Some of the questions on Tuesday will be direct: What did you know, and when did you know it?

They also want to know why former IRS Commissioner Douglas Shulman didn't tell Congress that agents had been singling out conservative political groups for additional scrutiny when they applied for tax-exempt status — even after he was briefed.

Shulman, who was appointed by President George W. Bush, left the IRS in November when his five-year term ended. He could prove to be a significant player in a scandal that has driven the Obama administration to distraction. Shulman is testifying before the Senate Finance Committee, which has launched a bipartisan investigation into the matter.

On Monday, the White House revealed that chief of staff Denis McDonough and other senior presidential advisers knew in late April that an upcoming inspector general's report was likely to find that IRS employees had inappropriately targeted conservative political groups.

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With the scandal joining the parade of political headaches buffeting President Barack Obama, the Republican-run House Ways and Means Committee planned to question the agency's ousted chief, Steven Miller, on Friday.

Miller, acting director until he resigned Wednesday, seems sure to get a hostile reception from the committee. Members of both parties have spent the past week bitterly chastising the agency for abandoning its charge of making nonpolitical decisions about which groups should qualify for tax-exempt status, which makes it easier for them to collect contributions from donors.

Lawmakers also have said that despite asking the IRS repeatedly about complaints from conservative groups that their applications were being treated unfairly, the agency — including Miller — never told them the groups were being targeted, even after May 2012, when the agency said Miller was briefed on the practice. Miller was previously a deputy commissioner whose portfolio included the unit that made decisions about tax-exempt status.

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Three congressional committees are investigating and the FBI is looking into potential civil rights violations at the IRS, Attorney General Eric Holder said.

Other potential crimes include making false statements to authorities and violating the Hatch Act, which prohibits federal employees from engaging in some partisan political activities, Holder said.

President Barack Obama said Treasury Secretary Jacob Lew had asked for and accepted Steven T. Miller's resignation.

"Americans are right to be angry about it, and I am angry about it," Obama said Wednesday evening in a televised statement from the White House. "I will not tolerate this kind of behavior in any agency but especially in the IRS, given the power that it has and the reach that it has into all of our lives."

Miller's ouster came five days after an IRS supervisor publicly revealed that agents had improperly targeted groups with "tea party" or "patriots" in their applications for tax-exempt status. It came a day after an inspector general's report blamed ineffective management in Washington for allowing it to happen for more than 18 months.

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"There are laws in place to prevent this type of abuse. Someone made a conscious decision to harass and to hold up these requests for tax exempt status," Boehner told reporters Wednesday. "I think we need to know who they are and whether they violated the law. Clearly someone violated the law."

The Justice Department is opening a criminal investigation of the Internal Revenue Service just as another probe concludes that lax management enabled agents to improperly target tea party groups for extra scrutiny when they applied for tax exempt status.

Attorney General Eric Holder said he ordered the FBI to investigate Friday — the day the IRS publicly acknowledged that it had singled out conservative groups.

"Those (actions) were, I think, as everyone can agree, if not criminal, they were certainly outrageous and unacceptable," Holder said. "But we are examining the facts to see if there were criminal violations."

Holder is scheduled to testify Wednesday before the House Judiciary Committee. It is the first of several hearings that will focus on the issue.

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Attorney General Eric Holder said he ordered the FBI to investigate Friday — the day the IRS publicly acknowledged that it had singled out conservative groups.

"Those (actions) were, I think, as everyone can agree, if not criminal, they were certainly outrageous and unacceptable," Holder said. "But we are examining the facts to see if there were criminal violations."

Holder is scheduled to testify Wednesday before the House Judiciary Committee.

Three congressional committees already are investigating the IRS for singling out tea party and other conservative groups during the 2010 congressional elections and the 2012 presidential election. But Holder's announcement would take the matter to another level if investigators are able to prove that laws were broken.

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In an upcoming report, the Treasury inspector general for tax administration says lax management allowed the practice to go on for 18 months. The Associated Press obtained a copy of the report ahead of its release.

