The Treasury Inspector General for Tax Administration (“TIGTA”) released to the public yesterday a report: “A Concerted Effort Should Be Taken to Improve Federal Government Agency Compliance.” As of December 31, 2011, 70 Federal agencies with 126 delinquent tax accounts owed approximately $14 million in unpaid employment taxes. In addition, 18 Federal agencies had not filed or were delinquent in filing 39 employment tax returns. In the version of the report released to the public, all of the names of the Federal agencies were redacted.
If a business fails to pay employment taxes, the IRS can assess penalties and interest, file tax liens, fine the responsible officer for nonpayment of the trust fund portion of employment taxes, and seize property. You can be sure that the IRS will exercise any or all of these powers to get the employment taxes.
On the other hand, Federal agencies are forbidden from paying interest and penalties to the IRS. Thus, the IRS will not assess those penalties or take enforcement actions against Federal agencies with delinquent tax accounts. Professional courtesy, I guess, or maybe it’s because taking money from one agency and giving to another agency as a fine is a zero sum game.
The report points out that Federal agencies often have good excuses for not paying their employment taxes. Don’t we all?