IRS has lost track of millions of sensitive data, putting taxpayers at risk for identity fraud — a year after the agency destroyed data on 30 million filers

The IRS has lost track of millions of sensitive tax records, according to a new watchdog reportputting taxpayers at risk of tax refund identity theft.

As part of an investigation, the Inspector General of the Treasury for the Internal Revenue Service (TIGTA) found “significant deficiencies” in protecting and accounting for millions of individual and corporate tax records containing sensitive information.

The watchdog said it found seven empty boxes at an IRS facility in Ogden, Utah, which should have contained as many as 168 microfilm cartridges, containing up to 2,000 photographic images of records. The IRS uses microfilm cartridges to store backup data of business and individual tax records, which is required by law.

TIGTA also found that 8,000 microfilm cartridges, which would be transferred from California to an IRS processing center in Kansas City in 2021, had not been accounted for.

“The personal tax and tax information on these backup cartridges is important information that can be used to commit tax refund fraud,” the TIGTA report said.

The watchdog found empty boxes at an IRS facility in Ogden, Utah, said to contain as many as 168 microfilm cartridges

The IRS has been criticized in the past for mishandling tax information. Last year, TIGTA accused the agency of destroying data on an estimated 30 million petitioners at the height of the pandemic in March 2021.

This sparked an outcry from the tax community — with experts raising concerns about how missing information could delay and complicate taxpayer returns.

The latest report found that required annual inventories at three tax processing centers in Austin, Kansas City and Ogden failed to perform required annual inventories.

“In fact, management was unable to provide a time frame of when the last required annual inventory had been performed,” the report said.

The watchdog also expressed concern about how microfilm cartridges containing sensitive information were stored at the Ogden facility.

According to the report, information was stored in the middle of a large warehouse on open shelves.

In response, IRS Wage and Investment Commissioner Ken Corbin said in a letter that the findings revealed a reduction in experienced staff at the agency.

He said continued underfunding had forced the IRS to redirect experienced workers to higher priorities, compromising its ability to keep track of “timely updating inventory data.”

IRS Pay and Investment Commissioner Ken Corbin said in a letter that the findings revealed a reduction in experienced staff at the agency

He added that the agency is still sending tax records to processing centers across the country and that officials “are confident that as the backlog of non-tax documents is processed, the remaining cartridges will be processed.”

It comes weeks after three of America’s largest tax preparation firms were accused of sharing tens of millions of sensitive taxpayer financial data with tech giants Google and Meta without their consent.

A seven-month congressional investigation released last month and led by Massachusetts Senator Elizabeth Warren alleged that H&R Block, TaxAct and TaxSlayer used visitor tracking technology embedded in websites to share the information.

While customers did not appear to be at risk of identity fraud, in a possible violation of federal law, the investigation found that data was in some cases misused by Facebook parent company Meta for targeted advertising.

Three of America’s largest tax preparation companies were accused of sharing tens of millions of sensitive taxpayer financial data with tech giants Google and Meta

The seven-month congressional investigation was led by Massachusetts Senator Elizabeth Warren

According to the report, in addition to sharing data such as addresses and phone numbers, companies also shared details about taxpayer status, income, estimated refund amount and names of dependents.

They even allegedly shared information about what buttons and text fields customers clicked when filling out a tax form — which could reveal what tax breaks they may have claimed or whether they are using government programs.

Tax preparation companies help people file their federal and state taxes online through their websites.

“On a scale of 1 to 10, this is a 15,” said David Vladeck, former chief of consumer protection at the Federal Trade Commission. CNN of the alleged data breach.

“This is a five-alarm fire, if what we know so far is true,” added Vladeck, who is now a law professor at Georgetown University.