December 23, 2013

Although 1,168 Internal Revenue Service (IRS) contractors owe a combined $589 million in back taxes, the agency paid them about $741 million between October 2010 and June 2012, and continues to resist a key reform proposed two years ago, according to a report by the Treasury Inspector General for Tax Administration (TIGTA). Only 50 of the scofflaw vendors were on a current payment plan, leaving 1,118 of them (96%) delinquent to the tune of $587 million as of July 2, 2012. The data comes just weeks after a related TIGTA report found that 5% (691) of the 13,591 contractor employees assigned to the IRS had almost $5.4 million in federal tax debts.

Prior to 2012 this would not have been an issue because federal law allowed companies to get government contracts even if they had a tax delinquency, but the Consolidated Appropriations Act of 2012 barred firms with unpaid tax bills from getting government contracts. IRS now conducts checks for tax debt prior to awarding a contract, but the agency does not monitor its contractors’ tax compliance after award, according to TIGTA.

That is the one recommendation, first made to IRS in 2011, which the agency refuses to implement, even as it accepts other suggestions of a more technical nature. For example, IRS agreed to take steps to improve its compliance monitoring in light of a finding that the agency awarded four new contracts or contract options worth $2.6 million to three vendors that were barred from government work.

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