The IRS plans to use a portion of the increased funding it was allocated in the 2022 Inflation Reduction Act (IRA) to eliminate the need for taxpayers to use the mail for tax filings and correspondence by the 2025 tax season. According to the IRS’s announcement of its paperless processing initiative, for the 2024 tax season, taxpayers will have the option of going paperless. For the 2025 season, the agency will achieve paperless processing by digitizing all paper-filed returns when they are received. Those taxpayers who’d prefer to use paper returns and correspondence can continue to do so, but the IRS will be digitizing them when they are received so they can be processed electronically.

The IRS currently receives about 76 million paper tax returns and 125 million pieces of correspondence, notice responses and non-tax forms each year. According to the IRS, there are two primary reasons for the high volumes of paper documents it receives annually: taxpayers can’t submit many forms and correspondence beyond a Form 1040, U.S. Individual Income Tax Return, digitally and the IRS can’t digitally process the paper returns it receives. Thanks to the IRA, the IRS says it has made major progress in adopting technology that automates the scanning of millions of paper-filed returns.

In a recent speech on the initiative, IRS Commissioner Danny Werfel said the increased implementation of document scanning has been a “game changer” for the agency. While the IRS has been undertaking piecemeal document scanning for more than 35 years, the recent increase in funding made possible by the IRA has allowed the agency to take a more comprehensive approach to scanning, which will allow it to tackle the enormous volume of paper it receives daily.

Paperless processing will also allow the IRS to make the following improvements to taxpayer service:

• Eliminate the errors that result from manually inputting data from paper returns, which will speed up processing, reduce storage costs and allow the IRS to focus on customer service.
• Using data extracted from digital forms, IRS customer service employees will be able to answer taxpayer questions more quickly and accurately to resolve their issues. Customer service employees do not have easy access to information on paper returns and correspondence.
• When combined with an improved data platform, digitization and extraction will allow data scientists to implement advanced analytics and pattern recognition methods that will help identify wealthy individuals and large corporations using complex structures to avoid paying taxes.

2024 filing season
The IRS says that by the 2024 filing season, taxpayers will be able to digitally submit all correspondence, non-tax forms and notice responses. As a result, the agency estimates that more than 94% of individual taxpayers will no longer need to send mail to the IRS.

Taxpayers will also have the ability to e-file an additional 20 tax forms, which should allow for up to 4 million additional tax documents to be digitally filed each year. These forms include some of the most common forms that taxpayers use to file amended returns, including:

• Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return
• Form 941, Employer’s QUARTERLY Federal Tax Return
• Form 941 (PR), Employer’s Quarterly Federal Tax Return (Puerto Rican Version)

At least 20 of the most used non-tax forms will be made available in digital, mobile-friendly formats that will make it easy for taxpayers to complete and submit. The IRS explained that roughly 15% of Americans only have access to the internet through their mobile phones because they do not have broadband at home. Therefore, making forms available in mobile-friendly formats is key to serving those taxpayers.

2025 filing season
For the 2025 tax filing season the IRS plans on making an additional 150 of the most used non-tax forms available in a digital, mobile-friendly format. The IRS will also digitally process all paper-filed tax and information returns, which should improve customer service and cut processing times in half.

The IRS expects that half of paper-submitted correspondence, non-tax forms and notice responses will be processed digitally by 2025. All paper documents will be processed digitally by the 2026 filing season. Finally, up to 1 billion historical documents will be digitized to improve customer service and taxpayer access to their data. The digitizing of historical documents will also save about $40 million a year in storage costs.