IR-2023-41, March 8, 2023 WASHINGTON — As part of ongoing transformation efforts, the Internal Revenue Service announced today the successful expansion of digital scanning. In a major step in the new Digital Intake scanning initiative, the IRS has already scanned more than 120,000 paper Forms 940 since the start of 2023, this is a twenty-fold increase compared to all of 2022. This effort will expand soon to include scanning of Forms 1040 as well as Forms 941. The scanning effort is part of a multi-form, multi-solution scanning initiative known as Digital Intake. "This expansion of scanning is another milestone for the IRS as we work to transform the agency," said Acting IRS Commissioner Doug O'Donnell. "We anticipate expanding scanning of more paper returns in the near future, saving time and creating efficiencies for taxpayers, the business community as well as tax professionals and the IRS." Digital scanning is part of a larger effort underway at the IRS to transform the agency and make improvements for taxpayers. As part of the Inflation Reduction Act, the IRS has taken steps to improve service, including hiring more than 5,000 new telephone assistors, adding staff to IRS Taxpayer Assistance Centers and holding special Saturday hours, expanding the Document Upload Tool and other features. The IRS has been using various technologies to scan tax returns for more than 35 years but recently took a leap forward by leveraging cutting-edge technologies via a revolutionary procurement approach to test their effectiveness. The capabilities enable the IRS to digitalize more paper for downstream processing and storage, resulting in greater efficiencies and improved data management outcomes. In addition to contracts with industry partners, the IRS is also working with Treasury's Bureau of the Fiscal Service and Lockbox Financial Agents to expand the reach of this work. Current scanning initiatives currently underway at the IRS cover: Digital Intake with Lockbox: Lockbox Financial Agents (FAs) are banks that specialize in payment processing but until now have not taken the extra steps to scan and process tax forms. Each year, millions of taxpayers send payments and associated tax forms to these Lockbox banks. The Lockbox project works to scan paper returns on-site, and e-file those returns. Digital Intake with Industry Partners: Like the work with the Lockbox Financial Agents, this process extracts machine-readable information from paper tax returns and then e-files those returns. These efforts with industry partners, via contracts issued by the IRS, allow the IRS to process forms that are also received directly by the IRS. "We are making significant progress in this effort, and we look to expand scanning efforts dramatically in the months ahead and working toward a fully digital future," said Enterprise Digitalization and Case Management Office Co-Director Harrison Smith. "We're building a foundation that will enable us to help taxpayers and businesses for years to come." The vast majority of tax returns are now filed electronically. But millions of forms are still filed by paper, which means a time-consuming process of manually handling and transcribing of these tax returns. By providing a capability to scan and electronically process paper returns, the IRS will be able to shorten the processing time for taxpayers who file paper returns. "Technology powers tax administration, and we have completed important work over the last year to help people get the assistance they need and reduce paper, in addition to improving the agency's underlying technology infrastructure," said IRS Chief Information Officer Nancy Sieger. "This is another positive step in the future technology direction for the IRS that includes improving service to taxpayers."