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Filers will not be affected by the IRS’ decision to destroy the data of millions of taxpayers, the agency said in a statement Thursday.
The IRS discarded about 30 million so-called paper information returns in March 2021, according to an audit by the Treasury Inspector General for Tax Administration.
The news has drawn ire from the tax community, many of whom are concerned about the agency’s ability to verify returns, triggering more notices of error, especially with limited means to reach the IRS.
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“We processed 3.2 billion information returns in 2020. Information returns are not tax returns, and they are documents submitted to the IRS by third-party payers, not taxpayers,” said the IRS in its press release.
The agency said 99% of information returns had already been processed and the remaining 1% had been destroyed due to a “software limitation”, leaving room for the 2021 filing season.
“There were no adverse consequences for taxpayers as a result of this action. Taxpayers or payers have not been and will not be subject to any penalties as a result of this action,” the agency said.
The agency said the situation reflected “significant issues with outdated IRS technology.” In 2020, the IRS prioritized pending returns to provide refunds and other Covid-19 relief rather than processing less than 1% of paper information returns — mostly Form 1099s.
System constraints require the IRS to process paper forms by the end of the calendar year in which they were received, the agency said.
“Failure to process these information returns had no impact on taxpayers filing the original return, as taxpayers received their own copy to use in filing an accurate return,” the IRS said. .
“The IRS plans to process all paper information returns received in 2021 and 2022,” the agency added.