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Filers will not be affected by the IRS’s decision to destroy data for millions of taxpayers, the agency said in a statement Thursday.
The IRS launched about 30 million so-called paper information statements in March 2021, according to an audit by the Treasury Inspector General for Tax Administration.
The news has sparked anger in the tax communitymany of which worry about the agency’s ability to verify returns, triggering more error alerts, especially with limited ways to reach the IRS.
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“We processed 3.2 billion information returns in 2020. Information returns are not tax returns and are documents submitted to the IRS by third-party taxpayers, not taxpayers,” the IRS said in their tax return.
The agency said 99% of the information statements have already been processed and the remaining 1% have been destroyed due to a “software limitation”, making room for the 2021 archiving season.
“There have been no negative consequences for taxpayers as a result of this action. Taxpayers or taxpayers have not been and will not be subject to penalties resulting from this action,” the agency said.
The agency said the situation reflects “significant problems posed by antiquated IRS technology.” In 2020, the IRS prioritized backlog returns to provide refunds and other Covid-19 aid over processing less than 1% of paper information returns, mostly Form 1099.
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 statements did not affect taxpayers’ submission of the original statement in any way as taxpayers received their own copy for use in filing an accurate statement,” the IRS said.
“The IRS has plans to process all paper information returns received in 2021 and 2022,” the agency added.