Tax season begins with policy changes, e-filing push

The Internal Revenue Service began the 2007 income-tax-filing season by encouraging all taxpayers to file their returns electronically. The agency also released guidance on how to cope with last-minute changes in tax policy in 2006 and information on federal excise-tax refunds.

Currently taxpayers who wish to file electronically can do so by going to authorized tax preparers, using over-the-counter software, or going through the Free File program, according to an IRS spokeswoman. The program allows free e-filing for eligible taxpayers and is headed by the Free File Alliance and the IRS.

The agency announced that ancillary offerings such as solicitations for refund loans -- which sometimes carry high interest charges and fees -- will be removed from Free File this month.

The IRS has advised the public that taxpayers who file their taxes electronically will get their refunds faster and drastically reduce their chances of making errors. In order to address the people who do not have Internet access or computers, IRS spokeswoman Nancy Mathis said "the IRS partners with organizations that operate 12,000 free tax-preparation physical sites nationwide to help lo-income and elderly people to file their taxes."

Mathis said that currently, paper returns must be manually entered into electronic forms by IRS employees. In 2006, roughly 54 percent of taxpayers filed electronically, she said. Money saved from new technology has been diverted to customer service and enforcement, Mathis added.

The IRS also has advised taxpayers to visit its Web site in order to receive information on how a new law affects their taxes.

This year, individual taxpayers can request refunds if they paid the federal excise tax on long-distance or bundled telephone service between Feb. 28, 2003, and Aug. 1, 2006. The government stopped collecting the tax on long-distance service in August 2006. The IRS expects more than 146 million individual taxpayers to request the refund.

The e-filing system has been updated to reflect the elimination of that tax, but paper forms went to print before the law was enacted in December.

Members of the 110th Congress wasted no time last week introducing bills that would eliminate the remaining portion of the tax that applies to customers who receive only local phone service. Sens. John Ensign, R-Nev., and Charles Schumer, D-N.Y., filed measures on the subject.

IRS.gov at times is one of the most heavily visited Web sites in the world and so the agency has tried to make the site more user friendly, Mathis noted.

Over the last couple of years, the IRS increasingly has offered new online tools to help educate taxpayers. Mathis said one of the most popular features allows users to check the status of their tax filings and track their refunds.