The total amount of bonuses amounted to more than $2 million. In addition to not paying taxes, other bonus recipients were facing disciplinary action for drug use, violent threats, and fraudulently claiming unemployment benefits.
"While not prohibited, providing awards to employees who have been disciplined for failing to pay federal taxes appears to create a conflict with the IRS' charge of ensuring integrity of the system of tax administration," said Treasury Inspector General for Tax Administration J. Russell George in a statement.
The audit recommends that the IRS change its policies so disciplinary action can be taken by management when giving bonuses to employees. The IRS has said it will comply with the recommended changes.