- In 2025, the IRS indefinitely paused or cancelled many existing modernization efforts and announced a new modernization plan framed around nine initiatives.
- Details of this new modernization plan have not been made public.
- The Direct File program, which provided free public tax filing software, has been eliminated.
DATA IN THE SPOTLIGHT
Data highlights:
For decades, an underfunded IRS has struggled with outdated technologies and business systems. The agency remains inundated with paper documentation, including over 10 million returns filed on paper each year. Paper documents are often processed by hand, and backlogs result in stacks of paperwork filling rooms in IRS facilities. The IRS lacks key online tools that would allow taxpayers to interact with the agency digitally; scores of IRS forms can still only be submitted on paper. Many IRS IT systems cannot communicate with one another, making it difficult for employees to access all the information they need to assist taxpayers.
Using funding provided by the 2022 Inflation Reduction Act (IRA), the IRS moved forward with a plan to modernize the agency. Over the following two years, progress on that plan was slow, but substantial. The IRS released new online and mobile-friendly tools and accounts systems, developed new data analytics capacities, and piloted free public tax preparation software known as Direct File. Analyses by TIGTA and the GAO found that the agency was mostly meeting its modernization milestones. A GAO report on the 2024 filing season highlighted new mail sorting and scanning machines and improved tools for electronic document submission. The agency was “integrating its roughly 60 separate case management systems” under an initiative called “Taxpayer 360,” allowing customer service representatives to see taxpayer information in a centralized interface. The agency also was “scanning more than half of paper-filed returns and forms,” according to the National Taxpayer Advocate (NTA).
Nonetheless, serious issues remained. Even documents that could be submitted electronically by the taxpayer could not always be processed electronically by the agency; instead, the IRS printed these documents to route them to the appropriate employee. An initial post-IRA goal to achieve paperless processing of all tax returns by 2025 was scaled back.
Alongside these perennial issues are evolving challenges, particularly the uses and risks of AI for tax administration, including in identity verification.
Scroll down for a documented timeline of IRS modernization since 2025 ↓
You can also download a spreadsheet with the full list of available data, including the range of years for which data is available.
The IRS Spotlight © 2025 by The Brookings Institution is licensed under CC BY 4.0