WRITTEN TESTIMONY OFDANIEL WERFELCOMMISSIONERINTERNAL REVENUE SERVICEBEFORE THE
SENATE FINANCE COMMITTEE
ON THE FILING SEASON AND THE IRS BUDGETAPRIL 16, 2024

INTRODUCTION
Chairman Wyden, Ranking Member Crapo and members of the Committee,
thank you for the opportunity to discuss the 2024 filing season and the IRS
budget.
After a year as IRS Commissioner, it remains an honor for me to lead this great
institution. My respect for the agency’s role and admiration for its workforce
continue to grow. I’m pleased to report the 2024 tax season opened on scheduleon January 29, and we’ve seen a historic filing season unfolding since then.
Through March 30, the IRS received more than 90.3 million individual income tax
returns and issued more than 60.8 million refunds for more than $185.6 billion.
Going into the final days of tax season, the Inflation Reduction Act (IRA) funding
has enabled the IRS to have one of its best filing seasons ever in terms ofcustomer service. Wait times and level of service on our main phone lines have
improved. We’ve dramatically expanded service in our walk-in sites, increasing
hours and serving more taxpayers. And new and expanded tools on IRS.gov areseeing heavy use. I will have more detail on these later in this testimony.
IRA funding has also enabled us to begin making critical inroads in addressing
the tax gap and tax evasion among the most complex and largest filers, which
represents a sharp turnaround from the past decade when our work washindered by lack of resources. Our compliance work includes focusing on
delinquency and non-filing among high-income individuals, as well as leveraging
artificial intelligence (AI) and hiring subject matter experts to find tax evasion
among our largest and most complex partnerships and corporations.
But while we have seen a historically strong tax season so far, I want to be clear
the IRS has much more work to do on many fronts: closing remaining gaps onphone service; expanding digital options for all taxpayers; further strengthening
data security; and increasing support for vulnerable populations by such actions
as increasing access to the Earned Income Tax Credit (EITC) and otherrefundable credits as well as protecting and supporting scam victims.

1Our ongoing success hinges on sustained investments to make sure that wehave the right size workforce, with the right training and tools as well as amodern technology infrastructure, with increasingly modern web-enabled tools
for taxpayers. These are needed to ensure the IRS is ready to implement the tax
system of today and the future.
Along with delivering the filing season and other day-to-day activities, we have atremendous amount of transformation work taking place at the IRS. Thesechanges, which are made possible by IRA funding, touch every part of ouroperations, from taxpayer service to tax enforcement to information technology
and data security.
We have a unique opportunity – a once-in-a-generation chance – to envision andrealize a future of tax administration that meets the evolving needs of taxpayers
and the nation. Using IRA funding, there are three central themes I’ve been
reminding taxpayers about this filing season:• Ensuring taxpayers can easily contact the IRS – whether in person, on thephone or online – and get help navigating complex tax laws and accessing
the credits for which they are eligible;• Identifying the growing number of taxpayers with complex returns –including certain wealthy individuals, large corporations and complex
partnerships – who are shielding income to evade their tax responsibility
and collecting from them what is owed; and• Addressing the growing risk of tax scams and schemes by protecting
honest taxpayers from them and rooting out the nefarious actors thatperpetrate them.
The IRS has many other goals and objectives supporting this effort as part of ourStrategic Operating Plan. This includes making dramatic improvements to ourInformation Technology (IT) infrastructure and design as well as deliveringmodern technology platforms that center around data and applications. These
efforts will support all our transformation work.
Achieving this ambitious transformation agenda requires us to rebuild areas in
the IRS that have suffered from more than a decade of underfunding thatpreceded the IRA. A critical change we are making involves providing our IRS
workforce with the right tools – including training, technology and smarter
processes – so we are ready now, and in the future, to meet our core mission of
supporting taxpayers and the nation.
Aiding us in our efforts, the President’s Fiscal Year (FY) 2025 budget proposal
would restore and maintain the full IRA investment in the IRS through 2034,
avoiding funding cliffs that would dramatically degrade our ability in manydifferent areas, including taxpayer services beginning in 2026. Sustained fundingis necessary for us to build on the successes of the 2024 filing season andcontinue our work to:

