Embattled IRS plans employee bonuses for 2013 work to ‘boost morale’

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Citing the need to boost employee morale, the Internal Revenue Service’s new commissioner said Monday that he will pay out millions of dollars in bonuses to agency employees, reversing a decision his predecessor made to save money amid the sequester budget cuts and other belt-tightening last year.

The agency remains under fire for targeting tea party groups, but Commissioner John Koskinen said the bonuses are needed to retain and attract good employees in a time of cutbacks.

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“This is money best spent on our existing employees,” he said in an email to agency employees. “The performance award payouts are in recognition of that great work done in very trying circumstances. I firmly believe that this investment in our employees will directly benefit taxpayers and the tax system.”

The move didn’t sit well with congressional critics who have been stupefied by the agency’s targeting of tea party groups and, more recently, proposed rules to crack down on an even broader class of political activities by tax-exempt groups.

“It’s hard to think of a group of people less deserving of bonuses than IRS employees. Frankly, this is outrageous,” said Sen. Orrin G. Hatch of Utah, the ranking Republican on the Senate Finance Committee.

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He said while “not every IRS worker” was involved in the tea party targeting, it sends a “wrong signal” to reward the agency.

Mr. Koskinen is slated to appear on Capitol Hill for an oversight hearing Wednesday.

His predecessor, acting Commissioner Danny Werfel, whom Mr. Obama tapped to clean up the agency after the tea party-targeting came to light, canceled the bonuses last year. He said the money was used to limit furloughs to just three days, instead of the five that would have been necessary under the budget sequesters.

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It’s not clear where IRS officials found the money to pay for the bonuses, given last year’s tight budget.

The National Treasury Employees Union, which represents many IRS workers, argued that canceling the bonuses was illegal under the union’s collective-bargaining agreement. The union took the agency to court.

To head off the lawsuit, Mr. Koskinen negotiated the bonuses with NTEU President Colleen M. Kelley.

Ms. Kelley said the lower bonuses were better than waiting out a court case where the outcome could be no payouts at all.

“The awards are a relatively small amount of money, but they go a long way toward acknowledging the hard work of employees who exceed their performance expectations for the year,” she said.

The bonuses will amount to about 1 percent of pay — less than the 1.75 percent rate of previous bonuses.

Agency officials said they will pay $43.4 million to employees represented by labor unions and $19.1 million to other employees, for a total of $62.5 million in bonuses for 2013.

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