There may be errors in spelling, grammar, and accuracy in this machine-generated transcript.

Roger Harris: Well [00:00:00] welcome everybody. It's another federal tax update podcast. This is Roger Harris. And I'm joined as always by Annie Schwab. Annie, how are you today?

Annie Schwab: I'm doing pretty good. Roger. How about yourself?

Roger Harris: Can't complain. Can't complain. It's a little rainy and cool, but hey, we need the rain. And I'll take cool weather this time of year.

Annie Schwab: Exactly. Same here. We got a lot of rain coming in Dallas, so, um, I'll take it, though. Better than 105, 110 degrees over here.

Roger Harris: That's right. [00:01:00]

Annie Schwab: Well, today we've got someone very special. I know, Roger, you've spent some time with him. I've had the opportunity to meet with him as well. But I'll turn it over to you for the brief introduction of our special guest today.

Roger Harris: Yeah. We are very fortunate, uh, to have our guest today. And, uh, interestingly, uh, our guest was the acting commissioner in 2013 of the Internal Revenue Service, which I guess was a, um, kind of a harbinger of the future [00:01:30] because we are extremely happy to have the 50th commissioner of the Internal Revenue Service who, ten years after being interim, was, uh, made the permanent commissioner 50th. And today we are joined by Commissioner Danny Werfel. Commissioner, thank you so much for being here. And how have you been?

Danny Werfel: Well, I guess I kind of wish it was truly permanent. Um.

Roger Harris: Yeah. Yeah. Well, yeah. You know.

Danny Werfel: Uh, it is, uh, it hasn't [00:02:00] been boring. I would say the, uh, you know, since January, uh, since I stepped down, um, I have been quite busy. Um, really, uh, kind of, uh, doing, uh, podcasts like these, talking to, uh, people, uh, from, uh, all over the country and the world, actually, about, um, what all this means in terms of the changes we're seeing not [00:02:30] just at the IRS, but across government. Um, and, um, and, you know, kind of finding, uh, a lot of, uh, a lot of questions have have arisen that don't have easy answers, uh, as people try to get their minds around, uh, all the changes that are underway. And I'm doing my best to try to offer perspectives. I don't always have the the right answers and the right insights, but I've got some experience and some expertise that's worth, uh, [00:03:00] exploring some of my perspectives on on what's happening and what it means.

Roger Harris: Yeah, I can imagine you have been in in great demand with all that's gone on, you know, since you, uh, resigned and left the service and what's going on in IRS. And we'll touch on some of those things. But, uh, yeah, I can imagine that your perspective was was in great demand from a lot of.

Danny Werfel: It wasn't because of the IRS. You know, before you, most of my government [00:03:30] career was actually at the Office of Management and Budget and some of the responsibilities that I had, um, for, for many years, uh, revolved around things like Treasury payments and the Treasury payment system, which there's been a lot of questions on. I was, uh, you know, the improper payments or the fraud error. And. Uh, for both uh, Bush [00:04:00] and uh, uh, and so when there are questions around, um, whether, you know, whether you can eliminate a government agency like USAID, uh, and the president was asked if he can do that without an act of Congress, and he said, yes, if it's fraud. And so that raises questions. What is fraud? Is it subjective or is it objective? Um, and I have some expertise there. Um, and then, [00:04:30] uh, then I've, I led, um, something called the campaign to cut waste, uh, for Vice President Biden. Um, so, uh, it's interesting there are some similarities in the DNA of the campaign to cut waste and the Doge, but, um, but mostly they're radically We different, um, initiatives. Uh, so having led that and comparing and contrasting is interesting. And then obviously the IRS and everything that's happening [00:05:00] there. So, so um, oh, and I didn't even mention grants management. I ran grants management for the US government for over a decade. And a lot of grantees are have a million questions about the loss of funding and the significant and rapid shift in, in grant priorities that they normally would get notice for and haven't gotten notice this time. So so my phone is ringing off the proverbial hook, if you will, not just because I'm the 50th commissioner, [00:05:30] but because some of the other areas of responsibility I've had across my federal career happened to be relevant in the context of the actions of the Doge. And again, I don't have all the answers, but, uh, but I have some informed opinions that I think are helpful in shaping the dialog.

Roger Harris: No, it's. Yeah. And I think that's probably something that most of us didn't appreciate is your overall background is much stronger than just being at the IRS and particularly in the times [00:06:00] of when right now. So I can imagine your your phone is ringing off the hook. And, um, personally, I wish you were still at the IRS because that experience would have helped there. But you know, we'll get to that. We'll get to that. And and how that took place. But again, thank you for being here. And we look forward to the next, uh, 45 minutes to to pick your brain and share on some of those experiences. I'm sure our listeners who are primarily practitioners are going to be very interested to get your perspective on on your [00:06:30] time there, as well as where we sit right now and what the future may or may not look like, uh, for tax administration, uh, in these I will call them challenging and confusing times for sure.

Danny Werfel: Absolutely.

Annie Schwab: Well, Danny, can you tell us a little bit about your time as commissioner? Was there like best or worst parts or biggest challenge or any kind of stories that you have to share?

