, so that went through the disclosure program. i want to make this point, we had a whole conversation internally when we wanted to publish the numbers in my annual
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report to congress going to the voluntary disclosure programs. large business international said that was official use only, and i said then why are you disclosing earned income tax credit audits. why are you different? and in fact, the privacy counsel determined that it was an official use only. so i think you just made the mistake of having me on this panel because i think that -- i mean is very early, and i'm not saying we should do that now, but those numbers, i do not believe meet the official definition of use only, and i do have a lot of backup on that. and don's defense, i did not warn him i was asking that question. nina also raised her annual report. i won't flag the audience and have you raise hands if you have read the annual report, but if you have not, i urge you to read
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the most recent annual report and maybe if you have some spare time, which i know many of us do not, but if you do, go back and read the old reports. these are fantastic publications. there's a tremendous amount of time and effort that goes into these. -- top 20 issues issues that are addressed in detail and i guarantee you if you pull up the most recent report in you read those top 20, you will find at least one, if not 10, that apply to your clients right now in retained matters. so if you're not reading this really it should be the first thing you read when it comes out . a little commercial there. question,e ci, last have any of the cases been referred to austin for exam? >> i think under the new
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process, they all go to austin. the ones under process this year have all gone to austin. >> for those of you who are not familiar with the process, the new practice requires the taxpayer to come in before there's a triggering event, before the irs learns of their noncompliance, they have to go back six years, prepare the returns or prepare amended returns. they have complete, very detailed disclosure forms that they submit and every voluntary disclosure is now assigned for audit. that is a tremendous difference from years past where domestic disclosures, you would come in, file your returns, and oftentimes you would never hear from the irs again. you would get a notice of demand for the tax due. you might have some automatic delinquency penalties. if there was an audit, it was rare. they have turned that box upside down. you are automatically assigned to an audit. it is assigned to revenue agent and it is very detailed audit.
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there is no guarantee of a closing agreement at the end, but now i want to shift it to marybeth and say what are you seeing in terms of exams in the voluntary disclosures these days? numbers, butve any it's a small number so far in fy 2019. we are kind of surprised at the number. 80% of those that we received were submitted under the new program. point, domestic is a much higher number. it's really not new, it is a long-standing program, so we have worked these cases before. you talked about the standard look that policy, we are sticking with that policy and we're just working through the cases. it's a very small number.
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>> and now we do have a penalty framework under the new practice where a taxpayer has to agree are generally needs to anticipate one simple fraud penalty based on the tax at the highest year in the six year look back at there is an undisclosed for an account, they penalty which is 50% of the high balance of the account during the highest year. so it did pull from the odpd pieces here so it is a new process, but it is based on the voluntary disclosure practice that was in the irs for decades. closingy offer agreements at the end of each exam? >> we will. to the taxpayers of the representatives have to request a closing agreement or will it just become par for the course? >> it should be par for the
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course. quick so if you're in one of these exams and you haven't been offered a closing agreement unless there's a reason why you don't want one, which i would love to talk to you afterwards if that's the case, but as for the housing agreement to bring finality to your client. >> i just want to make a public service announcement. whenever you're working with one of our agents, you should feel free to ask them any questions, and if you don't get an answer, go to their manager. we issue guidance to employees. we hope they always follow it, but it is you're right, and i would rather have you asked the manager question and i get an email. i don't like getting an email, but i will go to that manager. free to freak -- feel talk to the brevity agent, you can talk to the territory manager and in the area director in any of these cases. >> i have talked to other
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practitioners that are always reluctant to ask for manager information in the middle of an audit because they think now things are kind of taking a turn and if i ask now on going to take this good relationship i've built up over the last six months and it is going to go awry. best practices, when you first start an exam or a collection inquiry, ask in. maybe suggesting to the revenue officers at the outset, i am so-and-so in here is my leadership chain. it takes it out of the adversarial context and it's just more information just like all the publications you get when you sit down in your first meeting with the revenue agent or revenue officer. >> in the past, whatever the revenue agent was doing, it would go up to a technical person and that technical person
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may reverse what the revenue agent had proposed. problem was that the taxpayer would never be able to have access to that technical person and would not really be told white was being reversed. that has been the source of many cases that have come into our office. that, becausetand i have technical advisors in my organization and they should be talking to the taxpayer or the representative if the case gets referred to them. i just got an email this morning from a representative who was giving me an example of a technical advisor who had gotten it wrong. and recognized they were not understanding the law. so i don't understand that secrecy, and there has been a great deal of resistance. as a matter policy, my understanding is that the technical advisors will not talk to the reps to explain anything.