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Make further phone service improvements, answering calls and otherinquiries from taxpayers,
Provide additional digital tools for taxpayers so the IRS can keep pacewith the rest of the digital economy,
Continue efforts to hold complex filers accountable for tax evasion,
Make critical upgrades to our data security environment so that we remain
one step ahead of evolving cyberattacks and other threats,
Disrupt tax scams by bad actors and provide assistance to taxpayers
victimized by such scams, andDeploy and sustain new technologies made necessary by an expanding
tax system.

For these improvements to continue and accelerate, a consistent, reliable
funding stream remains critical for the agency – both in regard to our annual
appropriations and maintaining the IRA funding.
The decision about whether to adequately fund the agency comes down to afundamental choice: Whether or not we will have an IRS that…
• Taxpayers can easily interact with to meet their tax responsibilities orresolve issues if they arise,• Ensures fairness in the tax system through its enforcement activities,• Quickly and effectively addresses tax scams that exploit vulnerable
populations, and• Has updated IT infrastructure and modern technology platforms capableof supporting our transformation work.
For the IRS to be able to do all these things, adequate stable funding is essential.
UPDATE ON THE FILING SEASON AND TRANSFORMATION EFFORTS
The IRS remains focused on improving service to taxpayers, offering them more
in-person and online resources as part of our effort to deliver another successful
tax season this year. Taxpayers and tax professionals saw additional
improvements in our operations and service this year that made it easier for themto prepare and file taxes.
The IRS has worked hard to ensure this filing season would build on theaccomplishments of last year. Early results show that we’ve exceeded severaltransformation goals set for the 2024 filing season:• Again committing to an 85 percent level of service (LOS) on our main tollfree phone line during the filing season. As of early April, we haveexceeded that level of service, which means the vast majority of callers
routed to live assistors have been able to connect and receive support.
• Committing to an average call wait time of 5 minutes or less on theagency’s main taxpayer helpline. As of early April, we exceeded our goal,with our main line phones being answered in about 3 minutes.
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Giving taxpayers the ability to opt for a call back from the IRS if their wait
time on the phone is more than 15 minutes. This has saved taxpayers
many thousands of hours of wait times.
Increasing self-service support in a number of areas, such as the Where’s
My Refund and Where’s My Amended Return tools, which usedconversational voice bot technology for the first time to help taxpayers get
answers on the status of their refund or amended return more quickly.
Providing more in-person help at our Taxpayer Assistance Centers (TAC),
with a goal of delivering 8,500 more hours of in-person assistance than we
did during the 2023 filing season. We have exceeded that goal, having
delivered 9,000 more hours of in-person assistance. We expanded hours
at nearly 250 TACs around the country during the filing season. And weagain offered special Saturday hours at TAC locations around the country;
this past Saturday, April 13, we had more than 70 TACs open to help
taxpayers.

Although these were ambitious goals, our workforce proved it is up to thechallenge. The progress we have made thus far using IRA funding shows what is
possible in the years ahead.
I’ll have more to say about our efforts to provide world-class service, but first I’ll
turn to enforcement, where we’ve seen early success in ensuring the wealthiest
Americans with ongoing issues pay what they owe.
On the compliance side we continue to take swift and aggressive action toensure that high-income taxpayers who evade taxes play by the same rules aseveryone else. We are increasing scrutiny of these taxpayers as we work toreverse the historically low audit rates for large corporations, complex
partnerships, and high-wealth individuals that existed since before the IRA waspassed.
As an example, we have concentrated our revenue officers’ work on those
taxpayers with more than $1 million in income and more than $250,000 inrecognized tax debt. Over the past year, the total we have recovered throughthese new initiatives is about $500 million. That’s half a billion dollars
recovered from fewer than 1,000 millionaires and billionaires. That is just the
beginning: Our revenue officers continue to work on hundreds of these cases torecover more back taxes from delinquent high-wealth individuals.
In a related effort, we recently launched an initiative focused on high-income
taxpayers who have failed to file federal income tax returns, some as far back as
2017. In February we began sending out compliance letters on more than
125,000 cases where tax returns haven’t been filed. This includes more than
25,000 mailings to those with more than $1 million in income, and over 100,000
mailings to people with incomes between $400,000 and $1 million, between tax

