IRS chief seeks to reassure taxpayers about increased enforcement

The new funds will help the Internal Revenue Service crack down on wealthy tax evaders while greatly improving service to middle-class households, IRS Commissioner Danny Werfel said Thursday.

Werfel said it was too early to say whether the IRS would eventually hire the 87,000 employees who have become a fixture of Republican talking points about the alleged “weaponization” of the government against ordinary Americans.

Instead, the new money would help the IRS “move toward a world-class customer service operation,” Werfel told reporters, stressing that small business owners, workers with regular wage income and retirees don’t have nothing to fear from a greater application of taxes directed at those who earn more.

“People who receive W-2s or Social Security payments or who have a small business shouldn’t worry about a new wave of IRS audits; we will take it off the table,” Werfel said. “Our focus will be on other big money areas for quite some time, because there is a lot of work to be done in those more complex areas of tax law that will take years to accomplish.”

The agency’s $80 billion funding increase, a 69% increase from its previously projected budget, was a key part of the Cut Inflation Act, a partisan bill that Democrats passed last year by a special budget process that allowed them to circumvent Republican objections. The Congressional Budget Office said the money would help the IRS raise an additional $200 billion in revenue, meaning the investment would pay for itself and also reduce the cost of the legislation.

Republicans have taken advantage of a 2021 Treasury Department Report which estimated that the additional funds would cover nearly 87,000 new IRS employees, suggesting that increased IRS audits are part of a plot by Joe Biden to go after supporters of former President Donald Trump.

“The use of guns and the politicization of federal agencies is egregious and terrifying. These are Gestapo-like tactics,” Rep. Jeff Duncan (RS.C.) saying after the FBI searched Trump’s home in August for classified government documents. “If the FBI can do this to President Trump, what do you think 87,000 new IRS agents will do to the American people?”

The supposed figure of 87,000 IRS employees has become so important to Republicans that the first bill they voted on after taking control of the House of Representatives this year was to repeal the agency’s additional funding. The measure has no chance of being passed by the Senate or signed by President Biden.

Biden has said he would not support tax increases on households making less than $400,000, and his administration has said increased IRS funding would also not increase audits on such households, a promise Werfel repeated Thursday.

“The IRS has no plans to increase the most current audit rate we have for households making less than $400,000,” Werfel said.

But officials It did not say how many people the IRS intended to hire overall, suggesting the number could change based on improvements in customer service, such as new online tools that could help people resolve problems with their returns faster than before.

“We don’t want to be locked into numbers on a piece of paper because we want to see the benefits we get from technology and how we can build a flexible workforce that helps us meet the needs of the American people. and also help us generate revenue,” Treasury Assistant Secretary Wally Adeyemo said in response to a question from a reporter.

Werfel said the IRS staffing had dropped from 95,000 employees in 2010 to 80,000 last year, thanks to funding cuts on Capitol Hill. Meanwhile, the number of Americans making more than $10 million a year and the number of tax returns from complex business entities have increased exponentially.

When the IRS suspects that a tax filer hasn’t paid what they owe, for example by failing to report income, the agency takes a closer look, usually by sending an audit letter. The IRS sends a disproportionate number of those letters to low-income taxpayers claiming tax credits, often asking them to verify their earnings.

Meanwhile, audit rates for large corporations fell from 10.5% in 2011 to 1.7% in 2019, according to IRS data. Werfel said budget constraints have reduced the number of auditors looking at complex cases from more than 5,000 a decade ago to just 2,600 now, and that the new legislation would help hire the accountants, lawyers, economists and data scientists needed for such tasks. cases.

“The agency focuses on evaluating the tax compliance of high-income and wealthy individuals, complex partnerships, large corporations,” Werfel said. “The IRS has no plans to increase the most current audit rate we have for households making less than $400,000.”

CORRECTION: An earlier version wrongly attributed a Wally Adeyemo comment to Danny Werfel.