The delivery of public services by the government continues to evolve as citizens increasingly look for more personalized and seamless experiences. The last three years have acted as a tailwind, further pushing the demand and forcing government to rethink their service delivery models. The Internal Revenue Service’s (IRS) tax return processing function, the quintessential citizen service that touches every American household, is a powerful example of the innovation that can come from viewing public services through the lens of citizens.
In 2020 the IRS faced significant paper tax return processing backlogs. Tractor trailers full of paper were sitting at processing centers to be opened, scanned, sorted, properly inventoried and manually processed onsite. Tax return processing delays can impact the timing of refunds for taxpayers by as much as six months or longer. And although the increase in electronic filing of tax returns has greatly reduced the number of paper returns the IRS receives in an ordinary filing season, paper tax return volume is still significant. In alignment with the agency’s strategic goals to make the IRS more accessible, efficient and effective by continually innovating operations, adopting industry leading technology and increasing the efficiency and currency of technology investments, the IRS engaged IBM to digitize its tax year 2020 and 2021 paper tax return intake process to enable remote scanning, validation and processing.
The project went well beyond paper scanning and the automated extraction of data from paper tax returns. Enabled by artificial intelligence and a digital extraction tool, with IBM’s automated data validation process, the IRS’s Modernized e-File (MeF) system ultimately accepted 76% of paper tax returns processed without human intervention. In the end, working with the IRS, the team processed nearly 140,000 paper tax returns at a significantly higher rate of quality relative to human transcription — providing the IRS with the simplicity and efficiency needed to tackle its backlog challenge. Technologies used for the project also laid the foundation for the possibility of future anomaly and fraud detection during the tax return intake process — even for paper tax returns.
The IRS is at a self-defined inflection point. IBM’s IT modernization work with the IRS is a demonstration of the agency’s commitment to the delivery of more seamless citizen services. However, as with all digital transformations, there’s still work to be done. Backlogs of tax returns may unfortunately continue into the 2023 filing season, and IBM is prepared to continue assisting the IRS in this critical work for the American people.
In today’s rapidly changing, technology enabled world where citizens have become used to services only a click away, government agencies are under increasing pressure to keep pace. As we learned during this work with the IRS, digital transformation is a marathon, not a sprint. It’s steered by continuous technology innovation that presents new, more effective ways to conduct business and deliver services. Complex challenges and growing citizen expectations make it imperative that agencies maintain the accelerated pace of digital innovation to deliver value today and tomorrow.