Some Senate Republicans are worried that the IRS is placing an “overwhelmingly disproportionate” focus on enforcement in its latest budget requests and operating plan.
“Of the $80 billion provided to the IRS in the partisan IRA, more than half, or about $46 billion, is directed toward enforcement activities, while only 4 percent of the $80 billion … was earmarked for improving taxpayer services,” Sen. John Thune (R-S.D.) said.
Noting that Biden was requesting an additional $29 billion for enforcement purposes, Thune asked Werfel whether some of the “overwhelmingly disproportionate” enforcement funding wouldn’t be more effectively spent on customer service.
“I think that we actually need funds to do both,” Werfel replied. “And I worry that if we were to redirect funds out of one bucket into another, we would lose important ground that we need to cover in one particular area.”
While acknowledging that the funding appeared to be skewed, Werfel advised that the IRS currently lacks sufficient staff to handle the complex returns of high-income earners.
“The reality is that, today, we have 2,600 staff that work on high-income, high-wealth taxpayers, individuals, corporations, and complex partnerships,” he said. “There are more than 390,000 of those.
“And a lot of these filings are thousands of pages—tens of thousands of pages—and some come in hundreds of thousands of pages,” he added. “So, every dollar we move off of our efforts to build the capacity to unpack those returns means, I think, we’re leaving money on the table for the American people in terms of our ability to close the gap … of what’s paid versus what’s owed.”
Operational Changes
Earlier this month, the IRS released its strategic operating plan (pdf) through fiscal year 2031, outlining significant changes to agency operations, including a greater emphasis on modernization and customer service and a shift in focus toward auditing those with complex tax filings and “high-dollar compliance issues.”“Republican budget cuts created a double standard for tax enforcement that put too much of the audit burden on working families and ushered in a golden age for wealthy tax cheats,” Wyden contended. “Democrats passed additional funding for the IRS to fix the double standard, crack down on wealthy tax cheats, and improve customer service for everybody else.”
Weaponization Concerns
While Werfel stressed throughout the hearing that taxpayers earning less than $400,000 per year would not see an increase in audit rates, Republicans, like Sen. Ron Johnson (R-Wis.), voiced the concern that increases in enforcement funding might be used to target political opponents of the Biden administration.“How are you going to keep partisanship out of your enforcement efforts?” Johnson asked. “How do you make sure that enforcement is apolitical?”
Citing examples such as the IRS’s targeting of Tea Party organizations under the Obama administration and the lack of enforcement action against Hunter Biden over his potential tax evasion, Johnson also noted the recent experience of journalist Matt Taibbi, whose home was visited by an IRS agent while he was testifying before the House Judiciary Committee.
“This is very troubling, to have the IRS take that type of action,” he said. “Again, the chances are so infinitesimally small that an IRS agent would show up at a journalist’s door the day that journalist is testifying before a House committee.”
Werfel, who said he could not comment on Taibbi’s individual case, advised that the IRS typically only visits taxpayers’ homes when there is a problem with their tax return and the agency has been unable to reach them through other means.
Johnson, however, said he would be requesting all documents related to the incident.
