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The IRS Can Spend Up to $2.25 Billion to Have Four Companies Scan Its Paper Mail

In September 2025 the IRS signed five-year contracts with Iron Mountain, 22nd Century Technologies, GovCIO and Vastec to scan the paper it still receives. A year later, federal spending records showed about $162 million committed to them.

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The IRS receives about 90 million pieces of paper a year: 35 million pieces of correspondence and non-tax forms, 33 million tax returns, 16 million information returns, 4 million amended returns, and millions of paper checks. Processing all of it costs the agency more than $600 million a year.1 In September 2025 the IRS gave five-year orders to four companies: Iron Mountain Information Management LLC, 22nd Century Technologies Inc., GovCIO LLC, and Vastec Inc. Their job is to receive, scan, extract, validate, transmit, store, and eventually destroy the paper the agency still gets. Together the four orders let the IRS spend up to about $2.254 billion.2 By September 30, 2026, USAspending.gov showed about $162 million committed to them.3

The Treasury Inspector General for Tax Administration (TIGTA), in a May 2026 report on the four awards, called them "volume-based contracts, meaning the IRS is only billed for the work completed."4 The $2.254 billion is the contracts' ceiling: the most the government could spend if it renews every order each year and every contractor handles full volume for five straight years. What the IRS actually commits, and later pays, depends on how much paper arrives, how fast the contractors can scan it, and whether Congress keeps funding the program. Through December 2025, TIGTA counted $6.2 million billed by the four companies, about a quarter of a cent for every dollar of the ceiling.5

Two pilots, a missed goal and a one-year bridge

On August 18, 2021, the IRS put out matching "Scanning as a Service" pilot awards to Brillient Corporation (a $7.5 million ceiling, with $6.7 million obligated) and GovCIO ($200,000 obligated against the same $7.5 million ceiling). The agency was testing, in parallel, whether outside contractors could do front-end scanning at all.6 A year later, on August 8, 2022, it ran the same play for a "Submission Processing Modernization" pilot, splitting the work between Brillient again ($2.4 million obligated against a $7.5 million ceiling) and 22nd Century Technologies ($7.5 million).7 Two of the four eventual winners, GovCIO and 22nd Century, trace back to those small pilot awards. Iron Mountain and Vastec do not.

In February 2026, TIGTA reported that the IRS had missed its own goal of digitally processing paper-filed Forms 940, 941, and 1040 for the 2025 filing season. As of May 2025, 5 percent of those forms had been converted.8 In April 2025 the IRS had combined its modernization efforts into a single program, the Zero Paper Initiative, and awarded two one-year contracts the same month: one for $142 million, one for $18 million. The IRS cancelled the $18 million contract in May 2025 over concerns that it had not used a competitive bidding process, and kept the $142 million contract as an interim bridge while it ran a competition for the permanent work.9 TIGTA does not name the interim contractor. USAspending records an Iron Mountain order for "Scanning as a Service," approved April 24, 2025 and running to September 2025, with $2.86 million obligated, which rounds to the $2.9 million TIGTA reports the interim contractor billed. USAspending records the order's total value as the same $2.86 million; TIGTA put the interim contract at $142 million.10

The permanent competition, solicitation number 2023H2-25-Q-00048, drew eight bidders off the General Services Administration's Multiple Award Schedule.11 On September 15, 2025 (contracts signed September 12), the IRS set up four Blanket Purchase Agreements with one-year base periods and annual options running through September 14, 2030: the "five-year" orders TIGTA describes.12 Treasury announced the awards publicly a week later, grouping the Zero Paper contracts alongside an extended Salesforce deal for taxpayer online accounts and a new Palantir contract for a "Unified API Layer," a separate procurement, doing separate work.13

The four ceilings

Iron Mountain, whose April 2025 order matches the interim contractor's billing, has the largest permanent order, with a ceiling of $714,121,974. 22nd Century Technologies, which had one of the 2022 Submission Processing Modernization pilots, holds $664,081,703. GovCIO, whose 2021 pilot award was $200,000, holds $467,580,388. Vastec, the only one of the four with no earlier IRS pilot or interim order in the record, won its $408,164,245 ceiling on the open competition alone.14 Together they come to about $2.254 billion. TIGTA's own report rounds it to "$2.3 billion."15 None of the four awards carries a small-business or socioeconomic set-aside; all four were won on full-and-open or fair-opportunity competition off the GSA schedule.16

