Senators press for answers after IRS loses loads of taxpayer data

WASHINGTON, D.C. – After a watchdog report revealed the Internal Revenue Service (IRS) lost millions of taxpayers’ data due to lax handling of backup records, U.S. Sen. Chuck Grassley (R-Iowa) joined forces with U.S. Rep. Jason Smith (R-Mo.) to press for answers and urge action. Grassley and Smith serve as senior member and chairman, respectively, of the Senate Finance Committee and House Ways and Means Committee which have responsibilities over tax policy and oversight.   

“The information contained in these backup records can be used by nefarious actors to commit tax fraud and identity theft,” the lawmakers wrote. “The American people deserve better. They deserve an IRS that prioritizes protecting their confidential information and takes the necessary action to safeguard their confidential records. There must be accountability to prevent this type of misconduct from occurring in the future.”  

IRS protocol requires it to securely file business and individual backup tax records. Those records include taxpayer names, social security numbers, employer identification numbers and tax account and return information. However, the Treasury Inspector General for Tax Administration (TIGTA) found the IRS for years has neglected to safeguard them. For example:   

• The IRS cannot locate Fiscal Year 2010 backup records from a California processing center.

• More than 100 backup cartridges – each holding up to 2,000 photos of tax information – were allegedly sent for reformatting by an outside contractor in 2013. The IRS does not know where the cartridges are now, and the contractor went out of business in 2018.  

• Fifteen pallets of backup records that should have been sent to the Federal Record Center five years ago have, instead, been sitting at an IRS distribution center.   

While IRS policy requires backup records be stored in controlled areas, at some IRS processing centers, all employees can access them.  

IRS managers told TIGTA they cannot remember the last time a mandatory annual inventory of backup records was performed. 

Smith and Grassley in their letter to IRS Commissioner Daniel Werfel are demanding to know what steps the IRS has taken to investigate the disappearance of millions of tax records. They are digging into whether the IRS has notified individuals and businesses that their sensitive data could be compromised, as well as how the agency held employees accountable for losing backup records.  

The lawmakers’ push takes on added urgency as a senior IRS official dismissed portions of TIGTA’s report, saying the IRS chose to redirect resources to “higher-ranking priorities” instead of maintaining control over “lower-risk programs” like protecting sensitive taxpayer records.