[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]
HEARING ON ACCOUNTABILITY AND
TRANSPARENCY AT THE INTERNAL REVENUE
SERVICE WITH IRS COMMISSIONER WERFEL
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON WAYS AND MEANS
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTEENTH CONGRESS
FIRST SESSION
__________
APRIL 27, 2023
__________
Serial No. 118-14
__________
Printed for the use of the Committee on Ways and Means
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__________
U.S. GOVERNMENT PUBLISHING OFFICE
54-350 WASHINGTON : 2024
COMMITTEE ON WAYS AND MEANS
JASON SMITH, Missouri, Chairman
VERN BUCHANAN, Florida RICHARD E. NEAL, Massachusetts
ADRIAN SMITH, Nebraska LLOYD DOGGETT, Texas
MIKE KELLY, Pennsylvania MIKE THOMPSON, California
DAVID SCHWEIKERT, Arizona JOHN B. LARSON, Connecticut
DARIN LaHOOD, Illinois EARL BLUMENAUER, Oregon
BRAD WENSTRUP, Ohio BILL PASCRELL, JR., New Jersey
JODEY ARRINGTON, Texas DANNY DAVIS, Illinois
DREW FERGUSON, Georgia LINDA SANCHEZ, California
RON ESTES, Kansas BRIAN HIGGINS, New York
LLOYD SMUCKER, Pennsylvania TERRI SEWELL, Alabama
KEVIN HERN, Oklahoma SUZAN DelBENE, Washington
CAROL MILLER, West Virginia JUDY CHU, California
GREG MURPHY, North Carolina GWEN MOORE, Wisconsin
DAVID KUSTOFF, Tennessee DAN KILDEE, Michigan
BRIAN FITZPATRICK, Pennsylvania DON BEYER, Virginia
GREG STEUBE, Florida DWIGHT EVANS, Pennsylvania
CLAUDIA TENNEY, New York BRAD SCHNEIDER, Illinois
MICHELLE FISCHBACH, Minnesota JIMMY PANETTA, California
BLAKE MOORE, Utah
MICHELLE STEEL, California
BETH VAN DUYNE, Texas
RANDY FEENSTRA, Iowa
NICOLE MALLIOTAKIS, New York
MIKE CAREY, Ohio
Mark Roman, Staff Director
Brandon Casey, Minority Chief Counsel
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C O N T E N T S
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OPENING STATEMENTS
Page
Hon. Jason Smith, Missouri, Chairman............................. 1
Hon. Richard Neal, Massachusetts, Ranking Member................. 2
Advisory of April 27, 2023 announcing the hearing................ V
WITNESS
Danny Werfel, Commissioner, Internal Revenue Service............. 4
MEMBER SUBMISSIONS FOR THE RECORD
Member Questions for the Record and Responses from Danny Werfel,
Commissioner, Internal Revenue Service......................... 153
PUBLIC SUBMISSIONS FOR THE RECORD
Public Submissions............................................... 268
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ACCOUNTABILITY AND TRANSPARENCY AT
THE INTERNAL REVENUE SERVICE WITH
IRS COMMISSIONER WERFEL
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THURSDAY, APRIL 27, 2023
House of Representatives,
Committee on Ways and Means,
Washington, DC.
The committee met, pursuant to call, at 1:04 p.m. in Room
1100, Longworth House Office Building, Hon. Jason T. Smith
[chairman of the committee] presiding.
Chairman SMITH. The committee will come to order.
Commissioner Werfel, thank you for being here today.
I first want to address an issue that has been widely
reported last week. A whistleblower came forward with troubling
claims about abuses of power, and we are conducting a review of
this matter and will go wherever the facts lead us. And I
expect full cooperation from the IRS, particularly with regard
to ensuring this whistleblower is protected from any
retaliation.
We value the importance and the role of whistleblowers in
ensuring the integrity of our governing institutions, which is
why we established an online portal providing IRS employees a
direct avenue to provide information regarding any wrongdoing
that they may witness or believe to be occurring.
Commissioner, while I know you are fairly new on the job,
it would be irresponsible not to put you on notice about the
various concerns the American people have about your agency.
Over the past two years the IRS has leaked private tax
information of Americans at the same time the Biden
Administration was pushing tax increases on those very
individuals.
Accidentally posted online the private taxpayer information
of thousands of retirees. They apologized, they took it down,
said it wouldn't happen again, and did the very same thing four
months later.
They destroyed over 30 million tax returns due to the
backlog. They tried and then delayed for a year a new paperwork
nightmare of gig economy workers under the new 1099K reporting
requirements.
And promised to release a spin plan for the $80 billion pay
raise Democrats gave the agency, only to fail to explain
whether low-income taxpayers will be protected from increased
audits, and failed to show exactly how many bureaucrats in
total you plan to put on the payroll.
Repurposed $3.9 billion of the $80 billion to support
costly green corporate handouts, and requested an additional
$43 billion for your agency last month on top of the $80
billion it received last August.
Concocted plans to become the tax preparer, the tax filer,
and government auditor of the American people.
I was surprised that, after receiving the greatest windfall
in agency history, the President's fiscal year 2024 budget
requested an additional--an additional--$43 billion. That is 91
percent of which is targeted toward enforcement and operations
like further increasing audits on middle-class families.
Meanwhile, the IRS cannot tell us in total beyond the next two
years how many people it plans to hire with its new funding.
Statements from you and Secretary Yellen make clear that
audit rates will rise for Americans earning less than $400,000.
The only question left is how fast those rates will rise. When
I asked for a plan, I was not looking for assurances. I was
looking for concrete proposals of how the Treasury Department
and your agency will protect lower and middle-income Americans.
I look forward to you making good on your commitment from
last week to follow up with far more detail about how your
agency plans to spin these funds over the next 10 years.
Democrats super-charged the IRS with the hopes of raising
billions to pay for special interest tax breaks for the wealthy
that are now projected to cost three times that amount. Now the
IRS is dedicating billions to support these green corporate
handouts, and it is clear Democrats are all about subsidizing
the low-emission lifestyles of the wealthy.
It is not only new audits Americans have to worry about.
The Inflation Reduction Act includes new reporting requirements
for any Venmo or PayPal transaction over $600. Is it really a
top priority for tax collectors to know whether someone is
selling a used couch, or unused concert tickets, or paying for
their neighbor's kid to mow the lawn?
This gives your agency too much power and, in effect,
creates a surveillance network that will invade Americans'
privacy and squeeze them out of more of their hard-earned
dollars.
The IRS has a lot of work to do to repair the trust it has
broken with the public over the last decade. I hope we can
begin the conversation to do that in today's hearing.
Chairman SMITH. And I am pleased to recognize the gentleman
from Massachusetts, Ranking Member Neal, for his opening
statement.
Mr. NEAL. Thank you, Mr. Chairman, and I want to welcome to
the Committee on Ways and Means Commissioner Werfel.
It certainly is an honor to have you here today, and we
look forward to working with you as you start your time as the
commissioner. So let's start by saluting the dedicated workers
of the Internal Revenue Service. It is their commitment to
taxpayers that has allowed for the Inflation Reduction Act to
make such quick headway.
Many members on the other side of the aisle and their
constituencies are already taking advantage of the Inflation
Reduction Act in terms of investments as they relate to the tax
credits. Your testimony this afternoon comes at an important
time for the IRS. The Democratic multi-year investment in the
Internal Revenue Service has already unlocked a new era of
service for America's taxpayers.
This filing season alone, Americans experienced a historic
level of customer assistance and support. Two million more
calls were answered through live assistance, wait times were
drastically decreased, new digital tools were introduced, and
in-person services at taxpayer assistance centers were
expanded. Modernizing the IRS should have been a bipartisan
undertaking. Its systems needed to be remodeled, and we are
appreciative of the fact that it appears as though the much-
needed headway is now underway. Updates to technology
infrastructure will pay dividends for the American taxpayers
for decades to come.
It still is the old adage: people at the bottom shouldn't
be paying for more than they ordinarily would because people at
the top are able to escape their fair share. The Inflation
Reduction Act also reverses decades of Republican-targeted cuts
to the IRS, taking action to close the tax gap and eliminate
our two-tiered tax system. Far too long, the wealthy and the
well-connected have been able to get away with not paying their
share at the expense of everyday Americans. It is interesting
to note that the compliance rate for those who pay taxes
through withholding is in the high 90 percentiles.
The IRS recently released Strategic Operating Plans. It is
a strong blueprint for bringing our historic legislation to
reality. Soon the IRS will be better equipped to ensure that
top one percent of those who avoid the tax system will be held
accountable.
Once again, the contrast between our achievements and the
extremism of the other side could not be more clear. We have
pushed for decisive action to regain taxpayers' trust and build
a fairer tax code. And just yesterday our colleagues on the
other side doubled down on undoing this progress, and thereby
adding to the deficit. While we are looking out for workers and
their families, they, apparently, were looking out for their
own, costing taxpayers $100 billion.
That is, sadly, not the limit of that extremism. They have
advocated for legislation that would abolish the IRS in favor
of a 30 percent national sales tax. I served on this committee
when members on the other side did precisely that. Republicans
would raise the cost of groceries, gas, medicine, child care,
and just about all aspects of life for the middle class, while
extending the unfunded tax cuts for the wealthy and well-
connected. That would create more harm than good.
So I look forward to working with you as we continue to
implement the Inflation Reduction Act and deliver on our shared
commitment to a tax system that works for all members of the
American family.
Mr. NEAL. Thank you, Commissioner.
Thank you, Mr. Chairman.
Chairman SMITH. Thank you, Ranking Member Neal.
Today's sole witness is the very new commissioner of the
Internal Revenue Service, Mr. Daniel Werfel.
The committee has received your written statement, and it
will be made part of the formal hearing record today.
Commissioner Werfel, you can begin when you are ready.
Mr. WERFEL. Thank you.
STATEMENT OF DANIEL I. WERFEL, COMMISSIONER, INTERNAL REVENUE
SERVICE
Mr. WERFEL. Chairman Smith, Ranking Member Neal, and
members of the committee, thank you for the opportunity to
testify on the filing season and the IRS budget.
I am pleased to report the IRS provided substantially
better service to taxpayers during the 2023 filing season. We
delivered a strong tax season for the nation, the best in
several years. IRS employees were able to make substantial
improvements this tax season because of funding Congress
provided through the Inflation Reduction Act. This funding made
a difference. It allowed us to hire more than 5,000 phone
assisters, which led to a phone level of service averaging 85
percent during the filing season. The average wait time on the
phone was three minutes. This is a major improvement from last
year, when service levels were under 16 percent and wait times
averaged 28 minutes. Perhaps most telling was this: IRS
employees answered seven million calls to help taxpayers. That
is 2.7 million more than last year.
Improvements were seen in other areas. We increased face-
to-face visits at our taxpayer assistance centers to 523,000,
up about 30 percent from the year before. And we expanded
digital scanning efforts to speed up the processing of paper
returns.
Providing a better filing season experience this year was
an important step, but more work remains. The long-term funding
gives us a unique opportunity to transform our agency over the
next decade.
Historically, the IRS received funding that allowed our
staffing and operations to keep pace with the size of the U.S.
population. In 2010 that changed. Cuts in annual funding caused
IRS staffing levels to decline by nearly 17 percent to less
than 80,000 full-time employees by 2022. While the IRS shrank,
the U.S. population grew by more than 7 percent, reaching 334
million. These reductions caught up with us. You could see that
in the poor taxpayer service levels in previous years,
including last year.
We were able to improve this filing season by shifting
Inflation Reduction Act funds over to our day-to-day
operations. If we continue using IRA funds this way, focused on
short-term operations rather than long-term systemic
improvements, we will not be able to transform the taxpayer
experience, modernize outdated IRS technology, and deliver more
effective enforcement of the tax laws, as the IRA envisioned.
The IRA funding was designed to restore IRS core operations
and prepare the agency to serve the nation in its future. But
that work is outside of our base funding levels. That level of
funding, which is $12.3 billion for fiscal year 2023, has not
materially increased since fiscal year 2010. In fact, in real
terms, we are 33 percent below our funding level in fiscal year
2010 if we had just received inflationary adjustments. It is
not enough resources to fund a tax system in an economy that
grows in size and complexity every year.
So I ask for your help to build on the remarkable progress
we saw this filing season by supporting the $1.8 billion in
incremental discretionary funding requested for fiscal year
2024. This funding will enable us to maintain our current
performance in the next filing season, while allowing us to use
IRA resources, as Congress intended, to modernize our
operations so we can sustain and improve our service to
taxpayers into the future.
Our Strategic Operating Plan lays out in detail our path
forward, describing how we will improve all aspects of our
operations. The plan, which I call our public to-do list, lays
out more than 200 projects for improvements for taxpayers, tax
professionals, and IRS employees that will transform our work
on the phones, in person, and online.
IRA funding also gives us an important opportunity to
improve enforcement efforts, to promote fairness while
respecting taxpayer rights. The agency will follow Secretary
Yellen's directive not to raise audit rates above historic
levels for small businesses and households making less than
$400,000.
I want to be crystal clear: we are not increasing audit
rates for hardworking taxpayers making under $400,000. That is
my pledge. There is no new surge of audits coming for workers,
retirees, and others. We have plenty of other areas we need to
focus on.
I am optimistic we can build on the accomplishments of this
filing season. The question is not whether the IRS can improve
taxpayer services. This year we proved that dramatic
improvement is possible. The question is whether we continue to
improve.
Chairman Smith, Ranking Member Neal, and members of the
committee, that concludes my statement. I would be happy to
take your questions.
[The statement of Mr. Werfel follows:]
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Chairman SMITH. Thank you, Commissioner. We will now
proceed to the question-and-answer session, and I will begin.
Nearly two years since a massive leak of confidential
taxpayer information was published by ProPublica, the American
people are still without answers from the Biden Administration
on who is responsible and how this could have occurred. This
leak happened at the same time the Administration was pushing
for higher taxes on the same taxpayers who had their
information disclosed.
Given this terrible breach of trust at the IRS, what has
the agency done in the last two years to secure its systems to
prevent something like this from happening again?
Mr. WERFEL. Mr. Chairman, data security is essential to
everything we do. For the whole system to work, taxpayers have
to have trust in our abilities here. And as I roll up my
sleeves on the job, I am taking numerous steps to assess our
current capacities and our current gaps. And I have to tell
you, there are areas that I have been impressed with. We
successfully defend more than a billion cyber attacks a year.
And I have looked into our employee training. It is very
robust, including what are the consequences of failure to
secure our data.
But as you mentioned, there are areas we need to improve.
And I would point to TIGTA and GAO have a series of
recommendations for how to strengthen our overall data security
process, in particular with respect to our IT. And underfunding
is one major reason why we don't have the score--an A on that
report card. But with funding under the IRA, and with renewed
purpose around data security and IT modernization, my objective
is to get that A on the report card for those TIGTA
recommendations and those GAO recommendations.
Chairman SMITH. Let's get the A, Commissioner.
Mr. WERFEL. Absolutely.
Chairman SMITH. As we discussed previously, we set up an
online whistleblower portal for IRS personnel wishing to share
information with the committee. I continue to urge you to let
your employees know about the portal. I believe it will
encourage agency personnel who witness wrongdoing to come
forward.
And just this last week we received outreach from an IRS
whistleblower requesting the committee look into concerns the
individual has about allegations of misconduct. So can you
commit that there will be no retaliation against that
whistleblower?
Mr. WERFEL. Mr. Chairman, while I can't comment on a
specific case, I can say without any hesitation there will be
no retaliation for anyone making an allegation or a call to a
whistleblower hotline.
Chairman SMITH. Thank you, Commissioner.
The Biden Administration first asked for $80 billion to
hire 87,000 new employees. The Administration later claimed it
would be hiring to replace retirements, and it would not be
adding 87,000 additional employees. However, the information
you released related to how the agency will spend the funding
shows 30,000 new employees in just the next 2 years. At that
rate, you will surpass 87,000 over 10 years. Can you clear up
the discrepancies here?
And right now you have 85,000 employees at the IRS. How
many total employees do you intend to have working at the IRS
in 10 years?
Mr. WERFEL. Mr. Chairman, as I told the Senate Finance
Committee last week, we are working on a final set of estimates
for that, and I will have that information, the full 10-year
view of the hiring plan, within the next few weeks.
I can clarify a couple of things, though, about your
question, which is--one important point is also to recognize
the attrition that we have. Through 2024, 16,000 IRS employees
are expected to retire. So this is not all about plussing-up
IRS staff. We are also making up for the staff that we are
losing to retirements and other attrition.
The other point I want to make about staffing increases is
that staffing increases are necessary to keep pace with the tax
system that we have today. Now, in my opening statement I
talked about the rise in the population, the rise in the number
of filers, the rise in the complexity of the tax law. That
means we get more phone calls to our call center. That means we
get more people walking into our walk-in centers. And if we
don't have the staff to meet them, answer their questions, then
we are failing the American people in doing our job to serve
them.
And on the enforcement side, just one more point. Today we
have 2,600 IRS employees that are responsible for assessing the
most wealthy taxpayers, the most wealthy filers. That is
individuals, large corporations, and complex partnerships.
There are roughly 390,000 of these wealthy taxpayers. I am not
talking about $400,000 a year; I am talking about $10 million a
year, I am talking about $10 million in assets. I am talking
about, for these large corporations, $250 million in assets.
For the very top of our income strata, 390,000 filers,
2,600 staff. And as a result, we have seen a dramatic decline
in the audit coverage of our wealthiest filers. And when you
see our staffing numbers over the next 10 years--and you have
them through the 3-year window--I ask you to think about what
we are doing is closing the gap when we talk about enforcement
between those 2,600 employees and the 390,000 of our wealthiest
filers in America.
Chairman SMITH. In regards to your comments earlier about
not increasing audit rates on people making less than $400,000
a year, there has been a lot of statements from Secretary
Yellen that says that the audit rates will not be above that of
the historical audit rates, which was--2010 was the peak. When
you say that there is not going to be an increase in audit
rates, are you referring to the audit rates last year or the
historical, like what Secretary Yellen has said?
Mr. WERFEL. Let me provide some clarity on that, Mr.
Chairman. Here is where I am at on this, in consulting with
Secretary Yellen and her team.
We have a lot of work to do over the next few years. We are
going to be focused completely on doing what I said earlier,
closing the gap between our staff and the enforcement we need
to do with our wealthiest.
What that means is the audit rate, the most recent audit
rate we have that is complete and final is 2018. That is the
rate that I want to share with the American people. The audit
rate will not go above that rate for years to come because, for
the next several years at least, we are going to be focused on
the work that we are doing with the highest-income filers.
Now, once we start and reconsider that, because the 2008
rate is so low, it is not anywhere near the historical rate,
if--you have probably looked at the years and said, well, the
historical rate is a lot higher than the rate in the most
recent years. So even if we did start increasing our audit
footprint a few years from now, then you are still not going to
get anywhere near the historical average for quite some time.
So I think there can be assurances to the American people
that, if you earn under $400,000, there is no new wave of
audits coming. The probability of you being audited before the
Inflation Reduction Act and after the Inflation Reduction Act
are not changed at all.
Chairman SMITH. The Inflation Reduction Act spends $15
million to pay for a supposedly independent analysis about the
feasibility of setting up an e-file system through the IRS,
which would essentially make the agency America's--it would
make the agency the American people's tax filer, their tax
collector, but also their auditor. Asking the IRS to do your
taxes is like asking your kid to guard the cookie jar. The
temptation to take more than their so-called fair share is too
much.
Nevertheless, you all choose to hire an organization, New
America, and a tax attorney, both of which have stated their
support for establishing such an e-file system. How are we to
expect this will be an impartial review, if those in charge of
it are already committed to seeing it happen?
Mr. WERFEL. Thank you for the question, Mr. Chairman. When
I arrived at the IRS, I learned that we have this study that is
mandated under the Inflation Reduction Act to study a direct
file option. I want to stress the word ``option'' there,
because I think the important thing is whether we go forward
with the direct file solution or not, and if we were to, it is
an option for taxpayers.
If they feel concerned about engaging with the IRS in a
direct file solution, they don't have to do it. There are other
ways to engage with the IRS. And that is, by the way, part of
our hope and our vision, that we will meet taxpayers where they
are. If they want to file on paper, we are not thrilled with
it, but we will be ready for it. If they want a fully digital
experience, if they want to work with a third-party servicer,
we want to accommodate that. They currently don't have a direct
file option. So my understanding from the Inflation Reduction
Act is to study it, and see if it is viable.
The report is not done yet. It will be done by mid-May. And
I understand, Mr. Chairman, that there are--that you have a
keen interest in seeing what this report says. I will make
myself available once the report is out to answer any questions
that you have. I am happy to come back to this committee and
testify on it. I just think it would be premature to get into
the details of the study before it is finalized.
Chairman SMITH. You know, our committee has learned that a
different organization, MITRE, that occasionally does work for
the IRS, conducted a study around taxpayer opinions about an
IRS e-file system. Among their findings, most working-class
Americans who file simple tax returns do not want an IRS
system. And the plan is only popular in cases where the IRS
could pull off handling complex tax returns and providing state
returns, basically adding a tax preparation software company
inside the IRS. A lack of trust in government was one of the
main reasons taxpayers would oppose an IRS system.
And without objection, I will be submitting the MITRE study
for the record.
So ordered.
[The information follows:]
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Chairman SMITH. Commissioner Werfel, why wasn't the IRS
transparent with the American people about this study?
Mr. WERFEL. Well, I want to make clear, Mr. Chairman, the
IRS didn't ask for this study. We didn't commission the study.
Often you have companies, non-profits, academics on their own
writing white papers, writing studies that the IRS didn't ask
for. But if they send it to us, then we absolutely will look at
it, and particularly if it is credible, and MITRE is a very
credible organization.
And we have received the study from MITRE, and we were
under the impression that it was going to be made public so
that there wasn't a need to immediately report it out. But
there was no intention of holding anything back here. People
send us studies, we review them, and we will incorporate the
findings from the MITRE study into our final study.
Chairman SMITH. I now recognize the ranking member for
questions.
Mr. NEAL. Thank you.
Commissioner Werfel, there have been a lot of false claims
made about who the IRS will audit. I know you attempted a few
moments ago to address some of that. But with the additional
money from the IRA, how many armed revenue agents will be hired
to accomplish these audits?
Mr. WERFEL. None, sir.
Mr. NEAL. That is what I thought. So let me go over some
other facts here.
Last year Secretary Yellen sent a letter to then-
Commissioner Rettig, a Republican, directing that none of the
additional money provided by the IRA would be used to raise the
historical audit rates on families and small businesses making
under $400,000 a year. The former commissioner also sent a
letter to Congress reiterating this fact.
Without objection, I would like to enter both letters into
the record.
Chairman SMITH. So ordered.
[The information follows:]
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Mr. NEAL. Thank you.
Commissioner, do you stand by the letter sent to Congress
from Commissioner Rettig stating that audit rates will not rise
relative to recent years for households making under $400,000 a
year?
Mr. WERFEL. I do.
Mr. NEAL. Thank you. Commissioner, with the additional
money provided by the IRA, does the IRS plan to hire 87,000
revenue agents to carry guns to audit families and small
businesses?
Mr. WERFEL. We do not.
Mr. NEAL. Thank you. Commissioner, Americans are very tired
of the two-tiered tax system that allows the wealthy and well-
connected to play by one set of rules, while those who use
withholding, they play by another set of rules.
I have consistently stated that repealing the IRA
additional enforcement funds will let the wealthy, large
corporations and tax dodgers off the hook.
Last year the committee reviewed the IRS mandatory audit
program for presidents and found that it was not working as
intended for a former president who operated a complex web of
more than 500 businesses. Given this program, the fact that it
was not working, how can we be certain that audits for other
wealthy individuals are taking place?
And how would the additional enforcement monies be used to
assist the IRS with auditing complex returns?
Mr. WERFEL. Congressman, as I said earlier, the first thing
that concerns me is the chasm between the number of IRS
employees we have today to assess the number of high-wealth
filers that are out there. And as a result, over the period of
time from 2010 to today, there is a steep decline in the audit
coverage of our wealthiest filers.
And, you know, from my vantage point, one of the reasons
why I came to the IRS and am excited about the job is thinking
about honest taxpayers, you know, those that own a small
business, middle income, lower income. And right now the IRS
does have the capability to evaluate--we have that capability
because those are simple returns. The returns that come in from
our wealthiest filers are sometimes thousands, tens of
thousands, and sometimes hundreds of thousands of pages long.
And so, when you have a team outsized--2,600 personnel to
390,000 filers--and those files are not only voluminous, they
are complicated--and multi-national corporations, the way it is
structured today is more complicated than it was structured 10
years ago. Partnerships are becoming more layered and more
complex, harder to find where the actual taxpayer is. We have
to up our game if we are going to effectively assess whether
these organizations are paying what they owe. So it is about
hiring. It is about training. And it is not just hiring
auditors. It is hiring economists, scientists, engineers--and
when I mean science, I mean data scientists--to truly help us
strategically figure out where the gaps are so we can close
those gaps.
