Everybody Needs to Pay Their Taxes...Everybody!
by Adam Hughes*, 6/24/2008
Our friends over at the Government Accountability Office released another great report a week or two ago concerning how Medicare providers (hospitals, nursing homes, and doctors) are failing to pay federal taxes to the tune of at least $2 billion a year. Findings from the report: Our analysis of data provided by CMS and IRS indicates that over 27,000 health care providers (i.e., about 6 percent of all such providers) paid under Medicare during calendar year 2006 had payroll and other agreed-to federal tax debts totaling over $2 billion. The $2 billion in unpaid tax debts only includes those debts reported on a tax return or assessed by IRS through its enforcement programs. This $2 billion figure is understated because some of these Medicare providers owed taxes under separate tax identification numbers (TIN) from the TINs that received the Medicare payments or they did not file their tax returns. GAO found some pretty crazy stuff in their investigation, including abusive and potentially criminal activity, and found that many individuals associated with their investigation used the proceeds of their tax evasion for personal profit. Again from GAO: Furthermore, individuals associated with some of these providers at the same time used payroll taxes withheld from employees for personal gain. Some of these individuals accumulated substantial wealth and assets, including million-dollar houses and luxury vehicles, while failing to pay their federal taxes. While the actions of these providers is pretty bad, the failure of the Centers for Medicare and Medicaid (CMS) to take any actions to prevent these abuses might be worse: CMS has not developed a policy to require contractors (1) to obtain consent for IRS disclosure of federal tax debts and (2) to screen providers for unpaid taxes. Further complicating this issue, absent consent by the taxpayer, which CMS does not require, federal law generally prohibits the disclosure of taxpayer data to CMS or its contractors. IRS can continuously levy up to 15 percent of each payment made to a federal payee—for example, a Medicare hospital—until that tax debt is paid. However, CMS has not incorporated most of its Medicare payments into the continuous levy program. As a result, for calendar year 2006, the government lost opportunities to potentially collect over $140 million in unpaid taxes. Health care providers receiving federal resources should be treated no differently than contractors who fail to pay their taxes. Congress recently passed legislation to prevent contractors from using off-shore tax havens to avoid paying federal taxes. They should do the same to make sure all entities who benefit from our common resources pay the taxes they owe. One-Page Summary of GAO Report Full Report: Thousands of Medicare Providers Abuse the Federal Tax System