4years 2017 and 2021. People who fail to respond to these letters will be subject
to additional notices and other enforcement actions.
We are also closely examining potential noncompliance among the largest U.S.
corporations and partnerships that were identified as higher risk for tax
noncompliance with the help of new AI tools. As of December, the IRS had open
audits of more than 75 of the largest U.S. partnerships. On average, they eachhave more than $10 billion in assets and represent a cross-section of industries
that include hedge funds, real estate investment partnerships, publicly tradedpartnerships, large law firms and other industries. IRA funding is also helping us
expand our Large Corporate Compliance Program, which covers entities withaverage assets of more than $24 billion and average taxable income of about$526 million per year, and our hiring of new staff has allowed us to open 60 new
audits of taxpayers in this group.
Another illustration of how our long-term funding is helping us more fully address
high-risk compliance areas: We recently announced we are beginning dozens of
new audits on corporate aircraft involving personal use. We are focusing on
aircraft usage by large corporations, large partnerships and high-income
taxpayers. The IRS has concerns that the use of these jets is not being properly
allocated between business and personal activities. We are concerned people
are using business aircraft for personal use, which means the businesses aretaking deductions they may not be fully entitled to.
Personal use of corporate jets and other aircraft by executives and others has
personal and business tax implications. This is a complex area where, in thepast, IRS work has been stretched thin. With expanded resources, these aircraft
audits will help ensure high-income groups aren’t flying under the radar with theirtax responsibilities.
In all its compliance work, the IRS’s focus is on those posing the greatest risk to
our nation’s tax system in terms of ensuring fairness. As I have previously stated,
we remain committed to following the Secretary of the Treasury’s directive not toincrease audit rates relative to historical levels for small businesses andhouseholds earning less than $400,000 per year. All of this work will be with aneye toward fairness and always respecting taxpayer rights. Although focusing onthese types of complex issues will be resource intensive, achieving our goals will
result not only in a fairer tax system, but also in benefits for taxpayers and thenation, because detecting and stopping noncompliance in these areas will resultin significant additional revenues and reduce the deficit.
Launching the Direct File Pilot
As part of our effort to deliver significantly improved taxpayer services, the IRS
has been conducting a limited-scope pilot this filing season of a system thatallows taxpayers to prepare and file a tax return for free, online, directly with the
IRS, called Direct File. Our work on Direct File is an important innovation in our5ongoing efforts to transform the IRS and lead the agency into a digital, taxpayerfocused future.
This year, eligible taxpayers in 12 participating states had the option to prepare
and file their return this way. The pilot will allow us to assess customer andtechnology needs, so we can evaluate and develop solutions and make a
recommendation about the future of a Direct File system. After a successful
testing phase, we announced on March 12 that all eligible taxpayers in the 12
states – representing 19 million taxpayers – could use the system at any time.
Thousands of taxpayers already have successfully used the system, and users
are giving the new option positive reviews. These early results from Direct Filehave shown taxpayers like the ease and convenience of the tool.
It is important to note that a core part of the IRS’s mission is to meet taxpayers
where they are and ensure they have options to fulfill their tax obligations thatmeet their needs. I want to emphasize that taxpayers will always have choices
for how they prepare their taxes. They can file using a trusted tax professional,
our Free File program, tax software, or free tax preparation services such as the
Volunteer Income Tax Assistance and Tax Counseling for the Elderly programs,
or they can file a paper return. We saw an extremely successful filing season
involving all of those options. We continue to emphasize that taxpayers should
use the filing option that works best for them and their personal financial
situation. Direct File is designed to be an additional option for some taxpayers
this year that is simple, secure, accurate and free.
Progress on Transformation
IRA resources have been fundamental in our efforts to modernize our operations.
The IRS is using this funding to upgrade our IT infrastructure and improve theexperience for those who choose to interact with us online. By utilizing
technology, we are making the IRS more efficient while meeting taxpayers where
they are.
Along those lines, we continue to enhance our online offerings. We have
expanded the capabilities of the IRS Online Account and Tax Pro Account, so
this filing season taxpayers and tax professionals have been able to perform
more types of transactions in their accounts. We also launched a Business Tax
Account to make interacting with us easier for small business owners.
We have also made critical progress on our Paperless Processing Initiative.
While online options for taxpayers have increased, the IRS has continued to be
flooded with paper, including tax returns and correspondence. We had beenworking toward digital scanning of paper forms and returns for some time, but the
IRA funding has allowed us to greatly accelerate these efforts. For example,

