Federal Workers Owe Billions in Back Taxes

By Kathleen Day
Washington Post Staff Writer
Thursday, April 26, 2007

More than 450,000 federal workers and retirees owe a total of $3 billion in back taxes, prompting the top Democrat and Republican on the Senate Finance Committee to urge President Bush to put more effort into collecting from delinquent government employees.

"If the federal government doesn't make its own employees follow the rules, it's hard to tell the rest of the American people that they should do better," committee Chairman Max Baucus (D-Mont.) said in a statement accompanying the delinquency figures.

Baucus and Sen. Charles E. Grassley (Iowa), the ranking Republican on the committee, sent a letter to Bush asking him to "remind" federal workers and retirees of their "obligations and to warn them of the consequences for failing to comply with the nation's tax laws."

The senators sent the letter as Congress and the White House grapple with how to close the $345 billion tax gap, the estimate of what taxpayers owe but have not paid.

The latest information the Internal Revenue Service gave the senators says that as of October 2005, about a third of the 450,000 had agreements with the IRS to pay, in installments, about $1 billion in delinquent taxes. The rest -- about 3.28 percent of the nation's more than 9 million federal workers and retirees -- owed $2.07 billion, though some of the workers included in this group were in bankruptcy, on active military duty or trying to reach payment agreements.

An IRS spokesman said the agency does not have an estimate of delinquency rates overall for wage earners in the general population, which would be the appropriate group to compare to federal wage earners. That makes it hard to compare the delinquency rate of federal workers and retirees to that of the general population, he said.

Nonetheless, the agency said in a prepared statement that "federal employees and retirees traditionally have a higher rate of tax compliance than the general population."

The IRS said ethics rules require executive-branch workers "to timely file and pay all taxes" but that IRS regulations prevent the agency from giving employee tax information about individual workers to personnel offices for possible disciplinary action. But, the statement said, IRS collection procedures give higher priority to tax cases involving federal employees.

In its statement yesterday, the IRS released more recent data, from October 2006, which it has not given to the Finance Committee. The newer information shows a slight drop in the delinquency rate among federal workers without repayment agreements, to 3.1 percent in 2006. But it also shows a slight increase in money owed but not yet part of payment plans -- to $2.11 billion in 2006.

White House spokesman Tony Fratto said he cannot comment on the letter until it is reviewed.

An IRS spokesman declined to comment on why the agency did not give the senators the 2006 data when the committee asked for the delinquency information a few weeks ago. A committee spokesman said senators expect the IRS, when asked for information, to provide the most current available data.

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