IRS Accepts Returns Filed on PCs

Taxpayers with home computers and the proper software will be able to file their tax returns directly to the Internal Revenue Service this year, the agency said yesterday.

The IRS and a group of software companies and on-line services -- including CompuServe -- have worked out the technical and legal details to sharply expand what up to now has been a largely experimental program.

As a result, the IRS expects to get 100,000 returns directly from taxpayers in 1996. In fact, a spokesman said, the agency has already received several thousand on-line returns this year.

The electronic filings will speed up the refund process -- cutting the turnaround time to three weeks from 40 days for a paper return -- and cut down errors, the IRS said. It also saves the agency money because its employees do not have to enter data into agency computers -- as they do with paper returns -- and so no time is wasted correcting keyboarding errors.

Until now, most electronic return filing had been completed by commercial return preparers and special transmission services. Last year, the agency got 11.1 million electronic returns, virtually all of them through the commercial route. Only about 1,400 returns came directly from home computers as part of a test involving CompuServe and America Online.

"We had tested the concept for the past couple of years" and the results had been satisfactory, IRS spokesman Don Roberts said. "What we doing is trying to move toward the direction" of simple and direct electronic filing, he said.

To file directly on-line, a taxpayer will need a moderately sophisticated personal computer and a modem, and will have to buy a copy of one of the nine participating software packages.

Besides CompuServe, the other transmitters have been primarily involved with commercial preparers.

America Online is not participating at the moment, but a spokeswoman said it is working on a system that should be available soon.

"We've grown ten-fold and we wanted to make sure if we offered electronic filing, it was the most easy interface," she said.

To file on-line, a taxpayer will use the software to prepare his or her return, and then, following directions in the program, send it to one of the transmission companies. The company will convert the return into a format that the IRS computers can read, and forward it to the agency.

If the return is in order, the taxpayer will receive an acknowledgment from the IRS. Similarly, if there is a problem, the agency will tell the taxpayer, via the transmitter, what needs to be corrected.

Once the return is accepted, the taxpayer will be required to mail a special signature form to the transmitter -- Form 8453-OL -- along with any W-2 forms. The transmitter then relays these documents to the IRS.

"The real vision is to get all the paper out of" the return filing process, Roberts said, but at this point the agency hasn't worked out an electronic substitute for the taxpayer's signature.

There are some limitations. Certain very complex returns may not work, but the chances of that "are very, very slim," Roberts said. "We expect that 99 percent of all returns could be filed electronically."

Also, each taxpayer will be limited to three returns -- a joint return for a couple and returns for two children, for example. The agency doesn't want computer entrepreneurs filing for the whole neighborhood, Roberts said.

And procrastinators should note that the electronic version of Form 4868, "Application for Automatic Extension of Time to File," isn't ready yet, although the IRS is working on it.

On-line filers will be able to have refunds deposited directly in their bank accounts, as can paper filers. Filers who owe will have to send the IRS a check by April 15, Roberts said.

The IRS has taken pains to check out the companies and systems involved to ensure privacy and prevent tampering or misuse of the data, Roberts said.

The agency also has been studying ways to allow taxpayers to file directly, either via their own modem or through the Internet, and may test that next year.