More midyear tax moves
States could get more money by modernizing sales tax laws

IRS wants to trade bonuses for furlough days as House appropriations subcommittee cuts IRS' fiscal 2014 funds

If the acting Internal Revenue Service chief has his way, all tax agency employees will be working -- and getting paid -- on the previously announced furlough days of July 22 and Aug. 30.

AFGE members march in San Antonio to protest sequestration furloughs
American Federation of Government Employees members in San Antonio, Texas, were among those who participated in 100 rallies across the country as a part of AFGE's National Day of Action on March 20 to protest sequestration and furloughs. Photo courtesy AFGE via Flickr Creative Commons.

But in exchange for putting all of the IRS' almost 98,000 employees back to work as usual, some of those workers would not get their expected bonuses.

That was the word from IRS Principal Deputy Commissioner Daniel Werfel via a July 9 agency-wide email to agency staff. Werfel wrote:

"While we have made significant progress in cutting costs, we must be committed to doing more. To that end, and in this unprecedented budget situation, I do not believe the IRS should pay performance awards this year to employees, managers or executives. This is not a reflection of the quality or performance of the work done by you and your colleagues, but rather an unfortunate byproduct of the difficult budgetary situation we find ourselves in."

The budgetary situation is sequestration's automatic spending cuts, which led to the IRS closing all its offices and some of its automated services for three days this summer.

By not paying almost $98 million in employee bonuses this year -- $76 million for union workers; $19.3 million for nonunion workers, including managers; and $2.5 million for executives -- Werfel said the IRS could afford to keep all workers at their jobs the remainder of this fiscal year.

Congress happy, but still cuts IRS money: Werfel's decision is welcomed by many in Congress, that is, Republicans in control of the House, who raised the question of bonus payments during several hearings on IRS troubles this year.

The possibility that Lois Lerner, the former head of the IRS' tax-exempt division, might receive a bonus was particularly irksome to many members of Congress. Lerner is on paid leave while the IRS, the Treasury Inspector General for Tax Administration (TIGTA) and the Department of Justice continue to investigate charges that the IRS used inappropriate search criteria in reviewing organizations' requests for tax-exempt status.

And today (July 10), the House Appropriations Financial Services and General Government Subcommittee voted to cut the IRS' fiscal year 2014 budget by 24 percent from 2013 levels, in part because of the bonus payment issue.

The funding bill includes specific spending restrictions that read like a table of contents in the book of the IRS' recent missteps.

The appropriations subcommittee would:
  • Withhold 10 percent of funds for IRS enforcement activities until all recommendations from TIGTA to prevent future inappropriate targeting are implemented.
  • Prohibit funding for conferences until all of TIGTA's recommendations regarding such meetings have been implemented.
  • Prohibit funding for employee bonuses and awards until a review of the effectiveness of bonus and award programs is completed.
  • Prohibit funding for the making of videos that have not been reviewed or certified to be appropriate.
The funding bill that leaves the IRS with a budget of $9 billion, about $4 billion less that requested in the President's annual budget, also would increase the fiscal 2014 budget for TIGTA by $5.5 million more than requested.

Subcommittee Chairman Ander Crenshaw (R-Fla.) justified the cuts to the IRS' budget and increase of the investigating office as necessary "to help the IRS regain Americans' trust."

The subcommittee' ranking minority member José E. Serrano (D-N.Y.), however, disagreed.

Noting that the IRS has been in the news lately for the wrong reasons, Serrano said a multi-billion dollar cut to the agency will do nothing to solve the agency's problems. Rather, he said, "This funding level is something that will make tax cheats everywhere smile."

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