If you filed your tax returns via paper this year, you might be waiting a while for a refund.
That’s because the IRS still processes paper tax returns manually and doesn’t use basic scanning technology, according to national taxpayer advocate Erin M. Collins, head of the Taxpayer Advocate Service, an independent organization within the IRS that advocates on behalf of taxpayers.
In her most recent blog post, Collins called the system archaic and advocated for the IRS to update its technology.
“The IRS’s submission processing function today evokes images of what data transcription looked like in the 1960s—prior to the Information Age,” Collins wrote. “In the year 2022, this doesn’t just seem crazy. It is crazy.”
It gets worse: As of March 18, the IRS currently has a backlog of 15 million paper tax returns for the 2022 tax season, according to Collins. All of which, we know now, must be done manually, with workers typing out each digit and each letter.
Last year, the IRS received nearly 168 million tax returns in total, including roughly 17 million paper 1040 forms and over 4 million 1040-X forms, which account for individual returns. The agency also receives millions of paper business tax returns, according to the blog post.
In a statement to Coins2Day, the IRS said it has been reviewing bar code scanning and other viable options with tax industry partners.
“IRS technology needs, along with other core operations across the agency, have been underfunded for years,” the agency wrote. “The IRS wants to help taxpayers, and improving technology is a key aspect of that along with consistent, sustained funding increases for the agency.”
There are two leading types of scanning technology currently available that could work with paper tax returns: 2D barcoding and OCR, or optical character recognition, which recognizes text from a digital image, according to Collins.
A former national taxpayer advocate, Nina E. Olson, formally recommended that the IRS adopt the 2D barcoding method in 2004. That was 18 years ago.
“During the past two decades…the IRS has considered, rejected, proposed, reconsidered, partially implemented, and deferred the question of whether to implement scanning technology,” Collins wrote.
Although the federal government does not use basic scanning technology, states do. More than a third of U.S. States have been using the technology for returns since 2002. In the states where the method had been applied, the barcoding technology provides near 100% accuracy, according to Collins.
Processing paper returns are only one problem for the IRS this year, which has suffered more than its fair share.
On Jan. 24, the agency warned the 2022 tax season would be a mess. Aside from the scanning issue that Collins flagged, delays in the last two years have also been exacerbated by the COVID-19 pandemic, which caused staffing shortages.
Earlier this year, Senate Finance Committee Chairman Ron Wyden said Congress was considering how to make the filing season easier, including looking at ways to grant the IRS more money to fund taxpayer services. As of April 1, however, that hasn’t happened.
On March 29, a day before publishing her blog post, Collins issued a directive to the IRS instructing the bureau “to work with the tax software industry to implement 2D barcoding for next filing season.”
“If necessity can be the mother of invention, the unprecedented paper returns backlog resulting from the COVID-19 pandemic should spur the IRS to take immediate steps to automate the processing of paper tax returns,” Collins wrote. “The timely payment of tax refunds for millions of taxpayers is depending on it.”
