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The IRS has unveiled plans to offer digital correspondence for the 2024 tax season, building on the agency’s decade-long overhaul of improved service, technology and compliance.
By 2025, the agency aims to achieve “paperless processing” for tax returns and so-called information returns, used by employers and financial institutions.
The IRS expects to eliminate up to 200 million pieces of paper every year, slash processing times by half and speed up refunds by several weeks, the U.S. Department of the Treasury announced on Wednesday.
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The IRS currently receives 76 million paper tax returns and forms every year, along with 125 million pieces of correspondence, responses to notices and other forms, which have delayed service and added to backlogs. The agency also spends about $40 million every year to store 1 billion “historical documents.”
“This paperless processing initiative is the key that unlocks other customer service improvements,” Treasury Secretary Janet Yellen said in a speech on Wednesday. “It will enable taxpayers to see their documents, securely access their data and save time and money.”
She said these changes will expedite refunds, reduce tax processing errors and deliver “a more seamless and responsive customer service experience.”
While taxpayers will still have the option to send paper returns in 2025, the agency is committing to digitally process 100% of tax and information paper filings, as well as half of paper correspondence, non-tax forms and responses to notices, Yellen said.
The initiative is a ‘game-changer’ for the IRS
“This is truly a game-changer for the IRS,” said Eric Hylton, national director of compliance for Alliantgroup. “I think this is going to push the organization forward tremendously.”
However, the agency needs to allocate more funds for improved technology to meet these goals, said Hylton, who is a former IRS commissioner for the agency’s small business and self-employed division.
This is truly a game-changer for the IRS.
Eric Hylton
National director of compliance for Alliantgroup
Charles Rettig, former IRS Commissioner and board member of K1X, a digital platform for Forms K-1, described the agency’s processing initiative as a “win-win” because it will preserve “limited human resources” and allow IRS employees to focus on other service areas.
The initiative also has support from the American Institute of CPAs, which has pushed for these changes.
“We are optimistic that these steps will lead to reduced processing times and better experiences overall for taxpayers,” said Peter Mills, senior manager for tax policy and advocacy with AICPA.
The new plan comes amid continued debate over IRS funding. House Republicans in January attempted to strip the $80 billion approved by Congress in 2022, but the bill halted without sufficient Senate and White House support. In May, lawmakers agreed to rescind $21.4 billion as part of the debt ceiling deal.
