The IRS says it could run out of money to support modernization

The IRS has expressed concerns that it may need to scale back its business system modernization initiatives by fiscal 2026, as stated in its annual update to the IRA Strategic Operating Plan. The agency reported that it relies on IRA funds for digitization and other technological advancements, but the appropriations for fiscal years 2023 and 2024 did not allocate funds for these modernization efforts. Once the IRA funds are depleted, the IRS anticipates that automated taxpayer solutions will be reduced, and cyber and cloud-related work will remain incomplete, thereby increasing the risks of cyberattacks and system failures.

IRS Commissioner Danny Werfel emphasized the importance of secure and stable funding to continue technology modernization and improve taxpayer services. Over the past year, IRA funding has enabled the IRS to enhance online services, notably improving the “Where’s My Refund” tool, which has led to fewer calls and reduced the need for paper processes.

Despite these advancements, the IRS is cautious about celebrating too soon, acknowledging that significant work remains, especially in light of the impending funding shortfall. By fiscal 2025, the IRS plans to accelerate various digitization projects, expand online services, modernize foundational technologies, and enhance data security from the intake of tax returns and information systems. Additionally, the IRS aims to make up to 150 non-tax forms available in digital, mobile-friendly formats and to enable virtual scanning at the point of entry for all paper-filed tax and information returns.

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