The IRS Is Swamped With Paper Tax Forms. Will That Delay Your Refund?

The just-wrapped 2026 tax filing season served as an important reminder that a taxpayer's experience with the IRS increasingly depends on whether they file electronically or still rely on paper.

The IRS has made limited progress in reducing a paper backlog that costs the government hundreds of millions of dollars per year in interest — and critics say the issue is getting worse, not better, as time goes on.

In a memo to IRS leadership heading into tax season, the Treasury Inspector General for Tax Administration, or TIGTA, cautioned that "overall inventory levels in key return processing programs have increased due to efforts to reduce staff and the government shutdown." At that time, IRS inventories of returns and correspondence, much of them paper, were 129% larger than before the pandemic.

They were also up more than 32% from December 2024, before the IRS lost more than a quarter of its workforce under the Trump administration's push to cut federal spending. Despite thinner staffing levels, IRS officials insist the agency still delivered "premier service" to taxpayers this tax season.

But former IRS commissioner Danny Werfel says the paper backlog is where people could start to see the cracks.

"I've heard in various conversations that I've had throughout our tax system, whether it's preparers or filers or other interested stakeholders, that ... if you are dealing with the IRS in paper, it is materially more challenging than it has been in the previous few years," Werfel tells Money.

If this inventory isn't processed in a timely way, refunds can be delayed and taxpayers can find themselves stuck waiting months or even years for help and answers. This gets expensive fast: Federal law typically requires the IRS to pay taxpayers interest when refunds are issued more than 45 days past the filing deadline. According to the TIGTA report, the IRS paid over $2.6 billion in interest in the 2025 processing year.

In the past, the IRS blamed its "outdated technological ecosystem" for the backlog; in 2023, the agency reported that some of its systems for processing tax returns date back to the 1960s. Although paper tax returns have historically required manual entry by IRS employees, TIGTA noted that the IRS recently selected four contractors to digitize part of its stack of paper-filed returns.

The agency clearly believes modern technology is the solution. But in the next few weeks, Werfel says he'll be eager to see data on the status of the paper backlog. (In an email to Money, TIGTA said an interim report on the 2026 filing season will be released in June.)

"The IRS did surprisingly well in a variety of different areas. The technology works, and for many taxpayers, they had a smooth filing season," Werfel says, attributing the success in part to Biden-era technology improvements. "Where there really [are] more acute performance challenges is with respect to the paper backlog."

When Money reached out to the IRS for an update on the paper backlog and a response to Werfel's comments, spokesperson Stacy Engle declined to answer questions. Instead, she directed us to three resources that reflect the agency's response to the issue.

Filing statistics through the week of May 1 show that about 140 million returns were received through electronic filing. Paper returns appear to be in the ballpark of 3.5 million to 4 million; however, the IRS would not confirm an exact number.

This time last year, the IRS had already received about 5.8 million paper returns, suggesting that taxpayers could be hearing the agency's pleas for them to make the switch. (The IRS has been warning taxpayers that filing a paper tax return could lead to a wait of six or more weeks to get a refund.)

Engle also steered Money to written testimony from IRS CEO Frank Bisignano to the Senate Finance Committee. In it, Bisignano wrote that the government's objective is to modernize the IRS into a "digital-first agency" or, as he also calls it, a "Digital IRS."

He said "outdated paper processes" cost the IRS roughly $450 million in fiscal year 2025, which he aims to cut to $20 million by 2029 using automation, new policies and redesigned processes.

But engaging with the IRS digitally can't happen in every situation. Amending a tax return, for example, can require paper, and as of early May, the IRS was still working through amended 1040s received in February. Other taxpayers lack internet or computer access and rely on paper as a result.

Engle pointed Money to a page tracking processing times for various types of paper forms and correspondences. These are some of the notable paper processing times as of May 1:

The data is mixed: While the IRS appears to be on top of individual tax returns, identity theft victims who submitted Form 14039s are facing some of the longest waits.

Overall, it's still too early to tell how much the paper backlog may swell this year. But what the IRS isn't saying is almost as interesting as what it is. Although the IRS wants to keep the conversation focused on its digital efforts, those who are a bit more old-fashioned — or forced to use paper for whatever reason — are growing impatient.

As National Taxpayer Advocate Erin Collins said in her "2026 Objectives" report to Congress, the IRS should provide taxpayers with several convenient options for filing forms and corresponding with the agency.

"'Digital first' does not mean 'digital only,'" Collins wrote. "Digital access should expand service, not limit it. Taxpayers should still be able to call, walk in or use mail services."