COMMISSIONER

DEPARTMENT OF THE TREASURY

INTERNAL REVENUE SERVICE

WASHINGTON, DC 20224

IRS Commissioner Danny Werfel

Prepared Remarks: TACRE Quarterly Meeting

September 15, 2023

I want to thank the members of the Treasury Advisory Committee on Racial Equity for 

meeting with me today to discuss important steps the IRS is taking to rebalance our 

compliance efforts. 

The IRS is committed to enforcing tax laws in a manner that is fair, impartial and as 

accurate as possible. As you know, I committed to investigating the root causes of the 

audit disparities during my confirmation hearing. Soon after starting at the IRS, I 

committed to taking substantive action prior to the next filing season. Yesterday, we 

released details to Congress on steps we are taking that will allow us to repurpose 

resources to focus on other work that better aligns with IRS strategic priorities and 

further our core objectives of equitable and efficient tax administration, while improving 

payment accuracy. These steps will also make tax administration fairer for all 

Americans. 

Taxpayers need to be able to trust our processes and believe that we are administering 

the tax code fairly and impartially. This is essential to the IRS achieving its mission. I 

understand that findings of disparities in audit treatment -- which many advocates and 

scholars have previously raised concerns about -- have eroded some of the trust placed 

in our tax system. The imperative is clear: We must tackle this issue of disparity head 

on, be transparent about our progress, and build a culture and set of practices that 

routinely test and address enforcement challenges. 

Yesterday’s release described important actions that we will take to improve accuracy 

and reduce audit disparities, and I will provide details on those changes in a moment. 

As part of our work to ensure fairness and accuracy, we are focusing our enforcement 

efforts on high-dollar areas where taxpayers such as large corporations, complex 

partnerships and high-wealth individuals fail to pay the taxes they owe. 

While we are beginning to make progress, we have more work to do, and I hope 

TACRE members will serve as a resource as we consider our next steps. I have 

reviewed the recommendations you have submitted to Secretary Yellen regarding audit 

disparities. I appreciate the feedback TACRE is providing on this critical issue and look 

forward to discussing the steps we are taking that are responsive to your 

recommendations. 

Context
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Today, I want to focus on one of the most important elements of this overall agenda -

addressing racial disparities in audits. Before going into more detail about the changes 

we are making, I want to step back and put this issue into context. As all of you are well 

aware, recent research using imputed race information estimated that Black taxpayers 

are audited at three to five times the rate of non-Black taxpayers.1 These findings are 

deeply concerning. As soon as I was confirmed as Commissioner, I began meeting with 

the IRS team that has been studying this issue, as well as the management team that 

oversees the audit program, to better understand the drivers of this disparity. I want to 

emphasize that we are continuing our research to further improve our understanding of 

the ways in which the processes that the IRS uses to assign risk scores to returns 

claiming the Earned Income Tax Credit (EITC) and exam priorities contribute to this 

disparity. I am committed to regular evaluation of our audit systems and publicly 

reporting on our progress to mitigate the risk of disparity, as promised in the Inflation 

Reduction Act (IRA) Strategic Operating Plan.

Recent Progress and Next Steps 

Since I was confirmed as IRS Commissioner, our team of researchers at the agency 

has continued to evaluate potential contributing factors to racial audit disparities. To 

achieve transparency and obtain peer input, the research team has been presenting 

information on the methodology and preliminary findings in public forums. For example, 

a paper on this work was presented during the recent IRS-Tax Policy Center 

conference, and the presentation materials are available on IRS.gov. 

In our Strategic Operating Plan, we committed to conducting research to understand 

any potential systemic bias in compliance strategies and treatments. We are working to 

identify any disparities across dimensions including age, gender, geography, race and 

ethnicity. We are also continually refining our approaches to compliance and 

enforcement to improve fairness in tax administration and maintain accountability to 

taxpayers as informed by our research. We will share our findings on both matters 

publicly. The ongoing evaluation of our EITC audit selection processes is the topmost 

priority within this larger body of work and will inform additional, future changes to our 

processes. 

Changes for FY 2024

Starting October 1, the IRS is making changes that will improve exam outcomes and 

racial equity. 

First, we plan to substantially reduce the number of correspondence audits of returns 

claiming refundable credits, including EITC, in FY 2024. These steps will allow us to 

1 Elzayn et al (2023). “Measuring and Mitigating Racial Disparities in Tax Audits.” Stanford University, SIEPR WP 23-02 (January). 

