by At his Senate confirmation last February, Daniel Werfel told lawmakers that if given the job of commissioner of the Internal Revenue Service, he would work to increase “public confidence” in the beleaguered agency and use the $80 billion dollars that Congress had given him to build a “more modern city.” “high performance” organization.
A year later, Werfel oversaw the elimination of thousands of backlogged tax returns, reduced wait times on IRS phone lines, and created a system that allows qualified taxpayers to file their federal returns at no cost. But those achievements have not been enough to satisfy Republicans, who have accused Werfel of making the IRS more intrusive and even engaging in illegal behavior.
Hostile congressional hearings are routine for IRS commissioners, and when Werfel testifies before the House Ways and Means Committee on Thursday, he will receive a cold reception as he rejects efforts to cut his agency’s budget.
For Werfel, the showdown is an opportunity to explain why even skeptics would benefit from a well-funded IRS.
“I think the most powerful statement the IRS can make, when there is a proposal to significantly cut our budget, is to show our work and demonstrate that we are on a solid path to improving tax operations in a way that benefits taxpayers.” Werfel said in an interview this week.
The IRS was supposed to get $80 billion as part of the Inflation Reduction Act of 2022, and that money was expected to help the agency combat tax evasion and modernize its aging technology. As part of a deal to raise the debt limit last year, Democrats agreed to Republican demands to claw back $20 billion of those funds. And in recent months Republican lawmakers have been considering additional cuts amid negotiations over payment for other policies.
During his first year in office, Werfel has sought to alleviate concerns fueled by agency critics that the IRS would be hiring thousands of armed agents to harass middle-class Americans and small businesses. To that end, he has focused on efforts to make the IRS more accessible by staffing customer service centers and making it possible for taxpayers to contact the agency without having to wait hours on the phone.
As part of its modernization drive, the IRS also announced efforts to crack down on wealthy tax evaders, stopped sending unannounced agents to residences to collect unpaid taxes, and began introducing artificial intelligence technology into its audits. .
But top Republicans have argued that any signs of progress at the IRS are overshadowed by persistent problems. They insist that Werfel’s agency, which they believe has a history of attacking conservatives, is influenced by politics and favors Democrats.
Those concerns have been exacerbated by recent security breaches. The IRS has been under pressure to improve its data security protocols after a former contractor accused of leaking the tax documents of Donald J. Trump and other wealthy Americans was sentenced to five years in prison. A report published last week by the General Treasury Inspector for Tax Administration found that in July, more than 200 former IRS employees or contractors still had access to confidential information.
Tax committee members are expected to press Werfel Thursday on why he delayed implementing a controversial tax policy that would require users of digital wallets and e-commerce platforms such as Venmo, PayPal, Cash App, StubHub and Etsy to start to inform. small transactions to the tax collection agency. The policy was enacted as part of the 2021 American Rescue Plan and has faced criticism because it would increase scrutiny of middle- and lower-class taxpayers. Although Republicans hate politics, they maintain that Werfel’s delays are a violation of the law.
“The IRS should not be protecting Democrats from the consequences of their own bad legislation,” Rep. Jason Smith of Missouri, Republican chairman of the Ways and Means Committee, said in a statement. “The IRS cannot bypass the Constitution and simply rewrite the laws.”
Werfel said he planned to argue that he was within his rights to delay the so-called Venmo tax because the law as written would cause widespread confusion and potentially harm taxpayers. And he would argue that data security at the agency had improved significantly in the past year. However, these incidents have given rise to critics of the IRS to argue that it does not deserve the additional funding it has received.
“Any time you have any negotiations on budget issues, you want money for Ukraine or Israel or something like that, we’ll take it out of the IRS piggy bank,” said Grover Norquist, founder and president of Americans for Tax Reform, a group that promotes lower taxes. “Because they haven’t shown seriousness in being better at anything.”
The Biden administration has said that continued attacks on the IRS are part of a strategy to weaken the agency so that it does not have the ability to catch wealthy taxpayers who evade paying what they owe. The Treasury Department estimates that the United States has a almost 700 billion dollars “tax gap” of revenues that are not collected each year and argues that stricter enforcement of the tax code is critical to reducing America’s dependence on borrowed money.
“There are those with power and those with wealth who would like nothing more than for the IRS to not have the resources to go after them and force them to pay their fair share,” Wally Adeyemo, deputy secretary of the Treasury, said in a statement. interview.
Frequent discussions about cutting agency funding have left Werfel looking over his shoulder as he tries to carry out the priorities of the ambitious multi-year operating plan the agency produced last year.
Werfel said the barrage of criticism directed at the IRS over the years had taken its toll on his staff, but he believed morale was starting to improve. He likens the agency’s role to that of an impartial arbiter necessary for the government to function, but recognizes the challenge of staying out of politics.
“I think most people see us as tax collectors, and that’s not the most popular action the government takes,” Werfel said. “It becomes a reality that when the debate is about the role of government, the size of government, the actions of government, the IRS will be front and center in that debate.”
