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IRS faces hiring shortages amid workforce attrition

Officials at the Internal Revenue Service are looking to hire more employees to handle tax enforcement, compliance and administration of the tax code, even as more of the IRS’s older workers retire and leave the agency, particularly after the month-long government shutdown last December and January.

A series of top IRS officials made a pitch to tax practitioners that they should consider joining the agency at New York University’s Tax Controversy Forum last week.

“For those of you who have always wondered what it might be like to work at the Internal Revenue Service if you’ve not been there, come on board,” said IRS Commissioner Chuck Rettig. “We're hiring across the board.” He noted that the IRS Chief Counsel’s office, the Large Business and International division, the Small Business/Self-Employed, Criminal Investigation and information technology units are all hiring.

“It can be a tremendous experience,” Rettig added. “It can be an experience that you find tremendously rewarding, and I think it's an experience that you should reach out for.”

IRS Chief Counsel Michael Desmond acknowledged that recruitment of staff is one of his highest priorities. “I think one of the biggest challenges, and this isn’t unique to Chief Counsel — it’s shared on the commissioner’s side as well — is legacy planning, both at the leadership level and also for just bringing in younger attorneys,” he said. “We’ve had a pause in hiring for five or 10 years now, and that’s created a number of problems, particularly in the leadership pipeline. We’ve got some excellent young lawyers who have come in, particularly in the last year under the TCJA [Tax Cuts and Jobs Act], and we’ve been able to do a little bit of hiring for the last five or 10 years, but it’s by no means filling the attrition that we’ve had.”

Desmond said he signs retirement congratulatory letters multiple times a week and goes to retirement parties. “It’s nice to see people like Fran Regan, who is leaving the Manhattan office after 38 years, but those are very big shoes to fill,” he added. “We’ve got about 200 new lawyers coming in this year, but we’ve also got about 200 leaving. It’s better than we’ve had in the last eight or 10 years, but it’s certainly going to present a challenge. Bringing all those new and young and even lateral attorneys on board and getting them up to speed and getting them up to the level of performance that somebody with 38 years of experience is going to have is going to be a challenge for us, but we acknowledge it and we’re facing it.”

One of the other major priorities is helping develop guidance for the Tax Cuts and Jobs Act. Desmond said there has been a steep learning curve, though, in developing guidance for brand new provisions such as FDII (foreign derived intangible income) and GILTI (global intangible low-taxed income).

Douglas O’Donnell, commissioner of the IRS’s Large Business and International division, said the LB&I group is hiring hundreds more people, while also losing hundreds to retirement. “From 2010 or so, we’re down about 40 percent, from 7,100 to 4,300,” he said. “That limits what we can do, and that’s a significant drop. We’ve tried to be very thoughtful in how we’ve deployed our personnel and what type of work we’re going to do. We did get authority this year to hire 500-plus people new to the division, but we’re not growing by 500. We’re hiring 550, but we’ve been losing about 7 percent of our workforce a year to retirement, so the net increase in the division is roughly 200 to 250. We’re going to end the year with more people than we began with for the first time since 2011. That’s an accomplishment, but we still have challenges with people.”

Among the new hires are revenue agents, appraisers and computer engineers, he noted. The LB&I division has been leveraging technology such as data analytics to make up for shortfalls in personnel and now has the ability to look across an entire filing population with its new enforcement and examination campaigns.

Mary Beth Murphy, commissioner of the IRS’s Small Business/Self-Employed division, said her group is hiring thousands more employees. “We’re extremely excited about the hiring opportunities,’” she said. “We are hiring about 3,200 people, not all for the field. We’re going to hire about 950 exam folks, revenue agents and tax compliance officers, and about 500 revenue officers. Our first class started June 10 for the revenue officers. The lapse in funding slowed us down a little bit with our hiring. We had hoped to be well underway. We start to train the first wave of revenue agents in July, so we’re extremely excited about that. We still have our jobs open on USAJobs, so if you have any friends or family, we are a great organization.”

