IRS Failed to Properly Dispose of Sensitive Tax Documents, Report Says

Earlier this year, a federal judge sentenced a former IRS contractor to five years in prison for leaking the tax returns of several high-profile billionaires. The case involves genuine misconduct by someone who has been entrusted with people’s private information. But a new report from the US Treasury Department found that the IRS itself was routinely negligent with taxpayer documents in its possession.

“The IRS receives and creates a significant volume of confidential documents and is responsible for protecting these confidential documents from receipt to disposal,” according to a report of the United States Treasury Inspector General for Tax Administration (TIGTA). Specifically, federal agencies must “shred, burn, shred, pulp, or pulverize confidential documents beyond recognition and reconstruction.”

The TIGTA report notes that since 2009, the IRS has hired an unnamed “domestic third-party vendor” to do this. The vendor provides IRS facilities with locked containers to store confidential documents, which are then collected for secure disposal.

This provider serves “387 (75 percent) of 514 IRS facilities,” the report notes, while another 17 facilities contract with local companies. But otherwise, it’s apparently a free-for-all: “We found that the IRS does not know what confidential document destruction capabilities exist for the 110 facilities not covered by a contract. For example, the IRS initially thought Andover, Massachusetts, was covered by a local confidential document destruction contract. After we inquired about the contract, the IRS discovered that this facility was not covered by any contract.”

When auditors conducted a site visit at that facility, they found that “dumpsters were being used for all waste, including confidential documents containing tax information and personally identifiable information.”

The auditors also made seven other visits to the site, during which they found that “some containers were unlocked, tampered with and/or damaged,” including in such a way that inspectors “were able to pass their hands through the container disposal slot and “Easily recover sensitive discarded documents.”

At one facility in Ogden, Utah, inspectors even found an open trash can labeled “Sort Garbage Only.” According to the report, “IRS management instructed employees at this facility to store confidential documents in these open containers, so that employees would not have to get up from their desks to dispose of confidential waste in the secure confidential document destruction containers.” “.

“The IRS has yet to establish or communicate to staff at its various facilities standard operating procedures for the destruction of confidential documents,” the report notes, even though the agency had previously acknowledged the need to develop standard procedures following a report TIGTA 2009.

The report “is the latest evidence that the agency doesn’t care about taxpayer privacy despite a huge infusion of taxpayer funds.” according Americans for tax reform. “The IRS is failing taxpayers in this area.”

It is unlikely that anyone will face serious consequences for these errors: the report does not mention any dismissals. But it is worth noting that for anyone others Whoever misuses taxpayer information, the consequences are serious.

In 2020, The New York Times published stories drawn from then-President Donald Trump’s tax returns, which the authors say “reveal the emptiness, but also the magic, behind the image of the self-made billionaire.” The following year, ProPública reported Details from the tax returns of super-rich tech CEOs Elon Musk, Jeff Bezos and Mark Zuckerberg.

According to a indictment 2023 filed by the Department of Justice (DOJ) in the United States District Court for the District of Columbia, IRS contractor Charles Littlejohn was the source of the information. “From around 2018 to around 2020,” prosecutors claim, Littlejohn “stole tax returns and return information associated with…thousands of the nation’s wealthiest people, including returns and return information dating back more 15 years old”. Since then, the IRS has sent notices to taxpayers whose information Littlejohn may have stolen.

The indictment charged Littlejohn with unauthorized disclosure of tax returns and return information—a crime punishable by up to five years in prison and a fine of up to $5,000, and pleaded guilty in October 2023. According to his plea agreement, federal guidelines recommend a prison sentence of between eight and 14 months. Prosecutors recommended the maximum of five years, citing “the need for general deterrence” and that “the scope and scale of defendant’s unlawful disclosures appear to be unparalleled in the history of the IRS.”

Littlejohn’s Lawyers countered that “he committed this crime not for personal gain, not out of personal malice, but out of the belief that his violation of the law would serve the public interest… The defendant was wrong to violate the law even if he believed that it would serve the public interest” . public interest. “It is also incorrect for the Government to request six times the maximum Guidelines on the facts of this case.”

District Judge Ana Reyes sided with the government, judgment Littlejohn to five years in prison, three years of supervised release and a $5,000 fine. At the sentencing hearing, she seemed incredulous that prosecutors only charged Littlejohn with a single felony count.

“Someone can steal thousands and thousands and thousands of taxpayer information, and the only charge the government could bring is a disclosure charge?” kings asked. “Because I’m sure that’s not the case.”

In a letter to Acting Deputy Attorney General Nicole Argentieri, U.S. Rep. Jim Jordan (R-Ohio), chairman of the House Judiciary Committee, indicated would be “opening an investigation into the Justice Department’s unusual and questionable leniency” toward Littlejohn. “The Department of Justice’s decision to bring a single charge for thousands of separate criminal acts is deeply troubling, and the Committee is concerned that the Department of Justice’s decision may be politically motivated.”

It is not clear from Jordan’s letter what he would have preferred. Justice may not have been served by bundling the thousands of returns Littlejohn stole under one charge, but it also wouldn’t be best practice to charge him with thousands of felonies. Nevertheless, prosecutors threw the book at Littlejohn, even though he only published a handful of statements he deemed newsworthy to reporters.

I do not intend to defend his actions: it should surprise no one that Donald Trump’s image is built on smoke and mirrors or that billionaires like Bezos, Musk and Zuckerberg make every effort to reduce their tax burdens, and that certainly does not justify the massive invasion of privacy that Littlejohn carried out.

But it’s worth considering that as prosecutors, a judge and lawmakers competed to increase Littlejohn’s punishment, the fact that numerous IRS offices were simply mishandling taxpayer data as a matter of routine was treated as a matter of course. .