Mr. NEAL. Commissioner, if the proposals that have come
from the other side were to take place, including repealing the
funding that came from the IRS, what would that prohibit you
from doing in terms of modernization?
Mr. WERFEL. Yes, this is very concerning because, as I said
earlier, our base budget is about running the train schedules
that we have today. You know, and if we don't fund our base
budget, basically what I want you to picture is the platforms
getting more and more crowded as the trains aren't coming, and
people getting frustrated. And that is not the way to serve
taxpayers. That is our base budget.
Our modernization budget, which is what the IRA provides,
is how we modernize the whole system, how we improve everything
about the system. So it is the difference, for example, between
just having the person to answer the phone when it comes in for
the IRS, versus having the option to do a call back, versus
having a bot set up so, rather than wait, I can get my
transcript by just hitting 1 or 2. It is the difference between
just basic services and advanced services.
And one of the concerns that we should all have, if you are
a taxpayer, you should come to the IRS, which you are required
to do to pay your taxes, and get the same level of
functionality that you would from a bank, from an airline. And
right now, because of steep cuts in our funding, we are not up
to snuff with what taxpayers can see around the corner at their
local bank. So we want to be able to do that.
There is other--and I know I don't have enough time, but
there is other ways we can spend the modernization money that
is in the benefit of taxpayers, including securing data and
including, as I said, you can go to sleep at night knowing that
the IRS has the capability to assess the wealthy in the same
way we can assess middle and low-income because we have built
that capacity.
Mr. NEAL. Thank you, Commissioner.
Thank you, Mr. Chairman.
Chairman SMITH. Mr. Buchanan is recognized.
Mr. BUCHANAN. Thank you, Mr. Chairman.
And, Commissioner, I know you are new on the job, and I
guess the acting commissioner for about six months----
Mr. WERFEL. Eight months in two thousand thirteen, sir.
Mr. BUCHANAN. But let me just mention there is just a lot
of misinformation out there and disinformation, whatever you
want to call it.
You know, they have got a budget they originally set up, an
additional $80 billion, and now they are talking about another
$43 billion. How do you distill that down? Where is the money
going?
And I have just got to tell you, we have got to do a much--
or you have got to do a much better job in terms of
communicating that because the taxpayers want to know. I am
telling you in my district but across the country, they want to
know where the $80 billion plus another $43 billion would go,
and you will be the one to decide that.
Mr. WERFEL. Yes, I would love the opportunity, and I
appreciate the feedback of how we can be more effectively
communicating the budget.
So let me take a moment. What we are asking for in 2024 is
$1.8 billion. That is what we are asking for on top of the base
budget that we already have. And again, that is just to keep
the current train schedules on target. What does that
additional $1.8 billion do? About one billion of it is more
people, more people to man the phones, more people to process
transactions. And then about $800 million is mostly
inflationary adjustments, pay increases. It is a large
organization, so----
Mr. BUCHANAN. Excuse me, how much of that, the recruitment
and stuff, is going to go into auditing? What is the percentage
there?
Mr. WERFEL. For that it is mostly taxpayer services, the--
what we need in terms of more people. It is--I can get you
specifics on the percentage breakdown.
The 43 billion metric I just want to make sure is
understood. What we are asking for in 2024 is $1.8 billion, and
that is really all I want to stand here and defend. Most of the
money that is in that $43 billion is either already in our base
or is way out in 2030, 2031, because as we move forward there
is a cliff that occurs----
Mr. BUCHANAN. Commissioner, let me mention----
Mr. WERFEL. Yes.
Mr. BUCHANAN [continuing]. The reason I say that, because
one of the commissioners in the past--I chaired Oversight, and
we had a frank discussion--is he brought up the idea for every
dollar that you invest, we can get you back $5 or $6. It sat
with me the wrong way. So I just want to make sure we are kind
of--get a better understanding of where the dollars are going
so we got a better sense of that.
The other thing is some groups outside--conservative
groups, I would say--are estimating that, you know, people
under $400,000, there could be as many as 650,000 audits. Do
you have any sense of that, or can I--is that something I can
get to you?
Mr. WERFEL. I would love to better dig into the math. As I
mentioned earlier, at least for the last--for the next several
years, there will be no increase in the audit rate from the
most recent rate that we have, which is 2018, which is a
historically low rate.
Mr. BUCHANAN The other thought is just on--before I got
here I was in business 30 years and dealt with, obviously, a
lot of entities that were called pass-through. You are familiar
with those, partnerships and----
Mr. WERFEL. Yes.
Mr. BUCHANAN [continuing]. Limited partnership.
Well, the idea that, in terms of auditing, a lot of these
are over that size. They are claiming that it could be millions
or hundreds of thousands of organizations. And I just want to
tell you, when you get--if it is a company that has got 100 or
50 employees and it happens to make $400,000, it doesn't all go
to the owner.
But the bottom line is, you know, what I am concerned about
on these pass-throughs when they do get a dispute or something
with the IRS, is that you do everything you can to move that
along and try to resolve it as quickly as you can because it is
very expensive in terms of CPAs and tax attorneys and the time
taken away from their business.
So I don't know what more you could do in that area. I
would like to see more resources put in that, so when you have
disputes at any level, but especially small business and
individuals, you do everything, you try to resolve it. I would
make the best deal and go and get on to something else, but
that is just my opinion.
Mr. WERFEL. Yes, and I appreciate that and I agree with it.
When I made that analogy earlier of the train schedules, and
that we have to improve them, that is one of the improvements.
We have to improve the ability to resolve issues quicker.
First of all, it is one of the central bill of rights--we
have a taxpayer bill of rights, and one of the rights is the
right to a quick resolution, and I want to meet that right. So,
for example, we are putting into place, because of the
Inflation Reduction Act, online accounts for both small
businesses and individuals that will allow them to go in real
time and see if they have an issue, and have real-time ways of
solving it. So if we are successful, this--it will end the era
of weeks and weeks of letters and correspondence back and
forth----
Mr. BUCHANAN. Let me just ask one quick----
Mr. WERFEL [continuing]. With the IRS.
Mr. BUCHANAN. You made a comment about answering the phone.
Mr. WERFEL. Yes.
Mr. BUCHANAN. I think it has got a little better, but it is
still unbelievable. I mean, people can't get through, it takes
hours. And I just hear that in our office constantly. Now,
maybe in different parts of the country it is different, but I
would like to have you make sure that whatever numbers you have
got is an area you are working on, because people--their time
is important. They want information. They want to resolve
things with the IRS. They don't want sleepless nights.
Thank you, and I yield back.
Chairman SMITH. Mr. Doggett is recognized.
Mr. DOGGETT. Thank you, Mr. Chairman, and thank you,
Commissioner, for your service.
You know, in December this committee got a good, in-depth
look at the sorry state of high-end tax enforcement. After
years of Republican obstruction from members of this committee,
outside the committee we finally secured some of the tax
returns of ex-President Trump. As the public record reflects--
and I refer only to the public record--there were years of
paying little or no taxes, tens of millions of dollars in
questionable losses carried forward from prior years,
questionable foreign tax credits.
We learned that the IRS had assigned a single auditor, one
person, to review the returns of the Trump organization's 500
entities. Even after that auditor indicated that he could not
by himself do a really thorough audit, no one was assigned from
the specialist referral system, and he appears to have been
provided no reinforcements.
Beyond the question of whether Trump himself got special
treatment from his Republican appointees, and without asking
you to comment on the returns of any particular non-taxpayer,
the entire episode gives reason for concern that similar ultra-
wealthy individuals who may well have committed tax fraud
recognize that they, if they have enough high-paid accountants
and tax lawyers, can get away with it.
In reviewing the few available auditor's notes on Trump's
returns, the Joint Committee on Taxation, as you are probably
aware, faulted the IRS auditor for assuming that using high-
priced accountants and lawyers ensures the accuracy of claimed
credits and deductions on returns. My first question to you: Is
it standard practice at the IRS to assume that the ultra-
wealthy can employ a tax consultant and just assume that if the
tax consultant said that the income and credits and deductions
were accurate, that they are?
Mr. WERFEL. Again, Congressman, I appreciate the ability or
the opportunity to clarify that I am--would never and cannot
comment on any specific taxpayer. And my responses will relate
only to generalities.
Mr. DOGGETT. Sure.
Mr. WERFEL. The issue is, as I have been describing, it is
the depletion of IRS resources has taken a toll, and it has
taken a toll on our ability to do certain things, and one of
them is to assess or unpack complicated, voluminous returns
from our highest-income filers, individuals, partnerships, and
organizations.
And, you know, whether you have the visual of a truck
backing up with tens of thousands of pages for a given return,
or the individual--or the visualization of a team of attorneys
and accountants that a taxpayer might bring to the table, the
reality is--and that is their right to do that, but we want to
have an IRS that is resourced to ask the right questions, to
challenge in the right issues, to make sure that there is
fairness across the tax system.
Mr. DOGGETT. So is it fair to say you would agree with the
Joint Committee on Taxation in their analysis that they were
not comfortable with any reliance on professional tax
preparation as an indication of accuracy?
Mr. WERFEL. It is absolutely a trust-but-verify situation,
and we need the ability to verify, and we don't have that right
now.
Mr. DOGGETT. And is it standard practice to assign 1
auditor to cover 500 organizations a taxpayer might submit?
Mr. WERFEL. Right now, Representative, as I said, we have
2,600 personnel for 390,000 of our wealthiest filers. So we
have to make the smartest decisions we can, given that chasm.
Hopefully, with----
Mr. DOGGETT. What are the factors----
Mr. WERFEL [continuing]. The increase in resources, we can
change that.
Mr. DOGGETT. What are the factors that would cause an audit
to remain unresolved for seven, eight, nine years?
Mr. WERFEL. Complexity.
Mr. DOGGETT. And again, a lack of resources.
Mr. WERFEL. Yes, a lack of resources, complexity----
Mr. DOGGETT. If we eliminate all of the funding that you
received as an addition last year as the very first bill that
these Republicans passed in the House, will that facilitate
this same kind of minimal enforcement with 1 auditor for 500
organizations?
Mr. WERFEL. It would. I would point this stat to you,
Congressman: audit rates in 2010 for entities, corporations
between $100 million and $1 billion in assets ranged between 20
and 30 percent. Today they hover near five percent. And if we
don't have the resources, they will continue to hover near five
percent, and that means we are leaving money on the table.
Mr. DOGGETT. Thank you so much.
Chairman SMITH. The gentleman from Nebraska is recognized.
Mr. SMITH of Nebraska. Thank you, Mr. Chairman.
Thank you, Commissioner, for being here today. I want to
clarify perhaps. There was mention earlier about special
agents, especially within criminal investigation.
Now, it is my understanding from a communication I received
from your agency last fall that criminal investigation plans to
hire 360 special agents per year, per year, over the next 5
years for an approximate net gain of 1,200 special agents
considering attrition. Is that accurate?
Mr. WERFEL. That sounds about right. Again, Criminal
Investigation Division, which deals with fraud and significant
cases of tax evasion----
Mr. SMITH of Nebraska. Correct, and those----
Mr. WERFEL [continuing]. They are often----
Mr. SMITH of Nebraska [continuing]. Agents are armed.
Mr. WERFEL [continuing]. Put their own--okay.
Mr. SMITH of Nebraska. Those special agents are armed, is
that correct?
Mr. WERFEL. They are armed. It is less than three percent--
--
Mr. SMITH of Nebraska. And they----
Mr. WERFEL [continuing]. Of the IRS workforce.
Mr. SMITH of Nebraska. And they avoid magnetometers at
airports, and things like that. So----
Mr. WERFEL. They are law enforcement personnel.
Mr. SMITH of Nebraska. Now, you said earlier that you are
not hiring any new special agents that will be armed, but it
sounds to me like you are.
Mr. WERFEL. Well, that--my understanding--I am glad you are
clarifying. My understanding of the question was around audits.
Our CI division, our criminal investigation division, they
do not conduct audits. What they do is they are investigating
acute issues of fraud and tax evasion. And typically, they are
armed when they are putting theirselves in danger.
Mr. SMITH of Nebraska. Understood, I understand. But I
think it is important to note that there is a difference. There
will be new hires that will be armed, for the record.
Now, last September Secretary Yellen sent a letter to then-
Chairman Neal supporting Ways and Means Committee Democrats'
efforts to provide additional funding for the IRS. I would like
to ask for unanimous consent to include that letter in the
record.
Chairman SMITH. Without objection.
[The information follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. SMITH of Nebraska. Thank you. In that letter Secretary
Yellen addressed the long-term decline in the number of
auditors at IRS, and provided data showing the decrease in the
percentage of taxpayers audited across a number of filer
categories between 2010 and 2018.
Can you clarify whether 2010, the date put forward by
Secretary Yellen in 2021, is the historical average you were
referring to as a long-term goal--emphasis, long-term goal--
once IRS ramps up to high--ramps up to audit high-net-worth
individuals?
Mr. WERFEL. No, I would not clarify that--I would not
characterize that as a goal. It is a benchmark. And we look at
2010 because that is the first year that started the steep
decline in IRS resources.
Mr. SMITH of Nebraska. Okay.
Mr. WERFEL. So we want to provide transparency to the
American people that, at the start of our decline in
discretionary resources, this is what the world looked like in
terms of audit rates.
Mr. SMITH of Nebraska. Okay. And there is a lot of
confusion here, in terms of what a lot of these numbers are.
But, you know, we--there is consideration of income brackets,
what those targets will be, and the percentage of taxpayers
within each bracket who are being audited.
But when you are attempting to adhere to the instruction,
what metric will you actually be using? Will it be that
distribution across brackets, or there--are there other numbers
to consider?
Mr. WERFEL. I think what we would do, Congressman, is look
historically at the type of coverage we had when we were at our
healthiest. So, for example, if you look back at our audit
rates when we were at our healthiest, we had fairly high audit
rates for individuals with more than $20 billion--or companies
with more than----
Mr. SMITH of Nebraska. Okay.
Mr. WERFEL [continuing]. $20 billion in assets. We are more
than half of that right now.
Mr. SMITH of Nebraska. Okay, I----
Mr. WERFEL. And so I wouldn't call it a target, but it is a
trend to make sure we are getting back to healthy levels.
Mr. SMITH of Nebraska. Now, the Joint Committee on Taxation
found that more than 90 percent of under-reported income
actually came from taxpayers earning less than $400,000. So how
can we expect to generate $191 billion in new revenue over the
next decade without drastically actually increasing the number
of audits on families making less than $400,000, not even
considering for the impact of inflation since the President set
the $400,000 threshold not long ago?
I mean, the math seems to be difficult to reach.
Mr. WERFEL. Yes, and this is a very important question, and
I am glad you asked it.
Look, there is a lot of mounting evidence that there is
significant under-reporting or tax gap in the highest-income
filers. For example, there is a study that was done by the U.S.
Treasury Department that looked at the top 1 percent of
Americans and found as much as $163 billion of tax dodging----
Mr. SMITH of Nebraska. But roughly 90 percent of the new
audits will be of those making less than $400,000. Is that
correct?
Mr. WERFEL. No, none of the new audits will be of people
earning under $400,000. So maybe I am not understanding your
question.
There will be new audits under the Inflation Reduction Act,
but those will all be focused on our highest-wealth filers,
individuals----
Mr. SMITH of Nebraska. So the historic average is not
relevant, then, as referenced earlier.
Mr. WERFEL. Not for a number of years, no, it won't be.
Mr. SMITH of Nebraska. Okay. I wish I had more time. Thank
you.
Chairman SMITH. Mr. Thompson is recognized.
Mr. THOMPSON. Thank you, Mr. Chairman.
Commissioner, thank you for being here. Commissioner,
yesterday our Republican colleagues passed off the floor of the
House a bill that slashed $80 billion in IRS funding that we
had put in last year to help you solve some of these issues
that have been discussed today. They made that cut saying that
this was going to save money. It sounds like crazy math to me.
Can you help us understand? When we fund you with proper
funding levels, does that cost money or does it allow you to
recoup the money that is owed?
Mr. WERFEL. It allows us to recoup the money that is owed.
There is longstanding historical and robust analytics that
points to a return of $6 of return to the taxpayer for every $1
invested in the IRS budget.
Mr. THOMPSON. Thank you very much. I appreciate that. I
appreciate the fact that you cleared up this nonsensical
argument that we heard continuously over the course of the last
year that this $80 billion was going to pay for heavily armed
agents running around kicking in doors. So thank you for that.
I also appreciate the fact that we have made improvements
in regard to customer service at the IRS. And I know all I have
to do is talk to my district staff about how bad things were,
and things do seem to get better. But I just want to say you
got some work to do. Last week my wife spent three hours on the
phone with the IRS, and she still hasn't gotten through. And
most people, at least working people such as my wife, don't
have time to spend. It was three different calls trying to get
through. So she just didn't have time. People don't have time
to spend an hour on the phone. So that----
Mr. WERFEL. Yes, Congressman. It is stories like that that
is motivating. I know we have more work to do. But what worries
me, Congressman, is if we reduce our funding we will hear more
stories like that.
Mr. THOMPSON. Oh, I get it. I get it completely.
Mr. WERFEL. Yes.
Mr. THOMPSON. I just need to let you know that we----
Mr. WERFEL. Understood. I like when people tell me these
stories, because it is motivating.
Mr. THOMPSON. Commissioner, we have some devastating
wildfires in California 2015, 2017, and 2018. Fire survivors
throughout California received payments from an established
trust after the Pacific Gas and Electric bankruptcy. My
constituents and other Californians began receiving partial
compensation from that trust in 2021, and they continue to
receive payments today. None of the people that we are talking
about will ever be made whole. They are going to get less money
than it is going to take to rebuild their homes and their
businesses, and heaven knows what all they lost that are just
irreplaceable.
Now, in many cases, these folks are being told that they
owe taxes on the payment they received from the trust,
including taxes on the lawyers' fees, the lawyers that were
associated with that trust.
I have legislation with Representative LaMalfa that will
make these payments non-taxable, and I appreciate that your
staff has been working with mine on this issue, and I would ask
that you will continue to work with Congress. This is wrong.
This should not be like this. And I know the 2017 tax bill teed
up some of this inappropriate taxation to take place, but we
need to fix this. It is not a good situation for American
taxpayers.
Mr. WERFEL. Understood.
Mr. THOMPSON. Is that a yes, you will work to continue----
Mr. WERFEL. Well, I am--absolutely will work with you.
One of the limits that I have as the IRS commissioner is
not being able to comment on--pro or con--on legislative
proposals, only to talk about whether it is administrable.
I will say this, though. It is Treasury who----
Mr. THOMPSON. I will be satisfied with a yes, I will
continue to work with you----
Mr. WERFEL. Yes.
Mr. THOMPSON [continuing]. On helping the taxpayers who are
being----
Mr. WERFEL. Absolutely.
Mr. THOMPSON [continuing]. Being harmed.
Mr. WERFEL. And we appreciate when we are provided tools to
help taxpayers in need, especially those that are impacted by
natural disasters.
Mr. THOMPSON. Thank you. I also just want to say that Mr.
Kelly, who is not here today, and I have legislation, along
with Chairman Wyden and Ranking Member Grassley over in the
Senate, to strengthen the IRS whistleblower program. We have
got some common-sense fixes that will strengthen that, help you
guys out. And I guess it is not your policy to comment on
legislation.
Mr. WERFEL. It is not my----
Mr. THOMPSON. But you can tell us if this will be helpful.
Mr. WERFEL. Yes, I can. We can work with you on that. You
know, I will say we at the IRS will fiercely defend the
integrity of the whistleblower process. We welcome suggestions
on how to strengthen and improve it. So I would love to work
with you on that.
Mr. THOMPSON. Thank you very much.
I yield back.
Chairman SMITH. Mr. Schweikert is recognized.
Mr. SCHWEIKERT. Thank you, Mr. Chairman.
Mr. Commissioner, I have a fascination with the adoption of
technology as a way to deal with so many of your issues. I have
a--actually, an IRS press release from just a couple of weeks
ago talking about your adoption of a chat bot for simple
collection questions. Do you know anything about that?
Mr. WERFEL. I do.
Mr. SCHWEIKERT. How is it working?
Mr. WERFEL. Well, we have had a very successful filing
season, as I understand it, with the introduction of new chat
bots for things like getting a transcript, for things like
setting up an installment agreement if you have less than
25,000. These are relatively--25,000----
Mr. SCHWEIKERT. And the article makes it clear, your press
release also makes clear it is relatively simple. But you have
just engaged in an experiment of adopting the technology that
we see much of corporate America moving to----
Mr. WERFEL. Correct.
Mr. SCHWEIKERT [continuing]. Very quickly. I desperately--
what can I do, as a Member of Congress on this August
committee, to help you do a hell of a lot more of this?
Mr. WERFEL. Yes.
Mr. SCHWEIKERT. The fact of the matter is, being someone
who has been screwing around with chat GPT since the end of
last year, it is remarkable. I have had it write code for me.
The fact of the matter is you could build a stack, the IRS,
and my--ability to even ask complex questions, the ability to
actually say, here is the discussion I can have, and over here
is functionally the video on filling out the form.
I guess I am just desperate of what can I do to drag you in
to the adoption of the technology that is truly customer-
centric?
Mr. WERFEL. Congressman, I am a convert. There is not a lot
you have to do to convince me. And if my team behind me and
those back at the IRS are watching, they are probably laughing
because of how often in my first five or six weeks I have
raised this exact issue.
Mr. SCHWEIKERT. So if I went online right now, though, and
actually called in and talked to the chat and you would direct
me to here is the video that would walk me through how to fill
out the form in multiple languages, that exists? I look for it
last night----
Mr. WERFEL. Here is----
Mr. SCHWEIKERT [continuing]. And I couldn't find it.
Mr. WERFEL. Here is--when I think about a bot, I just want
to make sure--like, if you called in the IRS three years ago
and you needed a transcript, you got in line with everyone
else.
Mr. SCHWEIKERT. Oh, no, no, it is----
Mr. WERFEL. But not anymore.
Mr. SCHWEIKERT. I want to help you with this.
Mr. WERFEL. Yes.
Mr. SCHWEIKERT. Because I also must tell you I think it is
insane you maintain your own servers when you have substantial
portions of the Department of Defense on highly-encrypted cloud
servers.
Mr. WERFEL. Yes.
Mr. SCHWEIKERT. And you want to keep your own server farm?
Mr. WERFEL. Not necessarily, no. We are----
Mr. SCHWEIKERT. No, no, not--well, not necessarily yes or
no. What can I do to help you to join this century of
technology----
Mr. WERFEL. Yes.
Mr. SCHWEIKERT [continuing]. Both the storage and your
computing capacity? It is absurd that you still have that
server farm in West Virginia. It really is.
Mr. WERFEL. The first thing that you can do to help is make
sure that we are not underfunded to modernize.
Second----
Mr. SCHWEIKERT. But--stop. The migration--because I--we
spent some time looking at your plan. I didn't see the
migration away from all your own storage and all your own
processing, because this is really expensive. I mean, you still
are maintaining, what, some AS400s and some of these things?
That is insane, what you have to pay someone to do that.
Mr. WERFEL. Yes. It----
Mr. SCHWEIKERT. You know----
Mr. WERFEL. It is in there, Congressman. I will explain it,
if you give me one second.
Mr. SCHWEIKERT. Oh, please.
Mr. WERFEL. Which is in the plan we are committed to
replacing our core--main core systems.
Mr. SCHWEIKERT. Okay, so now stop. That is actually what I
was going at. I don't want you to replace it. I want you to
migrate it out.
Mr. WERFEL. Yes, that is one of the alternatives. I can't--
you know, and we should talk offline about large capital
technology transformation, because I want to make sure that I
am following best practice. And one of the things we need to do
is an alternatives analysis. And I am very interested, maybe as
interested as you, in what the cloud-based, service-oriented
architecture looks like as an alternative.
Mr. SCHWEIKERT. You do realize we are having a conversation
that is a decade out of date.
Mr. WERFEL. I agree.
Mr. SCHWEIKERT. I mean, when the Department of Defense did
this a decade ago, and you guys are still putzing around with
it, and it is a conversation I had for the first week I was on
this committee. And this isn't Republican or Democrat. It is
just modern practices. It is just, you know, we complain about
resources and funding, people are really expensive, and the
rest of the world, the rest of the corporate and the rest of
other parts of the government have made these migrations.
I want to--and this is one--I want to help you. If it is
resources, if it is talent, I want to help you do these
migrations. But the fact of the matter is this made me very
happy that you guys put this out because it is a demonstration
you are at least experimenting with technology.
But my pitch at the end here is a very simple one. So far,
every witness here, and part of the response is resources,
resources, resources. Okay. Some of them are saying the modern
use of the resources you have, you could dramatically cut your
operational costs by moving into this century of technology.
That is all. And I want to help.
