The Internal Revenue Service (IRS) took longer to process paper tax returns during the 2026 filing season after the loss of experienced IT acquisition staff delayed updates to key processing systems, according to a Government Accountability Office (GAO) report publicly released on Aug. 10.
The IRS processed about 98% of the 177 million individual and business returns it received during the filing season, roughly matching last year’s performance. However, it entered the 2026 season with fewer staff and new tax changes.
GAO said that IRS staff processed 46% fewer individual paper returns and 80% fewer business paper returns than in 2025, even as the number of paper returns received fell 19% to 8.9 million.
According to the report, two systems that the IRS uses to convert paper returns into electronically readable formats were not ready to process tax year 2025 returns when the filing season began.
IRS officials told GAO that the systems “were not ready for the filing season start due to the recent loss of experienced IT acquisition staff,” which delayed procurement requirements needed to implement programming updates for new tax law changes and the transition to digital refund payments.
The IRS’s individual paper-processing system could not process tax year 2025 returns for the first six weeks of 2026. Its scanning system for business paper returns could not process tax year 2025 returns for the entire filing season, according to the report.
GAO said those problems contributed to longer processing times. Individual paper income tax returns took an average of 30 days to process, exceeding the IRS policy of processing them within 13 working days.
Processing times for paper Form 941 business returns – employers’ quarterly federal tax returns – increased to an average of 72 days, up from 45 days in 2025 and 25 days in 2024. IRS policy calls for processing them within 32 days.
The agency also faced staffing shortages among employees responsible for processing returns. Its Submission Processing unit ended the filing season with 8,111 employees, down 18% from 9,850 at the end of the 2025 filing season.
To compensate for its unavailable systems, the IRS sharply increased its reliance on outside vendors to scan paper returns.
“IRS sent about 3.7 million business paper returns to outside vendors for scanning during the 2026 filing season – a 725 percent increase from the 443,000 business paper returns that IRS sent last year,” GAO said.
By the end of the filing season, GAO said vendors had scanned nearly all the business paper returns they received and more than four times the 860,000 processed by IRS employees.