Notebook with a pen on a page showing a personal budget. Underneath are paper currency and tax forms. Eyeglasses are nearby

IRS destroyed 30 million tax filing documents, lawmakers demand answers

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Casey Harper | The Center Square

(The Center Square) – The Internal Revenue Service has been under fire for delays and millions of backlogged returns, but now lawmakers are raising the alarm after the federal agency “destroyed” millions of Americans’ tax documents.

Republicans on the House Oversight Committee sent a letter to IRS Commissioner Charles Rettig this week asking for answers about why these records were destroyed.

“The intentional decision to destroy these documents – which the IRS would need to ensure taxpayers are accurately reporting their income – was based in part on the IRS’s continued inability to process backlogs of paper-filed tax returns…’” the letter said, referring to an inspector general report and the IRS’ millions of unprocessed tax returns.

The letter comes after the Treasury Inspector General for Tax Administration released an audit in May reporting that the IRS destroyed 30 million “paper-filed information return documents.” Experts said this will make it harder for the IRS to check if future returns are accurate and to conduct audits.

“Indeed, it appears that the IRS may now demand that taxpayers provide duplicate copies of information previously destroyed by the IRS,” the letter said. “We are also troubled by TIGTA findings that efforts by the IRS to modernize paper filing processing has failed and are skeptical that the IRS will follow through with TIGTA recommendations to alleviate these problems, particularly as “IRS management did not take sufficient actions to address recommendations included in [TIGTA’s] prior review.”

The records can also be used for reviews of the IRS’ performance.

“This audit was initiated because the IRS’s 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 TIGTA said. “The IRS uses these documents to conduct post-processing compliance matches to identify taxpayers who do not accurately report their income. TIGTA previously reported that there were actions the IRS could take to reduce paper filings and/or convert paper tax returns into an electronic format. In addition, TIGTA reported that, while the electronic filing (e-filing) of business tax returns continued to increase, the e-filing rate still lags that of individual tax returns. Finally, repeated efforts to modernize paper tax return processing have been unsuccessful.”

The federal tax-collecting agency also has struggled to keep up with returns and has taken fire for wasting billions of dollars in improper payments. The U.S. House Ways and Means Oversight Subcommittee held a hearing last month where Rep. Tom Rice, R-S.C. said the agency had 16 million unprocessed returns.

“The program has an annual improper payment rate of around 25 percent. In the latest fiscal year, the improper payment amount totaled $19 billion,” Rice said at the hearing

The IRS, though, says its delays are because of President Joe Biden’s COVID-era spending, which tasked the agency with distributing COVID-19 stimulus payments as well as creating and distributing checks to millions of American families based on the age and number of children they had under the Child Tax Credit program.

Those heavy administrative burdens, the agency said, put them behind.

“The agency was called upon to support emergency relief for taxpayers, like distributing an unprecedented three rounds of Economic Impact Payments, totaling over $830 billion, to 85 percent of American households,” The Treasury Department said earlier this year. “Including individual refunds, the IRS has distributed over $1.5 trillion to Americans since the pandemic began. This was all done at a time when the IRS budget was at historic lows, and while adjusting operating protocols to ensure the IRS workforce was safe and healthy in the midst of the pandemic.”