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Mr. KELLEY. Under the new tax law as it will probably come through, the auditing will be very much simplified, will it not, in so far as finding the value of property is concerned ?

Mr. WEST. There are certain administrative provisions in that law that will help considerably. It will help considerably in making determinations of the tax due.

Mr. KELLEY. What I was speaking of was the future. The chairman wanted to know whether this was to be the annual basis.

Mr. WEST. Our problem is to get current with the work. In other words, it is to get the 1917, 1918, 1919, and 1920 work cleaned up. If that is once done, I think it is safe to say that that force will not be anything like it is now.

Mr. KELLEY. I think that is what the chairman had in mind.

Mr. BLAIR. Our idea is to continue this force through 1923, and in the 1923 estimates which have been submitted we provide for that. In other words, we have based the 1923 estimates on the continuation of this force through that year.

The CHAIRMAN. That would bring your appropriation for 1923 to $37,000,000.

Mr. WEST. $38,000,000 is the estimate submitted to Gen. Dawes and the Secretary. This deficiency estimate will not make an annual basis of $38,000,000.

Mr. Byrns. Do you expect to clean up the back work during 1923 ?

Mr. CHATTERTON. That is what we hope to do. We are already pretty nearly up on the individual cases.

The CHAIRMAN. How about the individual cases, or how soon will you be current on them?

Mr. CHATTERTON. We are working on this year's cases right now, and we expect to finish them by the 15th of June next. On the 15th of June we expect to take up for audit the 1922 returns that were filed up to the 15th of March.

The CHAIRMAN. As a matter of fact, you have only about 9,000 consolidated section cases ?

Mr. CHATTERTON. My statement deals only with individual cases.

The CHAIRMAN. You have 9,000 consolidated section cases in which are included corporations with subsidiaries, and those are the cases that are unaudited ?

Mr. CHATTERTON. Yes, sir.

The CHAIRMAN. You are asking for about 2,300 more people that would be employed on the 9,000 cases for 1917—

Mr. BLAIR (interposing). Not entirely on that. We have field agents and people of that kind.

The CHAIRMAX. How many consolidated section cases are there of corporations to be decided ?

Nr. CHATTERTON. I can not give you the number of cases. I was formerly in the field service, and when I left the field service in June we had about 132,000 tax years for 1917 still in the field. Those were mostly corporation cases. That has been cut down since then by about six or seven thousand, or down to about 126,000.

REDUCTION OF ESTIMATE. The CHAIRMAN. What we want to know particularly is whether, as a matter of fact, you can assimilate all the men you propose to recruit

in the expenditure of this $2,630,000 between now and the end of the fiscal year. If you can not assimilate them or educate them and make them efficient in that time, then the question is to work out a statement showing how many you could really have efficient as a part of this cost. When did you begin to figure, or as of what date was this estimate made?

Mr. BLAIR. As of November 1.

The CHAIRMAN. You made your calculation of expenditures from that date in your estimate?

Mr. BLAIR. Yes, sir; from a recruitment of 100 per month beginning on that date.

The CHAIRMAN. You would not get that many if this bill should pass by the 1st of December.

Mr. WEST. No.

The CHAIRMAN. The idea I have in mind is that the force to be paid out of this appropriation would be a perfect force, and to enable you to have a perfect force you must have a period of training for the men. Of course, while that period of training is on, you must pay them.

Mr. WEST. Yes, sir.

The CHAIRMAN. If you begin as of January 1, and I should think that would be as soon as you could begin, because it is not fair to suppose that this bill can pass the House and Senate before the middle of December—how much would you require?

Mr. CHATTERTON. We have gone over the civil-service lists and everything of that kind so as to be in shape, if possible, on December 1.

The CHAIRMAN. I would not figure on any date earlier than December 15 for the passage of the bill. Of course, you must begin to accumulate the people, but that would be without expense.

Mr. CHATTERTON. We just call them in and interview them and lay the foundation, but no promises are made. The CHAIRMAN. That would reduce it how much?

Mr. CHATTERTON. The ratio would be 1 to 5 in the field, or 120 clerks.

The CHAIRMAN. And of course the traveling expense would be reduced as well.

Mr. CHATTERTON. Yes, sir.

The CHAIRMAN. The miscellaneous expense would be reduced, and the number of ordinary clerks would be reduced, as well as the number of engineers and experts.

Mr. CHATTERTON. The engineers have a separate class of work.

The CHAIRMAN. If you expect to employ new engineers, you would not be able to employ them until this became effective?

Mr. CHATTERTON. No.

The CHAIRMAN. So that if the committee should decide to allow all that you are asking, or in proportion to what you are asking, it would have to be given on a 6-months' basis instead of on an 8months' basis?

Mr. West. Right there I would like to say that so far as the 300 deputy collectors are concerned, the basis was six months.

The CHAIRMAN. How much would that be, modified along the lines we have just outlined here, or how much would this be reduced ?

