Tax delinquency rates for federal employees and retirees are climbing

Tax delinquency among federal employees and retirees has increased significantly since 2021, both in headcount and in dollars owed, even though the federal workforce itself has slightly shrunk. The rise appears tied in part to pandemic-era pauses in IRS collection activity and is now drawing renewed oversight and enforcement attention.

What the latest audit found

An audit by the Treasury Inspector General for Tax Administration (TIGTA), covering fiscal year 2024, found that about 571–572 thousand current and retired federal workers had unresolved federal tax debts or unfiled returns. That represents roughly a 43 percent increase in the delinquent population compared with 2021, despite a small decline in the overall federal workforce.

Those employees and retirees collectively owed about 6.3 billion dollars in unpaid federal taxes in 2024, up from roughly 4.8–5.0 billion dollars in 2021. TIGTA also reported that around 50,000 current employees had failed to file a tax return for multiple years, and more than 1,000 were delinquent for at least six years, with the worst cases referred to IRS Criminal Investigation.

Delinquency rates and trends

The delinquency rate for current civilian federal employees rose from about 4.9 percent in 2021 to about 6.9 percent in 2024, an increase of roughly 43 percent in relative terms. Over the same period, the total federal civilian workforce shrank by less than 1 percent, underscoring that the core story is the worsening rate, not just a larger workforce.

Even with this increase, federal workers remain more tax‑compliant than the general U.S. population, where noncompliance is estimated at roughly 15 percent based on IRS projections for recent tax years. However, the rapid rise in delinquency among federal employees and retirees, especially since the pandemic, has triggered concern among oversight bodies.

Impact of the pandemic and IRS response

The TIGTA report and IRS officials attribute much of the recent spike to pandemic‑era pauses and slowdowns in collection programs, including levies and some automated enforcement, which allowed balances and nonfiling cases to accumulate. As IRS has resumed enforcement—such as a phased resumption of the levy program starting in August 2024—it expects delinquency rates to begin declining over coming years.

In 2024–2025, IRS and Treasury sent about 427,000 LT36 notices to current and former federal employees identified as potentially having unpaid tax debts or unfiled returns under the Federal Employee/Retiree Delinquency Initiative (FERDI). Those notices led to nearly 65,000 individuals making at least some payment, and the IRS has warned that continued inaction can affect paychecks, pensions, and other federal benefits.

Agencies and groups most affected

The audit and related reporting note that certain large agencies account for a disproportionate share of delinquent accounts and dollars owed. One write‑up based on the TIGTA report notes that the U.S. Postal Service has one of the highest delinquency rates (around 10 percent) and about 27 percent of the total unpaid tax dollars among federal workers.

A small group of large employers—often described as a “big five” including USPS, the Department of Veterans Affairs, the Navy, the Army, and the Department of Homeland Security—represent about 59 percent of the federal workforce but around 64 percent of the unpaid taxes owed by federal employees and retirees. That concentration is drawing particular attention from both Congress and oversight bodies.

Federal employees vs. retirees

The TIGTA and earlier IRS “Federal Employee/Retiree Delinquency Initiative” (FERDI) work track both current civilian and military employees and retirees in their delinquency measures. Past IRS summaries have consistently found that a substantial portion of the aggregate balance is tied to retirees, who often have multiple income streams such as pensions and plan withdrawals, which can complicate estimated payments and withholding.

In the most recent TIGTA reporting, roughly 215,000 current federal workers were behind on their tax bills, owing about 2.1 billion dollars, with the remainder of the 6.3‑billion‑dollar total attributable to retirees and other former employees. This combined view (employees plus retirees) is important, because policy responses sometimes target current employment consequences even when much of the dollar exposure is in the retiree population.

Policy discussion and proposals

Congress has periodically considered legislation to tighten consequences for “seriously delinquent” federal employees, including potential termination or ineligibility for federal employment when taxpayers owe significant unpaid federal taxes. Earlier IRS data around 2011, for example, showed over 311,000 federal employees and retirees collectively owing about 3.5 billion dollars in unpaid taxes, which helped spur proposals to link employment status to tax compliance status.

The current spike in delinquency rates and balances is likely to revive those debates, particularly given the visibility of TIGTA’s findings and the renewed focus on compliance following pandemic‑related enforcement pauses. At the same time, IRS has emphasized that most federal employees and retirees remain compliant and that the agency is trying to resolve cases through notices and payment arrangements before moving to harsher measures.