A new report from the Treasury Inspector General for Tax Administration is drawing attention to a growing tax delinquency problem within the federal workforce.
According to the audit, released earlier this month, more than 571,000 current and retired federal employees had outstanding tax obligations as of fiscal year 2024, owing a combined $6.3 billion to the federal government. That represents a 43% increase in the number of delinquent federal employees and retirees since 2021, despite the overall federal and retiree workforce shrinking slightly over the same period.
The total amount owed grew by $1.5 billion, a 32% increase, over those three years.
How It Happened
The IRS attributes much of the tax delinquency spike to the pandemic. During the COVID-19 years, the agency temporarily suspended three enforcement programs: collection notice issuance, levy programs, and its Automated Substitute for Return program, which targets non-filers. With those programs paused, delinquencies accumulated without the usual enforcement pressure to resolve them.
The IRS resumed its levy program in August 2024 and has expressed confidence that delinquency rates will decline in the coming years as enforcement ramps back up.
The Numbers Up Close
Among current federal civilian employees specifically, 215,000 had outstanding tax bills as of 2024, a 45% jump from 2021, collectively owing $2.1 billion. The tax delinquency rate among federal workers grew from 4.9% in 2021 to 6.9% in 2024, meaning the vast majority of federal employees do pay their taxes on time.
Approximately 50,000 federal employees failed to file tax returns for multiple years. The audit identified more than 100 cases where employees had eight or more years of unfiled returns — cases that TIGTA referred directly to the IRS Criminal Investigation division after finding the IRS’s own collection function had not done so.
The U.S. Postal Service had the worst delinquency rate of any agency at 10%, with employees owing a combined $570 million in unpaid taxes.
What the IRS Is Doing About It
In May 2025, the IRS collaborated with the Treasury Department to send 427,000 LT36 notices to delinquent federal employees and retirees, encouraging voluntary payment. By August 2025, roughly 59,000 recipients had made at least some payment, with about 4,700 paying off their balances in full.
The report also noted that privacy restrictions currently prevent the IRS from sharing information about tax-delinquent employees with their employing agencies, a limitation TIGTA recommended revisiting through potential legislation.
