IRS knowingly rehired tax cheats, other employees with ‘performance’ issues: Audit

** FILE ** The exterior of the Internal Revenue Service building in Washington is seen here on March 22, 2013. (Associated Press)

The IRS rehired hundreds of employees who had prior records of bad performance at the agency, including 141 former workers who had botched their own tax returns and others who had used their positions to peek at private tax information, the agency’s inspector general said in a report released Thursday.

Five IRS employees were rehired even though the agency knew they had intentionally failed to file their taxes within the last two years, Treasury Inspector General for Tax Administration J. Russell George said. Of the employees with prior problems, nearly 20 percent of them had more problems after they were rehired.

In another instance, an employee who has taken eight weeks of unauthorized vacation and whose previous manager had written a note explicitly stating “do not rehire,” was nonetheless rehired.

“Rehiring prior employees with known conduct and performance issues presents increased risk to the IRS and taxpayers,” Mr. George said.

Most rehired employees don’t have any problems, and the IRS does a good job of weeding out those with criminal records or history of drug use, but the agency doesn’t give much credence to the workers’ rule-breaking during their previous stints at the IRS.

In its official response to the report, the IRS said it follows the current guidelines from the Office of Personnel Management and believes it already has the ability to handle these cases, saying its current process can weed out bad actors.

“IRS has fully evaluated this recommendation and determined its current process is more than adequate to mitigate any risks to American taxpayers, federal agencies and its employees,” Daniel T. Riordan, an agency Human Capital Officer, said in a reply memo. “IRS already fully considers prior conduct and performance issues before the final job offer is issued to all new hires.”

Mr. George said that didn’t explain why so many troublesome applicants were rehired and why nearly 20 percent of them have further performance issues during their new stints.

He also said the IRS seemed concerned that it could be breaking the law if it looked at a potential hire’s past behavior problems.

Sen. Orrin G. Hatch, chairman of the Senate Committee on Finance, said the report is stunning, coming the same week that President Obama proposed a massive increase in the IRS budget, including hiring 9,000 new agency workers.

“IRS employees must be held to high standards to ensure that taxpayers are protected, and there is no reason to hire employees who have already failed to uphold those expectations,” said Mr. Hatch, Utah Republican.

He said he would pressure the IRS to put in place new tools to prevent the agency from rehiring bad employees.

The IRS has been under fire for political mismanagement since it admitted two years ago that it had improperly targeted tea party groups for special scrutiny, and delayed approving applications for years. The agency also has had to revamp its rules to cut out lavish conferences after investigators reported employees were spending money on items such as a spoof “Star Trek” training video.

IRS Commissioner John Koskinen told Congress earlier this week that those sorts of conferences couldn’t happen anymore under the new rules put in place.