Blackwater accused of tax evasion

Lawmakers say embattled Blackwater USA, a private security firm that operates in Iraq and Afghanistan, may have defrauded the government out of millions in taxes.

The Democratic chairman of a House watchdog committee says the Internal Revenue Service disputes Blackwater's claimed exemption from Social Security and other employee taxes for contract workers.

In a letter dated Monday to Blackwater founder and chief Erik Prince, Sen. Waxman, D-Calif., says his claims of tax evasion are supported by an IRS decision earlier this year against the company and overall IRS rules outlining the difference between independent contractors and employees. Waxman adds that a nondisclosure agreement between Blackwater and the former employee proves the company is trying to prevent information about its tax preparations from being released.

Waxman says he believes that based on the IRS definition, most of Blackwater's workers probably fit the description of "employee" rather than "independent contractor," and therefore by his staff's calculations, Blackwater could owe as much as $15.5 million in Social Security and Medicare taxes, $15.8 million federal income tax withholding and $500,000 in unemployment taxes for the time frame between May 2006 and March 2007.

Blackwater is struggling to salvage its reputation after a string of security incidents involving its guards, including a September shooting that left 17 Iraqis dead.

Blackwater accused of tax evasion

The International Revenue Service alleges that Blackwater committed tax evasion.