During his Senate confirmation last February, Daniel Werfel told lawmakers that if he were given the job of commissioner of the Internal Revenue Service, he would work to “increase public confidence” in the beleaguered agency and the $80 billion dollars that Congress had granted it to use to build a “more modern and high-performing” organization.
A year later, Mr. Werfel has overseen the elimination of a backlog of thousands of tax returns, reducing wait times on IRS phone lines and creating a system that allows qualified taxpayers to file their federal returns for free. But those successes weren’t enough to satisfy Republicans, who accused Mr. Werfel of making the IRS more intrusive and even behaving illegally.
Hostile congressional hearings are commonplace for IRS officials, and when Mr. Werfel testifies before the House Budget Committee on Thursday, he will face a frosty reception as he fends off efforts to cut his agency’s budget.
For Mr. Werfel, the duel 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 for a significant reduction in our budget is to show the work we have done and show that we are well on our way to improving tax operations in this way “That taxpayers benefit from it,” Mr. Werfel said in an interview this week.
The IRS was set to receive $80 billion as part of the Inflation Reduction Act of 2022, and that money was intended to help the agency crack down on tax fraud and modernize its outdated technology. As part of a deal to raise the debt limit last year, Democrats followed Republican demands to claw back $20 billion of those funds. And Republican lawmakers have considered additional cuts in recent months as they negotiated funding for other measures.
In his first year in office, Mr. Werfel has sought to allay concerns raised by agency critics that the IRS would hire thousands of armed agents to harass America’s middle class and small businesses. To accomplish this, he has focused on making the IRS more accessible by staffing customer service centers and allowing taxpayers to reach the agency without having to wait hours on the phone.
As part of its modernization campaign, the IRS also announced initiatives to crack down on wealthy tax evaders, ended its practice of sending agents unannounced to residences to collect unpaid taxes and began introducing artificial intelligence technology into its audits.
But leading Republicans have argued that any signs of progress at the IRS are being overshadowed by ongoing problems. They insist that Mr. Werfel’s agency, which they believe has targeted conservatives in the past, is influenced by politics and favors Democrats.
These concerns have been heightened by recent security breaches. The IRS was 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 released last week by the Treasury Inspector General for Tax Administration found that more than 200 former IRS employees or contractors still had access to confidential information as of July.
Tax Committee members are expected to press Mr. Werfel on Thursday about why he delayed enforcing a controversial tax policy that requires users of digital wallets and e-commerce platforms such as Venmo, PayPal, Cash App, StubHub and Etsy would start reporting small transactions to the tax collection agency. The policy was enacted as part of the 2021 American Rescue Plan and has been criticized for increasing scrutiny of lower and middle class taxpayers. Although Republicans loathe the policy, they maintain that Mr. Werfel’s delays constitute a violation of the law.
“The IRS should not shield Democrats from the consequences of their own bad legislation,” Rep. Jason Smith of Missouri, the Republican chairman of the Ways and Means Committee, said in a statement. “The IRS cannot circumvent the Constitution and simply rewrite the law.”
Mr. Werfel said he wanted to argue that he had the right to delay the so-called Venmo tax because the law in its current form would cause great confusion and potentially harm taxpayers. And he argued that data security in the agency has improved significantly over the past year. However, such incidents have given critics of the IRS reason to argue that it does not deserve the additional funding it has received.
“Whenever it comes to budget negotiations, you want money for Ukraine or Israel or something, we take it out of the IRS piggy bank,” said Grover Norquist, founder and president of Americans for Tax Reform, a group that advocates for lower taxes Steer. “Because they’re not serious about getting better at anything.”
The Biden administration said the ongoing attacks on the IRS are part of a strategy to weaken the agency so that it is unable to catch wealthy taxpayers who fail to pay their debts. The Treasury Department estimates that the United States has a “tax gap” of nearly $700 billion that goes uncollected each year and argues that stronger enforcement of the tax code is critical to reducing America’s reliance on borrowed money .
“There are those who have power and those who have wealth who want nothing more than for the IRS to not have the resources to go after them and make them pay their fair share,” said Wally Adeyemo , the deputy finance minister, in a statement interview.
The frequent discussions about cutting the agency’s funding have left Mr. Werfel looking over his shoulder as he tries to implement the priorities of the ambitious multi-year operating plan the agency put together last year.
Mr. Werfel said that the barrage of criticism leveled at the IRS over the years has taken a toll on its employees, but that he believes morale is beginning to improve. He compares the agency’s role to that of an impartial arbiter necessary for the functioning of government, but acknowledges the challenge of staying out of politics.
“I think most people see us as tax collectors, and that’s not the most popular action that the government is taking,” Mr. Werfel said. “When the debate becomes about the role of government, the size of government and the actions of government, the reality is that the IRS will be at the center of that debate.”
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2024-02-15 05:42:16
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