Mr. WERFEL. I would appreciate that help. I would love to
meet with you offline.
One of the things I will walk you through is some successes
that we have had on technology that we can build on. You have
pointed to one, but there are others. But I am not disagreeing
with you.
Mr. SCHWEIKERT. Okay. I just--the last sentence is I was
underwhelmed with the vision on your migration plan. It just--
go. Okay. You had a sentence or two that were throwaway lines.
With that, I yield back.
Chairman SMITH. The gentleman from Connecticut is
recognized.
Mr. LARSON. Thank you, Mr. Chairman, and thank you, Mr.
Chairman, for having this hearing. I think it is enlightening
to have a hearing and to re-engage with ``We are from the IRS,
and we are here to help.''
And I want to say at the start I want to associate myself
with the remarks of the Democratic leader, Neal, that he so
artfully put out, but also talk about that service, and
especially for the service, putting aside for a moment people
earning above $400,000, but people who actually need the help.
And the VITA program, which has----
Mr. WERFEL. Yes.
Mr. LARSON [continuing]. Been in place for a number of
years, I can't tell you how successful that is, and how we need
to expand upon that. Is there something in the works to do
that, as well?
Mr. WERFEL. Yes, I think about improved service as meeting
taxpayers where they are, and working with community groups,
intermediaries to help us do that.
VITA is an essential partner. They do incredible work. The
number of times that VITAs are helping people file their taxes
is increasing. The trend is going in the right direction. We
are ready to partner and continue that trend.
Mr. LARSON. I think that is an important thing, and
something we can learn in government. I hope, along with Dr.
Ferguson, to talk about using a similar program. With more than
10,000 Baby Boomers a day becoming eligible for Social
Security, there is also a tremendous need for volunteer help at
no cost to make sure that people are getting the benefits that
they richly deserve and need.
It also brings to mind, et cetera, something like the
passage of the Child Tax Credit that is on the books and then
off the books, and for so many families out there that were
eligible that probably never even took advantage of this.
And so, again, giving new meaning to ``We are from the IRS,
and we are here to help,'' and to augment your team also with
volunteers, but making sure that you have the resources to
carry out what the regular taxpayer needs to understand.
[Chart]
Mr. LARSON. And we have a chart behind us, and I want to
commend you because we keep a record of this--I am sure most
Members do the same thing--of the number of cases that we take
up. And here, just in the area of tax filing for the year, we
have what went on in 2022 and what transpired in 2023.
And as you can see with the new resources, the tremendous
effort that was put forward--as Mr. Thompson said, yes, we can
do better, and I hope that that is the plan, as well. But
between modernization and also having that human being there--
--
Mr. WERFEL. Yes.
Mr. LARSON. The most frustrating thing I talk to to our
constituents is not having a person on the other end of that
phone, or being able to talk to.
The fact that you are open on Saturdays now, as well, and
provide that opportunity, if you could comment on that, as
well, Mr.----
Mr. WERFEL. Yes, I really appreciate the opportunity to
comment.
I mean, when we had lower resources, it was so frustrating
for IRS employees, not just because we couldn't have the right
amount of people on the phone, but also we couldn't do what we
need to do as part of meeting taxpayers where they are and
serving them effectively in underserved populations.
So what funding allows us to do is to do what--the base of
what we are supposed to do, which is to be there to answer the
phone, but it allows us to lean in and provide a more fulsome
service experience. That means meeting taxpayers where they
are, allowing them, if they want to walk into a walk-in center,
that that walk-in center is open, staffed, and there is no line
outside.
One of the things we did, Congressman, is we have opened 16
additional walk-in centers this filing season. That would have
not been--those are in local communities around the country.
Some of the districts of the members of this committee. We
could not do that without the Inflation Reduction Act.
So there is really no agenda here, other than to meet the
demand of a very complicated tax system so that we can serve
Americans effectively.
Mr. LARSON. And it is a great thing for the American
taxpayer to understand that you are from the IRS, and you are
here to help, and we need to take advantage of that. Thank you
for your testimony.
I yield back.
Mr. WERFEL. Thank you.
Chairman SMITH. Mr. LaHood is recognized.
Mr. LaHOOD. Thank you, Mr. Chairman.
Commissioner Werfel, welcome. Thanks for being here today.
Let me start by echoing the concerns of many of my colleagues
on the supplemental funding for the IRS received last year in
the Democrats' IRA that disproportionately focuses on audits
and enforcement over customer service and technological
modernization.
Like anything in the Federal Government, things need to be
made more efficient, more effective, and more accountable, and
that concerns me. Law-abiding families and small businesses in
Illinois need their tax returns processed and phone calls
answered. And we have heard immense frustration here today
regarding the lack of that being done. We don't need more IRS
agents knocking on their doors with burdensome audits.
I want to focus my time today, though, on a specific
provision included in the IRA: the $15 million in funding to
study the feasibility of implementing the free direct e-file
tax return system at the IRS. We have heard that the study is
on track to be shared with us next month, and that it is likely
that the group Code for America would be involved in this
endeavor.
At this time, Mr. Chairman, I would like to ask unanimous
consent to enter into the record an article from the Wall
Street Journal dated April 26th, yesterday, titled, ``Cooking
the IRS Study Books: The Tax Agency Wants to Decide What You
Owe Before You Do.''
[Pause.]
Chairman SMITH. So approved.
[The information follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. LaHOOD. So approved? Thank you. [Laughter.]
Thank you. With that, in that article, as I am sure you are
well aware, Commissioner, it outlines that the IRS direct e-
file system in the pending feasibility study are of grave
concern. And I guess I am trying to figure out the general
premise behind the direct e-file study.
As I look at the extensive list of already existing
problems at the IRS, and your plans that you have to focus on
in the coming years, and the fact that free e-filing services
already exist in the market today--as you know, the tax
preparation industry already provides free filing services for
roughly 30 million returns each year. So I am not quite sure
why trying to tackle this concept in the near term would be
beneficial to the IRS or, more importantly, to the American
taxpayers.
Now, I know you are new coming into this, and I heard your
comments earlier before. But don't you think the e-file effort
could lead to the IRS biting off more than it can chew, with
all those things that I mentioned that you talked about,
further complicating the tax filing experience?
Mr. WERFEL. Well, I would start by saying we have a
responsibility to provide tax--to meet different taxpayer
preferences. Not everyone wants to engage in the IRS in the
same way, and not everyone has the means or the position to do
so. So we have to create this menu. The menu includes walk-in
centers, the menu includes our IRS.gov platform, and working
with our--the Free File Alliance, and the third-party
preparers, it involves advancements on the smartphone, as
Congressman Schweikert was holding up his.
The question I think being posed here is, is this an
additional menu item for certain taxpayers to avail themselves
of if that is the way they prefer to engage the IRS, this
direct file?
So the Congress said, ``Study it.'' And they--and my
understanding of the congressional provision is what would it
cost, what are the taxpayers' opinions on it, and then an
independent assessment of its feasibility. And that is what we
will produce in mid-May, and we will come and we will talk
about it, and you will have more grounding to ask me the tough
questions.
Mr. LaHOOD. Well, I understand that, and I understand the
study. But obviously, you are the new commissioner. You have
had opportunity to digest this and look at this. What is your
opinion?
Mr. WERFEL. Well, I don't want to get in front of the
report itself, because the report is not done, and I don't want
to get out in front of a report that isn't complete.
My take on it is I want to make sure that we are meeting
customers--taxpayers, in this case--where they are. I think it
is a best practice for an organization to not have a one-size-
fits-all. I don't know yet whether the direct file solution is
the right additional menu item to put in place so that
taxpayers that prefer to engage that way can do it. What I
would like to do is have the report issue and then engage in a
conversation with the right set of stakeholders, and figure out
what the go-forward is.
Mr. LaHOOD. Well, I would just say--and we look forward to
that conversation, but it appears to me that it seems very
problematic, and the focus on the IRS should be those things we
talked about: prioritizing customer service, modernizing
technology. You have enough to do there.
And so, again, we look forward to getting that study back,
and look forward to trying to do all we can to help make the
IRS more efficient, effective, and accountable to the American
people.
I yield back.
Mr. WERFEL. Thank you.
Mrs. MILLER [presiding]. The gentleman from Oregon.
Mr. BLUMENAUER. Thank you very much, Madam Chair.
Mr. Commissioner, thank you very much for being here. Thank
you for taking what is arguably the most thankless job in
America. I have had this conversation with a number of your
predecessors, and I feel the same way. Anybody who is qualified
to be appointed has lots of other career opportunities with
less grief, less pressure, and probably more remunerative. So I
really appreciate your willingness to take this assignment on,
particularly considering some of the combative attitudes that
you have to put up with.
My experience with your employees, on balance, is one that
is very positive. I routinely meet with Treasury employees in
Oregon, and I found in the midst of the pressures that
literally reduced them to tears because they couldn't answer
the phone and get the job done. And Congress is complicit in
this. Congress has routinely underfunded the agency, while all
the time we make the tax code more complex, and you have more
returns to deal with.
I have just one question. Do you have 73,000 or 85,000
employees?
Mr. WERFEL. Today we have roughly 85,000, which is still
kind of at a level of staffing that is----
Mr. BLUMENAUER. No, no----
Mr. WERFEL. Yes.
Mr. BLUMENAUER. I hear you. Your reference here in terms of
trying to meet the taxpayers where they are, I think, is
commendable. Are there other countries in the world that have
an automatic system that provides taxpayers with their returns,
that computes it for them?
Mr. WERFEL. There are other countries that have adopted
that type of system.
Mr. BLUMENAUER. Thank you. I don't find that particularly
threatening.
I will say that I wish people had the same ire against some
of the private tax preparers who have been involved with tax
scams that take advantage of taxpayers who aren't particularly
sophisticated. You don't have to look very far to find
taxpayers who are cheated by this industry. Not all, not many,
but it is a not-insignificant number.
I appreciate what you are talking about, being able to
equip the IRS to meet the challenge. I remember an article a
few years ago that GE had 1,200, it was one of the largest law
firms in the country was their tax department, 1,200 tax
attorneys for one corporation filing, I imagine,
extraordinarily complex returns.
And to the point one of my colleagues made earlier, these
are very difficult to move through. I meet routinely with CPAs
and tax advisers and attorneys in my district, talking to them
about the challenges. Most of them lament the understaffing and
the inability of the IRS to be able to respond, and they
acknowledge that audits largely are a thing of the past. Very
few of them have clients that go through this, and they are
talking about the most wealthy and privileged.
So I appreciate the course you are trying to navigate here
to try and equip the agency to meet the challenges. I think you
said almost 400,000 very high-wealth and expensive programs
that are complex, and you have maybe 2,600 people, you know,
not much larger than General Electric's former law firm,
dealing with these. I think it is an admirable challenge.
I appreciate your being forthcoming with us, willing to
work and explore these items. The things that my colleagues
have raised, I think, are worthy to be looked at. But I do
think we need to be mindful of the fact that this committee in
the past did not cover itself with glory in terms of some
pretty outrageous activities in terms of some of the hearings
that we convened and sensationalized them. I think we can do
better than that. And I appreciate what you are trying to do,
your attitude, and cooperation, and look forward to working
with you.
Mr. WERFEL. Thank you, sir.
Mrs. MILLER. The gentleman from Ohio, Dr. Wenstrup.
Mr. WENSTRUP. Thank you, Madam Chair, and I am grateful
that we are having this hearing today.
Commissioner Werfel, I want to thank you for being here. I
look forward to working with you throughout, and appreciate
your candor today.
And I do want to make a plug for my IRS Advocate at home. I
will tell you that we have had great success, a good
relationship working there. Sometimes it is unfortunate we have
to go to the Advocate as much as we do, but that cooperation
has been good, and I just think it is good to give some good
feedback here and there.
Mr. WERFEL. It is great to hear.
Mr. WENSTRUP. The couple topics I would like to ask you
about today--so I am just going to jump right into it--my staff
back home has been working for several months now with
constituents who are having trouble getting their Employee
Retention Tax Credits released because they have contracted
with a professional employer, organization, or PEO for payroll
and related tax duties. And from what I understand, the PEO and
IRS are following the law, trying to resolve the issue, but it
has been more than six months of ongoing casework now, and it
seems that the use of the PEO is what is delaying them from
getting their tax credit released.
And you know, I know you mentioned before the phones being
answered more quickly. Well, that is good. That is a good first
step. But resolving the issues, too, is really the ultimate
step.
Mr. WERFEL. Yes.
Mr. WENSTRUP. So, if you don't mind, how is the IRS
handling this PEO-related ERTC claims and the delays that are
taking place?
Mr. WERFEL. Yes, it is--I am concerned about any time we
have a backlog, and we need to focus on it. And what happened
during the filing season is we moved and concentrated our
personnel resources on the phone to make sure we were answering
the phone.
We have made progress on the backlog. During filing season
we were resolving and processing about 20,000 Employee
Retention Credits a week, but that was not enough to keep up
with the demand, because more come in. There is still
eligibility through 2025. So this is a growing target, not a
stable one.
Now that the filing season is over, we can reset our
staffing. I am hoping that we can more than double the rate,
closer to 40 to 50,000 resolved a week. Plus we have teams
looking at ways we can improve the process and be more
aggressive in our efforts to manage that backlog.
So it is an absolute priority. It has got my attention, and
we are--you know, and I am holding people to more aggressive
targets inside the IRS.
Mr. WENSTRUP. I appreciate that, and I am glad to have this
opportunity to discuss the awareness of the issue that you seem
to have.
Shifting gears to the IRS Strategic Operation--Operating
Plan, I want to ask you specifically about the energy security
lines and the IRA allocations summary table on page 109 and the
FTE table on page 131. For context, the SOP allocates just $3.2
billion to taxpayer services. Even the National Taxpayer
Advocate noted in a recent blog post that the funding in this
plan was ``disproportionately allocated for enforcement
activities,'' and that the IRS needed to ``not lose sight of
its core mission.''
So I look at the $3.2 billion allocated for taxpayer
services, which is seemingly woefully inadequate as a share of
the total funding here. And I am wondering why more than one-
third of that is earmarked for energy security, because the SOP
lays out five transformation objectives: dramatically improve
services, quickly resolve issues, focus expanded enforcement,
deliver tech improvements, recruit and retain a workforce.
Those are all challenges, I get it.
And then there is this energy security line item tacked on
after those five objectives. And under the taxpayer services
is--energy security is siphoning off $1.2 billion.
Quickly resolving taxpayer issues when they arise for
objective number two is another quote.
Let me just cut to the chase. What specifically about the--
those 1,800 new IRS employees--what will they be doing to
support energy security that warrants a specific line item,
rather than funding improved tax administration through the
five transformational objectives?
Mr. WERFEL. Yes, it is a great question, and just lifting
up for one moment, you know, just--the tax code is constantly
changing, and the Inflation Reduction Act changed it.
But even before that, between July 2019 and December 2022,
there were 950 amendments enacted under the Internal Revenue
Code. And what that means is--and that is in Congress's wisdom
and the President's wisdom to sign out those. What that means
is it changes the forms. It changes the types of questions that
we get. It changes the type of processing that we need to do,
and we need to make those adjustments.
The energy-related credits in the IRA are new, and there is
some novel elements to them. And so we have to do what we are
doing now, which is we have issued rounds of public comment,
asked for information, we are doing advance and notice of
proposed rulemaking. We also have to hire more people to be in
the phone center, because calls will come in with questions on
am I eligible or not, how is this working? New forms will come
in that we will have to assess.
We will have to have strong program integrity. So that--
those funds are really dedicated to administration of these new
tax provisions.
Mr. WENSTRUP. Well----
Mrs. MILLER. The gentleman's time has expired. The
gentleman from New Jersey, Mr. Pascrell.
Mr. PASCRELL. Thank you, Madam Chair.
Commissioner Werfel, congratulations on your confirmation
and, hopefully, a successful IRS filing season. I can't imagine
the enormity of the job. We have had some hearings over the
past session about the IRS, and I think it comes down to
leadership. That is my opinion and my perception. I think you
got great workers. They have to face a tremendous amount of
filing and questions throughout the year, not just until April
15th, every year.
The historic funding enacted in the last session empowers
the IRS to answer phones and get refund checks out. And looking
at the numbers--I think you put it in your testimony--I think
we are going in the right direction. We have a long way to go,
and you said that. We are going to make writing out your taxes
as easy as possible. We have promised that a number of times.
We even had the postcard theory.
Now we hear lip service about protecting working Americans
from audits. Let's get one thing straight. I believe there has
been a sabotage of the IRS over the last years. And when
Democrats were in charge we didn't do much about it, because
you have to have a budget. You can sweet talk all you want. If
you don't have the money, you can't get the resources.
You marked seven different places where you have improved
in this year's filing season. Tremendous. And you have already
got 117 million people who have filed. So we are halfway there
because 50 percent of those folks got a check, a refund,
already.
So we are ensuring working families face big audits while
the rich get scot free. Our hearing last year laid that out.
And when you see the numbers, it is startling. Smearing fear
enforcement is just code for protecting somebody.
Commissioner, your predecessor shielded Donald Trump's tax
returns for years. Whether he never read 6103 or not is still
dubious. IRS began a ham-fisted audit the same day Chairman
Neal made his appeal. It was clear, it was moderate, it was
fair. Republicans did nothing while Trump's commissioner broke
the law. Because you don't know the law exists or you don't
know what the law says is not an excuse; 6103 is very clear, as
the courts pointed out.
And I don't want to hear that we went after Mr. Trump
unfairly. Where the heck were these people 10 years ago, when
they investigated Ms. Lerner, who had your job, threw her out,
and then exposed the names of 12 taxpayers who lean to the
left--whatever the heck that means--lean to the left in the
charities that they represented?
I want you to commit to following our recommendations to
clearly detail the mandatory presidential audit program in the
Internal Revenue Manual. I have read it. Have you?
Mr. WERFEL. Yes, I am familiar with the IRM on this.
Mr. PASCRELL. Where are we?
Mr. WERFEL. Well, first, I am required to clarify, of
course, that any remarks that I make are prohibited to be
attributed to any individual taxpayer.
Mr. PASCRELL. Right.
Mr. WERFEL. We have a requirement amongst many in the
presidential tax review program to review the taxes of a
president. And I am in the process of understanding the
different ways that the reduction in IRS resources have
impacted our abilities to carry out a variety of different
functions, including potentially this one.
So, Congressman Pascrell, I think my answer for you right
now is that I want to work with you and provide you more
detailed updates on what we are doing on this program. But
right now there are a lot of different activities underway as
we reset the priorities.
And in particular, as I have mentioned several times in
this hearing, we have a significant opportunity to change the
way we assess the complex filings of the wealthy. We have
capacities that we need to build, skill sets that we need to
hire, resources that we need to put in place that--right now we
are not able to do the types of the review that I think middle
and lower-income Americans want us to be able to do to
demonstrate that the tax system is fair.
And so, holistically, we are going to improve our overall
efforts in this area. And then separately, I would like the
opportunity to come back to you with an additional briefing on
how that impacts anything related to the presidential tax
review program.
Mr. PASCRELL. Fair enough, thank you.
Chairman SMITH [presiding]. Mr. Ferguson is recognized.
Mr. FERGUSON. Thank you, Mr. Chairman.
Commissioner, thank you for being here today. I have got a
lot to cover, and would like to jump right into it. I am going
to make a plea to you to--for--to help my constituents, all of
our constituents, get their money back from the IRS, and to get
what is owed to them.
I am going to make a plea to you to help with the mental
health of my district staff that works with your agency all of
the time, and all of the district staffs, because they are
losing their minds over the frustrations of dealing with things
like a taxpayer advocate service that simply is not responsive
and not working. They are losing their minds over 4.5-hour
courtesy hang-up calls. They are losing their minds trying to
help my constituents day in and day out.
And we have heard about all of these vast improvements, and
I am glad that somewhere in the rest of the country that is
happening. So I am going to beg you, if I get you certain cases
or get you--will you work with my staff to help get the folks
the relief?
Let me give you a couple of examples of why this is
important. We had one small business that was looking for $1.4
million in Earned Income Tax Credits. Because of the delays, it
cost $150,000 in interest. In 2021, interest payments grew to
$3.3 billion, up 33 percent.
I have got list after list after list here of the number of
quarterly interest payments that--in just a very few cases that
my staff works. Think about this. One of these interest
payments could provide benefits for a Social Security
beneficiary for maybe up to six years. Think about that. We are
struggling to figure out how to pay--to solve insolvency--to
fix the insolvency problem with Social Security, and one, if
you just fix one of these cases, we could cover somebody for up
to six years. So will you work with my office to handle this?
Because another case that is very interesting is that we
have a letter--one of my constituents has a letter that says
you are due a seven-figure refund, says it from the IRS, and
for three years they can't get an answer on it. Three years.
So I am proud that somebody is getting a little relief, but
we ain't getting it down to the Peach State. So will you help
us? Will you please help my constituents and my staff?
Mr. WERFEL. Yes, you have my commitment.
Mr. FERGUSON. Okay, good. Look, now, here is the other
challenge that we have got. This is the data that you provided
regarding where the new hires in the IRS are going to be
through fiscal year 2031. This is the data that you provided,
and we have just put it into a nice little graph form here.
[Chart]
Mr. FERGUSON. And so, with this wonderful customer service
that you have right now--and I say that very facetiously--what
we see, taxpayer services in the out-years begins to drop
significantly. So a bad problem is getting worse, yet the
enforcement number is going straight through the roof, and
operational support is coming down.
Based off of where we are right now, this whole thing is
backwards. You need to be funding taxpayer services a heck of a
lot more, getting folks their money back, and you don't need to
be going after the enforcement side the way that you are. So, I
mean, this simply does not make sense.
Every single person here is talking about the problems that
they have, that their constituents have with the IRS in getting
their money back, and yet what we see from your own data is
that this line is coming down. So this doesn't make any sense.
So taxpayer services are going down, enforcement is going up.
It just doesn't make sense.
So one other issue that is out there I want to bring your
attention to, just get your thoughts on it--I guess maybe just
get a commitment. You are not planning to implement a bank
surveillance scheme with IRS that was proposed before that was
not--but you are making no effort to implement----
Mr. WERFEL. That is correct.
Mr. FERGUSON. Right, okay, good. So if you were a
representative--and I know that you are the commissioner, but
if you were a representative you would have absolutely no
problem with H.R. 1010, our bill that would prohibit the IRS
from implementing that bank surveillance scheme.
Mr. WERFEL. Yes, I defer to the Treasury Secretary on those
types of questions.
Mr. FERGUSON. Okay. Well, she was----
Mr. WERFEL. I am just required to----
Mr. FERGUSON. She was fairly non-committal, as well. But it
sounds like it is not something that you----
Mr. WERFEL. We have no intent of----
Mr. FERGUSON [continuing]. Are going to pursue. So good.
You wouldn't have a problem with this.
So I looked at this, and I looked at these numbers, and I
go back, I look at the enforcement side of it in the out-years.
So you say, oh, don't worry about it here, nothing here. So we
are going to have all of this enforcement. So the final
question that I have got for you is how many rounds of
ammunition does IRS plan to purchase this year?
Mr. WERFEL. I can get back to you on that, but it is not--
--
Mr. FERGUSON. Thank you.
Mr. WERFEL. It is not a lot.
Mr. FERGUSON. I look forward to it. Because if you are not
going to hire armed agents, it doesn't make sense for you to be
hiring--to be hiring agents.
But by the way, on your job posting board today there is an
application for armed agents.
With that, Mr. Chairman, I yield back.
Chairman SMITH. Mr. Davis is recognized.
Mr. DAVIS. Thank you, Mr. Chairman.
And first of all, Mr. Werfel, let me congratulate you on
your new assignment, and say that I look forward to working
with you.
Secondly, let me thank Tracy Walker Carter and your SPEC
team for their efforts to help foster and homeless youth better
understand tax resources. I know how much the Earned Income Tax
Credit expansion helped homeless and foster youth in 2021.
Given its expiration, I am very grateful that the Internal
Revenue Service has continued its outreach to help these
vulnerable youth.
Third, I have got to tip my hat to our new Chicago taxpayer
advocate and her team; they were very helpful to my office and
to my constituents.
Mr. Commissioner, I would appreciate your updating me with
some information when it is available. In particular, when the
IRS has data on tax year 2021, I would appreciate reports about
the benefits of the expanded Earned Income Tax Credit, the CTC,
and the CDCTC in 2021. This information will greatly help us
better understand how these credits impacted families and
workers.
And finally, like other systems in our country, the
seemingly race-neutral tax policies and audit practices can
have a substantial disproportionate impact on taxpayers of
color. I am glad that the Internal Revenue Service is beginning
to examine these disparities, and I hope that you will keep me
updated about this work and any legislation that may be needed
to build on these efforts to ensure that our tax code applies
fairly to all taxpayers.
And I thank you, and look forward to your response.
Mr. WERFEL. Thank you, Congressman. And I will provide you
with those updates.
