Biden IRS nominee vows no increased audits for those earning under $400K
Zachary Halaschak
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Danny Werfel, President Joe Biden’s nominee to lead the IRS, said during his confirmation hearing that he will not use boosted funding to increase audits of those earning under $400,000.
Werfel testified on Wednesday before the Senate Finance Committee and faced questions about the controversial Internal Revenue Service funding provision within the Democrat-backed Inflation Reduction Act. The legislation dedicated $80 billion in funding to the IRS, a big chunk of which goes toward enforcement — something Republicans have said could lead to excessive audits.
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Werfel told lawmakers that taxpayers “rightfully expect a more modern and high-performing IRS” and noted that Treasury Secretary Janet Yellen has already publicly committed to stopping an influx of audits for small businesses and those earning below $400,000 annually.
Werfel, who previously served as acting IRS commissioner in 2013, said he is “committed to meeting” that directive from Yellen.
“Therefore, if I am fortunate enough to be confirmed, the audit and compliance priorities will be focused on enhancing the IRS’s capabilities to ensure that America’s highest earners comply with applicable tax laws,” Werfel said. “Also front and center will be efforts to modernize and dramatically improve taxpayer service.”
Republicans have pointed to a Joint Committee on Taxation analysis from 2021 about revenue from underreported income that indicated that those below $400,000 could be on the hook for higher tax bills.
The analysis found that of the revenue projected to be raised from underreported income, 40% to 57% would come from taxpayers earning $50,000 or less, 78% to 90% would come from taxpayers making less than $200,000 annually, and just 4% to 9% would come from those earning more than $500,000 per year.
During the process of passing the IRS funding, Sen. Mike Crapo (R-ID) offered an amendment (which failed along partisan lines) that would have mandated that none of the new IRS funding would be used to audit those with taxable incomes below $400,000.
Last August, Yellen sent a letter to the IRS directing it not to increase audits for taxpayers earning below that threshold.
“Specifically, I direct that any additional resources — including any new personnel or auditors that are hired — shall not be used to increase the share of small business or households below the $400,000 threshold that are audited relative to historical levels,” she said.
The $80 billion in funding has emerged as a flashpoint for congressional Republicans. The IRS is set to prepare a plan for how it will spend the funds, set to be delivered to Yellen sometime this month, although it hasn’t been made public.
Crapo, ranking member of the Finance Committee, pushed Werfel to ensure transparency on the matter.
“I agree that the plan that is put together should allow both you, this committee, and the public to connect the dollars from the Inflation Reduction Act to the various activities and investments,” Werfel responded. “I really want to earn this committee’s trust. … I think you and I are sharing the same values, senator, let’s be public about the plans, and let’s make sure that we’re building trust on the way forward.”
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“Thank you, and I’ll take that as a commitment that you will publicly release the plan,” Crapo said.
Given the Democratic majority in the Senate, Werfel is expected to be confirmed as the next IRS commissioner. Republicans, who now control the House, have vowed to conduct aggressive oversight over the tax agency.