Tax scofflaws often kept IRS jobs, watchdog finds

Washington (CNN)More than half of Internal Revenue Service employees who willfully broke tax laws over the past decade weren't fired because the agency's commissioners saved their jobs, according to a new report by an independent IRS watchdog.

The Treasury Inspector General for Tax Administration reported that between fiscal years 2004 and 2013, almost 1,600 IRS employees had willfully violated tax law. During that time, 61 percent of the agency's tax scofflaws, some 960 employees, were handed lesser penalties such as suspensions, reprimands or counselling, the report said.
The law states those employees should be fired unless the penalty is mitigated by the IRS commissioner. The cases reviewed were prior to the term of the current IRS commissioner, John Koskinen.
The inspector general reviewed a sample of 34 cases and found employees with similar violations faced different penalties. The report also found that the case files didn't explain why the commissioner mitigated the penalties.
    "Some employees had significant and sometimes repeated tax noncompliance issues, and a history of other conduct issues. Moreover, management had concluded that the employees were not credible. Nonetheless, the proposed terminations were mitigated by the IRS commissioner," the report said. "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 timely."
    Republican Senate Finance Committee Chairman Orrin Hatch said the IRS failed to hold its employees to the same standards as ordinary taxpayers.
    "The IRS has often failed to maintain that standard and has instead allowed employees with serious tax violations to go about their business as usual," Hatch said. "Even worse, the agency appears to have rewarded some of them with cash bonuses, promotions, and paid time off. This is unacceptable -- American taxpayers deserve better."
    The IRS said in a statement Wednesday that the agency will now ensure that employees who have willfully failed to pay their taxes are ineligible for performance awards.
    "The IRS is committed to ensuring that employees meet their tax compliance responsibilities. It's important to note that the IRS has a more than 99% tax compliance rate, the highest of any major federal agency," the statement said.
    The inspector general recommended that the IRS require that the commissioner document the evidence and basis for a decision to mitigate the penalty to something less than termination. The IRS agreed with the recommendation and has begun implementing it, the report said.