Federal Employees Beware!

Last month, Senators Tom Coburn (R-Oklahoma) and Claire McCaskill (D-Missouri) introduced a bill requiring federal employees to be current on their federal income taxes, or risk losing their jobs. The proposed legislation seeks to capture the nearly 100,000 civilian federal employees who are delinquent on their federal income taxes. These same delinquent federal employees owe the U.S. government over 1 billion dollars in back taxes. When you add federal government retirees and the military, the number mushrooms to over 282,000 federal employees who owe the IRS more than 3.3 billion dollars in back taxes.

The proposed legislation is expected to save the government over 1 billion dollars in back taxes. Under the bill, any federal employee who has a seriously delinquent tax debt would be ineligible to be appointed, or continue to serving as a federal employee. Senator Coburn’s office noted that “federal employees have a clear obligation, just as the rest of American citizens do, to pay their federal income taxes.”

During the interview with Senator Coburn’s office last month, it was also noted that federal salaries have increased an average of 4 percent since 1999 and that federal salaries are outpacing inflation by more than 1.5%. Statistical data collected over the past 10 years also suggests federal salaries have outpaced their civilian counterparts by a large margin.

The proposed Coburn/McCaskill legislation targets outstanding tax debts for which a notice of IRS lien has been filed (except in situations where the debt is already being paid off in a timely manner; i.e. where an offer in compromise is in place or an agreed upon installment payment plan) or when there has been a collection due process hearing or relief has been requested or was pending. In truth, the real purpose of the legislation appears to be focused on a limited segment of federal workers who have willfully neglected to pay their income taxes and excludes federal employees from termination if there is a good faith effort on their part to pay up.

Speculation abounds whether this legislation might pass, and if so, how the IRS might implement its enforcement. Obviously one of the most important aspects of the proposed legislation is the compliance affect the threat of its passage might produce. Private tax lawyers and IRS tax lawyers are all waiting to see if the legislation garners support with Congress. Ultimately, a taxpayer system that treats all taxpayers fairly is the most desirable system.


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