rity retirement benefits, should be forced to hire a private attorney to get something which the Government supposedly should be willing to furnish him. I don't understand why this is so, but it is so, and it is merely another area in which I think the very thing that we are talking about here, bringing legal services to the elderly poor, could fill a void as some of the people before me have testified exists. I can think of very few things that would be more helpful than this very thing. BUREAUCRATIC ATTITUDES Senator TUNNEY. Thank you very much. Of course, as you know, there is a problem endemic to all bureaucracies that once a certain type of person gets into a civil service position, he or she feels that somehow he is doing a favor to the person coming in to receive a service which the law entitles them to, and which the person who is on the civil service payroll is being paid to administer. Now, as I say, I don't think this is representative of the attitude of the majority of people who are working for the Social Security Administration or working in the Federal bureaucracy or State bureaucracy, but there are, you know, some bad apples in every bushel. Mr. BURK. It isn't just the bad apples, Senator, it is the whole process. The whole thing needs to be overhauled. I can't think why I, who will be eligible for retirement in a few years, should have to hire an attorney to get my rights to something I have spent my whole life accumulating. I don't understand this. Senator TUNNEY. I agree with your proposition that you don't understand why you have to do it, but, on the other hand, let's say that there is a controversy and a legitimate controversy between a senior citizen and the Social Security Administration as to the amount of compensation to which that person is entitled. It seems to me that if that legitimate controversy does exist and if a lawyer is needed, there ought to be a lawyer available to a senior citizen who is impoverished to pursue that senior citizen's rights and insure that those rights are recognized by the appropriate forum without throwing that person into bankruptcy or making him a charity case. Mr. BURK. I couldn't agree more. My point is this, how come a private attorney can get more from the Social Security Department than I or any private citizen can? If he can do it, obviously the client was entitled to it, then obviously the Social Security Department should have given it to him in the first place. That's my point. Senator TUNNEY. If we had a better attitude on the part of people who are in the front line of administering these programs for the aged, a feeling that they were there to be of service, rather than to bestow some privilege, I would say that we'd be better off. You can't imagine the number of people who are writing to my office every week, literally tons of letters in the course of a year, who are having trouble with the Veterans' Administration and Social Security Administration. The trouble they are having is that the people they are dealing with at that front line of encounter are treating them as though they were trying to raid the Federal Treasury; that the agency staffers are bestowing a privilege on people who are simply asking for the rights that they are entitled to by the law. Mr. BURK. What we'd better do is reshuffle the front line. STATEMENT OF ROBERT FORST, EXECUTIVE DIRECTOR, NATIONAL LEAGUE OF SENIOR CITIZENS, LOS ANGELES COUNCIL ON AGING Mr. FORST. Senator Tunney, members of the committee, my name is Robert Forst. I am the executive director of the National League of Senior Citizens and I am the vice chairman of the Los Angeles Council on Aging. I have a few brief remarks that I would like to make. I think we have graphically heard today that there is a need for legal services for senior citizens. Five thousand years ago a tablet came down from a mountain on which was written, "Honor thy father and mother." Two hundred years ago we decreed that people have inalienable rights. Thirty years ago we enacted in this country Social Security. Ten years ago we realized the right of the aged to medical care, and thus we enacted Medicare. Two years ago we realized that Social Security was not doing the job and thus we enacted in this country a guaranteed annual income for senior citizens, albeit far too low. The point that I am trying to make is that we are past the stage of talk; we are at a stage where the aged in this country do have the right to legal services. It is said that the wheels of justice grind exceedingly slow. The wheels of justice in the case of the senior citizen in his right to get justice, to have justice, grind even more slowly. I think we have heard talk that demonstrates the need. I am sure that your meetings throughout the country have demonstrated that need. I implore Congress to enact legislation that will enable our senior citizens to have the right to which they are justifiably entitled, the right to legal counsel. Thank you. Senator TUNNEY. Thank you very much. STATEMENT OF JOSEPH BERKS, LEGISLATIVE COMMITTEE, NATIONAL RETIRED TEACHERS ASSOCIATION/AMERICAN ASSOCIATION OF RETIRED PERSONS Mr. BERKS. Senator