What's Happening?
The Internal Revenue Service (IRS) has encountered significant challenges in its goal to achieve paperless processing of tax returns. A recent report by the Treasury Inspector General for Tax Administration revealed that the IRS scanned only a small fraction
of paper-filed returns last tax season, falling short of its planned goals. The IRS had aimed to digitally process 78% of all paper-filed returns, but contractors managed to scan only 5% of the target. The report highlights the higher costs associated with processing paper tax returns compared to electronic ones and notes that funding reductions have hindered modernization efforts.
Why It's Important?
The IRS's struggle to transition to paperless processing has implications for tax administration efficiency and cost management. Digitizing tax returns can improve processing accuracy and timeliness while reducing storage costs. However, the IRS's inability to meet its digitization goals may result in continued high processing costs and storage expenses. The report underscores the need for adequate funding and effective contractor management to achieve modernization objectives, which are crucial for improving taxpayer services and compliance with federal mandates.
What's Next?
The IRS plans to continue its Zero Paper Initiative, aiming to eliminate paper submissions of tax returns and expand electronic filing options. The agency faces challenges in contractor selection and staffing, which have delayed progress. The IRS is also prioritizing the scanning of historical tax documents to comply with federal records management requirements. The Treasury Inspector General for Tax Administration has recommended that the IRS evaluate options to prioritize document scanning to realize cost savings and meet digital format mandates by December 2030.
