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Shutdown Pain May Make Working at IRS a Tougher Sell

Jan. 25, 2019, 11:00 AM

The ongoing government shutdown is setting up a serious question for IRS employees: is working there even worth it?

The last several years have been rocky for the tax agency. It weathered fallout from its scrutiny of tax-exemption applications, its former commissioner John Koskinen faced an impeachment effort in Congress, and it has been hampered by repeated budget cuts. And now a job at the Internal Revenue Service may seem even more unappealing as the government shutdown has left tens of thousands of agency employees without a paycheck.

The agency has already been dealing with employee attrition. It could now struggle to recruit new employees, who may seek out a higher paycheck in the private sector—without the risk of it stopping because of a political stalemate, tax practitioners fear.

“Given all the budget cuts we’ve had over the years, and the grievous harm that’s been inflicted upon employees during this shutdown, it could take a generation to repair the harm that’s been done,” said Phil Hackney, a law professor at the University of Pittsburgh. Hackney previously worked in the IRS Office of the Chief Counsel.

Since 2010, the agency has lost about $715 million in funding and 22,000 full-time employees.

The shutdown pain extends beyond the IRS, which has called back 57 percent of its employees as filing season nears. At least 800,000 federal employees haven’t been paid since the shutdown began on Dec. 22. That reality could have negative consequences across the federal government, not just at the IRS, Hackney said.

Some IRS employees are seeking financial refuge by claiming a hardship exemption as permitted in their employment contracts—hundreds of employees that have been recalled to process tax returns have asked to be excused. Federal workers, including IRS employees, are on the cusp of missing their second paycheck on Jan. 25.

The IRS didn’t respond to a request for comment.

Retention Problems

Many employees at the IRS could make a lot more money in the private sector, but stay out of dedication to public service, said Nicole Elliott, a partner at Holland & Knight LLP in Washington.

“The shutdown sends a signal that the sacrifices these employees make for the public are not valued, and I would not be surprised if they look elsewhere for employment,” said Elliott, who previously worked as a senior adviser to Koskinen and led Affordable Care Act implementation.

Head count in the IRS Large Business and International Division alone has fallen to 4,500 from 7,000 in 2011, and renewed hiring hasn’t been able to keep up with attrition, the division’s Deputy Commissioner Nikole C. Flax said in September.

Koskinen warned in 2015 that more than 40 percent of employees would be eligible for retirement by this year. He also regularly said that many employees choose to work at the IRS because they believe in what it does, despite the challenges it can bring.

“The IRS is able to recruit the best and the brightest because they understand that public service requires both sacrifice and the passionate effort of employees dedicated to the mission,” but the shutdown will hamper the government’s ability to retain and recruit future employees, said Frank Agostino, founder and president of Agostino & Associates in Hackensack, N.J. He is a former attorney with the IRS’s District Counsel.

To contact the reporter on this story: Robert Lee in Washington at rlee@bloombergtax.com

To contact the editors responsible for this story: Patrick Ambrosio at pambrosio@bloombergtax.com; Colleen Murphy at cmurphy@bloombergtax.com

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