More Americans filing taxes electronically

With less than one month to go in the 1998 tax-filing season, the Internal Revenue Service reports that millions more Americans are filing their taxes electronically this year.

As of March 13, nearly 18.8 million Americans filed their taxes electronically, compared with 15.2 million during the same period last year. As a result, the number of taxpayers filing traditional paper forms dropped from 35.4 million in the first two and a half months of 1997 to 31.9 million in the same period this year. The IRS expects about another 70 million individuals to file their taxes by April 15.

Taxpayers can electronically file their taxes using one of three methods: using IRS e-file with a tax preparer; submitting simple tax information over the phone with the IRS' TeleFile program or transmitting tax information via modem from a home PC.

This tax season, 72 percent of the 18.8 million electronic filers used IRS e-file and about 24 percent used TeleFile. Only about 4 percent, or 550,000 people, used their home PC to file. However, filing online was up dramatically from 233,000 in 1997.

"This is the smoothest filing season we've ever had," said Terry Lutes, national director for IRS' Electronic Program Operations. "What is so significant this year is the increasing popularity of the filing-from-home option as taxpayers get more comfortable filing their transactions from their PCs."

For years, the IRS has campaigned to encourage taxpayers to file electronically. The agency hopes that within 10 years, four out of five taxpayers will file taxes electronically. Through March 13, about 37 percent of all taxpayers used one of the electronic-filing methods.

However, Charles Lacijan, a former senior policy adviser to the National Commission on Restructuring the Internal Revenue Service, said the IRS still can improve its electronic tax services. For example, some federal and state tax forms require a signature for electronic tax returns, and several tax forms such as the 1310—- a form used to claim a refund for a deceased taxpayer—- cannot be accepted electronically.

"I think the IRS faces three major challenges in increasing the number of electronic filers," Lacijan said. "They have to completely eliminate paper from the filing process, they have to accept all forms, and they have to make electronic filing attractive to the 'balance-due' taxpayer whose account is debited some two or so weeks earlier than those who file through the paper process."

The IRS also reported that the number and value of direct deposits—- tax return payments made electronically to individuals' bank accounts—- increased from 11.8 million deposits worth $21.9 billion through March 14, 1997, to 13.6 million deposits worth $25.7 billion in the same period this year.