Danny Werfel: Well, [00:07:00] I mean, it really. Uh, Roger, when he introduced me, you know, talked about the fact that I was IRS commissioner, two different points. And it's a real unique experience to, um, to lead an organization, uh, stand in the commissioner's office with the weight of it. And then, uh, ten years later to the day, uh, having, you know, have having all these different experiences, life experiences, different point in life, uh, [00:07:30] to come back into that same office and, and in a very different circumstance. Um, and, uh, the first time was, was, was a crisis. It was, uh, you know, kind of a quote unquote scandal, if you will. And we were, you know, kind of managing and putting a fire out. And this time we had, uh, an opportunity versus a crisis and the opportunity the crisis would have been if we wasted the opportunity. That was the stress. [00:08:00] We had an opportunity with the funds under the Inflation Reduction Act to do two things. One was to plug the holes in the dam that existed coming out of the 2022 tax filing season, where there was record low levels of service and record high paper backlog, um, and all kinds of, of challenges. Um, let's reverse those immediately and let's then build [00:08:30] an IRS for the future. Let's lay out a vision, uh, start, uh, working towards that, that vision as feverishly as we can, where we're getting both quick wins. Um, the taxpayers and tax practitioners can feel and experience, uh, while at the same time laying the groundwork for, uh, true automation, automation and modernization in the future. And so, um, [00:09:00] it was, uh, it was an exciting moment. And I felt like we were able to quickly, uh, mobilize, uh, we started with hiring surges, uh, to plug the hole, those dams.

Danny Werfel: And we I said this, you know, a lot in the recent hundred days, like when I arrived at the IRS, I didn't see a turnkey tech solution to immediately address the [00:09:30] issues. Um, I only could see, uh, the way to make sure we were answering taxpayers phone calls and, uh, and adjusting our operations to better serve the mission and serve taxpayers by adding more people to the to the front lines. That meant more people on in our call center, more people in our walk in center, more people in submission processing, and more people in audit and collections. Um, I also knew that eventually [00:10:00] technology, AI and automation would ease the, the need for, for as many employees over time. So we started to develop we developed this, this roadmap. That would mean that we wouldn't need as many employees, uh, in the future. But but we we saw it as a, uh, as a sequence where we would hire and we did design the, the and present a vision for the future, which we did. [00:10:30] And then, as I said, start working feverishly towards that vision, which we did. And, and a lot of progress was made. Um, not perfect progress. And, you know, I'm happy to answer a question on what we could have done better or differently because there's a lot. But but for the most part, I left the IRS proud that, uh, that we were able to reverse those those negative performance trends coming out of 2022. Uh, I felt that our approach [00:11:00] did it in a way that was, uh, highly strategic, uh, in terms of of managing various tensions of we got to serve taxpayers now, but we also have to build one for the future.

Roger Harris: Yeah. You you brought up a lot of great points. And the first one is you mentioned filing season, which I think is how the average taxpayer kind of rates the IRS. What's their experience during, you know, the one time of year we all interact with the service, which was filing season. [00:11:30] And I think, um, to your point of the work that you did, I think generally speaking, across the board, if you act practitioners or taxpayers. This this tax season that just ended was was very smooth. Um, and and yet that didn't happen by accident. And some people are trying to say, well this one was smooth. So therefore the next one will be smooth. But you guys start planning for the filing season way before January. And a lot of the things that you just talked about led to this filing season being [00:12:00] smooth. And it doesn't necessarily mean the next one will be smooth. So how soon does the IRS actually start? I mean, I guess it's year round, but I guess that filing season, having making it work and having people on the phones and processing and getting payments out, uh, is a is a massive project that, uh, just because this one went good doesn't mean the next one's going to go good.

Danny Werfel: So one of the things that I've been doing, uh, Roger and and, and Annie is, um, experimenting [00:12:30] with different analogies and metaphors as a way of trying to explain to a broader audience what what is happening and what what they're seeing. Right. Um, and, um, and I'm pretty good at analogies, so, uh, I think I can come up with a hopefully an analogy that resonates for any question. So so I've [00:13:00] come up with an analogy for, uh, to explain where the IRS is right now with the successful filing season that it's had. Um, and the analogy is this, um, uh, it's a refrigerator where the power has been cut. And if you cut the power to a refrigerator, it stays cold for a while, but not forever.

Roger Harris: Right.

Danny Werfel: And so, uh, what I see happening with all the the resource cuts, the personnel cuts, the [00:13:30] leadership tumult at the IRS is that the power has been cut. Um, and now if we open the refrigerator, five minutes, ten minutes, even 20 minutes, or even an hour after the power is cut, the milk is still going to be fresh, right? And so the filing season, the momentum of of what we built and the lead leadership and just the resilience of the IRS and the IRS workforce meant that [00:14:00] they were able to keep things, uh, you know, in the right temperature, uh, through this first filing season. But unless power is restored, that milk is going to spoil. And, uh, given the the changes, uh, I raised the question of of of what filing season is going to be like next year, because you're right, that power source, uh, involves people and planning and technology upgrades and testing of that [00:14:30] technology and a lot of the the expertise and the resources and the stability that enables effective operational planning is in question. Do I know for sure that it's going to fail? Absolutely not. But I think we're at high risk. When I hear about the number of, uh, institutional, uh, leaders and knowledge that have left, when I hear about, you know, kind of zeroing out modernization budgets, um, [00:15:00] when there's, uh, a lack of, of consistency and stability in the IRS leadership ranks, I think it only makes sense to raise the question of, are we at risk now that that, um, that, that, that, that system that has been developed or in my case, the refrigerator that is needs to be powered at all times, otherwise the food goes bad. Um, what is that food going to look like? Uh, as we get ready for next filing season?

