October 13, 2016
New Rules Rely on Inter-Agency Cooperation to Collect Taxes
Like any large organization, federal government agencies often operate in silos. Communication between them is rarely seamless. New tax collections rules show a focus on inter-agency coordination.
But how well will these rules really work? Back in an April post, we discussed a rule that would allow the Department of Justice in coordination with the IRS to revoke passports for those who owe more than $50,000 in tax debt. It is now October, and passports have yet to be taken.
Another new rule has the potential to bar those with tax debts from contracting with the federal government. We’ll discuss the proposed rule in this post.
No floor on tax delinquency reporting
At the end of September, federal acquisitions officials finalized a new rule that requires contractors to disclose back taxes when in the contract bidding process. The justification cited was to avoid the misuse of appropriated funds.
One difference is that there is no reporting floor. The rule specifically states, “there is no de minimus amount of delinquent federal taxes which does not need to be reported.” Federal Acquisition Regulation had only required disclosure on tax debt of $3,500 of more.
Tax controversies and appeals
A caveat does exist: you do not need to report a tax debt until all appeals have been exhausted. But if you are convicted of a federal felony-level tax crime, you would have to disclose it even if the case was pending on appeal. Federal felony reporting requirements are stricter.
Once notified of delinquent tax debt or federal felony conviction, a government official can take as long as needed to make a debarment decision. The rule is broad and can apply to joint venture members or a team putting together a contracting bid.
In the past, many agencies made their own rules. Enforcement was patchy as best. An IRS watchdog report in 2013 caused outrage when it found vendors owed significant unpaid federal tax bills or had liens against their businesses.
These new rules apply government-wide and could mean that individuals with tax liabilities are prohibited from contracting with the federal government.
Any audit or tax assessment could put a federal government contact at risk. Talking to one of the tax attorneys at Brown P.C. is the first step in the process to proactively resolve any tax problem.