Clinton to offer tax break for e-filers

Next month, President Clinton will ask Congress to create a tax credit for taxpayers who file their federal income taxes electronically.

Treasury Secretary Lawrence Summers said the president's 2001 budget proposal would include a $10 tax credit for taxpayers who file their returns online and a $5 credit for those who file via the telephone.

"Electronic filing will produce faster refunds, a reduction in errors, quicker identification of compliance problems and reduced costs — all at the same time," Summers told the IRS Modernization Conference in Washington, D.C., on Thursday.

Electronic filing has grown dramatically. In 1999, more than 29 million taxpayers filed online or by phone — a 19 percent increase compared with the previous year. That included 2.5 million taxpayers who filed their returns by home computer — a 161 percent increase compared with the previous year, Summers said.

This year, an estimated 34 million taxpayers are expected to file their returns electronically. The latest IRS projection shows that about one-half of all returns will be filed electronically by 2007. The tax credit outlined by Summers would give taxpayers a greater incentive to file their taxes electronically.

"The IRS is changing the way it does business to bring the agency into the 21st century," Summers said.

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