IRS Chief Seeks To Reassure Taxpayers About Increased Enforcement

New funding will help the Internal Revenue Service crack down on rich tax cheats while greatly improving service to middle-class households, IRS Commissioner Danny Werfel said Thursday.

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

Instead, new money would help the IRS “move toward a world-class customer service operation,” Werfel told reporters, stressing that small business owners, workers with regular wage income and retirees have nothing to fear from increased tax enforcement targeting higher earners.

“People who get W-2s or Social Security payments or have a small business should not be worried about some new wave of IRS audits — we’re taking that off the table,” Werfel said. “Our focus will be on other high-dollar areas for quite some time, because there’s a lot of work to do in those more complex areas of tax law that will take years to accomplish.”

The agency’s $80 billion funding increase — a 69% boost to its previously projected budget — was a key part of the Inflation Reduction Act, a partisan bill Democrats passed last year using a special budget process that allowed them to sidestep Republican objections. The Congressional Budget Office said the money would help the IRS collect $200 billion more in revenue, meaning the investment would pay for itself and also bring down the cost of the legislation.

Republicans have seized on a 2021 Treasury Department report that estimated the extra funding would cover nearly 87,000 new IRS employees, suggesting increased IRS audits are part of a Joe Biden plot to persecute supporters of former president Donald Trump.

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

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

Biden has said he wouldn’t support tax increases on households earning less than $400,000, and his administration has said the increased IRS funding wouldn’t increase audits on such households, either — a pledge Werfel repeated on Thursday.

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

But officialswouldn’t say just how many people the IRS intended to hire overall, suggesting the figure could change based on improvements to customer service, such as new online tools that might help people clear up problems with their returns more quickly than before.

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

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

When the IRS suspects a tax filer didn’t pay what they owe, such as by underreporting their income, the agency takes a closer look, usually by sending an audit letter. The IRS sends a disproportionate amount of those letters to low-income filers claiming tax credits, often requesting they substantiate their earnings.

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

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

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