6during Calendar Year 2023, we scanned more than 1.5 million forms and returns
we received on paper.
Additionally, we are making progress toward our five-year goal of giving
taxpayers the ability to securely file all documents and respond to all notices
online, as well as securely access and download their data and account history.
We met our first goal of this initiative three months ahead of schedule. Taxpayers
are now able to digitally submit all correspondence and responses to notices.
Complementing these efforts, the IRS recently announced a sweeping initiative
to simplify and clarify about 170 million letters sent annually to taxpayers. The
Simple Notice Initiative builds on notice-redesign efforts already in place for the2024 tax season and expands on a recent successful pilot involving identity theftletters. The redesign work will accelerate during the 2025 and 2026 filingseasons, improving common IRS letters going out to individual taxpayers andthen expanding into notices going to businesses.
The IRS also made significant progress in bringing our paper inventory back to
manageable levels after COVID-related interruptions in our operations resulted inhistoric backlogs. Inventory challenges involving original returns have been
completely resolved.
Taken together, these initiatives will make it easier for taxpayers to respond tonotices from the IRS. They have the option to go paperless and conveniently
submit necessary responses online, and they will receive clearer and moreconcise IRS notices, so they can better understand the actions they need to take.
ENHANCING DATA SECURITY
The IRS works continuously to preserve taxpayer privacy and protect our
computer systems from cybersecurity incidents through a combination of
preventative and detective controls. IRS systems withstand well over 1 billion
cyberattacks annually (including denial-of-service attacks; unsuccessful intrusion
attempts, probes or scans; and other unauthorized connectivity attempts). Since I
became Commissioner, I have seen teams across the IRS make amazing
progress to improve our security posture, permanently closing gaps utilizing IRA
funding to make needed updates, and we continuously work to ensure that
taxpayers and our own systems are protected.
We continue to strengthen our systems, training and overall infrastructure under
the Strategic Operating Plan, funded by the IRA. Measures we have taken
include (but are not limited to):• Further restricting user access. We restructured our operations to
reduce the number of people with access to the most sensitive taxpayer
datasets.

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More robust protective security controls. We updated data protection
mechanisms – including encryption and anonymization – to better protect
taxpayer information.
Improved firewalls. We have added additional firewalls between key
taxpayer information and the rest of the IRS, providing additional
monitoring capabilities.
Stronger 24/7 monitoring. We have expanded advanced analytics todetect and prevent risky data usage, providing improved insight into
suspicious activities around the clock.
New tools. We are adding new analytical tools and dashboards to monitor
user activity involving sensitive data. These tools will help to improve thedetection of potential data misuse.

