May 16, 2022: -An audit by the Treasury Inspector General for Tax Administration said that the IRS has tossed data for many payers, sparking anger from the Tax professionals.
The material is the paper-filed information returns in accounting jargon, is sent every year by employers and financial institutions, and covers taxable activity, like W-2 forms, with the copies mailed to taxpayers and the IRS.
“The continued inability in processing backlogs of paper-filed tax returns contributed to the decision of the management to destroy an estimated 30 million paper-filed information return documents in March 2021,” the report said.
According to the Commissioner Charles Rettig, the IRS backlog, created by years of budget cuts, understaffing, and pandemic-related office closures, adding to the duties, is expected to clear by December.
While the report does not clearly show which information returns the agency chucked, the news triggers angry responses from tax professionals, particularly after one more difficult filing season.
“I was very horrified when I read the report which describes the destruction of paper-filed information returns,” said Phyllis Jo Kubey, an enrolled agent and president of the New York State Society of Enrolled Agents.
She then justified that missing information returns could cause a “mismatch” at the IRS, delaying refunds due to the agency can’t verify details on a taxpayer’s returns.
While the final consequences of the decision are unknown, tax professionals have long complained regarding the stream of automated IRS notices, limiting the options to reach the agency.
“If they are not putting those into the system, there will be discrepancies, which means potential notices are sent out,” said Dan Herron, a San Luis Obispo, based on California certified financial planner and CPA with Elemental Wealth Advisors.
However, the IRS halted over a dozen automated notices in February; Herron says the constant correspondence still creates tensions for taxpayers and advisors.
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