IRS Wants to Trade Bonuses for Fewer Furloughs

The Internal Revenue Service is attempting to eliminate performance bonuses to its employees in 2013 in exchange for cutting two scheduled furlough days, according to a memo sent to IRS workers.

Danny Werfel, the principal deputy commissioner at IRS -- and the agency’s effective chief -- said IRS had previously decided to eliminate monetary awards for non-bargaining unit employees, per White House guidance. The agency now intends to cancel bonuses for union-backed workers, and is “determining options” for stopping senior executives’ bonuses as well.

“This is not a reflection of the quality or performance of the work done by you and your colleagues,” Werfel said in the memo, “but rather an unfortunate byproduct of the difficult budgetary situation we find ourselves in.”

The silver lining for IRS employees is the decision could spell the elimination of two agency-wide furlough days scheduled for July 22 and Aug. 30. The IRS has already required three days of unpaid leave for its workforce.

“If this occurs, this would mean that all employees would be paid on those days, minimizing the loss of the awards,” Werfel said. “Even more importantly, it would mean the IRS would remain open on those days to serve taxpayers and meet the needs of the nation’s tax system.”

Werfel said cutting bonuses is part of a wider effort to reduce costs at the IRS, stating the agency has trimmed its budget by $1 billion since 2010. A House appropriations bill unveiled Tuesday would slash the IRS budget by 24 percent.

“I believe we are beginning an important new chapter in our efforts to set the IRS on a new path,” Werfel said. “We have demonstrated our commitment to making hard choices to reduce our spending, and we must also make it clear that the IRS needs adequate resources for the necessary investments in services and enforcement that will enable us to continue carrying out our mission to serve the American taxpayer, now and in the years ahead.”

The National Treasury Employees Union, which represents IRS workers, said the IRS cannot legally eliminate the bonuses.

“NTEU has had a negotiated performance awards program at the IRS for decades, pursuant to the law and regulations which specifically direct agencies to implement such merit-based incentive programs,” Colleen Kelley, the union’s president, said in a statement. “It is NTEU’s position that the awards are legally required as part of the collective bargaining agreement between NTEU and the IRS.”

Kelley said NTEU will negotiate the proposal with the IRS. The White House’s February guidance advised agencies that bonuses “should occur only if legally required,” and Werfel confirmed the IRS will fulfill its bargaining obligations.  

The union added the agency should cancel the remaining two furlough days without eliminating bonuses by targeting other areas of the budget.

“IRS employees are dedicated and hard-working professionals who perform important and difficult work for our country,” Kelley said. “Employees have already earned these awards.”

Sen. Chuck Grassley, R-Iowa, welcomed the proposal from the IRS.

“This is a step in the right direction,” Grassley said in a statement. “But it shouldn’t take a media firestorm and congressional outrage for the IRS to act within its budgetary constraints.”