The bottom line is that as Commissioner I have made it a priority to improve thedata security protections at the IRS against potential internal and external
threats. Taxpayer data must always be protected and safeguarded, and any
unauthorized disclosure will not be tolerated. We’ve made remarkable progressand have dramatically reduced risk in all aspects of data security, and we willremain focused on this in the future.
COMBATING FRAUD: EMPLOYEE RETENTION CREDIT
The IRS is committed to protecting hard-working people and small businesses
from scammers and fraudsters who try to use the tax system for their schemes.
Along those lines, we continue to face a major challenge related to scams
involving the Employee Retention Credit (ERC).
The ERC provided a financial lifeline to millions of businesses and exempt
organizations during the pandemic. The IRS has worked hard to implement thiscredit, and we have processed about 3.6 million ERC claims worth approximately$230 billion to businesses. However, promoters have been aggressively
misleading people and businesses that are not eligible into claiming the ERC,
even though they do not qualify.
The IRS has been flooded with ERC claims, and we are concerned that many ofthese claims were not being filed by businesses that qualify. We appreciate thepatience of businesses and tax professionals as we continue our effort to protect
against fraud. Since last fall we have been intensifying our compliance work inthis area.
Last September, as we were being inundated by questionable ERC claims, weannounced a moratorium on processing new claims to allow us time to makeadjustments and add taxpayer protection provisions into the program, including
options for businesses that may have been unduly pressed by a promoter.

8Since then, the IRS has taken a number of actions, which together haveprotected more than $1 billion between September 2023 and mid-March 2024:• We continue to offer a withdrawal option for businesses with a pending
ERC claim, which allows certain employers that filed a claim – but have
not yet received a refund – the ability to withdraw their submission andavoid future repayment, interest and civil penalties on a refund for which
they are ineligible. Claims that are withdrawn are treated as if they were
never filed. A total of 1,800 entities have withdrawn a total of $251 million
in claims so far.
• In December, we sent letters to more than 20,000 businesses notifying
them of disallowed ERC claims. Since then, we have determined that
more than 12,000 entities filed more than 22,000 claims that were
improper and resulted in $572 million in assessments that the IRS will beworking to recoup. The IRS is continuing this work with all of our available
compliance tools, and more activity is planned in this area in the months
ahead.
• Also in December, we launched a special ERC Voluntary Disclosure
Program that ended on March 22. The program allowed voluntary
repayments by businesses that received an improper ERC payment.
Those accepted into the program needed to repay only 80 percent of thecredit they received. This has yielded more than $225 million from over
500 taxpayers, with another 800 submissions still being processed,
including many that came in at the last minute before the March 22
deadline.
During this period, we have processed some ERC claims, but at a much slower
rate than before our approach changed in the summer and fall. While wecontinue to process ERC applications received prior to the moratorium, ourprogress is hampered by the fact that amended returns from ERC applicantscome in on paper and require time-intensive manual processing. We aredeveloping a scanning process for both pre- and post-moratorium paper returns
so that we can digitize the information from other pending claims and expect thatprocess to be completed this spring. We continue our work to determine next
steps involving ERC.
This current situation is an excellent example of where IRA funding will make adifference in the future. These claims are being filed on paper. The IRA funding
will give us improved capability to receive digital information, whether onamended returns or other information such as taxpayer correspondence. In turn,this will help us more rapidly identify risks and develop response strategies – theexact issue that we have confronted with the ERC claims.
Additionally, the IRS remains very serious about tracking down unscrupulous
promoters of the ERC. We have specially trained auditors examining ERC claims
that pose the greatest risk. Also, our Criminal Investigation Division is conducting

