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Vendors To IRS Have Substantial Unpaid Tax Debt

by Mike Godfrey, Tax-News.com, Washington

26 December 2013


More than 1,100 vendors doing business with the Internal Revenue Service (IRS) owe a combined USD589m in United States federal tax debt, according to a report released by the Treasury Inspector General for Tax Administration (TIGTA).

The TIGTA reviewed the IRS's controls over the integrity and validity of vendors receiving payments from the agency, including the vendor's tax compliance status, as federal law generally prohibits agencies from contracting with businesses that have unpaid federal tax liabilities.

The TIGTA also reviewed controls over the IRS's Vendor Master File (VMF), which contains information about vendors that enables them to engage in contracts, purchase orders, and other non-contract acquisition methods for the purpose of providing goods and services to the IRS and receiving payment for goods and services delivered.

It was emphasized that the vast majority of vendors that conduct business with the IRS meet their federal tax obligations. However, the TIGTA found that 7 percent of IRS vendors had a combined USD589m of federal tax debt as of July 2012. Few of the vendors had a current tax payment plan.

"When the IRS conducts business with vendors that do not comply with federal tax laws, it conveys a contradictory message in relation to its mission to ensure compliance with the tax laws," said J. Russell George, the TIGTA.

As in reports issued in September 2011 and September 2010, he has recommended that the IRS should determine why it did not identify the suspended vendors within the General Services Administration's Excluded Parties List System, require an annual tax compliance check for all IRS contractors, and improve its overall control of the VMF maintenance and operation.

TAGS: compliance | tax | business | tax compliance | Internal Revenue Service (IRS) | tax authority | contractors | United States | services | Tax

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