Roger Harris: Right. And I [00:15:30] don't know if I have as good an analogy, but maybe it's like you've got a whole nother batch of food coming because we have a whole potential new tax bill to pass, which piles additional work on top of a normal filing season, because anything and there are some things retroactive to 2025 is going to require guidance and forms and processing. And so this filing season will look different than last one, even if we had the same people. And I'm assuming that puts added burden on the service [00:16:00] when in addition to just processing, you've got to issue guidance and develop forms and all the other things that go around with changes in tax law.

Danny Werfel: Yeah. And the, the, um, the public like, um, explanation right now that we have on the, the, the activities that the IRS is more about, we're gutting it.

Roger Harris: Sorry. Sorry to interrupt you. Sorry. Could you could you go back to the start of that answer? You actually [00:16:30] broke up for a little bit.

Danny Werfel: Yeah, absolutely.

Roger Harris: Sorry. Thank you so much. You need to restate it, Roger. Or do you think you're Danny? Do you think you're good?

Danny Werfel: You know, I'm. I think I'm good.

Roger Harris: Okay. All right. Thanks.

Danny Werfel: Yeah. The the public, uh, statements that we have or the presentation of of of what the strategy is for the IRS right now is centered on it being gutted, on it being dramatically reduced. Um, [00:17:00] and, uh, and I have yet to see, uh, a, uh, an articulation of what the, the future vision is. Um, I've heard reference to automation, AI technology, but, uh, but which parts will be automated? Uh, when, uh, with what funding? Um, Um, uh, all of that, uh, we, we produced a strategic operating [00:17:30] plan and updated it, which and again, not perfect and certainly got its fair share of criticism, but it laid out a vision, uh, for, uh, and a set of priorities for which parts of the operation we were going to target for modernization, for improvement, um, etc.. And the reason why I raised this in response to your question, Roger, is that there are things that need to happen [00:18:00] at the IRS between now and the time it's modernized. So let so so you can say, look, the IRS doesn't need 100,000 employees. You could have that, that that view. You could have the view that the Irish should have half that or, or a quarter of that with, with, with, with the rest of it and the tax mission, the tax authority mission powered by robots. And that could be your vision. Sure. And you won the election. So you get [00:18:30] to you get.

Roger Harris: You get to have your vision.

Danny Werfel: You get to have your vision. Um, but the question that I've raised and I used another analogy for it in a recent op ed that I posted, is what do you do with the existing, uh, organization while you are building towards that modern view? And so I use the analogy of a of a football stadium, and I use the event that the commanders, the Washington commanders, [00:19:00] where I live, and I happen to be a huge commanders fan, announced that they're building they're building a new stadium. Right. Uh, exciting for me, walking distance from where I live. So very exciting. Right? Awesome. But that stadium is going to take five years at least before it's ready to to roll. So now we have an old stadium that we're going to play in. The in. The commanders are going to play in for five years and we can't abandon it completely. People still need to go there. The parking lot can't be littered [00:19:30] with potholes. The bathroom stalls can't all be broken, the food service vendors can't be operating on faulty equipment like you still need for five seasons an operating stadium. So. So one of the things that the commanders ownership group is going to have to do that won't get a lot of press and won't get a lot of celebration, but it's necessary, is they're going to have to dedicate time, energy and money to maintaining [00:20:00] the existing stadium while the new stadium is being built, because there are games to be played.

Danny Werfel: And that's true about this new tax bill. There needs to be that new tax bill. That game, to stick with the analogy is going to be played before a new, more modern, robot centered IRS is going to be up and running unless there's this, you know, kind of turnkey technology solution that's about [00:20:30] to land on the IRS and be tested and operate effectively. And if so, I'll be the first to cheer it. I'll be the first to to tout the new modern IRS. But what we don't have yet is that vision, the critical path, the explanation, the like, all of that that we tried to put out in our strategic operating plan is not there yet. So there's two real questions right now. What is the vision and the critical path for that vision? [00:21:00] And what happens to the existing IRS operations while that vision is being deployed? How are we serving taxpayers effectively? How are we meeting requirements like the new tax law provisions effectively? These are questions that I think, like I had to answer a lot of questions when I was the Irish commissioner and be accountable got grilled on Capitol Hill. Op eds.

Danny Werfel: Written in the Wall street Journal about how terrible we were doing. Us holding us [00:21:30] accountable. All of that I would expect and hope. Um, the new leadership has that type of of public scrutiny because that motivates action certainly motivated me to be responsive and to act.

Roger Harris: Oh, yeah.

Annie Schwab: I think the tax practitioners are very concerned. I can speak on their behalf. Um, I think taxpayers are also wondering, what is this all going to mean for me, and how am I going to get answers? And how is, you know, how am I going to get my refund so fast? Um, as in previous years, [00:22:00] so I, I don't when would we even expect a plan to come out or some strategic mission? Because we haven't even gotten Commissioner Danny long in. Sorry. Billy Long. He's still. He's still hanging out there like waiting. Do. Waiting and waiting and waiting.

Roger Harris: I think we're on. What, your fourth or fifth replacement? Trying to replace you. We're at number four now. Or five.

Annie Schwab: Who's going to come out and.

Danny Werfel: Be.

