Georgia Tech Procurement Assistance Center

  • Home
  • About Us
  • Training
    • Class Registration
    • On-demand Training
    • GTPAC COVID-19 Resource Page
    • Cybersecurity Video
    • Veterans Verification Video
    • GTPAC Community
    • Other Training Audio & Video
  • Useful Links
  • Team Directory
    • Albany Counselor
    • Athens Counselor
    • Atlanta Counselors
    • Augusta Counselor
    • Carrollton Counselor
    • Columbus Counselor
    • Gainesville Counselor
    • Savannah Counselor
    • Warner Robins Counselor
  • Directions
    • Athens
    • Atlanta – Training Facility
    • Atlanta – Office
    • Albany
    • Augusta
    • Carrollton
    • Columbus
    • Gainesville
    • Savannah
    • Warner Robins
  • COVID-19
  • New Client Application
  • Contact Us

Report finds IRS does business with tax delinquents

January 17, 2011 By ei2admin

The Internal Revenue Service in recent years has awarded contracts to at least 20 companies with delinquent taxes totaling $5.2 million, according to a new watchdog report.

The Treasury Inspector General for Tax Administration found IRS procurement officials often fail to verify if agency contractors have paid federal corporate and payroll taxes. And, even when officials discover the tax delinquencies, a loophole in federal acquisition law prevents the IRS from terminating the contract, the report said.

“Although IRS contractors are not considered employees, they are conducting business and doing work on behalf of the agency whose mission is to ensure taxpayers meet their tax responsibilities,” Inspector General J. Russell George wrote. “As a result, we believe IRS contractors should be held to the same ethical standards as IRS employees and paid preparers concerning their compliance with the nation’s tax laws.”

The IG reviewed 135 current IRS contactors with awards of at least $250,000 issued between October 2006 and December 2008, and determined that 20 of the firms owed federal taxes. Six of the companies had delinquent tax liabilities totaling $943,000 when they first won the contracts. As of March 2009, the amount the six companies owed had increased to $4.9 million.

In 13 cases, an IRS contracting official conducted a tax check, as required by federal acquisition law. But the reviews shed relatively little light on the significance of the tax liabilities, failing to distinguish the type of taxes owed, the age of the debt, or if the contractors had established a plan to repay the funds.

IRS procurement officials failed to conduct a tax check for the seven other firms. But, it’s unclear whether the checks would have prevented the businesses from winning the awards. Federal guidelines bar the IRS from using tax-indebtedness to exclude a company from obtaining a contract. Regulations permit the agency to verify a bidder’s tax record only at the time of the initial award to determine if the debt could jeopardize the performance of the contract.

Federal acquisition guidelines also do not require the IRS to conduct a tax check when contracts are being considered for renewal, allowing companies to continue receiving federal payments without having to answer for their debt, the IG said. The IRS renewed the contracts of 17 of the 20 companies with delinquencies.

IRS employees, meanwhile, face disciplinary action, including termination, if they fail to file accurate and timely income taxes.

“If the IRS continues to conduct business with contractors that do not comply with the nation’s tax laws, an adverse message will be sent to the American taxpayers as to the fairness of the tax administration system,” George wrote. The problems TIGTA identified are not new in federal contracting. In February 2004, the Government Accountability Office reported that about 27,000 Defense Department contractors owed nearly $3 billion in federal taxes. In June 2005, an audit of 33,000 civilian agency contractors identified $3.3 billion in delinquent federal taxes. And, in March 2006, GAO found that 3,800 General Services Administration contractors owed $1.4 billion in federal taxes.

A 2009 bill that former Rep. Brad Ellsworth, D-Ind., sponsored would have prevented any company with “a seriously delinquent tax debt” from winning a government contract or grant. The legislation cleared the House, but not the Senate.

In January 2010, President Obama issued a governmentwide memorandum directing the IRS commissioner to review the certifications that firms bidding on federal contracts submit to demonstrate they are up-to-date on their taxes. The memo also required the Office of Management and Budget director to issue recommendations on ensuring tax delinquent contractors are not awarded new contracts, and to develop plans to make contractor tax certifications available in a governmentwide procurement database. Those plans have not yet been announced.

The IG recommended the IRS ensure that all required tax checks are conducted before contracts are awarded and that senior agency executives meet and review Obama’s 2010 memorandum. The IRS concurred with those recommendations but disagreed with another IG suggestion that would require an annual tax check on all IRS contractors.

David Grant, chief of agencywide shared services at the IRS, wrote in his response that there is no justification in federal law or regulation for annual tax verifications. “A tax check is cursory,” Grant wrote. “Unverified that is not actionable as the contractor has had no due process in regard to the tax check information and the tax liability has not been finally determined.”

— by Robert Brodsky – GovExec.com –  January 10, 2011

Filed Under: Contracting News Tagged With: contract awards, federal contracting, IG, IRS, tax

Recent Posts

  • DoD publishes long awaited interim rule on CMMC
  • GSA Region 4 OSDBU hosting small business webinar
  • GTPAC launches COVID-19 resource page
  • GDEcD seeks GA Manufacturers and Distributors that can help with critical health care supply needs related to COVID-19
  • Georgia DOAS to hold 4th Annual Georgia Procurement Conference April 21-23, 2020

Popular Topics

8(a) abuse Army bid protest budget budget cuts certification construction contract awards contracting opportunities cybersecurity DoD DOJ False Claims Act FAR federal contracting federal contracts fraud GAO Georgia Tech government contracting government contract training government trends GSA GSA Schedule GTPAC HUBZone innovation IT Justice Dept. marketing NDAA OMB SBA SDVOSB set-aside small business small business goals spending subcontracting technology VA veteran owned business VOSB wosb

Contracting News

DoD publishes long awaited interim rule on CMMC

Small business subcontracting for cloud computing gets easier

Long awaited changes to WOSB/EDWOSB regulations expected this summer

The CMMC has arrived: DoD publishes version 1.0 of its new cybersecurity framework

GSA keeping ‘on track’ with schedule consolidation

Read More

Contracting Tips

A guide to labor and employment obligations for federal contractors

Who pays for CMMC certification?

Other transaction agreements: Where does an unsuccessful bidder go?

Knowledge is power, if you know how to use it

EAJA provides relief to construction contractor for government’s bad actions

Read More

GTPAC News

GSA Region 4 OSDBU hosting small business webinar

GTPAC launches COVID-19 resource page

GDEcD seeks GA Manufacturers and Distributors that can help with critical health care supply needs related to COVID-19

Georgia DOAS to hold 4th Annual Georgia Procurement Conference April 21-23, 2020

MICC Fort Stewart hosting acquisition forecast open house on Thursday, Feb. 6, 2020

Read More

Georgia Tech News

Dr. Abdallah testifies on U.S. competitiveness, research, STEM pipeline at Congressional hearing

Georgia Tech’s Technology Square Phase III to include George Tower

Student surprises his teacher with Georgia Tech acceptance news

Georgia Tech Applied Research will support DHS information safeguarding effort

$25 million project will advance DNA-based archival data storage

Read More

  • SAM.gov registration is free, and help with SAM is free, too
APTAC RSS Twitter GTPAC - 30th Year of Service

Copyright © 2021 · Georgia Tech - Enterprise Innovation Institute