IRS commissioner sees digital salvation for ‘iconically unpopular’ agency

Commissioner Daniel Werfel vowed to usher the IRS into a new digital nirvana, saying that his vision is for Americans to be able to do all of their communication with the tax agency online without ever needing to call or send a letter.

He said that kind of automation will mean more accurate taxes, faster refunds and more people to help taxpayers get the credits they deserve, and cheats get the comeuppance they’re due.

But Mr. Werfel said it all depends on Congress leaving intact the $60 billion in money his agency is due under Democrats’ 2022 budget-climate law, which he said will pay for a cleanse of the IRS’ technology, its hiring and its expertise.

“The IRS is a good investment,” he said. “Not only are we going to ease stress and anxiety and create an easier way for you to do your taxes, get things done in less time, get your issues resolved, protect you from scams, but the work we do to recover taxes from those that are noncompliant, it generally runs about a 6-to-1 ratio of $6 for every $1 invested.”

He was speaking Monday at American University’s Kogod School of Business, where he made a pitch for students to consider careers at the IRS, and also urged them to use the agency’s new Direct File tool to complete their tax returns.

He acknowledged the IRS has had a public relations problem in recent years — and he even played a video of Homer Simpson booing the IRS to drive home the point.

“We are iconically unpopular across America,” he said, though he said some of that’s to be expected and he compared the agency to being an NFL referee who gets booed by fans on all sides.

“Without the referee there’s no game. It’s chaos,” he said. “At the end of the Super Bowl, no one’s planning a parade for the referees and that’s OK. The referees can go home at night knowing that they’re a critical part of what made this special event happen.”

Still, he cast some of the agency’s recent struggles as a perfect storm of growing demands, less money and a once-in-a-lifetime pandemic.

He said employees tried to manage it all, “but eventually the bottom fell out.”

“Coming out of the pandemic, we were so buried in paper backlogs, understaffed, and hobbled by stagnant technology, we literally could no longer answer the phones or keep our walk-in centers open,” he said.

The 2022 law changed all of that, he said, giving the agency the resources for the IRS makeover he’s now trying to lead.

His goal is an IRS where a taxpayer can — if they want — conduct every interaction digitally, ranging from filing and paying to getting assistance to resolving disputes.

He said that should also cut down on scams, because taxpayers who get a communication will know they can go to the IRS webpage and see if it’s actually the agency itself trying to reach them.

Republicans have complained about the cash infusion and some of Mr. Werfel’s moves, such as rolling out the Direct File program, which is a free IRS option to compete with the pay services such as TurboTax. The Republicans say the IRS could become oppressive to average taxpayers unless it’s reined in.

GOP lawmakers have already managed to slice about $20 billion out of the $80 billion that the 2022 law envisioned for the IRS.

President Biden, who signed those cuts into law as part of deals with the GOP-led House, is pushing back, proposing in his new budget to restore the money.

Mr. Werfel, for his part, says fears of an oppressive IRS are unfounded.

Earlier this year he announced that for those making less than $400,000, their audit rates will remain what they were in 2018, when they were at historic lows.

He said the real targets for enforcement are the wealthy who aren’t paying. That includes 125,000 people with incomes more than $400,000 who haven’t filed taxes since 2017, he said.

He said the IRS just hasn’t had the bandwidth to go after them until it got the cash infusion. That means it now has money to have employees do the kind of follow-up to see cases through to the end and collect payments due.