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 WASHINGTON, Dec. 28 /PRNewswire/ -- More than 100 million federal income tax packages go in the mail beginning Saturday, Jan. 2. For millions of Americans this year, the familiar paper Form 1040 will be a thing of the past as they may take advantage of new filing options.
 Besides 14 million electronically filed tax returns, the IRS expects to receive millions of returns that look like a standard computer printout. Taxpayers will prepare these returns on their home computers using the 1040PC format option available on many tax preparation software packages.
 The 1040PC returns only print lines where taxpayers have an entry. For example, if a taxpayer had only wages and interest income to report, the 1040PC format would print only those two lines. This compares to 17 lines on the Form 1040 for reporting all types of income. By printing only lines with entries, the 1040PC is much shorter. For example, a regular 12-page return could be cut to two pages.
 The 1040PC format will be available on tax preparation software for use on either home computers or through professional return preparers. The IRS provides programming specifications to software developers and is now testing their products for acceptability. The software packages may also give the taxpayer the choice of having the refund check deposited directly into the taxpayer's bank account. If there is a balance due, the software will print out a voucher to accompany the tax payment.
 The IRS is continuing to test telephone tax filing for some Ohio taxpayers but with a new twist. Last year more than 126,000 single Ohio residents with income under $50,000 used TeleFile to file their returns. This year TeleFile will be completely paperless for taxpayers in southern Ohio who will enter all information -- including the "signature" -- by telephone. The TeleFile system will ask these taxpayers to say their names and social security numbers providing the same information as signatures on tax returns. Other TeleFilers in Ohio will need to sign special forms and mail them to IRS along with the W-2 forms.
 Many taxpayers in 15 states can now file both their state and federal returns electronically -- all in one transmission to the IRS. The IRS then sends the state tax agency the data it needs. Federal/state electronic filing will be available statewide in North and South Carolina and Kansas. In the following states, this program is being tested in a more limited way -- Indiana, Kentucky, Louisiana, Maine, Michigan, Mississippi, New Mexico, New York, Oklahoma, Utah, West Virginia and Wisconsin.
 The 1992 tax forms have few tax law changes but the IRS made some improvements. The tax tables for Form 1040 now allow people with taxable income up to $100,000 to compute their liability by just looking up the amount. For more than 14 million taxpayers this means using the new tables and avoiding the errors made in figuring the tax using the tax rate method.
 Small business taxpayers have a new, simpler form for computing their profit. The Schedule C-EZ has 15 lines compared to 44 on the regular Schedule C. About 3 million self-employed taxpayers with gross receipts of $25,000 and $2,000 or less in business expenses should be able to use this new form.
 By the end of the upcoming three-and-one-half month tax filing season, the IRS expects to receive more than 116 million tax returns. The Postal Service is delivering the 107 million tax packages for filing 1992 tax returns. Almost 11 million taxpayers who used return preparers last year have already gotten postcard reminders that include pre-printed labels for use on returns.
 By offering various filing options and helping taxpayers choose the simplest form to file, the IRS now finds than almost half of all filers use the less complicated Forms 1040A or 1040EZ or an electronic filing format that reduces errors and speeds processing.
 The IRS offers several filing methods for people looking for alternatives to the traditional paper forms. TeleFile is again being tested in Ohio. 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 have fewer mistakes 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 retransmit the return. 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 issue refunds within three weeks. For alternatives which involve Direct Deposit to their bank accounts, taxpayers have greater security -- no lost or stolen checks -- and get their refunds a week before the government would otherwise mail paper refund checks.
 -- Acknowledgements of receipt. Usually within 24 hours, the electronic filer receives 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 the 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 formats on plain paper.
 When a refund is coming, the software may give the taxpayer the option of entering the information for a direct deposit to the taxpayer's bank account. When additional tax is due, the program prints out a voucher to accompany the payment. The taxpayer can send everything at once, or mail the 1040PC upon completion and separately send the payment voucher and check to the IRS by April 15.
