IRS’s Paper Backlog Problem Is Starting to Affect Taxpayers

The 2026 tax filing season has come to a close, leaving behind a trail of challenges and successes for taxpayers interacting with the IRS. One of the key takeaways from this tax season is the stark contrast in experiences between those who file electronically and those who still rely on paper forms.

The IRS has been struggling to reduce a significant paper backlog that has been costing the government hundreds of millions of dollars each year in interest payments. Critics argue that instead of improving, the issue has worsened over time, creating delays and frustrations for taxpayers who submit paper returns.

According to a memo from the Treasury Inspector General for Tax Administration (TIGTA) sent to IRS leadership before tax season, the inventory levels of returns and correspondence, particularly paper filings, had increased by 129% compared to before the pandemic. This backlog has been exacerbated by staffing reductions and the aftermath of the government shutdown.

Former IRS commissioner Danny Werfel highlighted the challenges faced by individuals dealing with the IRS through paper submissions. He mentioned that the process has become significantly more difficult than in previous years, leading to delays in refunds and responses to taxpayer inquiries. The IRS is required by law to pay interest to taxpayers if refunds are issued more than 45 days past the filing deadline, resulting in billions of dollars in interest payments in recent years.

The IRS has attributed the backlog to its outdated technological infrastructure, with some systems dating back to the 1960s. Efforts have been made to modernize the IRS’s processes, including digitizing paper returns through the help of contractors. However, the true impact of these technological upgrades on the paper backlog remains to be seen.

Despite the challenges faced by the IRS, Werfel commended the agency for its performance in other areas during the tax season, noting improvements made under the Biden administration. However, he emphasized that the paper backlog continues to be a critical issue that needs attention.

When approached for a response to the paper backlog and Werfel’s comments, the IRS declined to provide specific answers. Instead, they directed inquiries to resources reflecting their stance on the matter.

As the IRS prepares for the upcoming tax season, it is essential for the agency to address the paper backlog to ensure timely processing of returns and provide better service to taxpayers. The impact of modern technology on reducing this backlog will be closely monitored in the coming months, shedding light on the IRS’s progress in improving taxpayer experiences. The Internal Revenue Service (IRS) has indicated that paper tax returns for this year seem to be in the range of 3.5 million to 4 million, although they have not provided an exact figure. This is a significant decrease compared to last year when the IRS had already received around 5.8 million paper returns by this time. The drop in paper filings could be attributed to the IRS’s efforts to encourage taxpayers to file electronically, as processing paper returns can lead to longer wait times for refunds.

IRS CEO Frank Bisignano has emphasized the importance of modernizing the agency into a “digital-first agency,” also known as a “Digital IRS.” In written testimony to the Senate Finance Committee, Bisignano highlighted that outdated paper processes cost the IRS approximately $450 million in fiscal year 2025. He aims to reduce this cost to $20 million by 2029 through the implementation of automation, new policies, and redesigned processes.

While the IRS is pushing for more digital interactions with taxpayers, there are still situations where paper forms are necessary. For instance, amending a tax return often requires submitting a paper form. As of early May, the IRS was still processing amended 1040s that were received in February. Additionally, some taxpayers do not have access to the internet or computers, making paper filings their only option.

For taxpayers who still rely on paper forms, the IRS has provided a page where they can track the processing times for various types of paper forms and correspondences. This allows taxpayers to have a better understanding of when they can expect their returns to be processed.

Overall, while the IRS is making efforts to transition to a more digital-focused approach, paper filings are still a part of the process for many taxpayers. By keeping track of processing times and following IRS guidelines, taxpayers can ensure a smoother filing experience, whether they choose to file electronically or through paper forms.