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hundreds of investigations involving potentially false claims worth billions ofdollars.
THE PRESIDENT’S FISCAL YEAR (FY) 2025 BUDGETThe President’s FY 2025 Budget proposal for the IRS provides $12.3 billion indiscretionary appropriations, equal to the FY 2024 and FY 2023 enacted levels.
As the IRS implements its plans for transformative change with the significant
resources provided by the IRA, annual discretionary appropriations need toprovide sufficient recurring “base” resources.
However, with no anticipated discretionary increases for inflationary requirements
in FY 2024 and FY 2025, the IRS will be required to further extend its reliance on
IRA resources to fund base needs. IRA resources are limited, and the IRS will
likely use them entirely before the funding expires in FY 2031. In addition, theauthorizing language does not provide the flexibility to realign the IRA funds
across appropriations.
This will have the most immediate impact on the taxpayer services appropriation,with IRA resources for this category expected to run out completely by FY 2026.
The IRS is spending much more on taxpayer services than is provided for in
annual appropriations, with IRA funding heavily supplementing telephone and inperson service. Without additional funding or additional flexibility to realignbetween appropriations, IRS telephone LOS is expected to see a drastic decline
in FY 2026 and fall even further in FY 2027. In this scenario, the vast majority of
taxpayers would be unable to reach an IRS representative for assistance andmillions of pieces of taxpayer correspondence would not be answered in a timely
manner.
To address this issue, the President’s Budget includes a mandatory proposal thatwill avert the IRA funding “cliffs” (after which IRA funds are exhausted for a given
appropriation) and will extend IRA funding through FY 2034. This proposal would
provide $104 billion over the 10-year budget window and is estimated togenerate at least an additional $341 billion in revenue. It will ensure the IRS cancontinue its transformation efforts – as described in our Strategic Operating Plan
– to improve service, modernize technology and ensure that taxpayers withcomplex returns, including certain high-income individuals, large corporations
and complex partnerships, pay the taxes they owe.
We have worked to identify the highest priority areas of focus through filingseason 2025, with a second sprint to cover efforts through filing season 2026.
The following represent the areas of focus from this work:•

Digitalization. Digitizing all paper documents we receive from taxpayers
and enabling our employees to perform their work digitally.

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Fairness in enforcement. Expanding enforcement efforts for complex
taxpayer segments while simultaneously ensuring fairness for taxpayers at
all income levels. This includes providing the outreach and support
necessary to ensure taxpayers receive the benefits for which they are
eligible.
Live assistance. Ensuring that when taxpayers need answers from the
IRS, we are available.
Notifications and scams. Providing taxpayers with clear and concise
notices, and stepping in to disrupt and dismantle scams while providing
support to victims.
Self-service and online accounts. Giving taxpayers the option to address
all of their tax-related needs with the IRS online if they choose.
Employee tools and experience. Enabling a fully equipped, empoweredand engaged IRS workforce ready to serve taxpayers.
Foundational technology. Modernizing the IRS’s foundational technology
to meet the needs of taxpayers and IRS employees.
Human capital. Attracting, retaining and empowering a highly skilled,
diverse workforce that is better equipped to deliver results for taxpayers.

LEGISLATIVE PROPOSALS IN THE PRESIDENT’S FY 2025 BUDGET
Along with the funding requested in the President’s FY 2025 Budget request, weare also requesting legislative proposals that would improve tax administration,
including, but not limited to, the following:••

