The Internal Revenue Service (IRS) is moving towards a “massive transformation” by embarking on an effort to process all tax returns digitally by 2025, agency officials said this week.

During remarks at an IRS facility on August 2, Treasury Secretary Janet Yellen stated that the “IRS is committing to digitally process 100 percent of tax and information returns that are submitted by paper as well as half of all paper correspondence, nontax forms, and notice responses.”

The move will also focus on “[digitalizing] historical documents that are currently in storage at the IRS,” stated Yellen.

At the same event, IRS Commissioner Danny Werfel said that “achieving this milestone will enable up to 76 million paper documents to be processed digitally every year.”

The move to digital processing will also empower taxpayers by giving them “new tools that will help them go paperless,” stated Werfel. “We are launching web-based solutions for the upcoming filing season that will allow virtually all correspondence to be uploaded by taxpayers rather than mail them.”

“That means that taxpayers will have the potential to digitally submit up to 125 million paper documents each year,” he said. “In addition, we will be adding more nontax forms and digital family formats that will make it easier for taxpayers,” added Werfel.

The paperless processing initiative will also cut down tax return processing times for the agency and expedite tax refunds to American taxpayers by several weeks.

Werfel said the modernization efforts are being made possible primarily due to funding from the Inflation Reduction Act, in which the agency received $80 billion of funding over ten years to enhance its workforce and modernization efforts.

The agency lost $20 billion of that funding stream under the Fiscal Responsibility Act of 2023 debt-ceiling agreement approved by Congress earlier this year.

“It is a very clear example of how with the right funding, and the right priorities, we can relatively quickly move the IRS operations decades forward,” Werfel said this week.

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Jose Rascon
Jose Rascon
Jose Rascon is a MeriTalk Staff Reporter covering the intersection of government and technology.