Janet Yellen: The IRS plan to let taxpayers digitally submit documents is ahead of schedule

WASHINGTON (AP) — Taxpayers will be able to submit all sorts of tax documents and other communications to the IRS digitally months earlier than originally planned under a new timetable for paperless taxpayer communications announced Tuesday by Treasury Secretary Janet Yellen.

“The impact will be significant and far-reaching,” Yellen says in a speech prepared for delivery at IRS headquarters in Washington, “and we’ll speed up processing times for the system as a whole.”

The IRS has endured decades of underfunding and been overloaded with paper documents that prevented the agency from processing tax forms at a faster pace. Yellen‘s speech is intended to signal that the infusion of cash for the IRS over 10 years included in the Democrats’ Inflation Reduction Act is working.

“Taxpayers will save time and effort,” she says, as people can begin submitting their documents now, instead of waiting until the originally planned time frame of early next year.

The IRS plan for customer service improvements for the 2024 filing season comes against the backdrop of a series of proposals by congressional Republicans to reduce its funding.

Tuesday’s focus will be on what the allotted funds are doing for taxpayers.

Under the initiative, most people will be able to submit everything but their tax returns digitally in 2024. As the IRS pilots its new electronic free file tax return 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change is expected to cut back on the $40 million per year that the agency spends storing more than 1 billion historical documents. The federal tax administrator receives more than 200 million paper tax returns, forms and pieces of mail and non-tax forms annually, according to the IRS.

The improvements are being announced as the agency faces yet another effort to exact cuts.

An aid bill that passed the House on Thursday – unlikely to be approved by the Democratic-controlled Senate – would cut $14 billion from the nation’s tax collector in exchange for providing assistance to Israel. President Joe Biden has said he would veto the bill if it reaches his desk.

The IRS cutback would cost taxpayers billions of dollars, not save money, according to independent budget analysts.

Yellen said on CNN last week that tying Israel aid to cuts at the IRS is “irresponsible.”