And we are working in response to a request from Senator
Wyden, chair of the Senate Finance Committee, on an assessment
of the report that I think you were alluding to with respect to
potential disparate impact of IRS audits on racial minorities.
Once that report is complete and we have submitted it to
Chairman Wyden, and I would be happy to come and brief you on
its findings and what we are doing to move forward from here.
Mr. DAVIS. Thank you very much. And while all of your
offices throughout the country do outstanding work, there are
none that does what the office in Chicago does. They are the
best. Thank you very much.
Mr. WERFEL. Noted.
Mr. DAVIS. And I yield back.
Chairman SMITH. The gentleman from Kansas is recognized.
Mr. ESTES. Well, thank you, Mr. Chairman, and thank you,
Commissioner Werfel, for joining us today.
You know, as a new commissioner, I know you have your work
cut out for you as far as things going on. And, you know, I
look forward to working together to help clarify the agency's
priorities and deliver a better experience for the taxpayers
and, at the end of the day, helping them retain as much of
their income as possible. After all, they worked for it. And
paying the taxes is a task that we want to do as part of our
country and the process we have here.
We are all aware Tax Day was last week, and I know that it
is fresh on Kansans' minds about how much money is going into
the Federal Government in Washington, D.C. via their taxes. And
they want to know, and have a right to know, that their hard-
earned dollars are going--and what--where they are going and
what it is being used for. And that is true across the Federal
agencies, any agency that exists in the Federal Government.
I want to talk a little bit about, you know, instead of
increasing the audits on ordinary Americans, where--what is the
IRS doing about dedicating their efforts to help focus on
security and protocol, given the--some of the major leaks of
confidential information that has happened in recent years?
You know, it has been nearly two years now since ProPublica
published confidential information obtained through a massive
leak, and still no one is held accountable. And just last week
the IRS disclosed confidential information contained in a Form
990T when it was not once, but twice posted online. And, you
know, mistakes like this don't inspire confidence that the IRS
can be trusted with the secure, confidential taxpayer
information. So why is it that nobody has been held accountable
for the ProPublica leaks?
And, you know, as the new commissioner, will you commit
that--you know, to--that you are going to focus on finding why
these leaks occurred, and will work to make sure that they
don't happen again?
Mr. WERFEL. Well, let me start, Congressman, by saying--and
I mentioned earlier--how important data security is. And when I
first was approached about doing the IRS job, and I sat down to
get ready for my Senate confirmation hearing, I wrote down,
``What are the most important implementation factors?'' And the
first thing I wrote in tax administration is data security. It
is the top-most priority.
And as I mentioned earlier, in my early weeks here I am
trying to figure out and determine what is our state of the
union in terms of data security. Where do we have strength? For
example, right now I am comfortable with our cyber profile in
terms of what we are doing, but we need to stay ahead and keep
investing in the right solutions.
And there are areas as--for example, there are several
TIGTA recommendations that we have not done yet that we need to
do, and I want to close those gaps, and the Inflation Reduction
Act provides us the resources.
With respect to the specific issue that you raised, it is
my understanding that the issue has been referred to the
inspector general, and the appropriate protocol for me at that
point, once an issue has been referred to the inspector
general, is to stand back, let the inspector general do any
review that they deem necessary, and to offer to the inspector
general any support that is needed from me.
And I had a general conversation with Russell George early
in my term that confirmed my understanding that my role is to
refer issues, let him do his work, and when he needs my help in
an investigation, I will be there to help him.
Mr. ESTES. Which is great, and we want to make sure that
inspector generals are able to do their job, wherever the work
that they are doing.
I guess the frustration that we feel is now, two years in,
we are hearing this constant story. There is an investigation
underway, and we are not hearing anything. And is--do you
have--are you getting updates from the inspector general? Are
you having meetings, or do you have a schedule that you will
get together every three months, every quarter to get an
update? Or what is the process there?
Mr. WERFEL. Typically, in any investigation, what the
inspector general will provide is immediate input to us if
there is an action that we can take to close a critical gap.
Let's say they are doing a review of a system for security.
They won't wait five months and say, ``We see a gap.'' They
will come to us early and say, ``We see a gap,'' even though
the study is not done yet, or the audit, or the investigation.
So anything that the inspector general tells us mid-audit or
mid-investigation is for us to take an immediate action.
And I think, in general, broader than their ongoing
inspector general reports on data security and ongoing
recommendations that were in place for years that haven't been
closed, and my focus is on closing those.
Mr. ESTES. Well, and that is good. I guess there is just a
frustration that sounds like this is being swept under the rug.
Two years now, and nothing happening.
So I know I am about out of time. I have got so many other
questions.
You know, one of the things that concerns me--and I know
several members have already talked about it--is the Inflation
Act, when it came out, only dedicated $3.2 billion out of the
$80 billion for support and customer service. And that is a
concern, I think, that a lot of us have.
So my time is expired, but I will yield back, Mr. Chairman.
Chairman SMITH. The gentleman from Oklahoma is recognized.
Mr. HERN. Thank you, Mr. Chairman.
Mr. Werfel, thank you for drinking from a fire hose for the
first six weeks of the new job, and sitting here for almost two
hours now--and probably have another couple of hours to go
here. But you know, this--the IRS is something that is--you
know, most people out in America--I am sure you have heard
this--kind of considers the boogeyman, and sort of a place to
be.
The last two-and-a-half years, you know, every
congressional office has acted as the customer service reps for
the IRS, trying to reach out and find people. And when I say
find--I mean, let me get my Oklahoma accent--find, with a D on
the end; not fine, with an E on the end.
And, you know, a lot of the--when you talk to preparers, a
lot of that is due to the fact that, you know, you couldn't get
answers to, you know, certain things on the returns, and then
people would make adjustments and they would find out after a
period of time that there were penalties, and so we were trying
to get penalties abated, and things of that nature. So, you
know, I would hope, as you work through this, there is some
consideration of that, as well.
I want to ask you a couple of questions here in the time I
have remaining. You know, in--we talk about the IRA and their
allocation. When you look at the tax credits in the so-called
Inflation Reduction Act, it has been widely reported that the
green energy incentives in the IRA will cost us astronomically
more than originally scored last year.
The JCT and Congressional Budget Office scored the tax
credits last year to be $271 billion. Yesterday JCT amended
that score, and now the IRA tax credits will be $570 billion,
more than double the original cost. And this score does not
include an update for the EV credits. But Goldman Sachs has
said the provision cost $392 billion, which is 28 times more
than the original score of $14 billion.
Now, we know implementing these tax credits or tax
incentives will also be far more expensive than we have ever
imagined. In fact, when you look at the omni last year, the
omnibus bill, it allocated $500 million for the IRS to
implement these provisions. However, when we look at this in
the Bloomberg tax article, it says it is going to cost $3.9
billion. So there is a little bit of a discrepancy there
between what was originally appropriated and what you are
saying you need.
First of all, I guess part of my question is can you
explain why it is eight times more than expected?
And are you seeing potential for abuse in these hundreds of
billions of dollars in credits?
And with the cost of the bill going up almost 80--in fact,
your current estimate of $3.9 billion, is that even accurate
now?
And if you could answer that, I have got one more question
as it relates to that.
Mr. WERFEL. Yes, so I will try to provide some clarity on
that. There are funds that are in the Inflation Reduction Act
that are necessary to administer the energy credits. We also
felt that we needed additional funds in our base funding.
So again, this is a point that the Inflation Reduction Act
funding sits on top of our base funding. Our base funding is
roughly at this point $12 billion a year. And we have asked for
a $1.8 billion increment for 2024. Within that $1.8 billion
increment is $100 million to pay for additional people to be on
the phones for energy credit-related questions. So what you are
seeing over the 10-year period is the full cost of what the IRS
feels is necessary to administer the energy credits that were
in the Inflation Reduction Act.
Mr. HERN. So with the ever-escalating anticipation of the
take rate of those EV credits--we have heard this widely
reported outside of any governmental agency--does that mean
that you are going to have to come back for a second bite at
the apple as this continues to rise, and more and more people
are taking, which is going to generate more and more questions
and more and more oversight?
Mr. WERFEL. I am not sure. I mean, you are--this is why we
have this annual budget process, is to figure out if the world
changes, exigent factors, assumptions that we may have made
that were incorrect. But based on our best assessment right
now, we have provided you the best understanding we have of
what the cost to the IRS will be over the next--over the life
of the Inflation Reduction Act to administer the energy-related
provisions.
Mr. HERN. So currently there are already tax credits out
there that are energy----
Mr. WERFEL. Yes.
Mr. HERN [continuing]. Tax credits. And so you are only--is
this 500 incremental just to----
Mr. WERFEL. Yes.
Mr. HERN [continuing]. Handle the new EV credits?
Mr. WERFEL. That is correct.
Mr. HERN. And so do you feel like adequately--you are
adequately doing oversight and answering questions on the
existing, with what your current budget is?
Mr. WERFEL. We currently have budget to administer the
credits. As you have heard earlier, we haven't had sufficient
resources, and therefore we have a backlog for some of those
credits. So the idea with our funding plan is to make sure that
we are in a state of readiness for the changes that have been
made to the Internal Revenue Code, so that we can administer
it.
But yes, we already do manage energy-related credits. The--
this is--the Inflation Reduction Act expands the number of
credits or the types of credits that are available, and thus we
have to adjust our operations to accommodate that.
Mr. HERN. So this $3.9 billion that you have set aside
right now in the $80 billion, that is what you anticipate based
on the original projections of the EV credits. This take rate
increase, which, again, will be more individuals taking it,
more businesses, when you come back for your next budget----
Mr. WERFEL. We--if we felt that we didn't have enough
operational resources, we would come back and ask for a plus-
up, yes.
I mean, and it is not--and again, I go back to it. There is
no agenda here. We just want to make sure that we can meet the
demand of American citizens who come to the IRS for help.
Mr. HERN. Well, I guess--Mr. Chair, if I may--just the
point being that this is--as these costs rise outside of your
control, your responsibility is to do oversight, answer
questions.
Mr. WERFEL. Yes.
Mr. HERN. So the point being here is that, as these costs
rise, there are other ancillary, add-on expenses to the
American taxpayer, not just what the allocation of the EV
credit is, but the oversight of those credits, the
administration of those credits----
Mr. WERFEL. Administration, yes.
Mr. HERN [continuing]. That are going to impact the
American taxpayer.
I yield back. Thank you.
Mr. ESTES [presiding]. Thank you, and I now yield five
minutes to Ms. Sanchez from California.
Ms. SANCHEZ. Thank you, Mr. Chairman, and I want to thank
you, Commissioner Werfel, for being with us today.
It really can't be overstated how challenging last tax
filing season was for our constituents. And that is why I,
along with others, led a bipartisan effort last year to try to
urge Treasury and the IRS to give taxpayers some breathing room
while the agency tried to dig out from that enormous backlog.
And it wasn't the IRS's fault that there was a global
pandemic, and it wasn't the IRS's fault that, after years of
being demonized and attacked and under-funded, the agency just
didn't have the capacity to keep up with all of the extra
strain and complexity. So I do want to take a moment here to
appreciate how far we have come since then.
We still have work to do, but it has improved, from
dramatically improved individual and business backlogs to just
being able to talk with a live IRS employee, we are in a much,
much better place. And I want to thank you and the employees of
the IRS who have been working non-stop to get us to this point.
I feel like we don't thank IRS employees enough for the work
that they do that is often thankless.
Commissioner Werfel, my colleagues on the other side of the
aisle are sort of constantly repeating the false claim that the
IRS is planning to send hordes of agents after working families
using the funding that we passed under the Inflation Reduction
Act.
And in reality, the fact is that the lowest earners, who
are disproportionately people of color, are already audited at
far higher rates than wealthy taxpayers. And that is because it
takes, as you said, a lot more resources to audit a single
wealthy taxpayer who can afford a skilled accountant and who
has, you know, many complexities going on in their returns. So
it is kind of interesting that the first bill this Republican
majority passed was to gut IRS enforcement funding. And what
that would have is the practical effect of protecting very
wealthy tax cheats who can use the complexities to their
advantage.
I wonder if you could expand on the differences in time and
resources that it takes to audit a millionaire compared with
filers who are at the lowest income levels?
Mr. WERFEL. Yes, thank you for the question. You know, as
you know, most of Americans file--they are single source income
filers. Most of their taxes are administered through their
payroll. It is a very straightforward operation. When we have
multi-source income, like large partnerships, corporations,
billionaires, and multi-millionaires, it takes up to 50 times
longer for the IRS to assess, examine, or audit those returns.
And that is due to their volume, their complexity.
And, you know, I--you know, to even put more of a fine
point on it, it takes about five hours, on average, to audit a
middle and low-income taxpayer when those audits do occur. It
takes--can take 250 hours or more to audit a wealthy or more
complex filing. So it is a much harder job, and it requires a
specialized skill that has deteriorated at the IRS, while the
complexity of these organizations have increased. So we have a
lot of work to do.
And that is--if you are a mom-and-pop shop, if you are a
middle-income individual, the message that the IRS has for you
is the Inflation Reduction Act is going to be focused for you
on improving your service. That is where our focus is.
Ms. SANCHEZ. Great. And the auditing----
Mr. WERFEL. The efforts in enforcement will be on these
very complex returns for the wealthiest taxpayers, individuals,
corporations, and partnerships.
Ms. SANCHEZ. Perfect. Thank you. Commissioner Werfel, if my
colleagues were to succeed in cutting the Inflation Reduction
Act's funding, what would that mean for the IRS's ability to
improve audit rate disparities and make it harder for wealthy
filers to game the system if your funding is cut?
Mr. WERFEL. Yes, I mean, I mentioned earlier, you know, our
audit rates in 2010 for corporations between $100 million and
$1 billion in assets ranged between 20 and 30 percent, and now
they are hovering near 5 percent. So we are not doing enough to
assess. And when you don't do enough to assess, you know, you
create risk. You create risk that the laws are not being
followed, especially if there is a sense that no one is ever
going to look at what we are doing, and so then you can be more
risk-preferred in how you file.
This is--you know, this is something that we can never
perfect. But if we have the right amount of resources, and if
we are effective at looking at these complex returns, then we
can rebalance that, and they will take less risks, and that
will be beneficial to the U.S. Government's bottom line.
Ms. SANCHEZ. Great. I want to just briefly touch on another
issue, which is the reporting threshold for folks who report
business income on the 1099Ks.
Mr. WERFEL. Yes.
Ms. SANCHEZ. If we raise the reporting threshold to a more
reasonable dollar value without reinstating the 200 transaction
requirement, will we still see greater reporting of true
business income while avoiding some needless confusion?
Mr. WERFEL. Yes, I mean, the way I would answer that
question is the way in which the law was enacted is extremely
complicated. And we are learning in real time it is
complicated--it was complicated for the IRS to administer and
it was complicated for employers to determine how to work with
third-party pay providers to make it all work.
So, as you know, we took a pause. And, you know, in
retrospect, we want to get better and better at not having to
take pauses and planning better. But this provision turned out
to be way more complicated than was anticipated. So anything
that can be done to change the dimensions of how complicated it
is would be helpful for the way we administer it.
The question is a broader tax policy one that is best
answered by the Secretary of Treasury. But in terms of the
question of would it help with the simplicity of
administration, yes.
Ms. SANCHEZ. Great. I appreciate that, and I yield back.
Mr. ESTES. Thank you. And now I yield five minutes to Mrs.
Miller from West Virginia.
Mrs. MILLER. Thank you, Chairman Estes, and thank you for
being here today.
The IRS is facing many, many hurdles, and I don't think
your job has gotten any easier in the last year or two. I wish
you the best of luck in taking on this huge challenge and
facing what you have to face, and I encourage you to do it
transparently and as productively as you possibly can.
I have been working to solve an issue for over two years
that was caused by the incessant greed of the current
Administration for our tax dollars. It involves the lowering of
the threshold for taxpayers to receive a 1099K form and moving
it back to its original intent. The lowering has created
significant challenges for taxpayers, small businesses, and
payment processors, along with the IRS, because President Biden
needed to pay more for his agenda.
Luckily, though, we avoided an imminent disaster because of
the delay in implementation last year. It saved an estimated 40
million taxpayers from a tsunami of impossible paperwork. And I
would like to remind you that it is the role of Congress to
make policy, and it is the role of the IRS to implement it, not
upside down.
Last year the IRS cited the difficulty in administering the
program as one reason for this delay. And the IRS did have a
full year to send taxpayers a bill that they likely really
didn't owe, and the agency wasn't really prepared to handle
that type of a burden.
If this policy was too difficult for the IRS to get right
in that year, with all your new employees--some of whom still
are not back in the office, I believe--how do you expect an
individual who is selling a bicycle or paying their rent as a
group to handle the cost and the compliance burden?
Mr. WERFEL. You know, I think one of the most important
principles of tax administration is that taxpayers have clarity
on what is expected of them. And sometimes a law change in the
Internal Revenue Code--sometimes we can administer it fluidly
without any impact on the clarity. And sometimes the change is
complex to administer.
In this case, we were not ready to administer in a way that
provided taxpayers the clarity they need. So we paused it. This
was before I got there. I think it was the right decision,
though----
Mrs. MILLER. It was.
Mr. WERFEL [continuing]. To pause it. Now we have work to
do, and we are working very closely and engaging all the
stakeholders to figure out--because the law hasn't changed yet,
it is still the same law--how do we, when we resume next year,
do a much better job in providing the type of clarity? What are
the questions we need to answer? What are the flexibilities we
need to explore?
We are asking all those questions of your constituents and
other stakeholders around the country, and I am hopeful that we
are going to get it right this time. But I will say again it is
complicated to administer.
Mrs. MILLER. Absolutely. Would the IRS welcome Congress
raising that threshold back to the time-tested standard of
20,200 separate transactions?
Mr. WERFEL. Again, as I said earlier, I cannot opine on the
wisdom or the preference of a particular policy outcome, but I
will share that a change in the threshold would be easier to
administer. And so, at my seat at the table, I would say the
IRS would have an easier time administering it.
Mrs. MILLER. Thank you, because then my next question would
be, do you have a plan to delay it again if indeed nothing had
happened? But I am hoping it will happen with this bill.
And I also want to thank all my Republican colleagues who
had signed onto the bill, and I certainly hope that my Democrat
colleagues will do so, as well, in order to protect our
constituents and make life a little bit easier while we support
what we can support.
Thank you so much. I yield back.
Mr. ESTES. Thank you, and now I yield five minutes to the
gentleman from North Carolina, Dr. Murphy.
Mr. MURPHY. Thank you, Mr. Chairman.
And thank you, Commissioner, for coming. I heard good
things about you, and I know you have just been two months on
the job. I congratulate you for going and, being a Tar Heel
undergrad, I am sorry you couldn't get into a real graduate
school, as you had to go to Duke. [Laughter.]
So anyway, I look forward to positive things, and I
actually believe the IRS needs more people, 100 percent.
[Chart]
Mr. MURPHY. But I just want to follow up, because this
chart is concerning to me. Can you just comment on that?
Because, you know, it shows an absolute meteoric rise in
enforcement, and we are not pushing people to take care of
the--our taxpayers.
Mr. WERFEL. Yes.
Mr. MURPHY. Can you briefly comment on this?
Mr. WERFEL. Yes. Well, yes, thank you for the question.
My job is to do both--actually, to do all three. The job of
the IRS is to serve Americans and help them with their tax
obligations; it is to enforce the code, and make sure people
pay what they owe; and then, obviously, we need a foundation at
the IRS that is stable and operates----
Mr. MURPHY. But right now--I mean, I will just ask you
this. Do we need this many more enforcers, rather than that
many more people to take care of taxpayers?
Mr. WERFEL. I will say, Congressman, I am concerned with
the chasm that exists today between the number of people we
have to assess and unpack complex filings of very wealthy
Americans. And therefore, I believe we are going to put those
enforcement dollars to very good work and make a lot of
Americans proud in terms of how we equitably----
Mr. MURPHY. Well, I would say this, and we can get off
this, but, you know, you have heard from both sides of the dais
here, both sides talk about absolute unbelievable taxpayer
frustration. And I think that needs to be the number-one
priority that you have. We are in the business of customer
service, and everybody in government should be. And that is
customer service. All right. Thank you.
Let me just ask this. You have been saying a couple of
times, you know, about the $400,000 limit, that you wouldn't
get working on those individuals to tax them--to audit for a
while. You know, when I had patients come in and I would say,
``How long has it been hurting,'' or, ``How long you been doing
this,'' they say a while, and I say, ``Is that two weeks, three
months, five years? How long is a while?'' Can you give me,
like, two years, two-and-a-half years? Can you give me a
number?
Mr. WERFEL. Yes, I would say that if I am fortunate enough
to still be in this seat in 2026, we should sit down and talk
through where we go from there. Because I think that----
Mr. MURPHY. So you are going to say four years you are--
those people are going to----
Mr. WERFEL. Three to four--I would say in the three to
four-year timeframe, we will--I will have enough information in
the capacity building that----
Mr. MURPHY. Okay.
Mr. WERFEL [continuing]. We are doing for high-income
filers that I will be able to turn to you and say, ``Okay, what
is next?''
Mr. MURPHY. All right. Do you have a percentage that you
have a--close--that you say Americans are not honest on their
taxes? Let's just be----
Mr. WERFEL. Yes, I think----
Mr. MURPHY. Let's see what it is.
Mr. WERFEL. I--my understanding, it is roughly 85 percent
of taxpayers come in----
Mr. MURPHY. So you would say 85 percent of the people on
this dais--no, I am just kidding. [Laughter.]
All right. Okay. So that is an alarming number in some
ways. It is not alarming in other ways. It is sad, it is
whatever.
So let me just ask this, because we always hear about this
fair share thing. What percentage of tax receipts come from
those who make the top one percent?
Mr. WERFEL. That I would have to get back to you on.
Mr. MURPHY. It is, like, 45 percent. I mean, the top 1
percent and the top--and the bottom 50 percent, we all know,
hardly pay any taxes at all. I just want to put this in
relative terms.
Mr. WERFEL. Yes.
Mr. MURPHY. I am not saying we should not go after people--
the multi-billionaires who, you know, make all this money and
pay relatively small amounts. But when they say the fair share,
come on, let's get real. I mean, it is just--you know, when you
are paying almost half the tax burden, the top one percent,
let's just be real. And I just want to be fair about those
things.
Let me get back to just one other thing. Let's see how much
time I have.
You talked about--that you need about 2,900 employees to
audit the 390,000 wealthiest, and that is about a roughly----
Mr. WERFEL. We have 2,600 today.
Mr. MURPHY [continuing]. 2,600, I am sorry.
Mr. WERFEL. Yes.
Mr. MURPHY. And that is roughly about a 1-in-150 ratio.
Mr. WERFEL. Correct.
Mr. MURPHY. Let's flip that. Let's look at the--say, the
people that make under $100,000. What is the ratio there?
Mr. WERFEL. Oh, it is much, much, much higher in terms of--
because there is so many more Americans that make under
$150,000. And so--but it is a different challenge.
In other words, you have a return that comes in that is
just a couple of pages versus a return that comes in 100,000
pages. It is just kind of optimizing the staffing that we have
for the challenge of the materials that are coming in. And most
middle and low-income files process very quickly, very easily,
especially if they file electronically. You know, we run our
math checks and we run, you know, an automated review, and many
of those filings just go through. And, hopefully, if they file
electronically and direct deposit, they are getting their
refund within 21 days at this point.
Mr. MURPHY. All right.
Mr. WERFEL. The reason we need a lot of people is because
for billionaires and large, multi-national corporations, it is
just a complicated return.
Mr. MURPHY. I understand, I understand. I absolutely
understand. But you also need--I am not going to say need to
understand--surely understand that, especially in the last two
years, the American people are tired of government over-reach.
Now you can't have a puddle on a farm with [sic] it being
regulated by the Biden Administration. You can't have a boat
that speed is not regulated. You can't do so many things. They
feel the Federal Government needs to be in every single pocket
of Americans, and every single thing that you do.
So when you hear the IRS knocking on the door, when you see
the differential on that slide or that graph that shows so many
more people knocking on your door, it scares the hell out of
the American taxpayer. So please give us some reassurance that
we are going to come back to the fact that we want to be
customer service first, rather than enforcement--law
enforcement agency.
Mr. WERFEL. We have a lot of work to do on customer
service. In the Strategic Operating Plan that we issued on
April 6th, there is roughly 200 projects. I referred to it
earlier as my public to-do list. A lot of that is about
changing the way we serve Americans by opening up our taxpayer
assistance centers, answering phones better, putting on--tools
on their smartphones and on our website. There is a lot of
focus on that.
And yes, there is $3 billion to do that, and we have--the
challenge that we have, Congressman----
Mr. MURPHY. But you have $46 billion for enforcement.
Mr. WERFEL. Yes.
