By using funding from the Inflation Reduction Act (PL 117-169), the IRS can better leverage data to set a more “level playing field” in its enforcement efforts, as well as refine the taxpayer experience, according to the head of the agency.
Speaking at the Tax Executives Institute conference March 18 in Washington, DC, IRS Commissioner Danny Werfel said despite the “rhetoric” that the IRS is “going to crack down on taxpayers that aren’t paying their fair share,” expanding compliance capabilities “benefits everybody.”
Werfel explained this is because the IRS is focused on preciseness in identifying areas where complex filers are not “playing by the rules,” which will only take pressure and scrutiny away from compliant taxpayers not engaging in avoidant behaviors. “We shouldn’t be selecting for audit or exam … a taxpayer of high complexity if we have an understanding that we can see through that complexity” and determine that everything is accurate and colored inside the lines.
The commissioner has insisted the IRS is not taking a sweeping position that any individual, corporation, or partnership making above $400,000 is automatically assumed to be a tax cheat and should face more attention than usual. A high no-change rate in audit selection only indicates that valuable time and resources are going to waste while unnecessarily burdening taxpayers, the agency has signaled in defending its inflation bill funds from critics wary of broad-stroke increases in examinations across all tax brackets.
Later in his TEI appearance, Werfel said that as the IRS modernizes its processes, it is “putting more focus than we ever have” to “really lean into analytics and the evidence base” of changes. Referring to “taxpayer journeys,” Werfel gave examples of situations where taxpayers require assistance from the IRS, such as if there is an issue with a refund or they are victims of a tax scam. The IRS cannot control what laws are enacted by Congress, he continued, but it can control how it communicates with taxpayers and expedite resolutions.
Feedback from taxpayers provides the IRS with analytics to pinpoint where the problems are along a certain journey, illustrated by a red X while areas where the IRS is successfully helping are denoted by a green checkmark. The commissioner believes there should always be red X’s when on a path of “continuous improvement,” because “things change” with technology and taxpayer needs.
“If you ever look at journey and it’s all green checkmarks, you’re probably doing it wrong,” said Werfel.
He added that the IRS’ job is ultimately to “reduce stress” for filers while remaining “agnostic” about “how much [they] pay.” Making it as easy as possible to complete an accurate return is the philosophy Werfel has attempted to engrain in his staff since taking the job one year ago. While he is happy with how customer service representatives and other employees brought on during a hiring wave last filing season are progressing in their roles, Werfel is not looking to “spike the football” in celebration, showing a cautious optimism toward the IRS’ performance this time around compared to years prior.
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