World and Nation

Back Taxes Unchecked By Gov’t As Doctors Accumulate Wealth

Thousands of doctors and other health professionals who participate in Medicare are delinquent in paying federal income and payroll taxes, owing more than $1.3 billion, but they continue to receive Medicare payments because the government does little to check their background, federal investigators said Monday.

“Many of these individuals accumulated substantial wealth and assets, including million-dollar houses and luxury vehicles, while failing to pay their federal taxes,” the investigators said. “One physician gambled millions of dollars at the same time the individual owed hundreds of thousands of dollars in federal taxes.”

The findings are set forth in a report from the Government Accountability Office, a nonpartisan watchdog agency, to the Senate Permanent Subcommittee on Investigations, which plans to hold a hearing on the problem Tuesday.

Medicare has no mechanism to prevent doctors who are delinquent on their taxes from receiving the payments, the report said.

Gregory D. Kutz, director of forensic audits and special investigations at the GAO, said more than 21,000 health care providers, mostly doctors, had tax debts totaling $1.3 billion as of last Sept. 30. That amount reflects tax liabilities that have been acknowledged by taxpayers or certified by a court. The number almost certainly understates the amount owed because it does not include the obligations of people who failed to file tax returns or understated their incomes, Kutz said.

About half the amount owed was individual income taxes and 41 percent was payroll taxes. Other taxes, including corporate income and excise taxes, accounted for the remainder.

Some doctors withheld payroll taxes from their employees and then used the money to buy new homes or to finance their businesses rather than sending it to the government, the auditors said.

“Our investigation found abusive and potentially criminal activity,” including willful failure to pay taxes, Kutz said in testimony prepared for the hearing.

When an employer withholds taxes from a worker’s wages, the employer has a duty to hold the money “in trust” for the government, and willful failure to send the money to the government is a felony under federal law, Kutz said.