Mr. WEST. Based on a 6-months' recruitment instead of eight months, a reduction of $838,000 in the estimate of $2,630,000 should be made.

This covers salary, travel, and miscellaneous items.

Mr. CHATTERTON. One hundred additional men per month to be assimilated and to be scattered about in the field in the different divisions and put to work is a very safe figure. We started out last spring with training classes, and there was not any month when we did not send out to the field 100 new men, except one month when we sent out 86. Some months we sent out as high as 120. At that time the force was not as large as it is now. Of course, these men had to go out into the field in order to finish their courses, and they are not of much value until they have learned to apply their knowledge, and the man who is training him is to that extent slowed down. I think that 100 per month is a safe figure.

The CHAIRMAN. How many men would the same auditor be able to assimilate in his work ?

Mr. CHATTERTON. It depends upon the case. If he is handling a small corporation or individual or a partnership, he can handle one man, but in the case of a good-sized manufacturing concern, he could take on three. He could do the supervisory work and teach them at the same time. With regard to these 100 men, we would not assign many of them in any one division.

The Chairman. These men are supposed to be expert accountants before they come in?

Mr. BLAIR. Yes, sir; but they have to be taught to apply their knowledge.

The CHAIRMAN. They must apply their knowledge to this experience?

Mr. BLAIR. Yes, sir.

The CHAIRMAN. Nobody is put into this service merely to give him a job?

Mr. Blair. No, sir; we keep books on every man, showing the amount of work he does and the kind of cases he handles.

The CHAIRMAN. Explain what you mean by tax years. I think I know what it means, but I would like to have it explained in the record.

Mr. CHATTERTON. A tax year is the return of any one individual or corporation for one year.

The CHAIRMAN. That is a tax year?

Mr. CHATTERTON. That is a tax year. Every man turns in between eight and nine tax years per month. The field force are sent a little more than 16,000 tax years per month, and they turn in a little less than 18,000 tax years per month. There are a little less than 400,000 tax years that we must catch up on, and it will take a long time to do it.

INDIVIDUAL TAX RETURNS.

The CHAIRMAN. You say that you have the individual tax returns almost current ?

Mr. CHATTERTOX. In the office; yes, sir.

The CHAIRMAN. You say they are current in the office. Does that mean you have all of the field work done?

Mr. CHATTERTON. No, sir; and a lot of them will have to go to the field. The audit in the office will show if there is something that can not be handled by correspondence in the office.

The CHAIRMAN. How long are they in the field before you finally dispose of them, or before they come back to you?

Mr. CHATTERTON. That depends upon the features that relate to them. For instance, it may be a partnership with a distributive interest, and the individuals concerned in that partnership will have returns out in the hands of agents awaiting action. To give you another example, there may be an individual who received a great deal of income from, we will say, a lumber business, and the question is how much of that is income and how much represents the sale of capital assets. All of those things tie them up, but, generally speaking, an individual case with no features other than the information and the check on it, is promptly figured.

The CHAIRMAN. There is nothing involved in the individual case except the amount of the income.

Mr. CHATTERTON. The agents engaged in that work do not get above a certain salary. They must qualify on corporation work before they get $3,000.

DISTRIBUTION OF EMPLOYEES.

The CHAIRMAN. How many employees have you here on incometax work and how many in the field?

Mr. CHATTERTON. There are over 5,300 in Washington.

Mr. West. On September 30, 1921, the total number in the income tax organization was 5,382, and the total per annum rate of salary was $9,163,600. The total number of agents on income-tax work was 2,036, at a per annum rate of salary of $5,428,790. The number of clerks in these agents' offices was 351, at a per annum rate of salary of $492,510, and 31 agents in charge of divisions--four were acting—$135,900, with two valuation engineers at $8,300 for salary. That completes, so far as the salary is concerned, the present organization on September 30, 1921.

The CHAIRMAN. If you get the 2,301 men asked for, how many of those will be here and how many will be in the field?

Mr. West. If you start on January 1
The CHAIRMAN (interposing). When you get them all completed.

Mr. WEST. That would increase this force from 2,036 to 2,626 and the clerks from 351 to 471.

The CHAIRMAN. Those are all in the field ?
Mr. WEST. Yes, sir.

The CHAIRMAN. Then you would have about 10,000 altogether, if you got this force recruited ?

Mr. West. A total of 9,197 on income-tax work.

OFFICE SPACE.

The CHAIRMAN. I made it more than that. Anyway, you have plenty of space to house these people?

Mr. West. Our space while ample is not very good.

The CHAIRMAN. The main question is whether we will have to rent space?

Mr. 'West. No, sir; we can get space at Sixth and C Streets.
Mr. BLAIR. Such as it is; it is not very satisfactory.

Mr. WEST. Just a short statement here will be interesting on the space problem.

The Internal Revenue Bureau now occupies space in seven different buildings, scattered over an area of approximately 2 square miles. The income-tax unit alone is in four buildings-annex No. 1,

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