The IRS culture must be fixed. We all agree about that, and only Congress can do it. The Tax Prof links to paper looking at the problem, but I tend to agree with Instapundit. Hanging a few of the upper echelon as an example to the others might help with the culture inside the agency, but if Congress is unwilling to do that, then zeroing out the conference budget would be a good place to start, along with the bonuses budget. I understand that Lois Lerner, who famously plead the Fifth when refusing to testify, got over $42,000 in bonuses in '09, '10, and 2011. There is no sense in paying civil servants bonuses to do their jobs.
If you're not willing to hang them, then slice the budget to the bone.