Archive for Sunday, January 28, 2001

E-filing hits the mainstream in 2001

January 28, 2001


As federal forms, state forms, W-2 forms and all the other forms make their way into mailboxes, tax preparers in Lawrence and across the country are bracing for a less-taxing rush this season.

The reason: Filing taxes electronically is more popular than ever.

"It's fast, it's easy and it's friendly," said Scott Holeman, spokesman for the Kansas Department of Revenue, which processed its first 100 e-returns in early January. "By filing electronically, taxpayers can expect a more accurate return. And if they're entitled to a refund they'll get their money faster."

Revenue officials expect 450,000 Kansans to file their state returns electronically this year, whether it's by phone or computer. Last year 343,611 returns or nearly a quarter of the 1.5 million filed were delivered electronically.

And this year, for the first time, Kansas taxpayers can use a Mastercard, Visa or Amer-ican Express to pay their tax bills. They also can choose direct deposit for refunds.

The average time for processing an e-filed return and posting a direct-deposit refund is four days, compared with the typical two weeks using more traditional methods, said Gary Centlivre, the department's manager for e-commerce.

"This is a lot better than paper," he said.

The IRS also has adjusted its e-filing requirements to make things easier. This year people filing federal forms electronically may choose a five-digit personal identification number, instead of having to mail in a separate paper form.

Another 23 tax forms also are being added to the electronic list, meaning almost every individual taxpayer now can take advantage of e-filing.

"This really makes electronic filing paperless," IRS Co-mmissioner Charles Rossotti said.

The electronic evolution isn't the only tax change in store for this season, which ends with the filing deadline of midnight April 16. The traditional cutoff, April 15, falls on a Sunday.

Feds make adjustments

Among changes at the federal level:

Marking a new box on the 1040 form will authorize the IRS to discuss any problems directly with a paid preparer. The IRS says this will reduce the "correspondence burden" on taxpayers, but it won't authorize the preparer to represent the taxpayer in an audit or collection matter. The IRS expects more than half of an anticipated 130 million returns to be handled by paid preparers.

Taxpayers whose only capital gains or losses are distributions from mutual funds can report gains on line 10 of the 1040A form, rather than filling out the longer capital gains forms.

"In the past they've had to use Schedule D, which is a nightmare," said Bob Meyer, district manager for H&R; Block offices in Lawrence and Topeka. "This makes it a lot easier, especially for the folks who are doing their own taxes."

The definition of a foster child for the $500 child tax credit or earned income tax credit now requires that the child be a relative or placed in the home by an authorized placement agency, instead of simply being supported by a taxpayer. The child also must have lived in the home for the entire year.

Meyer said the change likely would eliminate up to 15 percent of those who made such claims last year.

Up to $2,000 in student loan interest is deductible, up from $1,500 in 1999. But the deduction isn't available for married couples filing jointly with incomes above $75,000, or $55,000 for singles.

The shift could save some taxpayers $300, said Brenda McFadden, a certified public accountant and owner of McFadden and Associates LLC, 825 Vt.

"For anybody who's paying for school, it's a big deal," she said. "Anytime you can save money on taxes that's a good thing."

State of change

Among the differences at the state level this season:

The definition of the $25,000 income limit for a refund of food sales tax paid has been changed.

To determine a filer's income, certain interest and retirement benefits now must be added to a filer's adjusted gross income.

Net operating farm losses may be allowed for Kansas taxpayers in the same manner as allowed for federal filings, and can be carried back for five years.

Refunds from net loss "carrybacks" are limited to $1,500 in any year.

State forms will include a place to make donations to the Kansas World War II Mem-orial Fund, created to provide money on behalf of Kansas to the World War II Memorial Society, to be used for creation of a World War II Memorial in Washington, D.C.

The Associated Press contributed information for the story.

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