Thousands of federal employees and contractors working in the intelligence community, as well as those serving the Internal Revenue Service (IRS) owe millions of dollars in back taxes.

The Government Accountability Office (GAO) found 8,400 individuals with security clearances between 2006 and 2012 who owed $85 million to the IRS.

About half of the 8,400 had not arranged a repayment plan with the IRS, according to the GAO report (pdf). The average amount owed was $3,800.

Some owed as much as $2 million.

Those owing taxes represented 3.4% of all government employees and contractors approved for clearances during the period reviewed. About half of them (4,700) were federal employees, while the rest were contractors.

“Federal tax cheats with security clearances are double threats that jeopardize both our national and economic security,” Senator Tom Coburn (R-Oklahoma), ranking member of the Senate Homeland Security and Government Affairs Committee, said in a joint statement. “It is imperative the administration and Congress quickly take action to eliminate this egregious and preventable practice.”

Failure to disclose a tax debt exposes these individuals to bribery and blackmail, said ranking Senate Finance Committee member Orrin Hatch (R-Utah).

An attempt to address this problem was made last week with a bill introduced by Senate Select Committee on Intelligence member Susan Collins (R-Maine) and supported by a bipartisan group of female senators. The bill is designed to increase the frequency of follow-up screenings for federal employees and contractors who hold security clearances.

The IRS needs to also work on collecting back taxes from contractors working for the agency, according to a report (pdf) from the Treasury Inspector General for Tax Administration (TIGTA).

The TIGTA found 5% (691) of the 13,591 contractor employees assigned to the IRS had almost $5.4 million in federal tax debts.

This wouldn’t be a problem if all 691 were on a repayment plan with the IRS, the inspector general noted.

But it turned out that 352 contractors, who owed $2.7 million as of June 14, 2012, had not made arrangements to resolve their tax debt.

Most of the IRS contractors (65%) had tax debts from only one calendar year. But 30 of them owed back taxes for five or more years.

The TIGTA also reported that nearly 80% of the 691 contractor employees owed $10,000 or less. Eleven owed more than $50,000 each, with the tax debts ranging from $64,000 to $184,000.

-Noel Brinkerhoff

To Learn More:

Contractor Employees Have Millions of Dollars of Federal Tax Debt (Treasury Inspector General for Tax Administration) (pdf)

Security Clearances: Additional Mechanisms May Aid Federal Tax-Debt Detection (Government Accountability Office) (pdf)

Feds and Contractors with Security Clearance Owe $85 Million in Unpaid Taxes (by Josh Hicks, Washington Post)