February 15, 2023
During his confirmation hearing to become the next IRS Commissioner, Daniel Werfel suggested that improving tax compliance among high earners could entail hiring the people skilled at hiding money from the tax agency.
“I think we want to hire and bring in experts – maybe bring in some of the same individuals that earlier in their careers prepared these very intricate returns and are ready to come back and actually serve their country,” he told the Senate Finance Committee on February 15th.
“I’m not sure that training the current workforce would be sufficient,” he added.
The Inflation Reduction Act (IRA) that was enacted last year provides the IRS nearly $80 billion over the next ten years to improve tax compliance. Enforcement funding was increased by 69% while the boost for taxpayer services was just 9%, according to Congressional Research Service. Despite this disparity, Werfel sees improving tax compliance by enhancing services and enforcement.
“We will be equally focused on taxpayer services, in particular for working families and small businesses. And side-by-side with that will be the commitment to improve the IRS’s capacity to unpack complicated returns, which is something that I understand today they [the IRS] lacks that capacity,” Werfel said.
The IRS Chief nominee also supports the goal that taxpayers earning less than $400,000 annually would not be subjected to further audits. But he noted that it does not mean that taxpayers below this income threshold will not get audited and must still pay taxes owed.
“I think an important clarification is that the directive from [Treasury] Secretary [Janet] Yellen was to make sure that the Inflation Reduction Act funds do not increase audit rates for those earning less than $400,000. All those individuals still have a responsibility and a balance due,” he said.
If confirmed to the post, Werfel’s first task will be gathering information on why black taxpayers are contacted more frequently by the IRS than non-black taxpayers. Recent research shows that black taxpayers receive audit notices between 2.9 times to 4.7 times more frequently than non-black taxpayers.
Senate Finance Chairman Ron Wyden (D-Ore.) told Werfel to provide him a study about this development within 60 days of becoming IRS Commissioner. Werfel agreed to this timeline.
It is not clear when the full Senate will vote on Werfel’s confirmation to head the IRS, but him assuming the post is expected to occur when that vote happens.
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