Danny Werfel: The acting commissioner? Who? Who? From what I understand is [00:22:30] a terrific. Leader and thinker, Mike Falkender. But he has a big plate as just as deputy secretary of Treasury. Right. And so, um, so, yeah, I do, uh, wish, uh, there to be a confirmed, uh, commissioner. Um, uh, but I also have beyond that, I want to confirm, Commissioner, that is going to answer some of the questions that I think taxpayers and the nation [00:23:00] should have. I, I start at the big the biggest premise of all is my love of country. Uh, and I am a firm believer that a healthy nation needs a healthy tax system. A healthy tax system needs a healthy tax authority. Um, it may not be pleasant. Uh, you know, nobody throws a parade for the tax system or the tax authority. Sometimes in order to have [00:23:30] a healthy, thriving country, a healthy, thriving America, there's some work that's done in the trenches that isn't fun or popular or, you know, that you're not going to, you know, kind of get cheers when you mention it, uh, in front of a crowd. And that's okay. There are times that that you will and there are times that you won't. And our tax system is one of those where it's just like, you got to grind it out. You got to do the hard work because it's an essential puzzle [00:24:00] piece to, uh, to put together a great country and a great nation. Um, and so we need to be pushing, uh, these, these questions. It's easy politics to say the IRS stinks or taxes. You know who needs them? Uh, but the reality is, is that, uh, is that essential to every successful nation in the history of our planet has been, um, a successful, [00:24:30] uh, tax system. None of them have been popular.

Roger Harris: But they never will be.

Danny Werfel: Thriving nations have high performing tax systems, you know, and that's that's where we need not high taxes, unnecessarily high taxes, whatever the tax rate is high, medium, low. You love it. You got the tax break you wanted. You didn't. Whatever. However that plays out, the underlying system needs to work. And that means fairness. It means the [00:25:00] phone calls are answered. It means the computer systems work. All of that, uh, has to work effectively.

Roger Harris: Right? And I can think of a thousand questions. But you're right. I mean, first of all, the IRS never has been and never will be popular, particularly with politicians. No one ever got elected by talking about how they funded the IRS or made the IRS bigger and better. But it is a critical part. I mean, our our tax system is it's voluntary, but you do have to comply with it. And we all expect, if I'm complying with it, that my neighbor's complying [00:25:30] with it, particularly in the small business community where it can create a competitive disadvantage if other people. So, I mean, I think when we dig into the IRS, we all know we need a good functioning IRS. None of us like to pay taxes, but you just collect it. You don't come up with what the laws are and you don't set the rates, and you don't do all the things that we're more.

Roger Harris: Frustrated.

Roger Harris: With.

Danny Werfel: It's one of my favorite analogies was my, uh, my I guess I'm a big football fan, my NFL referee, where [00:26:00] I feel like we are the referee and yeah, we we know we're going to get booed. We're going to get booed when we make the right calls. We're going to get booed when we make the wrong calls. Yeah, but there's no game without the referee. It's chaos. Right? Uh, you really, you know. And, um. And what are the refs need? They need training. You know, they need to be physically safe. You know, like.

Danny Werfel: Protect them with security.

Danny Werfel: So because the boos are one thing, but you don't want anything beyond that, right? Um, but [00:26:30] they don't need a parade, you know, and, and and it's fine for the refs to be booed. It is. It's an American pastime.

Danny Werfel: I never.

Roger Harris: We've all done it.

Danny Werfel: Yeah Like, I get it, I get it. I have thick skin and and and if I'm walking down the street and someone wants to boo me because I'm the IRS commissioner, boo away. Like that's my job, you know?

Danny Werfel: Yeah.

Danny Werfel: Um, but you need the IRS, and it needs to be functioning. And I think [00:27:00] fans like, I think ultimately you modernize you. You come up with instant replay to make sure the calls are more and more accurate. Um, and, uh, and you want the referees, uh, to increasingly get it right so that the right team wins. Um, no different here. Uh, right here. You want those that are going to play by the rules, those that are going to do their civic duty to pay their taxes. You want the IRS to leave them [00:27:30] alone and not audit them? Uh, you want, uh, the you want the IRS to answer their, their calls, get their refunds out quickly. Um, be an effective, uh, referee for them and those that aren't going to play by the rules. You want the, uh, the referee to call fouls, um.

Roger Harris: And call the flag correctly.

Danny Werfel: Throw the flag. Yeah. So, um, so I again, I think politics can sometimes, you know, kind of get, [00:28:00] get messy and, and then people conflate and say, oh, well, someone just got up on stage and said, boo! Irs and we all cheered. Great, go ahead and do that. But at the end of the day, fund it and invest in it and make sure that it's successful. Um, that's that's my my bottom line.

Annie Schwab: I love your perspective on all of this. You have such a vision and such a great perspective. You can even explain it to to people who are not, you know, in the trenches with you. I just love, love [00:28:30] it. I can I can tell your passion for it. So dare I ask why you left the IRS?

Roger Harris: Yeah, talk about that.

Roger Harris: Yeah, that that had to be tough because.

Danny Werfel: I, I.People you know, it's funny in the moment, you know, you feel differently and you, you diagnose the issue differently than with the passage of time. But I also had some mentors in the moment. And and the reality is I think the question is, [00:29:00] is kind of interesting. Why did you resign instead of, uh, having, uh, Trump fire you? And the reality is, is that, you know, I was fired, if you think about it. Right? Yeah. I'll give you an example. Let's say you're the anti. Let's say you are the, um, CFO of Coca-Cola. Let's say you're the CFO of the.

Annie Schwab: I'll take it. Um hum.

Danny Werfel: Yeah. Yeah. Right. And let's say you.

