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IRS lost millions of taxpayer records that could be used for identity theft

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The Internal Revenue Service lost millions of taxpayer records and federal employees don’t know where they have gone.

Lawmakers want answers and accountability for the IRS over those documents, which could be used by nefarious actors to steal Americans’ identity.

Sen. Chuck Grassley, R-Iowa and House Ways and Means Chair Rep. Jason Smith, R-Mo., sent a letter to IRS Commissioner Daniel Werfel raising concerns about the IRS’ inventory of taxpayer records.

“The IRS’s lackadaisical attitude towards the loss of millions of taxpayer records containing Social Security numbers, addresses, and other sensitive tax return information is appalling,” the letter said. “The American people deserve better.”

The IRS keeps microfilm records of individual and business tax records in warehouses around the country. However, a recent Treasury Inspector General for Tax Administration report found that millions of those records were unaccounted for, and federal employees couldn’t answer questions about what happened to them.

The TIGTA report, released earlier this month, says the IRS is “not in compliance” with federal recordkeeping rules.

“Specifically, the microfilm cartridges are being stored on open shelving in the middle of the Files building, a large warehouse,” the report said. “The warehouse is accessible by all Files Function personnel within the facility, and the shelving is not within eyesight of the IRS personnel responsible for overseeing microfilm activities.”

The letter lays out some of the more concerning examples of improper storage. From the letter:

TIGTA also reported that the IRS was unable to locate any of the fiscal year (FY) 2010 backup records that should have been sent from a Tax Processing Center in Fresno, California, to Kansas City, Missouri. In addition, the IRS could not account for 4,500 backup cartridges from FY 2019 containing individual taxpayer information and 4,000 backup cartridges from FY 2018 containing business tax records. This means the IRS cannot account for possibly 17 million tax records between FY 2018 and FY 2019 alone.

Moreover, during an onsite visit to an IRS Tax Processing Center, TIGTA observed multiple empty boxes that were intended to store up to 168 backup cartridges with hand written notes stating “sent for reformat 4-11-2013.” IRS personnel, however, had no idea where these backup cartridges were located because the microfilm contractor that would have received the backup units went out of business in 2018.

The lawmakers’ letter demanded answers about what has been done to rectify the problem, one of many administrative issues for the agency.

Lawmakers have also blasted the IRS for destroying about 30 million taxpayer documents.

Smith and Oversight Subcommittee Chairman David Schweikert, R-Ariz., sent a letter to Werfel in July saying the IRS has skirted oversight over the records and “willfully ignored” multiple information requests from Congress.

That inquiry began after a different TIGTA report showed the IRS destroyed 30 million taxpayer records in 2021. Those documents could have been used to help Americans defend themselves during audits, which President Joe Biden has pledged to ramp up to increase federal revenue.

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