Early last year, Danny Werfel had recently gotten a new job and $80 billion added to his budget.
He's commissioner of the Internal Revenue Service. The IRS was shrinking even as the U.S. population was growing and the new money was part of a rebuilding project.
Just in time for tax season, Werfel spoke to All Things Considered host Ari Shapiro about how the project's going, what options people will have to file their returns, and how the IRS is going after wealthy people who owe back taxes.
This interview has been lightly edited for length and clarity.
Ari Shapiro: Some of the money you got has gone to hiring people who are going to help taxpayers filing. Can you measure the difference that that has made so far?
Danny Werfel: We can. With the new money under the Inflation Reduction Act, we've hired more than 5,000 new customer service representatives. That means that we are now at a point where our call centers are fully staffed, our walk-in centers around the country are fully staffed. These same people that are both answering the phones and meeting with taxpayers, they also process paper returns that come in. So we're able to manage our paper inventory so much better.
Shapiro: It's interesting that you mention paper inventory because I've been shocked to see images of millions of pieces of paper that the IRS is using to manage filings, even in this day and age. And the technology that there is in some cases dates back to the 1960s and '70s. Have there been upgrades to that as well?
Werfel: Absolutely. Look, I've seen the same pictures. It's a call to action for us. When we see paper returns filling hallways and cafeterias as it was prior to the Inflation Reduction Act, we knew we had to end that. And there's two ways to do that. First, hiring enough people to review all of it. If it's coming in in paper, it still needs to be reviewed. And second, scanning all of those paper forms before they leave our mailroom. And that's why, with our new funding, we've been buying modern scanners, more efficient scanners to make sure that our hallways and our cafeterias don't have paper in them anymore.
Shapiro: Commissioner Werfel, let me ask about a new project that the IRS is piloting this year, which is a free electronic in-house direct filing system for tax returns, which would allow taxpayers to avoid paying a company like TurboTax or H&R Block for their tax prep software. They would just do it right through the IRS. This is now a limited trial in 12 states, only for people with simple tax situations. What do you hope for the program's future, and can you say how the trial is going so far?
Werfel: So this, Ari, is an option. And one of the things we've heard from taxpayers, from Congress through the Inflation Reduction Act, through the administration, is a desire for an additional option, one in which you could file for free with the IRS directly.
Shapiro: The big tax preparation companies don't like this at all. An Intuit spokesperson called it a solution in search of a problem. What do you say to that criticism?
Werfel: I say we are on the side of taxpayers and want to build that menu of options to give taxpayers as many choices as possible that work for them. So I'm always thinking about it through the lens of how do we best serve taxpayers. And different taxpayers come at it from different angles. Some, for example, don't have the resources to be able to hire an accountant. Some want to file on paper. We don't encourage it, but we're ready for it. Some want to file for free with a commercial software solution. They should do that. But what we're hearing is some want to file for free directly with us electronically. And we want to meet taxpayers where they are.
Shapiro: Let me ask about enforcement, because the point of investing money in the IRS is for the government to collect what it's owed. So is the budget that you've received actually returning more money in increased tax enforcement, especially on very wealthy people, which you've promised would be the focus of enforcement?
Werfel: Yeah, absolutely. Look, the Inflation Reduction Act has a very simple agenda. If you're middle or low income, you will see better service. If you're high wealth with a tax issue, you will see more scrutiny. So we are absolutely ramping up efforts to figure out where we have wealthy filers — these are millionaires and billionaires, but also large corporations and complex partnerships — who are increasingly shielding their income and not paying what they owe. We're already seeing some very powerful early results in our efforts that demonstrate that this investment in improving our enforcement on high wealth is paying off.
Shapiro: What does "powerful early results" mean? Like, can you get specific?
Werfel: I absolutely can. So we, for example, created a high-risk list of 1,600 millionaires and billionaires who owe back taxes. And we've put in a laser-focused effort to collect that money. And the new resources under the Inflation Reduction Act help us to do that. And we're working our way through that list. In just several months, we've collected nearly $200 million in back taxes, and we're not even through the list yet. So that demonstrates to you how much money is out there that is owed to the IRS. People want to know that the IRS is doing its part so that everyone is paying what they owe regardless of their income level.
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