IRS chief details plan to combat ‘unprecedented and unrelenting political headwind’

The Internal Revenue Service is continuing to make its case for sustained elevated funding in the face of political pushback, with its agency head saying he can win over detractors by showing the progress it is effecting. 

IRS is growing its workforce and capacity after receiving an unprecedented surge in funding, Commissioner Danny Werfel told members of the Ways and Means Committee on Thursday, but ongoing success will require sustained—and additional—spending allocations.

As the agency awaits its fiscal 2024 appropriation, Werfel warned his agency will not be able to realize its modernization vision made possible by the now-$60 billion infusion from the Inflation Reduction Act without also receiving modest bumps in its annual funding. If Congress cuts IRS funding, he said, the agency will borrow from the hiring and modernization pool just to “keep the lights on.” 

Facing that risk, the commissioner is laying out his strategy to protect his agency from the politicized attacks he identified as inevitable. 

At a Partnership for Public Service event on Wednesday co-hosted by the Senior Executives Association, Werfel said he considered a significant part of his job to be “chief communications officer.” He said he understood the significant opposition he will continue to face throughout his tenure as commissioner, but will confront that head-on by “showing our work.”

By regularly providing updates on the advances his agency is making with its cash infusion—from answering the phones faster and with more regularity to shrinking the “tax gap” by collecting from delinquent millionaires and billionaires—Werfel said he can make it more difficult for Congress to ever turn off the spending spigot. 

“Ultimately, I think it's going to be hard for Congress and others to go back to a time where the IRS was underfunded, where the lines are around the block, where we aren't answering the phone,” Werfel said, “but we have to demonstrate this new standard.”

Before taking the job, Werfel said, he was told by the White House he should prepare for “unprecedented and unrelenting political headwinds.” House Republicans have voted to rescind all the enforcement funds included in the IRA and while that measure has not advanced into law, Congress and the White House have agreed in a fiscal 2024 budget deal to claw back $20 billion from the $80 billion the tax agency was originally slated to receive. Rep. Bill Pascrell, D-N.J., called the revocation of boosted IRS funding the “white whale” for congressional Republicans. 

“Like the shark in Jaws, they want another bite,” Pascrell said. 

Werfel expects IRS to continue receiving negative attention, likening his agency to referees at a football game. Whether the refs get the call right or wrong—or even if they can prove they got it right with instant replay, which the commissioner suggested was analogous to his agency’s improved IT—the fans are going to boo. 

At the end of this past weekend’s Super Bowl, Werfel said at the event on Wednesday, “No one was dumping Gatorade on the refs. No one was planning a parade for the refs. But the refs did their job, and there is no game without the refs. There’s chaos.” 

Referees require training, proper technology and adequate operational capacity, he added, as it will “lead to a better outcome in the game.” 

“We don’t mind people booing. Boo away,” Werfel said. “That's fine, but don't eliminate the ability of the referee to do their job effectively.” 

On Thursday, Werfel sought to put his ideas into practice, telling the committee of boosted call center answer rates, the dozens of newly opened taxpayer walk-in centers and the effectiveness of community events. He also told lawmakers his agency must focus on wealthy and corporate tax evaders because that is where capacity had dropped off the most precipitously. 

“That’s where we have a growing problem of tax evasion and we need to address it,” Werfel said, adding the agency has added thousands of employees to boost customer service efforts and eliminate backlogs in tax return backlogs. 

IRS has said it lost more than half of its high-income/high-wealth audit workforce and Werfel stressed on Thursday his agency was focused specifically on bringing on the expertise necessary to address that shortfall.

As the IRS looks to rebuild its rolls, however, the Government Accountability Office said this week the agency is failing to detail its current and future needs, where skill gaps exist and its strategy for filling them. It has broad hiring plans and types of roles for which it will hire, but did not specify which workers would go toward high-income/high-wealth audits.

GAO called on IRS to more specifically detail its hiring needs and plans in that area, which the agency agreed to do and noted it was boosting its internal human resources capacity to assist in those efforts. 

Werfel said on Wednesday more constituencies are advocating for his agency, giving more voice than just his own to the importance of its work. Climate and health care groups have recognized IRS’ power to implement tax credits and incentives and want to see the agency empowered. The more groups that see IRS’ impact, Werfel said, the less political its mission will become. 

“If you underfund the IRS and it’s only politically motivated, not substantively motivated, it's going to create a lot of headaches [and] not just for us at the IRS,” Werfel said. 

He stressed the agency will not accomplish its ambitious goals unless its 91,000 employees buy in. 

“If we are not engaging the workforce in a way that we're positively trending, we're not being successful,” Werfel said. After Thursday's hearing, he added he would rightsize the IRS workforce to the agency's needs and suggested any reductions to its fiscal 24 funding would only impact staffing goals in the "out years." 

Republicans on Thursday suggested Werfel was being too lenient with his workforce, with several members of the Ways and Means panel saying the agency is allowing too many employees to work remotely. The commissioner defended the practice, saying he was in compliance with governmentwide requirements set by the White House and those whose jobs require in-person work are reporting on site.