Obama calls for crackdown on tax cheats

Federal contractors, including physicians and other health professionals who receive Medicare and Medicaid funds, might lose federal business if they're behind on tax payments.

By Chris Silva — Posted Feb. 5, 2010

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President Obama announced Jan. 20 that he is directing the White House Office of Management and Budget, the Treasury Dept. and other federal agencies to take steps to prohibit businesses that are delinquent on their taxes from receiving new government contracts -- and he's asking lawmakers to do their part.

The targeted contractors include those who bill the government for Medicare and Medicaid while continuing to owe back taxes. Obama also is directing the Internal Revenue Service to conduct a review of the overall accuracy of companies' claims about their own tax payment status.

"The steps I'm directing today and the steps I'm calling on Congress to take are just basic common sense," Obama said. "They're not going to eliminate all of the waste or abuse in government contracting in one fell swoop. Going forward, we'll also have to do more to hold contractors more accountable, not just for paying taxes, but for following other laws as well."

Sen. Charles Grassley (R, Iowa) praised Obama's announcement.

Grassley, the ranking Republican member on the Senate Finance Committee, has been pressing the IRS to disclose how it intends to collect unpaid taxes from contractors, including physicians and other medical professionals who continue to receive Medicare and Medicaid payments. He seized on a report issued in mid-December 2009 concluding that federal contractors -- a term that includes physicians collecting public health pay -- collectively owe more than $3 billion in unpaid income taxes from 2008.

The Government Accountability Office also has released reports in recent years indicating that contractors accrue more than $1 billion in unpaid taxes each year, including payroll taxes used to fund Medicare and Medicaid.

Grassley sent a Dec. 14, 2009, letter to IRS Commissioner Douglas H. Shulman asking for a detailed description of all of his agency's collection activities.

"This crackdown is the right thing to do," Grassley said of Obama's actions. "It's a matter of fairness, and it's especially offensive that contractors who make money from tax dollars are delinquent in paying their own taxes. I've worked on this issue for a long time, including asking the president's nominees about it, so it's good to see the president express interest."

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