By Jennifer Liberto@CNNMoneyJuly 9, 2013: 6:06 PM ET
IRS chief Danny Werfel told employees on Tuesday he's working to stop bonuses and instead cut back on furloughs.
The news comes after an outcry over IRS plans to award $70 million in bonuses by Sept. 30. Werfel told his 90,000 Internal Revenue Service workforce that he aims to reverse the plan to award bonuses, according to a memo. He blamed the move on the sequester -- the $85 billion in forced spending cuts that has hit all federal agencies.
"This is not a reflection of the quality or performance of the work done by you and your colleagues, but rather an unfortunate byproduct of the difficult budgetary situation we find ourselves in," said acting chief Werfel in the memo to employees.
Werfel said that he plans to try and stop bonuses for senior executives as well as IRS employees covered by union contracts. But he stopped short of saying that bonuses wouldn't happen.
"It is my intention to continue to pursue eliminating award payouts this year to bargaining unit employees," he wrote.
Previously, the IRS has said it can't end the bonuses, which are bound by legal contracts with the unions. The federal spending cuts allow spending that is legally required.
"If the IRS cancels the remaining furlough days, all employees would be paid on those days," Werfel said. "It would mean the IRS would remain open on those days to serve taxpayers and meet the needs of the nation's tax system."
The National Treasury Employees Union, which represents IRS workers, remains firm that the bonuses are legally required to be delivered this year. They say furloughs should not be contingent on bonus awards.
"NTEU believes it is not necessary for the IRS to cancel the awards in order to avoid the remaining furlough days," said NTEU President Colleen M. Kelley in a statement. "The IRS should examine all parts of its budget before eliminating incentive awards for high-performing front line employees."
In May, Sen. Charles Grassley protested the bonuses and wrote Werfel that all such payments were supposed to be halted under the federal spending cuts, known as sequester. Grassley called Werfel's call to end bonuses a "step in the right direction."
What's behind the IRS controversy?
"But it shouldn't take a media firestorm and congressional outrage for the IRS to act within its budgetary constraints," he said in a statement. "Rejecting the White House's mandate to stop bonuses across the board would be a slap in the face to taxpayers."