IRS Scandal: 5,800 Employees Owe Nearly $50 Million

The Internal Revenue Service is facing mounting scrutiny after a federal watchdog revealed that thousands of its own employees and contractors owe nearly $50 million in unpaid taxes — and that the agency has rehired individuals with criminal and sexual misconduct records.

The Treasury Inspector General for Tax Administration (TIGTA) audit, conducted at the request of Senator Joni Ernst (R-IA), found that 5,807 IRS and contractor employees were delinquent on their tax obligations, including more than 3,300 current IRS employees who collectively owe $20 million.

In response, Ernst blasted IRS Commissioner Daniel Werfel for “a complete lack of accountability” and introduced the Audit the IRS Act, legislation that would require annual audits of all agency employees and mandate the termination of any IRS worker who fails to pay their taxes.

“The spirit of 1776 is still alive and well with a tax revolt happening right now at the most unlikely of places in Washington — the IRS,” Ernst said. “While the IRS warns, ‘tax evasion is a serious crime punishable by imprisonment, fines, and the imposition of civil penalties,’ the agency is rewarding its own tax dodgers with paychecks and lavish benefits made possible, ironically, with the taxes paid by law-abiding citizens.”

Ernst’s letter to Werfel paints a picture of systemic negligence and hypocrisy inside the tax collection agency.

“More than 5,800 employees of the IRS and its contractors were found to owe nearly $50 million in overdue taxes,” Ernst wrote. “Despite the IRS having the statutory authority to terminate employees who willfully fail to file tax returns or understate their tax liability, just 20 employees found to be tax cheats were removed as a result.”

The 2024 TIGTA report also revealed that over 500 former IRS employees with histories of serious misconduct have been rehired — including individuals cited for criminal behavior, sexual misconduct, physical assaults, and unauthorized access to taxpayer data. Of those, 282 had multiple prior disciplinary issues on record.

Even more troubling, the audit determined that thousands of delinquent IRS employees and contractors were not even on payment plans to resolve their debts.

Ernst cited data showing that of the 3,323 IRS employees with unpaid taxes, 2,044 — owing more than $12 million — were not enrolled in repayment plans. Among 2,484 contractor employees, 1,729 — owing over $17 million — were also not on payment plans.

The senator called the situation “a stunning display of double standards” within the agency tasked with enforcing tax law against the public.

“There is absolutely nothing fair about forcing hardworking Americans to pay the salaries of tax-evading tax collectors while the IRS targets lower-income and middle-class Americans with nearly two-thirds of the new audits,” she wrote. “Taxpayers will never trust the IRS when the agency’s own auditors can’t even pass a tax audit.”

The TIGTA investigation further revealed that government-wide, 149,000 federal employees owe $1.5 billion in unpaid taxes, including tens of thousands of repeat offenders who have failed to file year after year.

The Audit the IRS Act, introduced by Ernst, would compel annual reviews of IRS employee tax compliance, prohibit the rehiring of tax-delinquent workers, and require immediate termination for current employees found to have willfully evaded taxes. It would also direct the IRS to refer repeat offenders to the Department of Justice for potential prosecution.

Ernst called on Werfel to personally enforce the zero-tolerance policy now, even before her bill is enacted.

“To hold the IRS accountable and to demonstrate the agency takes its own warning that ‘tax evasion is a serious crime,’ I strongly urge you to routinely check the tax status of every employee and fire every employee and contractor who is delinquent on their taxes and not enrolled in a payment plan,” she wrote. “Repeat offenders should be referred to the Department of Justice and subjected to imprisonment, fines, and civil penalties.”

The findings have sparked bipartisan alarm on Capitol Hill, with lawmakers questioning how an agency responsible for enforcing compliance against American taxpayers could allow such widespread misconduct internally.

As Ernst summed it up: “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 own employees.”