The Electronic Tax Administration Advisory Committee (ETAAC), a federal advisory panel that advises the Internal Revenue Service (IRS), has released its latest annual report outlining 18 recommendations to help modernise the U.S. tax system, with a focus on digital services, fraud prevention, and the taxpayer experience.

What Are The 18 Recommendations

The proposals are split between lawmakers and the IRS, with six aimed at Congress and 12 directed at the IRS itself, with each group expected to play a role in overhauling how Americans file and manage their taxes.

Recommendations made to Congress

The committee is calling on lawmakers to:

• Deliver key tax form data to states quicker, and shorten filing deadlines for certain information returns to speed up processing.

• Strengthen systems that detect and prevent fraudulent refund claims.

• Provide stable, flexible, multi-year funding to support long-term improvements and strategic planning.

• Enhance oversight of paid tax preparers and introduce measures to tackle poor performance and fraudulent behaviour.

• Improve digital tools used by reporting agents to boost efficiency and ease of use.

• Default to electronic delivery of W‑2 forms for employees, while still allowing individuals to request paper copies.

Recommendations made to the IRS

The remaining proposals target IRS operations, focusing on six priority areas:

• Technology and data sharing: Expand systems that allow the IRS and partners to exchange information securely
• Digital filing and payments: Improve online filing tools and payment systems
• AI and user-focused design: Modernize platforms to be more intuitive and responsive
• Fraud prevention: Strengthen safeguards against identity theft and tax scams
• Tax simplification and outreach: Make forms, guidance, and communication easier to understand
• Tax preparer oversight: Improve monitoring and standards within the tax preparation industry

The recommendations that the ETAAC has made around these areas are:

• Provide key tax form data to states more quickly and shorten deadlines for submitting certain information returns to improve processing speed.
• Introduce real‑time checks for the preparer and firm identification numbers, and expand safeguards to strengthen system integrity and taxpayer protection.
• Upgrade core technology systems and expand the use of artificial intelligence (AI), while ensuring transparency to maintain public trust.
• Allow authorized third parties to securely access tax data on demand, rather than relying on delayed or manual processes.
• Strengthen systems that detect and prevent fraudulent tax refunds.
• Improve data sharing with states and industry partners by standardising tax metrics and providing timely, comparable reporting.
• Ensure the agency has stable, flexible, multi‑year funding to support long‑term improvements and planning.
• Enable authorised tax professionals to access taxpayer information online more easily using existing permission forms.
• Enhance IRS Online Accounts by improving functionality, consistency, user experience, and communication tools.
• Update and clarify e‑file rejection codes so taxpayers and preparers can better understand errors and fix them quickly.
• Remove redundant filings by eliminating extension submissions that are already automatic.
• Improve communication, outreach, and education around tax law changes so taxpayers better understand new requirements.
• Strengthen oversight of paid tax preparers and introduce measures to address poor or fraudulent practices.
• Upgrade digital services used by reporting agents to improve efficiency and usability.
• Use artificial intelligence to strengthen identity theft detection and allow professionals to verify taxpayer identities more quickly to release delayed refunds.
• Increase transparency in how tax returns are processed and how issues are resolved.
• Expand and prioritise electronic filing for employment tax forms (Form 94X series) and improve handling of duplicate filings.
• Allow employees to receive W‑2 forms electronically by default, while preserving the option to request paper copies.

The report makes it clear that the goal is a more efficient, secure, and accessible digital tax system.

Why The Committee Is Pushing For Change

In this year’s report, the panel emphasised mounting pressure on the IRS to:

• Handle growing digital demand from taxpayers
• Improve service quality and response times
• Keep pace with technology and cybersecurity risks
• Align tax systems with broader government digital transformation efforts

The recommendations reflect concerns that old systems and inconsistent funding are limiting the IRS’s ability to deliver modern, reliable services.

What These Recommendations Actually Mean For Taxpayers

If adopted, the reforms could affect millions of Americans who file taxes each year.

Key potential impacts include:

• Faster, easier filing: Improved online tools and simpler processes
• Better customer support: More responsive systems and clearer communication
• Reduced fraud risk: Stronger protections against scams and identity theft
• More consistent services: Stable funding could reduce delays and backlogs

For tax professionals and small businesses, enhanced digital infrastructure and regulation could also mean fewer errors and clearer standards.

What Happens Next

The ETAAC report is advisory, meaning its recommendations are not binding.

Next steps include:

• The IRS will review the proposals and decide which operational changes to implement
• Congress will also consider the legislative recommendations, particularly around funding and tax policy

Any major changes—especially those requiring legislation—could take time to be enacted.

However, the report signals a clear push toward a digital-first tax system, with reforms likely to roll out gradually over the coming years.

Key Takeaway

The ETAAC’s latest report highlights growing urgency to modernize the IRS, with recommendations that could reshape how Americans file taxes—making the process faster, safer, and more user-friendly if adopted.