Mr. MURPHY. Okay. So--I am sorry, I have probably gone on
my time here, but, boy, that just--it doesn't pass the smell
test. Thank you. You got a hard job, but I would say if
businesses ran their business like the Federal Government runs
its business, we would be bankrupt. Oh, by the way, we are
bankrupt.
So thank you.
Mr. ESTES. The gentleman's time has expired. Thank you.
Now I will yield five minutes to the gentleman from New
York, Mr. Higgins.
Mr. HIGGINS. Thank you, Mr. Chairman.
The Brookings Institute came out with a report that said,
over the past 10 years, $7 trillion of taxes that were owed
were not paid. Is that an accurate figure?
Mr. WERFEL. If I am doing the math right, our tax gap
assessment is roughly $500 billion a year. So if you multiply
it by--you know, you get into the trillions once you start
multiplying that over a 5, 10, 15-year timeframe.
Mr. HIGGINS. So if nothing changes over the next 10 years,
how much money will be lost in revenue of taxes that are owed,
but not paid?
Mr. WERFEL. If nothing changes, about $5 trillion.
Mr. HIGGINS. So that is $12 trillion over the past 20
years.
You know, there is a lot of talk here about concerns about
a debt, the national debt, which is $31.6 trillion. Well, there
is 12 of it, right?
And, you know, you talk about one of your main objectives
is to enforce the tax code. But obviously, it isn't being
enforced fairly to include everybody. You know, a teacher will
pay about 22 percent in Federal taxes; 50 American corporations
that are recording record profits pay nothing, and many of them
get a return.
A 1960s Harvard economist, Peter Drucker, said the whole
point of creating an economy is to create a middle class
because they fight our wars, they teach our kids, they build
our roads and bridges, and they pay our taxes.
Your predecessor, one of your predecessors--it may have
been once removed--came to a Senate hearing 2 years ago and put
the number of taxes that are owed but not paid at $1 trillion.
That is a lot of money. And you can't at the same time talk
about debt and deficit, and with any credibility not be bullish
about collecting this money that is fairly taxed against
corporations for income taxes that are reporting billions of
dollars of profits.
So I just want to make very clear this is not about
enforcement. This is not about meeting taxpayers where they
are, because I will tell you where they are not. They are not
in corporate America. And if you look at the list of these
corporations--Amazon, you know, we--first of all, in 2017 we
lowered the corporate tax rate from 35 percent to 21 percent,
right? Well, Amazon the next year paid 6 percent in corporate
income taxes; Exxonmobil paid a little less than 3 percent;
AT&T got a rebate of $1.2 billion; Ford paid 1 percent; Charter
Communications got a rebate of $1.2 million; an American
teacher pays 22 percent, 22 percent in Federal income taxes.
So the problem here, it is not really customer service. It
is about the fair--not aggressive, but the fair--enforcement of
the U.S. tax code, which this committee is primarily
responsible for.
So I know I threw a lot out there, but, you know, the
Institution on Taxation and Economic Policy says that at least
55 of the largest corporations in America--in America, the
largest 55 corporations in America--paid 0 Federal income
taxes. Teachers pay 22 percent. Sir, this is not a customer
service problem. This is a fairness problem, and the middle
class is getting screwed again, and there is no denying it.
If it is not $7 trillion in 10 years, there are many other
reports that you could point to, as you know, that put the
number at $10 trillion a year. Some put it at $6 trillion a
year. But these are trillions of dollars that contribute to the
Federal debt that this body has been preoccupied, obsessed with
over the past 48 hours.
So I yield back.
Chairman SMITH [presiding]. The gentleman from Tennessee is
recognized.
Mr. KUSTOFF. Thank you, Mr. Chairman.
Thank you, Commissioner, for appearing today. I ask this,
and I realize you are less than two months into the job, but I
want to follow up, if I can, about the ProPublica leaks. Based
on what you know now, do you think that the controls and the
protocol are in place today to prevent another type of
ProPublica leak?
Mr. WERFEL. That is a very good question. I said earlier a
couple of things. I said data security is a top priority, and
it is. I said I am in the process of assessing where our
strengths and gaps are, and I am. There are gaps, and I want
those gaps to be closed. And I have asked the team to put
together an action plan. And I am really leaning on TIGTA,
because the taxpayer inspector general basically gives us the
roadmap. They have recommendations. As long as those
recommendations are open, I think we have a higher risk than we
should have.
And so the way I would answer that question is we have
risks to mitigate, and I am prioritizing mitigating them.
Mr. KUSTOFF. You can appreciate why those types of leaks
are concerning not only to wealthy Americans, but to all
Americans.
Mr. WERFEL. Yes.
Mr. KUSTOFF. Fair enough. We sent a letter--Congressman
Ferguson, who questioned you earlier, and myself--to your
predecessor and to Secretary Yellen on October the 6th
regarding the Employee Retention Tax Credit.
Mr. WERFEL. Yes.
Mr. KUSTOFF. So I appreciate the letter was not sent to
you, it was sent to your predecessor. It regards the number of
backlogged Form 941 claims. I think at that time, when we sent
the letter, there were a little over 200,000 unprocessed forms.
The number today is substantially higher. Again, I understand--
I sent the letter--we sent the letter to your predecessor, and
not to you.
My question is, first of all, can--based on what you know,
can you address the backlogs and the status of the backlogs?
Mr. WERFEL. Yes, I can. Look, without--it is absolutely
important that speed and processing is done. I think taxpayers
expect and demand that, when they file for a credit, it is
going to take a reasonable time, not an unreasonable time, for
the IRS to process it.
The Employee Retention Credit has two particular
challenges--probably more, but I will highlight two of them.
One is that it turns out to be an extremely difficult
credit to process because it impacts multiple tax years. So the
individual at the IRS that has to process it has to make sure
they get the information right in each of the right tax years.
That takes time. It takes expertise. And in order for the
credit to register, we have to get it right.
The second is--it is a problem with the number of
fraudulent credits we are getting in. So we are having to set
aside credits that just don't seem to add up, and it is
clogging the system a bit.
These are not excuses. These are just realities. I have
still made it an absolute commitment to drive that backlog
down. Earlier in the hearing I mentioned during the filing
season we were processing about 20,000 a week. Now that filing
season is over and we can reset staff a bit, I have asked the
team to up that to double that rate.
And I am happy to come back and report to you periodically
on whether that direction that I have given and whether the
impact is bearing fruit. I expect it will.
Mr. KUSTOFF. I appreciate that. If I could ask you--again,
it was sent to your predecessor--the letter is dated October 6,
2022. If you could respond to the letter----
Mr. WERFEL. Oh, yes.
Mr. KUSTOFF [continuing]. Laid out in the letter.
Mr. WERFEL. I will.
Mr. KUSTOFF. Lastly, a lot has been asked about the new
employees and the enforcement agents--enforcement staff,
however you want to characterize it. Let me just ask you,
whether they are armed, or unarmed, or whatever, who are you
looking for? What are their--on the enforcement staff, the
enforcement agents, what are their qualifications? What is
their background? Who are they?
Mr. WERFEL. Good question. So to--under the Inflation
Reduction Act our focus is to rebuild our capacity to unpack
complex filings. To do that we need people that understand how
these filings are put together. So we need expert accountants,
we need expert economists, we need data scientists that can
help us analyze trends and economic behavior so that we can
understand where there might be risks of balances owed that
haven't been paid.
So we are looking for a pretty sophisticated group of
employees that can help us unpack sophisticated returns. And
that is the focal point. And look, there are labor market
realities that are challenging. We have to improve our overall
human capital operations. People have said this is a hard job,
and it is, but I have confidence that we are going to get this
done.
Mr. KUSTOFF. There is a shortage of accountants. So I
think----
Mr. WERFEL. We have a shortage of a lot. But that doesn't
mean we are not putting a full court press in play to make sure
that we get the right staff at the IRS.
Mr. KUSTOFF. Recent reports said that more than 300,000
accountants and auditors quit their jobs in the last 2 years.
Mr. WERFEL. Yes.
Mr. KUSTOFF. Thank you, I yield back my time.
Thank you, Commissioner.
Chairman SMITH. Mr. Arrington is recognized.
Mr. ARRINGTON. Commissioner, good afternoon. Thank you for
your time.
So I serve with some of my colleagues here on the Budget
Committee, and I am trying to do the math here on the numbers,
and then connect the sources to uses--$12 billion, I think,
before IRA annual budget. Then you have got the $80 billion
from IRA.
Mr. WERFEL. Yes.
Mr. ARRINGTON. That is eight billion a year. So you have a
75, 80 percent increase.
And then, in the President's budget this year, there is
another 15 percent increase. So----
Mr. WERFEL. Correct.
Mr. ARRINGTON. And then the--so the first eight billion a
year coming out of the IRA was for compliance and enforcement.
The analysis on 2010 audit rates and the historic data from the
IRS suggests that the audits would result--or the additional
audits with the additional monies--would result with a million
more audits per year, and that of those million additional
audits, 600,000 would be people, individuals, families making
$75,000 or less a year. So that would be certainly over half,
maybe as high as two-thirds of your audits, a million more on
people making $75,000 or less. That is using IRS historical
data. Is that consistent with your analysis----
Mr. WERFEL. That is not----
Mr. ARRINGTON [continuing]. Of your own information?
Mr. WERFEL [continuing]. Consistent with our plans. I want
to unpack your math a little bit, or the math that has been
presented. And I appreciate the question, because I think it is
important to clarify for middle, low-income, and small
business, what the plan is.
But the plan, as I have mentioned, is to focus our
enforcement efforts on complex returns of high-wealth filers.
And with respect to those making less than $400,000, you
can go to the 2018 audit rate, and that is all we are going to
audit to, at least for the next couple of--several years.
Mr. ARRINGTON. And Commissioner, you can imagine how
concerned people are that, with your past practice, if that is
any prediction of future behavior, they see a deluge of new
audits on working people, on small businesses, and they are
having to hear the line, ``We are from the government, we are
here to help, and you can trust us.''
I mean--and listen, I am not questioning your commitment or
integrity, but I think too often we take the American people
for fools, and they are just going on their past experience and
the data. So I, you know, certainly hope that the commitment is
genuine, and that the fulfillment of that commitment is
consistent with what you are saying, because I find that
unacceptable.
And if you are going to focus on the more complicated and
the high-net-worth individuals, I don't see any justification
for the $8 billion a year, and then the President's budget
asking for a 15 more percent increase. Now, I am not asking for
you to respond to that.
Mr. WERFEL. Okay.
Mr. ARRINGTON. If I may, let me jump to another question.
It seems a little unrelated to that one, but----
Mr. WERFEL. Please.
Mr. ARRINGTON [continuing]. Another concern. I was at the
Rules Committee talking matters of budget and debt ceiling, but
the issue of the IRS, your agency, came up, and firearms, and
the idea that in some of your job listings--I don't know if it
is all of them, but it says that people who are looking to be
employed are--should be willing to use deadly force.
There was an article in The New York Post that was cited in
this hearing that stated that the IRS had almost 5,000 guns,
3,282 handguns, 600-plus shotguns, 539 rifles, 15 fully
automatic weapons. Anyway, a big cache of weapons. Is that true
or not true? I mean, with no sort of commentary on--or a value
judgment, is it true?
Mr. WERFEL. I am not going to make a value judgment, I am
just going to make sure that I point out that our criminal
investigation division is where we work to reduce and engage in
tax fraud and acute areas of tax evasion where, in order to
enforce, we are putting a Federal employee's life in danger,
and therefore there is a need to arm.
This is less than three percent of the IRS. It is a small
part of the overall operation.
Mr. ARRINGTON. But just--can you confirm that some number--
--
Mr. WERFEL. I can get back to you. I don't know the
specifics on the data that you provided, but I certainly can
get back. But I think context is important.
Mr. ARRINGTON. Well, I know my time has expired, and I
regret that I didn't get to talk about the customer service
challenges that you face. We can talk about that offline. But--
--
Mr. WERFEL. I would like that.
Mr. ARRINGTON [continuing]. I have got real concerns, like
my colleagues do, on that front.
Mr. WERFEL. Okay.
Mr. ARRINGTON. Thank you, and I yield back.
Chairman SMITH. Thank you.
Mr. Commissioner, could you make sure that at some point
you get us the total number of employees that are armed at the
IRS? You said less than three percent, but----
Mr. WERFEL. Less than three percent. I can do that.
Chairman SMITH. I would love to get the total number----
Mr. WERFEL. Mr. Chairman, I will do that.
Chairman SMITH [continuing]. Of employees. Thank you.
Ms. DelBene, you are recognized.
Ms. DelBENE. Thank you, Mr. Chairman.
And thank you, Commissioner, for taking the time to be with
us today. I appreciate it.
Along with my colleagues, Mr. Pascrell and Ms. Chu, I have
led an appropriations letter requesting increased funding for
the IRS. After years of neglect through decreased
appropriations, the IRS has reduced workforce and staff to
levels not seen since the 1970s. So the reduction in workforce
has had a direct impact on taxpayer services, as folks have
talked about. And with the funding provided by the Inflation
Reduction Act, the IRS can be brought into the 21st century and
provide taxpayers with the customer service and transparency
they deserve.
I am disheartened that funding for the very agency that is
responsible for generating 96 percent of the funds that support
the Federal Government's operations, including infrastructure
and education, has become such a partisan issue. So,
Commissioner, I wondered if you could speak to why annual
discretionary funding for the IRS is still necessary, and how
the Inflation Reduction Act funding will supplement it?
Mr. WERFEL. I really appreciate the question. I have a--we
have been saying I have a hard job to do, and one of the
hardest jobs is to explain the funding that we need and why it
is so important.
And, you know, the--our base budget, which is currently at
12--roughly $12 billion, that pays for ongoing operations, you
know, answering the phones, processing the returns that are
coming in. And as you mentioned, what happened over the last 10
or 15 years is our population grew, filing went up, the economy
grew, filings got more complicated, and our staff went down to
about 1970s level. And so we really couldn't keep pace. So we
have to build back to where we can meet that demand.
I gave the analogy earlier of people waiting on the train
platform. And if you don't fund our base budget, they either--
they wait longer, and the platform gets more and more crowded.
And what we are trying to put in our budget is here is what it
takes to make sure that people aren't waiting too long on the
platform, and that it doesn't get too crowded. That is what it
takes just to run the train schedules.
But we need to modernize, because right now the system that
we have is outdated. And when taxpayers go to their favorite
airline or their favorite local bank, they engage and see a
suite of tools on the call center, on the website, on their
smartphones that they don't get from the IRS. And why? Because
in the funding cuts that we have had over the past 10 or 15
years, we haven't had the ability to modernize. We have just
kind of kept everything together. And we know that during COVID
we were no longer to keep it together as well as we could, and
the bottom dropped out, and we went to historic low levels of
service and historic long wait times.
One concern I want to make sure is clear, and especially
since it has been raised how important our taxpayer service
investments are, because our base budget has not been
increased, in order to keep those trains going this year we had
to use Inflation Act reduction--Inflation Reduction Act service
money to pay just for base operations. So essentially, we have
raided modernization dollars so that we could answer the
phones. And by doing that, we now have less resources to
modernize the phone system.
It is the difference of can the IRS answer the phone? Yes.
Can the IRS modernize the phone system to improve the call-back
option, to produce--increase automated options? No, not if we
raid to pay for base. And that is why it is important that
Congress fund both our base and our modernization, because it
is the American people that end up suffering. They are the ones
waiting on that train platform for the next train to come that
is taking too long, and it is getting really crowded.
And what we are doing in our budget is explaining what we
need to do to keep those trains running, and what we need to do
to give them an experience commensurate with what they get
around the block when they go to their local bank.
Ms. DelBENE. And it will just get harder, the longer we
wait to----
Mr. WERFEL. Yes, because it is getting more complicated.
When I say 390,000 wealthy filers, that number is from 2019. It
is probably a lot higher than that now, we are just catching up
with the data.
Ms. DelBENE. I also wonder if you could speak to how the
enforcement funding in the Inflation Reduction Act would
improve taxpayer compliance and would close the tax gap, and
what the revenue impacts of that might be.
Mr. WERFEL. Yes. I mean, I mentioned earlier, when you
think about the train platform, you think about service, but
there is also an enforcement component there, as well. And our
audit rates of our most wealthy filers--and I know there has
been a lot of discussion about the $400,000 level--I thought it
might be helpful to explain to the American people, let's lift
that up. Let's lift it up to individuals that make $10 million
or more, partnerships, and S Corps that have $10 million or
more assets, corporations that have $250 million or more
assets. So this is the wealthiest of the U.S. filers, right?
That is where we have 2,600 staff today with the right skill
set and the right responsibilities to assess those 390,000
filers.
And I know it sounds weird for the IRS to say it, but we
are overmatched in that moment because we don't have enough
people with the right skill sets to assess these filers. And if
you are middle-income, low-income, own a mom-and-pop, we want
to build your trust, we want to improve your service, but I
don't know that we can effectively build your trust if we have
the capacity to audit you, but don't have the capacity to audit
the most wealthy filers because those filings are most complex.
I would also share and reiterate my message to those mom-
and-pops there is no new wave of new audits coming. We are
focused on building that capacity for the most wealthy filers.
That is the directive from Secretary Yellen, and I am going to
meet it.
Ms. DelBENE. Thank you. Thank you, Mr. Commissioner.
I yield back, Mr. Chairman.
Chairman SMITH. The gentleman from Pennsylvania is
recognized.
Mr. FITZPATRICK. Thank you, Mr. Chairman.
Commissioner Werfel, thank you for being here. You have got
a tough job, so we appreciate your service. The IRS gets a lot
of scrutiny, but it should, because it is the one agency that
touches literally every single American.
It is really a question of--you know, and we all understand
it is important to collect revenue. The question is how to best
do it in the fairest, most efficient way and the most just way
possible. And it really comes down to an allocation of
resources. You are hearing a lot about this 87,000 IRS
personnel. It is not agents, as you pointed out.
Mr. WERFEL. Yes.
Mr. FITZPATRICK. It is personnel. But with the addition of
87,000 additional personnel, the IRS will now be larger than
the entire State Department, entire Border Patrol, entire
Pentagon, and the entire FBI, not individually, but combined.
First of all, my first question is, do you accept that
metric as a fact?
Mr. WERFEL. I am going to be providing an update with the
staffing numbers over the 10-year period. But I am willing to
accept the premise that the IRS will grow and be larger than
those agencies.
My response to that is that that is the size of the
organization needed to address the complexity of our tax system
today.
Mr. FITZPATRICK. So you do accept it. And it is just a
question of math, there is----
Mr. WERFEL. Well, I don't--we will have the--the next time
I am sitting here, we will have all the numbers that we can
look at.
Mr. FITZPATRICK. You don't dispute it.
Mr. WERFEL. But I don't dispute the fact that, under the
Inflation Reduction Act, the IRS will grow.
Mr. FITZPATRICK. Do you believe that simplification of the
tax code would reduce the number of needed IRS personnel?
Mr. WERFEL. Yes, I agree with that.
Mr. FITZPATRICK. Do you think the tax code should be
simpler?
Mr. WERFEL. As I said earlier, it is not my jurisdiction to
weigh in on that. That is the domain of the Treasury Secretary
on behalf of the Administration. But I will say the simpler the
code, the more effective the IRS can be in administering.
Mr. FITZPATRICK. And how is the decision made between CID
agents, Criminal Investigation Division, which is the law
enforcement arm of the IRS, and non-law enforcement personnel,
how is that allocation decision made, and how would you
describe to the American people and to this committee, who
don't understand the difference, how would you describe that
difference?
Mr. WERFEL. I mean, in virtually every interaction you are
going to have with the IRS, it is not going to involve the
Criminal Investigation Division. If you are calling to get
help, if you are--get a letter that is saying you missed
filing, if you owe an amount, you know, in most--in virtually
all cases, you are going to be dealing with an IRS employee
that is not part of our Criminal Investigation Division.
Mr. FITZPATRICK. So----
Mr. WERFEL. What happens, though, is that certain tax
issues become acute. They become more challenging. You know, we
have reached out, there is a nefarious behavior, there is an
unscrupulous actor. This unscrupulous actor is known to be
dangerous. We work with local law enforcement.
Mr. FITZPATRICK. Right.
Mr. WERFEL. We work with the Justice Department. This is
all--and I would be happy to unpack this with you in a separate
briefing.
Mr. FITZPATRICK. You have answered, you have answered
sufficiently.
But can you understand the concern? Because people--you
know, there have been abuses in the past, as there have been
with other agencies, and I hope you are working to correct
that. But just the allocation of resources.
The State Department is required for diplomacy efforts
across the globe.
Border Patrol is required--you know, responsible for
protecting the entire southern border, 1,300 miles, and the
entire northern border with Canada from gun runners, and drug
runners, drug dealers, terrorists, CI concerns.
The Pentagon is the nerve center of our entire United
States military.
And the FBI is responsible for counterintelligence,
counterterrorism, criminal, and cybersecurity. Those are very
broad, and it is encapsulating the size of all four of those
agencies. So what would your response be?
I mean, it is--clearly, you want the--as many people as you
can to execute your mission.
Mr. WERFEL. No, I don't want that.
Mr. FITZPATRICK. But for Americans who are concerned about
the----
Mr. WERFEL. I want the right amount of people to execute
our mission, I want to right-size the IRS.
I mean, I have heard the phrase super-size the IRS. That is
not the intent. We have to meet the demand. If there is a
certain amount of calls coming in, we have to have the right
amount of people on the phones. If there are people coming into
our walk-in centers, they can't be closed. It is not fair to
the taxpayers.
The taxpayers don't have a choice. They have to pay their
taxes, they have to work with the IRS. If we are ill-equipped
to work with them, then we are not serving the American people
effectively.
Mr. FITZPATRICK. But do you believe that that demand is the
case because of how complex the tax code is?
Mr. WERFEL. I think that is a big driver of it.
Mr. FITZPATRICK. Okay.
Mr. WERFEL. It also is the number of filers that we have.
We are a growing economy, a growing population, something we
should be proud of. But with that comes a larger tax system.
Mr. FITZPATRICK. I am glad we can agree on one thing: the
tax code needs to be simplified, because it is tens of
thousands of pages of a monstrosity that, you know, you need a
sophisticated tax attorney to navigate. So with that, sir, I
appreciate your service.
Mr. WERFEL. Thank you.
Mr. FITZPATRICK. Mr. Chairman, I yield back.
Chairman SMITH. Mr. Steube is recognized.
Mr. STEUBE. Thank you, Mr. Chairman.
On March 9th, 2023 the IRS sent agents to the home of
Twitter Files journalist Matt Taibbi during his testimony in
front of the House Select Committee on Weaponization of the
Federal Government. IRS agents don't generally just show up at
taxpayer homes. Making the situation even more bizarre, the
agents left a note telling Mr. Taibbi to call them. If this was
an issue that could be handled with a phone call, there would
seem to be no reason to send the agents in person. The
presumption has to be that this was an attempt to intimidate a
witness, unless it can be proven otherwise. I mean, this is the
type of tactics you see in Soviet or communist China.
Are you willing to state that there is an appearance of
impropriety when an executive branch agent shows up at the home
of a witness testifying before Congress literally at the time
while he is testifying before a committee?
Mr. WERFEL. Congressman, section 6103 prohibits me from
responding to specific questions to an incident involving a
taxpayer.
Mr. STEUBE. Okay. Well, do you--did you approve of the
visit to Mr. Taibbi's home?
Mr. WERFEL. Again, same answer.
Mr. STEUBE. Who would approve that? What would be the
approval process?
Mr. WERFEL. Again, I would be breaking the law if I asked
questions specific to a specific incident of a taxpayer.
Mr. STEUBE. Okay. Well, let me ask it this way. Is there
any incidences with any taxpayer that you would have to approve
the involvement of, either an agent going to their house or
approval of an investigation?
Mr. WERFEL. As a general rule, the IRS commissioner is not
involved.
Mr. STEUBE. So who would be, as a general rule?
Mr. WERFEL. As a general rule, we have IRS personnel that
work to ensure that individuals are complying with the tax
code. So, for example, if they don't file, we will send a
letter. If they owe a debt, we will reach out with a letter.
There are--I think it is important to understand, at a very
broad sense, without commenting on any specific taxpayer, the
IRS reaches out in multiple ways to educate taxpayers while
ensuring it fairly enforces our taxes.
Mr. STEUBE. Well, obviously, there has got to be some type
of approval process for investigations, right?
So, like, whether it is Mr. Taibbi or whoever, what is that
process within the IRS?
And are there instances, depending on the profile of the
taxpayer, that you would be involved? And if you would not be
involved, who is the approval process for opening an
investigation, going to an individual's home? How does that
work?
Mr. WERFEL. Okay. Again, making sure that I am careful----
Mr. STEUBE. I am----
Mr. WERFEL [continuing]. Not to comment----
Mr. STEUBE. I am speaking completely generally here.
