The IRS is stepping up its crackdown on tax evaders this year, but has failed to enforce the rule on thousands of its employees.
While 96% of IRS employees met their tax obligations last year, a significant proportion were behind on their payments and owed the IRS nearly $50 million in taxes, a new failure report The lack of accountability within the agency’s ranks raises questions, especially given the IRS’s extensive efforts to enforce tax compliance and restore fairness to the nation’s tax system – starting with noncompliant taxpayers.
“We believe that IRS and contractor employees who fail to comply with their tax obligations could negatively impact public confidence in the tax administration and the perception that the IRS is dealing honestly with all taxpayers,” Danny Verneuille, acting deputy inspector general for audit, wrote in the report.
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Tax enforcement by the IRS?
The IRS audit comes as the tax agency’s funding is under scrutiny. Bolstered by $80 billion from the Inflation Reduction Act (IRA), a key initiative was to increase audit rates for wealthy taxpayers.
What is worrying: Most IRS employees with confirmed tax violations had no repayment plan and apparently faced few consequences.
Congress also criticized the IRS’s inability to get its employees to comply with the regulations it imposes on millions of taxpayers.
“The irony and hypocrisy here is certainly impossible to miss: taxpayers are being forced to pay billions more to the IRS to audit America, while the agency fails to even collect the tens of millions of dollars in unpaid taxes owed by its employees.” said Sen. Joni Ernst (R-IA), who commissioned the audit. “Taxpayers will never trust the IRS if the agency’s auditors themselves can’t even pass a tax audit.”
IRS employees and contractors in default of tax payments
You’d expect IRS employees to be the first to file their tax returns on time, but that’s not always the case. Data shows that around 5,800 IRS employees and contract workers were behind on their taxes last year, and that’s not even the worst of it.
In total, IRS and contractor employees who did not have a repayment plan owed the federal government about $29 million as of May of last year. Meanwhile, those with installment plans owed the IRS about $17 million. This was despite the agency offering several payment options for those unable to pay the full amount of their federal taxes by the tax deadline.
And that’s not all: Some IRS employees – especially contractors – experienced delinquencies that persisted beyond one tax cycle.
- Nearly 30% of IRS employees without a repayment plan owed taxes for more than one tax period
- Over a third of IRS contractors who were not in the repayment phase owed taxes for more than one tax season
Why were these workers behind on their taxes? The audit was unable to clarify this, but IRS policy requires that all federal employees comply with their federal tax obligations in order to continue working for the agency.
“Contractor employees must comply with federal taxes by filing and paying all taxes on time,” the inspector general wrote in the report. “Contractor employees, like any other taxpayer who is unable to pay their debts, may enter into an installment payment plan.”
IRS failed to enforce strict disciplinary measures
While the IRS warns Although the agency stated that “tax evasion is a serious crime punishable by imprisonment, fines and civil penalties,” the agency’s disciplinary measures against its employees were apparently lax.
Congress requires the firing of IRS employees who intentionally fail to file their tax returns on time or understate their tax liability. However, the IRS commissioner has sole authority to “mitigate the mandatory firing of employees,” the report said.
For example, the audit found that failure by an IRS employee to pay taxes on time is considered “misconduct” and can result in disciplinary action, up to and including termination.
Although thousands of IRS employees and contractors were delinquent on their taxes, only 70 cases were referred to the Board of Review because it was proven that they committed intentional tax violations, and only 20 employees were ultimately terminated.
How to pay taxes when you have debts
So what does this mean for you? Whether you are employed by the IRS or not, you are expected to pay your taxes on time, and the IRS offers several repayment options for you to settle your tax debt.
- For example, short-term online plans offer payment terms of up to 180 days if the total amount of taxes, penalties and interest owed is less than $100,000. Setup is also free.
- Longer-term online repayment plans are installment agreements with a monthly payment for debts under $50,000. These require establishment feealthough low-income taxpayers may be eligible for a fee waiver or refund.
If you are not eligible or cannot pay online, you can Form 9465, Installment Agreement Request. (The IRS generally responds to Installment Agreement requests within 30 days.)
If the IRS determines that you cannot pay your tax debt due to difficulties, there are other options! You could apply for a delayed collectionwhere the IRS temporarily suspends your tax collection. Remember, you will still have to pay back your tax bill and will continue to accrue interest and penalties.
Finally, you can Offer of compromise (OIC), where your IRS debt could be settled for less than the full amount due. An OIC requires a nonrefundable filing fee of $205, but according to the IRS, the fee is generally waived for low-income taxpayers.
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