Former IRS head says you need tech, not brute force, to bring tax cheats to heel
Daniel Werfel appears likely to become America’s next IRS commissioner in the coming months, but then the hard part starts, says a former commissioner who led the agency from 1997 to 2002.
Charles O. Rossotti joined Yahoo Finance Live recently and said the first thing on Werfel's plate is improving customer service, but notes that progress is already evident on that front with the Internal Revenue Service keeping up better with the 2023 tax season. He said getting more people into the agency to answer phones will take resources “but it's not that hard to understand where you're trying to go.”
Task number two - using a recent $80 billion infusion as part of last year’s Inflation Reduction Act to chase down tax cheats - is the more complicated. That’s “going to take a little bit longer” said Rossotti.
“It's not a matter of blanket auditing everybody, it's just the opposite,” he added. “It's got to be very selective, and you need technology to do that, as well as trained people.”
‘The IRS is never going to have even as many agents as it had when I was commissioner’
The recently approved infusion is designed to help increase enforcement and refresh the agency’s outdated technology.
But the funding has also led to accusations in right-wing circles that the money will lead to 87,000 new IRS agents going after average Americans - in spite of Biden administration promises that enforcement would only increase on those makes over $400,000 a year. “I’m skeptical,” said Sen. Mike Crapo (R-ID), the influential ranking member of the Senate Finance Committee. During the nomination hearing last week he asked whether enough guardrails were in place to ensure the money is spent responsibly.
Overall, Werfel walked away with positive reviews after last week's low key hearing that even featured some of Sen. Crapo's GOP colleagues pledging to support his nomination.
The issue that will confront him once he is in office is the so-called “tax gap” — the difference between what taxes are owed to the government and what is actually paid — which the IRS has estimated is hundreds of billions of dollars a year. (Sen.Crapo said he would look to Werfel to “fill the gap if you are confirmed.”)
The $80 billion is aimed at taking a bite out of the gap with a focus on wealthy taxpayers and pay for itself and then bring in an additional $100 billion in increased tax revenue over the coming decade.
The challenge for Werfel is how to realize that return; Rossotti said he needs to use a proverbial scalpel instead of a hammer.
“It's not an across the board approach [to] hire thousands of agents and just go out and audit everybody,” Rossotti said, “that makes no sense whatsoever, and the IRS has never done that.”
He added: “Even with the additional money that's been provided, the IRS is never going to have even as many agents as it had when I was commissioner 25 years ago, believe it or not.”
Ben Werschkul is Washington correspondent for Yahoo Finance.
Click here for politics news related to business and money
Read the latest financial and business news from Yahoo Finance
Download the Yahoo Finance app for Apple or Android
Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, LinkedIn, and YouTube
