More than 571,000 current and retired federal employees carry an unresolved federal tax obligation totaling roughly $6.3 billion, a balance that has grown by $1.5 billion, or 32 percent, since fiscal year 2021. The count comes from the Treasury Inspector General for Tax Administration’s review of the Internal Revenue Service’s long-running program for tracking tax compliance among its own workforce. The report frames the growth as a byproduct of pandemic-era enforcement pauses that have only partially been reversed.
Why the IRS Tracks Federal Employees Separately
The Federal Employee/Retiree Delinquency Initiative, known inside the IRS as FERDI, dates back to 1993. Each year the program matches Social Security numbers tied to delinquent tax accounts against federal employment and retirement records, producing a public annual report on how many current and retired employees owe money or have unfiled returns. The idea behind the program is straightforward: because federal salaries and pensions are funded by tax dollars, the IRS treats compliance among its own extended workforce as a matter of public confidence in the tax system generally.
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A Delinquency Rate That Has Climbed Since the Pandemic
The federal civilian delinquency rate rose from 4.9 percent in fiscal year 2021 to 6.9 percent in fiscal year 2024, even though the federal civilian workforce itself grew by only about 4 percent over the same stretch, according to the TIGTA report. IRS collection managers attributed the mismatch to years of paused levy programs, a paused automated substitute-for-return process for nonfilers, and reduced notice volume during the pandemic and its recovery period. A phased resumption of levy enforcement began in August 2024, and the IRS has said it expects the delinquency trend to ease in coming years as that enforcement returns to normal levels.
The Postal Service’s Outsized Share of the Balance
Not every federal agency contributes evenly to the total. Postal Service employees account for 27 percent of the total delinquent balance while making up only about 20 percent of the federal civilian workforce, and roughly 10 percent of Postal Service employees carry a delinquent account, the highest rate among the large agencies the report examined. By contrast, the Department of the Treasury, which is legally permitted to hold its own employees accountable in ways other agencies cannot, posts a delinquency rate of just 2.4 percent, the lowest of any agency the report tracked. Across the five executive departments and five large independent agencies with the highest balances, delinquency rates climbed an average of 1.9 percentage points between fiscal years 2021 and 2024, with the Postal Service posting the steepest increase, 3.7 points, and the Environmental Protection Agency the smallest, 0.5 points. Combined, the unresolved balances at those ten entities rose by more than $516 million over the period.
A Privacy Rule That Keeps Other Agencies From Acting
That gap traces back to a specific legal restriction. Under Section 6103 of the Internal Revenue Code, the IRS is generally barred from disclosing an employee’s tax return information to that employee’s own federal agency, even when the agency might otherwise use the information to enforce accountability. The Treasury Department is the exception, since the IRS itself sits inside Treasury, which is part of why its own delinquency rate runs well below the government-wide figure. TIGTA’s report notes that it recommended in 2023 that the IRS work with Treasury’s Office of Tax Policy on a legislative fix to that restriction, but the Office of Tax Policy has not yet responded with feedback or guidance.
One Reminder Letter, Never to Be Repeated
Federal employees are still bound by the same general obligation as any other citizen. Ethics regulations governing the executive branch direct employees to satisfy in good faith their just financial obligations, specifically naming federal, state, and local taxes. In May 2025, the IRS and the Treasury Department created a one-time notice, Notice LT36, to remind noncompliant employees and retirees of that duty. The IRS identified about 525,000 current or retired employees who were behind on their taxes as of April 30, 2025, then narrowed that list by removing people under criminal investigation, in bankruptcy proceedings, in a combat zone, or already on a payment plan, before mailing roughly 427,000 letters between June 13 and July 14, 2025. The IRS has said it does not plan to send the notice again, and it has not tied specific payment outcomes to the mailing.
Fewer Staff, More Cases in the Queue
The report also points to a staffing reduction that coincided with the growing caseload: the number of IRS employees specializing in FERDI inventory fell from 242 in January 2025 to 121 by July 2025, a 50 percent cut tied to broader federal workforce reductions. Separately, TIGTA’s review found that roughly 50,000 federal civilian employees failed to file a tax return for two or more years between fiscal years 2021 and 2024, including 122 employees with eight or more years of unfiled returns. None of those 122 cases had previously been sent to IRS Criminal Investigation, so TIGTA referred them directly in December 2025. The findings build on a 2023 TIGTA audit that first pushed the IRS to prioritize nonfiling cases among federal workers, a recommendation that drew a follow-up letter from a member of the Senate Finance Committee in April 2025 asking the IRS to detail its progress.
What a Balance-Due Letter Does Not Explain
A notice about an unresolved tax balance is only half of the paperwork federal employees and retirees run into. The other half shows up on the refund side, when a return has already been filed correctly but the money never arrives and the standard status tools stop giving useful answers. That gap, between a return being accepted and a refund actually showing up, is where most households lose track of what to do next.
The IRS Refund Recovery Kit includes the refund-trace steps built around Form 3911 and a refund status tracker spreadsheet for following the case through to resolution.
Look up the notice decoder in The IRS Refund Recovery Kit.
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