Murphy recently visited Las Vegas to explain tax compliance to a group of casino employees. She noted that the SB/SE division has been working on tax compliance for cryptocurrency and for Uber and Lyft workers. The IRS Criminal Investigation unit accepts about 90 percent of the cases they refer.

IRS Collection Director Paul Mamo said his group is fighting resource shrinkage by using robotic process automation technology to target egregious tax delinquents. The Collection unit has also introduced a new automated chat function to further leverage technology. “Everyone’s touched on the hiring,” he said. “It’s a very cyclical process. The revenue officers, for example, who many of you probably face off with each and every day, right now, as we stand here today, we’re just over 2,000. In fact, we have a group of folks in Atlanta being trained this week. As Doug [O’Donnell] described, it’s the same idea we have. We’re hopefully going to bring in somewhere in the range of 500 or 600 revenue officers this year, but again we’re churning out a lot. We’re churning out about 250, so that attrition rate is a little bit higher for us. But we want folks to have a career path, we want folks to grow. That’s the process we’re in now. For the first time in eight years, we’re going to see an increase in revenue officers when we close this fiscal year. We’re excited to see that.”

IRS Criminal Investigation chief Don Fort said his unit has lost about 1,000 agents in recent years to retirement and only hired about 250 replacements. In 1991, when he joined the IRS CI unit, there were about 2,900 agents and it’s now down to just over 2,000 last year.

“It’s a depressing number,” he said. “The high-water mark for CI was in 1996 or 1997, when we had about 3,300 agents. So it’s down considerably. I wish I could snap my fingers and hire agents, but the process doesn’t work that way. We don’t control the budget, and even within the IRS, I don’t have control over hiring because every part of the IRS needs resources desperately, so there are trade-offs everywhere you go.”

IRS Criminal Investigation Chief Don Fort (right) being interviewed by Jeremy H. Temkin (left), a principal at Morvillo Abramowitz Grand Iason & Anello, at the NYU Tax Controversy Forum

However, the IRS is hiring more agents for the Criminal Investigation unit this year and next year. “By the time this fiscal year is over, we will have hired probably about 150 agents,” said Fort. “That sounds like a decent number compared to 2,000 agents, but you have to recognize that we also lost about 140 or 150 to retirement every single year. This year, we’re treading water, basically staying about the same. Next year, we’ve got tentative approval for about 10 classes, which means anywhere from about 200 to 250 agents, so we’ll finally start to see an increase. That’s great news.”

To help with priorities like payroll and employment tax fraud, the IRS is using technology like data analytics. Still, the new hiring brings another set of problems. “Some of these offices haven’t had new employees in years, so having new energetic agents come in really breathes life into offices, but it comes with significant challenges,” said Fort. “When you have that many classes and bring that many new agents on, it means that we have to take some experienced agents offline to help train them. There’s a lot of competition for getting the classes and our agents go to federal law enforcement training centers in Georgia. There are about 100 federal agents who compete for space there, so getting the classes is a challenge to begin with. But then staffing up with instructors takes time and effort. Then, once they get back in the field, one of the strongest parts of our training program is on-the-job instructors. These are seasoned agents that work with the junior agents to help them go on interviews and teach them how to do the job. From the time that we hire an agent to the time that they’re likely to recommend a case to the Department of Justice is anywhere from two to three years."

Training new agents is a priority, even if it means taking previous investigation time away from older employees.

"We have to recognize that we have to make that commitment to the future, but we’re taking some of our most experienced agents offline to help get the next generation of agents up and running, so there’s definitely challenges there," Fort added. "If you look at the last six or seven years, we’ve lost about 1,000 agents to retirement, and only 250 coming in. Those 1,000 agents walking out the door are your most experienced agents, and you’ve got no new agents coming to pass along that knowledge. It does present some challenges for sure.”

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