WASHINGTON -- The Internal Revenue Service is doing business with tax-delinquent contractors despite a federal law that bars the tax agency from awarding contracts to those companies, a government watchdog said Wednesday.
The IRS awarded contracts to 17 businesses in 2012 and 2013 that had delinquent tax debts, according to a report by the Treasury inspector general for tax administration.
The tax debts totaled more than $10 million as of Sept. 30, 2013. The businesses were awarded 57 contracts worth nearly $19 million.
"Awarding contracts to corporations with federal tax debt conveys a conflicting message in relation to the IRS's mission to ensure compliance with the tax laws," the report said.
The IRS said in a statement that the contracts represented a small fraction of the more than 20,000 contracts the agency awarded in 2012 and 2013. The statement said nine of the contractors have since paid their back taxes or enrolled in a payment plan.
The report did not name the contractors, because the IRS is barred by federal law from disclosing information about taxpayers.
The IRS has the unique ability to check whether contractors owe back taxes -- other agencies don't have access to tax information. But Wednesday's report said the IRS was not regularly checking whether contractors were delinquent.
When soliciting contracts, the IRS is supposed to require contractors to certify that they don't owe delinquent taxes. But the agency wasn't doing that, either, the report said.
And despite the 2012 law, the IRS hadn't determined what constitutes an unpaid tax liability for the purposes of barring a contractor, the report said.
The inspector general's office identified tax delinquent companies as those that had exhausted their appeals and were not enrolled in payment plans.
Of the 57 contracts awarded to tax-delinquent businesses, 25 were new contracts. The remaining 32 awards were modifications to existing contracts, the report said.
In a written response, the IRS said the ban on doing business with tax delinquents didn't apply to modifications made to existing contracts. The inspector general's office disputed that, saying the modifications called for new work that was covered under the law.
"The IRS remains deeply concerned about awarding contracts to delinquent corporations. We have taken a number of corrective steps to make improvements in this area, and we will continue to do more," the IRS said in its statement.
Also Wednesday, in another case that has led to scrutiny of the IRS, government investigators said IRS employees erased computer backup tapes a month after officials discovered that thousands of agency emails had been lost.
The investigators, however, concluded that employees erased the tapes by mistake, not as part of an attempt to destroy evidence in an inquiry over the tax agency's scrutiny of Tea Party groups applying for tax-exempt status.
J. Russell George, the Treasury inspector general for tax administration, said in written testimony prepared to be delivered to the House Oversight Committee today that the destroyed tapes "most likely" contained emails to and from former IRS official Lois Lerner, who has emerged as a central figure in the congressional investigations.
A Section on 06/25/2015