IRS Claims No Taxpayers Harmed as 30 Million Documents Destroyed

The Treasury Inspector General for Tax Administration (TIGTA) has reported that an audit of the Internal Revenue Service (IRS) has revealed personnel there destroyed 30 million taxpayer documents in response to a huge processing backlog. The IRS claims that no American taxpayers have been adversely affected by the document destruction.

The TIGTA made three specific recommendations for the tax collection agency to improve processing of paper tax forms and to promote electronic filing. The IRS objected to two of the recommendations.

The TIGTA report stated the audit was conducted because the IRS decided in March 2021 to destroy millions of paper documents in response to its inability to manage the immense processing backlog it faced.

In a public report issued last week, the IRS said there were “no negative taxpayer consequences” as a result of the mass document destruction.

The documents that were destroyed included W-2 and 1099 forms. Those forms are generally used to ensure accurate reporting of income on tax returns.

The TIGTA report states that it is “of particular concern” that the IRS does not have an accurate list of tax forms that cannot be “e-filed,” or submitted electronically. The report states that the IRS provided TIGTA with a alist of 365 official forms that cannot be e-filed.

TIGTA later identified inaccurate items on that list. Some forms listed could be e-filed and some that cannot be e-filed were omitted. The IRS responded by saying the list was out of date since 2018 because of limited agency funding.

The TIGTA report recommended that the IRS develop a strategy to make all forms subject to e-filing. The IRS agreed with that finding.

The report found that e-filing had increased since 2014 from 41% to 63% among business taxpayers. It also indicated that the IRS has not yet established procedures to identify corporate and employer filers that have not complied with published e-filing mandates.

It says that the analysis of tax return filings identified more than 15,000 filers that submitted paper returns in 2018 even though they were required to e-file the documents. Because the IRS is not effectively encouraging e-filing of documents when required, the processing of the limited number of analyzed returns cost the IRS $30,196. That compares with $3,405 the processing would cost if the documents were e-filed as required.