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 /ADVANCE/ WASHINGTON, Dec. 31 /PRNewswire/ -- With the new year

come new tax packages. Beginning on Thursday, Jan. 2, 1992, post offices across the country will deliver over 110 million 1991 federal income tax packages. And many taxpayers may be surprised by what they find inside.
 In Ohio, for instance, over 1 million single taxpayers who would have used Form 1040EZ can now file by phone using the IRS TeleFile system. In Rhode Island, Texas and Washington, 340,000 people can let IRS do all the work for them, mailing in just their Forms W-2 from employers and a special test Form 1040EZ-1.
 These filing alternative tests are designed to make it easier for people to file tax returns. These returns will also be more accurate -- a benefit for both taxpayers and the IRS.
 In both cases, taxpayers eligible to participate are receiving special tax packages explaining the test. With TeleFile and the 1040EZ-1, IRS figures the tax and the refund or balance due -- avoiding two of the most common taxpayer errors.
 There's also something new for those who plan to file electronically in 1992. This year, all filers -- not just those expecting refunds -- can use the electronic filing system. Taxpayers who owe can file when they're ready, then send the payment by April 15 -- with no penalty or interest. Electronic filers expecting refunds should get their money within three weeks. Those electronic filers electing to have their refund deposited directly into their savings or checking account will get their money even sooner.
 Everyone getting the 1040 or 1040A tax package will find a new form inside this year. Schedule EIC, "Earned Income Credit," reflects significant changes in this special tax break for workers with income under $21,250 who have a child living with them. Taxpayers qualifying for the credit can choose to fill in only three lines of the form and IRS will figure the credit for them.
 Those who need forms other than those in their tax package can call (toll-free) 800-TAX-FORM (800-829-3676) or visit their local IRS office. Forms are also available at many banks, post offices and libraries.
 For those tired of the same old paperwork at tax time, the IRS is offering several alternative filing methods this year. Two approaches to reducing taxpayer burden -- TeleFile and Form 1040EZ-1 -- are being tested in selected areas. Two systems using computers -- the 1040PC format and Electronic Filing -- are operating nationwide.
 The IRS is offering TeleFile to the 1.2 million persons with Ohio addresses who receive Form 1040EZ tax packages -- single persons with income under $50,000. They must not have any changes to their tax package label.
 TeleFilers will first complete a five-line Form 1040-TEL, entering their total wages, interest and tax withheld. Then, with a Touch-Tone phone, they call a toll-free number and enter the information from their Form 1040-TEL. The IRS will figure the adjusted gross income, the tax and any refund or tax due while the taxpayer is on the phone. The taxpayer must sign Form 1040-TEL and send that to the IRS with any W-2 forms from employers. Refunds will be sent about three weeks after the telephone filing, and any tax due can be paid by the usual April 15 deadline.
 The IRS expects to continue the TeleFile test for at least another year after 1992. Decisions on where the 1993 test will be conducted and any changes to be made to the test will depend on extensive analysis of the 1992 experience.
 Persons looking to avoid almost all return filing work may find Form 1040EZ-1 to be the solution. With the EZ-1, a taxpayer just enters any interest income, answers three questions, attaches the W-2s from employers and signs the form. The IRS takes the wage and tax withholding data from the W-2s, figures the tax, then sends the taxpayer a refund or a notice of any tax due, with an explanation of how the tax was figured.
 The IRS has expanded the EZ-1 test from a limited Texas population last year to over 300,000 residents of Rhode Island, Texas and Washington. Only those receiving a special tax package with the EZ-1 option will be able to participate. Texas and Washington do not have state income taxes, simplifying the test. The IRS will share return information with Rhode Island state tax officials so that EZ-1 users there will also have an easier time filing their state tax returns.
 With the IRS figuring the tax and refund amounts -- two of the most frequent taxpayer errors -- EZ-1 returns are more accurate, avoiding refund delays. The broader test of the form in 1992 should give better data on the public's interest in this approach to tax filing.
 1040PC Program
 Computer-assisted tax filing has a new twist -- print out a tax return answer sheet from your home computer and mail it to the IRS. Unlike traditional forms, which may have many blank lines, the printed 1040PC format has only the lines with entries. The result is a three-column list that generally fits on one page. Taxpayers sign the 1040PC answer sheet and attach their W-2 forms, any other required documents and payment for any tax due.
