A revenue agent with the Internal Revenue Service found out the hard way that if you get sloppy with your individual federal tax returns you could find yourself out of a job. (Agbaniyaka v. Department of the Treasury, C.A.F.C. No. 2011-3211 (nonprecedential), 6/19/12
Mr. A was with IRS for about 22 years. He had excellent evaluations, many promotions, got a master’s in taxation, and overall seemed to have a stellar career. Overlapping his day job, Mr. A had outside interests selling arts and crafts at trade shows and other outdoor events. He apparently never made a profit on the outside business, consistently reporting operating losses on Schedule C of his income tax returns.
Any IRS employee could tell you that if you work for the agency you need to be scrupulous in filing tax returns. You will be audited.
When Mr. A was audited for the 2004 tax year red flags were raised as to the adequacy of his business records. So, the agency decided to audit several years and found similar issues. The end result was a finding that the employee’s tax returns did not pass muster—he was not entitled to the Schedule C deductions he had claimed for four separate years. (Opinion pp. 2-3)
Mr. A appealed to the Tax Court but lost.
At this point IRS instituted a removal action against Mr. A, citing the federal law that requires termination of any IRS employee “found to have willfully understated his federal tax liability, unless such understatement is due to reasonable cause and not willful neglect.” (p. 3) In the end, Mr. A was removed.
His union took the case to arbitration. The arbitrator who made “extensive findings of fact and credibility determinations” sustained Mr. A’s removal. (p. 4) As the arbitrator opined, “Given the Grievant’s experience and expertise, he was undoubtedly aware that he had to substantiate his efforts to conduct a business…By claiming deductions on Schedule C, he knowingly and willfully submitted tax filing to which he was not entitled.” (pp. 4-5)
After the Merit Systems Protection Board affirmed the arbitrator’s decision, Mr. A took his case to the appeals court. He has received no sympathy from that court. The law clearly requires removal when an IRS employee willfully understates tax liability, that is what Mr. A did, and he was therefore properly removed.