Report: IRS doling out contracts to firms with tax debt

The Internal Revenue Service improperly paid out $18.8 million in contracts to corporations that owed back taxes, according to a new report.

The tax agency’s independent watchdog announced Wednesday that the IRS had failed to prevent 17 corporations with outstanding tax debts from receiving 57 different contracts in fiscal years 2012 and 2013. Beginning in 2012, the IRS is barred from using appropriated funds to do business with companies that owe back taxes, or felons.


The Treasury Inspector General for Tax Administration (TIGTA) criticized the IRS for failing to proactively check to see if companies receiving contracts were up to date on their taxes, Furthermore, TIGTA said the IRS did not require companies to assert at the outset of a business deal that they are tax compliant, which is a requirement under the Treasury Department.

All told, TIGTA determined that the IRS failed to require contractors to certify their tax status for at least 94 percent of all IRS contracts. That leaves IRS officials with no knowledge if, when they award a government contract, if the company is permitted to do business with the IRS, according to the watchdog.

TIGTA went on to say that when they interviewed IRS officials about the issue, employees said they either were unaware of the recent requirement, or did not know how to implement it because they received no training.

TIGTA called on the IRS to update its policies to ensure the agency is determining the tax status of potential contractors before giving them business.

In a response to the audit, the IRS agreed to strengthen its training program on that front, but disagreed with the numbers TIGTA reached. Rather, the IRS said many of those contracts awarded were modifications of previous contracts, which should fall outside the scope of the new legal requirement. TIGTA disagreed.