When a business fails to pay its payroll taxes in to the government, it's a recipe for trouble. As we noted in our July 2 post, the penalties for not paying these employment taxes in to the Social Security trust fund can be substantial.
For starters, there may be an employment tax audit. If the failure to pay was willful, the consequences may be still more serious.
You'd think that if businesses are held to this standard, federal government agencies would be as well. But that is not the case, according to a recent report released by the inspector general for tax administration at the Treasury Department.
The report found that some 70 federal agencies had a total of 126 delinquent accounts - to the tune of $14 million dollars. There were also 18 agencies that had not filed a total of 39 employment tax returns in a timely manner.
The inspector general (IG) noted that the IRS lacks the authority to take tax enforcement action against fellow federal agencies. Nor can it file tax liens against those agencies or seize their property.
Given this lack of enforcement power, the IRS has had limited success in collecting on delinquent accounts from other government agencies on delinquent accounts.
The IRS acknowledges there is a problem, but asserts it is making progress on the issue.
An additional problem, however, is the incongruous message that the delinquent accounts of federal agencies send to private businesses. When those businesses are trying hard to comply with the law on the proper payment of payroll taxes, it is definitely problematic to learn that the government itself is not in full compliance with the law.
Source: "Some federal agencies delinquent on payroll taxes," Washington Post, Eric Yoder, 9-28-12