Charles S. Clark | August 12, 2016 | 0 Comments

IRS Falls Short in Tracking Tax-Delinquent Contractors

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.

The IRS officers, however, did not provide sufficient documentation of their tax checks, and agency policies “did not give contracting officers the ability to communicate tax check results to the affected contractor using consent processes when tax check results indicated tax debt.” By checking only those solicitations worth more than $250,000, TIGTA added, “contracting officers could inadvertently violate the conditions placed upon the expenditure of appropriated funds.”

Despite efforts to automate the tax check process by the IRS Office of the Chief Financial Officer, “current Office of Procurement policies and procedures are outdated, do not accurately reflect the tax debt prohibitions in federal appropriations law, and do not allow communication between contractors and COs to resolve award eligibility matters specific to tax debt,” the inspector general wrote. As of now, agency contract solicitations do not put bidders on notice that their tax delinquencies would be disqualifying.

TIGTA recommended that the IRS’s chief financial and chief procurement officers improve documentation and free up contracting officers to communicate with companies seeking contracts, as well as recast solicitations to alert prospective contractors of their obligations.

The IRA agreed, noting that it has created a database to alert contracting officers of delinquencies.



Thank you for subscribing to newsletters from
We think these reports might interest you:

  • Forecasting Cloud's Future

    Conversations with Federal, State, and Local Technology Leaders on Cloud-Driven Digital Transformation

  • The Big Data Campaign Trail

    With everyone so focused on security following recent breaches at federal, state and local government and education institutions, there has been little emphasis on the need for better operations. This report breaks down some of the biggest operational challenges in IT management and provides insight into how agencies and leaders can successfully solve some of the biggest lingering government IT issues.

  • Communicating Innovation in Federal Government

    Federal Government spending on ‘obsolete technology’ continues to increase. Supporting the twin pillars of improved digital service delivery for citizens on the one hand, and the increasingly optimized and flexible working practices for federal employees on the other, are neither easy nor inexpensive tasks. This whitepaper explores how federal agencies can leverage the value of existing agency technology assets while offering IT leaders the ability to implement the kind of employee productivity, citizen service improvements and security demanded by federal oversight.

  • IT Transformation Trends: Flash Storage as a Strategic IT Asset

    MIT Technology Review: Flash Storage As a Strategic IT Asset For the first time in decades, IT leaders now consider all-flash storage as a strategic IT asset. IT has become a new operating model that enables self-service with high performance, density and resiliency. It also offers the self-service agility of the public cloud combined with the security, performance, and cost-effectiveness of a private cloud. Download this MIT Technology Review paper to learn more about how all-flash storage is transforming the data center.

  • Ongoing Efforts in Veterans Health Care Modernization

    This report discusses the current state of veterans health care


When you download a report, your information may be shared with the underwriters of that document.