IRS to Digitally Process All Tax Returns by 2025

The Internal Revenue Service said Wednesday that the agency is tapping its $80 billion budget boost under the Inflation Reduction Act to accelerate paperless processing for the 2024 and 2025 tax filing seasons.

Treasury Secretary Janet Yellen said Wednesday in a statement that the agency’s “Paperless Processing” initiative “marks a significant step in our efforts to digitalize IRS operations.”

The “ambitious plan” will ensure that by filing season 2024, “taxpayers will be able to go paperless if they choose to do so,” the IRS said, and by filing season 2025, “the IRS will achieve paperless processing digitizing all paper-filed returns when received.”

In effect, the IRS said, “this means all paper will be converted into digital form as soon as it arrives at the IRS.”

Thanks to the Inflation Reduction Act, “we are in the process of transforming the IRS into a digital-first agency,” Yellen noted.

By next filing season, taxpayers “will be able to digitally submit all correspondence, non-tax forms, and notice responses to the IRS,” according to Yellen.

Taxpayers, of course, “will always have the choice to submit documents by paper,” Yellen said.

By the 2025 filing season, the IRS “is committing to digitally process 100% of tax and information returns that are submitted by paper — as well as half of all paper correspondence, non-tax forms, and notice responses,” Yellen continued, as well as “digitalize historical documents that are currently in storage at the IRS.”

The agency, according to Yellen, “receives about 200 million paper documents a year — many of which still undergo manual processing. It also has decades of historical documents that together cost around $40 million a year to store.”

The paperless processing initiative will also unlock “other customer service improvements,” Yellen stated, allowing “taxpayers to see their documents, securely access their data, and save time and money.”

Other parts of the IRS will be able to “rely on these digital copies to provide faster refunds, reduce errors in tax processing, and deliver a more seamless and responsive customer service experience. And much more,” Yellen continued. She urged Congress to provide stable and sufficient annual appropriations for the IRS in order to sustain and build on this progress.

By the 2024 tax filing season, the IRS said taxpayers will be able to:

• Digitally submit all correspondence, non-tax forms, and responses to notices. As a result, the IRS estimates “more than 94% of individual taxpayers will no longer ever need to send mail to the IRS.”
• Use non-tax forms to request or submit information on a range of topics, including identity theft and proof that they are eligible for key credits and deductions to help low-income households. This will allow “up to 125 million paper documents to be submitted digitally per year.”
• E-File 20 additional tax forms, which will enable up to 4 million additional tax documents to be filed digitally every year.
• Access at least 20 of the most used non-tax forms in digital, mobile friendly formats that make them easy for taxpayers to complete and submit.

By the 2025 tax filing season, the IRS stated, it will:

• Make available an additional 150 of the most used non-tax forms in digital, mobile-friendly formats. An estimated 15% of Americans rely solely on mobile phones for their internet access.
• Digitally process all paper-filed tax and information returns. This will enable up to 76 million paper documents to be processed digitally every year, improving service, cutting processing times in half, and expediting taxpayer refunds by several weeks.
• Process digitally half of paper-submitted correspondence, non-tax forms, and notice responses. This will allow up to 60 million paper documents to be processed digitally every year. All paper documents — correspondence, non-tax forms, and notice responses — will be processed digitally by the 2026 filing season.
• Digitize up to 1 billion historical documents, giving taxpayers access to their data, and ultimately saving the IRS about $40 million in annual storage costs.