IRS Unveils Mandatory Sequential Filing System, Pauses Briefly to Figure Out What 'Sequential' Will Mean

The Internal Revenue Service announced Tuesday that it has completed the first phase of its landmark tax modernization initiative, which will require all Americans to file their federal returns in a strict, predetermined sequence of forms. The agency emphasized that compliance is mandatory, effective immediately, and that the sequence itself remains under active internal review.

"This is a historic step forward for the American taxpayer," said IRS Commissioner of Modernization Initiatives Dale Furbeck, reading from a laminated card. "For too long, citizens have filed their documents in whatever order felt natural to them — W-2s before 1099s, schedules before summaries — and frankly, it's been chaos. Orderly chaos, but chaos nonetheless. We are ending that era today."

When asked what order taxpayers should now follow, Furbeck consulted a second laminated card and confirmed that the question was "very much on the table."

The Pilot Program That Preceded the Program

According to internal documents obtained through a Freedom of Information Act request that took fourteen months to process, the Sequential Filing Initiative — officially designated Project FORM-SEQ-7 — originated in 2021 as a response to a 2019 audit recommending that a 2017 efficiency review be revisited. The audit itself was twelve pages long. The response to the audit was forty-three pages. The response to the response has not yet been filed, though sources indicate it is in sequence.

The agency ran a pilot program across three field offices in the fall of last year. Participants were asked to file their documents in a specific order that the IRS describes as "provisional" and "subject to revision pending focus group analysis." Seventeen of the twenty-two pilot participants filed their forms incorrectly, a result the IRS called "extremely informative and largely expected."

"We learned an enormous amount from the pilot," said Gretchen Mohl, Deputy Associate Director of Taxpayer Experience Pathways. "Primarily, we learned that people are very confused about the difference between Phase One ordering and Phase Two ordering. Which makes sense, because we haven't finalized Phase Two ordering yet. Or, if we're being fully transparent, Phase One."

Ms. Mohl confirmed that focus groups are ongoing and that the agency expects to have a "strong directional consensus" on filing sequence by the third quarter, though she acknowledged that the third quarter in question had not been specified by calendar year.

The Form to Determine Form Order

In the meantime, the IRS has released Form 1-SEQ, a two-page document that taxpayers are encouraged — though not yet required — to complete before beginning their returns. Form 1-SEQ asks filers to self-report their preferred filing style, their prior-year form submission pattern, and whether they believe they are "a sequential thinker by nature."

The form must be submitted before any other form, except in cases where the filer has not yet determined their filing sequence, in which case Form 1-SEQ should be submitted after Form PRE-1-SEQ, which is available upon request from participating field offices, three of which are currently closed for renovation.

"We want to make this as intuitive as possible," said Furbeck, who had by this point set down both laminated cards. "The goal is that a taxpayer picks up their forms, knows immediately what order to file them in, and proceeds with confidence. We're not there yet. But we know what that would look like, and that vision is very exciting for us as an agency."

Tax professionals have greeted the announcement with the specific brand of silence that indicates deep professional suffering.

"I've been a CPA for twenty-six years," said Marcus Delray of Delray & Associates in Columbus, Ohio. "I once filed forty-seven amended returns in a single week. I survived the Alternative Minimum Tax. I will get through this. Probably."

Experts Weigh In, Carefully

The Center for Federal Tax Administration Clarity, a Washington think tank, released a four-page statement praising the initiative's "ambitious structural vision" and noting that the concept of sequential filing had "genuine theoretical merit in an environment where sequence is defined." The statement did not specify what should happen in environments where it isn't.

A separate analysis from the Brookings Adjacent Policy Forum concluded that the program represented "a meaningful commitment to the idea of modernization" and recommended a follow-up study to examine whether the follow-up study should be conducted before or after the original study, for sequencing purposes.

The Congressional Budget Office has estimated that implementing the Sequential Filing Initiative will cost $340 million over ten years, with an additional $120 million allocated to "sequence determination activities" and $18 million for the production of updated laminated cards.

What Taxpayers Should Do Now

The IRS has advised Americans not to delay filing their returns while awaiting sequence clarification. Taxpayers should continue filing as they normally would, with the understanding that their current filing order may retroactively be deemed compliant, non-compliant, or "provisionally acceptable pending review," depending on outcomes that will be communicated through a forthcoming notice system that is itself in early development.

Filers who wish to get ahead of the new requirements are encouraged to visit the IRS website, navigate to the Modernization Portal, click through to the Sequential Filing subsection, and complete the online readiness assessment, which is currently available in beta and requires a login credential that can be obtained by submitting, in the correct order, three forms that have not yet been published.

"The American people deserve a tax system that works for them," said Commissioner Furbeck, in closing remarks that lasted forty minutes and covered, among other topics, the history of the W-4, a brief tangent about the metric system, and a personal anecdote about a particularly well-organized filing cabinet he once owned.

"We are building that system. We are committed to that system. And as soon as we determine what order to build it in, we will begin."

The deadline for the 2024 tax year remains April 15th. The deadline for understanding what is expected of you has not been announced.