Treasury Inspector General for Tax Administration
October 23, 2013
TIGTA - 2013-34
Contact: David Barnes
WASHINGTON – Although the Internal Revenue Service (IRS) requires its employees to file their Federal tax returns on time and pay any Federal tax debt, hundreds of the employees of IRS contractors are not held to that same standard, according to a report published today by the Treasury Inspector General for Tax Administration (TIGTA).
“Because many contractor employees have access to sensitive IRS systems and facilities, the IRS should address tax noncompliance for these employees in a similar manner as it would for its own employees,” said J. Russell George, Treasury Inspector General for Tax Administration.
TIGTA’s review identified weaknesses in the IRS’s existing practices that allowed contractor employees with Federal tax debts and instances of nonfiling to go undetected after the IRS initially granted staff-like access because the IRS does not continuously monitor contractor employee tax compliance in the same way it monitors IRS employee tax compliance. Instead, the IRS reviews contractor tax compliance only once every five years or if the contract employee has longer than a two-year break in service.
TIGTA conducted its review to determinate the effectiveness of the IRS background investigation process to identify contractor employees who do not file required Federal tax returns or who owe Federal taxes but are not currently on a payment plan. The Internal Revenue Manual requires all IRS employees, and contract employees, to file their Federal tax returns on time and pay any Federal tax debt.
TIGTA found that as of June 14, 2012, 691 (5 percent) of the 13,591 IRS contractor employees reviewed by TIGTA had $5.4 million in Federal tax debt. These debts were either agreed to by the taxpayers or affirmed by the court. Of the 691 contractor employees, 352 were not currently on a payment plan to resolve their tax debt. Most of the contractor employees appeared to have been compliant when their initial staff-like access was granted. However, at least 319 contractor employees had tax debt assessed after they were granted staff-like access, and these employees were not currently on a payment plan. Under IRS policy, these 319 contractor employees were not eligible for staff-like access and should not have had access to IRS facilities, systems and data.
TIGTA made three recommendations including further evaluating contractor employees TIGTA identified as potentially noncompliant and promptly bringing those individuals into compliance or removing them from IRS contracts. The IRS agreed with our recommendations and stated that they plan to establish and implement policies to ensure that contractor employees are tax compliant.
Read the report.
Note: The difference between the date TIGTA issues an audit report to the Internal Revenue Service and the date TIGTA publicly releases the report is due to TIGTA's internal review process to ensure that public release is in compliance with Federal confidentiality laws.
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