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IRS destroys data on 30 million tax Payers

 June 1, 2022

An audit by the Treasury Inspector General for Tax Administration revealed the IRS has tossed data for millions of payers.

The material, known as paper-filed information returns in accounting parlance, is sent yearly by employers and financial institutions, and covers taxable activity, such as W-2 and 1099 forms, with copies sent to taxpayers and the IRS.

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 IRS backlog, created by years of budget cuts, understaffing, pandemic-related office closures and added duties, is expected to clear by December, according to Commissioner Charles Rettig.

While the report doesn’t specify which information returns the agency chucked, the news has triggered angry responses from tax professionals, particularly after another difficult filing season.

Missing information returns can cause a “mismatch” at the IRS, delaying refunds because the agency can’t verify details on a taxpayer’s returns, she explained.

While the eventual consequences of the decision are unknown, tax professionals have long complained about the stream of automated IRS notices, with limited options to reach the agency.

If they’re not putting those into the system, there’s going to be discrepancies, which means potential notices that are sent out.

Although the IRS halted more than a dozen types of automated notices in February, Herron says the constant correspondence is still creating headaches for taxpayers and their advisors.

To see the IRS just destroy these is almost like the IRS admitting they don’t really care, of course.
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