 The IRS provides programming specifications to software developers and tests their products for acceptability. Many computer tax programs will include the 1040PC format in their software for individuals and tax preparers for the 1993 filing season. These software packages will carry a logo with the word "1040PC" and a "reverse L" arrow key, the usual "enter" key on a computer.
 Taxpayers nationwide may use the 1040PC format, sending their printouts to the Service Center where they normally file their federal tax returns. In 1992, the IRS received nearly 1.5 million 1040PC format returns; the projection for 1993 is 6.7 million returns.
 In addition to offering direct deposit of refunds at no extra cost, 1040PC format returns have fewer errors in either the preparation or transcription of the tax data. There is also less paper to handle and store, perhaps cutting 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 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 is again testing TeleFile with the 1.1 million persons with Ohio addresses who receive Form 1040EZ tax packages -- single persons with income under $50,000. To use TeleFile, they must not have any name or address changes to their tax package label. Last year, the IRS received 126,000 TeleFile returns. A typical TeleFiler was 25 years old and had income of $10,000, with about $25 of interest income. Asked why they used TeleFile, taxpayers most often mentioned the faster refunds, ease of filing and convenience.
 For residents of southern Ohio, TeleFile in 1993 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. The TeleFile 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 format tests to the accuracy of the return. The only thing these filers may need to mail will be a payment check. For northern Ohioans, TeleFile 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 and -- for northern Ohioans -- their total wages and tax withheld. Then, with a Touch-Tone phone, they call a toll-free number and enter the requested information. Southern Ohioans will enter the wage and tax figures from each W-2 separately, and will not have to add them up if they had several jobs. 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.
 This is the second year for the TeleFile test. Decisions on future testing or operational implementation will be based on an analysis of the 1992 and 1993 experiences.
 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 11 million returns in 1992, with 14 million expected this year. IRS centers in Andover, Austin, Cincinnati, Memphis and Ogden process electronically filed returns for the whole country.
 Taxpayers in 15 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 Kansas, North Carolina and South Carolina, with more limited tests in Indiana, Kentucky, Louisiana, Maine, Michigan, Mississippi, New Mexico, New York, Oklahoma, Utah, West Virginia and Wisconsin. When South Carolina offered this statewide in 1992, over 154,000 taxpayers -- more than half the electronic filers in the state -- used the federal/state option.
 Other Tests
 The IRS will test its Electronic Refund Authorizations program in 1993. This will allow a taxpayer filing a regular paper tax return to arrange for the direct deposit of an expected tax refund with a participating financial institution before filing the tax return. Up to 25 financial institutions, currently testing automated federal payments with the Treasury Department, may participate.
 An individual signs up for the direct deposit through the financial institution, which notifies IRS where to send the refund. The taxpayer files the tax return as usual, and the IRS deposits any refund directly to the taxpayer's designated account.
 In 1991 and 1992, the IRS tested another approach to reducing the burden of tax filing. With Form 1040EZ-1, a taxpayer just entered any interest income, answered three questions, attached the W-2s from employers and signed the form. The IRS took the wage and tax withholding data from the W-2s, figured the tax, then sent the taxpayer a refund or a notice of any tax due, with an explanation of how the tax was figured.
 Just 2 percent of the 340,000 taxpayers who received the test package in 1991 and 1992 used the EZ-1. Contrary to the expectation that the percentage of test subjects using the form in 1992 would be more than double that in 1991, it actually declined. A subsequent survey showed that taxpayers who did not use the EZ-1 wanted to figure their tax and know their refund amounts before filing and thought that the regular EZ form was easy enough.
 The survey also found that about two-thirds of those who did use the EZ-1 totaled their wages, computed their tax and figured their refunds, even though the purpose of the form was to relieve them of this burden.
 Based on these results and the costs that would be required to continue or expand the EZ-1, the IRS will no longer offer this alternative.
 -0- 12/28/92
 /CONTACT: Internal Revenue Service, Public Affairs, 202-622-4000/

CO: Internal Revenue Service ST: District of Columbia IN: SU:

IH -- DC003 -- 0097 12/28/92 14:00 EST
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Date:Dec 28, 1992

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