The initiative will be funded through the Inflation Reduction Act, which approved $80 billion over ten years for the IRS.
The Internal Revenue Service (IRS) has announced that it will allow taxpayers to submit all their tax documents electronically for the 2024 tax season. Consequently, taxpayers will no longer need to mail or fax their paper forms and supporting documents to the IRS. Instead, they can upload them online through a secure portal. Additionally, the Treasury Department announced it will convert all paper tax returns to digital documents by the 2025 season.
According to US Treasury Secretary Janet Yellen, taxpayers will retain the choice to submit documents by paper. She said:
“For those taxpayers, by filing season 2025, the IRS is committing to digitally process 100 percent of tax and information returns that are submitted by paper.”
This will not be the first time the US is allowing digital filings. Already, many taxpayers file their returns digitally through third-party providers. However, the COVID-19 pandemic, associated filing delays, and staffing shortages resulted in a massive backlog of unprocessed paper tax returns. This warranted a return to manual processing.
A Decade-Long IRS Initiative
The paperless project has been a priority of IRS Commissioner Daniel Werfel, who took over in March. According to the IRS, the digitalization effort is part of a decade-long program to modernize systems and improve its services for taxpayers.
Currently, the service handles up to 125 million documents annually. Officials say that the IRS will save tens of millions of dollars each year by reducing paper submissions. It would also save the agency time wasted on sorting through the documents.
According to the IRS, starting from 2024, taxpayers will also benefit from digital document submissions as they can expect faster refunds, fewer errors, and more security.
The initiative will be funded through the Inflation Reduction Act, which approved $80 billion over ten years for the IRS. While this has been cut to $60 billion, it remains the biggest funding the IRS has received in ages.
Progress So Far
Already, the IRS has obtained new scanning technology that will allow it to process tax returns more efficiently. It also plans to recruit an additional 20,000 employees over two years. These will bolster the commission’s tax enforcement and customer service unit.
According to the Treasury Department, the funding is already yielding short-term gains. The agency customer response rate has improved from 155 in 2022 to 87% in 2023. Treasury Secretary Yellen believes that with stable funding, the IRS will be able to sustain its initiatives and improve how it serves taxpayers.
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