IRS Processing Improvements Could Bring Faster Tax Refunds

Can you expect faster tax refunds in the future? Recent customer service improvements and technology upgrades, including an accelerated IRS paper processing initiative, signal a new “normal” at the agency — where people will receive their federal tax refunds sooner than in the past. 

The funding for the IRS improvements, some of which recently helped the agency clear a pandemic backlog of over 23 million unprocessed tax returns, have come thanks to the Inflation Reduction Act (IRA). The IRA initially allocated $80 billion in funding for the IRS over ten years. And although some of those funds have been clawed back in recent legislation, the agency has a detailed plan for using the funds.

Some taxpayers already saw the benefits of IRS service improvements during the 2023 filing season. In an annual report to Congress, The National Taxpayer Advocate's office points to “quicker refunds for millions of taxpayers.”  

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Additionally, IRS Commissioner Danny Werfel said in a statement, that the IRS has “dramatically improved phone service thanks to more staff," Werfel added, "More walk-in services are available across the country. New digital tools have been added. And these are just the first steps."

IRS Paperless Processing Initiative

Most recently, the IRS announced an acceleration of its "paperless processing initiative," which will "expedite refunds by several weeks," according to the agency. Going paperless will make the tax season more convenient for taxpayers by allowing them to respond to more notices online. Paperless processing will also eliminate the need for IRS staff to manually enter taxpayer information.

• The IRS plans for taxpayers to be able to "digitally submit all correspondence, non-tax forms, and responses to notices" for the 2024 filing season.
• For the 2025 filing season, the IRS estimates an additional 150 forms will be mobile friendly.
• The IRS also plans to digitize up to 1 billion historical documents for the 2025 filing season. This will allow taxpayers to access their data and is estimated to save the IRS roughly $40 million per year in storage costs.

New IRS Agents and Faster Tax Refunds

IRS service improvements are also important. As of February 2023, approximately 23.5 million unprocessed tax returns had piled up in part due to the COVID-19 pandemic. That backlog of unprocessed returns caused millions of refund delays. (In some cases, it took years for refunds to hit people's bank accounts). However, the IRS previously announced that it cleared that backlog and did so at a faster-than-average rate. 

In recent years, the IRS hasn’t had enough staff to work through the unprocessed paper returns or answer taxpayer calls in a timely manner. Since then, the IRS has hired 5,000 new representatives to answer customer calls. 

• According to the Treasury Department's 2023 Filing season report card, the IRS effectively cut hold times this year by 85%. 
• Prior to the new staffing, average call hold times during tax season were 27 minutes. 
• Hold times are now only four minutes, meaning that many taxpayers can respond to IRS notices and resolve processing delays faster. 

More IRS.gov Tools

Increased IRS funding has allowed the IRS to expand the use of digital scanning. The agency hopes that continued advancements in scanning, and other planned technology upgrades, lead to even faster processing times for paper returns and tax refunds.

The IRS also wants to expand its Document Upload Tool, so you can respond to more types of IRS notices online. Contacting the IRS is also more convenient with a new callback feature. The feature allows you to choose a prompt for the agency to call you back instead of waiting on hold.

The IRS's $80 billion spending plan includes hiring 20,000 more employees over the next two years. That additional staffing, including highly trained IRS agents, could mean more representatives available to answer phones, review, and audit tax returns. That could result in even shorter call waiting times, faster tax refund processing, and possibly more audits for large corporations and wealthy taxpayers.

Where’s Your Refund?

And, if you’re wondering about the status of your federal tax refund for this year, you can use the Where’s My Refund portal, which is available on the IRS website. Although the average tax refund is lower this year compared to last, it is still $2,878 (as of April 7).