Over half a million federal employees, the very people who run the government, owe $6.3 billion in unpaid taxes. And the IRS hasn’t really done much about it.
I’m Susan Ferrechio, and this video, we’re breaking down just how bad federal tax delinquency has gotten, why the IRS’s own workforce is able to dodge accountability, and why the government’s enforcement tools aren’t being used.
How many federal employees owe back taxes? And how much money are we talking about?
The numbers are pretty astonishing. As of 2024, delinquent federal workers owed $2.1 billion. That’s nearly 7% of the entire federal workforce who owe taxes. And that’s only counting current employees. Add in the retired federal workers and the numbers look even worse. According to the IRS Inspector General, more than 571,000 federal workers and retirees are late paying their taxes.
It’s a problem that’s been getting worse. The report found a 43% increase in delinquencies among federal workers and retirees, in just three years. In total, they owe a combined $6.3 billion to Uncle Sam.
Which federal agency has the worst and best tax compliance record?
The award for the federal workforce’s most delinquent in paying taxes goes to the United States Postal Service.
The investigation found that Postal Service workers make up a third of all federal workers who fail to even file tax returns with the IRS. The Postal Service had a 10% delinquency rate, the investigation found, and an outstanding balance of $570 million in unpaid taxes for its employees.
The Veterans Affairs Department had a delinquency rate of 7.3%, and its employees owed nearly $380 million, while the Department of Homeland Security’s tax delinquency rate was more than 5%. The Treasury Department, which oversees the IRS, also had its share of tax scofflaws, but at a relatively low 2.4% of the workforce.
What did the IRS actually do about this, and how well did it work?
The IRS last year took a stab at getting federal workers and retirees to pay up. It mailed 427,000 letters to federal employees and encouraged the scofflaws to voluntarily resolve their outstanding tax bills. But very few people complied.
Within a month of receiving the letters, 59,000 recipients made a payment and only 4,700 people actually paid all the taxes they owed. In total, the IRS recovered a mere $58 million in delinquent tax payments from the federal workforce. That’s less than 1% of the total owed by all federal workers and retirees.
What is the Federal Payment Levy Program and why isn’t it being used more?
The federal government has enforcement avenues beyond sending friendly letters encouraging compliance. The Federal Payment Levy Program authorizes the IRS to garnish up to 15% of federal employees’ salaries and retiree pensions to recover unpaid taxes, but the program is rarely used.
Why can’t other federal agencies just police their own employees’ tax compliance?
There’s a legal loophole that’s been making it much easier for federal workers to get away with not paying their taxes. This law prohibits the IRS from sharing tax information outside of the Treasury, so other departments don’t know which of their workers are tax scofflaws. The Inspector General said the IRS does flag some of the most suspicious cases by looking at people for whom significant income was reported, but who failed to file returns for at least three years.
Is it actually illegal for a federal employee not to file taxes, and could anyone go to jail for it?
Yes, failure to file is a federal crime. This raises the question of why criminal enforcement seems basically non-existent, even for repeat offenders. The IRS has been letting these cases slip through its fingers. The audit identified 102 instances where a federal employee had earned income for eight years but failed to file a return, and 20 cases where employees went nine years or longer.
None of those had been referred to the IRS’s Criminal Investigations Division as of late last year, so the Inspector General made referrals itself.
Who are the worst offenders?
Is this really just people falling behind, or is something more extreme happening? The report found 122 federal workers hadn’t filed for eight years or more, and 14,000 repeat non-filers earned salaries of more than $100,000.
Is a 6.9% delinquency rate actually unusual or does everyone have tax problems?
According to the most recently available data from the IRS, which is from 2022, about 85% of federal taxes were paid voluntarily and on time, which means about 15% of taxpayers aren’t paying up.
What is Congress going to do to try to force compliance amongst federal workers?
The House Oversight and Government Reform Committee Chairman James Comer, a Kentucky Republican, plans to crack down on the federal government’s apparent lack of enforcement. Mr. Comer asked the IRS to turn over the number of non-filers referred to the Federal Payment Levy Program and the amount of tax money recovered through that program. He’s also seeking the number of wage garnishment requests for unpaid taxes that have been made to the Bureau of Fiscal Service. And he wants to know the number of employees and pensioners who “had federal payments or salaries levied by the federal government.”
The loophole leads to weak enforcement, according to Mr. Comer. He said, “It seems unlikely that employees who are already failing to pay or file taxes for years in violation of federal laws would then voluntarily identify themselves to their employing agencies.”
For now, the question is whether the IRS will move beyond warning letters and start using the enforcement tools already on the books. Because when hundreds of thousands of federal workers and retirees hold back taxes, it raises a basic fairness concern.
Are the rules being applied evenly?
Congress is now demanding answers from the IRS. Whether those answers lead to action is yet to be determined.
