The IRS shredded tax data for millions of filers, according to the agency’s own watchdog, in a move that enraged tax professionals and prompted a key Democrat lawmaker to call for the firing of the agency’s chief.
Word that 30 million paper tax returns had been dumped came in a report from the Department of Treasury’s Inspector General for Tax Administration. It said bureaucrats gave up on churning through a huge backlog and simply trashed the documents over a year ago.
“The continued inability to process backlogs of paper-filed tax returns contributed to management’s decision to destroy an estimated 30 million paper-filed information return documents in March 2021,” the report stated.
The #IRS decided to destroy an estimated 30 million paper-filed information return documents in March 2021 because of its inability to process its backlog of paper #tax returns, according to a new report. https://t.co/8o5EhZrmy2
— Accounting Today (@AccountingToday) May 9, 2022
The documents, described as paper-filed information returns, are filed annually by employers and financial institutions, and include copies of the W-2 forms sent to taxpayers. The paperwork is used to verify the details on individual taxpayers’ returns, and without it, the IRS could see more delays and mixups, they predicted.
IRS Commissioner Charles Rettig blamed the backlog on budget cuts and the COVID pandemic, which resulted in offices being closed for long stretches.
“There were no negative taxpayer consequences as a result of this action,” the IRS said in a statement. “Taxpayers or payers have not been and will not be subject to penalties resulting from this action.”
Rep. Bill Pascrell, (D-NJ), called on the Biden administration to fire Rettig over the scandal.
“The IRS is vital to public confidence in our nation and its Trump-appointed leader has failed,” said Pascrell, chair of the House Ways and Means Committee’s oversight subcommittee.
Tax professionals were aghast that the agency dumped the massive trove of documents.
“I was horrified when I read the report describing the destruction of paper-filed information returns,” Phyllis Jo Kubey, president of the New York State Society of Enrolled Agents, told CNBC.
Even with the agency increasingly going paperless, experts said the documents should have been put into the system, not simply tossed. They predicted the missing information will result in discrepancies, which the IRS will address by sending out notices to employers that they may not be in compliance.
“Small businesses stress out every year in January trying to accurately prepare these informational returns and get them filed on time,” Brian Streig, a CPA with Calhoun, Thomson and Matza in Austin, Texas, told CNBC. “To see the IRS just destroy these is almost like the IRS admitting they don’t really care.”