Tunney, I shall now speak upon something that touches a raw nerve in all of us, taxes. My name is Joseph Berks. I am a member of the Joint State Legislative Committee of the National Association of Retired Persons and the National Retired Teachers Association. We represent in the United States over 712 million members. We have close to 800,000 members in the State of California. I am an attorney. I was admitted to the bar in Philadelphia in 1925, so I think that qualifies me as a senior citizen. I moved to California in 1971 when I retired, and finding retirement a little irksome, I took a job as a taxpaper service representative with the Internal Revenue Service. In that position I think I have probably seen more senior taxpayers than the ordinary tax preparer sees in many years and I am familiar with the problems of the senior tax payer. Let us ask, who is the senior taxpayer? First of all, he is a minority. He only represents 41 percent of his own age group. He is a low income taxpayer, because of the 6.7 million returns filed by those over 65, by an Internal Revenue survey, 57 percent of those returns were filed by people having an adjusted gross income of less than $5,000, and 79 percent of those who filed had an adjusted gross income of less than $10,000. He is also, as a whole, not as well educated as the average, because in his generation he did not have the benefit of the educational opportunities, so therefore only about 28 percent of his generation has had a high school education. When a person reaches 65, he is confronted with an entirely new situation so far as his taxes are concerned. Wages and salaries which are the easiest types of income to report no longer have much significance for him. His income now depends on pensions, annuities, capital gains, interest, dividends, rental income, royalties, all of which are difficult to compute, requiring the filling out of complicated schedules and after these schedules are filled out they transfer them to the Form 1040 and the computation of what tax is due. Being limited in his education and being harassed by the decrements of old age, impairment of hearing, eyesight, lack of mental capacities, the task becomes more and more difficult to him. So it is no wonder that a survey taken by the Internal Revenue Service showed that about 80 percent of the aged taxpayer goes for outside assistance in computing and filing his tax returns. And because of the fact that his tax return is a more complicated tax return than the ordinary citizen, he is charged a higher fee for the preparing of his return than the ordinary citizen. I have been told that the average for this year was about $16 a return. It was. not unusual for me to hear people say that they had to pay $40, $60, and in many cases over $100 for the preparation of returns. INCOME TAX PREPARATION FOR SENIORS I would say that an attorney or an accountant who would prepare a tax return for a senior citizen who had income to report from the sale of securities, a pension to report, a retirement income credit to make out, would be justified, considering the time and computation needed, in charging a minimum fee of at least $100 to prepare such return. I think it is a shame that these people should have to pay that. It is a charge against those whose income is low and who can ill afford to pay it. It almost amounts to a surcharge, a tax against them. In order to claim the benefits that Congress has given to the aged in his taxes, let me take you through some of the steps that he must go through. If he wants the retirement income credit, he must complete a schedule R, which is a complicated return. We have provided the committee with a written statement and we have gone through the steps required to compute a retirement income credit. It is so complex that I am sorry to say that many people in the Internal Revenue Service can't complete it. If he sells his property and he wants to take the benefit of the $20,000 exclusion from income taxes of the sale price, he must file a schedule 2119, transfer any capital gains that he has to a schedule D, then transfer it to the back of the Form 1040, compute his tax, and then go it from there. If he has a pension or an annuity due him and he wants to claim. the benefit of the tax exclusion for the cost of the annuity to him, he must complete a schedule E, and he must compute the exclusion by using actuarial tables, which, in many cases, are not even available to him. The only place he can get them is from a financial journal or an insurance digest, or by going to the Internal Revenue office and asking them for the actuarial tables, and I will guarantee you that 90 percent of them won't understand those actuarial tables. Many people in the I.R.S. don't understand them. If he has a distribution of a pension-when many people retire they have savings funds and profit-sharing plans and when they retire the amounts are distributed to them in a lump sum and in some cases these contributions come to a sizable sum-many of them do not know that there is a provision in the law which enables them to take these lump sum distributions and average them out