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Filing by Phone : IRS Experiment in Ohio May Be Expanded


People nationwide may be able to file their income tax returns by telephone--without doing any of their own calculations--and get their refunds mailed within three weeks if an experiment in Ohio proves successful.

Since Jan. 10, about 5,000 taxpayers in Ohio have filed their taxes by calling a 24-hour 800 number and punching information from their W-2 forms into their touchtone phones. The IRS computer connected to phone lines automatically calculates their payment or refund. The entire process takes only five to 10 minutes. And if all goes according to plan, the checks will be mailed in two to three weeks, about half the usual time.

The telefiling system saves time and money for everyone, according to Rollie Woods, an IRS spokesman in Cleveland. The Ohio experiment cost the IRS about $600,000, but telefiling eliminates the enormous extra paperwork generated by surprisingly frequent errors, which require reprocessing of 16% of tax returns.

The IRS is considering expanding the experiment to several more states next year, but no specific locations have been decided. However, "it is reasonable to expect to see nationwide telefiling in the next five years," Woods said.

A nationwide system could boost Germantown, Md.-based Microlog Corp., which provides the computer system that makes it possible. Microlog, with $19.6 million in sales last year, set up the IRS' automated tax question-answering service, one of the most-called phone numbers in America. Microlog provides similar telephone information and service systems for other government clients, including the Immigration and Naturalization Service and Walter Reed Army Medical Center, and corporations.

The telefiling plan so far is available only to people filing 1040 EZ forms--often young people just entering the job market, part-timers or others with incomes under $50,000 and less than $400 in annual interest income. Taxpayer advocacy groups like that.

"It sounds like a good idea. It gives the average person, even someone who doesn't own a calculator, computer power. It's going to help people making the least amount of money," said David Keating, executive vice president of the National Taxpayers Union.

About 1.2 million Ohio taxpayers who had qualified to file 1040 EZs in the past were mailed purple leaflets in January inviting them to use the system, along with a 1040-TEL form. The 1040-TEL has only five lines to fill in, including a question on donating $1 to the Presidential Election Campaign Fund, and no adding, subtracting, or looking up tax tables. These taxpayers still can file by mail if they prefer.

In effect, the telefiling system eliminates one step in the tax processing system by having taxpayers directly input their information into an IRS computer, rather than having a data clerk read their written form and type it in. Many people are already familiar with similar systems that let them check bank balances, movie listings or sports event ticket availability by telephone.

The IRS says security is provided for by a personal identification number mailed with the form, which must be used in combination with a Social Security number. The taxpayer must still mail in the form with his signature, but processing of the return takes place at the time of the phone call, even before the form arrives at the IRS.

For taxpayers with more complicated returns, it could be longer before telefiling can handle their taxes. If they're in a hurry, they may prefer to use existing systems that let them file electronically by using a professional tax preparer. But Keating warns against "instant refunds" provided by some of these services, which for a fee give a high-interest loan in the amount of the expected refund.

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