2026 Filing Season: Preliminary Observations on IRS Performance

Executive Summary

The GAO’s preliminary observations on the 2026 IRS filing season describe continued strain on IRS processing and customer service driven by fewer staff, unavailable processing systems, and operational changes (including phasing out paper-check refunds in response to a 2025 executive order). IRS processed about 98 percent of roughly 177 million returns during the 2026 filing season (January 26–April 15, 2026), but paper-return processing slowed substantially (about one month on average for individual paper returns, roughly twice the prior year). IRS sent about half of paper returns to outside vendors for scanning and electronic submission, and as of early May 2026 had sent about 4.2 million notices requesting banking information to issue refunds by direct deposit.

For contractors, the event signals both near-term demand shocks and heightened compliance expectations across multiple market segments named in the Tags: Document Processing Services; Document Scanning and Imaging; IT Services; Tax Administration Support; and Business Process Outsourcing. Key operational effects cited by GAO include increased use of automated self-service (automation answered 41% of calls, up from 34%), longer average phone wait times (8 minutes vs. 3 minutes in 2025), fewer in-person interactions (about 15% fewer taxpayers served in person), and reliance on external vendors to process paper returns. Contractors should prioritize scalable, compliant scanning and processing capacity, IT stabilization and modernization support, and secure customer-service/BPO offerings that align with IRS security and data-protection regimes noted in the Tags.

Impact Matrix

Document Processing Services

• Risk Level: High
• Opportunity: Increased demand for vendor scanning and ingestion services given IRS reliance on outside vendors for about half of paper returns. Specific opportunities TBD pending solicitation language. Applicable NAICS codes (from Tags): 541214, 561110, 561499.
• Timeline: 2026 filing season (January 26–April 15, 2026); related notices/metrics through early May 2026.
• Action Required: Prepare to demonstrate scalable intake/scanning throughput, secure chain-of-custody controls, and rapid turn-up capability to absorb paper-return backlogs. Ensure capacity planning includes contingency for longer processing times and coordination with IRS timelines for direct-deposit notices.
• Competitive Edge: Present validated proof of performance for high-volume, time-sensitive document intake with compliant handling (see compliance surfaces), and offer modular surge capacity contracts or clear surge-pricing models.

Document Scanning and Imaging

• Risk Level: Critical
• Opportunity: Immediate need for high-volume, secure scanning/imaging services since IRS routed roughly half of paper returns to outside vendors and paper processing slowed to ~1 month per individual return. Specific opportunities TBD pending solicitation language. Relevant NAICS: 561110, 561499.
• Timeline: 2026 filing season and near-term follow-on activity (metrics reported through early May 2026).
• Action Required: Certify and document secure handling and transmission practices aligned with IRS requirements; be able to scale quickly to address current processing latency. Coordinate SLAs for scanning-to-ingest timeliness that align with IRS refund-notice timelines (including the 30‑day response window referenced in the Summary).
• Competitive Edge: Offer turnkey scanning + secure electronic submission packages with demonstrated compliance to IRS Publication 1075 and enterprise security baselines (see compliance surfaces) and rapid deployment playbooks.

IT Services

• Risk Level: Critical
• Opportunity: Need for stabilization, programming updates, and system availability improvements because GAO notes unavailable processing systems and delayed programming updates tied to staff losses. Specific opportunities TBD pending solicitation language. Relevant NAICS: 518210, 541511, 541512, 541519.
• Timeline: 2026 filing season impacts; programming-update delays and system availability issues described during that period.
• Action Required: Position offerings for application modernization, emergency remediation, and systems-integration work that minimize downtime and support scaling automated self-service. Prepare FedRAMP (Federal Risk and Authorization Management Program)/NIST-800-53-capable delivery approaches where cloud hosting or agency integration is involved.
• Competitive Edge: Emphasize rapid-devops pipelines, security-accredited (FedRAMP/NIST 800-53) toolchains, and staffed augmentation models that can backfill lost institutional capabilities on short notice.

Tax Administration Support

• Risk Level: High
• Opportunity: Support for managing refund transitions (phasing out paper checks per the 2025 executive order), taxpayer notices, and outreach for direct-deposit collection. Specific opportunities TBD pending solicitation language. Possible NAICS: 541214, 541519.
• Timeline: 2026 filing season; IRS began phasing out paper-check refunds in response to a 2025 executive order; notices and follow-up activity noted through early May 2026.
• Action Required: Develop services that support large-scale taxpayer outreach and secure collection of banking information, workflow management for notices, and analytics to prioritize follow-ups (respecting privacy and security regimes). Be prepared to support the 30-day response process and subsequent paper-check fallback timeframe described by GAO.
• Competitive Edge: Combine outreach capabilities with analytics that reduce response time and increase direct-deposit conversions while maintaining compliance with IRS Publication 1075 and applicable security baselines.

Business Process Outsourcing

• Risk Level: High
• Opportunity: Increased need for call-center and correspondence BPO to handle altered call volumes, automation mix, and fewer in-person locations; IRS saw about 28 million calls and more automation use (41%) with fewer live-answer staff. Specific opportunities TBD pending solicitation language. Relevant NAICS: 561110, 561499, 541214.
• Timeline: 2026 filing season (Jan 26–Apr 15, 2026) with performance metrics through early May 2026.
• Action Required: Offer blended human/automation contact center solutions that can absorb surges, reduce wait times, and integrate with IRS correspondence pipelines. Ensure staff augmentation plans and secure handling/recordkeeping consistent with IRS Publication 1075 and other security controls.
• Competitive Edge: Implement hybrid automated + human escalation flows tuned to reduce average wait time and provide measurable improvements in first-contact resolution; certify data handling under the compliance surfaces to shorten onboarding.

Cross-Segment Implications

• Document scanning/imaging and document processing feeds are tightly coupled: backlogs or capacity limits in scanning create downstream delays for IT ingestion and refund issuance workflows, so vendors should coordinate end-to-end SLAs rather than only point solutions.
• IT system availability and programming updates materially affect the throughput of document-processing vendors and BPO operations; IT stabilization is a prerequisite for improving paper-return processing times and refund issuance.
• Security and compliance regimes (IRS Publication 1075, NIST 800-53, FedRAMP) span all segments identified; meeting these requirements is a cross-cutting gating factor for winning and executing work.
• Changes in refund policy (phasing out paper checks per a 2025 executive order) shift workload from check issuance to secure payment-data collection and electronic refund pipelines—creating dependencies between Tax Administration Support, Document Processing, and BPO for outreach and data capture.