Including wow. The world has changed. Today a fast reliable Internet Connection is something that one can live without so wow is there for our customers with speed, reliability, value and choice. Now more than ever it all starts with great internet. Wow supports cspan as a Public Service, along with these other Television Providers, giving you a front row seat to democracy. Coming up, irs commissioner danny warfel testifies on the 2024 tax Filing Season and president bidens 2425 budget request for the industry. During the hearing commissioner warfel fields question from the Senate Finance committee on modernization efforts and improving Taxpayer Services. T. The hearing is two hours and 20. Minutes. Chair Wyden Finance Committee will come to order finance committee will come to order. Today the Committee Meets to discuss the irs budget and tax Filing Season, which closed yesterday. I want to thank commissioner werfel for being here at a very busy time for everybody at the agency. There are lots of issues to discuss and one that certainly is important to the American People is direct file. Anyone who denies that the direct file pilot was a huge success, my guess is just living in another universe. Its open to a fairly small percentage of taxpayers but the reviews it got from its initial users were overwhelmingly positive. It seems like a whole lot of people were very stunned that a federal agency, particularly one as frequently vilified as the irs, is able to build a helpful website who works. The taxpayers who used direct file this year collectively saved millions in fees that they wouldve paid to one of the tax software giants. The website was userfriendly. It was quick and easy to use. It didnt hassle users without charges for add on services they did need. Direct file showed that the irs could build a good tool that people like because it saves americans time and money. No surprise then the people who oppose it are absolute be furious and once again are doing everything they can to stop it from growing. The detractors said it didnt attract enough users but tens of thousands of new users came in over the last week. The iris hit its goal of 100,000 taxpayers using the system. There is no doubt in my mind that this will be more popular every year. Others have said the cost estimates were too vague but the fact is theres always challenges with Pilot Programs. Now that the irs has tested the system instead of baseline, costs are going to be clear Going Forward. Finally there are some who said the whole project was unnecessary. Theyve said that taxpayers have the option of using free filesystems through the big tax Prep Companies. They may have had a valid argument years ago because, before the tax prep giants got caught hiding free file options from eligible taxpayers, they were conning people into forking over hundreds of dollars they didnt need to spend. Congress simply cannot go around trusting the big tax Prep Companies to do the right thing. For some of them, their version of free file is the freedom for americans to pay them even more. Bottom line, direct file is long overdue and its the kind of Public Service the federal government ought to be providing to americans whenever it can. I understand the irs and Treasury Department are now evaluating how the Pilot Program went over the last two months. Personally i believe that this program should be expanded. Im looking forward to the day when oregonians come up to me in one of our 51 fred Meyer Grocery stores, i have been to every single one of them, and they had a chicken in each one, to tell me how thrilled they were to save time and money with direct file. On the topic of vastly improved federal programs ill turn now to the irs thats continued success in improving Customer Service during the Filing Season. The rs answered 1 million more calls with live assistance than it did last years filing system. It got call waiting times down to three minutes. It saved taxpayers 1. 4 million hours of time and in previous years they wouldve spent basically listening to all the music and just being on hold. It smashed its goals for in person service. Despite the success, apparently there have been some complaints from the other side of the aisle, the administration is asking for money to sustain this progress. Im not sure whats behind that. Maybe they want to go back to the battle of days when taxpayer sat on hold for hours and couldnt get timely refunds. Doesnt make any sense to me. For the second Filing Season in a row the irs is proving it can provide a topnotch level of Taxpayer Service when Congress Gives it the resources. Just a few words to close on enforcement. The irs has announced some major enforcement efforts in the last few months. This includes cracking down on 125,000 cases where wealthy individuals, many of them bring in more than 1 million a year, never even filed a tax return. Let me repeat this. This is not people who figure out how to gain the system. They are sufficiently contemptuous of the rules that they never even filed a tax return. There is also a new effort to root out the abuse of tax breaks for corporate jets, highflying executives who takes tax writeoffs for personal travel, for example, and in my view the iris ought to look at similar abuses of corporate owned yachts. When it comes to yachts the abuses seem to me to be more blatant. The odds produce big writeoffs but i find it hard to believe that anybody is yawning to a board meeting. Congress cuts the funding or the Inflation Reduction Act