over a 7-year period. There is a form given to the taxpayer to compute this reduction in taxes, and I might read you something about this income averaging. Senator, I would like to pass this down to you, sir, to show you the form of computations that must be undertaken by a taxpayer who wishes to get a benefit for the distribution of the pension fund to him. I would say that 90 percent of them will never be able to complete that form. Senator TUNNEY. Oh, I would agree with you. Mr. BERKS. It is the kind of form that even makes a Philadelphia lawyer flinch. Senator TUNNEY. If this were an examination that you were giving me and I had to do this thing in the next 3 hours in order to get an A, and I was supposed to get it right, I have a feeling just from looking at this thing that I have all the qualifications for F work. No, it is a very difficult form. Mr. BERKS. No question of it, sir. Many of the forms for the aged taxpayer are just as difficult. 50 PERCENT OVERPAYING TAXES ON ANNUITIES The result has been that surveys have been taken that shows that the average taxpayer either has to pay an exorbitant amount due to his income to get these taxes returned for him or he overpays. A survey taken in 1965 by the Internal Revenue Service of those who were reporting incomes from pensions and annuities showed that about 76 percent of them were reporting their pensions and annuities incorrectly and about 50 percent were overpaying. Senator TUNNEY. Fifty percent were overpaying? Mr. BERKS. Fifty percent were overpaying. And a survey was taken by our association in a tax aid program of 75 taxpayers who were called in by trained people, tax aides, and we examined their prior year returns and we found the same ratio running, too, about 75 percent were overpaying their taxes, and it is very easy to overpay your taxes. If you want to compute your retirement income credit, and it is estimated that about 35 to 40 percent of those who are entitled to the retirement income credit do not claim it or claim it incorrectly, and if a new bill before the Congress at the present time increasing the retirement income credit and extending the provisions of it goes into effect, I assure you that many more people who are entitled to this credit will never get it. Another place where taxes were overpaid and continue to be overpaid is on retirement disability. Many people are retired by their firms or by a government agency because they are disabled, cannot work, and they receive payments. The Internal Revenue Service has ruled up to the present time that any of these payments received are sick pay until you reach the minimum retirement age. At that time it becomes a pension and becomes totally taxable. A sick pay, of course, gives the right to a sick pay exclusion of up to $100 a week. In April of this year, prodded by some court decisions contrary to that ruling by the Internal Revenue Service, they have changed their ruling and they now say that anyone on disability retirement may claim the payments they receive as sick pay until they reach the mandatory retirement age which, in many cases, is 10, 15 or 20 years beyond the retirement age which is voluntary. They also made this ruling retroactive, which means that those who will file amended returns may get back as much as 3 years overpayment. I predict that unless prodigious efforts are made to acquaint the general public, and particularly this class of taxpayer, as to the change in that ruling, that many thousands are going to continue to pay their taxes in the same fashion and overpay, and there will be millions of dollars due taxpayers in refunds that will never be paid. to them because they don't claim it. TAX AID PROGRAM We have gone over the complexity of the tax reporting for senior citizens and the expense it is to many. Now we have to find a remedy for it. About 3 years ago our association, together with other associations for senior citizens, instituted a tax aid program. This program recruited dedicated senior citizens who volunteered to be trained by the Internal Revenue Service to help senior taxpayers in preparing their returns. In the 3 years it has been in operation the system has worked very well and it has grown. In 1973 the tax aid program trained 3,500 persons and provided services in 800 cities of the United States, and prepared returns for over 200,000 aged taxpayers. The senior aides in the tax aid program is operated in cooperation with the Internal Revenue Service, and I must give the Internal Revenue Service its due. In this particular program it has provided excellent training materials, it has provided volunteer instructors from its body of revenue agents and auditors who do give good instructions, but, unfortunately, they instruct for 1 week, somewhere around 12 to 16 hours, and in that particular time they can only teach these aides the very fundamentals of tax reporting. In order to clear up the problem of the senior taxpayers tax reporting it has been suggested that the Internal Revenue Service make out returns. We don't think that that is the route that should be taken. It would require the additional services of many, many |