Taxpayers will be able to submit all types of tax documents and other communications to the IRS digitally months earlier than originally scheduled under a new timeline for paperless taxpayer communications announced by Treasury Secretary Janet Yellen on Tuesday.
“The impact will be significant and far-reaching, and we will speed up processing times for the system as a whole,” Yellen says in a speech prepared for delivery at IRS headquarters in Washington.
The IRS has been underfunded for decades and was burdened with paperwork that prevented the agency from processing tax forms at a faster pace. Yellen’s speech is intended to signal that the 10-year IRS cash infusion included in the Democrats’ inflation-reducing bill is working.
“Taxpayers will save time and effort,” she says, as people can start submitting their documents now, rather than waiting until the originally scheduled timeframe of early next year.
The IRS’s plan to improve customer service for the 2024 filing season comes on the back of a series of proposals from congressional Republicans to reduce its funding.
The focus Tuesday will be on what the allocated money does for taxpayers.
Under the initiative, most people will be able to file everything but their tax returns digitally in 2024. As the IRS pilots the new free electronic tax filing system starting in 2024, the agency will be able to process everything, including tax returns , digitally. By 2025.
“The IRS will reduce errors and storage costs,” Yellen says.
The processing change is expected to cut the $40 million a year the agency spends to store more than a billion historical documents. The federal tax administrator receives more than 200 million paper tax returns, forms, pieces of mail and non-tax forms annually, according to the IRS.
The improvements are announced as the agency faces another effort to make precise cuts.
The aid bill passed by the House of Representatives on Thursday – which is unlikely to be approved by the Democratic-controlled Senate – would cut $14 billion from the country’s tax collection in exchange for providing aid to Israel. President Joe Biden said he would veto the bill if it reached his desk.
Cutting the IRS would cost taxpayers billions of dollars, not save money, according to independent budget analysts.
Yellen told CNN last week that linking Israeli aid to IRS cuts is “irresponsible.”