An audit report prepared by the Treasury Inspector General for Tax Administration has turned up a large number of delinquent taxpayers– independent contractors working inside the offices of the IRS. Although technically not considered employees, the contractors are individuals and firms “conducting business and doing work on behalf of the agency whose mission is to ensure taxpayers meet their tax responsibilities.”
The report was published in September, but was not made public until Monday, pending a legal review by IRS lawyers.
Conducting the study, auditors examined a sample of 135 current IRS contractors and found that 20, or 15 percent, had delinquent tax liabilities and penalties amounting to $5.2 million. Six of the contractors had tax delinquencies of $943,000 at the time that they were hired.
The period of the auditor’s review was from 2006 through 2008, and the report said that tax checks were not completed for seven of the contractors, as required by IRS guidlines.
Previously, federal guidelines permitted authorities to perform tax checks only at the time of hiring the contractor. Even if a contractor was found to have tax indebtedness, the IRS was not able to use the information to prevent the hiring, unless it was determined it would jeopardize contract performance.
In January 2010, an Obama administration directive was issued that required the IRS to determine if contractors seeking government work owed back taxes.
“In accordance with the presidential directive, the Internal Revenue Service must ensure that businesses contracting to provide services to the IRS are compliant with Federal tax laws,” said J. Russell George, the Treasury Inspector General for Tax Administration. “IRS contractors should be held accountable to the same tax compliance requirements as IRS employees.”
In the future, agreeing with the recommendations of the inspector general’s office, the IRS said it will perform tax checks before contractors are hired, and establish procedures to require an annual check of all contractors.