IRS hits key digitization goal months ahead of schedule

The IRS is making progress on long-term efforts to digitize its operations, top officials announced on Tuesday. Taxpayers can now digitally submit all correspondence and responses to notices — a key goal of the agency's Paperless Processing Initiative. 

“The impact will be significant and far-reaching,” Treasury Secretary Janet Yellen said Tuesday. “Taxpayers will save time and effort. The IRS will reduce errors and storage costs. And we’ll speed up processing times for the system as a whole.”

Before the most recent filing season, taxpayers responding to information requests from the IRS had to submit them by mail. That changed with the February 2023 launch of a document upload tool for responses to nine widely used notices covering tax benefits, such as the Earned Income Tax Credit. Now, the agency says that over 94% of individual taxpayers won’t have to mail the IRS anything anymore. As of Oct. 27, the IRS had already gotten 35,000 responses through the online tool, it says.

The agency is also aiming to allow taxpayers to electronically file an additional 20 tax forms by the start of the upcoming tax season. 

By the 2025 filing season, the IRS plans to make more non-tax forms electronically available; digitally process all paper-filed returns and at least half of correspondence, notice and other non-tax forms; and digitize up to 1 billion historical documents as part of its Paperless Processing Initiative.

The IRS has also made updates to its online “Where’s My Refund?” tool to give more detailed information to taxpayers, as opposed to generic answers to check back later, the agency says.

Certain taxpayers may also get the chance to participate in a forthcoming pilot of a direct file tool at the IRS in the coming filing season, which is being funded through the Inflation Reduction Act. That will allow taxpayers to file their tax returns electronically directly to the IRS without using commercial tax prep software.

Yellen also vowed to continue making progress on IRS staffing levels, focusing specifically on taxpayer services — including at Taxpayer Assistance Centers — and enforcement personnel with “specialized expertise” in auditing high-income earners and large corporations.

The tax agency’s announcements about its progress come soon after passage of a House Republican proposal to provide aid to Israel and cut $14 billion from IRS enforcement. Lawmakers gave the IRS a nearly $80 billion boost from the Inflation Reduction Act in 2022, although the White House and House leadership already agreed to about $20 billion in cuts to IRS funding as part of a debt ceiling deal earlier this year.

“The current proposals to cut funding for the IRS make this an especially crucial time to talk about the importance of this work. Playing politics with IRS funding is unacceptable,” said Yellen. “Cutting it would be damaging and irresponsible. The IRS collects 96% of the federal government’s revenue.”