During his swearing-in ceremony as 50th IRS Commissioner on April 4, 2023, Danny Werfel took to the podium at the IRS headquarters in Washington D.C. and stated that the Service’s strategic operating plan for the nearly $80 billion in Inflation Reduction Act funding will be issued later this week, promising “real world improvements for every taxpayer, every tax professional, and every IRS employee.”
Werfel, who was formerly a Managing Director and Partner at Boston Consulting Group (BCG), began work as IRS Commissioner on March 13, 2023, after being confirmed by the U.S. Senate on March 9, 2023. Deputy Commissioner for Services and Enforcement Doug O’Donnell, who served as the acting IRS Commissioner since November 2022, swore Werfel into office.
O’Donnell also introduced Werfel on Tuesday, alongside Treasury Secretary Janet Yellen, who spoke about the new IRS Commissioner and outlined the Service’s two major priorities that Yellen said Werfel will be focused on: “dramatically improving taxpayer service and ensuring that large corporations and the wealthy pay the taxes they owe.”
Yellen, who was sworn in as Treasury Secretary in 2021, noted that since the Inflation Reduction Act was signed into law by President Joseph Biden on August 16, 2022, the IRS has hired some 5,000 new customer service staff and improved automated phone and chat features where the Service is “achieving a level of service with live assistance between 80% and 90%.” She noted that this was a significant improvement compared to the around 15% service level during the previous filing season.
Technology improvements were touched upon by both the Treasury Secretary and new IRS Commissioner in their remarks where Yellen said it is a “must” to digitize a lot of the processes that “for too long have been handled on paper.”
Werfel, who started his career at the Office of Management and Budget (OMB) in 1997, talked about the IRS’ vision involving an “organization and infrastructure rooted in modern technology” that will provide taxpayers with more confidence that “their data is secure.”
Unfortunately, the IRS has had prior issues with data security. According to a 2016 Government Accountability Office report, in June 2015, the IRS suffered a data breach that ultimately affected some 724,000 taxpayer accounts. Also, a July 2022 Treasury Inspector General for Tax Administration (TIGTA) report found the IRS’s cybersecurity program was not fully effective, failing 17 out of the 20 metrics used.
Yellen, who began her career at the Federal Reserve Bank in 1976, expanded on the IRS’ second major priority later in her remarks by noting that the tax gap between taxes owed and paid was estimated at around $7 trillion over the next 10 years, explaining that the issue has been a lack of Service resources to “effectively audit wealthy taxpayers and complex businesses.” She added that the Inflation Reduction Act funding “will change that” by investing in technology and human resources to increase audits on the aforementioned taxpayers but not on small businesses and households making under $400,000 a year.
This was a pledge that then IRS Commissioner nominee Werfel made to the Senate Finance Committee in February 2023 during his confirmation process. Werfel said he was “committed to meeting” Yellen’s directive.
“We want people to avoid audits in the first place,” Werfel said during his confirmation speech at IRS headquarters on April 4, 2023, adding that the IRS “must safeguard the nations’ tax law and revenue needs.” He went on to say that specially skilled staff will be hired and trained to “unpack the complex return filings on high-income taxpayers, large corporations and complex partnerships.”
Another topic touched upon during Werfel’s speech was adding digital scanning to increase the speed of processing paper returns and reduce errors, which has already begun with scanning efforts announced on Forms 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return, earlier in March 2023.
At the beginning of his speech, Werfel hearkened back to the day when President Abraham Lincoln appointed George S. Boutwell as the first IRS Commissioner in July 1862, which made Werfel reflect “on how important this agency has been to the nation for over 161 years to collect the funds that support the functions that make life in America possible.”
Near the close of his remarks, Werfel said that while Boutwell started with the first chapter of the IRS, the enactment of the Inflation Reduction Act “provides an opportunity to envision and realize the future of our federal tax administration.”
He said that by the end of the week, the IRS will issue a plan for the massive funding provided by the Act that will include: ending long wait times on the phone “regardless of the time of year,” more service locations and IRS staff, more digital tools that involve refund tracking, and being able to respond to IRS issues electronically. “Letters from the IRS in the mail could be a thing of the past,” he stated.
The 50th IRS Commissioner closed his comments by saying his “top priority will be to ensure that the IRS uses this historic investment wisely and in the way that best fits the country.”
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