In its annual effort to send its own version of holiday greetings, the Internal Revenue Service promised Wednesday that your first batch of New Year's mail will include a 1994 tax form.
But while the new forms are not substantially different than the 1993 versions, the agency is enacting several procedural changes that could have a substantial impact on taxpayers, IRS chief Margaret Milner Richardson said.
Roughly 86 million tax booklets and 23 million postcards are scheduled to be pushed into mailboxes Jan. 3--the first working day of 1995. Some eager post offices have already put packages in the mail.
Because few tax changes took effect during 1994, the forms are largely familiar. Only retirees, low-income families, employees with unreimbursed business expenses and a handful of lucky investors will face noteworthy changes, IRS officials said.
However, in one of several key procedural changes, the agency will start cross-checking Social Security numbers for every taxpayer and dependent on the form--part of an effort to battle tax fraud, Richardson said.
Returns containing inaccurate Social Security numbers will be held up until the discrepancies can be corrected. No refunds will be processed in the interim, said Frank Keith, IRS spokesman in Washington.
"In the past, these issues were resolved after the refund was issued in classic audit fashion," Keith said. "Now even a careless error could hold up your refund. We are trying to stress that taxpayers should take this time to verify their Social Security numbers and those of their dependents."
In addition, the IRS is making electronic and telephone tax filing more widely available and less expensive, Richardson said. Already, about 15.5 million taxpayers file their returns via computer, mainly because filing electronically can cut refund waiting time in half. Whereas it takes between six and eight weeks to get a refund when you file by mail, the IRS promises your money within 21 days when you file electronically.
However, in the past you generally had to go to private tax preparers, who charged between $35 and $50 to transmit the returns. (A handful of preparers transmitted them free, but often only if you paid to have your taxes prepared.)
This year, about 126 IRS offices--including the main L.A. office at 300 N. Los Angeles St.--will provide free electronic filing services. Simply go in with your W-2 forms and other information and fill out the forms on the IRS computers.
In addition, many Voluntary Income Tax Assistance programs, which are offered to low-income and elderly taxpayers, will have electronic filing capabilities on site--also free for the asking.
However, to reduce foot traffic at peak filing times, some IRS offices will restrict the free electronic filing to low-income taxpayers or those who can qualify for the earned-income tax credit, spokesman Keith said. Roughly 40 IRS offices offered free electronic filing services last year.
To find a VITA program or an IRS office that offers free electronic filing, call (800) TAX-1040. But plan to file early. IRS officials expect to be swamped in the few weeks before the April deadline.
The agency has also expanded its telephone-based filing program, called TeleFile, Richardson said. The system allows you to file a 1040-EZ form over the phone in about three to four minutes. Like electronic filing, it promises faster refunds and greater accuracy.
The program, previously available in only seven states--Florida, Indiana, Kentucky, Michigan, Ohio, South Carolina and West Virginia--has been expanded to Northern California, southern Texas and all of Colorado.
To qualify for TeleFile, you must file a 1040-EZ form and live at the same location you did last year--in one of the qualifying districts. If you qualify, you should expect to get a special package that includes instructions and a personal identification number.
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Tax Forms: What's New
* 1040-EZ expanded: The nation's simplest tax form has been expanded to allow low-income parents to claim the earned income tax credit. In the past, you couldn't use this form if you had dependents.
* Earned income tax credit: This lucrative credit was expanded last year to allow non-parents to claim it. The form has also been abbreviated, to six lines instead of 20.
* Itemized deductions: Schedule A now includes lines to list personal property taxes and tax-preparation fees. Previously, these items had to be written in by hand. Taxpayers are also required to provide substantiation, such as a receipt or acknowledgment, for any charitable contributions over $250.
* Capital gains: Capital gains distributions this year will no longer be entered on the 1040, unless they're not filing a Schedule D. Those who don't file the capital gains and losses form should report capital gains on Line 13 of the 1040 and handwrite "CGD" on the dotted line.
* Social Security: Single retirees earning more than $34,000 a year and married couples earning more than $44,000 must pay additional taxes. Retirees will have to fill out a new 18-line work sheet--separate from the 1040--to calculate the taxable portion of their Social Security income.