Sen. Crapo: Weekly Column: Of Course IRS's Destruction Of Unprocessed Documents Harmed Taxpayers
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.