The IRS is failing to ensure contractors have paid all taxes owed as required by federal law, according to a new report by the Treasury Inspector General for the Tax Administration (TIGTA).

29 percent of businesses receiving IRS contracts were granted these contracts without tax checks, according to the report.  Under both internal IRS policy and federal law, the IRS is required to check if contractors have paid their taxes and fully comply with federal law before the business is granted a federal contract. As the report explains:,

“Federal appropriations law prohibits the IRS from awarding contracts to tax delinquent corporations. Current IRS policy requires a tax check for all bidders in the competitive range (under consideration for award) on solicitations greater than $250,000.”

Not only did the IRS fail to check whether contractors had paid their taxes, the agency also failed to ensure competing bidders had paid taxes. As the report notes:

“21 (29 percent) of the 73 contract awards reviewed did not have evidence that the contracting officer performed the required tax check on the winning bidders. In all 73 contracts (100 percent), there was no evidence that the other qualified bidders underwent a tax check, as required.”

This is not the first time TIGTA has raised concern about the IRS’ process of awarding contractors. A 2015 TIGTA report found that the IRS illegally gave 57 contracts valued at $18.8 million to 17 corporations, who had outstanding tax debt or a felony conviction.  

This report identified ZERO contracts that contained the required contract clause and certification guidelines to ensure tax debts of contractors had been paid. As a result, TIGTA estimated that at least 94 percent of contracts had been awarded without adhering to this law.