Direct Hire Authority and Streamlined Critical Pay. The President’s
Budget includes two administrative provisions within the appropriations
language designed to expand Direct Hire Authority (DHA) and provide theability to offer Streamlined Critical Pay (SCP) to certain new hires toaccelerate IRS hiring efforts. DHA provides the ability to expedite thenormal hiring process to hire more efficiently during a severe shortage ofhighly qualified candidates or during a critical hiring need. DHA has helped
the IRS address the backlog of paper tax returns and taxpayer
correspondence. As the IRS works to rapidly implement plans to utilize
IRA resources, expanded DHA will help ensure that hiring delays are notan obstacle for achieving broad mission related functions. The current
DHA provision will expire in 2024; the proposal included in the Budget will
extend DHA through 2027. SCP authority gives the IRS a management
tool to quickly recruit and retain a limited number of employees with highlevels of expertise in technical or professional fields that are crucial to thesuccess of the IRS’s transformative efforts by allowing for higher basesalaries for these hires than would otherwise be possible. The current
SCP authority will expire in 2025; this proposal would extend it throughSeptember 30, 2031.
Provide for information reporting by certain financial institutions anddigital asset brokers for purposes of exchange of information. Over
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time, the United States has established a broad network of informationexchange relationships with other jurisdictions based on establishedinternational standards. The information obtained through thoserelationships has been central to recent successful IRS enforcement
efforts against offshore tax evasion. The ability to exchange information
reciprocally is particularly important in connection with the implementationof the Foreign Account Tax Compliance Act (FATCA). Currently, however,the United States provides less information to foreign governments than
we receive from them. The proposal would expand reporting by U.S.
financial institutions and digital asset brokers with respect to foreign
account holders in a number of ways – for example, by requiring financial
institutions to report the account balance for all financial accounts
maintained at a U.S. office and held by foreign persons. These newreporting requirements would enable the IRS to provide equivalent levels
of information to cooperative foreign governments in appropriate
circumstances to support their efforts to address tax evasion by theirresidents. The proposal would be effective for returns required to be filed
after December 31, 2026.
Require reporting by certain taxpayers on foreign digital asset
accounts. Section 6038D(b) of the Internal Revenue Code contains anannual reporting requirement for individuals in regard to two categories offoreign financial assets, but there is no reporting requirement under thissection for digital assets. Against this backdrop, tax compliance andenforcement with respect to digital assets is a rapidly growing problem.
The global nature of the digital assets market offers opportunities for U.S.
taxpayers to conceal assets and taxable income by using offshore digitalasset exchanges and wallet providers. The proposal would amend section
6038D(b) to require reporting with respect to a new third category of asset:that is, any account that holds digital assets maintained by a foreign digitalasset exchange or other foreign digital asset service provider. Reporting
would be required only for taxpayers who hold an aggregate value of all
three categories of assets in excess of $50,000. The proposal would be
effective for returns required to be filed after December 31, 2024.
Extend the statute of limitations for certain tax assessments. Section
6501 of the Internal Revenue Code generally requires the IRS to assess atax within three years after the filing of a return. But for complex audits inthe largest cases, critical issues may not be identified until late in theprocess of an examination, and in many cases these issues cannot be
pursued further due to time and resource constraints. The proposal would
amend section 6501 to extend the three-year statute of limitations to six
years if a taxpayer omits from gross income more than $100 million on areturn. This change would give the IRS enhanced agility and flexibility inevaluating and staffing its case inventory and appropriately allocating its
limited enforcement resources. The proposal would be effective for returns
required to be filed after the date of enactment.

