"Outrageous": Government agencies are tax deadbeats, IRS says

WASHINGTON — Federal offices owe some $45 million in delinquent withholding taxes and the Internal Revenue Service needs to do more to ensure that the government lives up to its taxpaying obligations, according a report issued today.

The Treasury Inspector General for Tax Administration, who oversees IRS operations, also found that as of January this year delinquent state and local government accounts totaled $254 million.

"It is outrageous that government entities are failing to pay their employment taxes," Inspector General George J. Russell said in a statement. "It is especially troubling that federal organizations are a part of this problem. The IRS must develop comprehensive procedures to remedy this inexcusable situation."

Government offices, like any private employer, must meet employment tax deposit and reporting requirements. Some 86,000 federal, state and local entities file and pay employment taxes for some 23 million employees, 20 percent of the U.S. work force. These offices pay wages of more than $760 billion and employment taxes of more than $200 billion annually.

The report, which was requested by the IRS chief financial officer, said that as of December last year the IRS unit in Holtsville, N.Y., that handles federal cases, was assigned some $45 million in delinquent taxes. It said that 99 entities owing $5.8 million had been assigned for resolution for more than one year.

The totals for government delinquencies were still minimal compared to the $6 billion owed by businesses, but the report stressed that "it is critical to the image of the United States that federal government entities be held to the same standards as private employers."

The report commended the IRS for setting up the special unit in New York to cover federal delinquency issues, but said more needs to be done to identify and address the causes of the failures to pay taxes in a timely fashion.

It said the IRS also needs to strengthen controls over enforcement actions. As with private businesses, the tax agency can issue a levy, a means to take property to satisfy a tax debt, against a government agency.

The IRS, in response to the report, indicated agreement with its recommendations. The agency said a new database had been developed to identify the causes and resolutions for delinquency cases and a process was being created for information-sharing between the New York unit and the IRS's Federal, State and Local Governments office.