Not only does the federal government not bother to check if a company owes federal taxes before awarding a contract—but even the IRS fails to perform this duty when it hires businesses to perform a service for the agency. In both instances, federal offices are failing to follow a directive from President Barack Obama to make sure contractors are not making money off the government while owing back taxes.

 

In the case of the IRS, 15% of its current contractors doing at least $250,000 worth of business with the agency (20 out 135) owe a total of $5.2 million in unpaid taxes, according to the inspector general for tax administration.

 

The problem lies in the way federal rules are written. The government can check a company’s tax status before it’s awarded a contract for the first time—but the same review cannot be done when a contract is renewed. So a business that falls into delinquency during the course of a contract can skate by and keep getting its deal renewed.

-Noel Brinkerhoff

 

At Least 20 IRS Contractors are Tax Delinquents (by Michael Cohn, Accounting Today)

Report Finds IRS Does Business with Tax Delinquents (by Robert Brodsky, Government Executive)

Federal Guidelines Do Not Prohibit the Awarding of Contracts to Contractors with Delinquent Tax Liabilities (Treasury Inspector General for Tax Administration) (pdf)