Uncle Sam’s don’t ask, don’t tell tax policy

Test your business skills: Would you pay someone $510,000 to do a job if that person already owed you $250,000? Don’t answer, because you already did. That is if you pay taxes yourself.

Members of Congress are not amused when they learn of federal workers who are behind in their federal taxes which help pay their federal salaries.

Newspapers go into all-out-page-one mode when reporting on bureaucrats who abuse government credit cards and are caught shirking on the job or, worst of all, not paying their federal taxes.

Taxpayers, those who work for Uncle Sam and those of us who don’t, are equally unhappy with politicians (theoretically elected to represent us) don’t pay taxes. Or otherwise abuse or ignore the laws they make for the rest of us.

And of course many, many federal workers become contractors when they retire. They have a steady annuity from Uncle Sam, their own health insurance, expertise, security clearances and, last but not least, contacts in government.

So just about everybody should be unhappy when they learn that a lot of U.S. government contractors who take money — as in lots and lots of money — from various government agencies but who go brain dead April 15 when the rest of us are doing our civic duty.

You’d think that the government would have a “do-you-pay-your-taxes?” spot on the checklist contractors must fill out when bidding on and especially when being awarded a lucrative contract to design, build or operate a program, system or aircraft for the government. Well they do, sort of. The problem is the system isn’t working all that well according to auditors at the Government Accountability Office. The congressional watchdog agency says the government obligated about $507 billion on selected contracts in fiscal 2017. But in its summary in a contractor tax compliance report, GAO said that while businesses pay billions in taxes each year “Some … however, do not pay owed taxes” which, the agency says, contributes “to what is known as the tax gap.”

You think?

The problem isn’t that there are rules, regulations and procedures for insuring that contractors are up to date on their tax obligations. The problem, it seems, is that some agencies either don’t seem to ask the right questions or go ahead and award contractors even if they don’t get the right answers.

GAO took a look at five large departments (Army, Navy, Energy, Health and Human Services, and Veterans Affairs) that let just over half the contracts in 2017. Then it did a “nongeneralizable review” of seven contracts worth more than $510,000 even though they had more than $250,000 in tax debt “including penalties for willful noncompliance with tax laws.”

The GAO is making a dozen proposals to agency contract operations including that selected agencies “enhance controls for considering contractors’ qualifying federal tax debt before awarding contracts” and that the IRS “evaluate options to obtain comprehensive contact payment information.”

Nearly Useless Factoid

by Amelia Brust

Over half the world’s population lives within a 5000-mile-wide circle in East Asia.

Source: MentalFloss

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