The IRS has a big order to fill: tens of thousands of new employees are needed in the next two years to fight a high attrition rate that is eroding ranks at a time when the agency says it needs to expand.

To do that, the IRS should be making more use of pay incentives, which it has used sparingly in the last three years, according to its inspector general.

The agency did rely on pay incentives to keep essential workers from jumping ship at the onset of the COVID-19 pandemic in 2019, but it has issued relocation, recruitment and retention bonuses only 31 other times during that period.

“The IRS may miss hiring and employee retention opportunities involving mission-critical positions by not maximizing the use of appropriate special payment incentives,” according to the report.

Pay is often a pain point when it comes to attracting new entrants to federal service, with public sector pay lagging the private sector by almost 25%, according to the Federal Salary Council. Annual raises try to keep pace, but knowing they may not specifically address certain skill gaps,the Office of Personnel Management and Congress have given agencies other powers to set higher pay for high-demand positions in science, technology, medicine or human resources.

At the IRS, recruitment efforts are fighting against an attrition rate of 8.5%, higher than the governmentwide average of 6.1%. By the end of 2022, the IRS lost 917 revenue agents, nearly 11% of the strength it had at the beginning of the year. Officials said in the report that turnover for these roles has been linked to overall dissatisfaction with pay and opportunities for promotion.

Churn is in part is also driven by the high volumes of work and stress from increased political pressure and threats.

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So while the agency has a goal to hire 19,000 employees each year, in reality, it expects a net increase of 5,000 to 10,000 employees.

The agency’s watchdog recommended leaders use more recruitment and retention pay incentives, especially as the agency is being expected by Congress to modernize many of its tax services and improve customer service, requiring broad efforts to lift itself out of aging IT and ensure there are relevant experts in-house who can monitor these projects.

The agency has used pay incentives before, as it did in 2019 at the beginning of the COVID-19 pandemic to retain essential workers to process of tax returns. These duties were not telework-eligible and required the physical presence of staff in the office while many other operations went remote to keep employees safe from exposure to the virus.

The majority of the 1,466 incentive payments made between 2019 and 2022 were for these workers, totaling $900,000.

The other bonuses were given for recruitment, retention or relocation and varied in amount, with some as little as $200 and others as much as $64,000.

“To improve staffing retention, the IRS should consider expanding the use of retention incentives to encourage experienced revenue agents to remain with the agency,” according to the report.

The agency has also tried using a three-decade old authority granted by Congress to allow agencies to pay certain highly skilled positions at a higher rate. However, after it took the agency nearly three years to approve six hires, agency leaders told the watchdog it will not continue using it.

Few other agencies have used that governmentwide authority since it was created in 1990, citing the lengthy and complex approval process, according to watchdog reports and outside groups.

Molly Weisner is a staff reporter for Federal Times where she covers labor, policy and contracting pertaining to the government workforce. She made previous stops at USA Today and McClatchy as a digital producer, and worked at The New York Times as a copy editor. Molly majored in journalism at the University of North Carolina at Chapel Hill.

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