IRS Employee Tax Cheats Get Bonuses and Promotions
According to a May 5, 2015 report by J. Russell George, the Treasury Inspector General for Tax Administration (referred to as TIGTA) , from Oct. 1, 2003 through Sept. 30, 2013, 1,580 IRS employees were found to be willfully tax noncompliant. These cases included willful overstatement of expenses, claiming the First-Time Homebuyer Tax Credit without buying a home, and repeated failure to file required federal tax returns on a timely basis.
Over this 10-year period, 620 employees (or 39 percent) with willful tax noncompliance were terminated, resigned, or retired. For the other 960 employees (61 percent) with willful tax noncompliance, the proposed terminations were mitigated to lesser penalties such as suspensions, reprimands, or counseling. TIGTA’s review found that in some cases, employees with similar violations received different discipline.
Section 1203 of the IRS Restructuring and Reform Act of 1998 provides that the IRS should terminate the employment of any IRS employee if there is a final determination that the employee committed certain acts of misconduct, including willful violations of tax law, unless the penalty is mitigated by the IRS commissioner.
The IRS defines a willful act as the voluntary intentional violation of a known legal duty (such as timely filing of a tax return or accurate reporting of a tax obligation) for which there is no reasonable cause.
IRS Commissioner John Koskinen reduced proposed terminations in over 60 percent of the cases involving willful tax noncompliance by IRS employees to lesser penalties, such as suspensions, reprimands or counseling. The basis for the commissioner’s decisions to mitigate were not clear.
Some employees had significant and sometimes repeated tax noncompliance issues, and a history of other conduct issues. Management had also concluded that the employees were not credible, but the proposed terminations were nonetheless mitigated by the IRS commissioner.
What is really disturbing is that some of these employees even received cash bonuses, promotions, and paid time off while other employees who were terminated were rehired!
TIGTA recommended that the IRS commissioner should amend the existing policy on how Section 1203 cases are handled to include a requirement to document the analysis of evidence and the basis for the decision on whether or not to mitigate penalties to something less than termination.
The IRS agreed with TIGTA’s recommendation, noting it plans to review existing procedures to document the analysis of evidence and the basis for its decisions, and will consult with its General Legal Services on potential improvements to the transparency of the mitigation process while not interfering with the commissioner’s authority.
Rep. Diane Black, R-Tenn., member of the House Ways and Means Committee, weighed in on the report:
“While this report should not come as a surprise, given the misdeeds we have already witnessed at the IRS, it is nonetheless outrageous and unacceptable that the very agency tasked with enforcing our tax laws would knowingly retain employees who fail to pay their own tax bill.”
“Clearly this is another case of the Washington political class saying ‘do as I say, not as I do.’ "