TIGTA Finds IRS Lags on Paperless Processing Goals
The Treasury Inspector General for Tax Administration (TIGTA) released Report No. 2026-408-003 on February 6, 2026, evaluating the IRS’s progress toward digitizing paper tax returns. The goal: eliminate paper processing and move toward a fully digital system. The reality? Progress has been slower and more complicated than expected.
The audit focused on whether the IRS could meet its target of paperless processing for individual tax returns by the 2025 filing season. While efforts have been made, the results show a significant gap between intention and execution.
The Audit Results Are In
The IRS did not achieve its revised goal to digitally process all paper-filed Forms 940, 941, and 1040 by the 2025 filing season. The effort initially included developing an in-house paperless processing system for the 2025 filing season, but in April 2025, the IRS halted work on that system and shifted direction to a new Zero Paper Initiative (ZPI).
The ZPI is intended to take a phased approach to eliminating paper submissions of tax returns, correspondence, and information returns, relying on third-party contractors to carry out the work. As part of this initiative, the IRS set a goal to digitally process 26 of the highest-volume paper-filed returns for the 2026 filing season. However, early progress has been limited, with the interim ZPI contract scanning only approximately 7% of the 5.7 million forms received from May 2025 through early August 2025.
Delays and Staffing Challenges Put Progress at Risk
The IRS experienced delays in implementing its solution for the 2025 filing season and has already encountered similar delays with the Zero Paper Initiative (ZPI), primarily due to concerns about the contractor selection process. In addition, contractors had difficulty hiring sufficient staff, as workers are often unwilling to wait the estimated four to five weeks required for IRS background clearances. As a result, TIGTA found that the IRS is at risk of failing to meet the federal mandate to digitize all historical records by 2030.
What TIGTA Recommends
TIGTA recommended that the IRS evaluate available options to prioritize scanning historical documentation, with the goal of reducing ongoing storage costs and meeting the federal mandate requiring all paper records to be converted to digital format by December 2030. This recommendation is tied directly to concerns that current scanning progress is not keeping pace with the volume of historical records that still need to be digitized.
The IRS agreed with the recommendation and stated that it will continue evaluating available options for scanning historical documents. At this stage, the focus remains on identifying approaches that allow the agency to increase scanning capacity while balancing existing resource constraints and ongoing processing demands.
What This Means For You
IRS processing changes don’t happen in a vacuum. If you want a clearer picture of how shifts like this could affect your filings, timelines, or compliance, schedule a consultation with Leone, McDonnell & Roberts.
