Federal agencies owe the IRS at least $28M in fees

By Keith BieryGolick
Special to Federal News Radio

The IRS fails to collect about $300 billion a year from citizens who don’t file tax returns. The agency now can add its federal brethren to that list of organizations or people that owe it money.

The Treasury Inspector General for Tax Administration (TIGTA) released a report Monday stating the IRS doesn’t always get reimbursed for work it provides throughout the government.

TIGTA evaluated six random, reimbursable agreements within the federal government and identified more than $28 million in unpaid costs. In one case, the Treasury Department’s Financial Management Service didn’t reimburse the IRS $26 million between fiscal 2010 and 2012.


The IRS accepted 89 offers during 2011 to perform services on a reimbursable basis and collected $90 million.

“When the IRS is reimbursed less than the cost it incurred for performing reimbursable work, it must fund this work using its own operating budget, thereby reducing funds available for tax administration,” said Russell George, the Treasury inspector general for Tax Administration, in the report.

The report, however, found that much of the blame should fall on IRS itself for not calculating and applying overhead costs correctly. In six agreements the report studied, four didn’t follow IRS overhead procedures while the other two didn’t apply overhead costs at all.

Due to complexities regarding overhead cost calculation, IRS regulations require management to contact the Office of Cost Accounting’s chief financial officer for each specific reimbursement agreement.

But the IRS never contacted the CFO in six cases covered by the report. The IRS never made these requirements clear, business unit representatives told TIGTA. Instead, management generally calculated overhead based on their knowledge. That’s why TIGTA said the IRS should ensure guidelines are updated to include overhead costs. They also should periodically provide refresher training courses to make sure mistakes like these don’t happen in the future.

Pamela LaRue, IRS’ chief financial officer, agreed with the report’s findings.

“The IRS will conduct an ongoing, full review of all reimbursable agreements beginning in FY 2013,” she said in a letter to the IG responding to the report. “CFO is currently developing interim guidance on reimbursable work cost estimates to augment the reimbursable operating guidelines. The interim guidance will be completed by August 31, 2012.”

Keith BieryGolick is an intern at Federal News Radio


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