IRS awards more than $1 million in bonuses to tax collector tax cheats


By M.D. Kittle |

The Internal Revenue Service handed out a combined $2.8 million in monetary awards to more than 2,800 agency employees recently disciplined for conduct issues.

The Treasury Inspector General for Tax Administration, or TIGTA, also found more than 1,100 of the disciplined employees were given cash incentives or time off even after they failed to pay their taxes, according to an audit released by the IRS’ auditor Tuesday.

REWARDING BAD BEHAVIOR: The IRS paid out $2.8 million in cash rewards to employees who had recently been disciplined for conduct issues, according to a new audit.

Auditors reviewed a non-representative selection of 26 of the most serious conduct issues resulting in discipline — from more than 1,400 such cases — resulting in an “in-depth review to determine the circumstances and reasons for the misconduct.”

Violations included:

  • Late payment and/or nonpayment of federal taxes
  • Government travel card misuse or delinquency
  • Misconduct
  • Fraud

The audit found 1,146 employees at the tax-collection agency failed to comply with federal tax law. They received a combined $1,068,912 in bonuses and a total of 10,582 hours in awarded time off. Sixty-nine of the employees received Step Increases, or raises.

Cases of discipline included “willful understatement of tax liabilities over multiple tax years, late payment of tax liabilities, and underreporting of income,” the report notes. Employees discussed and received performance awards after being disciplined for their conduct.

In all, the audit found 246 cases in which agents misused their taxpayer-funded government travel cards, 53 were disciplined for various substantiated incidents of misconduct and there were 32 cases of fraud.

The IRS, between Oct. 1, 2010, and Dec. 31, 2012, doled out more than 27,000 hours in awarded time off and issued 175 quality step increases, or raises, to employees with recent substantiated conduct issues.

But an even bigger systemic problem was found in the audit.

According to TIGTA, the IRS, with few exceptions, doesn’t consider tax compliance or other misconduct when issuing performance awards or most other types of awards. In fact, governmentwide policies do not provide guidance on providing awards to employees with conduct issues.

“The IRS Restructuring and Reform Act of 1998 does not specifically mention awards, but does make mandatory the removal of IRS employees who are found to have intentionally committed certain acts of misconduct, including willful failure to pay Federal taxes,” the audit states. “Thus, while not specifically prohibited, providing awards to employees with conduct issues, especially those who fail to pay Federal taxes, appears to create a conflict with the IRS’s charge of ensuring the integrity of the system of tax administration.”

Taxpayers who have been hit with IRS sanctions for failing to comply with tax law may feel a bit left out. If you work at the IRS and don’t pay your taxes, you get a bonus.

In fiscal 2012, the IRS awarded $86 million in cash and nearly 490,000 hours of time off to 67,870 of about 98,000 employees. That was down from the nearly $92 million and about 520,000 hours of compensated days off the agency paid out to 70,500 of the its 104,400 employees in fiscal 2011.

The audit did find the IRS awards program complied with federal requirements to limit awards expenditures and saved additional money by keeping “aggregate incentive payments, individual employee compensation, and aggregate awards below the federal limits.” The IRS told its auditor it took further actions in fiscal 2013 to limit awards to the extent “allowable by law.”

So will anything come of the tax agency rewarding tax collectors who evade paying their taxes? Perhaps a stern talking to. Definitely an auditor’s recommendation that it may not be a good idea to give bonuses to people who can’t follow the laws that the their employer is sworn to enforce.

TIGTA recommends the IRS human resources department 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.”

Contact M.D. Kittle at