The Internal Revenue Service (IRS) is grappling with a significant challenge as millions of sensitive individual and business tax records have gone missing. These records were supposed to be transferred from a closed agency facility in California and stored in a microfilm backup cartridge format. However, a recent watchdog report from the Treasury Inspector General for Tax Administration (TIGTA) highlights significant deficiencies in safeguarding and accounting for these crucial tax records, which contain sensitive taxpayer information.
The report, released on Thursday, reveals alarming gaps in the IRS’s handling of these records. It was discovered that the agency lost track of both individual and business tax records that should have been transferred from the now-closed Fresno, California facility to the Kansas City processing center. This lapse in accountability raises concerns about the potential misuse of personal taxpayer information, which could lead to tax refund fraud and identity theft.
Moreover, the watchdog report unveils an additional troubling discovery. In the IRS facility located in Ogden, Utah, seven boxes were found to be empty, even though they should have contained up to 168 microfilm cartridges. These cartridges are capable of holding around 2,000 photographic images each, making the potential loss of such records even more significant. The cartridges were meant to serve as microfilm backup of tax records.
One contributing factor to this situation is the sudden closure of a vendor responsible for creating the microfilm cartridges in 2018. This unexpected development has led to confusion and the inability to locate stored records.
The IRS has previously faced criticism from various quarters for its handling of taxpayer information. This includes the destruction of 30 million paper tax returns during the height of the pandemic in March 2021, which raised concerns within the tax community. The agency has also been questioned about how nonprofit news organization ProPublica acquired thousands of tax returns from the wealthiest individuals in the country.
The TIGTA report underscores that IRS personnel have not been conducting the required annual inventories of the microfilm cartridges. The watchdog recommends that the IRS take immediate measures to better restrict access to these sensitive tax records. Currently, the cartridges are stored on open shelving in a warehouse, posing further security risks.
In response to the report, IRS Wage and Investment Commissioner Kenneth C. Corbin acknowledged the challenges faced by the agency due to persistent underfunding. He explained that the IRS had to redirect employees responsible for inventory tasks to higher-priority areas. Corbin also expressed confidence that as the agency continues processing shipments of tax records to various centers across the nation, the remaining cartridges would be properly accounted for.
This latest revelation regarding the missing tax records sheds light on the need for improved security measures and accountability within the IRS. The agency must address these deficiencies promptly to safeguard sensitive taxpayer information and maintain public trust.
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