Watchdog reveals that the IRS is unable to locate millions of backup tax records.
A recent report from the Treasury Inspector General for Tax Administration has unveiled that the Internal Revenue Service (IRS) is facing difficulties locating thousands of microfilm cartridges containing sensitive tax records for both businesses and individuals. The potential consequences of this situation are concerning, as these records could potentially be exploited for tax refund fraud. The watchdog report has exposed significant shortcomings in how the IRS safeguards, tracks, and stores these vital microfilm backup cartridges, which the agency is mandated by law to retain for a specific duration.
One glaring example of these deficiencies is the discovery of empty boxes labeled as housing microfilm backup cartridges, without any accompanying explanation for the whereabouts of the missing cartridges. Notably, during an on-site inspection, the IRS was unable to locate any of the fiscal year 2010 microfilm cartridges that should have been transferred to the Kansas City Tax Processing Center in 2022, following the closure of the Fresno Tax Processing Center.
In response to the report, Ken Corbin, the IRS's wage and investment commissioner, communicated the agency's actions. These include efforts to conduct comprehensive inventories of the microfilm collection and a commitment to phasing out the use of microfilm altogether. Corbin acknowledged that the report underscores the challenges that the IRS has grappled with in the past decade due to constrained funding and the departure of experienced personnel. These factors compelled the agency to reallocate its workforce to address high-priority tasks, consequently impeding its ability to maintain up-to-date microfilm inventory records.
The IRS has experienced a budget reduction of more than 15% in the decade leading up to 2022, resulting in decreased staffing levels and audit rates. This budgetary strain has significantly impacted the agency's operations and functions.