The IRS failed to correctly pay 31% of employees according to a recent report by the Treasury Inspector General for Tax Administration (TIGTA). Based on their sampling, TIGTA estimates that the IRS overpaid more than 600 employees by approximately $4.2 million and underpaid more than 900 employees by approximately $2.7 million.

The analysis was based on a sample of 4,985 IRS employees who were promoted into management positions and received pay increases that exceeded 10 percent between January 2006 and November 2015.

The IRS attributes these payment errors to complexities associated with setting pay when employees transiently move between the pay system of managerial and non-managerial roles—common to the cyclical nature of taxes. As the report notes:

“Cumbersome and confusing rules for setting pay resulted in mistakes when calculating pay for employees moving between the GS pay system and the management pay system”

These “cumbersome rules” on promotions between positions are as follows:

  • An employee selected for a first-time permanent management position is eligible for a one-time 10 percent pay increase.
  • An employee who is promoted from a management level position to another higher level management position, may receive an additional 10 percent pay increase.
  • An employee with prior management experience or selected for a temporary promotion into a management position is eligible for an 8 percent pay increase.
  • An employee who is promoted to a similar position to one they previously held may be entitled to receive increases that exceed the 10 percent and 8 percent.


The Inspector General’s report noted that the IRS recognized these problems existed in 2013, but failed to address them until 3 years later when The Inspector General announced their audit.

The last question that remains unresolved is whether the payment errors can be attributed to simple incompetency on the part of the IRS or malicious intent to bolster the income of some employees over that of others.