Tax delinquency is increasing among federal government employees as well as retirees, according to a new report.
Processing Content
The
The Fiscal Year 2024 FERDI Annual Report showed there were more than 571,000 current federal and retired employees with an outstanding tax obligation owing approximately $6.3 billion. The federal and retiree workforce decreased by less than 1% from fiscal years 2021 through 2024, but there was a significant increase of 43% in the number of delinquent federal employees and retirees during the same period.
That was partly due to some collection programs being suspended during the pandemic. The IRS resumed one of those collection programs since that time and expects the delinquency rates will decline.
The TIGTA report also found that approximately 50,000 federal civilian employees failed to file a tax return for multiple years. TIGTA identified 122 taxpayers with eight or more unfiled returns and referred those taxpayers to Criminal Investigation for review because the IRS’s Collection function had not.
In May 2025, the IRS collaborated with the Treasury Department to create a notice informing current and retired federal employees of noncompliance with their tax obligations. The IRS mailed out 427,000 of the notices. However, the IRS said this was a one-time notice and doesn’t anticipate using it again.
The report noted that delinquency rates among federal employees partly depend on whether agencies can hold employees accountable for their lack of tax compliance. Due to privacy restrictions, the IRS doesn’t share specific employee related tax information with the delinquent employee’s federal agency. However, the Treasury is allowed to hold its employees accountable, and accordingly, the delinquency rate is 2.4%.
TIGTA suggested IRS should revisit its previous recommendation to coordinate with the Treasury’s Office of Tax Policy to consider a legislative proposal to amend Internal Revenue Code Section 6103 to allow the IRS to share essential return information with other federal agencies upon the IRS’s identification of a current federal employee who is tax delinquent.
“All taxpayers have a legal obligation to file tax returns and pay their taxes,” said the report. “However, federal employees are held to a higher standard since their compensation is primarily from federal taxes. As the agency responsible for administering federal tax law, the IRS must ensure that federal employees comply with the tax law to maintain the public’s confidence. If taxpayers are aware that federal employees are not tax compliant, it may impact their willingness to comply with their own tax matters.”
The IRS followed many of the recommendations issued by TIGTA in an earlier report from 2023, including sending out the 427,000 reminder letters in 2025. In response to the new report, Lia Colbert, commissioner of the IRS’s Small Business/Self-Employed Division, pointed to some positive results from its efforts.
“Early indicators — such as $58 million collected, nearly 59,000 taxpayers making a payment, and more than 1,100 delinquent returns filed — show meaningful engagement and highlight the value of targeted outreach to the population,” Colbert wrote. “While these outcomes cannot be attributed solely to the notice, the results suggest targeted outreach can be effective and will inform future compliance strategies.”
Credit: Source link
