WASHINGTON (AP) – When confirmed as commissioner of the IRS, Daniel Werfel says he will commit to not increasing tax audits on businesses and households making less than $400,000 annually.
Anticipating questions before his confirmation hearing Wednesday before the Senate Finance Committee, Werfel in prepared testimony made several other commitments aimed at turning around the troubled agency.
President Joe Biden chose Werfel to lead the Internal Revenue Service because it received a huge funding boost – nearly $80 billion over the next 10 years through the Inflation Reduction Act, which Congress passed in August. Noting the impact of the action on the federal tax collector, Werfel said that “Americans rightly expect a more modern and high-performing IRS.”
While promising to modernize the agency’s technology, address its paperwork burden and audit high-income earners, Werfel said he “will not stop following my true north to increase the public trust.”
Werfel, 51, who leads the Boston Consulting Group’s global public sector practice, was nominated to replace Charles Rettig. Handpicked by President Donald Trump to lead the agency, Rettig stepped down when his five-year term ended in November. An acting commissioner is filling in.
Werfel will also have to navigate the controversy surrounding the new funding, brought on by critics who misrepresent how the new law will affect the IRS and taxes for the middle class. About $46 billion is allocated for the enforcement of tax laws and the rest for taxpayer services, operational support and updating business systems.
Republicans have suggested there is no evidence the agency will use the new money to hire an army of tax agents with weapons.
Disapproval of the agency reached new heights when House Republicans took office in the majority last month. by passing the bill that would eliminate the funding, fulfilling a campaign promise. The legislation has not advanced in the Senate and is unlikely to reach Biden, who has promised a veto.
“The hearing promises to be a doozy, and not just because the IRS is one of the most unpopular government agencies in the United States,” said Janet Holtzblatt, a senior fellow at the Urban-Brookings Tax Policy Center. “This is the first major IRS hearing since it received an $80 billion increase in its budget in the Inflation Reduction Act.”
GOP criticism appears to be aimed more at the Biden administration’s efforts to bolster funding for the agency than at Werfel himself. But tax experts say Werfel should expect to face more management questions.
Caroline Bruckner, a professor of taxation at the American University Kogod School of Business, said that, if confirmed, Werfel would have to face many challenges to the IRS workforce created by the deterioration, an older worker and a generally bad reputation.
“The next generation of accountants don’t want to work for the IRS,” Bruckner said. He added, “To attract the best talent, especially Millennials and Gen-Z workers who will be the future of the workforce, transparency as a leader goes a long way.”
Bruckner cites a study at Stanford University showing IRS data-driven algorithms select Black taxpayers for audit at up to 4.7 times the rate of non-Black taxpayers. “The next generation of workers cares about these things, and it’s a leadership challenge,” he said.
Robert J. Kovacev, a federal tax attorney at Miller & Chevalier in Washington, said Werfel must explain how the agency will spend its new funding.
“I think that $80 billion gives the IRS some options on how to improve that they didn’t have before,” he said. “They can spend it on new revenue agents, or new investments in technology to make it fairer and more efficient.”