funding expires and congress doesnt add more, we know exactly what will happen. Wealthy tax cheats will have an easier time getting away with breaking the law and that means misery for typical americans who are just trying to do their civic duty when tax Filing Season comes around every spring. Thats an outcome that the vast majority of the American People oppose. Lots to discuss this morning, colleagues. I want to thank commissioner werfel for joining us. I look forward to the question and answer. Thank you mr. Chairman and welcome again commissioner werfel. I agree and appreciate the work you are doing and the progress that you have made. There are going to be issues that i raised today, however. The irs needs to be accountable for the choices it makes. Become more efficient. Rigorously plan. Provide full transparency and timely solicit real feedback from informed stakeholders Like Congress before acting. Despite claims that the 80 billion in new funding would transform the irs into a 21st century agency, the president s budget request indicates otherwise. While modest progress has been made, there are other areas where the agency continues to miss the mark. For example, last year i raised concerns with the irs Strategic Operating plan including its vagueness and missing line item cost projections. A year later we are still missing important details yet this years budget asks for even more unprecedented irs funding, more than 104 billion. This underscores that the initial windfall was not a cure. The irs has not transformed and the president believes the only way that that vision can be achieved is to spend more. While i support the transformed irs, this approach is not a solution. For 80 billion, one would expect the transformational Customer Service changes and fully modern frontend and backend i. T. Instead it seems that taxpayers have paid for mail to actually be opened and a decline in the phone wait times. Meanwhile, several billion items of taxpayer correspondence remain unanswered and half a million i. D. Theft cases remain unresolved. On average, years later. I. T. Modernization funding is also scheduled to run out years before the irs finishes updating its systems. I assume that this is due in part to the bulk of the ira funding being directed to enforcement. I dont disagree with the enforcement needs that my colleague the chairman has identified. An emblematic example of the just spend more, no questions asked approach, though, is the direct file program. Despite their already being multiple free filing programs that i say that again, multiple free filing programs offered by the irs, the agency embarked on a redundant government run tax preparation project complete with all attended inefficiencies and conflicts of interest. Just last week the Government Accountability office reported a highlight of many ways the supposed Pilot Program has not followed best practices, including key planning, budgeting, and accountability failures. The report noted that while gao could not determine how much the program has and will cost to operate, the irs having not provided sufficient information to do this, the current tab far exceeds 100 million, just through fiscal year 2024. For an option that might only serve 100,000 taxpayers this year. In contrast, the federal government spends less than 5 million a year to add 2 to 3 million taxpayers served in one of its free income tax preparation programs. Were the irs to use this years direct file spending to pay thirdparty providers to prepare and file returns instead, literally hundreds of times the number of taxpayers could file for free. The irs spending hundreds of millions of its finite funding to simply test the utility of doing something that can already be done more efficiently with Better Outcomes and without the very real conflicts while simultaneously pleading for more funding calls for more oversight. Direct file is not my only concern with the irss current path. Other serious concerns include the continued irs use of biased data and post factor metrics to plan and justify its actions. Indiscriminate irs enforcement campaigns that pressure honest taxpayers and waste government resources. And the irss continued and highly disproportionate focus on increasing enforcement over improving Taxpayer Services. Commissioner werfel, while i appreciate the positive steps the irs has taken during your tenure, so much remains undone at the irs that any victory lap is unwarranted. I look forward to your testimony, commissioner werfel, and i thank you, mr. Chairman. All right. Our witness today is kissman or commissioner daniel i werfel, commissioner of the iris, previously a matting partner at the boston consulting group. Before joining them he was nominated to be the controller of the office of management and budget, a post he served in for four years before becoming acting commissioner of the irs in 2013. He began his career at the office of management and budget in 1997 as a policy analyst in the office of information and Regulatory Affairs. Commissioner, and. Please go ahead. Chairman wyden, Ranking Member crapo and members of the committee, thank you for the opportunity to testify on the Filing Season and the irs budget. Im pleased to report that the 2024 tax season opened on schedule on january 29 and we seen a historic Filing Season unfold since then. Through april 6 the irs received more than 101. 8 million individual income tax returns and issued nearly 66. 8 million refunds from more than 201. 