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

The Internal Revenue Service is facing unprecedented scrutiny after a federal watchdog disclosed that thousands of IRS employees and contractors owe nearly $50 million in unpaid taxes — while the agency has rehired workers with criminal and sexual misconduct histories.

The Treasury Inspector General for Tax Administration (TIGTA) audit, commissioned 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.

Sen. Ernst sharply criticized IRS Commissioner Daniel Werfel for what she described as “a complete lack of accountability,” introducing the Audit the IRS Act, legislation that would mandate annual audits of all agency employees and require termination of any worker who fails to pay 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.”

Systemic Negligence and Hypocrisy

Ernst’s letter to Werfel paints a troubling picture of an agency that enforces compliance on everyday Americans while failing to police its own ranks.

“More than 5,800 employees of the IRS and its contractors were found to owe nearly $50 million in overdue taxes,” she 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 TIGTA report also found that over 500 former IRS employees with serious misconduct histories — including criminal convictions, sexual misconduct, physical assaults, and unauthorized access to taxpayer data — were rehired. Among these, 282 individuals had multiple prior disciplinary issues on record.

Even more concerning, thousands of delinquent employees were not enrolled in repayment plans. Of the 3,323 IRS employees with unpaid taxes, 2,044 — owing over $12 million — had no repayment arrangements. Among 2,484 contractor employees, 1,729 — owing more than $17 million — were also not on payment plans.

“This is a stunning display of double standards,” Ernst said. “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. Taxpayers will never trust the IRS when the agency’s own auditors can’t even pass a tax audit.”

Broader Federal Implications

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

Ernst’s Audit the IRS Act would require annual reviews of IRS employee tax compliance, ban the rehiring of tax-delinquent workers, and mandate immediate termination for current employees found willfully evading taxes. Repeat offenders would also be referred to the Department of Justice for potential prosecution.

“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,” Ernst wrote. “Repeat offenders should be referred to the Department of Justice and subjected to imprisonment, fines, and civil penalties.”

Bipartisan Concern

The findings have triggered bipartisan alarm on Capitol Hill. Lawmakers are questioning how the nation’s tax-collection agency can demand compliance from Americans while tolerating massive internal misconduct.

“Surely the irony and hypocrisy can’t be missed here,” Ernst concluded. “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.”