 The answer sheets are generated by tax return preparation software and printed on plain bond paper. Standard computers and printers will produce the 1040PC formats. The IRS provided programming specifications to software developers and tested their products for acceptability. Several programs will be available commercially to individuals and tax preparers for the 1992 filing season. Taxpayers nationwide may use the 1040PC format, sending their printouts to the Service Center where they normally file their federal tax returns.
 Under the 1040PC Program, taxpayers and IRS will have less paper to handle and store. This may also reduce the taxpayer's postage cost. Tax preparers using the 1040PC program can keep their copies of completed returns on computer disks, reducing storage space, and won't need as many blank forms, further cutting costs.
 Electronic Filing System
 Electronic filing, in which accepted participants send tax filing data for their clients to the IRS from their computers, is now 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 15 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 over 7.5 million returns in 1991, with 10 million expected this year. In 1992, IRS centers in Austin and Memphis will join those in Andover, Cincinnati and Ogden in accepting electronically filed returns.
 For taxpayers and the IRS the benefits of electronic filing are:
 -- A more accurate return. Returns filed electronically have fewer mistakes because the software programs used to prepare and transmit them catch mistakes up front.
 -- Acknowledgement. Usually within 24 hours, the electronic filer receives a message over the computer that the return has been received by IRS. The message also alerts the filer to errors on the return so corrections can be made and the return retransmitted immediately.
 -- Faster refunds. Once IRS acknowledges receipt of a return, it can issue a refund within three weeks. And taxpayers who file electronically may also elect Direct Deposit of their refunds into their savings or checking accounts and get their refunds even faster.
 TAX TIME - 1992
 The Internal Revenue Service will mail over 110 million income tax packages beginning on Jan. 2 this year. With few tax law changes affecting these forms, many taxpayers will be able to use last year's form as a guide in completing their 1991 returns.
 The IRS expects to receive 114 million tax returns in 1992. Most taxpayers -- about 77.9 million -- will file Form 1040, 19.6 million will file Form 1040A and the rest -- 16.5 million -- will file the simplest Form 1040EZ. The printing bill for these packages comes to about $13 million with postage costing another $19 million. This works out to an average cost of 29 cents for each package.
 Taxpayers should not be surprised if they receive a different form than the one they filed last year. The IRS sends the tax form that is easiest and best fits the taxpayer's needs based on the return filed in the previous year. So a taxpayer who filed a Form 1040 last year but could have used the shorter Form 1040A will receive that package in the mail.
 The IRS has developed a special package for taxpayers who have difficulty reading the print in the regular package. This new package -- the size of most daily newspapers -- has forms taxpayers can use as worksheets. The entries can then be copied to a regular size form for filing. Taxpayers can order the large print packages by calling toll free 800-829-3676 and asking for Publication 1614 for Form 1040 or Publication 1615 for From 1040A.
 Earned Income Credit
 The earned income credit (EIC) has changed significantly for 1991. The amount of the credit is larger with a maximum credit this year of $2,020, up from $953 last year. The credit now has three parts, the basic EIC and two new credits -- one for taxpayers who paid for health insurance coverage for a qualifying child and another for taxpayers who have a child born in 1991.
 More people may qualify for the credit in 1992 because now taxpayers with single filing status can claim the credit; in the past only taxpayers filing as head of household or married filing jointly qualified. This year taxpayers with income (earned income or adjusted gross income) up to $21,250 can claim the credit. This is up from $20,264 last year.
 Earned income includes both taxable earned income, such as wages and salary, and non-taxable earned income, such as housing allowances, combat pay and voluntary salary deferrals.
 The basic credit is available to those who have a qualifying child and income under $21,250. This part of the credit can be as much as $1,192 for taxpayers with one qualifying child or $1,235 for two or more qualifying children.
 A qualifying child is a son, daughter, adopted child, grandchild, stepchild or foster child. The child must be under age 19, or 24 if a full-time student. There is no age limit if the child is permanently and totally disabled. The child must have lived with the taxpayer in the United States more than six months of the year. A foster child, though, must have lived with the taxpayer the entire year.
