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MSP #5: E-FILING AND DIGITALIZATION TECHNOLOGY

Failure to Expand Digitalization Technology Leaves Millions of Taxpayers Without Access to Electronic Filing and Wastes IRS Resources

TAS Recommendations and IRS Responses

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TAS RECOMMENDATION #5-1

Make and publish an e-file plan for the forms that taxpayers cannot e-file.

IRS RESPONSE TO RECOMMENDATION: The W&I e-File Services organization will continue to support the Digitalization Office and Information Technology as the lead stakeholders in the agency to determine the best way to move forward to expand IRS digitalization technology as outlined in the IRS Integrated Modernization Plan and required by the Taxpayer First Act. This includes developing an e-file plan for evaluating and prioritizing forms that taxpayers cannot currently e-file that is flexible to meet IRS priorities while continuing to respond to new legislative and other critical operational needs.

CORRECTIVE ACTION: The W&I e-File Services organization will continue to support the Digitalization Office and Information Technology as the lead stakeholders in the agency to determine the best way to move forward to expand IRS digitalization technology as outlined in the IRS Integrated Modernization Plan and required by the Taxpayer First Act. This includes developing an e-file plan for evaluating and prioritizing forms that taxpayers cannot currently e-file that is flexible to meet IRS priorities while continuing to respond to new legislative and other critical operational needs.

TAS RESPONSE: Developing and publishing an e-file plan that includes all forms that taxpayers cannot currently e-file will demonstrate the IRS’s commitment to reducing e-filing barriers for all taxpayers. Expanding e-filing options will provide better service to taxpayers and will reduce the IRS’s paper processing workload.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Adopted

OPEN or CLOSED: Open

DUE DATE FOR ACTION (if left open): 9/30/2022

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TAS RECOMMENDATION #5-2

Reevaluate the MeF System to allow for e-filing of all forms, schedules, and attachments.

IRS RESPONSE TO RECOMMENDATION: The IRS will perform a study to determine the feasibility of allowing all forms, schedules, and attachments to be electronically filed using the current MeF infrastructure based upon agency priorities and available resources (e.g., allocated funding, project schedule, programming resources).

Update: The IRS has established EDCMO to determine the feasibility of allowing all forms, schedules, and attachments to be electronically filed using the current MeF infrastructure or other platform. This will be based upon agency priorities and available resources (e.g., legislation, allocated funding, product schedule and programming resources). EDCMO should assume ownership of this recommendation to conduct the feasibility study. CAS SP will collaborate with them as needed. Proposed next update 12/31/2023

CORRECTIVE ACTION: The IRS will perform a study to determine the feasibility of allowing all forms, schedules, and attachments to be electronically filed using the current MeF infrastructure based upon agency priorities and available resources (e.g., allocated funding, project schedule, programming resources).

TAS RESPONSE: It is encouraging that the IRS will study the feasibility of allowing all forms, schedules, and attachments to be electronically filed. Expanding e-filing options will provide better service to taxpayers and will reduce the IRS’s paper processing workload.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Adopted

OPEN or CLOSED: Open

DUE DATE FOR ACTION (if left open): 12/31/2023

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TAS RECOMMENDATION #5-3

Expand the use of optical character recognition and 2-D barcoding to improve processing of paper filings and reduce processing transcription errors.

IRS RESPONSE TO RECOMMENDATION: The IRS is piloting the conversion of paper returns to a digital format in the Lockbox environment. The pilot is currently working through the technical and legal questions involved. The IRS is also exploring the expanded use of optical character recognition (OCR) for paper tax returns in a separate pilot project. As part of the IRS’s digitalization strategy, the IRS may consider these and other options for some forms, correspondence, and other paper submissions. Both barcoding and OCR technology have limitations and costs. For example, barcoding does not encode all information on complex returns, and OCR may misinterpret some information, requiring quality review and manual re-entry (as does the current manual transcription process).

CORRECTIVE ACTION: The IRS is piloting the conversion of paper returns to a digital format in the Lockbox environment. The pilot is currently working through the technical and legal questions involved. The IRS is also exploring the expanded use of optical character recognition (OCR) for paper tax returns in a separate pilot project. As part of the IRS’s digitalization strategy, the IRS may consider these and other options for some forms, correspondence, and other paper submissions. Both barcoding and OCR technology have limitations and costs. For example, barcoding does not encode all information on complex returns, and OCR may misinterpret some information, requiring quality review and manual re-entry (as does the current manual transcription process).

Update: The FS and the Legacy Branch is working with EDCMO to write requirements for the pilot program with two banks who are in the lockbox program. Currently the banks are submitting test cases in the Assurance Testing System (ATS) environment.

TAS RESPONSE: It is encouraging that the IRS is exploring the expanded use of OCR for paper tax returns through a pilot project and is willing to consider expanded use of barcoding on paper returns. All technologies have associated limitations and costs, but OCR and barcoding can be valuable tools for improving the IRS’s paper processing systems.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Adopted

OPEN or CLOSED: Open

DUE DATE FOR ACTION (if left open): 7/1/2022

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TAS RECOMMENDATION #5-4

Make permanent all temporary changes to electronic or digital signature requirements the IRS implemented in response to the COVID-19 pandemic.

IRS RESPONSE TO RECOMMENDATION: Not all temporary changes may be made permanent due to National Institute for Standards & Technology (NIST) requirements. However, the IRS continues its work towards identifying permanent signature solutions that allow for electronic submission of forms and digital transactions in a secure manner that meets NIST requirements. As we work toward permanent solutions, we are committed to maintaining as much flexibility as possible for electronic and digital signature requirements. We are taking specific actions in hopes of speeding up our e-Signature Program due to the increased need for virtual interactions during the pandemic.

CORRECTIVE ACTION: The IRS continues its work towards identifying permanent signature solutions that allow for electronic submission of forms and digital transactions in a secure manner that meets NIST requirements. As we work toward permanent solutions, we are committed to maintaining as much flexibility as possible for electronic and digital signature requirements. We are taking specific actions in hopes of speeding up our e-Signature Program due to the increased need for virtual interactions during the pandemic.

TAS RESPONSE: TAS understands the agreement in part and that the IRS is bound by NIST requirements. It is encouraging that the IRS is committed to maintaining as much flexibility as possible for electronic and digital signature requirements.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Partially Adopted

OPEN or CLOSED: Open

DUE DATE FOR ACTION (if left open): 12/31/2024

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