IRS expands TeleFile options to lure more users

During a recent meeting held by the Electronic Tax Administration Advisory Committee, Internal Revenue Service officials decided to give taxpayers who file electronically by telephone a wider range of payment methods.

Currently, TeleFile taxpayers file their returns via telephone and then mail in their payments. Under the expanded system, TeleFile customers will be able to pay by credit card over the phone or by having the IRS draw funds electronically from taxpayers' bank accounts.

"We are just trying to provide the taxpayers [with] options," said Terry Lutes, acting assistant commissioner of the Electronic Tax Administration. "We want to make it as easy as possible" to encourage electronic filing, he said.

The TeleFile system allows eligible taxpayers to file Form 1040EZ in about 10 minutes using a touch-tone telephone. A confirmation number is provided at the end of the call to verify that the return has been received by the IRS.

Lutes said taxpayers who file Form 1040EZ will be able to use their credit cards beginning in March 2000 to make quarterly payments via telephone. TeleFile customers also will be able to make federal and state payments using a credit card, and the IRS will forward payments directly to the appropriate state. As an alternative, taxpayers who want to cut a step out of the process can authorize the IRS to electronically collect from their banks debts that are owed to the federal government.

Lutes said the IRS will use a commercial automated clearinghouse debt system, which will allow the agency to request an electronic payment direct-ly from the bank after pre-approval from the taxpayer. The IRS hopes that the new payment methods will lure more users to the TeleFile program.

During the 1999 filing season, Lutes said, 5.6 million taxpayers used the TeleFile system—a decline from the nearly 6 million in 1998. Lutes said it is unclear why the number dropped, but tax law changes could have been a factor.

"We didn't have any problems with the system," Lutes said. "An analysis is under way."

Michael Cavanagh, executive director of the Council for Electronic Revenue Communication Advancement, a tax industry group that lobbies for electronic filing, said his organization is holding off commenting on the expected expansion until after it reviews the IRS' plans.

Cavanagh said CERCA is setting up a committee specifically to examine the new TeleFile options. "We are going to provide some industry feedback over the course of the summer," Cavanagh said, whose organization includes credit card companies and states.

This year, about 29 million of the 120 million taxpayers filed electronically, up from 17 million in 1997, Lutes said. Besides TeleFilers, electronic filers include taxpayers who file online either through their own PCs or through tax professionals.

In 2007, the IRS' Electronic Tax Administration would like to receive 80 percent of its tax returns electronically. "We've had significant growth—about 20 percent growth over three years," Lutes said. "The potential for us to reach our goal is there. We [have] to work cooperatively with industry."