Fiscal Policy Research · Government Accountability, Part 1 of 2
What the Government Can Do When You Get Money Wrong — and What Happens When the Government Does
If you owe the IRS money and don't pay, things start happening to you — on a schedule, automatically, often without a judge ever looking at your case. Interest builds. Penalties are added. Eventually the government can take money straight out of your paycheck or bank account.
That raises a fair question: when the government itself gets money wrong — pays the wrong people, spends money it wasn't given, or can't account for what it owns — does anything comparable happen to it?
This document doesn't answer that question yet. It lays out, in plain language, the facts on both sides: what the government can do to you, what exists to hold the government accountable, and the legal walls that make the two sides different. Every figure is checked against the actual law or the agency that produced it.
Part 2 takes these facts and tests the most common claims about government accountability — including the ones that turn out to be partly true.
This project builds on PFRG's earlier research, Where the Money Actually Comes From and Testing the Big Claims About Taxes and Inflation, which found that funding tax enforcement returns several dollars for every dollar spent. This project asks the mirror-image question: what enforcement points the other way?
Interest starts on the day your tax was due, whether or not you knew you owed it. The rate is reset every three months: the federal short-term interest rate plus three percentage points (26 U.S.C. § 6621), and it compounds daily (§ 6622).
On top of interest, the tax code adds penalties:
| Penalty | What triggers it | How much |
|---|---|---|
| Failure to file | Not filing your return on time | 5% of the unpaid tax per month, up to 25% (§ 6651) |
| Failure to pay | Filing, but not paying on time | 0.5% of the unpaid tax per month, up to 25% (§ 6651) |
| Accuracy | Underpaying because of negligence or a substantial understatement (more than the greater of 10% of the correct tax or $5,000) | 20% of the underpayment (§ 6662) |
A few details make these heavier than they look. Once the IRS sends a final notice of intent to levy and 10 days pass, the failure-to-pay penalty doubles to 1% per month. If a failure to file is fraudulent, that penalty rises to 15% per month, up to 75%. And interest keeps running on top of all of it.
Penalties can be reduced or removed if you show "reasonable cause" — but you generally have to ask and prove it. Relief isn't automatic.
Once the IRS has assessed a tax, sent you a bill, and you haven't paid it, a federal tax lien arises automatically (§ 6321). It attaches to everything you own — your home, your car, your bank accounts — and to anything you acquire later. The IRS can also file a public notice of the lien, which can affect your ability to borrow or sell property.
A levy is the actual seizure: wages, bank accounts, retirement funds, vehicles, or real estate (§ 6331). The IRS does not need a court order to do this. It must first send a bill, then a final notice of intent to levy at least 30 days in advance, along with notice of your right to a hearing (§§ 6330, 6331(d)). If the IRS determines that collection is "in jeopardy," it can skip the waiting period and seize immediately, with a hearing offered afterward.
The IRS's powers are not unlimited. Taxpayers have several real protections, most of which were added or strengthened by the IRS Restructuring and Reform Act of 1998:
Part 2 tests how well these protections actually work.
GAO is Congress's auditor. It investigates how federal money is spent and recommends fixes. It cannot order anyone to act — agencies and Congress decide whether to follow its recommendations.
The record is more mixed than people often assume:
Most federal agencies have an Inspector General — an internal watchdog created under the Inspector General Act of 1978. Inspectors General investigate fraud, waste, and mismanagement, refer possible crimes to the Justice Department, and report to Congress. Like GAO, they recommend; they cannot compel an agency to change.
This is the main law that stops federal officials from spending money Congress didn't approve. It bars spending more than was appropriated, or before it was appropriated, and requires agencies to report violations to the President, Congress, and GAO (31 U.S.C. § 1351).
The penalties on paper are real: administrative discipline up to removal from office, and for knowing and willful violations, a fine of up to $5,000, up to two years in prison, or both (§ 1350).
What actually happens: violations are reported regularly, and some officials have been suspended or removed. But we found no record of anyone ever being criminally prosecuted under this law. Reference sources describe prosecutions as rare or nonexistent. We could not locate a primary Justice Department record to confirm "never," so we state it as: no known prosecutions.
