Inspectors Report Document Destruction At IRS

The Internal Revenue Service is facing fresh criticism for destroying approximately 30 million tax documents in March 2021. Auditors from the Treasury Inspector General for Tax Administration (TIGTA) uncovered this purge during a walk-through of an IRS processing facility in Utah last year. However, it is attracting more widespread scrutiny now after its prominent mention in a TIGTA report detailing the agency’s e-filing woes.

TIGTA notes the returns in question were paper-filed information documents. These materials can include a “statement, return, form, or schedule that shows a payment of rent, salaries, wages, dividends, interest, or royalties made to another person.” Such filings — like Forms W-2, 1099, and more — are used by the IRS for compliance checks. The IRS told inspectors that system limitations prevented its staff from being able to process such paper information returns after the tax year concludes.

Later, after this document destruction came to light, the agency told reporters, “There were no negative taxpayer consequences as a result of this action.” The IRS specifically noted that filers will not face penalties stemming from the return purge.

But those promises may not reassure many Americans. Even before this incident the number of individuals who would give the IRS a favorable job performance review dropped significantly. Gallup poll numbers show a 13-points decline to 35 percent in just the two years between 2019 and 2021.

Now observers, including key legislators, believe they have cause for new worries, particularly given the third-party manner by which this information came to light. Reps. Richard Neal (D-Mass.) and Kevin Brady (R-Texas) — the top leaders of the House Ways and Means Committee — are pressing for more information. And Rep. Bill Pascrell, Jr. (D-N.J.), who leads the committee’s oversight panel, is calling for leadership change at the IRS, declaring that this incident is “just the latest example of the lackadaisical attitude” of the agency’s commissioner.

Tax professionals have also expressed their dismay knowing how hard their clients work to satisfy the requirements of the IRS each year. The fact that theyre not playing by the rules, or have a different set of standards, causes a lot of frustration,” said Amie Kuntz, a CPA with RubinBrown LLP, to Bloomberg.

Brian Streig, a Texas CPA, similarly told CNBC, “Small businesses stress out every year in January trying to accurately prepare these informational returns and get them filed on time. To see the IRS just destroy these is almost like the IRS admitting they dont really care.” 

 

 


This text is provided with the understanding that ECFA is not rendering legal, accounting, or other professional advice or service. Professional advice on specific issues should be sought from an accountant, lawyer, or other professional.

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