June 30, 2022 - Douglas Myser

IRS forms destruction part two. The Tax Professional community was shocked to learn that the IRS had destroyed nearly 30 million information return. Net Operating Losses and Carry Forwards cannot be determined without certain information, and those particular Information returns will create a nightmare for millions of taxpayers down the road. The Tax Inspector General for Tax Administration, TIGTA, reported the forms destruction in a September 2021 audit report, "Effects of the Covid-19 Pandemic on Business Tax Return Processing Operations." In that report, TIGTA said it learned of the incident in its "walkthroughs" of the Service's Ogden, Utah, processing center, and gave some details of its discussions with some IRS managers. Information returns are furnished to taxpayers and filed with the IRS, usually reporting income or another tax item that taxpayers then report on an income tax return or retain in their records to support tax return entries. IRS forms destruction part two.

Taxpayers in some cases fail to include the reported income or item or do not report it properly. To enforce proper inclusion of reported items, the IRS conducts what it calls post-processing compliance matches. First, the information returns are scanned into the IRS's computer systems and then matched against the returns of taxpayers with respect to whom they were filed. One such matching program is its Automated Under reporter Program. TIGTA reported that when asked about the destruction of the information returns, IRS managers said that the system used to process the returns had to be taken offline to program updates for the next filing season. The IRS also stated that taxpayers and the payers of income that filed the forms have not been subject to penalties resulting from the destruction.

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