Agencies must estimate and report payments that were made incorrectly, and submit plans to reduce them (Payment Integrity Information Act of 2019). As established in PFRG's earlier research, agencies reported an estimated $186 billion in improper payments in fiscal year 2025, about $153 billion of which were overpayments.
To be precise again: improper does not mean fraudulent. Many are errors, outdated eligibility information, or missing paperwork. The consequence for an agency with high improper payments is a reporting and corrective-action requirement — not a penalty.
Federal agencies are required to have their financial statements audited every year. The Department of Defense — which manages the largest discretionary budget in the government — failed its audit for fiscal year 2025, its eighth failure in eight attempts since full audits began in 2018. The Department's own Inspector General issued a disclaimer of opinion — meaning the Department could not provide enough evidence for auditors to reach a conclusion — and identified 26 material weaknesses. It is the only one of the government's 24 major agencies that has never passed. The defense authorization law for fiscal year 2024 requires a clean audit opinion by December 31, 2028.
We found no automatic consequence for failing, and no penalty attached to missing the 2028 deadline. The department's budget is not reduced, and no official is penalized.
You cannot sue the federal government unless Congress has agreed to let you. This principle, called sovereign immunity, is centuries old. Congress has waived it in specific areas:
Outside those waivers, the government generally cannot be sued for money.
The Constitution says: "No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law" (Article I, Section 9, Clause 7).
In Office of Personnel Management v. Richmond (1990), a retired Navy civilian worker receiving a disability annuity asked Navy personnel how much he could earn without losing his benefits. They gave him wrong information, orally and in writing. He relied on it, earned over the limit, and lost six months of benefits. The Supreme Court ruled 7–2 that no court can order the government to pay money Congress has not authorized — even when the government's own employee caused the loss.
Most court judgments against the United States are paid from the Judgment Fund, a permanent standing appropriation (31 U.S.C. § 1304). Section 7433 damages against the IRS are paid this way.
Congress has made exceptions. Under the Contract Disputes Act and the No FEAR Act, agencies must reimburse the Judgment Fund from their own budgets. An agency that fails to reimburse on time is listed as noncompliant in reports to Congress; we found no other consequence in the reimbursement rules.
In other words, a government agency cannot be financially punished the way a taxpayer can, because an agency has no money of its own. The only parties who can personally bear a financial consequence are people: the officials who made the decisions.
| When a taxpayer gets it wrong | When the government gets it wrong | |
|---|---|---|
| What happens automatically | Interest and penalties start adding up | A report and a corrective-action plan |
| Is a court needed before money is taken? | No — the IRS can levy after notice | A court is required, Congress must have consented, and payment must be authorized |
| Who pays | You, personally | Taxpayers — through the Judgment Fund or through the agency's taxpayer-funded budget |
| Criminal penalties on the books | Yes — tax evasion and related crimes | Yes — the Antideficiency Act |
| How often those penalties are used | IRS Criminal Investigation referred 2,043 cases for prosecution in FY2025 (all financial crimes; tax crimes were the largest share), with an 89% conviction rate | No known prosecutions under the Antideficiency Act |
The pattern is consistent: on the taxpayer's side, consequences are automatic, personal, and fast. On the government's side, accountability mostly takes the form of reports and recommendations, the cost of mistakes always lands on the public, and the personal penalties that exist on paper go unused.
That last point matters most. Because an agency has no money that didn't come from taxpayers, a financial penalty against an agency is a penalty against the public. Real financial accountability on the government's side can only reach the individuals who make decisions — and that is exactly where the existing penalties go unenforced.
But that isn't the whole picture. Taxpayers do have real protections against the IRS, and agencies do follow most GAO recommendations.
Part 2 tests five claims against these facts — including which ones hold up and which ones don't.
This research is presented for public understanding and does not constitute legal, financial, or tax advice. Figures are sourced to the statutes, regulations, court decisions, and agency publications listed above, current as of September 2026.