IRS uses Web to make up for lost time

The Internal Revenue Service is pushing taxpayers to the Web for the latest filing information after the 109th Congress passed last-minute legislation that delayed the IRS’ ability to distribute paper instructions for the tax filing season.

The previous Congress passed the Tax Relief and Health Care Act the day before it adjourned. The bill renews and extends tax cuts, including the college tuition deduction and the research and development tax credit.

But the information is not on the IRS documents already at the printer.

“Unless taxpayers are willing to get on the Internet and search, they may never know that we extended these [tax] incentives in the nick of time,” said Sen. Max Baucus, chairman of the Senate Finance Committee, just before Congress adjourned last year.

IRS Commissioner Mark Everson wrote in a Dec. 5, 2006, letter to Baucus that the individual tax form, Form 1040, was already being printed. Tax legislation passed after Oct. 31 risks hindering the IRS’ ability to meet tax filing season needs, such as distributing up-to-date information and on-time returns. He estimated that updating the forms would cost more than $2 million.

The IRS sends tax forms to the printer based on the legislation in effect at the time, Everson wrote. He said reprogramming IRS systems to include the tax law changes could cost about $500,000. A separate document to show sales tax tables could cost about $410,000 to print and $1.3 million to send out, the letter states. He said changing and checking the agency’s systems could take at least six weeks.

Delays force the IRS to start the tax filing season behind schedule, which impacts when the agency can send out tax returns. Also, tax software developers will have to address the tax changes, impacting the Free File Alliance.

Last-minute laws may not hit the IRS as hard in the future, however. The number of paper tax booklets being mailed continues to decline as more people opt to e-file their returns, the IRS said. It expects to process about 136 million individual tax returns for 2006, with more than half of those filed electronically.

Forms are available on the IRS’ Web site, according to a Jan. 4 press release.

“This is a one-stop online shop for people hunting key forms, looking for what’s new in the tax code and answers to frequently asked questions,” the release states.

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