This bill mandates the use of scannable barcodes on printed tax returns and requires the IRS to implement scanning and OCR technology to digitize paper returns and correspondence for increased efficiency.
Bradley "Brad" Schneider
Representative
IL-10
The BARCODE Efficiency Act mandates the use of scannable barcodes on printed federal tax returns and requires the IRS to implement scanning and Optical Character Recognition (OCR) technology for all paper returns and correspondence. This legislation aims to convert paper documents into electronic records to enhance efficiency in revenue collection and disbursement. Exceptions are allowed only if the technology proves slower or less reliable than current manual processes.
New BARCODE Act Forces Digital Scans for Paper Tax Returns to Speed Up IRS Processing
The BARCODE Efficiency Act is essentially a modernization mandate aimed at dragging the IRS’s paper processing into the 21st century. The core idea is simple: stop manually typing data from paper tax returns and start scanning it.
The Barcode Mandate: If You Print, You Scan
The biggest change targets the millions of people who use tax software (like TurboTax or H&R Block) but still print out the return and mail it in. The bill, under SEC. 2, requires that any federal tax return prepared electronically but filed on paper must now include a scannable barcode. This isn't just a random code; it has to contain all the data from the return in a format the IRS can convert into an electronic record. Think of it as a digital insurance policy for your paper filing. The IRS must then use scanning technology to pull that data instantly, bypassing the need for human data entry. This requirement kicks in for individual income tax returns on January 1 of the calendar year following enactment (plus 180 days).
OCR: Handling the Handwritten and the Messy
What about those who don't use software—the folks who still fill out forms by hand? The BARCODE Act addresses this, too. For any paper return not prepared electronically, or for any paper correspondence sent to the IRS (like a response to an audit notice or a simple question), the IRS is required to use Optical Character Recognition (OCR) software. OCR is the tech that reads text from an image and converts it into editable, searchable data. This is a crucial step for digitizing the mountain of mail the IRS receives every year. For most general correspondence, this rule applies starting January 1 of the calendar year following enactment (plus 12 months).
Real-World Impact: Faster Processing, Fewer Errors
For the average person, this bill is all about speed and accuracy. If you’re one of the millions who still files paper, this could mean your return—and your refund—gets processed faster because the IRS isn't waiting for an employee to manually transcribe the numbers. For small businesses that often communicate with the IRS via paper, getting their documents digitized faster means less chance of correspondence getting lost or delayed in the system. The goal is to cut down on the massive backlog and the inevitable human errors that happen when staff are keying in thousands of numbers a day.
The Practical Catch: The 'Slower or Less Reliable' Clause
There is one major caveat that gives the Treasury Secretary significant wiggle room. SEC. 2 includes an exception: the scanning and OCR requirements do not apply if the Secretary determines the technology is “slower or less reliable” than manual transcription or existing processes. This is a necessary safety valve—you don't want the IRS forced to use buggy tech that slows everything down—but it also gives the Secretary discretion to delay modernization. However, the bill does require a safeguard: if the Secretary uses this exception, they must report the determination to the House Ways and Means and Senate Finance Committees within 30 days, explaining why the tech is a bust. This oversight is key to ensuring the mandate isn't simply ignored.