The Internal Revenue Service plans to make it easier for more taxpayers to file their federal income tax returns by telephone next year.
During the 1997 filing season, which starts in about a week, more taxpayers who would normally fill out a U.S. Form 1040EZ on paper will be able to use the telephone instead, said IRS Commissioner Margaret Milner Richardson.
The file-by-phone system, dubbed “TeleFile” by the IRS, began as a pilot program in the 1992 filing season, and was limited to certain taxpayers in Ohio.
The IRS gradually expanded the program to other parts of the country, and rolled it out nationwide in the 1996 filing season, covering 1995 tax returns. Still, only single taxpayers were generally eligible.
In the coming filing season, however, the program will be expanded to include many married taxpayers who file jointly, Richardson said.
As a result, the IRS plans to mail about 26 million TeleFile packages for the coming filing season, compared with about 23 million packages in the last filing season, an increase of more than 13 percent.
The expansion of the telephone filing system is part of a broader effort by the IRS to cut down on paperwork and make the system more efficient and effective, Richardson said.
“We are committed to eliminating as much paper in the process as we possibly can,” she said.
Richardson outlined the change to a recent meeting in Chicago of personal-finance writers from throughout the country.
In general, you’ll be able to file your federal return by phone if you meet these requirements, said IRS spokesmen Frank Keith and Steven Pyrek:
Your filing status is single, or married filing jointly, and you have no dependents.
Your taxable income for 1996 is less than $50,000, including taxable interest income of less than $400.
You receive a TeleFile package from the IRS. (You can file by phone only if you receive one of these packages; the IRS will send the packages to taxpayers who fit the agency’s profile as the most likely candidates for TeleFile.)
You have not moved within the last year, and your filing status has not changed in that time.
TeleFile will generally work the same this year as it did last year.
Following the instructions in your TeleFile package, you’d gather all the material you’d normally need to file a complete and accurate return, including W-2 wage statements and Form 1099 interest statements.
Then, using a TouchTone phone, you’d dial a toll-free IRS number day or night.
When connected, you’d follow the automated voice instructions, and use your phone’s keypad to enter your income and various other numbers when called for.
Toward the end of your call, you’d be told if you owe money or if you are entitled to a refund, and how much.
“It doesn’t get any easier or more convenient than this,” Pyrek said.
The system has a number of security features, Richardson said. “We have built in some filters to try to prevent fraud.”
For example, your TeleFile package would include a personal identification number. When you called to file your return, you’d punch in this number when requested, along with your Social Security number and your date of birth.
You’d also be given a confirmation number before your call was completed; you’d write this number on the worksheet in your TeleFile package, to keep for your records.
(The IRS recommends that you use your own phone, and that you avoid using portable or cellular phones to avoid interference.) Also, there’d be no paperwork to send to the IRS; you’d keep your W-2 and 1099 forms for your files.
To further reduce paperwork and save money, TeleFile packages will not include a paper Form 1040EZ, as they did last year.
You could still file a paper return if you wanted; you’d just have to get a blank paper return, from the IRS or from your local post office or public library, for example.
In general, the TeleFile program is geared for basic returns. So, it would cover taxpayers with income from wages or unemployment compensation, for example.
No business returns are allowed in the program, so you couldn’t file by phone if you had Schedule C income from a sole proprietorship, for example.
Also, you’d be eligible only if you claim a standard deduction; the minority of taxpayers who itemize deductions on Schedule A cannot take part.
Gregory A. Porcaro, chairman of the federal and state tax committee for the Rhode Island Society of Certified Public Accountants, said the expanded TeleFile program will benefit lots of taxpayers.
“If you’ve got a couple of W-2s and that’s all there is, it’s a simple, painless, do-it-at-home process.”
But if you choose to file your return by phone, be careful when you punch in the numbers, to avoid mistakes, said Porcaro, who also is tax principal at Brindamour, Otrando, Porcaro & Associates Ltd., a CPA firm in Warwick, R.I.
Also, make sure you keep your TeleFile worksheet in a safe place, for your records. And if you’re subject to a state income tax, you’ll need the records to complete your state return, he said.
And just because you file by phone doesn’t mean you won’t need professional tax advice. “There is a group of people who don’t really need planning,” he said.
But the right tax preparer or financial adviser could offer advice to help you on tax-related matters overall, such as whether you are having too much income tax withheld at work, or whether you’re making full use of your employer’s tax-advantaged benefit plans, he said.
Altogether, about 3 million tax returns were filed by phone in the 1996 filing season. That’s only about 2.5 percent of the 119 million individual federal returns filed.
Still, it’s a more than fourfold increase from the number of returns that were filed by phone in the 1995 filing season, according to IRS figures.
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