Lawmakers grill Biden’s IRS chief nominee over new army of agents, backlogs and tip reporting

President Joe Biden’s nominee to lead the Internal Revenue Service took a battery of tough questions from lawmakers on the Senate Finance Committee Wednesday as the agency he seeks to lead faces a series of controversies.

One of the biggest questions facing Biden’s nominee, Daniel Werfel, a former acting IRS commissioner, was how he plans to handle the $80 billion included in the Inflation Reduction Act. Biden made clear that money was meant to supercharge the agency’s auditing efforts by hiring about 87,000 agents who the president claims would more than pay for the investment with new revenue.Werfel promised lawmakers the audits would target wealthier.

”The audit and compliance priorities will be focused on enhancing the IRS’ capabilities to ensure America’s highest earners comply with applicable tax laws,” Werfel said.

Critics have argued there are not enough wealthy Americans to audit to justify tens of billions of dollars for new auditors. The IRS recently seemed to contradict the spirit of Werfel’s comments by announcing a program to crack down on tip reporting from waiters and waitresses.

“Stop the presses. No need to raise the debt limit,” Rep. Thomas Massie, R-Ky, wrote on Twitter. “Biden is going after those billionaire waitresses’ tips,” he added, apparently referencing Biden's call for a billionaires tax in the State of the Union.

But these aren’t the only issues for Werfel to tackle if he secures the position, which he is expected to do given the Democrats' slim majority.

The IRS fell behind on tax returns in recent years in large part because it was saddled with distributing COVID-relief checks to millions of Americans. Then-Commissioner Charles Rettig raised concerns about the impact of this extra burden multiple times during his tenure.

Now, the IRS still has millions of suspended and backlogged returns to work through.

“Massive backlogs have left desperate families and small businesses waiting on much needed returns as they fight skyrocketing inflation,” U.S. Sen. John Barrasso, R-Wyo., said during the hearing.

The tax-collecting agency fell into the most significant controversy in years after news broke that the Biden administration was planning to have the IRS monitor bank transactions over $600. Bipartisan outrage followed, pausing but not altogether ending the plan.

The IRS announced in January it was delaying the need to report $600 transactions via services like Venmo for one year.

Other lingering issues are also plaguing the embattled agency.

Experts and lawmakers have also continued to push for answers after a Treasury Inspector General for Tax Administration report from 2021 showed that the IRS destroyed roughly 30 million taxpayer documents, raising eyebrows.

So far, the agency has given little explanation for the destroyed files, which Americans may need for future audits.

“What specific documents were in the pile? Were any attempts made to contact affected Americans?” Americans for Tax Reform said in a statement. “Many Americans submitted forms only to be told by the IRS that they never did so. How will you compensate them for their lost time?”

Barrasso said all of these issues has diminished the credibility of the tax-collecting agency.

“Restoring the credibility of the agency is going to be a steep mountain to climb. When we visited I said this would be critical as part of your job,” Barrasso added. “The policies enacted by President Biden’s reckless tax and spending bill are really not going to be helpful in trying to regain the credibility of the American people for the agency.”