Federal Agencies Delinquent in Payroll Tax

In keeping with yesterday’s theme regarding payroll taxes, a recent article in The Washington Post highlighted an unexpected group of entities with payroll tax issues: federal agencies.

According to a report by the Treasury Inspector General for Tax Administration, there were 70 agencies that had 126 delinquent accounts, totaling up to $14 million dollars in unpaid taxes. More than half of those accounts were more than three years behind in their payment of payroll taxes. This group alone constituted a total of $2.6 million in delinquent taxes. The report also stated that 18 of the agencies had not appropriately filed 39 employment tax returns.

The IG report emphasized the need for federal agencies to follow the same filing and paying standards to which all American taxpayers are subject, although the report did not specifically identify the agencies with payroll delinquencies.

According to the report though, the IRS may not take enforcement actions against the agencies with payroll tax issues, nor may penalties or interest be assessed against them. This contrast s with the way in which the IRS handles the delinquent payroll tax issues of taxpayers and their businesses. If they fail to pay the taxes owed, they could find themselves dealing with federal tax liens and the seizure of property.

Looking at the 2008 as an example, the report indicated that of 132 accounts involving 68 federal agencies that were delinquent in regards to payroll tax, agencies paid the taxes in 43 cases. Of the cases, 48 were dismissed because of collection statute issues. The IRS did not pursue collection on 34 of those cases. From an examination of this year, it seems unlikely that most the $2.4 million in delinquent payroll taxes owed this last year will ever be recovered by the IRS.

This was not the first time that the issue of delinquent payroll taxes from government entities has been discussed in a report by the IG. A portion of this year’s assessment was discussed a previous report the IRS had failed to act upon appropriately.

The IRS  has stated that it is committed to collecting the delinquent taxes in a quick and efficient manner, and that it has made significant progress in that area.


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