Sen. Chuck Grassley (R-Iowa), former chairman and current member of the Finance Committee, joined Finance Committee Ranking Member Mike Crapo (R-Idaho) and his Republican colleagues to urge Internal Revenue Service (IRS) Commissioner Chuck Rettig to implement 2-D barcoding for paper returns in the 2023 tax filing season – technology that would help to efficiently process millions of tax returns and speed up taxpayer refunds.
Processing paper returns is a tedious, time-consuming process, and the pandemic led to an unprecedented backlog of paper returns at the IRS. As the senators note in the letter, “For taxpayers due a refund, an IRS backlog means refund delays and possible financial hardship. For others, the backlog means the unavailability of tax transcripts necessary to secure a loan or employment.”
In March, the National Taxpayer Advocate (NTA) recommended the IRS implement 2-D barcoding for paper tax returns, which would concisely encode relevant data and import it in digital form into the IRS’s computer systems, bypassing time-consuming manual data entry and streamlining the process. However, the IRS has signaled it is unlikely to do so.
In the letter, the senators make several arguments in favor of implementing 2-D barcoding:
- Millions of taxpayers need their refunds. 2-D barcoding will help efficiently process millions of tax returns and speed up taxpayer refunds.
- It is affordable and the IRS has the funds. The American Rescue Plan of 2021 earmarked $1.86 billion toward the IRS to, among other things, provide taxpayer assistance, including $1 billion specifically for IT modernization. Entering into 2022, only $98.5 million of the $1 billion was spent. In 2017, the IRS estimated the cost for implementing 2-D barcoding technology was $8.3 million.
- There is an urgent need to address the problem now, not in five years.
- Stop chasing technological perfection. If we were to wait for the promise of better technology, nothing would ever get implemented. 2-D technology has been tested and is less expensive, and many states currently use it.
- 2-D barcoding will likely pay for itself. Faster processing means faster refunds. The result will be improved taxpayer outcomes and a reduction in the billions of dollars the IRS pays in interest.
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