IRS Destroyed Millions of Paper-filed Taxpayer Documents

According to an audit report (2022-40-036) published on 5/4/22 by the Treasury Inspector General for Tax Administration (TIGTA), a service-wide strategy is needed to address challenges that limit growth in business tax return electronic filing. The report states, “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 IRS uses these documents to conduct post-processing compliance matches to identify taxpayers who do not accurately report their income. “The IRS advised TIGTA that once a tax year concludes, the information returns, Form 1099-MISC (Miscellaneous Information), can no longer be processed due to system limitations. This happens because the system used to process the information returns is taken offline for programming updates in preparation for the next filing season. The report can be found at www.treasury.gov/tigta/auditreports/2022reports/202240036fr.pdf .