Between May and December 2025, the Zero Paper contractors (interim and permanent combined) billed the IRS a total of $9 million and scanned 2.2 million of the 11.9 million priority paper returns (18 percent) the agency received.5 The IRS had originally identified 26 tax forms as Zero Paper priorities, then narrowed the near-term focus to three: Forms 940, 941, and 1040, which together account for about 42 percent of the paper tax returns the agency expects to receive in Fiscal Year 2026.17 When the 2026 filing season opened on January 26, 2026, only one of the four contractors could scan and extract data from all three priority forms. The other three could handle only Forms 940 and 941 and were still building out the capability to do Form 1040.18 The IRS's own internal cost estimates put the price of processing those forms the old way at $2.75, $3.41, and $9.85 per form respectively. TIGTA said it could not use those figures to judge whether the new contracts are cheaper, because the contractors' invoices are not itemized by form.19

As of September 30, 2026, Iron Mountain's permanent order had drawn $84.0 million against its $714.1 million ceiling; 22nd Century's $15.3 million against $664.1 million; GovCIO's $15.0 million against $467.6 million; Vastec's $47.8 million against $408.2 million.20 Each contractor is guaranteed a floor of 70,000 documents a week, with the IRS distributing additional volume based on competitive performance (timeliness, accuracy, and scan-rejection rates) and cutting a contractor's share if it underperforms.21 As of early March 2026, the agency was routing paper to six of the ten contractor sites it plans to use. TIGTA's map puts the ten in Indiana, Pennsylvania, Maryland, Virginia, West Virginia, Utah, Louisiana, Missouri and Florida.22

Form 941-X is not on the list, and the money is shrinking

The forms these four contractors are scanning now are original returns: Forms 940, 941 and 1040.17 Form 941 is the return an employer files every quarter. Form 941-X, the form employers file later to amend it and the one they used to claim the Employee Retention Credit, is not among the 26 forms the IRS listed as Zero Paper priorities. The individual amended return, Form 1040-X, is fourth on that list. The contract scope in the IRS's privacy assessment for GovCIO's order does cover receiving amended returns, along with original returns, information returns and correspondence.23

The Zero Paper Initiative draws on Inflation Reduction Act money that Congress has been taking back. The IRS's original $79.4 billion IRA allocation had been cut to $26 billion by February 2026 through four separate rescissions, and the agency reported spending 62 percent of what was left as of January 2026.24 TIGTA also reported that, as of mid-December 2025, the IRS had approved background clearances for 1,088 (78 percent) of the 1,402 workers the four Zero Paper contractors had submitted.25

