Guest column submitted by U.S. Senator Mike Crapo
In 2021, the Internal Revenue Service (IRS) made an unwise--and frankly, disturbing--decision to intentionally destroy 30 million paper-filed tax documents without processing them. Upon learning of the incident, I led Senate Finance Committee Republicans in raising concerns with the agency and asked about the potential ramifications for taxpayers. We specifically worried about the destruction of documents ensuring taxpayers did not underreport income or inflate a deduction. The IRS has consistently maintained that no taxpayers were harmed by the destruction of these records. Now, we are hearing otherwise from taxpayers who had their documents destroyed. This has prompted a new round of pressing the IRS for answers about this incredibly frustrating and entirely preventable problem.
In a recent report, a low-income tax clinic lawyer whose client was negatively impacted by the destruction of the records argues that the act likely led to the unwarranted and onerous examination of many low-income taxpayers who claimed the earned income tax credit (EITC). In one example, a couple who filed a joint tax return and claimed the EITC and an additional child tax credit received a refund of $6,148. However, when the IRS had no record of the forms that should have been on file to substantiate the claims, the agency proposed that the couple repay the refund, plus penalties and interest. The couple ultimately prevailed in retaining their refund with time and expense, but they were fortunate to have obtained legal counsel through a low-income taxpayer clinic. It is highly likely that not all affected taxpayers have been so favored.
This is simply unacceptable. Finance Committee Republicans are asking the IRS about the issues raised in this account, as potentially 20,000 or more taxpayers who claimed the EITC for 2019 had their claims denied or challenged by the IRS solely because the IRS destroyed evidence of these taxpayers’ income. Many taxpayers may have lost out on their valid tax claims simply because they did not have the resources or expertise to challenge the IRS’s mistake.
There are significant issues with the IRS maintaining there were no negative taxpayer consequences resulting from the destruction of the documents, and even arguing the destruction “avoided unnecessary cost,” while the mounting evidence undermines such claims:
- “Relief” was not provided by the IRS to at least some, and potentially thousands of, taxpayers who claimed the EITC in 2019;
- The destruction of these unprocessed information returns was unnecessary, and its direct and indirect harm is disproportionate to whatever storage costs the IRS would have incurred;
- To date, the IRS is denying or challenging EITC claims that rely upon income reported by these destroyed information returns rather than evaluating documentation in each case; and
- The IRS has not responded to diverse substantive issues arising from this episode.
Equally concerning is the IRS’s lack of transparency and candor with Congress about its destruction decision and the corresponding consequences. The law requires the IRS Commissioner, and all IRS employees, to “act in accord” with codified taxpayer rights, including: the right to be informed; the right to quality service; the right to challenge the position of the IRS and be heard; the right to privacy; and the right to confidentiality. This taxpayer bill of rights is enumerated on the IRS’s own website: https://www.irs.gov/taxpayer-bill-of-rights. Yet, if the IRS truly followed the law and put customer service at the forefront, it would not have discarded 30 million documents without processing them, and we would not have to continue to press the IRS to meet its statutory obligation to uphold taxpayer rights and correct this needless, and all the more frustrating, wrong.
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