It doesn't seem _im_plausible for backups to have failed, or for recovery not to work or whatever. But, the other day I was working in a pottery studio with a ~8yo laptop as the only computer and they have offsite, encrypted, incremental backups of user data ... now it may not work correctly when it's needed (though it's been tested) ... but I'd kinda expect the USA's IRS to be slightly ahead of a micro-business working in arts-and-crafts as far as data security/recovery goes.
If you told the IRS you couldn't file your reports because you'd lost user data they'd consider it criminal negligence, I imagine, that you'd not secured the data through backup. Sauce for the goose ...
Data loss where there's no backup system even in place sounds like reason to fire all the IT managers in systems like the IRS where the preservation/security of data is vital to proper function.
Maybe it's the time I've spent in corporate environments, but losing data due to shitty IT management seems very plausible to me.