The IRS wants to do away with paper tax returns. On Wednesday, the agency announced the Paperless Processing Initiative, which will allow taxpayers to digitally submit common tax forms, correspondence and responses to notices by the 2024 filing season, with a goal of “paperless processing for all tax returns” by the following year.
“For decades, taxpayers had to respond to notices for things like document verification through the mail, and IRS employees had to manually enter numbers from paper returns into computers one digit at a time, creating significant delays for taxpayers and challenges for IRS staff,” the agency said in a statement.
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The new initiative will cut processing times in half and expedite refunds by several weeks, according to the IRS, while eliminating up to 200 million pieces of paper a year. It comes courtesy of the Inflation Reduction Act of 2022, which increased the IRS’ budget by some $80 billion over 10 years.
“Thanks to the IRA, we are in the process of transforming the IRS into a digital-first agency,” Treasury Secretary Janet Yellen said in a briefing on Wednesday, adding that taxpayers “will always have the choice to submit documents by paper.”
In May, the IRS announced it would begin a free online tax-filing pilot program next year that could pave the way for a full-scale electronic filing system.
The agency estimated a direct filing system could cost anywhere from $64 million to $250 million annually, depending on how many people used it.
If it was utilized by 25 million taxpayers, the IRS calculated, the cost would be less than $10 a person. That’s compared with the $140 the average taxpayer pays to file their return each year with third-party companies like TurboTax and TaxSlayer.
IRS Commissioner Danny Werfel said the pilot program could launch as early as January 2024, though he didn’t provide details on what it would include or how many people would be able to use it.