The Internal Revenue Service has reorganized its leadership structure at the top, with a single deputy IRS commissioner instead of two, and four chief executives to lead taxpayer service, compliance, information technology and operations.
This will be the first reorganization for the IRS in over 20 years and reflects the new transformation goals underway at the agency, which has seen its budget continually come under attack from Republicans in Congress. The IRS is supposed to receive an extra $80 billion in funding over 10 years from last year's Inflation Reduction Act for taxpayer service, technology upgrades and enforcement, but that amount was
The IRS said the changes would streamline operational efficiencies and align with major transformation work underway at the agency through the Inflation Reduction Act funding.
"We have a tremendous amount of transformation work taking place at the IRS," said IRS Commissioner Danny Werfel during a press conference Wednesday. "These changes, which are part of the Inflation Reduction Act funding, touch every part of our operations at the IRS, from taxpayer service to tax enforcement to information technology. We have made tremendous progress on this work since the IRA funding was enacted in 2002 and since I arrived here 10 months ago. As you can see in the IRS Strategic Operating Plan, and in our recent announcements, many more changes are on the horizon. Those changes will be seen in the quickly approaching 2024 filing season, and in the months and years after that. By any measure, this is a historic time at the IRS."
"In light of these historic changes, the IRS leadership team and I have given a lot of thought on the best way to approach this," Werfel continued. "We have wave after wave of change coming that will improve and update our agency operations. And we have spent a lot of time thinking about the best way to approach these changes, not just from an operational standpoint, but from a management standpoint. When I arrived at the IRS in March, I was not in a rush to make changes. I wanted to take time to learn more about IRS operations and to talk directly to IRS employees, ranging from the frontline staff doing the actual work for the managers involved in daily operations as well as our senior leaders. One thing that struck me is the need to have fast and efficient operations at the very top of the organization. The current structure has been here a long time. The IRS has not had a major structural change since the 2000 reorganization took place, putting in place changes from another historic period at the IRS, the Restructuring and Reform Act of 1998. Since then, there have been minimal changes in the high level organizational chart at the IRS."
The changes are expected to occur in early 2024. The leadership changes won't immediately affect the vast majority of IRS employees or their day-to-day work, only the reporting structure for these top positions, according to Werfel. The IRS will be working with Congress, the National Treasury Employees Union and others as plans progress on the changes.
The current IRS leadership structure dates back to 2000, when the agency recentered operations around taxpayer segments following enactment of the IRS Restructuring and Reorganization Act of 1998. Minor organizational changes were put in place in the years that followed, including adding a second IRS deputy commissioner in 2003 to oversee operations support.
The new organizational structure reflects years of effort at the IRS. The roots of the change date to the Taxpayer First Act Report to Congress in January 2021 and are included in the new
"Our transformation work and previous reviews highlight how the current structure limits our ability to operate as an integrated organization with shared goals," Werfel said in a statement. "The entire landscape around tax administration — including the economy, tax laws and technology — have undergone major changes since the last IRS reorganization. The new structure will help the top leadership to work together to drive faster and more effective progress. It's critical we deliver for taxpayers and the nation as we work to make important improvements at the IRS."
As part of the change in organizational structure, the IRS is shifting to a single deputy IRS commissioner model. Werfel said a similar approach has worked successfully both inside and outside government, and also reflects the model used at the Treasury Department.
The new IRS deputy commissioner role will be filled by Doug O'Donnell, who is currently deputy commissioner for services and enforcement. O'Donnell served as acting IRS commissioner from November 2022 through March 2023 and has spent more than 37 years at the IRS in a variety of roles. Prior to becoming deputy commissioner for services and enforcement in 2021, he was commissioner of the IRS Large Business and International Division for nearly six years. He joined the IRS in 1986.