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you don'tback to if have trust, you have to control. a lack of very much trust and that causes communication to break down, so you don't get a resolution at all. where theon't know technical advisors are acting in this new program. >> i would have to get back to you and i will email you the answer to that. we have been asking our tech services folks, our technical advisors to reach out to the remedy agents. the revenue agent often time doesn't know they have reversed a decision. this is a nice segue into broad referrals that don talked about. don, can you talk a little bit
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about the training that ci has been doing with the revenue officers in this area over the last several years? about 7% of our cases .re fraud referrals up ands a process set these are fraud technical advisors. the intermediary between a revenue agent and a revenue officer before a fraud referral is made to keep that separation there. want a lot of work, we fraud referrals. the commissioner is a big fan of the fraud referrals and we are trying to, with the reduction in resources, we have seen a similar decline in the number of fraud referrals. i expect my senior leaders to be
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out making the contacts with the other operating divisions and part of that, we don't have complete control of the cases that we work, and trying to educate the revenue agents and officers on what makes a good the badges ofof fraud. more so, to get a case through trial or through the legal process. sometimes we will bring in a doj tax attorney to talk about, somebody who has taken a case before a jury to explain to them it's not just ci saying you haven't met the threshold, but this is what it really takes to make a criminal referral. they have a lot of resources to support it but in the field we do a lot of work with compliance counsel, just trying to get together all the operating division heads to talk about
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what are the current trends or threats in a given area and just reinforce that it is a vital part of our case intake process. of cases from the department of justice and other federal and local agencies, whistleblowers, you name it. of the areas where we can do more that has suffered with the reduction of resources, were trying to reinvigorate the process. >> we've been talking about employment tax and how that remains a high priority of both the irs and department of justice. often i'm asked how i tell the difference between a civil and employment tax case when there is noncompliance and are criminal employment tax case. you see the similar language between the trust fund recovery
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statutes in a criminal statute in terms of willful noncompliance. can you speak to what types of factors ci would look to in terms of determining whether to pursue or select a case for prosecution as opposed to kind of throwing it back over the fence? >> that is a really hard question. i talked about the fact that we cannot work all of these cases. i think that marybeth's collection folks could send us 1000 fraud referrals. there are so many cases out there and it is all a fine line in the employment tax area. much to't help us that work 300 criminal employment tax noes in new york and employment tax cases in other parts of the country. a special agent in charge of a field office has a lot of responsibilities and they have to make sure that in each
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judicial district that we have brought some employment tax cases so it comes down to difficult decisions. you have to select the best cases, the most impactful cases, recognizing that we can't work them all. there's many other cases that we have to kick back or we never get them collection. we do analysis about geographically where have we had criminal -- employment tax cases in judicial districts and try to identify some judicial districts that we haven't had employment tax cases in a number of years and share that with our counterparts to be on lookout for cases in that area. but it is a fine line. lookingot always just for the employment tax cases where the money has been funneled into cars and boats and things like that. cases that a lot of haven't involved that type of conduct.
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the more specific is, we have to be selective about the cases that we take and they have to be broadly dispersed around the country. >> speaking of trying to figure things out on the taxpayer side and look the curtains, one way the tax -- taxpayers can get some insight into what is happening in the irs is to request a copy of the administrative file. we often do it in exams, we might do it in a collection case. there has been a trend over the last couple of years, and my experience, where either the revenue officer or the revenue agent or perhaps an appeals officer will direct us to the irs disclosure office and say you should file a freedom of information act request, rather than just hand over a copy of the file. i remember years ago when i was a junior lawyer i would walk over to the irs office across
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the street and i would sit there, we would have a portable copier and we would tap and copy the admin file. i went to see if marybeth can comment on whether there's a change in policy and terms of getting information from the irs regarding your case and whether there is a reaction from the revenue agents when those requests are made. that we say that no, it's not a new policy. memorandumissued a to our revenue agents and revenue officers reminding them request is not required in these cases. you have the right to it, you need to ask the revenue agent or revenue agent manager but you -- i'm not sure why the starting but we did issue of a random -- memorandum. going to go back and reissue it
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again but is not required. >> with a case has been referred over and we have a special agent conducting a criminal investigation, if we request the administrative file, what will be the response we get from the special agent? >> i think the response would be no. but i'm not really well-versed to answer that question. we don't generally turn over the administrative -- administrative file which would be copy of interviews and things like that. it also depends on the stage of the investigation as well. in the investigative phase we don't turn over the case file. >> the taxpayer advocate service under the law has the discretion to not disclose to the irs any information the taxpayer has given us or of the mere fact
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that the taxpayer has called us. so our database is completely blocked off, no one else can see our database where we keep our case management system and our administrative files. they are completely segregated. if you want to see what is in our files you have to make a separate request of us. this is at to say practice tip, being able to see what we have ordered the irs to do through taxpayer assistance order and seeing the response, sometimes they are emails at the lower levels. by the time it gets up to my office, i am sending the taxpayer assistance order to marybeth, to the chief of appeals, and it is a legal memorandum. and it has worked -- it is worked on by my attorneys that facts and thehe
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law and the procedures and our conclusions and my directive. our position has been that we will provide the taxpayer a copy of that memo. we do not feel it is our , to provide issue the irs plus response. i can tell you most responses or a page and a half and they are not very informative. usually because we said so, no offense to anybody on this panel. what is is a roadmap. we have been trying to work with our employees to understand there is life after the irs, that there is litigation. at least at my level, those memos are prepared with an eye to at some point the taxpayer may want to submit them to the court. they think of them as memorandum rather than taxpayer assistance
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orders but they have cited those documents. >> today senator kirsten legal brand speaks at the candidate's forum. watch live on c-span 2. then president pence chairs the space council in chance actually, virginia, and watch that on c-span 2. you can watch both events on or listen for free on the c-span radio app. >> campaign 2020. watch our live coverage of the presidential candidates on the campaign trail and make up your own mind. c-span's campaign 2020, your unfiltered view of politics. >> the first africans to land
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a.m. on c-span's washington journal and on c-span 3. >> president trump talked about afghanistan, china, the economy, israel and other issues in morris town, new jersey, as he was headed back to the white house. this is almost 40 minutes.


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