IRS is trying to eliminate paper tax return backlog with digital scanning
Paper was once dubbed the "IRS's Kryptonite" by National Taxpayer Advocate Erin Collins in an earlier report to Congress.
And the Internal Revenue Service now must find a way to deal with paper returns and, ultimately, avoid another situation like the brutal, well-publicized backlog of paper returns that hit the agency after the COVID-19 pandemic took off three years ago.
The IRS announced Wednesday that it took an important step to expand its digital scanning of paper returns, a process that was pushed for years by tax professionals and the taxpayer advocate's office.
Collins wrote in an earlier report that the IRS has failed to make progress in eliminating its paper backlog because “its pace of processing paper tax returns has not kept up with new receipts.”
The IRS said in a statement Wednesday that the agency already has scanned more than 120,000 paper Forms 940 since the start of this year's tax season, "a twenty-fold increase compared to all of 2022."
The Form 940 is filed by employers and addresses payments made under the Federal Unemployment Tax Act. Along with state unemployment tax systems, the FUTA tax provides money for paying unemployment compensation to workers.
The IRS said its digital intake effort will expand soon to include scanning of Form 1040 and Form 941, another business-related form.
The IRS is aiming to digitalize more paper to be more efficient in its processing and storage of tax documents.
Most tax returns are filed electronically, not by paper. But millions of forms are still filed by paper, which the IRS said involves "a time-consuming process of manually handling and transcribing of the returns."
“We are making significant progress in this effort, and we look to expand scanning efforts dramatically in the months ahead and working toward a fully digital future,” said Harrison Smith, co-director of the IRS enterprise digitalization and case management office, in a statement.
Once the IRS can electronically process paper returns, taxpayers can expect to see a shorter processing time if they must file paper returns. E-filing is still recommended.
Deputy Treasury Secretary Wally Adeyemo said automating paper-based processing is one of the highest priorities, as the IRS upgrades its technology.
"The IRS currently enters the numbers from paper returns into its computers one digit at a time — like they’ve done since the 1960s," Adeyemo said in a statement.
"The IRS is on track to scan millions of returns this year, delivering significant service improvements for taxpayers, including faster processing and refunds.”
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As part of money received through the Inflation Reduction Act, the IRS has hired more than 5,000 new employees to improve service via the telephone and added staff to IRS Taxpayer Assistance Centers. The effort includes holding special Saturday hours on select days.
The IRS will offer walk-in service at its Detroit Taxpayer Assistance Center from 9 a.m. to 4 p.m. Saturday at 477 Michigan Ave.
Face-to-face Saturday help is being offered in March at a wide range of IRS taxpayer centers across the country.
Normally, the centers are open only on weekdays and taxpayers need appointments.
Additional Saturday walk-in hours are planned for April 8 and May 13.
During special Saturday hours on specific days, walk-ins will be accepted for all services routinely offered, except for making cash payments. Taxpayers cannot get their returns prepared for them at IRS Taxpayer Assistance Centers
Contact Susan Tompor: stompor@freepress.com. Follow her on Twitter @tompor. To subscribe, please go to freep.com/specialoffer.
This article originally appeared on Detroit Free Press: IRS tries to eliminate paper tax return backlog with digital scanning
