Picture a refrigerator with its power cord yanked from the wall. Everything inside stays fresh for the first hour, maybe even the first day. The milk doesn’t sour, the vegetables remain crisp, and you might not notice anything wrong. But without that steady flow of electricity, deterioration is inevitable. And when it starts, it happens fast.
This analogy comes from Danny Werfel, the former 50th Commissioner of the Internal Revenue Service, during a recent Federal Tax Updates podcast with hosts Roger Harris, EA, and Annie Schwab, CPA. Werfel holds a unique distinction in government service: he’s the only person to serve as IRS commissioner twice, first as acting commissioner during the 2013 political targeting controversy and then as confirmed commissioner a decade later with Inflation Reduction Act funding in hand.
“The recent filing season went smoothly because of the momentum we built,” Werfel explained. “But unless power is restored, that milk is going to spoil.” The power he’s talking about? Sustained leadership, institutional knowledge, and modernization funding, all of which have been systematically cut since his resignation in January.
For tax practitioners, the situation is a warning about critical economic infrastructure that touches every American taxpayer and business. And as someone fielding calls from around the world about government efficiency initiatives, Werfel brings a perspective that extends far beyond tax administration.
Building Tomorrow’s Stadium While Today’s Games Continue
The challenge Werfel faced as commissioner mirrors what the Washington Commanders confronted when they announced plans for a new stadium. You can’t just abandon the old venue because fans still need somewhere to watch games for the next five years while construction proceeds.
“You still need an operating stadium for five seasons,” Werfel told Harris and Schwab, painting a vivid picture. “The parking lot can’t be littered with potholes. The bathroom stalls can’t all be broken, the food service vendors can’t be operating on faulty equipment.”
When Werfel returned to the commissioner’s office in 2023, he inherited an agency emerging from disaster. The 2022 filing season had record-low service levels, massive paper backlogs, and taxpayers who couldn’t reach anyone by phone. The Inflation Reduction Act funding provided an unprecedented opportunity, but taxpayers needed help immediately, while true modernization would take years.
His solution required strategic thinking about timing. First, launch massive hiring surges to “plug the holes in the dam.” That required more people answering phones, staffing walk-in centers, processing returns, and handling audits and collections. Simultaneously, the agency needed to develop a roadmap for an automated future requiring fewer employees.
“I also knew that eventually technology, AI and automation would ease the need for as many employees over time,” Werfel explained. “So we started to develop this roadmap that would mean we wouldn’t need as many employees in the future. But we saw it as a sequence where we would hire first and then start working feverishly towards that vision.”
This counterintuitive strategy worked. Phone wait times dropped, refunds were processed faster, and the 2024 filing season ran smoothly. But maintaining this delicate balance requires sustained leadership and clear vision.
The Silence That Spoke Volumes
Werfel’s resignation story reveals how quickly institutional stability can crumble. When Billy Long was announced as the next IRS commissioner, Werfel found himself in the unusual situation of being a confirmed commissioner with years left on his term who was suddenly facing replacement.
“It’s kind of like if you’re the CFO of Coca-Cola and you wake up to a press release saying ‘We’re proud to announce our new CFO,’“ Werfel explained. “You call home and say ‘I was just fired,’ not ‘What should I do now?’”
But Werfel wanted to handle the transition professionally. He contacted incoming Treasury Secretary Scott Bessent multiple times, seeking guidance on timing and expectations. Would it help to stay through filing season? Until Long’s confirmation? Thirty days for transition?
The response was deafening silence.
“Despite multiple efforts to get in touch with him, I never heard back,” Werfel recalled. “Thursday night before the inauguration, I’m making a final push and I still hadn’t heard. I did some soul searching, and I felt like his lack of response was my answer.”
To Werfel, the silence symbolized the abandonment of institutional continuity during a critical period. Filing season planning begins months in advance and requires coordination across technology systems, staffing levels, and operational procedures. Without stable leadership, these processes become guesswork rather than strategic preparation.
More Than Just Tax Collection: Critical Economic Infrastructure
Werfel’s broader government experience provides a crucial perspective here. Before working for the IRS, he spent years at the Office of Management and Budget handling Treasury payments, fraud prevention, and grants management. When questions arose about eliminating government agencies or massive spending cuts, his phone started ringing off the proverbial hook.
