TIGTA: IRS Overpaid 600 Employees, Underpaid 900 Employees

Chris Gaetano
Published Date:
Apr 3, 2017

A report from the Treasury Inspector General for Tax Administration said that the IRS's complex pay-setting rules has resulted in more than a thousand employees being either under or overpaid between 2006 and 2015, representing 31 percent of the sample. Specifically, TIGTA's audit found that 600 IRS employees were overpaid by $4.2 million, and 900 employees were underpaid by $2.7 million. These errors were largely because of the "cumbersome" and "oftentimes confusing" rules over who gets paid how much. 

The issue, according to TIGTA, is that when an IRS employee is promoted to a management position, they are taken off the standard General Schedule pay system for federal employees and put on a much more complex IRS-specific system, which requires over 70 pages of guidance to account for all its rules and exceptions to those rules. Pay can vary depending on the nature of the promotion, the salary history of the employee, and the management position that is being filled.

For instance, the base pay for every employee grade GS-13, Step 6 is $86,156, but certain employees will receive 15 percent more than that based on locality, making their actual salary $99,079.80, but if that employee is then promoted to a senior management position in the same locality, the new salary is calculated by multiplying the employee’s base pay by 10 percent to determine the salary increase that the employee is entitled to receive, adding the salary increase to the employee’s base pay, which would probably be $94,772. This sum is then compared to the minimum and maximum rates for senior managers in the management pay system. The new base pay amount falls, in this example, within the minimum and maximum base pay for a senior manager. Therefore, the new base pay for the employee is $94,772. However, if the calculated amount was lower than the minimum base pay for a senior manager, the new base pay would be adjusted to be the minimum base pay for a senior manager. If the calculated base pay was higher than the maximum base pay for a senior manager, the new base pay would be adjusted to be the maximum base pay for a senior manager. And this is all to say nothing about the degree to which the employee is being promoted to a similar position to the one they previously held. If so, they may be entitled to receive increases that exceed the 10 percent and 8 percent increases generally paid for permanent and temporary positions.

This is further complicated by the seasonal nature of a lot of IRS work. The IRS often promotes permanent employees to temporary management positions, who then may move back and forth between this temporary position and their permanent position within a short period of time, which sometimes entails alternating between the GS pay system and the IRS management pay system. Needless to say, TIGTA said that this is all very complicated, which increases the possibility of error. 

"Setting pay accurately requires an extensive knowledge of the rules and nuances associated with both the management pay system and the GS pay system. Not understanding these rules significantly increases the risk of errors in setting pay. For example, knowing if the movement into the management pay system is temporary or permanent is required because the type of promotion determines the appropriate salary increase. Additionally, the employee’s salary history must be reviewed because the salary history will affect the percentage increase that the employee is entitled to receive," said the report. 

While managers are meant to receive training in the proper pay procedure, TIGTA said this training was uneven, with certain offices (including the ones specifically responsible for setting pay) not receiving it at all. This has led not only to wasted money, but frustration on the part of IRS employees. TIGTA interviewed all current IRS employees with debt over $5,000 due to salary overpayments. 

"Employees stated that they were unaware of any overpayment until notified by the IRS and did not understand how pay calculations were made. Several expressed frustration with these pay issues, with some employees stating that they had delayed retirement, experienced medical issues, contacted their Member of Congress, or turned down management offers as a result," said TIGTA. 

TIGTA recommended that the IRS Human Capital Officer 1) address the salary overpayments and underpayments TIGTA identified and 2) consider simplifying pay calculation processes in areas in which pay errors continue to be identified. In their response, IRS management agreed with both recommendations and stated that the IRS will 1) take action to process corrective personnel actions for salary overpayments and underpayments TIGTA identified and 2) review results and recommendations from TIGTA, an internal review, and other sources to simplify pay policy and/or training.

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