Danny Werfel: Wake up one morning and [00:29:30] the CEO of Coca-Cola has issued a press release saying, we are proud to announce we have selected a new CFO. And that CFO is John Smith. Welcome, John Smith. He's going to do great things as CFO at Coca-Cola. Now you're going to call home to your family or spouse or whoever, and you're going to say, I was just fired. You're not going to say, um huh. What should I do now? [00:30:00] Know, the CEO has just announced their intention to bring on a new CFO. That was your job. Um, and so in some ways, in that moment that Billy Long was announced as the next IRS commissioner, it's kind of interesting question to say why resign? Why not force him to fire you? Because that's the leader, the elected leader, basically saying, this is who I want as IRS commissioner and it's not you.

Annie Schwab: You're right.

Danny Werfel: So now. [00:30:30]So now. So now let's go to the afternoon of January 20th, assuming I don't resign. Now, there's a lot of confusion about what my role is. The interest of the Treasury secretary in the white House is to have me leave so that they can get their preferred person in. So now my, you know, so. So what is my role is my role to advance and advocate for this new commissioner is, [00:31:00] is, you know, and so ultimately and it was a confusing moment, but I searched for a true north, which I always try to do in confusing moments. And my true north was just was to ask Scott Bessent, the incoming Treasury secretary, what his preference was. This is my new boss.

Roger Harris: Right?

Danny Werfel: And and and what what did he think would be best? Would it be to, uh, to stand down and resign on January 20th [00:31:30] at noon? Would it be to stay for 30 days and help with the transition? Would be stay to end of filing season or stay until Billy Long gets confirmed? And I wanted to talk to him about the expectations of this unusual and unprecedented situation where you have this commissioner with multiple years left on his term, kind of lame duck trying to, you know, with a team that's trying to get their guy confirmed. And I felt like if I could sort that out with him in [00:32:00] terms of timing and role and expectation, then than I would have stayed. But he never responded. Um.

Roger Harris: Wow.

Danny Werfel: Despite multiple efforts to get in touch with him and ultimately, uh, so this is the Thursday night, I'm holding out hope that he's going to respond.

Danny Werfel: And we're making a final push thursday night before the inauguration, which was coming that Monday. And I still hadn't heard. I did [00:32:30] some soul searching, and I felt like his lack of response was my answer.

Roger Harris: Yeah.

Danny Werfel: And, uh.

Danny Werfel: And I kind of came up with a framework that if I don't hear from him by the inauguration, then the answer is I should I should resign. So so I know that's a long winded answer, but I always wanted to make sure people understood and be transparent about where my thinking was.

Roger Harris: No, I think that that's a great insight because I don't think I mean, I think we can all maybe put ourselves in the position when [00:33:00] you hear your replacement being announced. I'm assuming you didn't know that until you I mean, nobody called you and said we're going to announce the replacement. You found out like we all did, that there was a there was a replacement for you.

Danny Werfel: Yeah. Just like Annie just lost.Her job as CF of coca Cola, and i'm so sorry.

Roger Harris: Yeah, yeah. Uh, and I and I know that was, you know, one of the things that that I particularly liked about your time at the IRS. And I know when your announcement, I don't think any [00:33:30] of us were surprised by the announcement you made. I think we were disappointed in it. We kept hoping that, you know, maybe you were going to be able to, to, to ride this thing out. But you were you had such a great outreach to our community, the, the, the tax professional community that, uh, you did things, you know, that we had not seen before and in ways of reaching out to us for our perspective and things like that. And, and I think that's what we all hope [00:34:00] continues. But I don't know if that was unique to you. Can you talk a little bit about, you know, why you because you were unique in that a lot of people talked to us, but you listen to us. And I think that was something that was, um, greatly appreciated and hopefully will be repeated. But why did you do that? And can you make us feel better?

Danny Werfel: I that comes from my my experience growing up in, in [00:34:30] government, uh, and understanding the, the, the pros and cons of things like the public comment process. Right. Like, if you create policy, uh, and, uh, and priorities and the strategic direction, and you do it behind closed doors without seeking input from the impacted stakeholders. You can do it quicker. [00:35:00] Um, uh, for sure. Um, you can avoid, uh, criticism and tension and complications, but it won't be as, in my opinion, as, as as thoughtful and as effective and as impactful and as resilient in the long run by, by seeking input from those that are impacted by it. It creates a cost because [00:35:30] it's it's sometimes it's hard and and it takes sometimes a public comment process can take months. Sometimes it can take weeks or days. But um, but I always saw value in it and I always felt like I was a smarter Martyr leader, um, and could develop and lead smarter policies and priorities. If I not only open the doors or open the windows to input, but [00:36:00] also adjusted approaches and you never going to make everyone happy, right? You're always going to.

Danny Werfel: I've experienced it in town hall meetings with external stakeholders and public hearings. All of it's like where two different stakeholders like, say, the state of Ohio and the state of Nevada standing up at a public hearing. And the state of Nevada says, if you're going to regulate, do it this way. Path A is the only way that works for us. And [00:36:30] State of Ohio turns up. It stands up and says path A is a disaster.

Danny Werfel: It has to be path B, right?

Danny Werfel: I've just so I get it. But then but the fact that that Ohio and Nevada can then hear my explanation for how we we squared the circle. Everyone's better for it. It just takes longer. And so there's a tension between. And I see it with the Doge and what's going on today. Like [00:37:00] there's a tension between agility and speed and real impact and like, look, the gears of government don't need to grind slowly. Look at what the Doge is doing. But there's a cost there because you're not providing, uh, an opportunity for people to weigh in on what the impacts are. And, um, and there might be and I think there are enormously complicated implications to the government moving this quickly, [00:37:30] uh, that need to be unpacked. And so I think why I did it was I was trained to do it, uh, and I believe in it as the right way to run a public sector organization.

