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Senate Confirms Werfel as IRS Commissioner

S.J. Steinhardt
Published Date:
Mar 9, 2023

The U.S. Senate has confirmed Daniel Werfel as the next IRS commissioner, The Washington Post and several other news outlets reported. 

The Senate confirmed Werfel by a vote of 54-42, with six Republicans voting in favor of confirmation and one Democrat, Sen. Joe Manchin III (D-W.Va.), voting against.

Werfel served as acting IRS commissioner in 2013, and most recently led Boston Consulting Group’s global public sector practice, the Post reported. Before serving at the IRS, he worked for nearly 16 years at the White House’s Office of Management and Budget, where he served as deputy controller and later federal controller, CNN reported.

At his confirmation hearing, Werfel was questioned extensively about how the IRS plans to spend the $80 billion allocated to it under the Inflation Reduction Act. And, the Post reported, Werfel will still have to deal with controversy over the new funding, as critics have distorted how the new law would affect the IRS and taxes for the middle class. Roughly $46 billion was allocated for enforcing tax laws and the rest for taxpayer services, operations support and updated business systems.

Sen. Ron Wyden (D-Ore.), chair of the Senate Finance Committee, spoke highly of Werfel's ability to receive support from some Republicans, the Post reported. He said, “For Mr. Werfel to get bipartisan support to lead the IRS at a time when a lot of Republicans would happily mothball the entire agency is a testament to his fairness, his ability to work with both sides and his undeniable qualification for this role."

According to CNN,  Werfel said he would follow through on Treasury Secretary Janet Yellen’s previous directive that the IRS will not use the funding from the new legislation to increase audit rates, relative to historic levels, for households making less than $400,000 a year. “If I am fortunate enough to be confirmed, the audit and compliance priorities will be focused on enhancing the IRS’ capabilities to ensure that America’s highest earners comply with applicable tax laws,” Werfel said at the his confirmation hearing.

“If poor people are more likely to be audited than the wealthy, that is something I think potentially degrades public trust and needs to be addressed within the tax system,” he said.

The New York Times reported that Werfel said at this confirmation hearing that he believed that the IRS needed to become a modern and high-performing agency after years of neglect. “I have been concerned about gaps in capacity that have impeded the IRS's ability to meet its critical mission,” he said. “The result is that hardworking, honest taxpayers who need assistance in meeting their tax obligations are not getting the service they need.”

Werfel's confirmation came a day after the IRS announced that it had begun a successful expansion of digital scanning. Doug O'Donnell, who will soon relinquish his position as acting IRS commissioner, called this development “another milestone for the IRS as we work to transform the agency. We anticipate expanding scanning of more paper returns in the near future, saving time and creating efficiencies for taxpayers, the business community as well as tax professionals and the IRS."  

This move is the latest in the agency’s efforts to improve its service and technological and enforcement capabilities afforded to it by the Inflation Reduction Act. The IRS has spent 847.6 million of its $80 billion allocation so far, The Washington Post reported, roughly half of it on improvements to taxpayer services, according to the U.S. Treasury Department.

The IRS said that it has already scanned more than 120,000 paper Forms 940 since the start of 2023, a 20-fold increase compared to all of 2022. The agency will expand this effort to include scanning of Forms 1040 as well as Forms 941.

“The vast majority of tax returns are now filed electronically. But millions of forms are still filed by paper, which means a time-consuming process of manually handling and transcribing of these tax returns,” the IRS said in its announcement. “By providing a capability to scan and electronically process paper returns, the IRS will be able to shorten the processing time for taxpayers who file paper returns.”

The agency’s continued reliance on paper processing drew the ire of National Taxpayer Advocate Erin M. Collins in her 2022 Annual Report to Congress. She noted that IRS employees spent 2.4 million hours manually inputting taxpayer data, with a 22 percent error rate.

IRS Chief Information Officer Nancy Sieger called the recent expansion of digital scanning “another positive step in the future technology direction for the IRS that includes improving service to taxpayers."

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