Lawmakers criticize IRS for paying bonuses to employees with bad conduct

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The chairmen of Congress’s main tax committees are calling on the head of the Internal Revenue Service to put in place screening procedures to make sure employees with serious conduct issues don’t receive bonuses, in response to a government report pointing to continuing problems in this area despite some progress.

The report, from Treasury Inspector General for Tax Administration, found over the past two fiscal years, the IRS handed out nearly $1.8 million in awards to 1,962 employees who had been subject to disciplinary actions.

A previous TIGTA report from 2014 found that between Oct. 1, 2010, and Dec. 31, 2012, more than 2,800 IRS employees with recent substantiated conduct issues received $2.8 million in monetary awards. TIGTA recommended at the time the IRS look into implementing a policy requiring the agency to consider conduct issues, including tax compliance status, prior to issuing awards. The IRS had agreed at the time with TIGTA’s recommendation and planned to conduct a study by June 30, 2014 for 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.

House Ways and Means Committee Chairman Kevin Brady, R-Texas, and Senate Finance Committee Chairman Orrin Hatch, R-Utah, called on IRS Acting Commissioner David Kautter on Thursday to immediately implement TIGTA’s recommendations in the wake of the new report. “In lieu of immediately implementing any of TIGTA’s recommendations, the IRS has offered to assess the resource needs and timeline to integrate the necessary corrections for the screening of all disciplinary actions; an assessment that is not expected to be completed until January of 2019, nearly a year from now,” they wrote Thursday in a letter. “Given that this is the second time TIGTA has raised concerns about the IRS awards process for employees with conduct or tax compliance issues and that Treasury and Congress have both laid out clear expectations, we strongly believe that an assessment of resource needs and timeline to implement the recommendations will delay solving this very real and pressing problem.”

In its report, TIGTA also found that between Oct. 1, 2015 and Dec. 31, 2016, the IRS issued more than $141 million in cash and time-off awards to employees for their performance. During the same time frame, though, the IRS prevented 1,048 employees with conduct and tax issues from receiving awards.

TIGTA acknowledged the IRS had increased its screening procedures for awards and denied nearly 80 percent of awards to screened employees with identified conduct and tax issues such as willful tax violations, criminal misconduct, substance abuse and unauthorized access to tax return information.

However, the improved processes didn’t ensure all employees with conduct and tax compliance issues were screened. Specifically, 26 employees with Section 1203(b) violations including willful tax noncompliance, whose employment was not terminated, got the awards.

As the lawmakers pointed out, TIGTA found that from October 1, 2015 through December 31, 2016, the IRS issued more than $1.7 million in awards to 1,962 employees who had a disciplinary or adverse action during the 12 months prior to receiving their award. Some of the employees exhibited serious misconduct, including unauthorized access to tax return information, substance abuse and sexual misconduct. TIGTA also pointed out the IRS screening processes don’t look for or identify employees with tax compliance issues unless those issues have resulted in disciplinary action.

“Providing awards to employees with conduct issues, especially those who fail to pay federal taxes, conflicts with the Internal Revenue Service charge of ensuring the integrity of the system of tax administration,” said TIGTA Inspector General J. Russell George in a statement.

In the new report, TIGTA recommended the IRS Human Capital Officer expand the agency’s misconduct screening to consider employees with any level of disciplinary action prior to issuing awards, examine the federal tax compliance status of all employees before issuing awards, and comply with Treasury reporting requirements for awards.

The IRS management agreed with all three of TIGTA’s recommendations, saying it would expand its screening procedures to include employees with any level of discipline and federal tax noncompliance prior to issuing awards and it would comply with Treasury reporting requirements.

“The IRS takes conduct issues very seriously,” wrote IRS Human Capital Officer Katherine M. Coffman in response to the report. “The IRS conducts reviews and misconduct screenings for granting awards and high-level recognition. As a part of this, the IRS has increased its review of awards since 2014, and continues to make improvements.”

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Tax evasion Kevin Brady Orrin Hatch J. Russell George IRS TIGTA