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IRS moves to halt employee bonuses, citing budget cuts

By Patrick Temple-West

WASHINGTON (Reuters) - The U.S. Internal Revenue Service, still reeling from its worst crisis in years, is taking steps to halt bonuses for union employees and senior executives, the acting IRS commissioner told employees on Tuesday.

Bowing to "an unfortunate byproduct" of government-wide budget cuts, acting commissioner Danny Werfel said the move does not reflect poorly on employees' work and follows a bonus freeze already in place for non-union employees and managers.

The tax-collecting agency was engulfed in controversy in May over the handling of applications for tax-exempt status from conservative political groups. The affair led President Barack Obama to oust Werfel's predecessor amid an FBI investigation and congressional hearings.

While the so-called IRS 'Tea Party' targeting scandal has not ended, with congressional investigators continuing to gather testimony, the agency has been moving on with its work.

IRS employee bonuses have come under political fire in recent months. Senator Charles Grassley, an Iowa Republican, in June questioned a proposed IRS plan to pay $70 million in bonuses this year. The IRS has about 90,000 employees.

If the IRS halts bonuses for union workers, the agency could avoid two furlough days scheduled for this year, Werfel said. Union workers would be paid as usual for those days, while taxpayer services, like IRS call centers, would remain open.

The IRS employees' union pushed back on Werfel's announcement and said it will keep negotiating the bonus issue.

"The awards are legally required as part of the collective bargaining agreement" between the union and IRS, Colleen Kelley, president of the National Treasury Employees Union, said in a statement.

The IRS does not need to cancel bonuses to prevent the two furlough days, said the union. The average bonus is $1,500 per IRS union employee, the union said.

Separately on Tuesday, a House of Representatives committee proposed a $9 billion, or 24 percent, cut to the IRS's fiscal year 2014 budget.

(Editing by Kevin Drawbaugh and Doina Chiacu)

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