Tuesday, May 24, 2011

Tax Cheats Receive $24 Billion of Stimulus Money

In a story harkening back to [Oct 8, 2010: 72,000 Deceased and 17,000 Prisoners Received Stimulus Payouts] we have news today that some $24 BILLION of stimulus funds were paid out to some 3700 government contractors and non profits who owe the government $757M in back taxes.  Nice.  Indeed, this is just an estimate and the GAO cautioned the number could be higher.

Via AP
  • Thousands of companies that cashed in on President Barack 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 cautioned that the real number might be higher because the known tax debt does not measure such factors as income underreporting.
  •  In one "extreme case," an engineering firm that received more than $100,000 in stimulus owed more than $6 million in back taxes. That company purchased three new cars totaling about $90,000 and paid its top three chiefs $700,000 while it still owed employment taxes, according to GAO investigators.
  • A social services nonprofit that received more than $1 million in stimulus funds owed taxes of $2 million. The executive of that company filed "numerous" questionable business expenses with the IRS and spent hundreds of thousands of dollars at casinos each year, the report found.
  • The investigators highlighted 15 cases of stimulus recipients who owed payroll taxes. Four were construction companies, recipients of more than $1 million in stimulus awards each, who owed between $400,000 to more than a million in mostly payroll taxes
  • Federal law does not prohibit tax delinquents from getting government contracts or grants, though there are provisions that enable the government to withhold payments in some cases. While the federal government requires contractors to present documentation that their taxes are paid, some recipients escaped federal review because the money was disbursed at state or local levels.
  • 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.
  • The report noted that about 35 percent of the unpaid taxes were for debts incurred prior to 2003 and that more than half of the apparent violations, $417 million, were from unpaid corporate taxes. Another quarter, $207 million, came from unpaid payroll taxes.
  • The most serious documented case was a security firm that owed $9 million, mainly in unpaid payroll taxes from the mid-2000s. IRS records indicated that the company paid other creditors while shirking its tax obligations. The company, which received more than $100,000 in stimulus money, had a history of being uncooperative, missing deadlines and repeatedly filing appeals, according to the records.

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