IRS Tax Checking Process Not Effective

September 7, 2016

IRS Falls Short in Tracking Tax-Delinquent Contractors

Source: Government Executive, Charles S. Clark, August 12, 2016

Despite past admonitions, the Internal Revenue Service still has a ways to go in preventing the award of agency contracts to firms that owe back taxes, an agency watchdog has found.

“The IRS tax check process was not effective in identifying tax-delinquent contractors,” wrote the Treasury Inspector General for Tax Administration in a report dated July 20 but released this week. The IG called for “significant improvements” to the process.

In a sampling of 73 awards among 336 contracts of $250,000 or more from September 2012 through August 2014, auditors found that 21, or 29 percent, “did not have evidence that the contracting officer performed the required tax check on the winning bidders.” What’s more, contracting officers handling all 73 contracts documented no tax checks on competing bidders.

Under the Federal Acquisition Regulation, failure to pay taxes is among the criteria that can rule out a prospective contractor for future work. “Contracting officers are required to perform responsibility determinations prior to each contract award by using the FAR 9.104-1 standards and consider information submitted by the contractor or information they research or acquire from other sources,” the report said. That information is used to determine whether, for example, the company is enrolled in a repayment plan.

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