The IRS on Friday apologized for targeting tea party as well as other conservative groups.

The report said that when asked by investigators, IRS supervisors said the criteria they used to decide which groups they examined were not influenced by people or organizations outside the IRS.

THIS IS A BREAKING NEWS UPDATE. AP's earlier story is below.

The Justice Department is investigating the Internal Revenue Service for targeting tea party groups for extra scrutiny when they applied for tax exempt status, Attorney General Eric Holder said Tuesday.

Holder said the FBI will investigate to see if any laws were broken. He said he ordered the criminal investigation Friday - the day the IRS publicly acknowledged that it had singled out conservative groups.

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The IRS said Monday that Miller was first informed on May, 3, 2012, that applications for tax-exempt status by tea party groups were inappropriately singled out for extra, sometimes burdensome scrutiny.

At least twice after the briefing, Miller wrote letters to members of Congress to explain the process of reviewing applications for tax-exempt status without revealing that tea party groups had been targeted. On July 25, 2012, Miller testified before the House Ways and Means oversight subcommittee but again was not forthcoming on the issue — despite being asked about it.

At the hearing, Rep. Kenny Marchant, R-Texas, told Miller that some politically active tax-exempt groups in his district had complained about being harassed. Marchant did not explicitly ask if tea party groups were being targeted. But he did ask how applications were handled.

Miller responded, "We did group those organizations together to ensure consistency, to ensure quality. We continue to work those cases," according to a transcript on the committee's website.

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The IRS apologized Friday for what it acknowledged was "inappropriate" targeting of conservative political groups during the 2012 election to see if they were violating their tax-exempt status. The agency blamed low-level employees, saying no high-level officials were aware.

But on June 29, 2011, Lois G. Lerner, who heads the IRS division that oversees tax-exempt organizations, learned at a meeting that groups were being targeted, according to the watchdog's report. At the meeting, she was told that groups with "Tea Party," ''Patriot" or "9/12 Project" in their names were being flagged for additional and often burdensome scrutiny, the report says.

The 9/12 Project is a group started by conservative TV personality Glenn Beck. In a statement to the AP, Beck suggested that the revelations were hardly news to him and other conservatives.

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Organizations were singled out because they included the words "tea party" or "patriot" in their applications for tax-exempt status, said Lois Lerner, who heads the IRS division that oversees tax-exempt groups.

In some cases, groups were asked for their list of donors, which violates IRS policy in most cases, she said.

"That was wrong. That was absolutely incorrect, it was insensitive and it was inappropriate. That's not how we go about selecting cases for further review," Lerner said at a conference sponsored by the American Bar Association.

"The IRS would like to apologize for that," she added.

Lerner said the practice was initiated by low-level workers in Cincinnati and was not motivated by political bias. After her talk, she told The AP that no high level IRS officials knew about the practice. She did not say when they found out.

Many conservative groups complained during the election that they were being harassed by the IRS. They accused the agency of frustrating their attempts to become tax exempt by sending them lengthy, intrusive questionnaires.

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The Senate is scheduled to vote Monday on a bill that would empower states to collect sales taxes for purchases made over the Internet. The measure is expected to pass because it has already survived three procedural votes. But it faces opposition in the House, where some Republicans regard it as a tax increase. A broad coalition of retailers is lobbying in favor of it.

Under current law, states can only require retailers to collect sales taxes if the store has a physical presence in the state.

That means big retailers with stores all over the country like Walmart, Best Buy and Target collect sales taxes when they sell goods over the Internet. But online retailers like eBay and Amazon don't have to collect sales taxes, except in states where they have offices or distribution centers.

As a result, many online sales are tax-free, giving Internet retailers an advantage over brick-and-mortar stores.

The bill would empower states to require businesses to collect taxes for products they sell on the Internet, in catalogs and through radio and TV ads. Under the legislation, the sales taxes would be sent to the states where a shopper lives.

