December 26, 1990
Tax Time 1991
Starting December 28, about 108 million tax packages and postcards will be delivered in
the mail to taxpayers. For the second year in a row taxpayers will have relatively few law
changes to tackle so the IRS is expecting another smooth filing season. One big change
should benefit 4.5 million taxpayers who can now file the more simple Form 1040A.
Revised Form 1040A for Taxpayers with Retirement Income
The IRS has revised the Form 1040A so that more taxpayers can use it -- mostly retirees
who used the longer Form 1040 last year just to report retirement income, the tax credit
for the elderly or estimated tax payments.
An estimated 4.5 million taxpayers can now use the simpler form to report pension or
annuity income, IRA distribution and taxable social security benefits. Also, the Form
1040A can now be used by those who made estimated tax payments or want to claim the credit
for the elderly or disabled.
The revision resulted from suggestions the IRS got form taxpayers and return preparers
at a series of town meetings the IRS held around the country in recent years and from
Congress. The IRS is sending a Form 1040A tax form package to taxpayers whose last filing
indicates that they can take advantage of the more simple form.
Separate Form 1040EZ Tax Package
There will be a separate package containing the Form 1040EZ, the one page form for
single people with simple tax situations, and instructions. This will be sent to those who
either filed or could have filed Form 1040EZ last year. In past years the 1040EZ and 1040A
forms were contained in the same booklet.
Highlights of Other 1990 Changes
In addition to IRS' continuing efforts to refine the tax forms, previously enacted tax
laws contain provisions affecting 1990 taxes and forms. Major changes include:
Tax Rates -- The basic tax rates remain the same for 1990 (15 and 28 percent) but the
tax brackets have been indexed for inflation. This indexing is built into the tax tables
and tax rate schedules.
Exemptions -- The exemption amount allowed for the taxpayer, spouse and each dependent
has been increased, by indexing for inflation, to $2,050, up from $2,000 last year.
Standard Deduction -- For most people the standard deduction is increased for 1990 as a
result of indexing for inflation, as indicated in the table below:
Single $3,250 $3,100
Married Filing jointly or
qualifying widow(er) 5,450 5,200
Married filing separately 2,725 2,600
Extra for age/blindness
(single) 4,750 4,550
Minimum for dependent 500 500
Earned Income Credit -- Taxpayers and those who owe no tax for 1990 may be able to
claim this credit if they had earned income under $20,264 and a child living with them.
The maximum credit available is $953. Both the 1040 and 1040A forms have a new line for
taxpayers to report advanced earned income credit payments received during 1990.
Self-employment Tax Deduction -- Social Security legislation enacted in 1983 contained
a provision that took effect in 1990 -- the replacement of the 2 percent self-employment
tax credit with a two-part self-employment tax deduction. First, on Schedule SE, a
deduction is claimed to reduce net earnings subject to the 15.3 percent self-employment
tax. Then, with a new line added on the face of the Form 1040, one half of the
self-employment tax computed on Schedule SE is deducted.
These changes have the effect of putting self-employment tax on the same basis as FICA
payments made by employers and employees. The employer's share of FICA is not considered
income to the employee and the employer is allowed a deduction for FICA tax paid.
College Savings Bonds -- Starting in 1990, taxpayers can exclude interest from series
EE U. S. Savings Bonds purchased after 1989 for qualified higher education expenses. A new
Form 8815, "Exclusion of Interest From Series Ee U. S. Savings Bonds Issued After
1989", is used by taxpayers to determine excludable interest.
Electronic Tax Filing
Last year 4.2 million taxpayers who were due refunds filed their returns
electronically. This year the IRS expects to get about 6 million returns filed this way.
Those who file their tax forms electronically usually get their refunds within three
weeks. They also lessen the chance that simple math or data entry errors will slow
processing of their returns.
Electronic tax filing is offered by return preparers and transmitters who successfully
complete transmission tests and have been accepted into the electronic filing program by
the IRS. Started in three locations in 1986 when 25,000 returns were filed, electronic
filing became available nationwide last year.
Although available at this time nationwide to taxpayers due refunds, IRS is testing
electronic filing for those who owe additional payment with their returns.
Filing 1990 Tax Returns
The IRS expects about 113 million individual income tax returns to be filed this year,
about the same number as last year. The breakdown by types of returns for 1990 compared to
1990 (est.) 1989
1040 74.8 M 75.0 M
1040A 19.5 M 18.5 M
1040 EZ 19.1 M 19.6 M
TOTAL 113.4 M 113.1 M
Typically, 70-75 percent of all returns result in refunds for the taxpayer. Last year
refunds averaging about $900 went to over 76 million taxpayers.
About 97 million taxpayers will receive tax packages. Another 11 million will get just
a postcard containing their name and address label.
Postcards are sent to taxpayers who filed returns with business or farm income
(Schedules C or F) and had their returns commercially prepared. These taxpayers are sent
postcards because their preparers generally provide the forms they file. However, the
postcard can also be sent back to the IRS to request a forms package. Last year only
700,000 of the 10.3 million taxpayers who received postcards asked for a tax package,
saving $1 million.
Taxpayers who receive postcards should give their preparer the name and address label
so that it can be put on their tax returns. The label speeds processing of the return and
cuts the chance that a mistake could be made entering the taxpayer's name, address and
social security number.
Developing the Tax Packages
Developing the tax forms and instruction packages is a year-round task for IRS that
includes soliciting and evaluation suggestions from the public, tracking tax legislation
and designing ways to incorporate changes onto the forms. In November, the IRS began
printing the 1990 forms packages for release in December. To get the job done during the
short time period, the IRS has contracts with seven large printing firms that print at
multiple locations throughout the country.
Printing and mailing the tax packages costs $29 million. The cost is 28.5 cents per tax
package and 13 cents per postcard.
Obtaining Additional Tax Forms
Taxpayers who need additional forms or publications can use the order blank in the back
of their tax packages or they can call the IRS Forms Distribution Center. The IRS has a
new tool free telephone number for requesting forms and publication -- 1-800-TAX-FORM
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