Tax Delinquency Among Federal Employees Is a Growing Problem

The recently IRS 2014 tax delinquency report identified nearly 100,000 federal employees who haven’t paid their taxes, resulting in a loss of more than $1 billion to the federal treasury.

This week the House of Representatives will consider two bills to hold federal employees and federal contractors accountable for their tax delinquent status. The bills provide that individuals with seriously delinquent tax debts would be ineligible for federal employment or federal contracts. Those who are in the process of making a good faith effort to fulfill their tax obligations will not be affected by the legislation.

In the last ten years, the dollar amount of past-due taxes owed by federal government employees has nearly doubled. Meanwhile, bonuses have flowed freely. From October 2010 to December 2012, 2800 federal employees who had disciplinary issues received more than $2.8 million in bonuses. Of those, more than 1,100 did not pay their own taxes and were still awarded with over $1 million in bonuses.

The IRS employees are expected to be tax compliant. IRS employees may be fired for willful failure to timely file their return or willfully understate their tax liability. Consequently, the IRS has the lowest delinquency rate of any agency at 1.19%.

In addition to tax delinquency rates in the federal workforce, we also have a problem among federal contractors. A July 2014 GAO Report indicated federal contractors in the Department of Defense alone owe more than $350 million in back taxes. Given that the federal government spends more on contract employees than on public employees, this is a significant problem.


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