The Internal Revenue Service (IRS) has launched a new wave of enforcement targeting a very specific group: federal employees and retirees with unresolved federal tax debt. If you’re one of the more than 500,000 individuals in this category, now is the time to act.
In June 2025, the IRS began issuing LT36 notices—official letters sent to current and retired federal employees who, as of April 30, 2025, have an “outstanding tax issue,” such as unpaid taxes or unfiled returns. While the IRS sends many types of notices, this one stands out because of its connection to the Federal Employee/Retiree Delinquency Initiative (FERDI), a powerful enforcement tool.
What is FERDI?
The Federal Employee/Retiree Delinquency Initiative (FERDI) is an IRS program specifically designed to identify and collect delinquent tax debt from current and former federal employees. It was created in response to growing concerns about compliance among federal workers and the perception that government employees should be held to a high standard of financial responsibility.
The program allows the IRS to match its taxpayer database with federal payroll and pension data to identify delinquencies and unfiled returns. FERDI applies to civilian employees, civil service or Federal Employee Retirement System (“FERS”) retirees, active duty military, military retirees, and members of the National Guard and Reserves.
There are some protections, however. According to the IRS, collection activities are suspended while a taxpayer is serving in a combat zone. Once the taxpayer is no longer a combat zone participant, normal collection procedures resume.
How much is at stake?
Some in Congress estimate that the IRS is owed more than $2 billion in unpaid taxes from federal workers and retirees. This staggering figure underscores why the agency is ramping up its enforcement efforts—and why taxpayers in this category should take these notices seriously.
Who is most affected?
While FERDI applies across the federal workforce, certain agencies report disproportionately high rates of tax delinquency. According to public estimates, the U.S. Postal Service and Department of Veterans Affairs have some of the highest concentrations of affected employees.
Under FERDI, the IRS can garnish wages, salaries, and withhold pension or Social Security payments. What’s more, IRS employees who fail to resolve their tax issues could face removal from federal service.
The stakes are now even higher. Just weeks ago, the Office of Personnel Management (OPM) proposed new regulations that would allow agencies to fast-track employee dismissal for ethical issues, including unresolved tax debt. What used to be a private financial issue can now become a career-ending one.
Federal employees, retirees, and military personnel will likely be caught off guard by these notices—and the consequences can be swift and serious. Here’s what every federal worker and retiree should know:
1. This isn’t just about unpaid tax bills.
You can receive an LT36 even if you don’t owe money. If you haven’t filed one or more tax returns, you’re still considered noncompliant. That alone can trigger IRS enforcement.
2. The IRS doesn’t need to call or sue before acting.
Most FERDI cases are handled by the IRS’s Automated Collection System (ACS), unless the aggregate assessed balance exceeds $1 million or the taxpayer is an employee of the IRS. This means your paycheck, pension, or benefits could be garnished without direct human involvement.
3. The clock is ticking once you receive a notice.
The LT36 notice urges immediate action, directing taxpayers to log into IRS.gov to pay their balance, file any overdue returns, or request a payment plan. But before taking action, it’s important to confirm the accuracy of the notice. IRS records aren’t infallible, and errors do occur. If you believe the notice is incorrect or you have questions, the IRS provides a dedicated contact number: 800-829-7650.
Given the high concentration of federal employees and retirees in the Washington, D.C. region, this issue deserves immediate attention from agencies, unions, and financial professionals.
It is vital that federal workers take control of their tax situation before it escalates. For those who have received an LT36, the most important thing is not to wait and to get informed about your rights and options before the IRS takes action for you.
Jessica Marine is a Director at Frost Law and a long-term former federal employee, including the former Deputy Clerk of the Court, U.S. Tax Court.
Glen Frost is the Founder and Managing Partner of Frost Law and a seasoned tax attorney representing individuals and businesses in complex tax matters.
