IRS Employees Misbehave, Don’t Pay Taxes, But Still Get Bonuses

Source: Getty Images

Source: Getty Images

The Internal Revenue Service continues to reveal the extent waste, mismanagement, and corruption permeates areas of U.S. government.

Since the investigation into the machinations behind the Internal Revenue Service’s actions during the 2012 election cycle began, a number of concerns have been brought to light. By no means has any final determination been made by either Congress or the Department of Justice. But what has been revealed about the tax agency’s politically-motivated targeting of certain groups for additional examination before deciding whether to grant tax-exempt status paints a picture of an agency that misused its authority.

While evidence obtained by congressional committees suggest that former Director of the IRS Exempt Organizations division, Lois Lerner, guided the agency’s policy on earmarking certain organizations for special scrutiny — evidence that has prompted Democratic lawmakers to downplay the scandal as the wrongdoing of one misguided individual — it speaks to a larger truth about the IRS.

Taking into account other recent scandals, including excess spending on agency conferences and what could be considered the inappropriate awarding of employee bonuses, it appears greater oversight is needed and that problems within the agency extend further than the awarding of 501(c) (4) status to social welfare groups that engage in political activity. And that truth could potentially fuel Congress’s extremely partisan debate over IRS corruption, which has already been exacerbated by election year tensions.

Again, the IRS has show itself to be not as fiscally responsible as many tax-burdened Americans would hope.

A March 21 report by the Treasury Inspector General for Tax Administration, recently made available to the public, details the basis on which the performance bonuses are awarded to IRS employees. More specifically, the report revealed that the agency employs few parameters when deciding which workers deserve additional compensation and directly violates federal law. The report states that when handing out performance bonuses — including cash, time-off awards, and other perks — the IRS does not take into account employee misconduct, meaning that IRS employees with bad conduct on their records, even those employees of the tax agency who failed to pay federal taxes, received bonuses.

In the 2011 fiscal year, the IRS award approximately $92 million in cash and almost 520,000 hours of time off to 70,500 of its nearly 104,400 employees, while in the 2012 fiscal year, $86 million in cash and almost 490,000 hours of time off were distributed to 67,870 of its 98,000 employees. Of these bonus payments distributed between October 1, 2010 and December 31, 2012, more than 2,800 IRS employees with recent bad conduct in their record received a small portion, collecting more than $2.8 million in cash awards, more than 27,000 hours in time-off awards, and 175 quality step increases in their employment. Included among those award recipients are more than 1,100 IRS employees with Federal tax compliance problems, and they received more than $1 million in cash awards, more than 10,000 hours in time-off awards, and sixty-nine quality step increases within a year after the IRS substantiated their noncompliance.

Employees with recent bad conduct on their records and federal tax compliance problems were still awarded bonus payments despite a 1998 federal statute that seemingly prohibits such behavior. As the Treasury Inspector General for Tax Administration’s report specifically states, that federal law requires the removal of IRS employees who have committed certain acts of misconduct, including willfully failing to pay federal taxes. “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,” concluded the report.

Specifically, the contract between the IRS and the National Treasury Employees Union states that disciplinary action or investigations do not preclude an employee receiving a bonus or other award unless the payment would damage the integrity of the tax collection agency.

This attitude toward employee misconduct is by no means an isolated incident for the IRS, and for that reason the federal watchdog recommended changes be made. The inspector general proposed that “the IRS Human Capital Officer 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.” And the IRS has agreed to pursue that proposal, beginning with a feasibility study that is to be conducted by June 30, 2014.

“The IRS takes seriously our unique role as the nation’s tax administrator. We strive to protect the integrity of the tax system, and we recognize the need for proper personnel policies,” the agency said in a statement attached to the audit. The IRS also noted that a policy is in place requiring that performance awards for executives be linked to conduct. But even without such a protocol, the agency stated it “has not issued awards to any executives that were subject to a disciplinary action.”

Employee bonuses are not the only place the IRS has show itself to be liberal with taxpayer dollars. Last year, an annual report compiled by the federal watchdog revealed just how much the agency has spent on conferences. On its 2010 tab, was a $17,000 charge to hire a speaker that painted pictures of former basketball player Michael Jordan and U2 singer Bono in an attempt to motivate employees at a conference in Anaheim, California. While that may be the most unnecessarily expensive item on the tax agency’s conference bill, the total amount spend on such meetings from fiscal 2010 and 2012 was no small figure. As the document revealed, the IRS spent approximately $49 million on 225 conferences during that period, including $4.1 million on the Anaheim event.

“The wasteful Anaheim conference is one example of a culture of excess that plagues the IRS and many federal agencies,” Darrell Issa, a California Republican and chairman of the House Oversight panel, said in a press release issued after the report was made public. “Taxpayer money meant to pay for a core agency mission, the hiring of more enforcement personnel, was instead spent on a lavish party.

But even that incident pales in comparison to outrage that still surrounds the IRS targeting scandal.

In 2013, pending the public release of an audit conducted by the Treasury Inspector General for Tax Administration, the United States Internal Revenue Service disclosed that through May of last year it had singled out political groups applying for tax-exempt status for closer scrutiny based on their names or political orientations. On May 10, then Director of the IRS Exempt Organizations division Lois Lerner answered what was later revealed to be a question planted by the agency at an American Bar Association conference in order to reveal that it had inappropriately targeted political groups ahead of the 2012 elections. She confirmed the IRS had taken “absolutely inappropriate” actions, for which the agency was “apologetic.” Shortly thereafter, the Federal Bureau of Investigation began examining the IRS’s actions as part of a criminal inquiry ordered by U.S. Attorney General Eric Holder.

Lerner — who was placed on administrative leave days after testifying to the House Oversight and Government Reform Committee that she had not broken any laws or agency regulations — is at the center of the controversy over the targeting of grassroots conservative. Thus far, she has invoked her Fifth Amendment rights at every congressional she has been subpoenaed to testify before. While some Democratic lawmakers and political commentators have pushed to end the investigation, noting that the White House was in no way connected to the targeting, the agency itself has admitted a “serious mistake” was made. And the House of Representatives has referred Lerner to the Justice Department for her role in targeting Tea Party-affiliated groups, despite the fact that President Barack Obama stated in an early February interview with Fox News commentator Bill O’Reilly that some “bone-head decisions” were made but there “not even a smidgen of corruption” at the IRS.

In the formal letter the tax-writing House Ways and Means Committee sent to the Justice Department earlier this month, Chairman Dave Camp, a Michigan Republican, noted that Lerner must be held accountable. “It is also important that the American people know what really occurred at the IRS, so this powerful agency cannot target American taxpayers ever again,” Camp wrote. Emails authored by the former IRS official and obtained by the committee detailed her plans to deny certain conservative-leaning groups tax-exempt status.

“The organization at issue is Crossroads GPS, which is on the top of the list of c4 spenders in the last two elections. It is in the news regularly as an organization that is not really a c4,” one email dated January 4, 2013, reads. “You should know that we are working on a denial of the application, which may solve the problem because we will probably say it isn’t exempt.”

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