Audit Reveals IRS Employees Owe $50 Million in Unpaid Taxes

An alarming new audit by the Treasury Department’s inspector general has revealed that Internal Revenue Service (IRS) employees and contractors collectively owe $50 million in back taxes. This discovery raises serious questions about accountability within the very agency tasked with enforcing tax compliance.

The audit found that over 3,800 IRS employees owe back taxes, with 2,000 of them failing to establish a payment plan. Shockingly, more than 50 of these delinquent employees have been employed by the IRS for over five years. The problem extends beyond the IRS, with nearly 150,000 federal employees owing a combined $1.5 billion in unpaid taxes.

Senator Joni Ernst (R-IA), who requested the audit, expressed outrage at the findings, especially given the $80 billion allocated to the IRS under the Inflation Reduction Act to expand its audit capabilities. “Surely the irony and hypocrisy can’t be missed here: taxpayers are being forced to pay billions more to the IRS to audit America while the agency won’t even collect the tens of millions of dollars in unpaid taxes owed by its employees,” Ernst said.

Key Points:

• Widespread Noncompliance: Over 3,800 IRS employees owe back taxes, with many not even on a payment plan.

• Lack of Enforcement: Despite laws mandating termination for willful tax misconduct, only 20 out of 70 employees were fired for such offenses between October 2021 and April 2023.

• Rehiring Issues: The IRS rehired over 500 individuals with known tax, performance, or misconduct issues, including 15 who committed fraud or theft.

The audit reviewed 1,068 cases where IRS management initiated disciplinary action for tax issues and found lenient penalties. Only 76 employees were suspended, most for less than 14 days, despite willful misconduct. The inspector general’s report highlighted that although the law requires termination for willful failure to file or understatement of taxes, this disciplinary action is not consistently enforced.

The IRS defended its actions, stating that the IRS Commissioner has the authority to mitigate termination penalties. However, the audit revealed a lack of written policies guiding these mitigation decisions. Additionally, the IRS re-hired more than 500 former employees with prior tax or misconduct issues, contravening a law prohibiting such rehiring.

On Monday, Senator Ernst called on IRS Commissioner Daniel Werfel to fire delinquent employees and refer them for criminal prosecution where appropriate. She also announced the introduction of the Audit the IRS Act, which would mandate regular tax audits of agency employees and terminate those with seriously delinquent tax debt.

As taxpayers grapple with an increasingly powerful IRS, the agency's internal failures highlight a glaring double standard. This audit underscores the urgent need for accountability and reform within the IRS to restore public trust and ensure that those enforcing tax laws are also adhering to them.

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