Lawmakers aim crackdown on federally employed tax scofflaws

Some members of Congress want to fire federal workers who are seriously delinquent on their taxes.

Furthermore, if they had their way, prospective employees in deep tax arrears wouldn't even be considered for a job with Uncle Sam.

The Republican-led House passed legislation last month that raised the consequences for federal civilian workers behind on their taxes, or anyone who wants to work for the government.

Supporters say the measure is necessary to hold employees accountable, collect about $1 billion past due and foster confidence among Americans that public servants aren't ditching their tax obligations.

Worker advocates say it's unfair to fire federal employees over unpaid taxes when that wouldn't happen in the private sector. They also say federal workers are far more likely to be current on taxes than the public in general.

"It sounds good and it makes sense, of course. If you are avoiding paying your taxes, you should not be employed by the federal government," said Jessica Klement, a lobbyist for the National Active and Retired Federal Employees Association.

She added, "It's too easy to make a mistake. Then let's say you get fired. The federal government isn't going to recoup what you owe anyway because you no longer have a job."

According to the most recent figures from the Internal Revenue Service, 3.3 percent of federal civilian employees — nearly 98,300 people — were delinquent on taxes worth $1.034 billion in 2010.

Rep. Jason Chaffetz, the Utah Republican who introduced the Federal Employee Tax Accountability Act, acknowledged that the delinquency rate among federal workers has held steady for years. But, he added, the amount owed has risen 72 percent since 2004.

"Employees who consciously ignore the channels and processes in place to fulfill their tax obligations must be held accountable," Chaffetz said after the bill passed the House. "In short, if you refuse to pay your federal taxes, you should be fired."

Under current law, only IRS workers can be fired for trying to dodge taxes. Three hundred forty-one IRS employees were dismissed since the law took effect in the late 1990s — 244 for willfully failing to file a federal return, and 197 for willfully understating their tax liability.

Fewer than 1 percent of workers at the U.S. Treasury Department, which includes the IRS, were delinquent as of 2010. But that still added up to 1,181 Treasury workers owing $9.3 million.

Employees of the legislative branch — which includes members of Congress — owe millions, too. In the U.S. Senate, 217 employees owed $2.1 million; 467 workers in the House owed $8.5 million.

Members of the military would not be included in Chaffetz's crackdown. But 143,832 service members and military retirees are delinquent on more than $1.9 billion in taxes.

In the big picture, these sums are small change.

The IRS reported that the estimated tax gap — the difference between what taxpayers owe and what they have paid on time — was $385 billion in 2006, the most recent figures available.

"The tax compliance rate of federal workers is over 96 percent," said Colleen M. Kelley, president of the National Treasury Employees Union. "In the general public, it's only 83 percent."

The federal government already has ways to collect back taxes from its employees, such as levying wages, Kelley said. The legislation, she said, is "unnecessary and another slam on federal workers."

The legislation targets workers and applicants with "seriously delinquent tax debt," a threshold which would be met once the IRS filed a lien in public records against them. Liens are triggered when a taxpayer owes at least $10,000.

"I do support the notion that federal employees should be held to a higher standard," says James P. Leith, the Maryland taxpayer advocate within the IRS. "It's a privilege to work for the government. With that privilege comes some responsibility on behalf of employees to set an example."

But Leith added that it's a bad idea to use a lien as the basis for discharging workers. Most liens are filed through an automated process that's "rife with abuse," he said.

A lien could be filed, for example, even though payment notices were sent to the wrong address or the tax liability is incorrect, he said.

The bill provides some leeway for workers and applicants. Workers wouldn't be fired, for instance, if they were in a payment plan with the IRS, their wages were already being garnished to pay the tax bill, or the agency had agreed to accept less than they owed under an offer in compromise, said Caroline D. Ciraolo, a Baltimore tax attorney who represents clients before the IRS.

Workers also couldn't be dismissed if they have an innocent-spouse claim pending that challenged the liability on a joint return, she said.

And delinquent taxpayers would be able to keep their federal jobs if it were found to be in the country's best interest.

With or without final passage of the law, Ciraolo said the consequences for tax delinquency are growing — and not just federal workers.

"This is the wave of the future," she said. "The states are much more aggressive in terms of collection."

Under a Maryland law that took effect last year, for example, delinquent taxpayers might not be allowed to renew their driver's licenses or vehicle registrations until they pay up or at least start making payments under an installment plan.


Federal agencies with the greatest tax delinquencies

U.S. Postal Service $269.6 million

Department of Veterans Affairs $151 million

Department of the Army $105.5 million

Department of the Navy $70.9 million

Department of the Air Force $49.5 million

Department of Health and Human Services $40.7 million

Department of Defense $39.5 million

Department of Commerce $27.4 million

Department of Homeland Security $36.9 million

Social Security Administration $20.1 million

Source: IRS Federal Employee/Retiree Delinquency Initiative, 2010