Last week, a confirmation hearing was held for Daniel Werfel, who is the next nominee for commissioner of the Internal Revenue Service. Although both sides of the aisle had a plethora of questions for Werfel, it does appear that both Democrats and Republicans will likely agree on approving the nominee.
New Commitments
A chunk of the confirmation hearing involved Werfel making many different commitments. One of these commitments is to improve the overall service of the IRS. To start, the service will be improved by implementing scanning technology that is “Long overdue”, according to Werfel.
The new IRS nominee also addressed a recent study that shows a higher tax audit rate for African American Taxpayers due to the Earned Income Tax Credit. The same study showed higher audit rates for low-income taxpayers as well. To address this, Werfel said he will report back to congress in 60 days with a new computer algorithm that could be the solution to this problem.
Daniel Werfel Statement
“I start with thinking through what are the elements of effective tax administration, and certain equity is one of them,” said Werfel. “To achieve equity, I think we should look at the audit footprint and see balance. I’m not at the IRS, but if there is an imbalance, that imbalance is concerning, especially if there’s a disparate impact on poor people. If poor people are more likely to be audited than the wealthy, that is something that I think potentially degrades public trust and needs to be addressed within the tax system.”
When asked about the higher audit rates of black taxpayers, Werfel said, “We have to have an understanding of whether our approaches or activities are having disparate impacts on any population. . “It’s particularly alarming if it’s having a disparate impact on racial minorities. Right now, not being at the IRS, I don’t yet have a good sense of what the issue is.”
Scanning Technology
Congress also asked Werfel about his plans to implement scanning technology to ultimately automate the processing of paper tax returns.
“I think one of the things that motivate me about wanting to be the IRS commissioner is a picture that I think was in The Washington Post months ago,” he recalled. “I think it was a cafeteria in Austin with a table full of paper returns. And I thought to myself when I saw that picture, technologies are emerging that can potentially rapidly scan them and do so in a way that creates machine-readable content that would allow that backlog to be reduced quickly. Since I’m not there, Mr. Chairman, I’m not sure where the IRS is on that. But I think it’s a huge priority to enhance scanning so that we can move out of paper.”
Wrap Up
Daniel Werfel was the previous acting commissioner for one year under the Obama administration in 2013. He also served for the Office of Management and Budget, where he was the controller there for several years before leaving the government and working for Boston Consulting Group.
It is well known that the Internal Revenue Service needs a leader that can pioneer change. With the experience that Werfel brings to the table, we can hope his skillset will bring the solutions that are much needed by the IRS.