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FinanceIRS

IRS boss says efforts to crack down on high-wealth tax cheats are starting to bite, even as Republicans try to gut service’s budget

By
Fatima Hussein
Fatima Hussein
and
The Associated Press
The Associated Press
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By
Fatima Hussein
Fatima Hussein
and
The Associated Press
The Associated Press
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March 20, 2024, 9:00 AM ET
Danny Werfel
IRS chief Danny Werfel zeroes in on wealthy tax cheats.Al Drago—Bloomberg/Getty Images

IRS Commissioner Danny Werfel has a message for high-wealth tax cheats who are wrongly deducting private jet travel and otherwise shorting the government on their taxes: Pay your fair share so “others aren’t shouldering the burden of funding our government.”

He also has a thought for ordinary taxpayers putting off the inevitable with less than a month left in tax-filing season: “Get it done.” (And double-check your work.)

Werfel, who will hit the one-year mark at the helm of the IRS in April, said in a wide-ranging interview with The Associated Press that the agency will expand its pursuit of high-wealth tax dodgers with new initiatives in the coming months and is using tools like artificial intelligence to ferret out abuses and taking the fight to sophisticated scammers.

That doesn’t mean the IRS has undergone a complete image makeover. There’s still plenty of criticism to go around, including from Republican lawmakers who accuse the agency of heavy-handed overreach.

“We’re kind of like the NFL referee — when we get the call right or wrong, we get booed, and we’re OK with that,” Werfel said.

But efforts to crack down on high-wealth tax cheats are starting to bite, he says, and that should mean more money coming in to fund the government.

“It’s having an impact,” Werfel said. Large corporate filers and others are “taking notice that the IRS is ramping up our scrutiny, and I think that will inevitably result in more compliance” — and revenue.

Werfel is promising taxpayers better service this year as he works to repair the agency’s image as an outdated and maligned tax collector. But it’s a tall order for a federal agency that even he has referred to as “iconically unpopular” with the American public.

“We have some myth-busting to do,” Werfel said, referring to alarmist and inaccurate Republican claims that the agency plans to hire 87,000 armed agents ready to harass middle-income earners.

”We are not,” he said. “We are hiring phone assisters armed only with phone headsets. We’re hiring accountants armed only with calculators.”

Werfel took over an agency that was understaffed and drowning in unprocessed tax returns after decades of underfunding.

Shortly before he arrived, the IRS received an $80 billion infusion under the Democrats’ Inflation Reduction Act passed in 2022. But Republicans have been chipping away at that money.

Last year’s debt ceiling and budget cuts deal between Republicans and the White House resulted in $1.4 billion rescinded from the agency and a separate agreement to take $20 billion from the IRS over the next two years and divert those funds to other programs. And this past January, a debt ceiling deal meant to avoid a government shutdown frontloaded the full $20 billion cut to this year.

Werfel has been in a race against time to show how improvements to the agency can benefit taxpayers. He said agency priorities include customer service improvements like answering the phones faster and making sure the rich “pay their fair share.”

The agency also is piloting a program for people to file their taxes directly to the agency without the help — or cost — of private commercial software.

Werfel said more than 50,000 people in 12 states have started using the new Direct File system to complete their taxes. The free online tool is available for people with very simple W-2s and who claim a standard deduction for their federal income taxes.

The Direct File rollout has drawn some consternation from commercial software firms like Intuit, as well as Republicans who argue there are free filing programs that already exist.

But so far, Werfel says, “people are telling us that they found it to be quick and easy, and everyone certainly loves that it’s free. And their No. 1 question is: Are we going to have this again next year?”

Werfel sounds optimistic, but he’s not ready to give an answer yet on the program’s future.

Overall, Werfel says, the agency has added “more tools to IRS.gov in the last two years than in the previous 20” to make tax-filing easier. Wait times for answering phone calls are at two minutes or less.

Werfel sat for an interview in an auditorium at the IRS headquarters in Washington, where he said sustained funding is critical to make up for past shortcomings. He said IRS workers are “passionate about helping taxpayers. And when we don’t have the funding to provide them the tools or the training, they’re upset because they can’t do enough to help the taxpayers.”

Major new initiatives in recent months have included an aggressive pursuit of high-wealth earners who don’t pay their full tax obligations, such as people who improperly deduct personal flights on corporate jets and those who just don’t file at all.

The private jets, in particular, are a place where “many corporations are sloppy with their bookkeeping,” he said. Werfel said the agency’s crackdown there “sets the tone for the American people” that everyone has to pay what’s due.

Werfel said the agency also has put new focus on “being accessible, answering the phones, keeping our walking centers open and updating our website so that people can do things more with the IRS without ever leaving their smartphone or their tablet.”

Even so, he allows, the agency still isn’t technologically where it needs to be.

There is still an operating pay phone located in the hallway at the IRS building.

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