The IRS failed to screen two-thirds of agency contractors for tax delinquencies and other errors, according to a new TIGTA report. This serves as yet another example of the IRS’s inability to complete basic tasks, even when it is required of them.
This report comes at a time when the Biden administration has proposed $80 billion in more funding for the agency, along with new powers and responsibilities. This report is just another example of the agency’s incompetency and demonstrates that the IRS needs reform, not more power and responsibility.
TIGTA reviewed 71 randomly selected new awards and found that 66 percent had one or more deficiencies related to the contractor tax check process. Based on sample results, TIGTA estimated that 2,435 of the 3,679 new award contracts granted between October 1, 2018, and March 30, 2020, have one or more of these errors identified.
In the Consolidated and Further Continuing Appropriations Act of 2015, Congress specified that the Government “will not enter into a contract with any corporation that has any unpaid Federal tax liability that has been assessed, unless an agency has considered suspension or debarment of the corporation and made a determination that suspension or debarment is not necessary to protect the interests of the Government.”
In TIGTA’s words:
“… not completing tax checks within the required time frame increases the risk that an offeror’s recently incurred tax liability will not be identified during the tax check process… untimely or incomplete notification to the Treasury Suspension and Debarment official increases the chances that contractors with a tax deficiency will obtain a contract award with another Federal agency.”
This tax check is a multi-step process that the IRS simply did not complete for multiple contractors. In the sample TIGTA used, the IRS failed to complete checks on 25 percent of the contract awards selected. Further, 29 percent of contracts did not have a signed Tax Check Notice and Consent provision, and 37 percent did not have a Tax Check Notice and Consent provision attached to the contract.
While TIGTA did independently verify that the 71 contractors did not have any delinquent Federal taxes at the time the contracts were awarded, the IRS would still be required to assess these delinquencies and make determinations based on them. To be clear, this was just a review of 71 of the 3,679 new award contracts; it is untold how many contractors had delinquent federal taxes out of the 2,435 contracts TIGTA estimates had errors. Moreover, given that TIGTA was able to screen all these candidates, presumably, it should not be difficult for the IRS to do the same.
This is one of several audit reports that demonstrates the incompetence of the IRS:
- The agency has repeatedly failed to compile legally required tax complexity reports. These reports are supposed to contain the IRS's specific recommendations on how to make the tax code easier to comply with. Since 1998, the IRS has done so just twice – in 2000 and 2002.
- A TIGTA report on the 2021 Filing Season found that almost 40 percent of printers were not working at tax processing centers in Ogden, Utah and Kansas City, Missouri. However, in many cases the only thing wrong with the printers is that no employee had replaced the ink or emptied the waste cartridge container: “IRS employees stated that the only reason they could not use many of these devices is because they are out of ink or because the waste cartridge container is full.”
- This year, despite having funding for new hires, the IRS only achieved 37 percent of their hiring goal. They had trouble onboarding new hires as well, as it was “difficult to find working copiers (as noted previously) to be able to prepare training packages.”
- In 2016, the IRS has lost track of laptops containing sensitive taxpayer data. TIGTA estimates that the IRS had failed to properly document the return of 84.2 percent, or more than 1,000 computers due to be returned by contract employees.
- A TIGTA report in 2017 showed that the IRS rehired more than 200 employees who were previously employed by the agency, but fired for previous conduct or performance issues.
- Each year the IRS hangs up on millions of callers -- a practice they refer to as “Courtesy Disconnects.” Currently, if you call the IRS, you have a 1-in-50 chance of reaching a human being.
- According to the National Taxpayer Advocate’s 2014 Annual Report to Congress the IRS was unable to justify spending decisions. As the report stated: "The IRS lacks a principled basis for making the difficult resource allocation decisions necessitated by today’s tight budget environment.”
- The IRS has repeatedly failed to include required information on notices they send to taxpayers, thus eroding taxpayers’ ability to understand said notices, figure out the right office/number to correspond with, file appeals, etc.
- The IRS is required by law to assign a single employee to each taxpayer’s case for mutually generated correspondence, and, in more cases than not, fails to do so.
While the IRS continues to blame its poor performance on a lack of taxpayer funding, the real problem is the inability of the agency to competently complete basic tasks and spend taxpayer dollars in a responsible way. Biden’s plan to give the IRS $80 billion would do nothing to fix existing problems and would only exacerbate them.