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IRS contractors owe back taxes

Agency pays companies that owe the government millions. Bill seeks to fire federal employees who haven't paid taxes.

By Kay Bell Mar 15, 2011 2:59PM

Everybody is looking for more tax money to cover ginormous budget gaps. At the federal level, it looks like the search for additional revenue should start at home.


The Treasury Inspector General for Tax Administration, or TIGTA, says existing practices within the IRS let tax agency contractors get paid even though they owed back taxes.


Eleven IRS contractors received more than $356 million in payments from Uncle Sam in 2009 despite owing a combined $3.8 million in back taxes, according to the new TIGTA report bluntly titled Existing Practices Allowed IRS Contractors to Receive Payments While Owing Delinquent Taxes.


TIGTA also identified five contractors with delinquent taxes totaling approximately $4.2 million that were not included in the IRS' automated Federal Payment Levy Program, or FPLP.


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All five contractors questioned the tax assessments and provided the IRS information to substantiate their arguments disputing the tax bills. The IRS told TIGTA that it has a responsibility to investigate the merit of a taxpayer's claim before initiating enforced collection activity.


That's a valid IRS position. Every taxpayer should be afforded the opportunity to argue his or her case.


TIGTA doesn't have a problem with the process. But it does think the IRS needs to speed things up.


The oversight group's investigation found that it took the IRS an average of eight months to review and determine if information contesting charges of unpaid taxes was sufficient to change the IRS' mind.


And while reviews are conducted, the IRS suspends collection efforts. Payments, however, continue to go out.


In this case, the contractors with questionable tax compliance skills received payments totaling approximately $356 million from the IRS and another $3.6 billion from other Federal agencies.


Not so good.


"All federal contractors, and particularly those that do business with the IRS, must meet their obligations to pay federal taxes," said J. Russell George, Treasury Inspector General for Tax Administration in a statement accompanying the report.


"Although the IRS has the responsibility to investigate the merit of a taxpayer’s claim before initiating enforced collection activity," George said, "it should improve its practices to expedite the timely resolution of federal contractor accounts that are in dispute."


TIGTA recommended that the IRS review its current processes to find ways to speed up cases where the agency believes federal contractors are behind in their taxes.  Ya think?


The IRS agreed with TIGTA's recommendations. No kidding!


Federal workers also owe Uncle Sam


On the individual side of unpaid taxes, federal employees regularly appear high on the tax debtors list.


That's no surprise. People from all professions sometimes get behind on their tax bill payments.


But some members of Congress say federal employees and contractors should be more responsible.


Rep. Jason Chaffetz, R-Utah, has introduced H.R. 828, which would terminate the employment of current federal employees and prohibit the hiring of future federal employees who have a seriously delinquent tax debt.


The bill defines "seriously delinquent" as "an outstanding debt under the Internal Revenue Code of 1986 for which a notice of lien has been filed in public records." If an employee is paying his or her tax bill under an agreement with the IRS or the tax debt is under review, the federal staffer wouldn't be fired or the prospective employee could be hired.


Currently, only IRS employees can be terminated for non-payment of federal income taxes.


Chaffetz, who serves on the House Oversight Committee overseeing Federal Workforce, Postal Service and the District of Columbia, also introduced H.R. 829, The Contracting and Tax Accountability Act of 2011, which would prohibit any person who has a seriously delinquent tax debt from obtaining a federal government contract or grant.


And in a rare case where a Republican positively cites the president, Chaffetz noted that in the 110th Congress then-Senator Barack Obama sponsored a similar bill in an attempt to weed out federal contractors with unpaid tax bills.


"Congress must send the message that those who deliberately and willfully dodge federal tax obligations should not expect to collect a taxpayer-funded paycheck," said Chaffetz in a statement announcing the bills. "At a time when this country is nearly $14 trillion in debt and many Americans are struggling to find work, the federal government need not tolerate tax evasion within the federal workforce."


This is Chaffetz's third attempt to fire federal employees or prevent the hiring of new federal workers who haven't paid their taxes.


More from Don't Mess with Taxes and MSN Money:



Mar 16, 2011 12:05AM
would this law also aply to members of congress and their staff as well as the white house?, because i believe the appointed head of the IRS was seriously deliquent in his taxes before he got the job.
Mar 16, 2011 6:19AM
Obama has staff and cabinet members who don't pay taxes.  HHS secretary said they overlooked it.  She isn't overlooking waivers to all of Obama's friends.  I guess she doesn't have her priorities right.  She can't afford to pay taxes, but will make sure we all get taxed. President should give them a choice, if he had any stones.  They will pay taxes or lose their jobs.  This includes the tresurary secretary.  Unusual idea isn't it?
Mar 16, 2011 7:10AM
How about the big corporations paying their fair share too! Bank of America for example in 2009, $4.4 Billion in profits while paying $0 in taxes they got $45 Billion in TARP that us tax payers are footing the bill for, they made $4.4 Billion pretax profit and got $1.9 Billion in federal kick backs and payed $0 income tax. I pay my income tax, you pay yours why are companies like BOA, Verizon, Citigroup, and the list goes on not paying theirs? If they would pay their fair share we would not have a financial crisis in this country. Instead our Government says nothing, looks the other way and allows them to abuse international tax shelters.