Reporting to him will be four new IRS chief positions and IRS Online Services. They will all work closely with Werfel:
The new chief of Taxpayer Service will be Ken Corbin, who is currently IRS Wage and Investment (W&I) commissioner. The new Taxpayer Service area will include many of the major taxpayer functions currently handled by Corbin's W&I organization, including handling the filing season work and taxpayer-facing operations including toll-free operations, tax return processing centers, Taxpayer Assistance Centers and tax forms, taxpayer correspondence and publication development.
The new chief Taxpayer Compliance Officer will be Heather Maloy, who is currently the IRS chief of staff. She will oversee IRS compliance operations including in the Large Business and International Division, the Small Business/Self Employed division, the Tax Exempt and Government Entities division, IRS Criminal Investigation, the Office of Professional Responsibility, the Return Preparer Office and the Whistleblower Office.
With Maloy moving into this new position, Jonathan Warsh, who currently serves as senior counselor to the IRS commissioner, will serve as acting IRS chief of staff.
"Compliance is an area where the IRS will be focused on during transformation work," Werfel stated. "Having a single leadership role focused on this will help our efforts going forward in this critical area for tax administration."
The chief information officer will be Rajiv Uppal, who will join the IRS in 2024. He currently serves as director of the Office of Information Technology and chief information officer for the Centers for Medicare and Medicaid Services, part of the U.S. Department of Health and Human Services.
The new chief position will include the current IRS information technology division, which is currently led by IRS's chief technology officer and acting chief information officer, Kaschit Pandya.
"Our work in the technology arena is critical to our current work on everything from filing season to our phone lines and our online tools," Werfel stated. "And we must continue to make foundational improvements in this area to ensure the success of our transformation work and bringing new tools to help taxpayers. Creating this position will be critical to making sure information technology works closely with our business units and our transformation teams to create successes for taxpayers and the tax system, now and in the future."
The new chief operating officer will be Melanie Krause. She joined the IRS in October 2021 in her current role as the chief data and analytics officer where she also leads Research, Applied Analytics and Statistics. Krause also co-leads the Data and Analytics Strategic Integration Board, where she works to advance areas of strategic importance to the agency, including using AI and other advanced analytics. She served as acting deputy commissioner for services and enforcement from November 2022 to March 2023 and has worked at the Government Accountability Office and the Department of Veterans Affairs Office of Inspector General.
Offices under the Chief Operating Officer include the Human Capital Office; the Chief Financial Office; Procurement; Facilities Management and Security Services; Privacy Governmental Liaison and Disclosure; RAAS; the Risk Office and others.
"The operating chief function will continue working to expand and enhance these vital areas at the IRS and to tax administration and work closely with the IRS business units to support our tax administration goals," Werfel stated. "This alignment will allow the chief operating officer to fully focus on these high priority areas in ways that we were unable to under the old structure."
Werfel noted during the press conference that currently the deputy commissioner for services and enforcement oversees both the nation's tax season and all of the IRS tax compliance work, while the deputy commissioner for operational support handles both information technology functions as well as other critical mission support areas, including contracting, budgeting, human resources, data analytics and more. The restructuring will allow the various chief executives to focus more on specific areas.
Werfel told reporters that the IRS will not need to seek approval from Congress for the changes, as it is not planning to reprogram its appropriations or reset the lines and guardrails of its budget. The law requires notification of Congress, however, and he said they have started that process.
Reactions from former IRS commissioners
Werfel briefed a number of his predecessors about the changes ahead of Wednesday's announcement. Former IRS Commissioner Charles Rettig welcomed the changes at the agency.
"IRS restructuring is long overdue," he said in an email to Accounting Today. "As the IRS enhances its operations using the important IRA funding, a more streamlined leadership structure will allow it to be more agile and operate more efficiently, especially if called upon during another crisis, whether COVID related or otherwise."
