Senators hear on IRS commissioner nominee's plans to ensure America's wealthiest earners comply with tax laws

The IRS nominee for Joe Biden answered a wide variety of questions during a Senate Finance Committee hearing this week. He highlighted key issues from both the Republican and Democratic sides.

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During a panel discussion on funding, enforcement, transparency and other issues, former budget official Daniel Werfel answered questions.  

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Former IRS commissioner Mark Everson, currently vice chairman of Alliantgroup, says he's quite impressed with Danny Werfel and recognizes what he'll face.

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Although there are still questions left to be answered, Everson anticipates a full Senate vote and confirmation "shortly."

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From the hearing, we can draw a few key conclusions.

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We will continue to scrutinize the funding of the IRS for $80 billion

Inflation Reduction Act funding of $80 billion over the next decade comes at a critical time for the agency, which is on the verge of going bankrupt.  

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A month after the funding was rescinded, House Republicans voted to repeal it. The move was often seen as a political messaging act that would not pass the Senate or gain the White House's support.

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With the House in Republican hands and the election approaching, it is not impossible for there to be a fairly charged environment while Werfel is being heard," Everson stated.

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On Friday, Treasury Secretary Janet Yellen has requested the agency deliver the $80 billion funding plan.

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Under $400,000, the audit rate won't increase

In response to Yellen's directive, Werfel has pledged not to increase audit rates for small businesses and households earning under $400,000.

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During his opening remarks, Werfel stated that if confirmed, the IRS's audit and compliance priorities will focus on making sure America's highest earners comply with tax laws.

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A key issue is the fairness of tax enforcement

As part of his opening statement, Wyden focused on the goal of the Inflation Reduction Act, which would provide resources for fair tax enforcement, aiming to go after large corporations that cheat on taxes. 

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After years of budget cuts, wealthy Americans are seeing fewer audits. Recent research from Syracuse University's Transactional Records Access Clearinghouse has found that millionaires are 1.1% more likely to be audited by the IRS during fiscal 2022. 

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Lower-income taxpayers who claim the earned income tax credit have seen their audit rates decline more slowly, and Black Americans are roughly three to five times more likely to face audits than other taxpayers. 

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According to Werfel, auditing poor people more frequently degrades public trust and must be addressed within the tax system if it takes place more often than auditing the wealthy.

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Dickinson Wright tax attorney Angelique Neal said Werfel "seems committed" to addressing the audit disparities so that taxpayers are treated equally.

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As a former chief counsel for the IRS, Neal previously worked as a senior trial attorney for the IRS. He said trust is at the core of administration, especially for agencies tasked with collecting most of the revenue.

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