The Internal Revenue Service (IRS) has announced the launch of its “paperless processing initiative” that will allow taxpayers to submit non-tax documents and correspondence digitally beginning next year, while speeding up processing times for tax refunds.
“As the next phase of its modernization, the IRS is accelerating paperless processing efforts,” said an Aug. 2 press release from the U.S. Department of the Treasury. “The IRS is launching an ambitious plan to ensure that by Filing Season 2024, taxpayers will be able to go paperless if they choose to do so, and by Filing Season 2025, the IRS will achieve paperless processing, digitizing all paper-filed returns when received. In effect, this means all paper will be converted into digital form as soon as it arrives at the IRS.”
The paperless processing initiative is expected to “eliminate up to 200 million pieces of paper annually, cut processing times in half, and expedite refunds by several weeks.”
At present, taxpayers are able to submit only their annual 1040 tax returns digitally. They are unable to digitally send other forms and correspondence.
Starting filing season 2024, taxpayers will be able to digitally submit all correspondence, non-tax forms, and responses to notices. As a result, over 94 percent of individual taxpayers will no longer have to send mail to the IRS, the agency estimates.
By implementing paperless processing, errors from manual input of data can be eliminated, thus speeding up processing and storage costs, the agency claims. IRS will be able to extract information from digital files quickly, allowing its customer service to respond to taxpayer issues quickly.
The digitization will not affect those who wish to continue filing their returns by paper. “Taxpayers who want to submit paper returns and correspondence can continue to do so.”
According to the IRS, the agency receives around 76 million paper tax returns and forms as well as 125 million pieces of other paper content each year.
The agency is also burdened with over a billion historical documents that cost $40 million annually to store. The new initiative is expected to result in these millions of documents being digitized.
IRS Digital Filing Proposal
The IRS’s proposed online digital-filing system has raised worries among Republicans.“IRS control of tax preparation is the latest step in Democrats’ ongoing efforts to supercharge the agency to go after working-class families, after giving the agency $80 billion to increase audits on taxpayers making less than $75,000,” House Ways and Means Committee chairman Jason Smith (R-Mo.) said in a May 16 statement.
The IRS has initiated the pilot program without getting congressional authorization. IRS officials also chose a left-wing think tank, Washington-based New America, to conduct a $15 million “independent review” of the agency’s proposed online tax-filing system. Moreover, New America had earlier supported the idea of IRS launching its own online tax-filing service.
“The characterization of New America as a strictly nonpartisan nonprofit is surprising since the organization is known to be a left-leaning think tank,” Mr. Smith had said in a March 6 letter to acting IRS commissioner Douglas O’Donnell.
“Specifically, some of the nonprofit’s top officials include alumni from the Obama administration ... and other top officials of the organization are tied to left-leaning mainstream and openly left-wing media outlets.”
In a July 2 opinion piece at The Hill, former Treasury secretary Bay Buchanan warned that the IRS’s online tax-filing system would essentially make bureaucrats America’s tax preparers and filers.
“Rather than easing Americans’ headaches over filing their taxes, this new government-run method would only worsen their filing woes,” Mr. Buchanan wrote.
Making IRS Processes Paperless
Paper-based processes have created multiple challenges at the IRS, per the agency.“Taxpayers are unable to digitally submit many forms and correspondence beyond their annual 1040 tax return, and the IRS is unable to digitally process paper tax returns it receives,” the IRS says.
“For decades, taxpayers had to respond to notices for things like document verification through the mail, and IRS employees had to manually enter numbers from paper returns into computers one digit at a time, creating significant delays for taxpayers and challenges for IRS staff.”
Finally, digitization will give data scientists the data needed to address issues like tax evasion by wealthy entities and individuals, the IRS claims.
The paperless initiative is being made possible due to funds allocated in the Inflation Reduction Act passed under the Biden administration last year, the IRS said. The act had initially set aside $80 billion for the IRS for a 10-year period, an amount that was reduced to $60 billion this year.
