Above, the Treasury Department headquarters in Washington. (Staff file photo)
The Treasury Department is exploring ways to catch tax-delinquent contractors — and contractors want to have a say in that.
The Professional Services Council sent a letter to Treasury Secretary Timothy Geithner on Friday asking the department to engage with industry on how best to capture and use information about contractors that owe taxes.
"[W]e recognize the important role that contractors play in contributing to federal tax revenue and we fully support balanced efforts to ensure that federal government contracting firms comply with federal tax laws," PSC President Stan Soloway said in a statement.
Treasury is evaluating how well contractors are meeting current requirements to certify whether they have delinquent tax debts, and studying ways to estimate and reduce the amount of unpaid federal taxes owed by federal contractors, as required by the 2011 Three Percent Withholding Repeal and Job Creation Act that President Obama signed into law in November.
Recent audits have shown that the government is awarding large contracts to companies that owe millions of dollars worth of back taxes. One report last year by the Treasury Inspector General for Tax Administration found that 11 contractors owing $4.2 million in back taxes were given nearly $4 billion in contract payments by federal agencies. Similarly, the Government Accountability Office reported that at least 3,700 federal contractors that won contracts for stimulus projects owed $757 million in back taxes.
The new law repealed one that Congress previously passed that would have required federal, state and local governments to withhold 3 percent of contract payments for goods and services worth more than $10,000 starting in 2013. The earlier law was supposed to reduce payments to people and companies with tax debts. Companies that did not owe taxes would have received back the 3 percent that was withheld at the end of the year. But federal agencies and businesses complained that the provision would cost millions of dollars to implement and result in higher prices from contractors.