Mr. WERFEL. Yes. Well, I think I would like the opportunity
to get back to you on the specifics----
Mr. STEUBE. So you can't, as you sit here right now, tell
me how the approval process works for opening an investigation
on a taxpayer, going to their home, an agent showing up at
their home, any of that. You can't give me any specifics on
that.
Mr. WERFEL. I will offer, as a general matter, one
important clarifying point to your questions, which is any home
visit that occurs is typically after the taxpayer has been
contacted through a letter or some less invasive method, and we
were not able to contact the taxpayer in that way. As a very
general matter, I can share that with you.
But in terms of your question of the complete process of an
investigation being opened at the IRS to closure, I am not
prepared to provide you an answer with full fidelity, because I
am still learning the process. And I will get back to you.
Mr. STEUBE. Okay. So you said, generally, that if somebody
is showing up to somebody's house, it has obviously been
elevated. So would that be a criminal investigation?
Mr. WERFEL. I did not say that. I did not say it was
elevated. I said that we would----
Mr. STEUBE. You said you would have opened an
investigation, right?
Mr. WERFEL. No, I did not say that. I said that we would
typically try to reach a taxpayer through a letter before we
would do any kind of additional outreach. And if we fail to
hear back from that taxpayer, then going to someone's home is a
possibility.
Mr. STEUBE. So would that be a criminal investigator within
the department that would go there, or a non-criminal
investigator?
Mr. WERFEL. As a general matter?
Mr. STEUBE. Yes.
Mr. WERFEL. It would often be a non-criminal investigator.
Mr. STEUBE. The oversight--the House Oversight Committee
has discovered numerous LLCs affiliated with Hunter Biden,
where it appears he was laundering money through the LLCs and
paying for basic living expenses out of the LLCs.
Now, I know you can't speak to specific taxpayers, so I am
not going to ask you that question. But if the House Oversight
Committee has evidence of a crime that was committed, or what
appears to be tax fraud or tax evasion, who would they get
those documents to within your department? Is that something
that we should get directly to you?
Mr. WERFEL. No, again, the IRS commissioner would not be
involved.
When there is an--and again, not specific to any specific
taxpayer, but when there is an allegation of any kind,
particularly from a whistleblower or anything like that----
Mr. STEUBE. Or evidence deduced from an oversight committee
in Congress?
Mr. WERFEL. Exactly, exactly----
Mr. STEUBE. So who----
Mr. WERFEL. My role is----
Mr. STEUBE. Who would it be within----
Mr. WERFEL. The inspector general.
Mr. STEUBE [continuing]. Your department that would handle
that investigation?
Mr. WERFEL. The inspector general.
Mr. STEUBE. Within IRS?
Mr. WERFEL. Yes.
Mr. STEUBE. What is----
Mr. WERFEL. Well, he doesn't--it is the tax inspector
general for--it is the inspector general for tax
administration, Russell George. And any time I learn of an
allegation, a credible allegation that something isn't right, I
immediately refer it to the inspector general to do the
investigation. And, as I said, then I stand back, let the
inspector general do their work. And my one ask of the
inspector general is, ``Let me know how I can help,'' and I
wait to hear back from him.
Mr. STEUBE. So just to--I am just trying to wrap this
around so I fully understand.
Mr. WERFEL. Yes.
Mr. STEUBE. So you, as the commissioner, are not involved
in making any of those decisions. So it--regardless of who it
is--again, I am not asking a taxpayer--at no point in time do
you get involved in making investigative decisions----
Mr. WERFEL. Correct.
Mr. STEUBE [continuing]. Enforcement decisions.
Mr. WERFEL. Correct.
Mr. STEUBE. And that--and your testimony here today is that
is the IG, and only the IG.
Mr. WERFEL. For--when there is an allegation of wrongdoing
amongst an IRS employee, or an allegation that requires
additional investigation. But, you know, I think we might be
talking past each other.
If there is----
Mr. STEUBE. I am not talking about internally.
Mr. WERFEL. Yes.
Mr. STEUBE. I am talking about a taxpayer.
Chairman SMITH. We need to wrap it up.
Mr. WERFEL. Okay. I think we should take this offline. But
again, I will go back to the important point. The IRS
commissioner does not generally engage in decisions about
individual taxpayers. If there is an allegation that something
is not right with respect to IRS operations, the inspector
general investigates it. If it just involves a taxpayer, and
they are being investigated for tax evasion, that decision is
made not at the commissioner level, but at the bureau level
within the IRS.
Mr. STEUBE. I yield back. My time has expired.
Chairman SMITH. Ms. Chu is recognized.
Ms. CHU. Commissioner Werfel, I want to congratulate you
and every IRS employee on what was, by all accounts, a
tremendously successful filing season. The IRS had an 87
percent level of service, which is 5 times higher than last
year; hired 5,000 new customer service representatives;
assisted 100,000 more taxpayers in person; and cut the phone
call wait time from 28 minutes to just 3 minutes.
The reason for this incredible turnaround is clear.
Democrats, led by this committee, finally gave the IRS the
resources it needed to operate properly. The Inflation
Reduction Act reversed over a decade of intentional
disinvestment in the agency, and I was proud to play a part in
its passage.
Contrary to the misinformation we have heard from the other
side of the aisle, the IRA is improving taxpayer service and
improving tax compliance by the wealthy. It is not targeting
low-income taxpayers. And in fact, actually, I have been long
concerned about the unfair burden of enforcement that low-
income taxpayers shouldered in recent years. It was back in
2022 that I asked numerous times and in hearings with our IRS
commissioner about the data that showed that low-income filers
earning less than $25,000 had been audited as much as 5 times
higher than the other filers, and these were the EITC filers.
And so, Commissioner, could you describe how the IRA
funding has impacted IRS's ability to ensure that both the
wealthy taxpayers are obeying the law and that low-income
filers are not unfairly targeted?
Mr. WERFEL. Thank you for the question, Congresswoman. And
the critical thing that the Inflation Reduction Act provides
the IRS that we haven't had previously is the resources to
build capacity to assess complicated returns of high-income
filers.
You know, I have talked earlier in the hearing about our
coverage or our audit rate for organizations that make more--or
have more than $100 million in assets. And it is historically
low today. And that is because, as you described, there has
been an era of divestment in IRS resources. The Inflation
Reduction Act allows us to essentially stop that reduction and
start to build a capacity that existed previously.
And we have a lot of catching up to do because the world is
very different right now in terms of the complexity of these
organizations. Partnerships are more complex than they were 10
years ago. Multi-national corporations are more complex. And I
believe even the way that billionaires operate, their finances
change. As an example, crypto currency didn't exist 10 or 15
years ago.
So we have an ever-complicating environment by which to
enforce the code. And a lot of these complications don't impact
middle and low-income. Most middle and low-income are single
source income, paying their taxes essentially through their
payroll. A lot of these changes really only impact the
wealthiest Americans. And if the IRS is unable to develop a
capacity to keep up with that, well, that means that we are not
doing our job to fairly enforce the tax code so that you are
just as likely to be assessed of meeting your commitment if you
are low or middle-income as you are higher income. And that
doesn't exist today.
And I think what you are describing is there is an
opportunity because of the Inflation Reduction Act to create
more fairness in the system that will build trust. And
ultimately, I do think that is my bottom line as commissioner,
is to build trust with the American people that we are meeting
our mission effectively.
Ms. Chu. Thank you so much. Commissioner, as a member
representing a district with a high percentage of people that
speak other languages, I am very thankful of the efforts the
IRS is making to meet the needs of taxpayers with limited
English proficiency. I see that these efforts are mentioned as
a goal in the Inflation Reduction Act, but what specifically
are you going to be doing to help these taxpayers with that
limited English proficiency?
Mr. WERFEL. There is a section in our Strategic Operating
Plan that points to efforts under the Inflation Reduction Act
to improve the way we serve underserved populations, service
improvements across diverse taxpayers segments, including those
with limited English proficiency. That means digital tools,
accessible, in taxpayers' preferred languages.
Again, we have now the investment to do that. We have funds
and resources now to expand community partnerships, to engage
with taxpayers, to understand how to educate and meet people
where they are. Again, this is the type of unlock that the
Inflation Reduction Act provides. I said earlier it is the
difference between just being able to answer the phone versus
being able to provide a call-back option.
Well, it is more than just a call-back option. It is the
difference between just standing back and waiting for the
taxpayer to come, and being only able to serve them in one
language versus meeting the taxpayers where they are,
understanding what their needs are to comply with the tax code,
and meeting them where they are.
Ms. CHU. Thank you.
I yield back.
Chairman SMITH. Ms. Tenney is recognized.
Ms. TENNEY. Thank you, Mr. Chairman, and thank you, Ranking
Member, and thank you to our witness.
And I know you have a tough job. I used to do tax law. I
know how difficult it can be, and how scary it is, actually,
for consumers, small businesses----
Mr. WERFEL. Yes.
Ms. TENNEY [continuing]. And those, and I appreciate your
comments today, understanding that, as well.
I think a lot of what the concern is--and a lot of
consumers and taxpayers see the IRS as all powerful, trying to
be too intrusive, trying to be too controlling, interfering in
our lives, now going online to not only be, you know, the tax
collector, but the tax preparer. And, you know, the $600
transactions that I might, you know, buy something from my
sister, and I have got to report that for $600, you know, or
whatever, I think people are concerned about that, and they are
concerned about our system of justice. And that is why I think
you see so many questions surrounding power in this case.
And I have always looked at the IRS as very all powerful.
It is--you know, the core principles of our system is you are
innocent until proven guilty. It seems the IRS operates on the
opposite principle. You are guilty until proven innocent. And I
think that is a lot of the presumption that people feel
sensitive about it.
And I know that you had an extensive dialogue with my
colleague, Mr. Steube, on the situation with Matt Taibbi and a
lot of the eyebrows that raised, that all of a sudden, here he
is, testifying on a sensitive issue dealing with the
Administration, and suddenly he has an IRS agent at his door.
And I understand you can't talk about that, but I know
there were a couple of issues surrounding that, and one of
those is that Chairman Jim Jordan actually asked you about
providing some of the requested documents to Chairman Jordan.
Did you, in fact, provide those documents that were requested
by Jim Jordan?
Mr. WERFEL. I need to check, and I am not sure I can answer
that question in this setting.
Ms. TENNEY. Well, let me ask you----
Mr. WERFEL. I am happy to answer the----
Ms. TENNEY. This is not a--this is a document request
response and answer. So you should be able to answer that
question.
[Pause.]
Mr. WERFEL. I apologize, Congresswoman. It is my
understanding that, if I answered that question, it is a
violation of 6103. If I am wrong about that, I will make a
correction.
Ms. TENNEY. Let me ask this. In the--is that document
request going to be granted, whether it has been done or not?
Mr. WERFEL. Well, let me lift up and say it is my absolute
commitment to comply with all document requests from this
committee, from Congressman Jordan's committee.
Like, I welcome the oversight. I really do. I think it is
important to be able to answer the tough questions. That is how
we build trust. And Congressman Tenney, you said it. There is
this power dynamic. And one of the ways we can reduce that
power dynamic is making sure that we are complying with
oversight entity requests. And that is my commitment.
Ms. TENNEY. Right, and I appreciate you are sensitive to
that issue, as well. But let me ask you this. And--was the IRS
agent that showed up at Mr. Taibbi's door armed with a weapon?
Mr. WERFEL. Again, another question that I can't answer
because it involves an individual taxpayer.
Ms. TENNEY. Well, let me ask you on the technical side of
that, since--we will get into procedure. Let's take Mr. Taibbi
out of that.
Assuming--what is the standard for somebody that has an IRS
agent show up at their door? What is the standard for being--
showing up armed?
I mean, obviously, we know that we have a drug dealer that
is not, for example, paying their taxes. But if we have a
journalist, who probably isn't making a whole lot of money, I
mean, it just concerns me that that standard is something that
really we should look into as the IRS. I mean, it is not every
day that an IRS agent shows up at your door with, you know,
with weapons. So I think that should be more, you know, rare
than the rule.
So let me just go back, and I want to get to another
substantive question.
Mr. WERFEL. Please.
Ms. TENNEY. I just wanted to talk to you, if we could, a
little bit about applying the R&D credit or the R&E credit, as
it is known, under 22--or 26 U.S. Code, Section 41. There have
been a lot of inconsistencies expressed to me in my district
through my tours through businesses. And really having a legacy
of a lot of small business, a lot of innovation, a lot of
technology, there has been a lot of confusion about, you know,
inconsistency in enforcing that R&D rule and, you know, and a
lack of clarity. And there was a question raised in last term
about getting some guidance on that, and I just want to say it
was not provided.
And I just want to, for the record, Mr. Chairman, I want to
actually put into the record two general guidance documents,
one on architects, and whether they qualify, and one on
engineers, and whether they qualify that we obtained on the
IRS's view of that. So I want to, for the record, if the
chairman would accept these----
Chairman SMITH. So ordered.
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Ms. TENNEY. Thank you.
Also, I just want also--so where are we going with this R&D
credit?
I mean, we are in a situation--we had the IRA pass, we have
all these tax credits we want to see, we want to see
innovation, we want to see our supply chains come back, we want
to get our ourselves in a better situation against some of our
competitors and adversaries like China on innovation.
Wouldn't--shouldn't we really look into this R&D credit, and
make it consistent and fair for taxpayers?
Because that is really all many taxpayers ask. You know,
there are many--many people are willing to pay their taxes.
They just want consistency, fairness, neutrality in their IRS
regulations so that we can have a fair playing field,
especially for our innovators in our communities. Would you
agree with that assessment?
Mr. WERFEL. I agree. And you know, as you were talking
earlier, Congresswoman, about the power dynamic I reached for--
you know, some people carry around the Constitution of the
United States, and I certainly respect them doing that. I carry
around the taxpayer bill of rights, and I make sure that I am
reminded of what my responsibility is, as the IRS commissioner,
to make sure that we are protecting those rights. And a lot of
those rights deal with things like the right to know what you
owe, and what you are entitled to.
And so your point----
Ms. TENNEY. Well, no, and if I could just--I know I don't
have any time left, but I just--I worked a lot with a lot of
tax preparers. And we have to come up with the laws to make it
easier for you and for us to collect the taxes that are
properly due, and also to give rights to our citizens.
And I have a longtime tax preparer who was one of my
mentors who said, ``Here is how we should look at our tax
preparation: simplicity, transparency, stability, and
neutrality.'' That is how we make tax law.
Mr. WERFEL. Agreed.
Ms. TENNEY. And I think that is something that the IRS and
you, as the new commissioner, would be grateful if you could
look up, and make that kind of policy----
Mr. WERFEL. That is a good----
Ms. TENNEY [continuing]. Based on those rules of the road,
which are so simple and, really, what we are all looking for
for fairness.
Chairman SMITH. We got to wrap it up.
Ms. TENNEY. I know. My time is up, and I thank you so much
for your service. I appreciate it.
Chairman SMITH. Okay. We are going to be very specific on
the timeframes, because it has been two members that has went
over a minute and 30 seconds just in the last 3 times. So I
will cut you off much quicker.
Mrs. FISCHBACH, please.
Mrs. FISCHBACH. And Mr. Chair, thank you very much, and I
take that very seriously. And I will say a lot of the questions
that I had were--you know, we have been discussing already,
but--so I have just a couple of follow-up things.
Mr. WERFEL. Please.
Mrs. FISCHBACH. Dr. Murphy had asked about how many people
you think--I don't know if he used the word ``cheated,'' or--on
their taxes. You came up with about 85 percent. You said 85
percent, if you are recalling that.
Mr. WERFEL. Yes, I would like to confirm that number. I am
not sure I understand the question in terms of cheated. That is
not a technical definition. I can certainly come back to this
committee with a very precise detail in terms of where the
different categories of non-compliance sit.
Mrs. FISCHBACH. Okay, and I appreciate that, because that
was going to be kind of my question. When you came up with that
number--and maybe this will help with your follow-up--I am
looking--I am wondering what percentage of that would you
consider, or what part of that would you consider actual
cheaters----
Mr. WERFEL. Yes.
Mrs. FISCHBACH [continuing]. I mean, who intentionally
write something wrong or, you know, deceptive on their taxes,
and how many of those people don't understand the complicated
tax code that we have in place.
And that leads--so for your follow-up, please, because I
would like to----
Mr. WERFEL. Yes, I am glad you----
Mrs. FISCHBACH.--I would like to understand that.
Mr. WERFEL. I am glad you provided me the opportunity to
clarify.
Mrs. FISCHBACH. And in particular, maybe even the breakdown
with those poor middle-class folks that are, you know, doing
their own taxes, and trying to figure out what is going on, and
it leads into kind of a follow-up that I had.
You know, you said you are doing more audits on the middle
class because the wealthier have more complicated and--correct
me if I am wrong, but this is what I have been hearing--the
wealthier have more complicated returns, and it is more
difficult, more time-consuming to do those. And I am wondering,
if that is the case, why are we looking at quantity versus
quality instead of, you know, moving resources and focusing on
potentially some of those folks?
But it seems like you are just saying, oh, well, there is
more of them. So we do it instead of actually moving resources
and focusing on some of those that potentially have more
complicated returns.
Mr. WERFEL. Well, I--well, first of all, I want to make a
clarification. The audit rates are going down for all--for
middle income, as well. And I mean, that is one of the issues
that I raised earlier, that the--as an example, the latest rate
we have, 2018, is a historically low rate. And that is----
Mrs. FISCHBACH. Okay, but--and I am reclaiming my time----
Mr. WERFEL. Yes, sorry.
Mrs. FISCHBACH [continuing]. Since the chair just gave me
the warning. [Laughter.]
Mr. WERFEL. Yes.
Mrs. FISCHBACH. But, you know, kind of----
Mr. WERFEL. But the answer to your question is yes, we are
moving resources in a----
Mrs. FISCHBACH. Okay.
Mr. WERFEL [continuing]. Way to go after the more
complicated returns that are going to have the highest return
on investment. That is the goal.
Mrs. FISCHBACH. Okay, because I--because it really felt
like, you know, is there kind of a quantity kind of focus?
Because obviously, with one guy you can do more for the
middle--do more on the middle class than the more complicated
returns.
But I guess--and you know what I am going to do is, given
that, since you are going to follow up on the 85 percent, I got
1 minute and 51 seconds left, and I am going to yield back.
Chairman SMITH. Wow. [Laughter.]
Mrs. FISCHBACH. I just made points with the chair.
Chairman SMITH. You definitely have some gold stars.
[Laughter.]
Chairman SMITH. Ms. Sewell, you are recognized.
Ms. SEWELL. I will try to do the same.
Mr. Commissioner, you did in your opening testimony talk
about how the added resources that were given in the Inflation
Reduction Act did bring up the number of calls that were
answered, the number of, you know, audits that were resolved.
But I also heard you say that more complicated tax returns are
challenging for the IRS.
And I can tell you that my district in Alabama in the Black
Belt is one of the largest districts that has--that gets the
Earned Income Tax Credit audit. And these are working Americans
who make less than minimum wage sometimes. And the fact that 20
to 30 percent of those audits are in poor, vulnerable
communities--seems to me you should be using those resources to
go after--I mean, what you are getting, what the Federal
Government gets by auditing them, while it makes a big
difference to those families, is peanuts in the grand scheme of
things.
So can you talk to us about why that is, and what you are
doing about it?
Mr. WERFEL. It is a really important question,
Congressman--Congresswoman, because, you know, I think what
happened, for example, with the Earned Income Tax Credit, just
to go back in history a little bit, is that that program,
because of the improper payments law that is on the books, that
program has a historically high improper payment. And so, as
part of IRS historical remediation of those improper payments,
audits increased.
Ms. SEWELL. I hear you.
Mr. WERFEL. I am not defending it or not.
Ms. SEWELL. I know, I hear you.
Mr. WERFEL. I am just giving you the history----
Ms. SEWELL. But, you know----
Mr. WERFEL. Yes.
Ms. SEWELL [continuing]. ProPublica did a survey. I mean,
this is documented.
Mr. WERFEL. Yes.
Ms. SEWELL. And that the report shows--the study found that
EITC audits are mostly heavily concentrated in the south, and
in southern Black Belt. And I represent them.
Greene County, where the median income for a family there
is right around $20,000 for 4----
Mr. WERFEL. Yes.
Ms. SEWELL [continuing]. Was among the 10 most audited
counties in the country for EITC recipients. In fact, audit
rates in many of these areas are more than 40 percent higher
than the national average, hitting rural communities of color
the hardest.
Mr. WERFEL. Yes.
Ms. SEWELL. We gave you some money. We gave you a lot of
money, actually. I don't expect you to target poor people.
So I understand that there is a problem that needs to be--
and the policy of EITC--then we should do something about that.
But if you think that there is a reason--I don't know what to
ask you, other than to say please do something about that.
Mr. WERFEL. Yes. My response to you, Congresswoman, would
be, first, I absolutely am in the firm belief that fairness and
equity in our tax system is essential.
You are asking important questions. We are looking, and
studying, and assessing the potential for--that our EITC audit
program is not consistent with these values of fairness. And I
am going to have to report back to you on what we find, and
work together to make sure that it is fair.
I mean, we are on a journey to get to more fairness. And I
think identification of the issue is maybe even not half the
battle, but an important part of the battle. Now the battle
begins, and I will work with you on this. That is my
commitment.
Ms. SEWELL. I look forward to that. I yield back the
balance of my time, 55 seconds.
Chairman SMITH. Thank you, Representative. The gentleman
from Pennsylvania is recognized.
Mr. SMUCKER. Thank you, Mr. Chairman.
Good afternoon, Commissioner. Thank you for being here, and
thank you for your willingness to take on this role. I want to
raise a few concerns I have heard from constituents regarding
the processing--IRS processing of the Employee Retention Tax
Credit----
Mr. WERFEL. Yes.
Mr. SMUCKER [continuing]. The ERTC. And I do understand the
program was implemented quickly.
Mr. WERFEL. Yes.
Mr. SMUCKER. And, you know, the IRS had to learn to run it
as it was being developed, almost. But, you know, so I know
there were kinks that needed to be ironed out. But we are now
three years out from enactment, and I am still hearing from
employers who have had challenges receiving the funds. Some may
still be waiting, and in some cases even had to shut down the
business completely because they did not receive the funds that
were promised, the relief. The program appears to be rife with
inconsistencies. And I am--I just want to raise this, hoping
for maybe your feedback, and hopefully you are planning to make
some program improvements.
So for one example, an employee shared with me that they
had received their quarter 2 and quarter 4 refunds 20 weeks
after applying, but never got the quarter 3. The IRS somehow
determined they were ineligible for the payment for quarter
three, although they got two and four, because they considered
the employer a government entity. After successfully appealing,
that employer finally received the quarter three check a year
later.
And I asked a tax preparer how that could happen, and they
revealed that they must send in the 941-X form separately for
each quarter, or else they do not get scanned into the system.
So it seems like there is a problem there. They were also told
that initially--they were not told that initially, so many sent
in their claims forms for the year, which delayed refund
checks.
Another employer received a refund check, but then shortly
after was contacted by the IRS being told to return the funds.
And in the weeks this employer spent trying to get
clarification, he received another check.
So it is actually sort of frightening for employers when
they are trying to do the right thing, and they are getting a
lot of mixed messages and a lot of different results.
In another conversation with tax preparers, they shared
that they were not even informed when the IRS removed the
Kansas City processing center from ERTC processing.
So I understand that you may be redeploying agents to help
process the backlog of these claims, but I would like to
understand what is being done to expedite the unprocessed
backlog at the Kansas City facility or anywhere else.
Mr. WERFEL. Yes, thank you for the question, Congressman.
And, you know, lifting up--before I get into the ERC [sic],
like, we are getting healthier. We are in the process of
getting healthier. And I think the--our low point was during
COVID, after years of funding decrease. And then, having to
shut down our operations and then retool our operations into a
virtual environment, we lost a lot of ground. The paper piled
up, including new requirements such as the Employee Retention
Credit, such as economic impact payments. So it was a bit of a
perfect storm----
Mr. SMUCKER. So are all these cases being processed now?
And I am sorry to cut you----
Mr. WERFEL. Yes, they are. They are being processed now. As
I mentioned earlier----
Mr. SMUCKER. So none being held back.
Mr. WERFEL. No.
Mr. SMUCKER. Like, at this point we can----
Mr. WERFEL. If--the only reason why it would be on hold is
if we thought there was an issue of fraud or error. Otherwise,
it is being processed. We were up to 20K a week at the end of
filing season in terms of the number we are processing----
Mr. SMUCKER. Thank you. And the issue of all of the 941s
being in one envelope, can you commit that the individuals
processing these will process multiple forms in the same----
Mr. WERFEL. Let me look into that----
Mr. SMUCKER [continuing]. Envelope? Yes.
Mr. WERFEL [continuing]. And commit to get back to you on
that question.
Mr. SMUCKER. All right, thank you. And just--I have a
minute left.
You have talked a lot about the $80 billion. You continue
to--describing the hiring at the IRS, and the new funding as
merely right-sizing the agency.