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The bill would empower states to require online retailers to collect state and local sales taxes for purchases made over the Internet. The sales taxes would be sent to the states where a shopper lives.

Under current law, states can only require stores to collect sales taxes if the store has a physical presence in the state. As a result, many online sales are essentially tax-free, giving Internet retailers a big advantage over brick-and-mortar stores.

The Senate voted 74 to 20 Monday to take up the bill. If that level of support continues, the Senate could pass the bill as early as this week.

Supporters say the bill is about fairness for businesses and lost revenue for states. Opponents say it would impose complicated regulations on retailers and doesn't have enough protections for small businesses. Businesses with less than $1 million a year in online sales would be exempt.

"While local, community-based stores and shops compete for customers on many levels, including service and selection, they cannot compete on sales tax," said Matthew Shay, president and CEO of the National Retail Federation. "Congress needs to address this disparity."

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The late filing penalty is usually 5 percent of the unpaid taxes for each month — or part of a month — a return is late. That can add up quickly if you owe additional taxes. But what if the unpaid taxes are zero? Five percent of zero is ... zero!

However, if you wait more than three years to file, you forfeit your refund. So maybe it's better to file by Monday, after all. Besides, if you're getting a refund, why wait?

The IRS got a late start on tax season this year, thanks to a last-minute tax law passed by Congress on Jan. 1. But the deadline for filing returns didn't change, so if you owe money, it's time to settle up with the government.

In all, the IRS expects to process 149 million returns from individuals this year, including returns from people who file for 6-month extensions. About a quarter of returns are usually filed in the last three weeks before Tax Day. This year the IRS received more than 10 million electronically filed returns from Friday through Sunday.

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Obama's budget proposal includes a mix of tax increases and benefit cuts in an effort to reduce government borrowing and spark the still-fragile economy. Obama says it is the kind of balanced approach that is necessary to tame runaway budget deficits.

But advocates from across the political spectrum are reminding the president of his past campaign promises.

"Clearly it will be up to members of Congress to set fiscal priorities that actually represent the needs of the average citizens they were elected to represent," said Max Richtman, head of the National Committee to Preserve Social Security and Medicare. "The president's budget is not the balanced plan promised to Americans before November's election."

Obama's budget blueprint would increase taxes by $1 trillion over the next decade. Most of the tax increases would target wealthy households and corporations, though some, including a tax increase on cigarettes, would hit low- and middle-income families, too.

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The nonpartisan Congressional Budget Office says budget deficits will be reduced by a total of $3.3 trillion over the next decade, largely because of the deficit reduction package passed by Congress earlier this month.

Nevertheless, the federal budget will be awash in red ink for years to come. Even with the savings, budget deficits will total nearly $3.5 trillion over the next decade -- more if Bush-era tax cuts scheduled to expire at the end of 2012 are extended.

The CBO doesn't foresee another recession, but the agency projects only modest economic growth over the next few years, with the unemployment rate falling only slightly by the end of 2012. The agency projects an unemployment rate of 8.5 percent for the last three months of 2012. The presidential election is in November of that year.

"The United States is facing profound budgetary and economic challenges," the new CBO report says. "With modest economic growth anticipated for the next few years, CBO expects employment to expand slowly."

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The bill was defeated on a procedural vote. But Democrats hope to build their case to include the measure in a deficit-reduction package being negotiated by key lawmakers and the Obama administration. Lawmakers from both parties are demanding deficit reduction as part of deal to increase the government's ability to borrow and avoid an unprecedented default on U.S. Treasury bonds.

"This bill says that even the most rich and powerful among us must do their fair share to help us reduce the deficit," said Sen. Robert Menendez, D-N.J., the bill's sponsor. "Their high-priced lobbyists cannot stop us from doing what is fair and what is right."

Republicans and some Democrats opposed the tax increase, saying it would hurt domestic drilling while doing nothing to reduce gas prices. The vote was 52-48 in favor of the measure, short of the 60 votes needed to advance it. Three Democrats -- Mary Landrieu of Louisiana, Ben Nelson of Nebraska and Mark Begich of Alaska -- joined with nearly all Republicans in opposing the measure. Two Republicans, Olympia Snowe and Susan Collins of Maine, voted for it.