Roger Harris: Well, I can tell you this. And for our listeners who don't understand what we're talking about. The IRS runs I'm going to use this as an example. And I'm going to ask Amy to comment because she attended one of these sessions. Those IRS forums around the country where they offer continuing education. And Commissioner Werfel, you would appear at not all [00:38:00] of them, but most of them, and have an hour where you spoke to the group. But what he did that I think stood out unique to to Commissioner Werfel was you held small group meetings with people who attended those sessions for, I don't know, hour and a half. I don't know how long they lasted, where there was feedback, where you wanted to hear from the people in the audience about the challenges that they were facing. And as important, you were able, because sometimes we all oversimplify problems [00:38:30] and we think, well, this can't be that hard to fix. But then when you had the opportunity to to respond back about some challenges that maybe we wouldn't have been aware of in, in what we were raising. I know, Annie, you attended in Dallas last year and that was the first time. And yeah, talk about the comments that you gave to me after that session.

Annie Schwab: Well, it was just it was so unique and such a wonderful opportunity. It was a small room. Um, the table was set up in a square so that you could see each and everybody's, um, their face, [00:39:00] their comments, their reactions. Um, and you basically allowed us to go around the room expressing concern, um, giving you our opinion. And I was so amazed. It was like you were looking at everyone directly in the eye, listening and actually caring about what they were. They were saying. And then your your comments afterwards were, thank you so much for sharing. I needed to hear that or I wanted that information. And it sounded like you cared. You actually cared [00:39:30] what people had to say. And it felt so good because anybody can send in a public comment, um, or, you know, post something on social media or give their opinion on, on this, but the fact that you wanted to hear from us and then reacted based on what we said, took it to heart. Um, was really just fascinating. That's I was. Thank you for allowing me in the room. I felt very honored. Um, it was a wonderful experience for me.

Roger Harris: Did we ever say anything that helped? Did we [00:40:00] ever say anything intelligent in any of those meetings?

Danny Werfel: I appreciate I really appreciate that.

Danny Werfel: I, I do care, um, I care deeply about, uh, the government, uh, care about the IRS. Uh, I care about the people, uh, in the IRS, the workforce. Um, and I care about the stakeholders and and their different ways in which we collectively partner to deliver [00:40:30] the tax system, um, and, uh, and so and so there's, uh, there's, you know, There's was a it's true to who I am. Um, and you know who taught me, um, uh, to to be. I've had many teachers on on how to listen. Uh, my wife is a really good teacher of me on how to be a better listener. But, you know, who really also taught me how to be a good listener is John Koskinen. [00:41:00]

Danny Werfel: I, you know, there are different leaders that you grow up underneath and you try to learn and be inspired by them. And, and John is a great listener. Um, he is the type of person that, uh, when you meet him and when you engage with him, both personally or professionally, he will ask more questions than give answers. And, um, when I was at the IRS [00:41:30] the first time he came in as the as the confirmed commissioner, but he was going through Senate confirmation, and I watched him. I was younger then. I was in my early 40s and, and and this was a substantial jump in my leadership experience, even though I'd been the deputy director at OMB. But either way, um, and I watched John come in and go on a listening tour. Um, and I was like, yeah, that's how you do it. Um, where he just, you where he did exactly [00:42:00]what you're describing.

Annie Schwab: Just absorb every just absorb and listen and process instead of.

Danny Werfel: He's really good. Yeah.

Roger Harris: Yeah. All right. I gotta ask you about this Annie and I's podcast. This is. I don't know, we're in our mid 50s. It seems like half of them had something to do with the employee retention credit. And it seems like your whole commissioner time as commissioner was in embroiled in the controversy about the employee retention credit. Was that was [00:42:30] it as bad on the inside as it seemed on the out? I mean, was I mean, I know there's such fraud and so many lessons to be learned that I hope we learn from it. But, um, that was one area.

Danny Werfel: Well, I gotta say.

Roger Harris: Listen to the outside.

Danny Werfel: I gotta say when, when, when when the Trump administration started and the Doge in the first kind of explosive moments of Doge where they were trying to get access to the Treasury payment systems and they were justifying it, [00:43:00] they were making public statements like, the government just lets all this fraud go.

Danny Werfel: Out, right? And they don't do anything to stop it. Right.

Danny Werfel: And I'mlike, well, we have short memories.

Danny Werfel: We just did a moratorium on the IRC and people were critical of this.

Danny Werfel: Like, what gives you the right or the authority to stop these payments? You know, just because you happen to think they're fraud. And then just a few months later, you know, we're in it's just just, you know, [00:43:30] fascinating, uh, moment for me to be, like seeing these public statements, saying the government just lets payments go out, they don't do anything to stop it, right? Yeah, you're right on all the all the heat and criticism for the for the ERC. Look, there are no perfect paths. I over and over again, one of my favorite Danny isms, if you will, at the IRS and in life is there are no perfect paths. There are only imperfect ones. Let's find and pick [00:44:00] the best of the imperfect. And so there was. It wasn't. It was never a no brainer to issue the moratorium. I struggled, we struggled with it and how to construct it and how to, you know, we we struggled, um, with doing the risk assessments, um, to, uh, to understand, you know, how to triage, uh, the portfolio, uh, effectively. It was it was a case in which the, [00:44:30] the Congress, and the president, who signed the law, designed a program that was extremely difficult to administer with fidelity. Um, and it had it had holes in it. The fact that that it had April 2025, uh, expiration date for filing for something that could, um, that, that that you had to be eligible for ending on December 31st, 2021. Um, the [00:45:00] fact that it was done, uh, through, uh, an amended return, um, there were a million different reasons why it was a complicated credit to, uh, to implement. Um, I, I would take the same step we took. I do believe that that there are moments where the risk and uncertainty of Widespread program [00:45:30] integrity issues. Widespread fraud. Widespread waste. Us calls for a break glass moment. And this was one of them. And there wasn't unanimity inside the IRS, um, for my decision. It was a mixed bag, but, uh, but every once in a while you have to break glass. And this was was one of them.

