IRS lost millions of individual and business tax records containing sensitive taxpayer info: Inspector general

The Treasury Inspector General for Tax Administration released a report Tuesday revealing that the Internal Revenue Services lost millions of individual and business tax account records containing sensitive taxpayer information.

The 30-page report noted “significant deficiencies in the IRS’s safeguarding, accounting for, and physical storage of its microfilm backup cartridges.”

The microfilm cartridges are used to store photographic tax records, as the Federal Records Act of 1950 requires.

According to the report, the backup data includes names, Social Security numbers, and other account information. Business tax records are to be destroyed after 75 years and individual tax returns after 30 years.

The Treasury inspector general reviewed three tax processing centers in Austin, Texas; Kansas City, Missouri; and Ogden, Utah. The report revealed that all three facilities had failed to conduct required annual inventories and could not indicate when the last annual inventory had been performed.

In perhaps one of the most shocking finds the report cited, no microfilm cartridges for the fiscal year 2010 could be located. The records were supposed to be shipped from the Fresno tax processing center to the Kansas City tax processing center.

The records log indicated that the Kansas City facility could not account for over 8,500 cartridges from fiscal years 2018 and 2019.

“As a result of the lack of adequate inventory controls, the IRS cannot account for thousands of microfilm cartridges containing millions of sensitive business and individual tax account records,” the report found. “The personal taxpayer and tax information included on these backup cartridges is key information that can be used to commit tax refund fraud identity theft.”

Records stored at the Ogden tax processing center were not “adequately safeguarded to limit access” and were instead located on “open shelving in the middle of … 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,” it stated.

At the same facility, the watchdog group located seven empty boxes that should have contained 168 cartridges. Those missing records could not be located.

The inspector general report also found that all three facilities had records stored past their destruction time frames and that management had “no process” in place for “timely” disposal.

In a letter to the Treasury Inspector General for Tax Administration, IRS Wage and Investment Commissioner Kenneth Corbin claimed that limited agency resources forced it to have employees responsible for cartridge inventories focus on higher priorities, Politico reported.

Corbin noted that he is “confident that as the backlog of non-tax documents is processed, the remaining cartridges will be incorporated.”

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