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The Internal Revenue Service tracks the tax returns with the 400 highest adjusted gross incomes each year. The average income on those returns in 2007, the latest year for IRS data, was nearly $345 million. Their average federal income tax rate was 17 percent, down from 26 percent in 1992.

Over the same period, the average federal income tax rate for all taxpayers declined to 9.3 percent from 9.9 percent.

The top income tax rate is 35 percent, so how can people who make so much pay so little in taxes? The nation's tax laws are packed with breaks for people at every income level. There are breaks for having children, paying a mortgage, going to college, and even for paying other taxes. Plus, the top rate on capital gains is only 15 percent.

There are so many breaks that 45 percent of U.S. households will pay no federal income tax for 2010, according to estimates by the Tax Policy Center, a Washington think tank.

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Pelosi said Tuesday she looks forward to leading a loyal but tenacious opposition in the House. She started by calling Republicans hypocrites for trying to repeal the new health care law, which would increase the deficit.

Republican John Boehner of Ohio will be sworn in as the new speaker on Wednesday, and Pelosi will be demoted to minority leader. Republicans have already scheduled a vote for next week on repealing the sweeping new health care law, an effort that is sure to fail in the Senate.

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There is even a tax break for people who buy race horses.

Millions of homeowners, however, might feel like they got a lump of coal. Homeowners who don't itemize their deductions will lose a tax break for paying local property taxes.

The business tax breaks are part of sweeping legislation that extends Bush era tax cuts for families at every income level through 2012. Obama signed the $858 billion measure a week ago. It also provides a new payroll tax cut for wage earners and extends jobless benefits to the long-term unemployed.

Most of the business tax breaks -- about 50 in all -- are part of a package that expires each year, creating uncertainty for tax planners but lots of business for lobbyists. Many of these tax breaks have been around for years but expired at the end of 2009 because lawmakers couldn't agree how to pay for them.

The new law extends most of them through 2011, some through 2012. They will be paid for with borrowed money.

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The plan is part of a package of tax cuts and extended unemployment benefits that Obama negotiated with Senate Republican leaders. It would cut workers' share of Social Security taxes by nearly one-third for 2011. Workers making $50,000 in wages would get a $1,000 tax cut; those making $100,000 would get a $2,000 tax cut.

The government would borrow about $112 billion to make Social Security whole. Advocates and some lawmakers worry that relying on borrowed money to fund Social Security could eventually force it to compete with other federal programs for scarce dollars, leading to cuts.

Social Security taxes "ought to be held sacrosanct," said Rep. Earl Pomeroy, D-N.D., chairman of the House Ways and Means subcommittee on Social Security.

"When you start to signal that the (Social Security) tax levels are negotiable, you end up in long-term trouble, I think, in terms of making absolutely certain that the entitlement funding streams are secure," Pomeroy said.

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President Barack Obama has said he wants to compromise with Republicans to ensure that tax cuts for middle-income families continue, suggesting he's open to extending all the tax breaks for a year or two. Republican leaders say it's a nice gesture by the president, but some key GOP lawmakers want more.

"It should be permanent," said Sen. Judd Gregg, R-N.H. "We've got to get this economy to pick up and if you raise taxes you're going to stifle the economy significantly. I'm sure that somebody's explained that to the president."

Rep. John Boehner of Ohio, who's in line to be the next House speaker in January, also played down talk of a compromise.

"I think that extending all of the current tax rates and making them permanent will reduce the uncertainty in America and help small businesses to create jobs again," Boehner said. "You can't invest when you don't know what the rules are."

Democrats will have majorities in both the House and Senate when Congress returns this week for a lame-duck session that is expected to stretch into December. They will need Republican support to get the 60 votes necessary to pass a tax bill in the Senate.

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