Mr. WERFEL. Yes.
Mr. SMUCKER. And you even pushed back today on the argument
that the funding is super-sizing the agency.
Mr. WERFEL. Yes.
Mr. SMUCKER. I do want to point out--and I would like to
submit for the record, Mr. Chairman, if I may--an article from
The New York Times from April 27th, 2021. And in this article
former IRS Commissioner Koskinen--I hope I am pronouncing that
right--said that he thought--and this is a quote, ``the $80
billion being proposed by the Biden Administration might be too
much.'' And his quote in the interview was, ``I am not sure you
would be able to efficiently use that much money. That is a lot
of money.''
So, again, Mr. Chairman, I know I am almost out of time,
but----
Chairman SMITH. Without objection.
Mr. SMUCKER [continuing]. Submit that for the record, if I
could. Thank you.
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Chairman SMITH. The gentleman from Utah is recognized.
Mr. MOORE of Utah. Thank you, Chairman. We are getting down
to the point where it gets serious business. Everybody has left
for votes.
Mr. WERFEL. Let's get down to business.
Mr. MOORE of Utah. There is just a few people left on the
dais. This is where we get the real work done.
Mr. WERFEL. That is----
Mr. MOORE of Utah. I am going to ask us to actually suspend
reality for a minute, and talk as if we weren't in a
congressional hearing, say, in a client-consultant type of
relationship.
And as I look at this whole--and I represent Ogden, Utah,
which is an amazing processing center, thousands of employees.
Mr. WERFEL. Amazing.
Mr. MOORE of Utah. My constituents. And so I have taken
this issue to heart to really dig into and truly understand,
you know, what we need to be doing here. And I want to--what I
want to highlight is there is an area of consensus here.
My frustration comes with how this all came out. This was,
you know, for better or worse--usually for worse when one-party
rule in Washington, they always--you know, you have to do big
things and, you know, you try to get as much through
legislation as you can. And there was a big bill that cost a
lot of money last year in the Inflation Reduction Act. And in
order to get that accomplished, we needed to find--Democrat
Party needed to find revenue. So they did a huge IRS bill
because the CBO would score it so they could gain revenue over
time. Like, of course we are going to be frustrated at that. We
don't want to manipulate a government agency in that way to be
able to just satisfy a CBO score.
So all that aside, setting that context, like, we have got
real areas of consensus here. And as I go meet with my
constituents in Ogden, and as I hear and address this issue,
there is a lot of opportunity for technical modernization,
customer service capabilities to enhance that. And my point is,
if I was, like, consulting the IRS to say, ``Let's take this as
a huge win, and there is areas of consensus, let's dig in and
really go out and find that opportunity,'' the workforce that
you have is strapped. They don't have the tools they need to do
their job.
So before we go and add on an enormous amount of
individuals and workforce to an already sort of system that
doesn't work for them currently, let's shore that up. And then,
after we evaluate the improvements that we have made in this
tech modernization, in customer service capabilities, in a
toll-free number, automation opportunity for them to not have
to be so bogged down with phone calls that they can't answer,
like, why don't we try that? And then, ultimately, take another
look and say this is where the workforce needs to go.
I would love your just sincere response to that. Is that
something that, if we were to be serious adults back here
instead of, you know, any of the partisan back-and-forth, could
we actually get something done if we did that?
Mr. WERFEL. If I understand correctly, I think your
question resonates completely with me.
You know, thinking about the folks in Ogden--and I really
appreciate you calling them out for the amazing civil servants
that they are--and going back to this question of what kind of
IRS are we going to be, are we going to be an IRS that just can
answer the phones, or are we going to be an IRS that actually
enhances and modernizes?
And let me give you a good example. With respect to the
Employee Retention Credits that those folks in Ogden are
working really hard to process right now, currently the IRS
does not have the capability to ingest an amended return
electronically. We need to be able to advance our technology to
be able to do that.
Now, you can say, well, that is outrageous. Why don't they
have that capability? And we can relitigate it from the past,
and I can make the case that resources have been dwindling for
years and years, and that is why we haven't done it. And
someone might make another case, I don't know.
But to your point, can we roll up our sleeves and figure
out what do we need in Ogden, Utah to improve that operation?
Because, ultimately, it is going to help the employees. But
more importantly----
Mr. MOORE of Utah. It helps the taxpayer.
Mr. WERFEL [continuing]. And I think the employees would
agree--it helps the taxpayers. People are waiting for their
retention credits. I don't want them waiting for their
retention credits. I want them to get their retention credits
as quickly as possible.
Mr. MOORE of Utah. And this is----
Mr. WERFEL. But these types of gaps are what we are dealing
with.
Mr. MOORE of Utah. And these types of gaps. This is the
part that--and if I haven't seen, and if I haven't done enough
research, I apologize in advance. But from the IRS plan and
from GAO reports, or the plan that was released in early April,
you know, technology, the word ``technology,'' was referred to
many times. But I haven't seen the specificity on what is
needed.
Because I know there is a motivation on our side, because
our offices are getting bogged down with requests, and we can't
even help our constituents to the extent that we need. Like, we
would love to see the specificity laid out, knowing that I am
sick and tired of saying there needs tech modernization. If I
say that one more time without real--seven layers of additional
things, specifics that we need to do for these folks, like,
that is the area that I want to get to.
And so I will add my comments from the gentleman from--my
colleague from Arizona. Like, I am ready to roll up my sleeves,
too, and dig in and actually get this part done before we add
on thousands and thousands and tens of thousands of more
employees to a system that doesn't work currently. Let's fix
that, and then figure out where we need to go in future.
And I definitely am going to stop. Thank you.
Mr. WERFEL. Thank you.
Ms. MALLIOTAKIS [presiding]. Thank you for staying on
schedule. The chair now recognizes Mr. Beyer for five minutes.
Mr. BEYER. Thank you, Madam Chair, very much.
Commissioner Werfel, I just want to thank you for being
here and taking on this task of leading the IRS through a very
pivotal time. And I represent many, many IRS employees, and I
know they are thrilled to see that, with your leadership,
through the Inflation Reduction Act, we are finally providing
the employees with the resources they need to serve the
American people better.
I just want to say, too, that I don't know, maybe we are
lucky, but our taxpayer advocates have been terrific, and have
done a really, really good job.
Mr. WERFEL. Thank you for that feedback.
Mr. BEYER. However, we do still get a lot of incoming
requests, which we are able to fix. Can you tell us about how
the backlog is? We are not that many months away from these
huge Washington Post, New York Times stories of cafeterias
filled with unprocessed IRS returns.
Mr. WERFEL. Yes. So, look, I said earlier to an earlier
question we are in the process of getting healthy, right?
Coming into this from last filing season, 2022 into this filing
season, we cut our backlog in half. We did that by people
working hard, some of the people that you represent. Over time,
you know, any time they are not doing something, they are
working the paper backlog.
But we also scanned more, and this is part of a modern IRS.
And, you know, we were not doing enough before we had the funds
in the Inflation Reduction Act to avail ourselves of the
sophisticated technology that is out there to take a tax return
and convert it to machine-readable format, a paper return.
A lot of the backlog--most of the backlog, if not all--is
caused by paper, and the fact that we don't have an automated
way of processing it. So you have individuals keying it in,
which seems like decades-old technology, and that is what it
is. But because we are now adding a scanning technology that we
previously didn't have the resources to avail ourselves of, we
now have a more sophisticated technology on the ground, turning
forms into machine-readable so they can be ingested into IRS
systems. That is an example of what we are doing.
Between this filing season and next filing season, it is an
absolute priority to further make an enormous dent in our in
our paper backlog. And I am hoping that citizens start to see
the results of that.
Mr. BEYER. Great, great. Thank you. I also want to thank
you on the tax gap. The unfairness of having the rich pay by
one set of rules and working families pay by another is
pernicious and dangerous. And it really undermines the basic
social contract that has kept our country so strong. So thank
you for that.
I want to touch on something I don't think anyone has
mentioned yet. I was ambassador to Switzerland for four years,
an incredible privilege. And one of the biggest problems we had
was Americans paying their taxes, the American expats. And the
challenge was that so many of them didn't owe any taxes to the
United States, but still had to pay 3, 4, 5, $6,000 in CPA fees
to get the tax returns processed over here.
I know you have a new initiative right now on allowing them
to pay with their foreign bank accounts. Can you update us on
what you are trying to do to make Americans' tax compliance--
the three to six million Americans who live overseas--a lot
easier than what it is right now?
Mr. WERFEL. Yes, and I am glad you asked this, Congressman,
because it goes back to this broader theme of taxpayer--we have
to meet taxpayers where they are. Some of them are overseas.
Some of them are in rural communities. Some of them don't have
the means to hire an accountant or pay for a third-party
provider. And some of them are hiring an army of accountants.
And for those taxpayers that are international, that want
to meet their obligations, even though they are expatriates,
which is great, and that is what we would expect, we need to
work with them to figure out how to make their filing easier,
as well. And to the extent that they are paying CPAs for filing
with no balance due, we want to work to fix that.
Mr. BEYER. Great. We have legislation which you can't
comment on, but bipartisan, which we will bring before you.
And one last thing in my last minute. The--by a 217 to 215
vote the Republicans passed their bill yesterday. What would
happen if we actually took away that $80 billion?
Mr. WERFEL. Yes, I have tried--I am trying, Congressman, to
explain in the plainest possible language how devastating that
would be for the American people, not just for the IRS,
because, again, we are not resourced to meet the demand that is
created by the complexity of our tax system today. That
complexity is in part the code, but it is in part just the
number of filers, the population.
And I keep on going back to this analogy of the train
platform. Right now, because of the IRA, we can get those
trains moving, we can move people off the platform, get them
where they want to go. If you repeal the Inflation Reduction
Act, you eviscerate our ability to fix the problems that we
have had historically. Those train platforms will get more and
more crowded, the trains won't come, Americans will be
frustrated. They will be calling your offices, they will be
saying I am a terrible person. That is okay, but the important
point is that eliminating the Inflation Reduction Act actually
harms taxpayers.
Ms. MALLIOTAKIS. I now recognize myself for five minutes,
and I would first like to--first, let me start by saying that
the taxpayer advocates in New York City--we will start on a
positive note. They have done a great job.
Mr. WERFEL. Great.
Ms. MALLIOTAKIS. With my office. We have spoken with them,
they have been very helpful, 528 constituent cases that have--
my office has had to intervene in, which is the negative part,
the fact that these American taxpaying citizens need to contact
their Member of Congress to get a solution or a resolution.
So I would ask one question. Are your staff members still
working from home? You still have that COVID telework, or are
they all back in the office today?
Mr. WERFEL. It is a mix, like all other Federal agencies. I
would emphasize that everyone is working.
I will say that in my first few weeks at the IRS the
question that I focused on with the IRS right now is, are we
getting the job done? Are we answering the phones? Are we
fighting off cyber attacks? Are we processing the backlog? As
long as the answer to that question is yes, then that is going
to be my priority.
Now, if the answer is no, then I want to go deeper into the
issue and figure out what the issue is. And if the issue
happens to be the telework policy is negatively impacting our
ability to get the job done for the American people, then we
will make a change.
Ms. MALLIOTAKIS. Well, I would just--I would love to
suggest that it is time to bring everyone back to the
workplace. As you know, Republicans passed a bill to get all
Federal employees--half the workforce still working from home,
and I think that does have an issue to do with constituent
services, and making sure that these calls are answered.
The fact that one congressional office in just 2 years had
to intervene in over 500 cases is a problem. When we were in
our hearing in Peachtree, Georgia, one of the accountants who
testified said that she had been transferred four times, and
was placed on hold for three hours until she received
assistance.
I want to also move on to another major issue that I am
seeing with my constituents, sadly. We have had over a dozen
issues of check thefts, check fraud, either stimulus checks or
tax refunds that have been stolen. Someone had signed the
checks and deposited the money. And--are you aware of this
happening, and are you working--what are you doing to try to
resolve that issue? Are you working closely with the U.S.
Postal Service and the Department of Justice to address that?
Mr. WERFEL. Yes, and another early priority of mine,
Congresswoman, is to, in particular, address issues where there
is a victim.
Look, it is upsetting when someone doesn't pay their taxes
because that victimizes the U.S. Government's financial bottom
line, and we are, of course, concerned about that. But when
there is an individual victim, whether it is identity theft,
their money is stolen, they are taken advantage of, that is
something that we absolutely have to prioritize.
So I absolutely commit to working with the Postal Service,
the Justice Department on cracking down on that type of
nefarious behavior.
Ms. MALLIOTAKIS. I appreciate that, and I would also make
the argument that that should really be a priority.
Mr. WERFEL. It is.
Ms. MALLIOTAKIS. I see some of the other initiatives that
you are focusing on, whether it is the 1099s for, you know,
selling something on eBay or whatnot, going after these small,
you know, just middle-class people. I think what we should do
is focus on these types of things to prevent those fraudsters.
But in addition to that, you said earlier that you cannot
meet the demands of today. And now we are----
Mr. WERFEL. Yes.
Ms. MALLIOTAKIS [continuing]. Also seeing that the IRS is
interjecting itself in government-populated returns, trying
to--you know, we have a whole industry of tax preparers that
are hundreds of thousands of jobs, good-paying jobs, that--they
do this in the private sector, and they do it right.
I think this is a case of government coming in, saying that
they feel they could do something better than the people who
actually do it every day. And I would say if you can't meet the
demands of today--and we have a lot of backlog here--why
interject yourself in doing something more? Why fix something
that is not broken?
Mr. WERFEL. Well, two responses to that. First, Congress
asked us to study it, so we are going to study it. And the
second is any product that would go forward would be an option
for taxpayers. They would not have to use it if they didn't
want.
And for me, the question is are we offering the right set
of services based on taxpayer preference? You know, whether
the--whether they are overseas, whether they still need to file
paper, whether they want to walk into our walk-in center, I
think we have an obligation to be able to provide diverse
enough services to meet taxpayer preferences.
So once this study is done, we will take a look at it, we
will talk with you about it, and see if this makes sense to
meet a taxpayer preference that is out there, if it is
feasible, and if the costs are right.
Ms. MALLIOTAKIS. As you can imagine, for some of us it is
just looking like IRS looking to do more Big Government, more
bureaucracy, interjecting itself in an area where you really
should just leave it to the private sector.
But I would love to work with you to see how we can fix
some of the issues that I brought up earlier today, because it
truly is my constituents and other American citizens who are
being victimized. Thank you very much for your time.
Mr. WERFEL. Thank you, Congresswoman.
Ms. MALLIOTAKIS. I now recognize Mrs. Steel of California
for five minutes.
Mrs. STEEL. Thank you, Commissioner----
Mr. WERFEL. Thank you.
Mrs. STEEL [continuing]. For participating today. This is
such long hours that you have been sitting and enduring, so
thank you. And thank you for your service, too.
Having said that, American families and small businesses
are having a hard time trusting in the IRS. Our constituents
should not have to fear that the IRS might come after them. Per
previous data, TIGTA, Treasury Inspector General for Tax
Administration, half of large corporate audits result no
change.
The article from this morning titled, ``The Surprising Risk
in Ramping Up IRS Audits,'' according to that article states
that nearly half of those making $10 million or more who are
audited saw no changes in their tax bills in 2018. Thirteen
percent of audits of people making between $100,000 to $200,000
were no change audits in 2018 IRS data show. More than 1 in 4
people with income between $1 million and $5 million were given
clear bills of health, and almost half of audits of a
corporation with at least $1 billion in assets found they owed
nothing more. Why are so many Americans being audited for no
reason?
This article, ``The Surprising Risk in Ramping Up IRS
Audits'' saying that could be because of the IRS is picking the
wrong people to audit, or it doesn't have the right specialists
to go toe to toe with big law and accounting firms. Though we
are not really sure. So we are all kind of like questioning
that. It sounds like the problem is not needing more money or
doing more audits, but one of wasted resources.
Commissioner, how will you ensure that the correct people
are getting audited in the first place?
Mr. WERFEL. Yes. So the objective, Congresswoman, is
equitable tax enforcement, right? We should be able to
demonstrate to the American people that, no matter what your
means are and no matter how complicated your return is, the IRS
is treating you the same. So just because your return is
simpler to review doesn't mean you should be more likely to get
an audit. If your return is more complicated to review, we
should be equally equipped. And currently we are not equally
equipped.
The reason I believe--my hypothesis is the reason why you
see zero-balance-due audits is because we don't have the right
capacities today to unlock these complex returns in an
effective way.
And there isn't a lot of audit coverage. In fact, a lot
of--we are at historic low audits across the board, including
for these--the wealthiest-most taxpayers.
Mrs. STEEL. So what you are saying is----
Mr. WERFEL. Historically low.
Mrs. STEEL [continuing]. Zero balances because of--they
didn't have enough--sufficient enough----
Mr. WERFEL. We need----
Mrs. STEEL [continuing]. Informations, is that the----
Mr. WERFEL [continuing]. The right economists, data
scientists, attorneys. We need to tap into the people that know
how these returns were constructed. The world is moving very
quickly in terms of the complexity of these corporations.
Mrs. STEEL. But isn't your--the staff supposed to be
trained for that?
Mr. WERFEL. We haven't had the resources to train.
Mrs. STEEL. So you are not training your people for----
Mr. WERFEL. Not as effectively as we could, not--we haven't
had the funds to train. We have--again, we have a staffing
level pre-Inflation Reduction Act that is equivalent to where
we were in the 1970s. We have not had enough resources to meet
the requirements of today's tax system.
And with these resources, and being able to train and hire
the right mix of people, I anticipate that we will not have as
many zero-balance-due audits in the future. And when we don't,
it is going to be a tremendous return for the taxpayer. And
that is why I think repealing the IRA costs so much in the eyes
of the Congressional Budget Office, because the--if the plan is
to engage at that level, a two percent, a three percent, a four
percent improvement in some of these metrics will easily pay
for what the Inflation Reduction Act investment is.
Mrs. STEEL. Then why don't you just reduce the audits and
just go really dig in those people that you are auditing
instead of those two percent, three percent, and you don't have
to increase those numbers on that.
Mr. WERFEL. It is a great question. I think--and it was--
another congresswoman asked the question, as well.
I think we do have to optimize. It isn't about quantity. It
isn't about doing more audits of wealthy taxpayers, it is doing
the right audits, and making sure that we have the right
balance and the right optimized approach to how we exam the
wealthiest taxpayers. We are not optimized right now. We are
leaving money on the table.
Mrs. STEEL. Mr. Chairman, actually, I prepared five
different questions, but it seems like my time is already up.
So what I am going to do is I am going to do in writing, and
ask for these questions.
Chairman SMITH [presiding]. Perfect. Please submit your
questions into writing.
Mrs. STEEL. Thank you so much.
Mr. WERFEL. I would like that, thank you.
Chairman SMITH. We will have that.
Chairman SMITH. Thank you, Representative.
Ms. Moore is recognized.
Ms. MOORE of Wisconsin. Thank you, Mr. Chairman, and I want
to thank our brand-new IRS commissioner, join my colleagues in
thanking you for your patience.
You are new, so I just am curious about your background.
Were you hired from within IRS, or you came from outside?
Mr. WERFEL. No, I started my career in government. I worked
for many years at the Office of Management and Budget. I worked
at the Justice Department, and I----
Ms. MOORE of Wisconsin. Okay, thank----
Mr. WERFEL [continuing]. Also worked at the IRS.
Ms. MOORE of Wisconsin. All right.
Mr. WERFEL. So I am returning.
Ms. MOORE of Wisconsin. You are returning.
Mr. WERFEL. Yes.
Ms. MOORE of Wisconsin. Okay. And I only ask that question
so I can just get a baseline of what you know about the laws
that we have passed recently.
So in 2013 we reauthorized the Violence Against Women Act.
And during that particular reauthorization, we required housing
providers who had received the Low-Income Housing Tax Credit
funding to no longer evict victims, as they had been doing,
along with their abusers.
And so Treasury really has informally indicated that the
agency needs to act, because non-compliance with the Violence
Against Women Act 2013 is not considered to be non-compliance
under the statute that created the Low-Income Housing Tax
Credit. But the IRS is required to administer this.
So are there any plans? Are there any priorities for it?
Because, you know, women who are leaving abusive situations,
they are more in danger of losing their life at a time that
they decide to leave a relationship, and so housing can be
really critical----
Mr. WERFEL. Yes.
Ms. MOORE of Wisconsin [continuing]. In terms of their
safety. Is this something that you are aware of, or is this a
priority for you to----
Mr. WERFEL. I was----
Ms. MOORE of Wisconsin [continuing]. Implement?
Mr. WERFEL [continuing]. Recently made aware of it. I am
really glad you are asking the question. I understand that we
are looking into the regulations, and seeing whether they could
be revised to expressly reference housing protections under the
Violence Against Women Act, and I think that would potentially
resolve the issue.
I--it is really important that this committee raise these
types of issues to our attention, because that will allow me to
prioritize and make sure that we close these types of issues
that are problematic.
Ms. MOORE of Wisconsin. Well, I have got some more for
you----
Mr. WERFEL. Please.
Ms. MOORE of Wisconsin [continuing]. Mr. Commissioner. The
Earned Income Tax Credit. I just want to congratulate the IRS.
They did a fantastic job during the pandemic, getting money out
to people who otherwise would not have gotten it. The uptake in
the Earned Income Tax Credit and the Child Tax Credit is low.
But through the non-filer portal you were able to contact
people who otherwise would not have received the benefit.
We have been talking to Treasury about using that non-filer
portal to identify people who could benefit from the Earned
Income Tax Credit and the Child Tax Credit. Is that something
that the IRS would be supportive of? These are really low-
income people, and they could benefit from this resource that
is available and for which they are eligible.
Mr. WERFEL. Yes, 100 percent. Look, when we implement
something new, we learn a lot. When we, as the IRS--and this
predates me, and I also congratulate the IRS workforce for the
amazing work they did during the pandemic--you know, we had to
turn on a dime and implement these economic impact payments. In
many cases, you know, essentially, lifesaving payments for
people in need----
Ms. MOORE of Wisconsin. Right. Well, I just want to work
with you to make sure that you actually implement--that you
actually use that portal.
Mr. WERFEL. Yes.
Ms. MOORE of Wisconsin. It is so valuable----
Mr. WERFEL. I think it is a good suggestion.
Ms. MOORE of Wisconsin [continuing]. To do it.
Mr. WERFEL. Yes.
Ms. MOORE of Wisconsin. Implementation of the SAFER Act.
Last Congress, as a part of Secure 2.0 there was a bill that
Congresswoman McBath and our Congressman Smucker from this
committee and I all led, Saving Access for Escaping and
Rebuilding Act, the SAFER Act. Again, domestic violence----
Mr. WERFEL. Yes.
Ms. MOORE of Wisconsin [continuing]. Often means that, you
know, women will not appropriately receive the tax refunds to
which they may be entitled. And if the non-custodial parent
files first and then the custodial parent files second, there
is a big hassle with straightening it out. They may have to
file a lot of paperwork.
Is there any interest in helping victims of domestic
violence? We saw this a lot during COVID, where the non-
custodial parent found themselves getting the check for the
children and not sharing it with with the actual custodial
parent, and IRS----
Mr. WERFEL. It is a very unfortunate outcome.
Ms. MOORE of Wisconsin [continuing]. Felt that they could
do nothing.
Mr. WERFEL. Yes, it is a very unfortunate outcome, and I
would absolutely be interested in making sure that the right
parent gets the credit. And, in particular, if a victim of
domestic violence is--you know, is not getting that credit when
it is rightfully theirs, that is alarming and concerning, and I
would like to work with you on that.
Ms. MOORE of Wisconsin. Well, I appreciate that. Thank you
so much.
And I would yield back my time.
Chairman SMITH. Ms. Van Duyne is recognized.
Ms. VAN DUYNE. Thank you very much, Mr. Chairman, finally.
Mr. WERFEL, you have been doing this for a really long
time. You came in nearly almost exactly 10 years ago as acting
director of IRS, correct?
Mr. WERFEL. Correct.
Ms. VAN DUYNE. Under the Obama Administration.
Mr. WERFEL. Yes.
Ms. VAN DUYNE. When you came in at that time, you--the IRS
was facing a tremendous amount of criticism because it felt--a
number of people criticized that the IRS was targeting specific
political groups for a tax exempt status, correct?
Mr. WERFEL. That was the allegation, yes.
Ms. VAN DUYNE. What did you find?
Mr. WERFEL. So through the process--and I was there for
eight months--we provided a tremendous amount of information to
the authoritative committees and the inspector general. And I
would really rely on the final reports of TIGTA and the
Permanent Subcommittee on Investigation that thoroughly, over
many years, evaluated those issues. And we can----
Ms. VAN DUYNE. So the IRS----
Mr. WERFEL [continuing]. Go over those results, but----
Ms. VAN DUYNE. Yes. So the IRS----
Mr. WERFEL. It is your time.
