October 24, 2013

Do you owe back taxes to the IRS? If so, you are in good company. Nationwide, 8.2 percent of American taxpayers were in debt to Uncle Sam in 2011. But the number of IRS contractors that owe back taxes to their employer right now might surprise you.

IRS Contractors Owe Back Taxes

Among the more significant delinquent taxpayers are 691 IRS contract workers who owed Uncle Sam more than $5.2 million in back taxes as of June 2012, according to a report issued October 23 by the Treasury Inspector General for Tax Administration. This figure represents more than 5 percent of all IRS contract workers. Of the total number of IRS contract workers in arrears, 352 delinquent contract workers were not enrolled in an installment payment plan, which translates to a delinquency rate of 2.6 percent, and total uncollected back taxes of $2.7 million.

The Inspector General issued the report after inspecting the records of nearly 13,600 employees of IRS contractors. In acknowledging the report, the IRS noted that the percentage of IRS contractors in arrears is significantly lower than the percentage of delinquent taxpayers in the general population. Nonetheless, the fact that any IRS contractors owe back federal income taxes places them in blatant noncompliance with IRS policy. In plain English – they shouldn’t be eligible to work for the IRS.

IRS Policy and IRS Contractors

The IRS requires all its employees to file (and pay) federal income taxes on time and in full every year. If IRS employees are unable to pay the taxes they owe in full, they must enroll in an installment payment plan or risk losing their jobs. The policy is strictly enforced by the IRS, even in the face of personal hardship. This strict enforcement has resulted in a back tax delinquency rate of just 1.1 percent among employees of the Treasury Department, which includes the IRS.

While IRS independent contractors are also required to adhere to the strict IRS policy concerning timely payment of federal income taxes, they are not monitored nearly as closely as IRS employees. Despite being thoroughly checked at the beginning of their employment tenure, follow-up monitoring for IRS contract workers is not nearly as rigorous as for IRS employees. As a result, IRS contract workers who owe back taxes are more likely to escape detection and disciplinary action.

IRS Response

The Inspector General’s report chided the IRS for failing to hold contract workers to the same strict standard to which it imposes on its approximately 90,000 in-house employees. In response to the report, the IRS pledged to act to correct the situation. Representatives from the IRS emphasized that the agency is thoroughly committed to ensuring that all of its workers achieve and maintain compliance in regard to timely payment of federal income taxes.