Private businesses that do not file and/or pay their employment taxes are subject to a variety of enforcement actions:
- assessment of penalties and interest
- filing of a federal tax lien
- final notice of intent to levy
- assessment of a Trust Fund Recovery Penalty (TFRP)
- seizure of property
But what happens when a federal agency owes taxes? According to the Treasury Inspector General for Tax Administration (TIGTA), not enough. Back in 2007 TIGTA made some recommendations that might improve oversight of these special tax accounts and improve compliance. TIGTA basically recommended that the IRS figure out why this is happening and how to make it stop.
It’s 5 years later and the IRS still does not have an adequate process for resolving aged federal agency tax cases. As of December 31, 2011 there were 70 federal agencies with delinquent tax accounts totalling $14 million in unpaid taxes. What’s worse is that 34 of these accounts were placed in Currently Not Collectible status because they could not pay. But the IRS has been known to actually shut down private businesses that demonstrate an inability to pay employment taxes. TIGTA admits to this double standard in its latest audit report.