IRS Destroys Documents Amid Backlog as IG Calls for More E-Filing
As many of you have recently heard, the Internal Revenue Service has destroyed some 30 million paper-filed information returns in 2021 due to their inability to process the backlog of filed returns. One of the key issues to remember here is that these were “paper” filed documents and not electronically filed ones. The IRS said in a May 13 statement that the documents destroyed were documents submitted to the IRS by third-party payors, not taxpayers. Per the IRS, 99% of the information returns were used to match to corresponding tax returns and processed. The remaining 1% of those documents were destroyed due to a software limitation and to make room for new documents relevant to the pending 2021 filing season. The agency added that there were "no negative taxpayer consequences as a result of this action.” Taxpayers or payers have not been and will not be subject to penalties resulting from this action.
The Treasury Inspector General has called for more documents to be filed electronically. They have recommended that the IRS develop a strategy to incorporate all forms for e-filing. Cost is a major reason for this suggestion because the cost to process a return filed by paper is roughly $15 rather than the 36 cents when filed electronically. Another factor is the non-compliance of businesses required to E-file but decline to do so.