Vendors Doing Business with IRS Owe Nearly $600M in Back Taxes

“When the IRS conducts business with vendors that do not comply with federal tax laws, it conveys a contradictory message in relation to its mission to ensure compliance with the tax laws,” said J. Russell George. “When the IRS conducts business with vendors that do not comply with federal tax laws, it conveys a contradictory message in relation to its mission to ensure compliance with the tax laws,” said J. Russell George. Charles Dharapak/AP file photo

Some 1,168 businesses that sell products and services to the Internal Revenue Service owe a combined $589 million in delinquent taxes, auditors found.

Federal law -- as updated in the 2012 Consolidated Appropriations Act -- forbids agencies from signing contracts with companies with unpaid federal tax liabilities, but the IRS’ system of controls, while effective much of the time, is not fool-proof, according to the report released Wednesday by the Treasury Inspector General for Tax Administration.

“When the IRS conducts business with vendors that do not comply with federal tax laws, it conveys a contradictory message in relation to its mission to ensure compliance with the tax laws,” said J. Russell George, Treasury Inspector General for Tax Administration.

The IRS in the past has resisted TIGTA’s recommendation that it conduct an annual check on contractor tax records. And though the agency’s use of its Master Vendor File is generally effective, auditors recently found that the IRS has not checked the General Services Administration’s Excluded Parties List System. The agency improperly awarded four new contracts or exercised additional option years on existing contracts, valued at $2.6 million, to three vendors that were suspended from doing business with the government, the auditors found.

“The IRS stated that it sometimes does not have a choice in the vendors it must do business with,” TIGTA noted, listing statistics on firms that had gone out of business, were part of larger contractors, or already had tax liens applied to them. “The IRS told us that it routinely issues summons to specific financial intuitions for a particular taxpayer to obtain records as part of its tax administration processes and must pay a fee for obtaining these records. The IRS stated that it must also pay filing fees to state and county governments in order to file tax liens. Thus, even if these entities have unpaid tax debt, the IRS must still use their services.”

IRS managers who reviewed the report agreed with TIGTA’s recommendations for using GSA’s database and improving other controls.

Stay up-to-date with federal news alerts and analysis — Sign up for GovExec's email newsletters.
FROM OUR SPONSORS
JOIN THE DISCUSSION
Close [ x ] More from GovExec
 
 

Thank you for subscribing to newsletters from GovExec.com.
We think these reports might interest you:

  • Forecasting Cloud's Future

    Conversations with Federal, State, and Local Technology Leaders on Cloud-Driven Digital Transformation

    Download
  • The Big Data Campaign Trail

    With everyone so focused on security following recent breaches at federal, state and local government and education institutions, there has been little emphasis on the need for better operations. This report breaks down some of the biggest operational challenges in IT management and provides insight into how agencies and leaders can successfully solve some of the biggest lingering government IT issues.

    Download
  • Communicating Innovation in Federal Government

    Federal Government spending on ‘obsolete technology’ continues to increase. Supporting the twin pillars of improved digital service delivery for citizens on the one hand, and the increasingly optimized and flexible working practices for federal employees on the other, are neither easy nor inexpensive tasks. This whitepaper explores how federal agencies can leverage the value of existing agency technology assets while offering IT leaders the ability to implement the kind of employee productivity, citizen service improvements and security demanded by federal oversight.

    Download
  • IT Transformation Trends: Flash Storage as a Strategic IT Asset

    MIT Technology Review: Flash Storage As a Strategic IT Asset For the first time in decades, IT leaders now consider all-flash storage as a strategic IT asset. IT has become a new operating model that enables self-service with high performance, density and resiliency. It also offers the self-service agility of the public cloud combined with the security, performance, and cost-effectiveness of a private cloud. Download this MIT Technology Review paper to learn more about how all-flash storage is transforming the data center.

    Download
  • Ongoing Efforts in Veterans Health Care Modernization

    This report discusses the current state of veterans health care

    Download

When you download a report, your information may be shared with the underwriters of that document.