Some 1,168 businesses that sell products and services to the Internal Revenue Service owe a combined $589 million in delinquent taxes, auditors found.
Federal law — as updated in the 2012 Consolidated Appropriations Act — forbids agencies from signing contracts with companies with unpaid federal tax liabilities, but the IRS’ system of controls, while effective much of the time, is not fool-proof, according to the report released Wednesday by the Treasury Inspector General for Tax Administration.
“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, Treasury Inspector General for Tax Administration.
The IRS in the past has resisted TIGTA’s recommendation that it conduct an annual check on contractor tax records. And though the agency’s use of its Master Vendor File is generally effective, auditors recently found that the IRS has not checked the General Services Administration’s Excluded Parties List System. The agency improperly awarded four new contracts or exercised additional option years on existing contracts, valued at $2.6 million, to three vendors that were suspended from doing business with the government, the auditors found.
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