Right now, we're missing out on up to 100 billion per year in corporate tax revenue because of offshore tax haven abuse- that's $1 trillion each decade. We need laws passed making it illegal for these big corporations to hide their money from the government  and start paying up! Check out Stop Tax Haven Abuse Act. It is time for action and stop the trash talk of "spreading the pain around" and "share sacrifice,"
Mar 16, 2011 11:12AM
Wow...pot calling the kettle black here! Congress is pushing this bill to fire federal employees that don't pay their many in congress are not and have not been paying theirs?? Fire yourself while you are at pieces of crap! As long as we have career politicians...nothing will ever be fixed in this country. All they do is set themselves up with golden care, retirement, etc. Our country has become a real joke!
Mar 16, 2011 11:14AM
Eleven IRS contractors received more than $356 million in payments from Uncle Sam in 2009 despite owing a combined $3.8 million in back taxes
First thing I want to know is, why in the world these people received more than $32.34 MILLION each in 2009? What the hell do they do that they should be paid that kind of money? Seems to me the government could cut some of that bs spending instead of Medicare and Social Security and save a lot more money. And second thing I want to know is, why they only owe a combined $3.8 million? If regular people made that kind of money we would owe more than $124 million combined. And the third thing I want to know is, like all of you, if the gov workers don't have to pay taxes then why do we have to pay taxes?
Mar 16, 2011 12:31AM

This is why I would not trust the Public Sector to manage my Fish Bowl.


"Eleven IRS contractors received more than $356 million in payments from Uncle Sam in 2009 despite owing a combined $3.8 million in back taxes".

The only motivation that I can think the IRS used in this case is that they thought they could panelize and attach interest to the owed monies. Obviously big business is getting Accident forgiveness these days so that philosophy does not fly with me.

I think they just don't know what the hell they are doing.

Mar 16, 2011 9:05AM
avatar have your facts wrong...I worked for a government agency back in the 80's and 90's and it was under Clinton that the government agencies were practically forced to start outsourcing.  We had all sorts of scams in order for these businesses to get priority for minority status or women owned status.  Corruption was and probably still is rampant because there is no real oversight.  Those in the government who want to do a good job are thwarted by senior management who don't want to rock the boat on anything becuase it creates paperwork.  You think government worker are overpaid, we have contractors that are billing $200/$250 per man-hour for the same job that a government employee is doing for $40/$50 an hour, sometimes less.  It is damn near impossible to fire a contractor once they are on board.  So, before you go bashing the republicans, look back and see when contracting in the government agencies really took off, it was under Clinton.
Mar 15, 2011 11:59PM

If an IRS employee cheats or even makes and honest mistake, he can and will be fired.  The Republican idea of outsourcing jobs to save money has proven to be a fallacy.  If there is no oversight of contractors, the contractors can rob the government blind and with impunity.


Blackwater, in Iraq, is the best example of grand theft by contractors with nothing done about it.


Want to save money, hire American taxpayers who pay their taxes and not corporations that do not.

Mar 16, 2011 11:08AM
Well let's put them in prison, like the Government did to Wesley Snipes.
Mar 16, 2011 10:59AM
No, no, no! We do not fire them or cut them off. We dock their wages or their contract proceeds to get the government paid back. Jeesh, don't be vindictive, be fiscally prudent! You have captive debtors here and a means of payback.
Mar 16, 2011 10:30AM
If government contractors don't have to pay taxes, why are the rest of us paying? Oh, I'll pay my taxes my city government! Neither Washington DC nor the state of Oregon will get another dime from me.
Mar 16, 2011 2:00PM

This news is incomplete, like all news you show,. We have the right to know WHO ARE THIS .


Mar 16, 2011 10:12AM
We all know that the reason why there are so many non-filers is that  the tax code has gotten too complicated. So the cry has gone up that we adopt a flat tax. With it, all the confusion relating to one's tax responsibilities and fear of filing an improper return will be removed. That it is a serious matter to file a fraudulent return is what causes so many who are unsure as to what and how to file to keep putting things off. Therefore, a simple and straightforward system of taxation should be set up for the benefit of all, citizens and business people alike. It would put a stop to all the blame game, the lies and the tricks people play every time April 15 rolls around. For sure, it would up the tax monies taken in by the IRS.
Mar 16, 2011 9:05PM

Will this policy also include Senators, and Representatives?


What's good for the goose...

Mar 16, 2011 4:21PM
Chaffetz' bill seems obvious.  Federal workers who wouldn't have jobs without tax revenue not paying their taxes themselves cannot be allowed.
Mar 16, 2011 9:16AM
It is because these companies are so patriotic and want to do their part to help support our country.   I know the IRS goes out of it's way to only hire honest and fair companies.  That is why we are seeing so much compassion when individuals get behind on their taxes.   Again all that matters is the bottom line;  we will go down in history as the bottom line generation.
Mar 24, 2011 10:33AM
why not just go to a flat tax?  10%  we pay a avg. of 35%  now....unreal so are so call leaders can spend, spend.  IRS can kiss the big one. 
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