Millions Opt for Tax Filing Alternatives

WASHINGTON - Over 12 million people this year used one of the alternatives to the traditional way to file tax forms.

Electronic filing is the most widely used alternative, with 10.8 million returns received by April 17. Over 45,000 balance due returns were filed electronically, the first year this option has been available nationwide.

The IRS received 1.3 million returns in the 1040PC format. This allows preparers or individuals to do the return by computer, then print out just the line items for which there are entries. The result is a three-column list that generally fits on one page. The IRS will work with producers of computer tax preparation software so that this option might be more widely available for home computer users next year.

Five thousand people in Rhode Island, Texas and Washington filed Form 1040EZ-1, which had IRS do all the tax computation work and send a refund or a bill for the balance due. The IRS is continuing to analyze the EZ-1 test and will decide on future plans later this spring.

The most innovative option was the file-by-phone system used by 126,000 people for their tax returns. As originally planned, the IRS will test TeleFile for at least one more year before determining whether it will become a regular part of the tax system. Next year's test will again be limited to Ohio residents who would otherwise file Form 1040EZ and who have not changed their name, address or filing status since their last tax return.

Some observations from this year's research are:

• The heaviest traffic was from late January to mid-February, soon after people received their W-2s.

• The busiest day was Feb. 3, with over 6,000 calls completed.

• Taxpayers took advantage of TeleFile's around-the-clock availability -- calls came in weekends, evenings, and even in the middle of the night.

• A few taxpayers submitted both TeleFile and regular paper returns. The IRS system intercepts such duplicated during processing. Researchers will study why taxpayers did this and whether TeleFile changes, such as enhancements to the instructions, could help prevent it next year.

• Since TeleFile operates on a separate computer from those used for paper returns, it had its own program for figuring the tax. For the first few weeks of the test this program overcharged by $1 or $2 about 1200 people with taxable income under $25. The IRS corrected the problem and is mailing refunds to affected taxpayers this week.

• Some people filed returns even though their income was below the filing requirement and they had no tax withheld. The IRS is considering how TeleFile might save people the unnecessary work of filing in such cases.

During the next few months, IRS researchers will send short questionnaires to a sample of both users and eligible taxpayers who did not use TeleFile. They will also conduct small focus group interviews. The IRS expects to announce specific changes for the 1993 test sometime this summer.

As of April 17, IRS had received about 100 million tax returns and certified 55 million refunds, worth $54 billion. At $979, the average refund is up 7.5 percent from last year.

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