Sensitive Business and Individual Tax Account Information Stored on Microfilm Cannot Be Located

On November 29, 2022, we notified the Director, Submission Processing, Wage and Investment Division, of the need to improve inventory controls over microfilm cartridges that are stored at the Tax Processing Centers. We recommended that the IRS conduct a detailed inventory of all microfilm cartridges on hand to include the beginning microfilm count, microfilm disposed of (or missing), microfilm obtained, and the ending count of microfilm. The inventory records should include the following information: type of register, cycle, number of sets, and number of cartridges per set. In addition, we recommended that the IRS develop and implement a process to ensure timely inventory and reconciliations are performed in the future.

The Commissioner, Wage and Investment Division, should ensure that detailed inventories are conducted at all Tax Processing Centers by October 2023 as planned. This should include a full reconciliation matching vendor provided microfilm logs to physical microfilm cartridges as well as reconciling all microfilm cartridges received from closed Tax Processing Centers. Per internal guidelines, discrepancies should be reported to the Input Correction Operations Manager.

The Commissioner, Wage and Investment Division, should ensure that annual physical inventories of microfilm backup cartridges are performed as required with unresolved discrepancies reported to the Input Correction Operations Manager.

On January 23, 2023, we notified the Director, Submission Processing, Wage and Investment Division, that inadequate information was being maintained in the microfilm request logs, and appropriate action was not taken to follow up on any unfulfilled requests. We recommended that the IRS take immediate action to properly maintain request logs, which should include all requests received for records stored on microfilm and include reasons for why any information is unavailable. If the reason the information is unavailable is because the cartridge cannot be found, appropriate actions should be taken to locate the cartridge or identify the impact of the lost taxpayer data.

The Commissioner, Wage and Investment Division, should ensure site adherence to documenting requests for tax account information from microfilm backup cartridges. Documentation should include a detailed explanation regarding the reason tax account information requests could not be fulfilled.