Some federal agencies are failing to pay the payroll taxes they owe, and the IRS lacks the range of enforcement powers it can bring to bear against other delinquent taxpayers, an audit has found.
A report issued Thursday by the Treasury Inspector General for Tax Administration noted that while federal agencies don’t pay income tax, they must pay employment taxes and meet related reporting requirements.
It found that as of the end of calendar year 2011, 70 agencies had 126 delinquent accounts, owing some $14 million in unpaid taxes. Forty of those accounts, involving $2.6 million, were more than three years behind. Also, 18 agencies were behind in filing 39 employment tax returns.
“Federal agencies should be held to the same filing and paying standards as all American taxpayers,” said the IG report, which did not identify the agencies involved.
However, the report added that the IRS may not take enforcement actions against federal agencies with delinquent tax accounts, nor may it assess interest and penalties against them. In contrast, the IRS may take such steps against businesses that fail to pay employment taxes, plus additional actions such as filing tax liens and seizing property.
Of 132 accounts involving 68 agencies that were delinquent as of year-end 2008, agencies paid up in 43 cases, but 48 cases involving some $176,000 were written off because their collection statutes had expired. The IRS has given up on attempting to collect on another 34, making the chance that the indebted agencies will pay the $2.4 million at stake in them “very low,” the report said.
The IG noted that it issued a similar report in 2007 and said that IRS management had not fully addressed the weaknesses found then. The latest report recommended strengthening the procedures for resolving delinquent tax accounts and assisting agencies with understanding and meeting their tax responsibilities. IRS management agreed and said it already has taken one step involving reporting requirements.
Update, 9:05 a.m.
“The IRS is committed to ensuring timely collection of the billions of dollars of employment taxes that federal agencies are required to withhold and pay for their employees each year and has seen substantial progress in this area,” the IRS said in a statement.
“The number of delinquent taxes has dropped significantly over the last several years, from $406 million in 2005 to $14 million in 2011 -- or less than 0.03 percent of the total tax deposits made by federal agencies last year. Despite a number of complexities, the IRS is working to continue to make progress in this area.”