http://news.yahoo.com/s/nm/20050616/us_nm/taxes_contractors_dcThousands of government contractors owe more than $3 billion in taxes, according to a federal report on Thursday that offered recommendations on how to curb the widespread cheating.
The Government Accountability Office said about 33,000 nondefense federal contractors have unpaid taxes for 2004 that include corporate and individual income taxes as well as unemployment and payroll taxes.
In a report to a Senate panel, the federal watchdog agency said some of the contractors do business with others that don't pay their federal taxes.
"One case study contractor has a 20-year history of opening a business, failing to remit taxes withheld from employees to IRS and then closing the business, only to start the cycle all over again and incur more tax debts almost immediately," the GAO said.
Sen. Norm Coleman (news, bio, voting record), chairman of the Senate governmental investigations subcommittee, said lawmakers would put an end to widespread tax cheating by federal contractors.
"Step by step, we are identifying and closing the loopholes that have allowed federal contractors to cheat on their taxes," the Minnesota Republican said in a statement.
The GAO said some companies with unpaid taxes had owners or officers who had been convicted or indicted for embezzlement, money laundering or other crimes.
One owner of a business that failed to send workers' payroll taxes to the IRS used the money to build houses overseas, the report said.
The GAO offered more than a dozen recommendations to improve tax collection from federal contractors, including suggesting federal agencies make sure firms provide proper tax identification numbers.
Last year, the GAO reported to the same panel that more than 27,000 Defense Department contractors owed nearly $3 billion in taxes. Coleman said new compliance efforts have helped boost tax collections from those contractors.
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