July 9 (Bloomberg) -- The Internal Revenue Service is considering canceling employee bonuses and using the money to avoid two unpaid furlough days, the agency’s interim leader told staff members in a memo today.
The agency made the announcement on the same day that House Republicans proposed a 24 percent, or $2.9 billion, budget cut that would make the IRS smaller in fiscal 2014 than it was in 2002.
The possible bonus cancellation “is not a reflection of the quality or performance of the work done by you and your colleagues, but rather an unfortunate byproduct of the difficult budgetary situation we find ourselves in,” Danny Werfel, the interim IRS leader, wrote.
The IRS has already stopped bonuses to managers, consistent with government-wide spending limits. Werfel wrote that he is now trying to stop bonuses for senior executives and for unionized front-line workers, who make up more than 85 percent of the 90,000-person workforce.
If the bonuses don’t get paid, the IRS would likely cancel furlough days scheduled for July 22 and Aug. 30, meaning that employees would get paid and the agency would be open to the public. The agency was closed for three days between May 24 and July 5.
The final decision will depend on the IRS’s negotiations with the National Treasury Employees Union.
The bonuses are “legally required” and were earned for work that started in 2012, union president Colleen Kelley said in a statement today. He also said that the NTEU will “fully pursue the bargaining process to the end.”
“It is not necessary for the IRS to cancel the awards in order to avoid the remaining furlough days,” Kelley said. “The IRS should examine all parts of its budget and operations before eliminating incentive awards for high-performing front-line employees.”
Lawmakers, including Iowa Republican Senator Charles Grassley, have criticized the tax agency for considering bonus payments amid the required federal spending cuts.
The tax agency’s announcement today is a “step in the right direction,” Grassley said in an e-mailed statement. “But it shouldn’t take a media firestorm and congressional outrage for the IRS to act within its budgetary constraints.”
He also said it “would be a slap in the face to taxpayers” if bonuses aren’t halted across the board at the agency.
Orrin Hatch of Utah, the top Republican on the Senate Finance Committee, said in a statement that “while efforts to block the bonuses are welcome news, actions speak louder than words.”
“The IRS should not be paying out bonuses, especially now when it’s under multiple congressional investigations for targeting conservative groups,” Hatch said, referring to the tougher scrutiny the agency applied to some organizations seeking tax-exempt status.
Werfel wrote that the IRS has found $1 billion in savings over the past four years.
“It is my hope that in the coming weeks and months, we can have a robust public dialog about the future of the IRS budget,” he wrote. “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.”
A House appropriations subcommittee is scheduled to consider the agency’s budget tomorrow, along with proposed limits on IRS spending on bonuses, conferences and videos.
The memo was earlier reported by the Associated Press.
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