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IRS Commissioner Warns of Increased Federal Deficit if Budget Cut Further

S.J. Steinhardt
Published Date:
Feb 16, 2024

Cutting the budget of the IRS would result in an increase in the federal deficit, Commissioner Daniel Werfel told a congressional committee on Feb. 15, The New York Times reported.

“For every $100 million taken from the IRS, the deficit grows by $600 million over 10 years,” Werfel said, speaking at a hearing before the U.S. House of Representatives’ Committee on Ways and Means, citing Treasury Department data.

Werfel was referring to Republican lawmakers’ desire to reduce the agency’s budget beyond the $20 billion reduction made from its original $80 billion allocation under the Inflation Reduction Act last May as part of the agreement to raise the debt ceiling.

The increased funding under the Inflation Reduction Act was intended to improve service by hiring customer service representatives and upgrading existing technology. The money was also to be used for hiring more agents and increasing audits, particularly of complex corporate partnerships and wealthy individuals.

The IRS has now collected $482 million from 1,600 millionaires who have not paid their tax debts, it reported in January, crediting the increased funding from the legislation for its better enforcement efforts.

In his prepared testimony, Werfel listed what he called “transformational goals for this filing season.” They included committing to an 85 percent level of service on the main toll-free phone line during the filing season; committing to an average call wait time of five minutes or less on the agency’s main taxpayer helpline; giving taxpayers the ability to opt for a call back from the IRS if their wait time on the phone is more than 15 minutes; and providing more in-person help at Taxpayer Assistance Centers.

Last week, a Treasury Department analysis showed that if the $80 billion allocated to the IRS by the IRA were fully appropriated, it would yield a significant return on investment, allowing the agency to recover nearly $561 billion in overdue and unpaid taxes over the next 10 years, higher than earlier estimates. This investment in the IRS could add up to at least five to seven dollars in additional tax collected for every dollar spent, The Washington Post reported.

Under questioning from the committee members, Werfel defended the IRS’s decision to delay implementation of the new $600 Form 1099-K reporting threshold for third-party settlement organizations. The IRS revised and updated its 1099-K guidance last week.

“I believe the IRS commissioner has the authority to implement laws in a manner that ensures taxpayer rights,” he said.

Werfel was also questioned about armed IRS agents and their stocks of weapons and ammunition. Only 1 percent of the new agents will work in jobs that require carrying guns, the Treasury Department has said, according to the Times.

“Most IRS employees are customer service reps,” said Werfel. “They’re armed only with phone headsets, and all of our accountants are armed only with calculators.”

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