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IRS Gives Bonuses To Tax-Delinquent Employees

by Mike Godfrey, Tax-News.com, Washington

28 April 2014


While an award program for Internal Revenue Service (IRS) employees complies with United States federal regulations, some employees with conduct issues, including the nonpayment of taxes, have received awards, according to a report released by the Treasury Inspector General for Tax Administration (TIGTA).

"These awards are designed to recognize and reward IRS employees for a job well done," said J. Russell George, Treasury Inspector General for Tax Administration. "However, while not prohibited, providing awards to employees who have been disciplined for failing to pay federal taxes appears to create a conflict with the IRS's charge of ensuring the integrity of the system of tax administration."

In its audit, TIGTA found that the IRS awards program complied with federal requirements to limit awards expenditures, and saved additional funds by keeping aggregate incentive payments, individual employee compensation, and aggregate awards below the federal limits.

For the 2011 fiscal year, the IRS awarded almost USD92m in cash and almost 520,000 hours of time off to 70,500 of its approximately 104,400 employees. For FY 2012, the IRS awarded USD86m in cash and almost 490,000 hours of time off to 67,870 of its approximately 98,000 employees.

However, it was also found that, between October 1, 2010 and December 31, 2012, more than 2,800 employees with recent substantiated conduct issues resulting in disciplinary action received more than USD2.8m in monetary awards and more than 27,000 hours in time-off awards. Among these, more than 1,100 IRS employees with substantiated federal tax compliance problems received more than USD1m in cash awards and more than 10,000 hours in time-off awards.

As a result, TIGTA recommended that the IRS should determine the feasibility of implementing a policy requiring management to consider conduct issues resulting in disciplinary actions, especially the nonpayment of taxes, prior to awarding all types of performance and discretionary awards.

While the IRS agreed with TIGTA's recommendation and disclosed plans to conduct a study by June 30, 2014 for the implementation of such a policy, TIGTA's report aroused a certain amount of astonishment amongst members of the US Congress.

For example, from the House of Representatives, Jason Chaffetz (R – Utah) stated that, "given the behavior uncovered over the previous years – political targeting, refusal to comply with subpoenas, and excessive spending on lavish conferences – it is hard to imagine that 69 percent of the agency's workforce are deserving of rewards for performance."

In addition, Senator Joe Manchin (D – West Virginia) called on IRS commissioner John Koskinen to rescind the bonuses given to the IRS employees with tax compliance problems. In a letter, he wrote that he was "appalled" by the findings in the TIGTA report and that the awards to those employees are "completely unacceptable and must be remedied immediately. … No federal agency should reward tax-delinquent employees with taxpayer-funded bonuses and rewards, least of all the IRS."

He added that "each employee's cash bonus should be held in escrow by the IRS until his or her outstanding tax compliance problems are addressed."

TAGS: compliance | tax | tax compliance | employees | Internal Revenue Service (IRS) | tax authority | United States | regulation | Tax

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