On Wednesday, the House Ways and Means Committee advanced a bipartisan bill that would require the IRS to adopt modern technology for tax return intake, setting the measure up for floor consideration.
The Barcode Automation for Revenue Collection to Organize Disbursement and Enhance (BARCODE) Efficiency Act (H.R. 6956) requires the IRS to adopt scannable code technology for electronically prepared, paper-filed returns. It also requires the agency to use optical character recognition technology to transcribe certain paper-filed returns.
As the Joint Committee on Taxation’s Tom Barthold noted during the January 14 markup, the requirements would only apply for individual tax returns and do not apply to corporate tax returns. However, the impact would still be large and come at a “negligible” cost, according to Barthold.
Last year, 94% of taxpayers e-filed their returns, according to Representative Rudy Yakym (R-IN), who headed up the bill introduction along with Representative Brad Schneider (D-IL). “That remaining 6% still represents 10 million taxpayer returns for the IRS to process,” Yakym added.
Yakym elaborated on why taxpayers may still file paper returns – even after initially preparing them electronically. He spoke about his personal experience last year when he prepared his return electronically but “the IRS portal kept kicking it back.” In his case, the portal came up with a lower tax liability than Yakym thought he owed. Rather than risking interest and penalties, he printed and paper-filed his return.
Schneider explained that under current IRS procedures, when a return is paper-filed, “employees sit at a keyboard and enter that data manually.” This is time-consuming and can introduce errors, he added, potentially resulting in “significantly delayed refunds going out to the taxpayers.”
States are already using scannable barcode technology, Schneider noted. And optical character recognition technology is “exactly what the post office uses to read handwritten addresses on envelopes.”
Barthold also drew attention to bill text calling for the changes to be put in place for returns “received on or after January 1 of the first calendar year beginning more than 180 days after the date of enactment.” That means should the bill be signed into law before July, the tech requirements will apply for 2026 tax returns filed in early 2027.
The committee advanced the bill 42-0. A Senate companion bill (S. 452) was introduced early last year, but has yet to be taken up.
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