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 computer-ready.

• 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 their returns.

1040PC Program

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.

TeleFile

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.

Assistance Alternatives:

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.

Walk-In Help

Available at local IRS offices, taxpayers may obtain one-on-one tax return preparation assistance, forms, etc.

Volunteer Programs

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 1-800-829-1040.

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