Some 215,000 federal civilian employees owed the government money in unpaid taxes in Fiscal Year 2024, according to a May 6 report by the Treasury Inspector General (IG) for Tax Administration.The number grew by more than 40% since Fiscal Year 2021, despite a growth of only 4% in the federal civilian workforce, marking yet another unsung failure of the Biden administration. While the IG proposes partial policy solutions, the extent of tax delinquency among federal workers suggests a deeper, moral crisis.
In Fiscal Year (FY) 2021 (which ran from October 2020 to September 2021), some 149,000 federal civilian taxpayers (4.9% of the workforce) were behind on their taxes. This could possibly be related to the COVID pandemic, but government employees were paid regularly throughout that period.
However, since then, the delinquency rate only skyrocketed. In FY2022, 180,000 federal civilian employees (6.0%) were delinquent. In FY2023, delinquency reached 191,000 employees (6.2%); and in FY2024, the number hit 215,000, or 6.9% of the workforce. Over this period, the federal civilian workforce only grew by 4%, from 3.0 million in FY2021 to 3.1 million in FY2022.
As the delinquency rate increased, so did the amount of money owed by federal employees in federal taxes. In FY2021, delinquent federal civilian taxpayers owed $1.5 billion. But, in FY2024, they owed $2.1 billion.
When the IG expanded the scope of its review from federal civilian employees to include both employees and retirees, it found that the problem only increased in scale, though at a slightly lower rate. In FY2021, some 401,000 federal civilian employees and retirees (4.0%) owed $4.8 billion in unpaid taxes. By FY2024, 572,000 employees and retirees (5.7%) owed $6.3 billion.
The IG anticipated a question many readers would ask themselves: which federal departments have the highest rates of employee noncompliance? The U.S. Postal Service topped the list, with 10.1% of its employees owing $570 million in unpaid taxes. Next was the Veterans Administration, where 7.3% owed $379 million in taxes. After that, the order becomes jumbled, with between 5.4% and 7.1% of civilian employees in various military and security departments (including each of the Army, Navy, Defense, and DHS) owing between $145 million and $115 million.
The IG report implied that one reason for the high delinquency rates in some departments is a legal information barrier that hampers accountability. “Delinquency rates among employees are partially dependent on whether agencies can hold employees accountable for their lack of tax compliance,” it stated. “The Treasury Department is permitted to hold employees accountable for tax delinquencies. As a result, the Treasury Department’s 2.4 percent delinquency rate is relatively low compared to other federal agencies.”
However, “Due to privacy restrictions under Internal Revenue Code Section 6103, the IRS cannot share specific employee related tax information with the delinquent employee’s federal agency,” it added.
Beyond this long-term, systemic issue, the IG report suggested that the recent rise in federal employees not paying taxes was due to the suspension of collection programs during COVID. “IRS Collection management attributed the year-to-year increase to the temporary pauses of levy programs, the Automated Substitute for Return program (an enforcement tool to address nonfilers), and collection notice issuance during the pandemic and recovery years,” the report concluded. “The IRS began a phased-in resumption of the levy program in August 2024 and anticipates that the delinquency rates will decrease in the coming years.”
Effectively, the IRS simply suspended its tax collection enforcement mechanisms for the pandemic and didn’t bother restarting them until around four years later — months from the next presidential election.
The IG report included some data suggesting these measures were successful. For instance, the IG got the IRS to mass-issue one-time notices to the delinquent federal employees. After issuing the notice, the IRS collected $58 million, the report said. Fifty-nine thousand employees made a payment, and 4,700 paid their full balance.
But that still only offers a partial solution. Less than half of the federal employees who owed taxes responded to the notice. The problem goes deeper than COVID-era enforcement suspension, and thus it requires a deeper solution.
This point is also evident from the IG’s finding that “approximately 50,000 federal civilian employees failed to file a tax return for multiple years.” There were 25,438 employees with two “unresolved” years, 13,687 with three, 6,209 with four, 2,761 with five, 1,020 with six, 381 with seven, 102 with eight, and 20 employees who had not filed a tax return in nine or more years.
For the 122 employees with eight or more unfiled tax returns, the IG “referred these taxpayers to Criminal Investigation for review because the IRS’s Collection function had not.”
Such a revelation is shocking. Amid the busyness of life, the possibility of exigent circumstances, and natural human limits, it is conceivable that someone may innocently forget to file his or her taxes once, perhaps even twice in a row (failing to file in non-consecutive years is unlikely due to needing to provide your past years’ AGI on your current year’s return.) Even still, it is nearly impossible for the ordinary American to avoid the omnipresent tax service ads that appear each spring, making it nearly impossible for anyone to forget to file taxes at all.
But for a person to not file taxes at all for the better part of a decade, no explanation presents itself except that the person refused to file taxes as a deliberate choice. That is, well-paid employees who persistently fail to file tax returns seem to be operating under the belief that the rules apply to everyone else, just not to them.
Furthermore, these are not just ordinary citizens, going about their lives with so little interaction with the federal government that they forget it even exists (as blissful and utopian as that may be). These are federal employees. They think about the federal government every working day of their lives because it is literally their boss. They also have a greater understanding than the ordinary citizen about the importance of federal funding and what it achieves.
Federal employees love to bear the title, “civil servant.” And there are many conscientious, hardworking federal employees for which this label is true. But the term “civil servant” implies a person who serves the public. Those who take a salary from Uncle Sam but refuse to return his cut to the common pot are better describing as “leeching off of” the public than “serving” it.
“Federal employees are held to a higher standard to file and pay their taxes since their compensation is primarily from federal taxes,” the IG report concluded. “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.”
As one negative side-effect, the report suggested, “If taxpayers are aware that federal employees are not tax compliant, it may impact their willingness to comply with their own tax matters.”
In other words, if private citizens notice and imitate the bad example of federal employees, it could result in fewer taxes paid all around. “Bad company ruins good morals” (1 Corinthians 15:33).
Perhaps that explains how federal employees started down the road to not paying their taxes in the first place. Federal employees are primarily overseen by politicians. Perhaps, over decades of selfish rule, America’s federal workforce has gradually learned from their political bosses the art of believing the rules do not apply to them.
Joshua Arnold is a senior writer at The Washington Stand.
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