IRS rehiring of fired employees troubles tax watchdog and House Ways & Means members

Most of the time, employees who are fired must look elsewhere for work. However, that’s not the case for some Internal Revenue Service personnel.

An audit by the Treasury Inspector General for Tax Administration (TIGTA) found that around 10 percent of more than 2,000 former employees the IRS rehired between January 2015 and March 2016 were folks the agency had let go earlier because of conduct and performance issues.

Troubling terminations: Those 213 rehired workers, according to TIGTA, had previously been ousted for workplace issues that included falsifying documents, avoiding taxes and taxpayer privacy offenses.

Specifically, the July 24 report found 130 of the terminated then rehired workers had “significant” prior conduct issues. They included —

• 86 who had separated while under investigation for absences and leave, workplace disruption, or failure to follow instructions (12 of these rehires had multiple issues in this category);
• 15 let go because of other tax issues;
• 13 who left because of falsification of employment Forms, Official Documents, or Unofficial Documents;
• 6 who had been let go because of misconduct, which includes such things as threats, off-duty misconduct and unprofessional conduct;
• 4 who had been terminated or resigned for willful failure to properly file their federal tax returns;
• 4 who separated while under investigation for unauthorized accesses to taxpayer information; and
• 2 who left due to email or property/equipment misuse.

In addition, according to the IRS watchdog, another 27 former employees failed to disclose, as required by IRS rules, a prior termination or conviction on their application, and were rehired by the agency.

“Rehiring hundreds of employees with a track record of substantiated conduct and performance issues, including willful tax noncompliance and unauthorized access to tax records, is not prudent and unnecessarily increases the risk of internal fraud and abuse,” said J. Russell George, Treasury Inspector General for Tax Administration. “Given the threat of identity theft and the amount of sensitive information that the IRS manages, job offers should only be extended to applicants of great integrity.”

Congressional concern: Five members of the House Ways and Means Committee agree with George and have written to IRS Commissioner John Koskinen demanding he quickly act to correct the situation.

“[T]he IRS must immediately stop rehiring employees who were previously involuntarily separated from service for misconduct,” wrote Ways and Means Chairman Rep. Kevin Brady (R-Texas) and fellow GOP panel members Reps. Peter Roskam of Illinois; Diane Black of Tennessee; Kristi Noem of South Dakota; and Tom Rice of South Carolina.

In addition to concerns about the audit’s findings, the tax-writing panel members are not happy that the IRS failed to respond to many of TIGTA’s recommendations for improving IRS hiring practices.

“Despite having instituted a revised process to address similar concerns raised in 2014, TIGTA concluded that the IRS — nearly three years later — still does not have a process in place that fully and adequately considers past conduct and performance of rehired employees,” wrote Brady and his panel members.

The W&M members also are troubled by TIGTA’s findings that the percentage of IRS workers fired or who quit while under investigation for a conduct or performance issue and then rehired has increased from approximately 12 percent to 15 percent since the last time that TIGTA reviewed this issue.

Brady et al also let Koskinen know they aren’t happy that some rehired IRS employees fall back into old, bad habits. TIGTA found that at least 7 percent repeated past violations once rehired.

Bills introduced to regulate IRS hiring: The lawmakers indicated that “further Congressional action” might be needed to solve the problem rehire issue.

Immediately after the TIGTA report’s release last month, Sen. Richard Burr (R-North Carolina) reintroduced the Ensuring Integrity in the IRS Workforce Act, which would bar the agency from rehiring employees who left the IRS due to substantiated conduct or performance issues.

Burr’s bill is nearly identical to one that passed the House in April 2015, but did not make it through the Senate during that congressional session. Noem, one of the signers of this week’s Ways and Means letter to Koskinen, also introduced a companion House bill.

But the letter indicated that more legislation isn’t necessarily the House members’ preferred choice.

Instead, Brady and his Ways and Means colleagues urged Koskinen and his IRS staff to “better address this issue while ensuring that it hires the requisite number of employees.”

“Failure to do so jeopardizes the internal workings of the IRS, the security of taxpayer records, and the service that a taxpayer receives,” added the Representatives.

More money might help: They have a point. But one of the main reasons the IRS has not followed through on implementing TIGTA’s personnel recommendations is expensive. Reviewing prior issues before a hiring decision would be cost prohibitive, according to the IRS, although the agency didn’t support that assertion with a formal cost-benefit analysis.

Still it’s no secret that Congress has taken a knife to the IRS’ budgets in recent fiscal years. Getting the agency more money to ensure that it can implement hire and rehire safeguards is something that will require the cooperation from others in the House, starting with the Appropriations committee.

Maybe Brady and the other tax-writers also should send a Dear Colleague letter to those committee members who control the federal purse strings.

You also might find these items of interest: 

• Tax concerns for the unemployed
• 5 moves — and 7 tax tips! — to make if you're fired
• Tax help in finding new work, or what to do differently from Jimmy McGill if you don't like your job