Report: 1,580 IRS workers evaded taxes over 10-year period

March 22, 2013: Shows the exterior of the Internal Revenue Service building in Washington. (AP)

Nearly 1,600 IRS workers were found to have willfully evaded taxes over a 10-year period, including some who were responsible for enforcing the nation's tax laws, a government watchdog said Wednesday.

It's a small percentage of the tax agency's employees -- about 160 workers a year out of a workforce of 85,000.

A new report by the agency's inspector general said most were not fired, even though a 1998 law calls for terminations when IRS workers willfully don't pay their taxes. The penalty must be waived by the IRS commissioner.

Among their offenses: improperly claiming dependents, repeated failure to file timely tax returns, and claiming a tax credit for first-time homebuyers when the worker didn't buy a house.

Some received promotions, raises and bonuses after they were caught willfully not paying their taxes, the report said.

"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," said J. Russell George, Treasury inspector general for tax administration. "Willful violation of the law by IRS employees should not be taken lightly."

The report looked at workers from 2004 through 2013, before IRS Commissioner John Koskinen started.

The IRS said more than 99 percent of its employees pay their taxes on time, the highest compliance rate of any major federal agency. Historically, about 8 percent of the general public owes back taxes.

The agency said those who weren't fired faced strong disciplinary actions, including suspensions and reprimands. Last year, the agency started denying performance bonuses to employees who willfully fail to pay their taxes.

"The IRS is committed to ensuring that employees meet their tax compliance responsibilities," the IRS said in a statement. "Nonetheless, the IRS agrees that we can improve this process."

The agency said it will become more transparent about why the commissioner chooses not to terminate certain employees who willfully don't pay their taxes.

Twice a year the IRS uses a screening process to identify employees who might owe back taxes. Tax information is confidential by law so the agency's ability to check compliance makes it unique among federal agencies.

Over the 10-year period, the IRS found 18,300 cases in which IRS employees owed back taxes but the delinquency was not willful, the report said. The IRS found 1,580 cases in which employees willfully did not pay their taxes.

Among the willful violators, the IRS fired 25 percent and an additional 14 percent retired or resigned, the report said. Sixty-one percent received a lesser penalty.

"It is crucial that IRS employees are held to the same standards as the hardworking taxpayers that pay their salaries. That means filing their taxes and paying the taxes they owe to the government," said Sen. Orrin Hatch, R-Utah, chairman of the Senate Finance Committee.