 The credit for health insurance premiums can be as much as $428. This credit is limited to actual premiums paid and reduces any other medical deductions claimed on the return, such as the self-employed health insurance deduction and the medical expense deduction on Schedule A.
 The credit for a child born in 1991 can be as much as $357. However, taxpayers should choose whether this credit or the child care credit is more beneficial, since both credits can not be claimed for the same child. Taxpayers with another child for whom they paid child care expenses may claim this new credit for their newborn child and the child care credit for their other child.
 The IRS has developed a new form, Schedule EIC, for taxpayers to claim this credit. Taxpayers have the option of letting IRS compute the credit for them by filling out only three lines on the form. The new Schedule EIC is included in all Form 1040 and 1040A tax packages.
 Changes Affecting Higher Income Taxpayers
 For 1991, higher income taxpayers will pay tax at a new 31 percent rate on taxable income over the following amounts:
 -- $82,150 for married taxpayers filing jointly
 -- $41,075 for married taxpayers filing separately
 -- $49,300 for single taxpayers
 -- $70,450 for heads of household
 The new 31 percent rate, however, does not apply to net capital gain income, which is taxed at a maximum rate of 28 percent. Taxpayers with net capital gains should use Schedule D, Part IV, to figure their tax.
 Taxpayers with adjusted gross income greater than $100,000 ($50,000 for married taxpayers filing separately) will reduce the amount of certain itemized deductions claimed on Schedule A by 3 percent of the amount that their AGI exceeds the $100,000 threshold. The tax package contains a new worksheet to help taxpayers determine their net itemized deduction.
 Taxpayers with AGI in excess of the following specified thresholds will reduce their personal exemption amount by 2 percent for every $2,500 or part of $2,500 ($1,250 if married filing separately) that their income exceeds the threshold:
 -- $150,000 for married taxpayers filing jointly and qualifying widow(er) with dependent child
 -- $ 75,000 for married taxpayers filing separately
 -- $100,000 for single taxpayers
 -- $125,000 for taxpayers claiming head of household status
 In determining the reduction, the total value of all personal exemptions is added together. Personal exemptions may be fully phased out by this provision of the law. There is a worksheet in the tax package for taxpayers to determine if their personal exemption amount must be reduced.
 Tax Law's Indexing Feature Benefits All Taxpayers
 The tax law provides that the personal exemption, standard deduction and tax bracket amounts be adjusted each year by an inflation factor, also called indexing, so that individuals do not face greater tax bills as a result of inflation. For 1991, the personal exemption amount for each taxpayer and dependent is $2,150, up from $2,050 in 1990.
 The 1991 standard deduction amounts are as follows:
 -- single taxpayer $3,400
 -- head of household $5,000
 -- married filing jointly $5,700
 -- married filing separately $2,850
 Additional Standard Deductions
 -- single, age 65 or over or blind $850
 -- married, age 65 or over or blind $650
 For taxpayers eligible to be claimed as a dependent on someone else's return, the standard deduction is the greater of $550 or actual earned income, limited to the standard deductions listed above.
 This year most taxpayers will not have to look up their standard deduction in the tax package instructions. These amounts are listed right on the form. This change should help eliminate one of the most common mistake taxpayers make when they file -- entering the wrong standard deduction amount on the return.
 Income Limits for Filing Are Higher
 Taxpayers must only file a return if their income is above a certain amount. These amounts vary, depending upon a person's filing status. Filing requirements for 1991 for taxpayers under age 65 are:
 -- single $ 5,550
 -- head of household $ 7,150
 -- married filing jointly $10,000
 -- married filing separately $ 2,150
 With the exception of the "married filing separately" filing status, the income threshold for taxpayers who are over age 65 is increased by the amount of their additional standard deduction. Special filing requirements for children and dependents are detailed in the tax instruction booklet.
 Other Changes
 Taxpayers must record on the tax form the social security numbers of dependents who turned age 1 during 1991.
 Personal interest (such as interest on car loans and credit card balances) is no longer deductible in 1991.
 -0- 12/31/91/1200
 /CONTACT: Internal Revenue Service, public affairs division, 202-566-4024/ CO: Internal Revenue Service ST: District of Columbia IN: SU:

DC -- DC006 -- 5508 12/27/91 15:07 EST
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Date:Dec 27, 1991

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