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Washington, D.C.—Instead of continued staffing reductions resulting in cuts in services for the American people, the Internal Revenue Service (IRS) needs to redouble its efforts aimed at eliminating unnecessary contracting—starting with contractors who owe back taxes, the leader of the union representing IRS employees said today.

That was the response of President Colleen M. Kelley of the National Treasury Employees Union (NTEU) to a report that 7 percent of IRS vendors—1,168, in all, as of July 2012—had a combined federal tax debt of $589 million. Not only that, the report found that “few of the vendors” had a current tax payment plan.

“It is well past time for the IRS to drop its double-standard when it comes to tax debts,” President Kelley said. “IRS employees can be—and have been—fired for owing back taxes, and all taxpayers face potential penalties and interest when they have a tax debt.”

She added: “At a time when the IRS budget has suffered drastic cuts, the IRS should sharply reduce the number of contractors it is working with, starting with those contractors that are behind on their tax debts, and use the money to rebuild its decimated workforce.”

The report from the Treasury Inspector General for Tax Administration (TIGTA) urged the IRS to establish procedures requiring annual tax compliance checks for all contractors. It also called on the agency to take other steps to improve control and monitoring of its Vendor Master File, which contains information about vendors, as well as work to identify suspended vendors through a review of the General Services Administration’s Excluded Parties List System.

TIGTA found multiple violations of the broad general policy in federal law that prohibits agencies from contracting with businesses that have unpaid federal tax liabilities. These include the improper award of four new contracts or exercised option years on existing contracts, valued at $2.6 million, to three vendors who were suspended from doing business with the federal government.

These actions come into clear focus when viewed through the lens of what has happened to the IRS workforce in recent years. The agency’s resources have been reduced by some $1 billion over the past two years as a result of budget cuts and sequestration.

The cuts have forced the IRS to reduce its ranks by 8,000 employees, more than 5,000 of whom were frontline enforcement employees. This year, sequestration cuts led to the closing of the IRS for three business days, during which employees were on unpaid furloughs.

The October government shutdown saw fully 90 percent of the agency’s workforce off the job through no fault of their own, bringing tax enforcement and customer service functions to a standstill.

“Every IRS contract should be carefully scrutinized, particularly consulting contracts that are not necessary for the operational efficiency of the IRS,” Kelley said. “The idea of continuing to pay contractors who have outstanding tax debts while not filling vacancies and making it more and more difficult for IRS employees to do their jobs is outrageous.”

NTEU is the nation’s largest independent federal union, representing 150,000 employees in 31 agencies and departments.