Rep. Ann Marie Buerkle, R-N.Y., sponsored the bill.

Rep. Ann Marie Buerkle, R-N.Y., sponsored the bill. House Committee on Oversight and Government Reform

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Senate expected to take up bill allowing IRS to levy TSP accounts

Legislation clarifying IRS authority to tap retirement funds to collect unpaid taxes could become law by end of the year.

Legislation that would allow the Internal Revenue Service to tap Thrift Savings Plan accounts to collect unpaid federal taxes is on track to become law before the end of the year.

The Senate will take up a bill the House passed this summer (H.R. 4365) ensuring TSP accounts are subject to a law that allows the IRS to collect unpaid federal taxes by levy -- the process of ordering a third party to turn over property of taxpayers who are delinquent. Lawmakers plan to act on the legislation before Congress adjourns in December, said Kim Weaver, director of external affairs for the Federal Retirement Thrift Investment Board, which oversees the TSP. Weaver provided the update during the board’s monthly meeting in Washington on Tuesday.

The 1986 Federal Employees Retirement System Act protects some assets in TSP accounts from levy. FRTIB asked Congress to clarify whether the IRS had the authority to levy the TSP funds of civil servants who are delinquent on their taxes.

The Congressional Budget Office estimated that the bill, sponsored by Rep. Ann Marie Buerkle, R-N.Y., would result in an additional $24 million in revenue from 2013 to 2022 if enacted into law.

“This legislation rights a wrong that allowed federal employees to benefit from a tax loophole,” said Buerkle when the bill passed in August. “It ensures that when it comes to paying taxes federal employees do not receive special treatment that private sector employees do not.”

According to an IRS report, more than 98,000 federal civilian employees owed more than $1 billion in unpaid federal income taxes in 2010, while retired civilians had a tax delinquency tab of $470 million. More than 83,000 military retirees owed nearly $1.6 billion in unpaid taxes in 2010 and active-duty service members owed about $111 million, the IRS report found. The tally does not include federal employees or military service members who owe taxes but have repayment agreements.

Still, federal workers have a better compliance rate than the general public: more than 96 percent of feds pay their taxes on time and do not owe the government money.

The House also passed legislation in August that would prohibit the government from hiring job applicants with seriously delinquent tax debt and allow Uncle Sam to fire current employees who don’t pay their taxes. Under current law IRS employees can be fired for failing to pay their taxes. That bill is currently in Senate committee.