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June 2012
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SCOFFLAWS IRS bonuses to employees owing back taxes offensive

Imagine this scenario: Your business had a bad year, your spouse divorced you, you paid all your savings to lawyers and you're working a weekend job to try to pay off the tax lien the IRS has filed against you. Your boss at the weekend job has designated you employee of the year and you're in line for a $500 bonus.

Question: Would you expect the IRS to seize the bonus to pay off the tax lien?

We suspect the answer, and the reality, is yes.

So it's no surprise that an Internal Revenue Service Inspector General's report on the IRS payment of bonuses to its own employees who owe back taxes has generated outrage. In fact, the IRS program doesn't stop there. It also pays bonuses to employees who have been disciplined for misconduct, often within the same year.

The Los Angeles Times reports that over a period of just more than two years the IRS paid roughly $1.1 million in bonuses to 1,146 employees who had been disciplined for failing to pay their own taxes.

The Times says these employees were among 2,800 who received performance awards despite recent disciplinary actions. Others received bonuses despite "suspensions or written reprimands for drug use, filing fraudulent time sheets, or other misconduct." That "other misconduct" (according to an Associated Press story on the same subject) included misusing government credit cards and fraudulently obtaining unemployment benefits.

At most companies things like drug use and falsifying time sheets do not result in reprimands. They result in terminations. But that's government for you (or more specifically, those are the terms of the union contract the IRS agreed to).

The Times also reports two-thirds of IRS employees received cash bonuses or extra time off totaling more than 10,000 hours from October 2010 to the end of 2012, and 69 received faster-than-normal pay grade increases under the bonus program. That too is problematic, in that bonus programs for exceptional performance don't typically extend to all but the bottom third of employees.

It all adds up to some really poor management practices, of the sort government is famous for. But the focus of most of the outrage, particularly in Congress, centers on not seizing the bonuses from employees who owed back taxes.

Democratic Sen. Joe Manchin of West Virginia said in a letter to IRS Commissioner John Koskinen, "How can we expect the American people - many of whom are struggling to make ends meet - to trust their government when they learn the very agency charged with collecting their tax dollars is rewarding employees who haven't paid theirs?"

Manchin is correct. The IRS goes after delinquent taxpayers without mercy, seizing bank accounts, assets and property in a fashion that at times shocks the conscience. For the agency to turn a blind eye to the tax transgressions of those in its own ranks is reminiscent of the Romans beating down the enslaved masses while coddling their own dishonest tax collectors. Americans are rightly angered and Congress needs to act to force the IRS to fairly police its own.

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