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Increase oversight of paid tax return preparers. Paid tax returnpreparers have an important role in tax administration because they assist
taxpayers in complying with their obligations under the tax laws. The
proposal would amend Title 31, U.S. Code (Money and Finance) to
provide the Secretary with explicit authority to regulate all paid preparersof Federal tax returns, including by establishing mandatory minimum
competency standards. The proposal would be effective on the date ofenactment.
Expand and increase penalties for noncompliant return preparationand e-filing. Inappropriate behavior by paid tax return preparers harms
taxpayers through the filing of inaccurate returns, erroneous refunds andcredits, and personal tax return noncompliance. Tax return preparer
misconduct continues, in part, because the amounts of the penalties undercurrent law do not adequately promote voluntary compliance. The
proposal would increase the amount of the tax penalties that apply to paidtax return preparers for willful, reckless or unreasonable understatements,
as well as for forms of noncompliance that do not involve an
understatement of tax. The proposal would be effective for returns filed
after December 31, 2024.
Expand authority to require electronic filing for forms and returns.
Under this proposal, electronic filing would be required for returns filed bytaxpayers reporting larger amounts or that are complex business entities,
including: (1) income tax returns of individuals with gross income of$400,000 or more; (2) income, estate, or gift tax returns of all related
individuals, estates, and trusts with assets or gross income of $400,000 or
more in any of the three preceding years; (3) partnership returns forpartnerships with assets or any item of income of more than $10 million in
any of the three preceding years; (4) partnership returns for partnerships
with more than 10 partners; (5) returns of real estate investment trusts,
real estate mortgage investment conduits, regulated investmentcompanies and all insurance companies; and (6) corporate returns forcorporations with $10 million or more in assets or more than 10
shareholders. Further, electronic filing would be required for the following
forms: (1) Form 8918, Material Advisor Disclosure Statement; (2) Form
8886, Reportable Transaction Disclosure Statement; (3) Form 1042,
Annual Withholding Tax Return for U.S. Source Income of Foreign
Persons; (4) Form 8038-CP, Return for Credit Payments to Issuers of
Qualified Bonds; and (5) Form 8300, Report of Cash Payments Over
$10,000 Received in a Trade or Business. Return preparers that expect toprepare more than 10 corporation income tax returns or partnership
returns would be required to file such returns electronically. The Secretary
would also be authorized to determine which additional returns,
statements, and other documents must be filed in electronic form in orderto ensure the efficient administration of the internal revenue laws without
regard to the number of returns that a person files during a year. The

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proposal would be effective for forms and returns required to be filed after
December 31, 2024.
Improve reporting for payments subject to backup withholding.
Backup withholding applies to a reportable payment if a payee fails tofurnish the payee’s taxpayer identification number (TIN) to the payor in themanner required. It is an enforcement tool that ensures payors andpayees are compliant with reporting obligations. Currently, the IRS may
only require that the payee furnish the TIN under penalties of perjury withrespect to interest, dividends, patronage dividends, and amounts subject
to broker reporting. Payees of these reportable payments are generally
required to furnish their TINs using a Form W-9, Request for Taxpayer
Identification Number and Certification. However, payees of otherreportable payments subject to backup withholding may furnish their TINs
in other ways. The proposal would treat all information returns subject tobackup withholding similarly. Specifically, the IRS would be permitted torequire payees of any reportable payments to furnish their TINs to payors
under penalty of perjury. The proposal would be effective for payments
made after December 31, 2024.
Improve IRS data disclosure to Tribal child support services and tochild support services contractors. Section 6103 of the Internal
Revenue Code prohibits the disclosure of return information except under
specific circumstances. For example, Section 6103 authorizes the IRS todisclose certain return information to Federal, State, and local childsupport enforcement agencies (CSEs). The section further authorizes
CSEs to disclose some, but not all, of that information to their contractors.
There is no explicit authority for the IRS to disclose to Tribal CSEs or theircontractors return information for purposes of child support enforcement.
The proposal would expand the IRS’s authority to allow CSEs to share
information with their contractors. It would also provide Tribal CSEs withthe same access to the same return information as Federal, State, andlocal CSEs. These changes would facilitate the establishment andcollection of child support obligations, locating individuals owing childsupport, and the administration of the Federal tax refund offset program. .
These proposals would be effective upon enactment.

CONCLUSION
Chairman Wyden, Ranking Member Crapo and members of the Committee,
thank you again for the opportunity to update you on the filing season and the
IRS budget. The 2024 filing season has been a good one overall, and, assuming
the agency receives adequate funding going forward, the future holds great
promise for the agency and the taxpayers we serve. As Commissioner, I remaincommitted to leading the IRS’s transformation efforts in close collaboration withyour Committee, and I look forward to working with you to achieve a more
modern and high-performing IRS, which will better serve taxpayers and ournation.

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