IRS Cannot Locate Sensitive Tax Account Information Stored on Microfilm

Cross References

TIGTA Report No. 2023-IE-R008, August 8, 2023 The Treasury Inspector General for Tax Administration (TIGTA) recently issued a report concerning sensitive business and individual tax account information stored on microfilm that cannot be located. The IRS is required to create and store backups of both business and individual tax records to ensure that these records are available to conduct business, document IRS activities adequately, and protect the interests of the Federal Government and the American taxpayers. The Federal Records Act of 1950 requires the IRS to backup and store tax records. The IRS uses microfilm cartridges to store photographic records of sensitive business and individual tax information. The TIGTA evaluation was conducted to assess the processes and procedures to account for and safeguard microfilm containing sensitive taxpayer information.

What TIGTA found. TIGTA identified significant deficiencies in the IRS’s safeguarding, accounting for, and physical storage of its microfilm backup cartridges. TIGTA’s discussions with responsible officials at the current three Tax Processing Centers (Austin, Texas; Kansas City, Missouri; and Ogden, Utah) that house microfilm backup cartridges identified that required annual inventories have not been performed. In fact, management could not provide a time frame of when the last required annual inventory was conducted. The lack of adequate inventory controls also includes no reconciliation of the microfilm backup cartridges noted as being sent from closed Tax Processing Centers to what was physically shipped and received.

In addition, TIGTA found that microfilm cartridges stored at the Ogden Tax Processing Center are not being adequately safeguarded to limit access to this information. Specifically, the microfilm cartridges are being stored on open shelving in the middle of the Files building, a large warehouse. The warehouse is accessible by all Files Function personnel within the facility, and the shelving is not within eyesight of the IRS personnel responsible for overseeing microfilm activities.

The IRS is not in compliance with records management requirements. IRS management stated that 15 large pallets containing microfilm cartridges required to be sent to the Federal Records Center have been stored at the IRS’s National Distribution Center since 2018. IRS management noted that efforts are underway to coordinate with the Government Publishing Office to have these 15 pallets of microfilm cartridges shipped to the

IRS Cannot Locate Sensitive Tax Account Information Stored on Microfilm continued

Federal Records Center. However, as of April 2023, IRS management noted that they have yet to secure a contract to have the microfilm cartridges sent.

Finally, the IRS is not in compliance with microfilm destruction time frames. TIGTA identified individual microfilm cartridges stored at all three Tax Processing Centers that exceed the 30-year storage requirement. Management noted that no process has been established to timely dispose of microfilm backup cartridges.

What TIGTA recommended. TIGTA made 13 recommendations in their report that included conducting a detailed inventory of all microfilm cartridges on hand, properly maintaining request logs, and securing microfilm cartridges stored at the Ogden Tax Processing Center. In addition, the IRS should have the microfilm stored at the National Distribution Center re-boxed and shipped to the Federal Records Center and dispose of all individual microfilm cartridges in storage with a processing year beyond 30 years. Further, the IRS should ensure that microfilm is properly stored and preserved. The IRS agreed with 11 of the recommendations and disagreed with two recommendations.