IRS audit finds 42,000 federal governments misusing tax dollars

A new audit says more than 42,000 federal employees “repeatedly” failed to file their tax returns with the IRS, limiting the government’s ability to punish cheats.

Known as the “Federal Employee Nonfiler,” the case is considered particularly egregious because it involves people who are being paid with taxpayer money but neglecting their taxpayer duties. increase.

But the IRS has made little effort to target federal nonfilers, according to the IRS Director of Taxation. The audit also found that the law limits the amount of information the IRS can share with other federal agencies, limiting its ability to provoke or punish employees.

As of 2021, delinquent federal employees owe $1.5 billion in unpaid taxes.

“It is blatant non-compliance for taxpayers to repeatedly fail to file a tax return when they are required to do so. There are social and ethical requirements,” the inspector general said in a report Thursday.

TIGTA has found that federal tax compliance has been on the decline in recent years. In 2017, just 108,000 employees were delinquent in their tax returns or payments. But by 2021, that has risen to 149,000 out of her 3 million federal workforce.

This corresponds to a delinquency rate of approximately 5%.

Even more impressive are the persistent cheats. An audit found 42,047 of his employees who failed to file or pay for multiple years during the review period. This represents approximately 1.5% of federal employees.

Over a period of at least eight years, more than 100 employees were delinquent, according to TIGTA.

In its official response to the report, the IRS said delinquency rates are lower among federal employees than among the general public, and that IRS employees are doing their best work of any agency.

The postal service had the most criminals, with more than 9,000 employees absent for at least two years. The Department of Veterans Affairs he was runner-up, with nearly 6,600 employees.

Together, the Department of Defense and the service sector generated about 13,000 cases.

Most of the non-filers were on the lower end of the scale, with incomes less than $100,000. About 738 of them he earned more than $200,000.

The exact number of criminal investigations has been compiled in a new report, but criminals generally go unpunished, the inspector general said.

And only 28 of the federal unfilers faced civil penalties.

Lia Colbert, commissioner of the IRS’s small business and self-employed division, said nearly 80% of delinquencies found in audits had been “resolved” by last September.

She said the department is trying to prioritize enforcement against federal employees.

“However, in recent years, severe staffing shortages, pandemics, and challenges with IRS submission processing centers have strained resources,” Colbert said in the IRS response to the audit.

She agreed with most of the inspector general’s recommendations for improvement, but rejected the idea of ​​referrals to the Department of Justice for federal employees who meet certain criteria for delinquency.

Colbert said the idea was “unfeasible” because the Justice Department would not accept systematic referrals based solely on criteria. Besides, she said knowingly failing to file was just a misdemeanor, and the average federal delinquent owes less than $10,000 of her debt, so it’s unlikely they’ll get a sentence. she said.

“Pursuing criminal prosecutions that end with minimal or no imprisonment can ultimately have a negative impact on voluntary compliance,” she said.

The inspector general said that meant many people fled with no repercussions.

“We have identified more than 17,000 refilers of federal civilian employees who have not filed income tax returns for three years or more. I continued to work for the federal government with pay and benefits,” the audit concluded.

The Inspector General also ordered the IRS to escalate willful failure to file a file to the Treasury Department’s inspectorate and to allow the IRS to share more information about its scofflaw employees with other agencies. proposed to urge Congress to amend the

The IRS has agreed to reach out to the Treasury Department on both issues.