He noted that the IRS leadership changes should not impact the vast majority of the employees. "The framework is quite similar to a plan that dates back to the Taxpayer First Act Report provided to Congress in January 2021," said Rettig. "We felt it was important to separate primary leadership responsibility for Taxpayer Services from Compliance operations. They are different and each requires the undivided attention of an experienced IRS leader. The plan was obviously prepared and submitted while we were also coordinating many COVID related efforts. As such, the transition was to first create and staff the Taxpayer Experience Office, before embarking on a more significant overall structural change at a later date."
Rettig also praised the people who have been selected to lead the agency with Werfel.
"The chiefs that have been selected for Taxpayer Service, Compliance, Information and Operations are each highly experienced and respected," said Rettig. "While Rajiv Uppal is new to the IRS, Ken Corbin, Dr. Melanie Krause and Heather Maloy each have considerable IRS experience and are well regarded both inside the IRS and throughout the tax professional community. As Commissioner, I worked closely with Ken Corbin, Dr. Melanie Krause and Heather Maloy and firmly believe there are none better in either the public sector or the private sector. [They are] IRS Rock Stars who each care deeply about taxpayers and tax professionals, the IRS workforce, and serving our country."
Former IRS Commissioner John Koskinen believes the restructuring will be beneficial. "I think the new structure for the IRS will help the Commissioner and his Deputy, who is a very experienced executive, coordinate and oversee more efficiently the important range of agency activities," he said in an email to Accounting Today. "I think the focus on taxpayer services, compliance, IT and operations makes sense, especially now that funding is available to improve operations in each of those areas."
Mark Everson, a former IRS commissioner who is now a vice chairman at Alliantgroup, a tax consulting firm, believes the restructuring makes sense and pointed out he had originated the two-deputy structure that is now changing.
"He's been in the job now 10 months," Everson said of Werfel. "He's looked around and he's structuring it the way he thinks will be most effective. And that's what you do when you go into a job like that. It's a totally normal course of events."
Everson noted that Werfel will still have a chief of staff, a congressional public affairs person, a chief counsel and other advocates. "What he's going to do is he's elevating things like IT, so it will be more directly part of the front office, and there will only be one deputy," Everson told Accounting Today in an interview. "He did brief the former commissioners yesterday. It was very courteous. We had a long conversation with him. And I think what he's doing is this will give him more access to the IT directly and areas like that. Instead of two deputies and a chief of staff in the business units, you end up with one deputy and a chief of staff and then these four principal players as people directly in his office."
Everson noted that it's not as extensive a reorganization as the Internal Revenue Service Restructuring and Reform Act of 1998 and the subsequent restructuring in 2000.
"It won't be impacting rank and file employees on the ground, but it will impact the decision making and I think he's 100% entitled to structure it the way things will be most effective," said Everson. "I happen to be the one who put in the two-deputy structure 20 years ago. And as I've said to people, 'Look, it's lasted a long time.' Organizational structures usually last 20 years, so it's just inevitable it would change at some stage and he knows what he's doing."
However, Everson pointed out that the IRS will still be facing challenges even after the restructuring.
"The underlying challenges are well known," said Everson. "It's hiring and training all the people for enforcement and customer service reps, but they still have a lot of work to do in terms of getting people to adhere to procedures. They've got to make sure that they keep their nose clean as they go up the organization."
The realignment of the information technology function could be helpful as well.
"The oversight of the IT is a little closer to the commissioner, and that's appropriate at this time, given just how important all the new technologies will be," said Everson. "That is a big continuing concern with data privacy. Are they putting in the right protocols to do the analysis? There's a whole host of issues there. Those challenges are mushrooming."
Political considerations will also be important.
"You're just a couple of weeks away from election year, and you see this drumbeat of press releases championing what's going on," said Everson. "You've got pressure from the administration to demonstrate that you've got results and tax administration is one of the policy points being emphasized by the administration, and certainly the Treasury. That pressure is at tension with the need to be very deliberate and make sure that the quality is there and there aren't any missteps. The more that the commissioner can make sure he has people around him who are balancing those factors, that's important, and I think this will help him do that."
