The IRS is just about as corrupt as it gets. When they decide to target someone, that person's life is over. Finished.
I have an acquaintance this is happening to. The IRS claims that he and his wife screwed up a tax return a few years ago, and now have to pay retroactively. The amount demanded is beyond anything they could have owed, but there is really nothing you can do: The "court" you go do for justice is an IRS court, and guess who it sides with 99 times out of 100?
Since there is no way they can pay this lump sum, they agreed to a payment plan: $X per month. Now, after several months of payments, they have received a statement of account from the IRS. Due to accruing interest and penalties, the amount they owe has increased. Some IRS pantywad has decided to have some fun. Ruin someone's life - it's so entertaining. No accountability, no independent appeal, you are just so screwed.
In the current case: The IRS is legally required to maintain their business records. They are supposed to produce them. "Oops, sorry, a computer crashed" - completely unbelievable. Nonetheless, it appears that they will be allowed to get away with it, and no one at all will be punished...