Features

WASHINGTON — In its quest to persuade more taxpayers to file returns electronically, the Internal Revenue Service this year is making 23 more forms available in e-format and scrapping the requirement that taxpayers mail in a separate paper signature form. 

“People made fun of us: ’You’ve got electronic filing but then you’ve got to file a piece of paper.’ It didn’t make sense,” said IRS Commissioner Charles Rossotti. “This is really a major breakthrough. It makes electronic filing paperless.” 

The IRS is expecting 42.3 million electronic tax returns out of a total projected 129.7 million returns by April 16, up from about 35 million that were e-filed a year ago.  

Among the benefits: faster refunds, much greater accuracy, direct deposit and debit and far less chance of further contact with the IRS. 

“You’re 40 times less likely to hear from the IRS if you file electronically,” said Terry Lutes, IRS chief of electronic tax administration. 

New this year to replace the paper signature form is a five-digit PIN number a taxpayer will select through a paid practitioner, tax preparation software or an Internet-based preparer.  

To prove identity, taxpayers must provide the IRS two “shared secrets” from last year’s tax return: the numbers for their adjusted gross income and total tax. 

“If those two things match, then we’ll accept it,” said Lutes said. 

This “self-selected” PIN number will also replace the postcards the IRS sent last year to about 11 million e-filing taxpayers that gave them an electronic signature to replace the paper form. 

Among the new IRS forms being made available electronically are those for supplemental income and loss, depreciation, wage and tax statements and farm rental income.  

With these additions, 97 percent of all IRS forms – and virtually every form needed by the average taxpayer – can be used in e-filing. 

Both of these changes will particularly encourage electronic filing by paid practitioners, who tend to deal with more complex returns and typically use a greater variety of forms, Rossotti said. 

“Paid preparers have said they don’t want some paper returns and some electronic. They want to do it one way,” he said. “That’s a legitimate point.” 

The IRS is attempting to meet a goal set by Congress of having 80 percent of all tax returns e-filed by 2007. 

Other electronic tax filing changes for this year: 

• Taxpayers will have a second option to pay their taxes using MasterCard, Discover or American Express cards. PhoneCharge Inc., at 1 (888) ALLTAXX, is now competing with Official Payments Corp., at 1 (800) 2PAYTAX. Fees apply in both cases. 

• Beginning April 1, taxpayers can seek a filing extension from the IRS through the TeleFile touch-tone phone system and allow taxes to be deducted directly from bank accounts. 

• Combined state-federal filing will be expanded to all states with an income tax. 

• Acceptance of 1040, 1040A and 1040EZ forms from U.S. overseas possessions. 

• Paid preparers will be able to write in comments supporting or clarifying an entry on a client’s tax return. 

Look for more tax help all this week on the Berkeley Daily Planet’s business page.