Federal workers owe $1.5B in back taxes after GOP remedies die under Democrat legislative control

For more than a decade, GOP lawmakers have proposed bills to respond to federal workers with outstanding tax bills, who now total 149,000.

Published: March 10, 2023 2:08pm

Updated: March 13, 2023 2:17pm

Federal workers with outstanding tax bills numbered 149,000, and their combined tax debt totaled $1.5 billion as of 2021, according to a new Treasury Inspector General for Tax Administration audit, as legislative remedies for the problem proposed by Republican lawmakers over more than decade have gone nowhere.

Finding that "the number of delinquent Federal civilian employees has increased by 32% from Fiscal Years (FY) 2015 to 2021" and their "related balances due" have increased by almost 36%, the IG report concluded that the IRS has failed to adequately prioritize delinquent federal workers for compliance.

The report said federal employees must be held to a higher standard when it comes to tax compliance.

"Like all taxpayers, Federal employees and retirees have a legal obligation to file tax returns and pay their taxes," the report reads. "However, Federal employees are held to a higher standard for a number of reasons, including that they draw their compensation and funds from Federal taxes. As the agency primarily responsible for administering Federal tax law, the IRS must ensure that Federal employees comply with the tax law in order to maintain the public's confidence."

In 2019, it was reported that the Internal Revenue Service failed to fire the vast majority of its own employees who were not paying their taxes.

According to a Government Executive report, the IRS is required to fire employees who are "willfully out of tax compliance" under a 1998 law.

In 2021, Sen. Mike Braun (R-Ind.) introduced the Federal Employees and Retirees with Delinquent Debt Initiative, which would have prohibited federal workers with an unpaid tax liability from employment with the federal government. The bill never came to a vote in the Democrat-led Senate. 

"Those who cheat from Uncle Sam and have a significant delinquent debt to the IRS should not be able to accept a paycheck from the federal government until they pay their delinquent tax bill, and this legislation will fix this problem," Braun said at the time.

According to FedSmith.com, "efforts in Congress to target tax delinquent federal employees date back to at least 2011," but none of the proposed bills have become law.

In 2012, the Federal Employee Tax Accountability Act passed the GOP-led House, but it failed in the Democratic Senate. The bill would have given federal employees who owe back taxes 180 days to show that they're paying off the debt. If they failed to do so, they would be barred from being "appointed or to continue serving as an employee" of the U.S. government.

The late Sen. Harry Reid (D-Nev.), the Senate majority leader at the time, had said he would review the bill but expressed opposition to putting broad restrictions on federal employees with outstanding tax bills.

"Just to have a carte blanche to fire everybody, someone could have had a death in the family, someone that’s really sick, so I think we have to be careful in throwing these blanket restrictions on people," Reid said at the time. 

The Senate version of the legislation never received a floor vote.

The IG pointed out that the IRS commissioner recently expressed support for a "change to I.R.C. § 6103 allowing the IRS to share information with Federal agencies pertaining to a Federal contractors' tax compliance." The report found that a "similar approach to information sharing with respect to Federal civilian employee tax compliance with the appropriate Federal agency may improve Federal employee tax compliance."

The IG described "repeatedly not filing a tax return when a taxpayer is required to do so" as a "brazen form of noncompliance."

"Federal civilian employees with tax delinquencies have a legal and ethical requirement to be current with their tax obligations," the IG noted. "While the employees themselves know they have an outstanding delinquency, the agencies they work for do not know who these individuals are due to I.R.C. § 6103 statutory limitations. Additionally, the IRS is not using all enforcement tools available for willful or grossly negligent Federal civilian nonfilers and should give a higher priority to addressing this noncompliance by identifying these Federal employees and working the cases for indications of fraud and willful nonfiling."

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