As part of its Digital Intake scanning project, the IRS expects to shortly begin scanning 1040 income tax returns for individuals as well as 941s for an employer’s quarterly tax returns, which represents a twentyfold increase over the same period in 2022.
Since the beginning of 2023, the Federal Revenue Agency has scanned over 120,000 paper Forms 940 for filing unemployment taxes. In an earlier report to Congress, National Taxpayer Advocate Erin Collins referred to the paper as the IRS’s Kryptonite.
IRS Digital Scanning
The Internal Revenue Service must now find a mechanism to process paper returns and, eventually, avoid a situation similar to the severe, well-publicized backlog of paper returns that plagued the agency after the COVID-19 outbreak began to spread three years ago.
Tax experts and the office of the taxpayer advocate have lobbied for years for the IRS to expand its digital scanning of paper returns.
Collins stated in a previous report that the agency has failed to eliminate its paper backlog because its rate of processing paper tax returns has not kept pace with new receipts.
Since the start of this year’s tax season, the IRS has scanned more than 120,000 paper Form 940, a twentyfold increase compared to all of 2022, according to a statement issued by the agency on Wednesday.
Form 940 is filed by employers and pertains to Federal Unemployment Tax Act payments. In addition to state unemployment tax systems, the FUTA tax provides funds for the payment of unemployment benefits to workers.
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Digitally Transformed Paper
The IRS has announced that its digital intake initiative would soon be expanded to include the scanning of Form 1040 and Form 941, another business-related form. The agency intends to digitize more paper in order to process and store tax papers more efficiently.
The majority of tax returns are filed digitally, not on paper. Nonetheless, millions of forms are still submitted on paper, which, according to the IRS, requires a time-consuming process of manually managing and transcribing the returns.
Once the IRS can electronically process paper returns, taxpayers who must file paper returns should anticipate a reduction in processing time. Electronic filing is still advised. As the IRS enhances its technology, automating paper-based processes is a top priority, according to Deputy Treasury Secretary Wally Adeyemo.
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