IRS Under Fire After Destroying 30 Million Tax Documents
The Internal Revenue Service, struggling with a massive backlog of paper documents, decided "to destroy an estimated 30 million paper-filed information return documents in March 2021," the agency's watchdog reported last week.
The IRS said in a statement Thursday that taxpayers "have not suffered and will not receive any penalties as a result of this action." It said it processed 3.2 billion information returns in 2020 and that the documents shredded are not tax returns, but rather documents filed with the IRS by third-party payers. It added that 99% of information returns have already been processed and the remaining 1% of those documents "have been destroyed due to a software limitation, making room for new documents relevant to the upcoming 2021 filing season".
The agency also said that "this situation reflects the significant problems posed by outdated IRS technology."
The destruction of documents has sparked a backlash from tax advisors, with some reportedly concerned that the decision could affect the agency's ability to review tax returns and trigger additional error messages. "The IRS management's decision to destroy information return documents due to the backlog raised numerous questions regarding the IRS's decision-making and risk assessment process," said Edward Karl, vice president of taxes at the American Institute of CPAs, in a statement. "The recent statement from the IRS provided some of the answers, but American taxpayers deserve to know why this decision was made and how it could affect them."
Rep. Bill Pascrell (D-NJ), chairman of the House Ways and Means Oversight Subcommittee, on Friday called on President Biden to replace IRS Commissioner Chuck Rettig, describing the document destruction as the agency's latest black eye.
"The IRS is critical to public confidence in our nation, and its Trump-appointed leader has failed," Pascrell said in a statement. “The manner in which we are informed of the destruction of unprocessed documents is just the latest example of Mr. Rettig's lax attitude. This latest revelation is contributing to declining public confidence in our unfair two-tier tax system. That trust cannot be restored if the American people see nothing but incompetence and disaster in the IRS.”
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