Obama targets "tax cheats" seeking government work

President Barack Obama speaks about the economy during a visit to Hudson Valley Community College in Troy, New York in this September 21, 2009 file photo. Obama will order federal agencies on Wednesday to take measures to prevent companies that are delinquent in paying taxes from obtaining new government contracts, the White House said.

WASHINGTON (Reuters) - U.S. President Barack Obama ordered federal agencies on Wednesday to take measures to prevent companies that are delinquent in paying taxes from obtaining new government contracts.

Obama also instructed the Internal Revenue Service (IRS) to review the accuracy of companies' reports on their tax obligations to be sure they are truthful.

"We need to be sure that when a company says it's paying taxes, that company is, in fact, paying taxes," Obama said.

The move is the latest in a series of populist-toned events Obama, a Democrat, has emphasized to generate support for his political and legislative agenda, which took a major hit on Tuesday after an upset victory by a Republican for the Senate seat left vacant by the death of liberal Senator Ted Kennedy.

Last week, Obama chastised bankers for taking large bonuses and proposed a fee to claw back taxpayer bailout money from top financial institutions.

The measures are meant to fire up Obama's political base and help move the spotlight back to the economy after intense public focus on security threats, the devastating earthquake in Haiti and, now, the shock election in Massachusetts.

Obama said there were tens of thousands of companies that were not paying their taxes but still receiving government contracts. Unpaid taxes from such firms were estimated at more than $5 billion, he said.

Obama's orders to pursue "tax cheats" were addressed to the White House Office of Management and Budget, the U.S. Treasury Department and other agencies.

The president called on Congress to build on legislation that would allow the IRS to share information about tax delinquency with contracting officials.

He also promised to renew a proposal in his upcoming budget that the government has the right to pay back taxpayers before it pays delinquent contractors.

The White House said the measures complimented earlier actions by the administration to reduce government waste.

(Editing by Mary Milliken and Todd Eastham)