Notes

  1. Treasury Inspector General for Tax Administration, "An Assessment of the IRS's Implementation of the Zero Paper Initiative," Report No. 2026-4S0-025, May 15, 2026, p. 1. ↩
  2. Sum of the four September 2025 permanent-order ceilings; see note 13. ↩
  3. USAspending.gov award records, current obligated ("Award Amount") totals as reported for awards CONT_AWD_2023H225F00139, CONT_AWD_2023H225F00137, CONT_AWD_2023H225F00138, and CONT_AWD_2023H225F00140 (re-pulled Sept. 30, 2026, unchanged from Sept. 28): $84,010,741.30 + $15,259,080.10 + $14,953,110.97 + $47,776,132.86 ≈ $162.0 million. A July 2026 pull showed $93.0 million. ↩
  4. TIGTA Report No. 2026-4S0-025, Highlights page. ↩
  5. TIGTA Report No. 2026-4S0-025, pp. 4–5 and Figures 1–2. ↩1 ↩2
  6. USAspending.gov, award 2032H821C00026 (Brillient Corporation, "EDCMO, PILOT IRS - SCANNING AS A SERVICE," start date 2021-08-18, $6,700,000 obligated) and award 2032H821C00030 (GovCIO, same description and start date, $200,000); HigherGov's award record for 2032H821C00026 reports the Brillient contract's $7.5 million ceiling; USAspending reports the same $7,500,000 base-and-all-options value for 2032H821C00030 (GovCIO). ↩
  7. USAspending.gov, award 2032H822C00018 (Brillient Corporation, "PILOT IRS SUBMISSION PROCESSING MODERNIZATION (SPM)," start date 2022-08-08, $2,376,562) and award 2032H522C00045 (22nd Century Technologies Inc., same description and start date, $7,500,000); HigherGov's award record for 2032H822C00018 reports the Brillient contract's $7.5 million ceiling. ↩
  8. TIGTA Report No. 2026-4S0-025, p. 1, citing TIGTA, "The IRS Has Made Limited Progress Achieving Paperless Processing," Report No. 2026-408-003, Feb. 6, 2026, p. 2. ↩
  9. TIGTA Report No. 2026-4S0-025, p. 3. ↩
  10. USAspending.gov, award CONT_AWD_2023H225F00055_2050_GS03F049GA_4732 (Iron Mountain Information Management LLC, "Scanning as a Service, including the digitalization of paper tax and/or information returns. Approved on April 24, 2025," obligated $2,864,081.06, base-and-all-options value $2,864,081.06, checked Sept. 30, 2026); compare TIGTA Report No. 2026-4S0-025, p. 4, Figure 1 ($2.9 million expensed by the interim contractor, May–mid-September 2025). ↩
  11. USAspending.gov award records for the four orders (note 3), latest transaction: solicitation identifier 2023H2-25-Q-00048, eight offers received, each order placed under a General Services Administration Federal Supply Schedule contract (checked Sept. 30, 2026); OrangeSlices AI, "IRS awards $2.2B in Tax and Information Returns Digitalization-as-a-Service contracts", Sept. 12, 2025 ("Number of Bidders: 8"; "RFP ID: 2023H2-25-Q-00048"; contract vehicle "GSA MAS"). ↩
  12. TIGTA Report No. 2026-4S0-025, p. 3 (performance period beginning September 15, 2025, with annual options through mid-September 2030); USAspending.gov award records for CONT_AWD_2023H225F00139, CONT_AWD_2023H225F00137, CONT_AWD_2023H225F00138, and CONT_AWD_2023H225F00140 (all signed September 12, 2025; period of performance start September 15, 2025; potential end date September 14, 2030). ↩
  13. U.S. Department of the Treasury, "U.S. Treasury Department Announces Major Progress in IT Modernization Initiatives", press release, September 22, 2025. ↩
  14. USAspending.gov award records, base-and-all-options value of each order (checked Sept. 30, 2026): Iron Mountain Information Management LLC, award 2023H225F00139, $714,121,973.62; 22nd Century Technologies Inc., award 2023H225F00137, $664,081,703.22; GovCIO LLC, award 2023H225F00138, $467,580,387.73; Vastec Inc, award 2023H225F00140, $408,164,245.37. OrangeSlices AI (note 10) reports the same total contract values. TIGTA's combined figure is in note 14. ↩
  15. TIGTA Report No. 2026-4S0-025, p. 1 (Highlights): "these contracts were awarded for $2.3 billion." ↩
  16. USAspending.gov award records list "full and open" or "full and open fair opportunity" competition for all four permanent orders (each of the four orders records eight offers received); none records a small-business or socioeconomic preference status. ↩
  17. TIGTA Report No. 2026-4S0-025, pp. 2–3 and Appendix I. ↩1 ↩2
  18. TIGTA Report No. 2026-4S0-025, p. 3. ↩
  19. TIGTA Report No. 2026-4S0-025, p. 5. ↩
  20. USAspending.gov award records, cited in note 3. ↩
  21. TIGTA Report No. 2026-4S0-025, p. 5. ↩
  22. TIGTA Report No. 2026-4S0-025, pp. 5–6 and Figure 3. ↩
  23. TIGTA Report No. 2026-4S0-025, Appendix I, pp. 9–10 (the 26 priority forms, ranked by projected FY 2026 paper volume; Form 1040-X is fourth and Form 941-X is not listed); IRS, Privacy Impact Assessment, "Scanned Paper Returns (SPR), Zero Paper Initiative (ZPI) - GovCIO," Questionnaire No. 2870, approved May 28, 2026 (contract scope: "Physically receiving inbound IRS mail (tax returns, amended returns, information returns, and correspondence)"). ↩
  24. TIGTA Report No. 2026-4S0-025, pp. 6–7 (Inflation Reduction Act funding history and rescissions). ↩
  25. TIGTA Report No. 2026-4S0-025, pp. 7–8. ↩

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