The IRS itself is paying tax-cheat companies hundreds of millions of dollars a year for services, according to a new internal audit releasedWednesday.
Federal law generally prohibits companies with unpaid tax liabilities to get government contracts, but the IRS doesn’t have sufficient controls to weed out tax cheats, according to the agency’s inspector general.
“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 new audit found that as of July 2012, 7 percent of IRS vendors had a combined $589 million in federal tax debt.
The IRS acknowledged the problems and said it would try to correct them.
The inspector general has previously urged the IRS to conduct an annual check of all IRS contractors to see if they are paying their taxes correctly, but the agency has refused to do that.
ITRS officials say there’s no federal law that authorizes them to do it, so there’s no reason why they should.