Wednesday, May 25, 2011

Stimulus Money Goes to Businesses that Owe Back Taxes

Since I haven’t posted for a week, I have received a few items that I want to post before going back to the federal budget. I will return to the budget series soon. I actually heard about this material today while listening to Rush. Our federal government at work! And yet, the Administration wants to spend even more money. I have taken some material directly from the report and have provided a link to the PDF of the report.


“Tax Delinquents Collected Billions From Obama’s Economic Stimulus Plan, Report Shows
Published May 23, 2011
Associated Press

WASHINGTON—Thousands of companies that cashed in on President Obama’s economic stimulus package owed the government millions in unpaid taxes, congressional investigators have found.

The Government Accountability Office, in a report being released Tuesday, said at least 3,700 government contractors and nonprofit organizations that received more than $24 billion from the stimulus effort owed $757 million in back taxes as of Sept. 30, 2009, the end of the budget year.

The report said the tax delinquents accounted for nearly 6 percent of the 63,000 contractors and grantees examined, and it cautioned that the real number might be higher because the known tax debt does not measure such factors as income underreporting.

Among the examples was an engineering firm that received a $100,000 stimulus act contract but owed $6 million in taxes. The IRS called it ‘an extreme case of noncompliance.’ A social services nonprofit that received more than $1 million in stimulus funds owed taxes of $2 million.”

“‘It is a matter of basic fairness that those who take government money should be required to pay their taxes like everyone else,’ said Sen. Tom Coburn, the panel’s top Republican. ‘That such a huge amount of the stimulus money went to known tax cheats should be a wake-up call for Congress.’

The stimulus package, enacted in February 2009, funneled some $821 billion into the recession-hit economy. Of that, about $275 billion was designated for contracts and grants, of which nearly $200 billion had been paid out as of March 25, 2011.”


PDF of Report:

“At least 3,700 Recovery Act contract and grant recipients—including prime recipients, subrecipients, and vendors—are estimated to owe more than $750 million in known unpaid federal taxes as of September 30, 2009, and received over $24 billion in Recovery Act funds. This represented nearly 5 percent of the approximately 80,000 contractors and grant recipients in the data from as of July 2010 that GAO reviewed.

Federal law does not prohibit the awarding of contracts or grants to entities because they owe federal taxes and does not permit IRS to disclose taxpayer information, including unpaid federal taxes, to federal agencies unless the taxpayer consents. The estimated amount of known unpaid federal taxes is likely understated because IRS databases do not include amounts owed by recipients who have not filed tax returns or understated their taxable income and for which IRS has not assessed tax amounts due. In addition, GAO’s analysis does not include Recovery Act contract and grant recipients who are noncompliant with or not subject to Recovery Act reporting requirements.”

Among other information, the following is given: “Recovery Act Contract and Grant Recipients’ Known Unpaid Taxes by Tax Type

1) Other taxes owed—18% of total—$133 million dollars

2) Payroll taxes—27% of total—$207 million

3) Corporate income tax—55% of total—$417 million”

Total: $757 million owed in taxes from companies receiving stimulus money.

“Employers are subject to civil and criminal penalties if they do not remit payroll taxes to the federal government. When an employer withholds taxes from an employee’s wages, the employer is deemed to have a responsibility to hold these amounts ‘in trust’ for the federal government until the employer makes a federal tax deposit in that amount. When these withheld amounts are not forwarded to the federal government, the employer is liable for these amounts as well as the employer’s matching Federal Insurance Contribution Act contributions for Social Security and Medicare. Individuals within the business (e.g., corporate officers) may be held personally liable for the withheld amounts not forwarded and assessed a civil monetary penalty known as a trust fund recovery penalty (TFRP). Failure to remit payroll taxes can also be a criminal felony offense ….”

The report discussed fifteen case studies. The fifteen case studies include five construction companies, one electrical services company, two engineering services companies, two health care nonprofits, one municipality, one security company, two social services nonprofits, and one technical services company. The summary of three of those fifteen are:

“Case Study—Nature of Work—Total Recovery Act awards—Known unpaid taxes

1) Case 9———Health care———over $100,000—————over $1,000,000

Nonprofit organization owes mainly payroll taxes for over 25 periods since the late 1990s. Nonprofit organization was also delinquent in filing quarterly tax returns for most of those periods.

IRS established an installment agreement for the nonprofit organization to pay approximately $1,000 per month toward over $1 million in unpaid taxes. The agreement defaulted after the organization missed required monthly payments. However, IRS subsequently reinstated the repayment agreement.

IRS filed federal tax liens against this organization.”

Page 15 of April 2011, “Recovery Act: Thousands of Recovery Act Contract and Grant Recipients Owe Hundreds of Millions in Federal Taxes”

2) “Case 10———Health care———over $100,000—————over $4,000,000

Nonprofit organization owes payroll taxes primarily from the mid-2000s.

Nonprofit organization stated that it did not make timely federal tax deposits because state and federal agencies were slow on their payments.

IRS established an installment agreement for the nonprofit organization for monthly payments of about $100,000. The nonprofit organization subsequently defaulted.

On multiply occasions, the nonprofit organization submitted dishonored checks to IRS for payment of federal taxes.

According to IRS records, at the time the nonprofit organization was not paying its federal taxes, the president of the organization was paid an annual salary that was considered very high for the area that it serves.

Nonprofit organization proposed a long-term offer in compromise of about 2 million dollars to be paid in installments over approximately ten years. IRS denied the offer in compromise because the offered terms were not acceptable and a long-term agreement was not in the government’s best interests.

IRS assessed TFRP’s on over five individuals. Most of these individuals have appealed the assessments.

Federal government awarded the nonprofit organization hundreds of thousands of dollars in nonstimulus funds in the late 2000s.

IRS filed federal tax liens against this organization.”

Page 16 of April 2011, “Recovery Act: Thousands of Recovery Act Contract and Grant Recipients Owe Hundreds of Millions in Federal Taxes”

3) “Case 13———Social services———over $1,000,000—————over $800,000

Nonprofit organization primarily owes payroll taxes from the mid to late 2000s.

The nonprofit organization’s major sources of income are Medicare and Medicaid.

Nonprofit organization submitted a request for an installment agreement of over $10,000 a month. IRS was in the process of reviewing the request to determine if it could be granted.

Federal government awarded the nonprofit organization millions of dollars in nonstimulus funds in the late 2000s.

IRS filed federal tax liens against this organization.”

Page 17 of April 2011, “Recovery Act: Thousands of Recovery Act Contract and Grant Recipients Owe Hundreds of Millions in Federal Taxes”

The basic problem with all this is that the federal government has expanded far beyond its authority and powers as provided by the Constitution. Consequently, the government is so huge and spends so much money that the right hand doesn’t know what the left hand is doing and ultimately no one is held ACCOUNTABLE!!!

It’s time, it is past time to TAKE BACK THE NATION!!!