The IRS spends millions of dollars each year digitizing paper tax returns, and storing them. While only six percent of individuals file tax returns by mail, the processing cost for those returns makes up 72% of the total processing costs per filing season.
The IRS set a goal to have all of the Forms 1040, 940 and 941 digitized by the 2025 filing season. The total received was approximately 517,000, however the IRS only achieved 5% of its goal. To understand the reason the IRS failed, read the full report, here.
It seems the easiest way to achieve this goal, rather than paying outside contractors to digitize paper returns, would be to require the returns be filed electronically for current year return, absent the inability to do so.
