Employees at the Internal Revenue Service (IRS) who deliberately did not pay their own taxes were rewarded with bonuses, according to a new inspector general report.
"As the Federal Government agency primarily responsible for administering the Federal tax law, the Internal Revenue Service (IRS) must ensure that its employees comply with the same tax law to which all taxpayers are subject," the audit, released Wednesday by the Treasury Inspector General for Tax Administration (TIGTA) said.
Employees who are found to willfully violate tax law are supposed to be fired, according to a federal law passed in 1998 known as the "Taxpayer Bill of Rights."
However, the IRS has not only allowed thousands of its employees to avoid paying taxes, but has rewarded many with time off, raises, and bonuses.
The audit found 1,580 employees who willfully did not pay their taxes, and 18,300 others who unintentionally did not comply with tax laws their agency is responsible for enforcing.
Of those who willingly did not comply with federal tax law, 61 percent received counseling, suspensions, or reprimands. Another 14 percent resigned or retired to avoid being fired, and 25 percent were terminated.
Only 1 percent of the 18,300 employees who were found to be in "nonwillful tax noncompliance" were fired.
Other IRS employees were rewarded with for "outstanding performance" within a year after intentionally avoiding their taxes.
"In addition to not being terminated for willful tax violations, some IRS employees also received promotions, performance awards, and permanent pay increases within one year after their willful tax noncompliance case was closed," TIGTA said. "Specifically, 108 of 364 employees with willful tax noncompliance cases closed between October 1, 2008, and September 30, 2013, received one or more awards, promotions, quality step increases, or Voluntary Separation Incentive Payments (VSIP) within one year after being disciplined for the tax noncompliance."
Quality step increases are a "within-grade" pay increase "used to recognize employees who "display outstanding performance," TIGTA said. A VSIPs is a "direct buyout incentive used to encourage voluntary separation by employees who occupy positions affected by organizational change," of up to $25,000.
The audit said the IRS "did not consider tax compliance or other misconduct when issuing performance awards."
TIGTA added that there are no government-wide policies to guide agencies on whether "employees with conduct issues" should get awards.
The more than one hundred IRS workers who intentionally did not pay their taxes received nearly $145,000 in performance and "special act" awards, nearly 900 hours in time-off awards, over 30 temporary and permanent promotions, and four permanent pay increases, all after being disciplined for willful tax noncompliance.
The audit was based on cases that were closed between 2004 and 2013, prior to the term of current IRS Commissioner John Koskinen.
Under section 1203 of the Taxpayer Bill of Rights, an employee who intentionally did not pay their taxes can only avoid termination if the IRS Commissioner intervenes to lessen the penalty. TIGTA recommended that the IRS change its existing policy to make officials explain why employees are not fired after willfully not paying their taxes.
The IRS said it has "plans to review existing procedures" and will consult with its lawyers.