(And Other Things I Never Thought I'd Say)
Every filing season, tax professionals ask themselves a few important questions:
Thanks to a recently released Treasury Inspector General for Tax Administration (TIGTA) report, we have some early answers about the 2026 filing season.
And surprisingly, the biggest story isn't refunds.
It's that the IRS has finally decided to modernize.
The catch? They're expecting taxpayers to come along for the ride.
"The IRS has finally decided to modernize. The catch? They're expecting taxpayers to come along for the ride."
Let's start with the change most likely to affect everyday taxpayers.
Beginning with the 2026 filing season, the federal government has largely moved away from issuing paper refund checks. The IRS implemented new procedures requiring most refunds to be delivered electronically through direct deposit, with limited exceptions available through a waiver process.
To support the transition, the IRS:
Tax professionals everywhere can probably hear the phone calls coming already:
"Wait... what do you mean they're not automatically mailing me a check?"
The answer, increasingly, is that the IRS would really prefer not to.
And honestly, if the IRS is finally dragging itself into the digital age, it's only fair that taxpayers come along for the ride.
For years, taxpayers have adapted to forms, notices, and procedures that sometimes felt frozen in time. Now the IRS is pushing online accounts, electronic filing, direct deposit, automated processing, and even AI-powered tools. It would be a little difficult to sell everyone on modernization while still mailing refund checks like it's 2024.
And in a development that will surprise absolutely no one who has ever received an IRS notice, TIGTA found that the IRS's new CP53E notice may be confusing to some taxpayers. The notice is sent when there is an issue with direct deposit information, but TIGTA noted that some taxpayers could receive it even when they never requested direct deposit in the first place. The IRS generally agreed and plans to revise the notice.
This is where the report gets interesting.
While the rest of the business world is trying to figure out how to implement artificial intelligence, the IRS is still working through the prerequisite step of teaching paper that it no longer needs to exist.
That may sound like a joke, but it's actually one of the biggest stories in this year's filing season report.
The IRS continues expanding its Zero Paper Initiative, which aims to convert paper-based processes into digital workflows. As of February 28, more than 76,000 paper-filed Forms 1040 had been scanned and processed electronically. The agency is also expanding automation for amended returns, with more than 36,000 amended returns processed automatically through new systems.
To be fair, you can't teach a computer to think until you first teach it not to rely on fax machines.
And in one of the more surprising developments, the IRS has begun rolling out Taxpayer 360, a platform that includes AI-enabled tools designed to help employees research Internal Revenue Manual guidance and answer taxpayer questions more efficiently. More than 9,000 employees had access to the initial release as of March 2026.
For those of us who work in tax, seeing the words “IRS” and “AI-powered tools” in the same paragraph is a little like seeing your grandfather join TikTok.
Unexpected, slightly confusing, but probably inevitable.
The report paints a picture that will feel familiar to just about every business owner right now: lots of technology projects and not enough people.
The IRS missed hiring targets in several critical areas. As of late February, the Submission Processing division had onboarded only 42% of its approved hires, while Accounts Management had onboarded 66% of approved positions. The agency even reassigned approximately 800 employees from other departments to help address processing workloads.
In other words, the IRS is trying to improve service, modernize decades-old systems, and process millions of returns while still filling open seats.
If that sounds familiar, it's probably because many private businesses are doing exactly the same thing.
The IRS received approximately 51.5 million individual tax returns and processed about 50.9 million of them by the end of February. The average refund climbed to $3,742, up about $360 from the prior year. Electronic filing continues to dominate, with approximately 99% of returns submitted electronically.
Those numbers are encouraging.
Of course, modernization doesn't solve everything overnight.
Amended returns remain one of the biggest pain points in the system. More than 70% of amended return inventories were considered “overaged,” meaning they've exceeded the IRS's timeliness goals for processing.
Translation:
If your return is straightforward, life is probably pretty good.
If we're correcting something after the fact, patience remains an important tax planning strategy.
The IRS reports that it answered 3.2 million taxpayer calls through February and achieved a 73% Assistor Service Rate. Average wait times increased to 8.2 minutes compared with 3.4 minutes during the comparable period last year.
Now for my favorite accounting observation.
The IRS met its service goal.
The catch?
The goal was reduced from 85% in 2025 to 70% in 2026.
That's a little like celebrating that you finished a marathon after moving the finish line closer.
Technically true.
Still worth noting.
If there's one area where the IRS continues to invest significant resources, it's fraud prevention.
The agency identified approximately 1.3 million potentially identity-theft-related returns, representing nearly $9.9 billion in potentially fraudulent refunds. Of those, approximately 19,000 were confirmed as identity theft cases, protecting roughly $138.5 million in refunds.
The IRS also issued 6.6 million Identity Protection PINs (IP PINs) for the 2026 filing season. These six-digit numbers make it significantly harder for identity thieves to file a fraudulent return using your Social Security number.
If you've never looked into getting an IP PIN, it may be worth discussing with your tax professional.
At this point, secure digital identity appears to be just as much a part of modernization as direct deposit and online accounts.
My biggest takeaway from this report is that the IRS is no longer just trying to process tax returns.
It's trying to reinvent how it processes tax returns.
We're seeing more automation, more digital services, more online account functionality, fewer paper-based processes, and even the early use of AI tools. At the same time, staffing shortages and inventory backlogs continue to create challenges.
For taxpayers, the practical advice remains pretty simple:
The IRS is improving.
It's modernizing.
It's digitizing.
And for those of us who work in tax, that's a sentence we sometimes have to read twice before believing ourselves.
The 2026 filing season report suggests that the IRS has finally accepted what the rest of the business world figured out years ago:
Paper isn't a long-term strategy.
For years, taxpayers have waited for the IRS to modernize.
Be careful what you wish for.
Apparently, modernization is now a group project.
Whether that's good news or not probably depends on how attached you are to paper checks, paper forms, and paper filing cabinets.
