IRS Staff Losses Complicate Paperless Goal, Watchdog Warns

The IRS’s goal to modernize how the agency handles paper hinges on its funding, staffing, and contractors—challenges the agency has yet to overcome, the agency watchdog said.

The Trump IRS wants to implement its zero-paper initiative in phases with its tax forms, information returns, and correspondence. It’s also using the help of government contractors. The IRS spent about $9 million in contracting expenses from May through December 2025, according to the Treasury Inspector General for Tax Administration in a report Tuesday.

But staffing challenges are impacting both the IRS and contractors. During the 2026 filing season, IRS submission processing management told TIGTA that the contractors weren’t ready to handle the volume of tax returns so the agency had to conduct more processing in-house. The IRS had 17% less staff than it did in 2021.

The staffing losses combined with the shrinking modernization funds from the 2022 tax-and-climate law will limit what the IRS can achieve in its paperless processing initiative, TIGTA said. Extra funds to help modernize and go after tax cheats initially was at almost $80 billion but has since shrunk to $26 billion after Republican clawbacks.

“Without addressing these challenges, the IRS’s modernization efforts may fall short of expected results,” TIGTA said.