Roger Harris: Oh, yeah.

Danny Werfel: And it allowed us the time we needed to ferret out better [00:46:00] the clearly ineligible from the clearly eligible and then figure out what to do with the gray. So, um, it just it just was it was an example of another government program where you can design it in a very difficult way to implement and then like turn to the implementer and say, gosh, you people are incompetent. Well, you know, we didn't have all the tools we needed. Um, we weren't again, not perfect. There are things we could have done better and smarter. But. [00:46:30] But I think it was the right decision to do the moratorium.

Roger Harris: Well, it's still a problem today. I mean, there's there's, you know, it's being addressed, at least in the House version, you know, of the tax bill, you know, to so it's it's not going away. I mean, the only you know, I think you've heard me say this, you've heard a lot of people on our side say this. It was designed in the middle of a pandemic when all of us were panicking. And but clearly there were some design flaws. And, uh, the fraudsters came in in a hurry, and, uh, it just took [00:47:00] off, and, uh, I thought the moratorium was something was needed. The moratorium was certainly one thing, because it was just rocketing out of hand that the fraudsters had taken over and were overwhelming the system with fraudulent claims, with no way to. You didn't even have to tell them why you were eligible. You just had to send a form in and put a number on the right line and ask for money.

Danny Werfel: And well, it was you mentioned these sessions that I had, uh, with, uh, with folks like you and Annie and others [00:47:30] from around the country. And that was part of what led to the moratorium, was input about, uh, about these, uh, these concerns. There's were, you know, kind of, uh, uh, you know, the Red star cluster was being fired from the from the boat. Right? You guys are saying there's a problem. Um, and so there was, uh, you know, you know, it was a bold move at the time. It compared to the stuff that's happening now, it doesn't [00:48:00] seem as bold, but it was bold.

Roger Harris: It's nothing. Yeah.

Danny Werfel: I would say Roger the other the, you know, as I look at my just for what it's worth is I think back about some of the big things that I was tackling or you use the term embroiled, um, direct file is another one. Um, and uh, I learned a lot from, from both the substance and the politics of of the Direct File Initiative. Um, so, [00:48:30] so I think I think there's a couple of things where we could do a case study on, um, on, on public management or public administration. And because it has, it has a richness of all these different issues politics, operations, risk, etc. IRC, uh, is one of them. Employee retention credit as, as is direct file as well.

Roger Harris: Mhm. Yeah.

Roger Harris: Um we don't have too much more. We could do this for another hour, but we're [00:49:00] not going to ask you. Maybe we can get you back for another one. But um, as you sit here today and you look at where we are and all the challenges, is there any. I don't know if it's a wish list, advice, commentary. What? What do you think? Because we all know the IRS has lost a lot of very good, smart people through either voluntary or involuntary means. And yet the challenges of employment, you know, administering a tax system [00:49:30] still exist. What would you like to see or hope to see, or what would if you could, if you were king of the world, you know, now, what would you do?

Danny Werfel: Well, I you know, it's interesting. I, I, it's a, it's a it's a difficult question, but I'll start here. I think we need to elevate the IRS importance to our economy, our stability as a nation from an economics and a market standpoint. [00:50:00] So for example, if if the head of the Fed Reserve, uh, Chairman Powell announced tonight that he was stepping down, I mean, there would be an immediate focus and an expectation, and everyone would drop everything to figure out who the next chairman is going to be. They wouldn't allow there to be an acting for that long. The Senate would move quickly. Sure. You know because. Because it has market impacts. I see the IRS through [00:50:30] the same lens. Um, the the IRS is is a critical. In fact, in some ways it impacts people more than the fed because.

Danny Werfel: Uh. Oh, yeah. Because every American.

Danny Werfel: Every American, every business is touched by the IRS. I know that the tax system causes great stress for people. It stresses them out. Um, it leads them to it burdens them. Um, [00:51:00] they need help in, in in dealing with that burden. Um, I believe that, you know, I wrote an op ed, uh. Where the premise was that corporations may want tax cuts, but they don't want tax chaos. And, um. And so my wish is that people drew a better connected line between the role the IRS plays and the success, stability and [00:51:30] certainty of our economy and our economic security. And I think if they did that, there would be less, um, passiveness in terms of the leadership, the functionality, the accountability, all of it, the funding. You know, it's kind of like if we saw this, to throw another analogy as a critical bridge that crosses a critical waterway, and we need that bridge to be stable. [00:52:00] And we saw that it was shaking or old or creaky. Everyone would would say, we have to fix the bridge.

Roger Harris: Right, right, right.

Danny Werfel: That's what that's my wish. I wish people had that perspective about the IRS because I believe it is fundamentally mentally a key part of of our country and our economy, and people just don't seem to see it that way.

Roger Harris: No, you're right, they don't. And it's always been this pendulum of give them money, take all my money, give them technology, [00:52:30] take away technology, give them people, take away people. And at some point you don't do that to something that you realize is important to critical. Critical. Yeah yeah.

