IRS keeps dozens of intentional tax cheats on payroll

Dozens of IRS employees who have “willfully” cheated on their taxes remain working for the agency, and some have even been hired back after evasion, an inspector general reported Monday.

According to the audit, 5% of the IRS’s workforce failed to pay their taxes in full and on time at some point while working for the agency. Most of those were deemed mistakes.

Still, 70 current employees were found to have intentionally cheated. Of those, only 20 were ousted. Most of the rest remain on the job after a short suspension. Under the law, all of them should have been fired unless they received a special exemption from the commissioner.

The IRS also rehired nearly 400 former employees despite red flags in their files. They included 85 who failed to pay their taxes in full and on time and 34 who were deemed to have peeked at taxpayers’ secret information.

Hundreds more former employees were hired back as contractors despite red flags that included avoiding taxes, falsifying documents or theft.

Sen. Joni Ernst, the Iowa Republican who requested the audit, said the agency must do significant self-cleaning if it wants to make Americans pay their taxes.

“While the IRS warns, ‘tax evasion is a serious crime punishable by imprisonment, fines, and the imposition of civil penalties,’ the agency is rewarding its own tax dodgers with paychecks and lavish benefits made possible, ironically, with the taxes paid by you, me, and other hardworking Americans,” Ms. Ernst said.

She has written legislation to ban the IRS from employing anyone with “seriously delinquent tax debts” and to require the agency to submit an annual review of its workers.

Of the 70 willful tax cheats the IRS flagged within its workforce over an 18-month period from 2021 to 2023, 20 were “removed” from the agency.

Another 47 were suspended. The fate of the other three was redacted from the public version of the audit, though based on the inspector’s past work, they likely either retired or resigned.

“Although the law requires an employee who has either willfully not filed or willfully understated their taxes due to be removed, subject only to the IRS Commissioner’s mitigation, this disciplinary action is not always enforced,” the inspector general said.

In its official response, the IRS said the commissioner exercised that discretion in each of those cases after receiving a recommendation from a review board.

Traci M. DiMartini, the IRS human capital officer, said the agency reviewed more than 2,000 employees the inspector general flagged as having outstanding taxes as of May 6, 2023. As of this June, 58% of them had resolved their issues to the agency’s satisfaction.

The IRS official said the report gave the IRS a generally clean bill of health. It found that the agency “has policies and procedures in place to detect and remedy employee and contractor tax non-compliance.”

The IRS also subscribes to “progressive discipline,” meaning employees are given the “least serious” punishment initially and stiffer penalties for further offenses.

The inspector general also found that the IRS had rehired former employees with black marks in agency employment files. That included 13 willful tax cheats and 34 deemed to have accessed taxpayer information that was required to be kept secret.

The inspector general made two recommendations in the audit, including requiring the IRS human capital officer to follow up on the employees flagged and make sure their taxes have been filed and their balances paid.

Ms. DiMartini disagreed. She said her office doesn’t have the power to collect or enforce tax laws, even on agency employees.

She said the agency has reviewed all the flagged people and ensured someone is addressing the problems.

The inspector general said it “appears” that addresses the issue.

A 2015 report looked at a 10-year period and found 1,580 employees who willfully evaded their taxes. Of those, 61% were allowed to remain at the IRS.

That means the agency has become more lenient, allowing 67% of the current tax evaders to remain on the job.

After the 2015 report, the IRS said it would adopt rules to require documentation when the agency kept employees on the job despite willful tax evasion.