1 billion dollars. Inflation reduction act funding has enabled the irs to have one of its best Filing Seasons ever in terms of Customer Service. Taxpayers are seeing a difference. Weve answered over 1 million more taxpayer calls than we did a year ago and 3 million more calls than we did in 2022. Wait times and level of service on our main phone lines have improved. Weve dramatically expanded service on our walk insights, increasing hours answering more taxpayers, and new and expanded tools on irs. Gov are seen heavy use. Employees worked hard to deliver. We committed to an 85 level of phone service on our main phone line during Filing Season as of early april. We exceeded that goal. Is a huge improvement from 2022 when only 15 of callers could connect and receive support from a live assistant. We committed to an average wait time of five minutes or less on the agencys main taxpayer helpline. We exceeded that goal with our mainline phones being answered in about three minutes. These are some of the examples of how we are seeing historic improvements and the agency is rebounding from some very tough years during the past decade. At the same time, the Inflation Reduction Act funding has enabled us to begin making critical inroads in addressing tax evasion amongst the most complex and largest filers. This is a sharp turnaround from the past decade when we were hindered by a lack of resources. Our compliance includes focusing on tax x delinquencies and nonfiling from highend individuals, areas we are particularly concerned about. We are also responsibly leveraging Artificial Intelligence and hiring subject Matter Experts to find tax evasion amongst the largest and most complex partnerships in the corporation. I want to be sure clear, despite improvements this tax season, the irs still has more work to do on many fronts. This includes closing remaining gaps on phone service, expanding digital options for all taxpayers, further strengthening Data Security and supporting vulnerable populations by protecting them from scams and increasing access to the earned income tax credit and other refundable credits. Our ongoing success hinges on a sustained investment to make sure we have the right size workforce with the right training and tools as well as modern Technology Infrastructure with increasingly modern webenabled tools for taxpayers. These are needed to ensure the irs continues our transformation work to serve the nation today and in the future. Helping us in these efforts is the administrations fiscal year 2025 Budget Proposal. It gives us flexibility and increases transfer authority to all available resources to be used efficiently and effectively. It will also help sustain a new irs baseline of resources and avoid immediate funding costs that would dramatically degrade our ability in many different areas including the Service Improvement that taxpayers saw this Filing Season. The 2025 funding is necessary to build on our success this Filing Season and continue our work to make further phone Service Improvements and provide Digital Tools to help taxpayers. For the irs to be able to do all of these things and add discretionary funding and complementary longterm funding are both essential. Finally, i want to publicly thank taxpayers for taking the time to file and pay their taxes this Filing Season. This is a critical component to support our great nation. Please note that all of us at the irs deeply appreciate and respect the time and care taxpayers take to do this vital civic duty and irs employees remain committed to helping taxpayers in any way that we can. Chairman wyden, Ranking Members of the committee, that includes my statement. I would be happy to take your questions. Commissioner, thank you. We appreciate your being here. You have experience in both the public and the private sector and it seems to me that launching Something Like direct file is a little bit like starting a startup company. Tell us, from a business perspective, how has this project launch on . It has gone very well. I think of it as a product launch. We are putting a new product on the street, if you will, and our customers, taxpayers, will a let us know if the product is working effectively and if they think they would like to use the product in the future. We started, like any private Sector Company would. We had the idea for the product and then we put it on the street with volunteers. We tested it. From january 29 to march 8, the direct file product had volunteered taxpayers who agreed to submit. We got very positive reviews but we are also able to make realtime fixes to the product based on taxpayer experience. On march 8, we were ready to go and that is when we made it publicly available for millions of taxpayers in 19 states that were eligible this year. The feedback has been great. D people are telling us that it is easy to use. It is simple. Of course, they like the price tag that is free. You mentioned, mr. Chairman, in the final days of the Filing Season, we saw extraordinary increase in the pace of taxpayers filing with direct l file and it all went very smoothly. Lets talk about the massive fraud that was seen now in the Employee Retention tax credit program. As we all know, this was a real help to a lot of people during the pandemic but it was a blower told me not to long ago that trust 95 fraudulent, choking the irs system, delaying ballad refunds. The bipartisan tax bill that i introduced with chairman smith over in the house would cut off the claim after january 31, 2024, and gave the agency new tools. T