The IRS plans to become totally paperless by 2025, meaning the majority of taxpayers will be able to submit a variety of tax documents and other communications to the agency digitally starting with the upcoming filing season.
Treasury Secretary Janet Yellen and IRS Commissioner Daniel Werfel unveiled the “paperless processing initiative” on Wednesday in an effort to lessen the excessive amount of paperwork that has bedeviled the agency.
The Inflation Reduction Act, which was signed into law last August and provides the IRS with an additional $80 billion over ten years, is used to fund the initiative, though part of that money has already been reduced.
Yellen made the announcement during a visit to an IRS paper processing center in McLean, Virginia.
“Thanks to the IRA, we are in the process of transforming the IRS into a digital-first agency,” she said.
Taxpayers will be able to electronically submit all communications, non-tax forms, and notification responses to the IRS by the following filing season, she said.
Of course, taxpayers will always be able to submit paperwork on paper, she continued. Most people will be able to electronically submit everything but their tax returns starting in 2024, thanks to the project.
Additionally, the IRS will be able to process all tax returns digitally by 2025 as it begins a trial program for its new electronic free-file tax return system in 2024.
The government currently spends $40 million annually archiving more than 1 billion historical documents, so the processing adjustment is anticipated to reduce that amount.
According to the IRS, the federal tax administration receives more than 200 million paper tax returns, forms, letters, and non-tax papers each year. According to IRS data, over 213.4 million returns and other forms were electronically filed in fiscal year 2022, accounting for 81.2 percent of all submissions.
According to agency authorities, years of underfunding and a backlog of paper work have combined to prevent the agency from processing tax forms more quickly in the past.
According to the IRS, the new strategy should enable the organization to speed up refunds by a few weeks.
The IRS reduced its backlog of unprocessed paper tax returns by 80%, from 13.3 million at the end of the 2022 filing season to 2.6 million at the conclusion of the 2023 filing season, according to National Taxpayer Advocate Erin M. Collins’ statement in June.
Funding for the federal tax collector is still subject to reduction. The debt ceiling and budget cuts package agreed by Congress this summer included a $1.4 billion cut to the IRS, which was included by House Republicans.
According to the White House, a second agreement included in the debt deal calls for taking $20 billion from the IRS over the next two years and diverting it to other non-defense programs.