It was a fairly disappointing turnout.
When the Internal Revenue Service and the Franchise Tax Board teamed up–with some fanfare–to help students at the University of California at Los Angeles file their tax returns by phone, they were hoping that hundreds would participate. The vast majority of the nation’s college students qualify for the program, which makes filing a tax return as easy as making a 10-minute phone call.
But only about 15 students showed up–and only seven of those had the proper tax documentation to file their returns by phone, says Laurie Keleman, an IRS spokeswoman in Los Angeles.
Yet, while that one experiment may have been disappointing, TeleFile as a whole is heralded as an astounding success. IRS officials are already estimating that roughly 6 million Americans–about one in every 19 taxpayers–will TeleFile their 1996 returns.
The federal TeleFile figures are more than double the number of federal returns filed by phone last year, and it’s up exponentially from 1995, when just 680,000 Americans used the program. TeleFile was launched in 1992. In that year, just under 26,000 Americans participated.
“It’s really so simple,” says Keleman. “But it’s like anything else. How long did it take automated teller machines to catch on?”
In a nutshell, TeleFile allows people who have simple returns and no dependents to file their tax returns via touch-tone phone. The program is offered by invitation only–if you don’t get a TeleFile booklet, you can’t file by phone–but it’s anything but exclusive. The IRS sent out about 26 million TeleFile packages this year, so roughly one in every five taxpayers had the option.
The IRS likes TeleFile because returns are filed early and accurately, and there’s no paperwork to contend with. Taxpayers fill out a short worksheet, dial a toll-free phone number and key their figures directly into IRS computers. Within 10 minutes, the return is complete and the participant gets a confirmation number.
There’s no need to send anything to the IRS unless you owe money. In that case, you send a check on or before April 15.
Equally appealing to participants is the fact that filing by phone speeds up receipt of refunds. Where those who file paper returns should expect to wait six to eight weeks to get a check from the IRS, those who file over the phone should receive refunds within two or three weeks, tax officials say.
And there’s no worry about those troubling “we have discovered an error on your tax return” letters. When you file over the phone, the IRS does the math. It computes your eligibility for tax credits and deductions and, while you’re still on the phone, it accepts your return.
Do not hang up until you hear your “confirmation number,” however, says Gary Iskowitz, partner at Gary Iskowitz & Co. and a member of the IRS Commissioner’s advisory group in Los Angeles. If the connection is broken before the confirmation number is given, the return has not officially been filed. That subjects taxpayers to one of the most onerous penalties in the tax code: a 5 percent per month failure-to-file fine. It’s worth noting that if you fail to pay the tax due–what many Americans fear–the IRS penalty is just one-tenth as much.
While TeleFile certainly has an appeal, it’s not available to everyone. The only people who can use the program are taxpayers who earn less than $50,000 and have a limited amount of income coming from sources other than wages. For instance, you could have received a portion of your income from taxable scholarships and grants, but only if the income was reported to you on W-2 statements. You can’t have earned more than $400 in taxable interest income if you wish to TeleFile. You can’t TeleFile if you have dependents. And you can’t use the program if you are married but want to file separate tax returns.
In addition, even if you qualify, you can only TeleFile if the IRS invites you to by sending you a TeleFile booklet, which contains a “PIN” or personal identification number that you must use to file.
“The system is practically error free. It speeds up your refund. You don’t have to hassle with paper. There is no cost–everything is done through an 800 number. You dont have to go to a preparer and it takes 10 minutes,” says Iskowitz. “It’s really a great deal.”