The IRS does not collect data on taxpayer race. Elzayn et al (2023) estimated probabilities that filers belong to particular 

race/ethnicity groups by comparing taxpayers’ names and addresses to public data on the racial composition of names and 

Census Block Groups. These probabilities have been used in retrospective analyses of audit outcomes, to help us understand 

the drivers of disparity. They have not been and will not be used in the operational selection of individual taxpayers for audit.
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repurpose resources to focus on other work that better aligns with the IRS' strategic 

priorities and further our core objectives of equitable and efficient tax administration, 

while improving payment accuracy. Moreover, the recent study identifying audit rate 

disparities demonstrated that the volume of IRS correspondence exams focused on the 

EITC is a major driver of overall disparity. In advance of the next filing season, we will 

be finalizing our plans for how we leverage the freed-up compliance resources to 

support sound tax administration, focus on our top priorities and further promote 

fairness. I will update you as this planning progresses. 

Second, we are implementing an initial round of changes to the EITC audit selection 

processes that we expect will improve the accuracy of exam outcomes and further 

reduce disparities. This includes an update to the automated risk scoring process, which 

we developed between 2020 and 2022. The update changes how the IRS considers 

information that helps determine who can claim the EITC, while improving accuracy. 

We are also launching two pilots of alternative approaches to our existing EITC audit 

selection process during the next filing season. We will publicly report on the results of 

these pilots and, if this initial round of changes yields the anticipated improvement in 

fairness and the accuracy of exam outcomes, the alternative approaches for audit 

selection could be the basis for further changes in a future filing season. 

Third, we are devoting more resources to addressing unscrupulous tax return preparers 

who are misleading their customers into underreporting income or overclaiming credits 

and deductions. We are leveraging data that identifies tax preparers with questionable 

practices. Our research suggests that these bad actors disproportionately file tax 

returns for vulnerable taxpayers, including low-income filers, filers of color, and those 

with limited English proficiency, which may contribute to higher audit rates for this 

taxpayer segment. Over time, we believe stepped-up efforts to stop unscrupulous 

preparers from targeting these groups will lead to higher quality tax preparation and 

increased return accuracy, thereby reducing the number of individual taxpayers at risk 

of audit. 

Of note, the IRS has already been taking bold steps to address bad actors. Last week, 

we announced a freeze on processing of claims for the Employee Retention Credit to 

disrupt opportunistic promoters who are exploiting small businesses through a 

relentless marketing campaign filled with false promises, which has resulted in a large 

volume of claims from businesses that don’t qualify for the credit. Regarding the EITC 

and other refundable credits, we will be focused on disrupting promoters or preparers 

who exploit vulnerable populations. The IRA funding will also allow us to continue our 

increased focus on reaching underserved communities to provide education and realtime assistance in claiming available credits and incentives. This is critically important 

given the complexity of eligibility rules for some of these incentives, especially the EITC. 

Another way we are working to ensure fairness in the tax system is by improving our 

ability to meet taxpayers where they are, to ensure they have the options that work best 

for them for fulfilling their tax obligations. Along those lines, as directed by the Treasury, 

we are moving to implement a scaled pilot of a free, IRS-run direct filing option for 
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individual income tax returns in the 2024 filing season. More details will be available 

soon. We are also developing approaches to alert taxpayers promptly to potential 

issues on their returns, such as those related to refundable tax credits, to encourage 

self-correction instead of an audit, as outlined in the Strategic Operating Plan.

Concluding Remarks

I have laid out for you a comprehensive strategy that includes immediate changes to 

reduce correspondence exams of refundable tax credits, test new selection processes, 

address challenges with bad actors, and support tax filers in obtaining the tax credits for 

which they qualify. These steps will allow us to repurpose resources to focus on other 

work that better aligns with the IRS strategic priorities and further our core objectives of 

equitable and efficient tax administration, while improving payment accuracy. It will take 

time for us to understand the full impact of our strategy, but we are committed to 

monitoring and sharing our findings. We anticipate it will take several months after the 

end of the 2024 filing season to determine the impact of these changes. 

Along with the changes we are implementing for FY 2024 that will improve the accuracy 

of exam outcomes and racial equity, we will continue to evaluate ways to improve our 

audit program. Based on what we find, the IRS will take further steps to advance our 

commitment to fair and equitable tax administration. I will make the same commitment 

to you that we have made in our Strategic Operating Plan -- to continuously examine 

our systems to understand any potential bias in compliance strategies and treatments 

and to publicly share the findings of that analysis. 

Again, I deeply appreciate the support TACRE is providing on this critical issue. I look 

forward to continuing to work with you to make additional progress in ensuring that all 

our enforcement activities are conducted in a fair and impartial manner, as well as other 

issues I did not have time to cover today, but that are of great importance to both the 

IRS and this committee. Thank you.