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Senators urge 2-D barcoding of paper-filed tax returns in 2023


Seconding a recent directive by the national taxpayer advocate, all 14 Republican members of the Senate Finance Committee wrote IRS Commissioner Charles Rettig to recommend that the Service implement 2-D barcoding to facilitate its processing of paper-filed individual tax returns.

The lead signer of the letter, dated May 24, was Sen. Mike Crapo, R-Idaho, the Finance Committee’s ranking minority member.

In an accompanying news release, the senators stated that “the IRS has signaled it is unlikely” to adopt National Taxpayer Advocate Erin Collins’s March 29 directive that the IRS move immediately to begin working with tax return software companies to enable taxpayers to print out a return that includes a scannable barcode containing all necessary information for the IRS to process the return, and for the Service to be able to scan those returns into its systems.

At least 17 state departments of revenue have used such technology since 2002, Collins said in the directive, also noting it has been used to capture retail point-of-sale transactions for much longer still. Between 50% and 60% of paper-filed federal returns are prepared with tax return software, Collins has reported.

Collins asked for a response by May 13 and a detailed plan by May 31 to implement a system for the 2023 filing season; whether the IRS has provided either or made any other direct response was not immediately clear.

However, in an April 7 Senate Finance Committee hearing, Sen. Rob Portman, R-Ohio, asked Rettig if additional funding to implement barcoding and modernize the IRS’s computer systems would help the Service clear its backlog of unprocessed returns, to which Rettig replied that “it would absolutely help,” adding, “It’s critical that we receive this.”

In their letter, the senators invoked the IRS’s backlog of paper returns as a reason to implement barcoding. As of April 29, the IRS had reported that the paper backlog stood at 15 million original returns and 3.5 million amended returns, the letter noted. Of these, 6.7 million were original individual returns and 2.5 million were individual amended returns. As of May 14, the IRS reported, it had 7.4 million individual returns filed on paper and 2.2 million amended individual returns awaiting processing.

Other reasons for barcoding all returns in the Form 1040 series, the senators said, included more promptly providing refunds to taxpayers and keeping taxpayers’ tax transcripts up to date with information they might need to obtain a loan or employment. In addition, barcoding “will likely pay for itself” by saving IRS personnel costs and avoiding paying interest on late refunds.

The letter also noted that an IRS budget request for 2017 estimated the cost of implementing barcoding technology at $8.4 million, while the American Rescue Plan Act, P.L. 117-2, allocated $1 billion for the IRS to modernize its information technology. As of the beginning of this year, only $98.5 million of that $1 billion had been spent, the letter stated.

— To comment on this article or to suggest an idea for another article, contact Paul Bonner at Paul.Bonner@aicpa-cima.com.



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