5,800 IRS Employees and Contractors Owe Nearly $50 Million in Unpaid Taxes: Treasury IG

Internal Revenue Service Commissioner Daniel Werfel testifies before the House Ways and Means Committee on Capitol Hill in Washington, on Feb. 15, 2024. Chip Somodevilla/Getty Images

At least 5,800 IRS employees and contractors owe almost $50 million in overdue taxes and more than half of them haven’t been required to agree to a payment plan, according to the Department of the Treasury’s Inspector-General for Tax Administration (TIGTA).

In a report made available to The Epoch Times, TIGTA  said auditors found 3,414, or 4 percent, of the 85,359 employees at the IRS have unpaid taxes. Of those with payment plans, $9 million remains unpaid, while $12 million is owed by employees without a payment plan.

Among IRS contractors, which include many former tax agency employees, 2,573 of 25,732 (10 percent) contractors have unpaid taxes. Of those without a payment plan, $17 million is owed and those with a payment plan have $8 million outstanding.

The TIGTA also reported that 512 former IRS employees were rehired, either as employees or contractors, despite having “tax compliance issues or conduct and performance problems, including criminal misconduct, sexual misconduct, inability to perform duties, fighting and assault, and unauthorized access to tax return information, have been rehired by the agency and its contractors,” according to Sen. Joni Ernst (R-Iowa), who requested the watchdog’s report.

Law Requires Tax Cheats Be Fired

Federal law requires that federal workers found to have unpaid taxes be removed unless the IRS commissioner specifically allows them to remain on the government payroll. The present IRS chief, Danny Werfel, has exercised that discretion to retain more than 1,000 such workers since 2021.

“Between October 1, 2021, and April 1, 2023, the IRS closed 1,175 cases with disciplinary actions, for 1,068 current employees, with confirmed tax noncompliance issues. During that same time period, 70 employees were identified with substantiated willful ... violations and 20 were removed as a result,” the TIGTA report explained.

“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.”

Ms. Ernst also pointed out in a July 29 letter to Mr. Werfel that a 2023 TIGTA report “found 149,000 federal employees owe an astounding $1.5 billion in unpaid taxes. Tens of thousands are repeat tax cheats, failing to file tax returns year after year, and the number is steadily increasing.”

The number of federal workers across the government with unpaid taxes rose 32 percent between 2015 and 2021 to 149,000. Congress approved and President Bill Clinton signed into law in 1993 the Federal Employee/Retiree Delinquency Initiative (FERDI) in response to persistent tax delinquencies among government workers.

The Treasury watchdog also expressed concern in the 2024 report that having thousands of IRS employees and contractors with unpaid taxes represents a privacy security threat to all taxpayers.

“Given the ever-increasing threat of identity theft and the substantial amount of sensitive information that the IRS holds, hiring employees of high integrity is essential to safeguarding taxpayer information,” the report said.

“We believe that IRS and contractor employees who are not tax compliant could negatively affect public trust in tax administration and the perception that the IRS is being honest in its dealings with all taxpayers,” the report continued.

The TIGTA report comes as the federal tax agency is doubling its workforce thanks to an appropriation of more $80 billion. President Joe Biden, who sought the IRS workforce increase, said the additional workers will boost tax compliance, especially by taxpayers earning more than $400,000 annually.

But Ms. Ernst said the new hires are instead targeting middle-income taxpayers, while the tax agency is doing too little to hold its own employees with unpaid taxes accountable.

“That is why I’m giving my July 2024 Squeal Award to the IRS for auditing honest hardworking Americans while ignoring the overdue and unpaid tax bills of its own tax collectors,” Ms. Ernst said in a July 29 statement. The Iowa Republican’s Squeal Awards spotlight waste and fraud in the federal bureaucracy.