Annie Schwab: I agree. Yeah.

Roger Harris: All right. I've got to do a personal comment before, but Annie, you got any last questions before I jump into, uh, something personal with the commissioner?

Annie Schwab: Um, no, just it's been such a pleasure to have you. And I love your insight and the way. And your analogies or metaphors, everything. It just. It's wonderful [00:53:00] to have that. And now I totally understand why you are so busy. Because everybody wants to talk to you, and everybody wants to get your opinion and and your suggestions. Um, so clearly you're not just hanging out at the beach, enjoying some vacay, um, or spending time, you know, doing some hobbies. Uh, you are quite busy, so I appreciate you taking time out to.

Danny Werfel: I will say that my my daughter who goes to University of Georgia, uh, when she came home for spring break, um, in March, [00:53:30] she commented to me. She said, dad, you are the busiest unemployed person on the planet.

Danny Werfel: You got to see, like, how packed my days are. So I thought that was a good line.

Roger Harris: That's before I comment on the University of Georgia comment. What's your future look like when you. Have you got any plans or are you still.

Danny Werfel: I'm not I'm not prepared to announce specifics, but I am, uh, I am, uh, heading, [00:54:00] uh, my full time gig, uh, will be, uh, in academia. I'm going to join the ranks of universities. Um, nice.

Danny Werfel: and not not prepared to to share details yet, but I've really become passionate around, um, some key things that I'd like to contribute to. Civics and civics, literacy. Um, uh, students, uh, making decisions on career paths, um, [00:54:30] what they want to major in. And I'd like to not lose a generation of leaders, and I want to be a part of universities thinking through how to recruit in public policy students and those that would come into or public administration students. Um, I'm probably going to have a little bit of a mixture of different roles, you know, maybe a board here or there on the, on the tax or corporate side. But, uh, but my main gig, which I think I'll announce some details on or be able to share more broadly, [00:55:00] um, probably in June or July will be, um, what do they say? Hanging my hat. Where do you hang your hat?

Danny Werfel: Hanging my hat at a University

Annie Schwab: Well that's exciting.

Roger Harris: Yeah. That's great. Now I've got. You've mentioned the University of Georgia. Those of you that most of you are listening to this, but if you're looking on YouTube, you see he has a Georgia hat on. Um, my first contact with Commissioner, uh, was on a phone call and somebody's dog barked [00:55:30] in the background, and his comment was, that doesn't bother me. My daughter goes to the University of Georgia, so I'm used to hearing people bark. And I remember my comment then was you instantly became my favorite commissioner because I live in Athens, Georgia, and I'm a huge University of Georgia fan. And uh, so it has been a pleasure to share. And the other thing I told somebody. Every meeting I've been in with him, uh, he ended by saying, go Dawgs. So you [00:56:00] have earned added respect to be my favorite commissioner, but it's way beyond just the fact that you we have a common tide of the University of Georgia, and I would hope that you don't tie your academic future to somebody else in the SEC. At least if it's not Georgia.

Annie Schwab: Oh, wow. Yeah.

Danny Werfel: You know what? I'm looking around, but I. I must have put it. I, I don't know what I did with my Kirby Smart for president button, but I have on [00:56:30]my desk i could have it up for for the YouTube audience.

Roger Harris: Yes. I'm very. If I'd have known you were going to wear your hat, I would have worn mine. Because it's, uh. And as I've told him privately. And I'll tell him publicly, he's always welcome in Athens and, uh, hope to see him at a football game this year. You got any predictions for the upcoming football?

Danny Werfel: Yeah.

Danny Werfel: I'm bullish on this team. I really am. And, uh, I think they're going to be hungry. I think they learned [00:57:00] a lot, uh, from the playoffs last year. Uh, in in, uh, in in Kirby, I trust, um, I'm super excited. They have a great home schedule. Just a terrific home schedule. So Sanford is going to be rocking this season. I'm excited to come down well.

Roger Harris: And please, when you come by, let us know you're here. You're always welcome to come by. And we will not ask you any tax questions. We'll talk nothing but but college football.

Danny Werfel: Sounds like a plan. [00:57:30]

Roger Harris: All right. Any any final words?

Annie Schwab: No. This has been great. Hopefully we can get you back another time. Um, I appreciate all your insight and your willingness to be here today. So thank you very much.

Danny Werfel: My pleasure.

Roger Harris: You would like to say we would just again. Any final comments from you?

Danny Werfel: Just thank you. Thank you for all you did while I was there to support me as Commissioner. Thank you for having me on this podcast and giving a voice and a platform for people like me and Terry Lemons and others [00:58:00] to, to to talk, uh, and talk with, with practitioners about about the things that we all should be talking about and pushing and and shining a light on to make sure that we're, um, part of this solution for our tax system going forward. So thank you.

Roger Harris: Well, no thank you. This is this has been, uh, a great honor to have you here. And we appreciate all everything you did at your time at the IRS. We we look forward to to staying engaged with you going forward in your [00:58:30] academic and whatever other ventures you take. And it's just really been a pleasure. It's been a. Again, glad I got a chance to cross paths with you. And, uh, hopefully that'll continue on. And for all of you that listened, I hope you enjoyed today's I don't know how you couldn't. It was a great session with Commissioner Werfel. Annie, thank you, as always for being here. Commissioner, thank you again for joining us. Thank you guys for listening, and we'll hope you'll be back soon on another federal tax update podcast. [00:59:00]

Roger Harris: Great. Going to stop it. Stay on. Don't leave.