Audit: IRS contractors rack up tax debts

On the other hand, regular IRS employees appear far less likely to hold a tax debt.

ADVERTISEMENT
That’s at least in part, the inspector general said, because the agency has far stricter oversight over whether their employees are up-to-date with their taxes than it does for contractors.

The IRS examines the tax status of its own employees three times a year, officials at the inspector general’s office said Wednesday. As the nation’s tax collector, the IRS also has more rules requiring employees to be squared away on their taxes than other agencies.

To start at the IRS, contractor employees must be current on their taxes, or at least be on a repayment plan. The inspector general report released Wednesday said the background checks on contractor employees generally caught those who weren’t up-to-date with the IRS.

But the report added that the IRS only follows up on the tax status of those contractors once every five years, or if the employee left the agency for more than two years.

With that in mind, the inspector general recommended that the IRS start screening how compliant contractors are with their taxes far more regularly — similar to what the agency already does for its regular employees.

The IRS said it agreed with that and other recommendations from the inspector general, and said in a statement that it "remains committed to working with these employees to help resolve their tax liabilities, and we remain committed to strengthening our policies to ensure that contractor employees are and remain tax compliant."

But the agency also pointed out that only 2.6 percent of its contract employees are late on their taxes and not on a repayment plan – a smaller figure than federal employees as a whole.

Just over 1 percent of Treasury Department employees — the majority of which work for the IRS — had a tax debt in 2011, compared to 3.2 percent for all federal employees or retirees. Around 8 percent of the country as a whole was behind on their taxes that year.