30 Million Tax Documents Disposed of by the IRS

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    An Internal Revenue Service audit found that the staff removed 30 million of tax records because of a massive backlog. This tax agency states that there were no taxpayers affected through the desecration.

    Three recommendations were submitted by the Treasury Inspector General for Tax Administration to the IRS to improve its tax forms that are processed on paper and encourage more electronic filing. Two of these suggestions weren't accepted by the IRS.

    As per the TIGTA report, which was signed by Michael E. McKenney (deputy auditor general), “This audit was initiated due to the IRS's inability to process paper-filed tax return backlogs contributed to management's decision of destroying an estimated 30,000,000 paper-filed information returns documents in March 2021.” The documents are utilized by the IRS to conduct post-processing compliance matches in order to locate taxpayers who did not report their income correctly.

    This week, the IRS issued a statement about the inspector general's first report released on May 4.

    In accordance with the IRS statement, it was not a negative effect for taxpayers as result of this move. This action hasn't resulted in tax penalties for taxpayers, and they are not expected to in the future.

    In the opinion of the inspector general's report, the tax documents that were destroyed included W-2 forms and 1099 forms. In the inspector general's report, the IRS gave incorrect answers to the inspector general.

    The report states that “Although the IRS doesn't have an exhaustive and accurate list of individual and corporate tax forms that cannot be e-filed,” is a matter of great worry. “For instance we received a list from the IRS on the 16th of September, 2020 which listed the tax forms that could not be electronically filed. The list was not complete and errors were discovered in our research. The list included tax forms that could be electronically filed, as well as the forms that were accessible for e-filing. We discussed the errors with IRS management. They informed us that the list had not been updated since the calendar year of 2018. The reason for this was the priorities of the agency and the limited resources.”

    In the report of the inspector general, the IRS was requested to create an overall strategy for the Service which prioritizes and integrates all forms used for electronic filing. The recommendation was approved by the IRS.

    It was also recommended by the IRS and was also suggested by the inspector general to “develop processes, procedures to identify and deal with potentially noncompliant corporate filers.”

    However, the IRS opposed this. In the document it says,  “The IRS disagreed with that recommendation.” The IRS management said that corporate filers will be subject to fines in the event that they do not electronically file their returns in accordance with the requirements. It is required that they have submitted 250 tax returns or more and possess assets of at minimum $10 million. These requirements may not be in place or available when filing.

    TIGTA recommended that the IRS “develop processes to ensure that penalties against business filers who are not compliant with efiling requirements are consistently assessed.”

    The IRS did not agree and said that “IRS management stated that it had systemic processes in place to e-file partnership returns and they were working as intended.”

    In the TIGTA report, electronic filing has seen an increase in business since 2014, from 41% to 63%.

    The article, “IRS Destroys 30 Million Tax Papers” was first posted at Conservative Research Group.

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