On Your Side Investigation: Tax truths

BIRMINGHAM, AL (WBRC) - You pay your taxes, right? And if you didn't--the last thing you'd expect would be the federal government paying you.

But our On Your Side Investigation found dozens of companies abusing the federal tax system--collecting millions of *your* tax dollars, even though they *owe* millions in back taxes themselves through tax liens.

"It's just blatant disregard for taxpayer money," Sen. John Kennedy of Louisiana said.

We found at least 125 companies that owe more than $40 million in back taxes as of August, still getting big contracts from the federal government--at least $134 million worth of work.

"Are you kidding me? This is just flat out wrong," was the reaction of Rep. Donald McEachin (D)-Virginia. "Absolutely should not happen."

Federal records show Simplicity Caterers based in Owens Cross Roads in Madison County has gotten $2.3 million worth of federal contracts since 2015, even though the company has a tax lien for almost $37,000.

"It's shocking because it's illegal," Rep. McEachin said. "You cannot get federal contracts and have a federal tax indebtedness, and so that obviously begs the question how is this happening."

"We have technology that can recognize someone's face on a new iPhone, why can't we have technology so you don't pay your taxes, you don't get a government contract," says David Williams, President of the Taxpayer's Protection Alliance, a nonpartisan watchdog group based in Washington D.C.

Most of the contracts for Simplicity Caterers are coming from the Department of Defense.

"The Department of Defense is such a big agency," Williams says. "They've never been audited and there's really been no fiscal management."

The owner of Simplicity Caterers blames the tax lien on what she calls a bad accountant for her business during the 2013 budget year and says "we don't want to be where we are, so we're working on it," going on to say she's in the process of settling the back taxes.

The government's been aware of this problem for at least a decade. A congressional watch dog pointed it out in a Treasury Inspector General's report, then a few years later President Obama sent a memo to agency heads asking them to crack down on the problem.

"There's no oversight," Williams claims. "Simple oversight could solve this whole thing. This is not rocket science."

Even the IRS has a problem--giving a $354,000 contract to a Maryland company that owes the IRS $1.5 million in back taxes.

Our Raycom investigation is already getting some results, with a Virginia congressman now asking Congress' internal think tank to find a legislative fix-- a way to enforce the law and make sure companies that owe taxes, don't get more of yours.

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