As the IRS continues to face a large backlog of tax returns, the agency is looking into technology that can scan and digitize paper tax filings to improve efficiency.
Lawmakers have called on the IRS to implement such technology, as the agency continues to use technology systems from the 1960s. As of late April, the IRS faced a backlog of about 23.5 million tax returns and pieces of correspondence stretching back to the 2020 tax season.
“Currently, the sorting of mail does not involve digitization/digitalization, but rather focuses on manual sorting based on size, batch, and visible indicators or codes,” the IRS’ new request for information says. “The IRS is looking to gather information on the current state of capabilities in the marketplace for this precise use case but would also like to understand mail-opening solutions that also include the potential for scanning/digitization at intake.”
The IRS said it will require technologies capable of handling a digital intake of over 100 million pieces of mail annually, including automating the opening and sorting of such a high capacity of mail.
Rep. Gerry Connolly, D-Va., called it a “no brainer” for the IRS to invest in 2-D barcoding technology during an April 21 House Oversight and Reform Committee’s Government Operations Subcommittee hearing.
Along with subcommittee Vice Chair Katie Porter, D-Calif., Rep. Connolly also introduced the Streamlining IRS Operations Act, which would require paper returns to include a scannable barcode to speed up IRS processing of millions of paper returns.
During the hearing, IRS Commissioner Charles Rettig noted that his agency is “in a very difficult situation” when it comes to technology modernization.
With the proposed digitization of paper returns, the IRS said in the RFI it hopes these efforts will “support improvements to taxpayer service, enhance the fairness of our compliance efforts, address Federal guidelines… and reduce teleworking challenges that emerged as a result of the COVID-19 pandemic.”
Responses to the RFI are due May 13.