Tax cheats kept jobs at IRS, audit finds

The IRS fired just two out of every five employees found to be tax cheats over a decade-long span, according to a new federal audit. 

Treasury’s inspector general for tax administration found that 1,580 employees willfully violated tax law from October 2003 to September 2013. The IRS was supposed to fire all of those staffers, under a 1998 law.

{mosads}But the inspector general found that the IRS commissioner saved 960 of them — 61 percent in all — who were instead given counseling, reprimands or suspensions.

“Given its critical role in federal tax administration, the IRS must ensure that its employees comply with the tax law in order to maintain the public’s confidence,” Russell George, the tax administration inspector general, said in a statement. 

“Willful violation of the law by IRS employees should not be taken lightly, and the IRS commissioner should fully document decisions made to retain employees whom management has proposed be terminated,” George added.

The audit comes at an awkward time for the IRS. John Koskinen, the IRS chief, has been saying for months that more than $1 billion in budget cuts have amounted to “tax cuts for tax cheats,” by hurting the agency’s ability to investigate crimes.

Koskinen took over the agency in December 2013, after the time span studied by the inspector general.

Still, Rep. Peter Roskam (R-Ill.), the chairman of the House Ways and Means subcommittee overseeing the IRS, said the fact that the agency would harbor tax cheats while complaining about their ability to find them “quite frankly defies logic.”

“The gulf of trust between taxpayers and the IRS has never been wider, and the IRS can and must do better,” Roskam added.

Senate Finance Chairman Orrin Hatch (R-Utah) added that he was amazed that the IRS even gave some of the employees who broke tax law promotions and raises.

“This is unacceptable — American taxpayers deserve better,” Hatch said.

In a statement, the IRS noted that the inspector general only took a deeper dive on 34 cases — which is just a fraction of the roughly 82,000 current full-time employees at the agency.

The inspector general report only found about 150 cases of tax violations in a given year, the agency added, while also pointing out that the IRS has the highest rate of tax compliance among major federal agencies.

“Nonetheless, the IRS agrees that we can improve this process,” the agency said. “The changes will include a more proactive approach to ensure timeliness and consistency and provide more transparency in the mitigation process while preserving the commissioner’s authority provided by federal law.”

The inspector general’s report added that the commissioner’s reasoning for saving employees who violated tax laws wasn’t always clear. In some of those cases, employees were found to have cheated on their taxes multiple times, and weren’t trusted by IRS brass — yet still kept their jobs.

Those employees also broke tax law in a variety of ways, including overstating expenses, repeatedly missing the tax deadline and even claiming a tax credit for first-time homebuyers without purchasing a house.