“When Federal Reserve Chairman Jerome Powell speaks, markets listen,” Werfel noted. “If Powell announced his resignation tonight, the Senate would drop everything to confirm his replacement. I see the IRS through the same lens. It impacts people more than the Fed because every American, every business is touched by the IRS.”
Yet we allow acting commissioners to serve indefinitely while confirmation processes stall. This creates the instability that undermines effective operations.
Werfel understands the IRS will never be popular. Like an NFL referee, “We know we’re going to get booed when we make the right calls. We’re going to get booed when we make the wrong calls. But there’s no game without the referee.”
Referees need training, safety, and functional equipment to do their jobs effectively, even if fans will always boo them. Similarly, regardless of political popularity, the IRS needs sustained investment and stable leadership.
Werfel’s bridge analogy drives the point home: If we saw a critical bridge becoming shaky and unstable, “everyone would say, we have to fix the bridge.” However, when the IRS shows similar warning signs, like leadership turnover, resource constraints, and outdated systems, we treat it as optional maintenance rather than critical infrastructure repair.
Learning From Those Who Live It Daily
One aspect of Werfel’s approach that impressed tax practitioners was his genuine engagement with their community. Schwab attended one of his small group sessions in Dallas and described the experience as a unique, wonderful opportunity. “You basically allowed us to go around the room expressing concerns, 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 said,” Schwab recalled.
This wasn’t political theater. Werfel credits this input with helping shape major decisions, including the Employee Retention Credit moratorium. “There were red flares being fired from the boat,” he explained, referring to practitioner warnings about widespread fraud. “You guys were saying ‘there’s a problem.’”
The decision to halt ERC payments wasn’t easy. “There are no perfect paths,” Werfel reflected, sharing one of his favorite sayings. “There are only imperfect ones. Let’s find and pick the best of the imperfect.” The moratorium faced criticism for stopping legitimate claims, but Werfel stands by it as a necessary “break glass moment” when program integrity was at risk.
This approach to stakeholder engagement came from mentorship by former commissioner John Koskinen, whom Werfel describes as “a great listener” who “will ask more questions than give answers.” It’s a management philosophy that treats complex policy challenges as collaborative problems rather than top-down mandates.
The Warning Signs Are Flashing
Today’s IRS faces a perfect storm of challenges. Multiple commissioner nominations have stalled, creating a leadership vacuum. Institutional knowledge has walked out the door. Modernization budgets have been zeroed out. And a potential new tax bill could add retroactive provisions requiring new forms, guidance, and processing systems.
“When I hear about the number of institutional leaders and knowledge that left, when I hear about zeroing out modernization budgets, when there’s a lack of consistency and stability in the IRS leadership ranks,” Werfel observed, “I think it only makes sense to raise the question: are we at risk?”
Complex operations don’t maintain themselves; they require constant attention, leadership, and strategic vision. When those elements disappear, deterioration happens quickly.
Filing season planning offers little margin for error. A smooth 2024 experience may create false confidence that the system is permanently fixed. But as Werfel warns, next year could look very different without restoring the “power” of stable leadership and sustained investment.
What Comes Next
Werfel’s post-IRS life reflects his commitment to public service through a different lens. He’s heading to academia to focus on civics education and recruit the next generation of public policy leaders. “I don’t want to lose a generation of leaders,” he explained, recognizing that government service needs talented people willing to tackle complex challenges.
His experience offers sobering lessons about government modernization. Success requires addressing immediate needs while building long-term capabilities. It demands sustained leadership that is willing to defend counterintuitive approaches. It also needs stakeholder engagement that treats implementation as a collaborative challenge rather than a bureaucratic mandate.
When the IRS phone lines go dark, processing delays stretch for months, and guidance becomes scarce and inconsistent, practitioners will be the ones explaining to frustrated clients why the system stopped working.
The current moment presents a fundamental choice: treat the IRS as critical economic infrastructure requiring sustained investment and stable leadership, or continue viewing it as a political target where disruption carries no consequences.
Werfel noted with his characteristic directness that “corporations may want tax cuts, but they don’t want tax chaos.” Neither should the rest of us. Listen to the full Federal Tax Updates podcast for more insight from Werfel’s interview. Some systems are too critical to fail and too complex to fix quickly once they break down.