The federal government hopes to update the world's largest revenue collection system by using computer wizardry to collect more than $700 billion in annual payroll taxes.
The overhaul, which is still in the early planning stages, has the potential of changing the way every business in the country submits tax revenue to Uncle Sam.
The goal is to eliminate a 40-year-old system that depends on 70 million paper forms a year to collect the personal income taxes and Social Security taxes that businesses withhold from employee paychecks.
The system, which also covers smaller taxes such as the corporate income tax, raised $720 billion in the 1987 fiscal year, two-thirds of Uncle Sam's total revenue take.
But the collection system makes a lot of mistakes. There were more than 300,000 errors last year, the vast majority of them made by businesses in filling out the Federal Tax Deposit forms that the companies submit to their local banks.
The banks send a copy of the form to the Internal Revenue Service, which credits the company's account, and to a regional Federal Reserve Bank, which transfers the money to the government's bank account.
Federal officials say their goal is to eliminate the paper and the banks, and require employers to submit the payment information electronically to a central computer clearinghouse, which would notify the company's local bank to transfer the money to the government and credit the company's IRS account.
Big corporations already have the computer capability to transfer this type of tax information. Small companies would have little trouble in programming their personal computers to handle the chore or using a push-button telephone to transmit the data, much like many individuals use bill-payer telephone services offered by banks, officials said.