December 01, 1993
Alternative Ways of Doing Business
From high tech electronic tax filing to automated refund information--from
multi-lingual telephone help to Walk-in assistance--the 1994 federal income tax filing
season promises a variety of services to make the process easier.
The IRS offers several filing methods for people looking for alternatives to the
traditional paper forms. TeleFile, the file-by-phone system pioneered and tested in Ohio
for the past two yeas, is being expanded to six additional states. And in Southern Ohio,
taxpayers will enter all information--including the "signature"--by telephone.
Two systems using computers--the 1040PC format and Electronic Filing--are operating
nationwide. These alternatives offer such benefits as:
- More accurate returns. Returns filed electronically or in the 1040PC format are more
accurate because the software programs involved catch and correct mistakes while preparing
the returns. If there are errors on electronically filed returns, the system alerts the
senders within a day or two so they can make corrections and re-transmit the returns.
1040PC format returns are easier for IRS data transcribers to process, reducing errors.
Electronic and TeleFile returns do not need transcription, as the data arrives at IRS
- Faster refunds. When the IRS receives computer-ready data, it can shorten the processing
time and usually issue refunds within three weeks. It's even faster when a taxpayer elects
to have the refund deposited directly into a savings or checking account. For alternatives
which involve Direct Deposit to their bank accounts, taxpayers have greater security--no
lost or stolen checks.
- Acknowledgements of receipt. Usually within 24 hours, the electronic filer received a
message that the IRS has accepted the return for processing. The TeleFile system gives
callers a confirmation number to let them know that they have completed the filing of
Home computer users can shorten their paperwork and choose direct deposit of their
refunds with tax preparation software that uses the 1040PC format. Unlike traditional
forms, which may have many blank lines, the printed 1040PC format has only lines with
entries. The result is a three-column list that can, for example, cut a regular 12-page
return to two pages. Taxpayers sign the 1040PC answer sheet and attach their W-2 forms and
any other required signature documents. Standard computers and printers produce the 1040PC
format on plain paper.
When a refund is due, the software may give the taxpayer the option of entering the
information for a direct deposit to the taxpayers bank account. When additional tax is
due, the program prints out a voucher to accompany the payment. The taxpayer can end
everything at once, or mail the 1040PC upon completion and subsequently send the payment
voucher and check to the IRS by April 15.
In addition to offering direct deposit of refunds at no extra cost, 1040PC format
returns have fewer errors in the preparation and transcription of the tax data. There is
also less paper to handle and store, perhaps cutting postage costs. Tax preparers using
the 1040PC program can keep their copies of completed returns on computer disks, reducing
storage space, and won't need to stock as many blank forms, further cutting costs.
Preparers who file electronic returns for their clients can use the 1040PC format for the
copy that must be given to the taxpayer, reducing their paper needs.
The IRS provides 1040PC specifications to computer software developers and tests their
products for acceptability. Many computer tax programs will include the 1040PC print
option in their software for individuals and tax preparers for the 1994 filing season.
Taxpayers nationwide may use the 1040PC return, sending their printouts to the Service
Center where they normally file their federal tax returns. In 1993, the IRS received 4.8
million 1040PC format returns; the projection for 1994 is 6.1 million returns.
The IRS is expanding TeleFile, its telephone filing system, to six more states this
year: Florida, Indiana, Kentucky, Michigan, South Carolina and West Virginia. TeleFile
will be offered to certain taxpayers in these states who receive Form 1040EZ tax
packages--single persons with income under $50,000. To use TeleFile, they must no have any
name or address changes to their tax package label. Last year, the IRS received 149,000
TeleFile returns. A typical TeleFiler was 25 years old and had income most often mentioned
the faster refunds, ease of filing and convenience. More than 550,000 TeleFile returns are
expected this year.
For residents of southern Ohio, TeleFile will be a paperless filing, with all
information given to the IRS over the telephone and a "voice signature"
attesting to the return's correctness. This TeleFile test system will ask these taxpayers
to say their name and social security number as a "signature" to the information
they have entered, just as a written signature on a tax form attests to the accuracy of
the return. The only thing these filers may need to mail will be a payment check. For
TeleFilers in other areas, the program will continue to be a combination of entering tax
data by phone and mailing the signed Form 1040-TEL with the W-2 forms from employers.
TeleFilers prepare for their call by writing down their interest income, their total
wages and tax withheld. Then, with a Touch-Tone phone, they call a toll-free number and
enter the requested information. The telephone call takes 5 to 7 minutes. The IRS will
figure the adjusted gross income, the tax and any refund or tax due while the taxpayer is
on the phone. Refunds will be sent about three weeks after the telephone filing and any
tax due can be paid by the usual April 15th deadline.
Electronic Filing System
Electronic filing, in which accepted participants send tax filing data for their
clients to the IRS from their computers, is available for balance due as well as refund
returns. This enables taxpayers to file returns earlier while still making tax payments by
the usual April 15th deadline. For refund taxpayers, electronic filing means a faster
refund and the option of having the money deposited directly into their bank accounts.
First tested in 1986, electronic filing has grown to about 12.5 million returns in
1993, with 14.6 million expected this year. IRS centers in Andover, Austin, Cincinnati,
Memphis and Ogden process electronically filed returns for the whole country.
Many taxpayers in 23 states will be able to file their federal and state tax returns
electronically in one transmission to the IRS. The IRS forwards the state data to the
appropriate state tax authority. This federal/state electronic filing will be available
statewide in Indians, Kansas, Louisiana, Mississippi, New Mexico, New York, North
Carolina, South Carolina, Utah, West Virginia and Wisconsin with more limited test in
Colorado, Connecticut, Delaware, Idaho, Iowa, Kentucky, Maine, Michigan, Missouri,
Nebraska, Oklahoma and Oregon.
Free Telephone Help
Telephone tax assistors are expected to answer over 18 million calls this filing
season. Taxpayers can call (toll-free) 1-800-829-1040 for tax assistance. Last year the
number of correct responses by IRS assistors increased from 88.7 percent to 89.1 percent.
This year IRS expects to maintain or exceed last year's percentage.
In addition to the usual toll-free telephone assistance, IRS will offer, on a test
basis, Spanish-language assistance both in South Florida and Southern California.
Available Monday through Friday during regular business hours, Hispanic taxpayers may dial
(toll-free) 1-800-829-HORA (4672).
Recorded Tax Information
Tele-Tax has about 140 topics available 24 hours a day using a touch-tone phone.
Taxpayers can call (toll-free) 1-800-829-4477to hear recorded information on tax subjects
such as earned income credit, electronic filing, 1040PC tax returns and what to do if you
can't pay your tax. Over four million taxpayers used Tele-Tax last filing season for
recorded tax information.
Automated Refund Information
Last year more than 21 million taxpayers used the Automated Refund Information system
to check on the issuance of their refund checks. Taxpayers may call the Tele-Tax toll-free
number--1-800-829-4477--to check on their refund status.
Available at local IRS offices, taxpayers may obtain one-on-one tax return preparation
assistance, forms, etc.
Over three million taxpayers were assisted last filing season through the IRS Volunteer
Income Tax Assistance program and the Tax Counseling for the Elderly program. Often these
volunteer programs are set up in shopping centers, libraries, churches or community
centers. To find out where to go for this free assistance, taxpayers should call
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