Republished with full copyright permissions from The San Francisco Press.

The Internal Revenue Service (IRS) recently unveiled an ambitious plan to revolutionize its processing systems and improve customer service through a comprehensive paperless initiative. This initiative aims to streamline taxpayer interactions by implementing digital solutions and reducing dependence on traditional paper-based processes.

Under the new program, the IRS will invest in the development and implementation of user-friendly systems that allow taxpayers to submit various forms and correspondence electronically. The initiative also includes provisions for mobile-friendly submissions using smartphones and tablets. With these advancements, the IRS aims to enhance efficiency, reduce processing times, and provide a more seamless experience for taxpayers.

For years, the IRS has faced challenges due to time-consuming paper-based workflows, causing delays both for taxpayers and IRS staff. The traditional process of responding to notices and verifying documents through mail has been a major hurdle. Additionally, IRS employees have manually inputted data from paper returns into computer systems, resulting in substantial processing delays.

To address these issues, the IRS will utilize funds from the Inflation Reduction Act passed earlier this year to support this initiative, seeking to eliminate the inefficiencies of paper-based processes. The agency currently handles around 76 million paper tax returns and forms, along with 125 million pieces of correspondence and notice responses each year. These numbers highlight the magnitude of the backlog and delays that taxpayers have experienced over time.

The ongoing COVID-19 pandemic and subsequent shutdowns have only exacerbated the paper-processing backlog issue, further delaying tax refunds. Paper tax returns, in particular, require a minimum of six to eight weeks to process. However, with the introduction of online filing and processing, this burden is likely to diminish.

Starting in 2024, taxpayers will have the convenience of digitally submitting all types of correspondence to the IRS. This shift is projected to eliminate the need for mail-based communication for more than 94% of individual taxpayers. Furthermore, the new system will extend to nontax forms, allowing taxpayers to digitally request assistance from the Taxpayer Advocate Service and provide necessary information related to identity theft or eligibility for credits and deductions.

Additionally, taxpayers will soon be able to electronically file 20 additional tax forms, including the Form 941 for businesses with employees. Given the Employment Retention Credit’s significance, many businesses will benefit from this innovation. However, further details on whether taxpayers can directly e-file these returns to the IRS or utilize third-party platforms remain unclear.

To improve accessibility further, the IRS plans to make at least 20 frequently used nontax forms available digitally in mobile-friendly formats. This exciting development will simplify form completion and submission for taxpayers. Notably, the initiative includes mobile-friendly access to the Request for Taxpayer Advocate Service Assistance, ensuring easier access to support for taxpayers requiring assistance.

While paper-based submissions will still be accepted, the IRS’s emphasis on digitization aims to transform its operational procedures fully. By 2025, an additional 150 frequently used nontax forms will be available in digital formats. Moreover, the agency plans to digitize all paper-filed tax and information returns and process up to 50% of paper submissions digitally. This transition will facilitate a significant reduction in processing times and enable taxpayers to access their data conveniently. Additionally, the IRS estimates an annual storage cost reduction of around $40 million by digitizing up to 1 billion historical documents.

By filing season 2026, the IRS envisions a complete digital transformation, with all paper documents, including correspondence, nontax forms, and notice responses, being processed solely in digital formats. These milestones signify a monumental shift toward enhancing service quality, reducing processing times by half, and expediting taxpayer refunds significantly.

The move to digitize paper returns not only aims to expedite processing but also eliminates errors arising from manual data entry. This advancement will result in improved accuracy, reduced storage costs, and allow the IRS to allocate more resources to customer service, ultimately benefiting taxpayers.

While the IRS’s announcement is undoubtedly welcome news for improved efficiency, it is essential to remain mindful that priorities can change and future legislative decisions may impact funding. Previous instances, like the budget cut resulting from debt ceiling negotiations, highlight the unpredictable nature of financial support for the IRS.