U.S. Treasury encourages e-filing

Taxpayers are dramatically increasing their use of computers, credit cards and direct bank deposits during income tax filing season, and the Internal Revenue Service predicts that more than 46 million Americans will try it this year.

It's called e-filing and Jim Hillin, who started his Cape Girardeau CPA practice more than 30 years ago, is just one tax preparer who has seen it coming for quite some time.

"There's no question that down the road, a large majority of the returns are going to be required to be filed electronically," said Hillin, who serves on the board of the Missouri Society of CPAs.

Hillin said that his firm -- Hillin and Clark, P.C. -- already does a portion of its tax returns electronically, but he said the firm is considering filing all of their returns that way.

"The IRS is pushing it," he said. "We want to stay ahead of the curve."

Many CPAs and tax firms are likely considering similar modifications to policy. An ever-expanding number of Americans are choosing e-file options that allow them to file a tax return, pay a balance due, get an extension of time or make estimated tax payments without getting a hand cramp or having to lick a stamp.

Reducing paperwork

More than 40 million Americans chose e-file options last year -- 13.6 percent more than the year before. While the majority of returns today are still filed on paper, the IRS has become tired of shuffling mounds of paper and hopes to triple the number of taxpayers who file income taxes electronically by 2007.

In addition to reducing the paper load, the IRS is pushing electronic filing because it reduces errors, speeds processing time and provides better security for private information. For the taxpayer, refunds can arrive in half the time compared with paper.

Teresa Robinson, a tax preparer and manager with H&R Block Cape Girar-deau, said they file a "large bulk" of their customers' taxes electronically.

"It is much more accurate," she said. "The IRS receives it within 24-48 hours. If you mail it in, you're never sure when they receive it."

Filing electronically does not mean having to pay early, she said. Those payments -- which can be made over the Internet for the first time this year -- still do not have to be paid until April 15.

The big selling point is the reduced time that taxpayers get a refund back, said Robinson.

"If you mail it in, it takes six or eight weeks to get your refund back," she said. "If you're getting a refund and you have it directly deposited into your account, you'll have it from 10 to 14 days. It really is much faster. That's why it's becoming the preferred way to file."

E-file methods

There are several ways to file taxes electronically.

Computer filing through an authorized provider has been the core of e-filing since its debut in 1986. Using this method, tax professionals send clients' returns electronically to the IRS.

Taxpayers can do it themselves, however, if they have a computer, a modem or Internet access, and tax preparation software. More than 6.8 million taxpayers chose that method in 2001.

The IRS Web site at www.irs.gov has a list of companies offering online filing software, as well as direct links to firms with low- or no-costs e-filing options.

But the easiest way to e-file is by phone. It's called TeleFile, which people can use instead of filling out form 1040EZ. Instead of tax forms, people fill out a worksheet that becomes the taxpayer's record. After filling out the worksheet, the taxpayer calls a toll-free number and follows step-by-step instructions.

There are two ways to pay taxes electronically -- by authorizing an electronic funds withdrawal from a checking or savings account, or by using a credit card. That is slower to catch on. Just over 640,000 people paid their taxes by electronic funds or credit card during 2001.

The newest option -- announced by the U.S. Treasury late last year -- is the option of paying all one's federal taxes through a secure Web site.

"The Internet is an increasingly integral part of today's business community," said IRS Commissioner Charles Rossotti. "It makes sense to offer an online option for paying taxes."

Business and individuals can enroll for the program -- Electronic Federal Tax Payment System -- via the Internet, using a user-friendly Web interface, Rossotti said. After filling out an online enrollment form, a confirmation kit will be mailed with instructions for obtaining an Internet password.

A PIN number will be mailed separately. Payment can be scheduled up to 365 days in advance.

Despite the IRS's push, not every accountant and tax preparer sees this is the tidal wave of the future.

Debbie Beussink of Beussink, Hey and Roe in Cape Girardeau, said most of the people who are e-filing are those who expect a big refund, which does not include most business owners and people who earn larger salaries.

"I don't see as many business people doing it because they are going to owe," she said. "The government wants less paperwork so they're pushing it, but people are not concerned about IRS's paperwork."

People who have complex tax returns with itemized deductions are less likely to want to send information over a computer or telephone, she said.

"I know the IRS is hoping that within the next few years, 100 percent of the returns will be filed electronically," she said. "But I don't see that happening."

smoyers@semissourian.com

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