IRS Paperless Processing: What Happened, Where Things Stand, and What It Means for Expat Filers
In August 2023, the IRS announced an ambitious “Paperless Processing Initiative” — a plan to allow taxpayers to go fully paperless by the 2024 filing season and to digitize all paper-filed returns upon receipt by the 2025 filing season. Funded by the Inflation Reduction Act, it was framed as a once-in-a-generation modernization of IRS infrastructure.
Two and a half years later, the initiative has been cancelled, replaced, and is still significantly behind its revised targets.
Here’s what actually happened — and what it means for U.S. expat filers.
The original Paperless Processing Initiative aimed to eliminate up to 200 million pieces of paper annually, cut processing times in half, and expedite refunds by several weeks. The plan had two phases: by filing season 2024, taxpayers would be able to digitally submit all correspondence and responses to notices; by filing season 2025, the IRS would digitize all paper-filed returns upon receipt.
The initiative also launched the Document Upload Tool (DUT), which allows taxpayers to securely upload documents to the IRS — though it still requires the IRS to manually process them on the back end.
The initiative ran into trouble almost immediately. The IRS spent nearly $61 million developing an in-house scanning system — and then, in April 2025, the IRS was directed to stop work on its in-house system and begin a new Zero Paper Initiative (ZPI).
The ZPI uses a phased approach to eliminate paper submissions of tax returns, correspondence, and information returns, with a goal of digitally processing 26 of the highest volume paper-filed tax forms for the 2026 filing season. The early results have not been encouraging. The interim ZPI contractor had only scanned approximately 7 percent of the 5.7 million forms received from May 2025 through early August 2025. A February 2026 TIGTA report concluded that while the pilots successfully proved the concept of paperless tax return processing, the IRS has yet to achieve the volume of returns necessary to meet goals set for the 2026 filing season.
For U.S. expats, IRS processing delays are not an abstract concern. Paper-based correspondence — amended returns, FBAR penalty responses, CP2000 notices — takes significantly longer to process than electronic filings, and the consequences of a delayed response can include compounding penalties and interest.
A few practical takeaways for the current environment:
File electronically wherever possible. E-filed returns are processed faster and are less likely to sit in a backlog. If your return requires paper filing due to complexity — certain international forms still cannot be e-filed — factor in extended processing times when planning.
Respond to IRS notices promptly and use the Document Upload Tool where available. The DUT allows you to respond to certain notices digitally rather than by mail, which reduces your exposure to mail processing delays.
Don’t assume a non-response means no problem. IRS processing backlogs mean that correspondence you sent months ago may not yet be in the system. If you’re waiting on a response to a notice or an amended return, follow up before assuming it has been resolved.
VAB clients: your bundle covers IRS correspondence handling. If you have a Supplemental or Full Care bundle with AET, correspondence handling is included. If you receive an IRS notice and aren’t sure what it means or how to respond, contact us before acting on it yourself.
The IRS paperless processing goal was ambitious, underfunded relative to the task, and has now been restructured twice. The Zero Paper Initiative may eventually deliver meaningful improvements — but expat filers should plan for the current reality: paper processing is still slow, backlogs persist, and electronic filing and prompt correspondence remain the best tools available to minimize exposure.
If you have questions about an IRS notice or need help navigating correspondence, AET’s Tax Specialists are available. Book a consultation or contact us directly.