Ms. VAN DUYNE [continuing]. Knew 10 years ago that it was
already being criticized for going after Tea Party groups and
their tax exempt status.
Mr. WERFEL. That was the allegation.
Ms. VAN DUYNE. So fast forward 10 years later, and I don't
need to repeat the questions that we heard from Chairman Smith
or from Congresswoman Tenney, Congressman Steube, but it seems
like the exact same thing is still happening in the IRS.
I mean, nobody wants to pay their taxes. The IRS has a
reputation as an agency that most people, most Americans, feel,
and it doesn't help that we have seen in this history that the
IRS seems to be treating Americans different based on their--
either their political affiliations or their family
affiliations.
So, Mr. Werfel, without getting into details of those past
cases, how can you assure the U.S. public, moving forward, that
they can actually trust the IRS to treat everyone the same,
regardless of political views?
Mr. WERFEL. Here are my assurances. It is my firm
commitment that there is absolutely no place for political bias
at the IRS. I will take very seriously any evidence of
political bias, and will immediately refer it to the inspector
general.
We have----
Ms. VAN DUYNE. So including the examples that----
Mr. WERFEL. Any example----
Ms. VAN DUYNE [continuing]. That Congressman--okay.
Mr. WERFEL. Any time----
Ms. VAN DUYNE. Okay, I appreciate that.
Mr. WERFEL. I will always refer to the inspector general.
Ms. VAN DUYNE. All right.
Mr. WERFEL. And also, I will work tirelessly----
Ms. VAN DUYNE. I am going to reclaim my time, because I
only got----
Mr. WERFEL. Yes.
Ms. VAN DUYNE. I want to make sure that I am staying on
time.
Mr. WERFEL. Please.
Ms. VAN DUYNE. I would like to discuss the IRS plan of how
your agency intends to spend the $80 billion passed as part of
the Inflation Reduction Act. I have voted to repeal this now
twice, but as of now this money will still be available to the
IRS.
I am concerned with a number of provisions in this plan,
including the $45.6 billion for auditing and enforcement,
compared to only $3.2 billion for taxpayer services, which
results in $14 spent on enforcement for every $1 spent on
taxpayer services. Now, you have said that, you know, we are
hiring more people to answer the phones.
Mr. WERFEL. We are.
Ms. VAN DUYNE. And yet you are spending 14 times the amount
on enforcement, and a very small, small amount on customer
service. And the dollars that you are spending on customer
service, over 30 percent of that is being used to implement IRA
green energy provisions.
Mr. WERFEL. Yes. So I am not really sure I know your
question, but I can comment on it.
Ms. VAN DUYNE. Are you spending 14 times as much on
enforcement as you are on customer service?
Mr. WERFEL. We are spending consistent with the
appropriation amounts that----
Ms. VAN DUYNE. That happens to be 14 times as much on
enforcement as on customer service, even though the complaints
that we have had have to do with our constituents not even
getting their refunds on time.
Mr. WERFEL. My commitment, Congresswoman, is to spend that,
those funds, as effectively as we can, with good program
integrity, and in the best interests of the taxpayer.
Ms. VAN DUYNE. But we are still spending 14 times as much
on enforcement with the promise that we are not increasing the
percentages at all of audits.
Mr. WERFEL. We are not increasing the percentage of
audits----
Ms. VAN DUYNE. But we are going to be spending 14 times as
much.
Mr. WERFEL [continuing]. For people earning $400,000 or
less. We are increasing the percentage of audits for those
wealthy taxpayers, where we also have historically low audit
rates.
So the enforcement funds that you are describing are
critically important in terms of ensuring that Americans at
every income level know that the IRS is treating every income
level equally.
Ms. VAN DUYNE. I just think it is disingenuous for you to
say that you are spending much more money for people answering
phones, when you are spending 14 times as much on enforcement.
Mr. WERFEL. Well, we did--we hired 5,000 people this filing
season to answer phones.
Ms. VAN DUYNE. Yes.
Mr. WERFEL. And we are making improvements. It is in our
plan issued April 6th on all the steps we are working to with
the money that we have. But there is a challenge.
Ms. VAN DUYNE. It is good to know that you can do that in 2
billion, you can hire 5,000 people on that. If that is the
case, then I am thrilled to hear that.
Mr. WERFEL. Well, we need more than just people.
Ms. VAN DUYNE. Because the number that I am hearing is not
what you are----
Mr. WERFEL. We need more than just people. I mean, one of
the challenges--and I don't want to take up too much of----
Ms. VAN DUYNE. Well, I appreciate that. And I have got
seven more minutes, and I have got one quick question.
Mr. WERFEL. Please.
Ms. VAN DUYNE. The IRS agents that you--the IRS people that
are helping on customer service, do you have 100 percent of
your workforce back to work 5 days a week?
Mr. WERFEL. Everyone is working.
Ms. VAN DUYNE. Do you have your workforce back to work in
the office five days a week?
Mr. WERFEL. Well, not everyone is in the office, but
everyone is working. And I will--one thing about----
Ms. VAN DUYNE. What percentage of your workforce is back in
the office?
Mr. WERFEL. I don't have the exact figure on that. I can
get it for you.
Ms. VAN DUYNE. Okay. I yield back. Thank you.
Chairman SMITH. The gentleman from Iowa is recognized.
Mr. FEENSTRA. Thank you, Chairman Smith and Ranking Member
Neal.
Thank you, Commissioner Werfel, for being here. You have
got a very tough job.
Mr. WERFEL. Yes.
Mr. FEENSTRA. Very challenging. Obviously, we talked a lot
about the $80 billion of funding in the IRS--I want to just
note that, but that is not where I am going--$4.8 billion was
for business modernization systems, about 6 percent of the
funding.
The key here is that in February the GAO has published a
report outlining the status of IRS, its IT modernization, which
is concerning to me. A third of the applications and nearly a
fourth of the software is considered legacy that is way behind.
The assets range from 25 to 64 years of age, including software
that needs up to 15 versions, or--15 versions of new versions.
It also noted that the individual master file has been in
place since 1970, and barely has anybody that understands the
code or, you know, I mean, it is stressed.
So the--my question is, you know, it seems like we are
cutting down a tree with a dull axe. And could we be more
efficient? Well, let me back up. Is the $4.8 billion--will that
satisfy creating a whole new system that is required or needed?
Mr. WERFEL. I would need to line up those funds. But to
make sure that I am answering your question, we have a larger
fund of money available in the Inflation Reduction Act to
improve our overall operations support, which includes
technology. But the bottom line----
Mr. FEENSTRA. Yes, but----
Mr. WERFEL [continuing]. Is we do need to update our core
systems.
Mr. FEENSTRA. That is what I am asking you. So is the $4.8
billion enough to update your core systems? That is simply what
I am asking.
Mr. WERFEL. I would have to get back to you in terms of
making sure that I am lining up that $4.8 billion. But there is
multiple core systems. There is the individual master file----
Mr. FEENSTRA. Yes.
Mr. WERFEL [continuing]. There is the business master file,
there is our enterprise----
Mr. FEENSTRA. So----
Mr. WERFEL [continuing]. Case management system.
Mr. FEENSTRA. So, Commissioner Werfel, do you see this as a
concern, when you have such an archaic system?
I mean, I can't even imagine a banking industry or any
business running on such a system. I mean, some of this is DOS,
I think.
Mr. WERFEL. Yes.
Mr. FEENSTRA. I mean, this is crazy. I mean, think about
that, running on DOS.
Mr. WERFEL. Yes.
Mr. FEENSTRA. I don't mean to stump you, but----
Mr. WERFEL. No, no, no. I mean, you are preaching to the
choir here in terms of the need to update these systems. They
are on old COBOL-based language. Those need to be updated.
Mr. FEENSTRA. Right, right. I would love to see the
colleges and universities that still teach COBOL. [Laughter.]
But--so this is my concern, right? So what has happened in
the last year under the Administration, right, is we are going
down the path of OECD with pillar 2, we have GILTI right now
that has 16 data points that is being collected. If you go down
pillar 2, you are going to probably have 200 data points that
needs to be collected. We are also going with a 15 percent
minimum tax, book tax. I mean, these are very complex things.
And yet would it be fair to say that we don't have a system to
handle all this?
Mr. WERFEL. Like, right now, the systems are functioning.
They need to function into the future better. And so what I
mean by that is not enough processes are automated, we have
updates we need to do to our data security requirements for
these systems, and we can't hire as agilely as we could because
people don't know COBOL.
Mr. FEENSTRA. Thank you. You just answered my question.
That is exactly right.
Here is my thing. Wouldn't you want to dramatically update
your system first before you are updating all your workforce?
I mean, right now, like I said, you have to hire somebody
that knows COBOL or DOS, heaven forbid. You know, you hear what
I am saying? I mean----
Mr. WERFEL. I do.
Mr. FEENSTRA [continuing]. How does--can you square this
up?
Mr. WERFEL. Yes, I mean, I think we have to do multiple
things to serve taxpayers in different ways.
Like, I--if I stop and just focus on the technology, then I
am not putting the people in the taxpayer assistance centers,
and people come to shuttered taxpayer assistance centers.
Mr. FEENSTRA. Right.
Mr. WERFEL. If I don't hire people to process the Employee
Retention Credit, then people are waiting longer. So we have to
have the ability to manage multiple priorities simultaneously.
Mr. FEENSTRA. Yes, you got--sure. There is a lot of things,
but this is what happens with such a complex tax code.
And, I mean, I want everybody to know out there that, I
mean, DOS, COBOL, this is--when a system is probably 25 years
or 60--up to 25 to 45 years of age, the security concerns alone
scare me, just a great fear of what--you know, what data is--
you are collecting, and what could be out in the public if we
don't get this right.
So I humbly ask, we got to make sure that we get a system
that is updated, that can handle these complex income returns,
because it is critical to our service.
Mr. WERFEL. It is actually a mission critical system, and
it needs to be updated.
Mr. FEENSTRA. Thank you.
Thanks, and I yield back.
Chairman SMITH. Mr. Evans is recognized.
Mr. EVANS. Thank you, Mr. Chairman.
I would like to congratulate you first for the job and all
the things that you are trying to do. I have two questions.
First question is Congresswoman Moore and I recently
introduced legislation to expand poverty-busting earned income
tax. I am going to follow with this question: What is the IRS
doing to help low-income families who might not file the tax
returns navigate through the tax system and access to benefits
they have earned? That is one question.
Second question, how does the agency plan to deploy
Inflation Reduction Act funds to improve customer service and
provide timely response to our constituents?
Mr. WERFEL. Yes. So I appreciate both questions.
On the first one, we absolutely have an opportunity to up
our game in terms of how we engage the public around what
benefits and what credits they are eligible for. We try to go
out using press releases, social media to remind people of what
they might be eligible for. We say--we tell them they may be
eligible for a credit they should file.
We have started to take other steps. We started to--we have
EITC Awareness Day that we participate in. We have taxpayer
experience days at our walk-in centers on Saturdays, where we
try to work with local organizers to make sure people
understand what might be available to them, and then how they
should go about working with volunteers like VITA, which is one
of our big partners, and helping them apply and fill out their
taxes with the credit in mind.
That is a healthy amount of activity, but it is not nearly
enough, because I think there is not enough people eligible for
these credits that are actually applying for these credits, and
I think there is an opportunity to up that.
In terms of the operating plan and--you know, there is a
bunch of different things that we are trying to do to improve
service: speed, accessibility. So it is one thing--we have to
staff the--all of these centers correctly. The calls--if you
want to walk in, we should be staffed. If you want to call us,
there should be someone waiting for that call.
If you want to go on irs.gov, we should be able to be
modern and, for example, have an individual account for you, so
that you can immediately go on, not get on the phone with
someone to see the status of your account, but actually log in
with your username and password and see, here is the status of
my account. Oh, look, there is a flag. Let me go see if I can
resolve it, and resolving it in real time and, essentially, end
the era of letters back and forth and correspondence with the
IRS in paper.
All of that will be made possible by the Inflation
Reduction Act. If we don't have those funds, then we are just
reverting back to just answering phones. And so that is why I
keep emphasizing it is important to fund our modernization
because, at the end of the day, who benefits? Taxpayers.
Chairman SMITH. Thank you, Mr. Evans. We greatly appreciate
it.
Mr. Carey.
Mr. CAREY. Commissioner, thank you for being with us. I
know it has been a long day. I am going to go through a few
things I have.
I am a huge believer in affordable housing----
Mr. WERFEL. Yes.
Mr. CAREY [continuing]. But as well as conversion, as it
relates to many of the office buildings that we have in our
inner cities, which I represent. But what I am going to focus
on is historical tax credits. So--I don't think anybody else
has done that yet, so I just want to get your mind set as I
read through some of the examples that I have back in Ohio.
In January of 2021, 9 of my colleagues in Congress,
including Ohio Senators Brown and Portman, sent a letter to the
former commissioner about the IRS denying historic preservation
easement tax deductions because an Ohio building owner
installed an ADA-compliant wheelchair ramp on a historic
structure. This building owner, who is a taxpayer, had worked
with the National Park Service to design the ramp in a way that
would protect the historic character of the building. But the
IRS said the law does not provide exemptions for local fire and
safety laws for Americans with Disabilities Act when
considering whether an easement compliance with this structure
is--the statutory requirement. The IRS subsequently reversed
course, and the IRS Office of Chief Counsel released a
memorandum in March of 2021 that clarified that the
installation of an ADA accessibility ramp was permitted. So
they did that.
However, I was recently made aware that the IRS has again
begun to deny easement deductions on historic buildings, this
time over the hypothetical scenario that a building owner might
some time in the future install a wheelchair ramp. The IRS
enforcement officer recently denied a historic preservation
easement, saying--and I quote--``In the event the use changed
to a retirement home for the elderly, it would be likely
required many modifications such as wheelchair ramps,
additional elevators, removal or expansion of current street-
level doors and windows in order to comply with the codes of a
retirement community. A change in use would likely require
changes on all sides of the building, and would be inconsistent
with the use of the building.''
Now, we all believe in historic preservation. I don't think
there is any one of us--so my question is, do you agree with
the IRS Office of Chief Counsel memo stating that the ADA
accessibility ramp should be permitted?
Mr. WERFEL. I haven't read that. But yes, if there is an
IRS counsel legitimate opinion out there, then I would support
it.
Mr. CAREY. So should taxpayers, historic building owners,
something that is very important in the State of Ohio but
across the country, and historic preservation community be
forced to choose between complying with the ADA or using
congressionally authorized preservation programs like the
historic preservation easement?
Mr. WERFEL. As you have presented it, Congressman, it seems
like there is an--it is very incongruent and not clear what the
IRS and--is asking of. And in relation to the Americans with
Disabilities Act enhancements, without commenting on any
specific taxpayer, I want to get back to you with some clarity
on the overarching policy.
Mr. CAREY. And this is an issue that I feel very strongly
about, because, as we have seen in many of our cities, the
ability to go in and take over some of these structures--many
of them were eyesores for many, many years.
So I would appreciate if your team would get back to me,
because it is something that I feel very strongly about. And
and I appreciate your time.
And Mr. Chairman, I yield back.
Mr. WERFEL. Thank you.
Chairman SMITH. I thank the gentleman. Mr. Schneider is
recognized.
Mr. SCHNEIDER. Thank you, Mr. Chairman.
And Commissioner Werfel, thank you for your patience today.
It has been a long day. Save the best for the last. But also,
congratulations on your recent appointment. Right, and you are
the last, that is the best. But I am excited about working
together.
I want to echo what my colleague from Illinois, Mr. Davis,
said, and praise the great people in the Chicago office for
their efforts. And I commend the incredible progress the IRS
has made in general, improving customer service over the past
year, largely thanks to the funding we secured through the
Inflation Reduction Act.
A couple of things. I know COBOL, one.
Mr. WERFEL. You do?
Mr. SCHNEIDER. I have done programing on tax software, but
in 1984. But I also worked at Sears catalog, overseeing their
call center. I know how hard it is.
Mr. WERFEL. We are hiring at the IRS, so----
Mr. SCHNEIDER. Yes. So we will talk afterwards.
But my team can attest to the quicker turnaround times and
the better service at the IRS now available because of these
funds. And I have heard the same from our constituents, as well
as my friends in the accounting profession.
I do want to mention some outstanding constituent cases. My
office has been working with people who have not yet received
their 2021 or 2022 tax refunds, either due to identity theft,
or delays in the processing and verification of their identity,
or a backlog of paper tax returns. We have been in touch with
companies waiting for their Employee Retention Tax Credit.
Mr. WERFEL. Yes.
Mr. SCHNEIDER. It is compounded by the financial strain
experienced due to the pandemic. It has been a burden on these
companies. So I will forward everything to your office, but can
I ask for your help and commitment----
Mr. WERFEL. Yes.
Mr. SCHNEIDER [continuing]. To work together?
Mr. WERFEL. Absolutely.
Mr. SCHNEIDER. Thank you very, very much. I appreciate
that.
Let me go back to the tax gap----
Mr. WERFEL. Okay.
Mr. SCHNEIDER [continuing]. For a second. Earlier you said
it is about $500 billion a year.
Mr. WERFEL. That is correct.
Mr. SCHNEIDER. Is that correct, $5 trillion over the next
decade?
Mr. WERFEL. That is correct.
Mr. SCHNEIDER. What are the, roughly, the projected
receipts coming in for fiscal year 2023?
Mr. WERFEL. I think it is around $4.6 trillion.
Mr. SCHNEIDER. So we are talking about a year's worth of
receipts over the course of the year that then puts the burden
on the law-abiding.
Very roughly--I won't hold you to this, but what percent of
that tax cap do you think is in those 300-and-some-odd-thousand
tax returns? Well, those people are filing returns, but that
top one percent who----
Mr. WERFEL. Here is the challenge, Congressman, is that we
have to evolve the way we measure the tax gap because of how
quickly that landscape is changing for high-income filers. We
can't measure effectively what we can't see. And the reality
is, because we have been under-resourced and haven't had the
capacity to assess these complicated returns, that is why you
have previous commissioners, you know, kind of opining on what
that number might be.
Mr. SCHNEIDER. But it is a big number.
Mr. WERFEL. It is--I believe it is going to be a very big
number, and I think CBO agrees with that, and that is why they
see the--a lot of deficit savings in our plan to go and better
assess----
Mr. SCHNEIDER. Okay, and I just want to be sensitive to
time.
Mr. WERFEL [continuing].--Dollars.
Mr. SCHNEIDER. You said you have roughly 2,600 people to
review the returns of this high----
Mr. WERFEL. Three hundred and ninety thousand of our
highest-wealth filers.
Mr. SCHNEIDER. Yes. How big do you think the army of tax
experts, the tax accountants, tax lawyers helping that 390,000
filers might be? Bigger than 2,600?
Mr. WERFEL. I don't know. It is big, and it is their right
to do it, but I also feel like, for middle and low-income
Americans to feel confident that the tax system is fair, we
have to be ready for those types of reviews and to be able to
assess them effectively.
Mr. SCHNEIDER. And let me be clear. They should have that
advice.
Mr. WERFEL. Absolutely.
Mr. SCHNEIDER. They should be doing everything they can to
not pay one penny more of the taxes they owe, but----
Mr. WERFEL. It is their fiduciary responsibility to do so.
Mr. SCHNEIDER. Right.
Mr. WERFEL. I understand that.
Mr. SCHNEIDER. There is a symmetry that--we should be able
to make sure that they are paying every penny they owe.
Mr. WERFEL. Exactly.
Mr. SCHNEIDER. Thank you. Let me go back now to the service
levels beyond the anecdotes we are hearing from our case
workers and my constituents.
The IRS filing season 2023 report card notes that the IRS
has exceeded even its own metrics for new hiring of personnel
in customer service roles. This includes nearly 6,000 customer
service reps, onboarding nearly 3,000 employees in submission
process being hired.
I ask unanimous consent that the IRS filing season 2023
report card be submitted for the record.
Chairman SMITH. Without objection.
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Mr. SCHNEIDER. Thank you.
Commissioner, my colleague earlier showed some charts
asserting that the IRS priorities when it came to customer
service were upside down. It made it look like the agency
didn't care about taxpayer service. But that is not really
true. Even amid the anemic funding over the past years, working
with systems on COBOL, and DOS, and maybe even Fortran, didn't
the IRS always do its best to shift resources to try to handle
all customer service needs?
Mr. WERFEL. I mean, it is absolutely a priority, customer
service. I mean, if we are not answering the phones, if we are
not helping taxpayers meet their obligations, then the system
isn't working effectively. And the reality is we have to be
able to do both effectively, and I think we can. And we have,
historically.
I think the reality is because of 15 years of underfunding,
and then the impacts of the pandemic, we found ourselves in a
really unhealthy state. And Americans suffered for it by not
being able to get help from the IRS in meeting their tax
obligation.
Both are a priority, enforcement and service. But if you
are a small business, middle or low-income, what the Inflation
Reduction Act means for you is better service. It doesn't mean
a new increase in our enforcement capacity. That is only for
our highest-wealth taxpayers.
Mr. SCHNEIDER. Thank you.
I yield back.
Chairman SMITH. Mr. Panetta is recognized.
Mr. PANETTA. Thank you, Mr. Chairman.
Commissioner Werfel, thanks for being here today, and thank
you for your testimony. You have done a really good job. First
of all, it gives me confidence in your ability to lead the IRS,
but I hope it gives your employees confidence, as well.
So I appreciate that, especially at this time when you are
taking on this role following these historic investments that
we have made in the IRS. And with that investment, as you
mentioned previously, you are able to hire 5,000 more
employees, allowing the IRS to answer 2.4 million more calls
than last year. That is great.
But I think, as you know, it is just not good enough. But I
have confidence that you are going to get to good. I really
do----
Mr. WERFEL. I am not satisfied.
Mr. PANETTA. I get it, good, and I appreciate that. Thank
you for saying that.
I think you are going to because, what, you got some new
call-back options, and you got new scanning technology, as
well, which I think will help. In addition to these customer
improvements, you have added funding for the staff to reduce
our tax gap and our deficits in the long run, as well.
Now, despite the majority's bill yesterday, I firmly
believe that we have to protect this investment and ensure that
we continue funding the IRS to serve customers and administer
the tax code fairly, and also so that we can go after those tax
cheats, those people who are intentionally evading the taxes
that they owe. So once again, thank you for your service.
Now, this is great. I got a question here that, being the
last in line on this dais, it is kind of nice that no one has
talked about this. But I am also proud of this question because
this is a question from a constituent that was brought to my
attention based on the good work of my staffer, Mark Dennin,
who basically talked about these ERTC mills.
You know, in my area, in the central coast of California,
you listen to the radio and you are just bombarded by these
advertisements for small businesses to apply for Employer
Retention Tax Credits.
Mr. WERFEL. Yes.
Mr. PANETTA. Yet these advertisements, they are directly
targeting businesses who did not experience any pandemic
losses, and are most likely ineligible for the ERTC. Now, I am
concerned that some of these companies may be taking an overly
generous view of the ERTC, taking fees or cuts of refunds, but
disappearing if small businesses get audited if they are not in
fact eligible.
So obviously, you put out a warning--and I am grateful for
that--to small businesses in October about these ERTC mills,
but it is clear more needs to be done. So I got two questions.
What else is the IRS planning to do to protect small
businesses from these ERTC mills?
And are there actions that we in Congress can do to shut
these things down?
Mr. WERFEL. Yes. So thank you for the question. And I
mentioned earlier one of the challenges we have with ERTC
processing, and one of the--there is a couple of different
reasons why there is a backlog. One of them is that we do get a
lot of fraudulent or ineligible applications in that clog the
system. And so we are working to try to figure out how to
ferret those out as effectively as we can.
I think the first thing is, as you said, we have to be
communicative. Like, we have our--we have what we call our
dirty dozen scams. We go out, we try to explain to as many
people that will hear us and engage with us, ``These are the
things to be on the lookout for that this might not end well
for you, because the person doesn't have your best interest, or
this is not an advisable way of getting tax advice. So we can
do more of that.
There are steps often that Congress can do to give us
authorities to regulate. I would love to work with you on what
those steps may be. Ultimately, it would be up to the Secretary
of the Treasury in terms of whether we would support them. But
I can certainly answer questions around the types of tools that
would help us.
Mr. PANETTA. Good. I look forward to working with you.
Mr. WERFEL. Thank you.
Mr. PANETTA. It has been a long day for you, for us, and
that is why I am going to yield back my minute. Thank you.
Mr. WERFEL. Great.
Mr. PANETTA. Mr. Chairman.
Chairman SMITH. I thank the gentleman.
Thank you, Mr. Werfel. We appreciate you appearing before
our committee today. We appreciate that you were here for over
four hours. We definitely appreciate your time and your
comments.
Please be advised that members have two weeks to submit
written questions to be answered later in writing. Those
questions and your answers will be made part of the formal
hearing record.
With that, the committee stands adjourned.
[Whereupon, at 5:03 p.m., the committee was adjourned.]
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