The recently wrapped 2026 tax filing season served as an important reminder that taxpayer information about the IRS is becoming more and more dependent on whether they file electronically or still rely on paper.
The IRS has made limited progress in reducing the backlog of paperwork that costs the government hundreds of millions of dollars a year in interest — and critics say the issue is getting worse, not better, as time goes on.
In a memo to IRS leadership heading into tax season, the Treasury Inspector General for Tax Administration, or TIGTA, warned that “backlog levels in key return processing programs have increased due to downsizing efforts and government shutdowns.” During that time, IRS returns and books, many of which are paper, were 129% larger than before the pandemic.
They are also up more than 32% since December 2024, before the IRS lmore than a quarter of its employees are under pressure from the Trump administration to cut government spending. Despite the reduced staffing levels, IRS officials insist the agency is still delivering “excellent service” to taxpayers this tax season.
But former IRS commissioner Danny Werfel says the backlog is where people can start to see the cracks.
“I’ve heard in various conversations that I’ve had throughout our tax system, whether it’s preparers or filers or other interested parties, that … when you’re dealing with the IRS on paper, it’s a lot more challenging than it was a few years ago,” Werfel tells Money.
If these lists are not processed in time, refunds can be delayed and taxpayers can find themselves stuck waiting months or even years for help and answers. This gets expensive quickly: Federal law generally requires the IRS to pay taxpayers interest when a refund is issued more than 45 days past the filing deadline. According to the TIGTA report, the IRS paid more than $2.6 billion in interest in the 2025 processing year.
In the past, the IRS blamed its “outdated technology ecosystem” for the backlog; In 2023, the agency reported that some of its tax return processing systems date back to the 1960s. While paper tax returns have historically required manual entry by IRS employees, TIGTA noted that the IRS recently selected four contractors to digitize a portion of its paper return stack.
This institute clearly believes that modern technology is the solution. But in the next few weeks, Werfel says he’ll be eager to see details on the status of the paper’s backlog. (In an email to Money, TIGTA said an interim report on the 2026 filling season will be released in June.)
“The IRS is doing amazingly well in a variety of different areas. The technology is working, and for many taxpayers, they’ve had a smooth filing period,” Werfel said, attributing the success in part to the technological advancements of the Biden era. “There really is [are] The most difficult operational challenges are around the paperwork backlog.”
When Finance contacted the IRS for an update on the paperwork backlog and a response to Werfel’s comments, spokeswoman Stacy Engle declined to answer questions. Instead, he directed us to three resources that show the agency’s response to the issue.
Filing statistics for the week of May 1 show that nearly 140 million returns were received through electronic filing. Paper returns appear to be in the ballpark of 3.5 to 4 million; However, the IRS will not confirm the exact number.
This time last year, the IRS had already received about 5.8 million paper refunds, suggesting that taxpayers may be heeding the agency’s requests for change. (The IRS has been warning taxpayers that filing tax returns can result in waiting six weeks or more for a refund.)
Engle also directed Money to written testimony from IRS CEO Frank Bisignano to the Senate Finance Committee. In it, Bisignano wrote that the government’s goal is to make the IRS a “digital-first agency” or, as he calls it, the “Digital IRS.”
He said “outdated paper processes” are costing the IRS about $450 million in fiscal year 2025, which he aims to reduce to $20 million by 2029 through automation, new policies and redesigned processes.
But engaging with the IRS digitally won’t be possible in all cases. Amending a tax return, for example, can require paper, and as of early May, the IRS was still processing an amended 1040 received in February. Some taxpayers do not have internet or computer access and rely on paper as a result.
Engle pointed to Imili on page trace processing times for different types of paper forms and books. These are some of the notable paper processing times from May 1:
The data is mixed: Although the IRS appears to be on top of individual tax returns, crime victims who have submitted Form 14039s are facing a very long wait.
Overall, it is too early to say how much of the paper shortfall is likely to be filled this year. But what is the IRS this is not the case to say is almost as interesting as it is. While the IRS wants to keep the conversation focused on its digital efforts, those who are a little older — or forced to use paper for whatever reason — are getting impatient.
As National Taxpayer Advocate Erin Collins said in her “2026 Goals” report to Congress, the IRS should provide taxpayers with several easy options for filling out forms and complying with the agency.
“‘Digital first’ does not mean ‘digital only,'” Collins wrote. “Digital access should enhance service, not limit it. Taxpayers should still be able to drive, log in or use mail services.”
