IRS Performance Sees Some Improvement This Year, Investigators Find

The Internal Revenue Service’s (IRS) tax filing season performance is a key indicator of how well IRS serves taxpayers, according to a new report by the Government Accountability Office (GAO). This year’s filing season was expected to be risky because of tax system changes, including the telephone excise tax refund (TETR) which can be requested by all individuals and entities that paid the excise tax, says GAO, which is the nonpartisan investigative arm of Congress.

IRS’s interim filing season performance is improved in some areas, GAO says. The number of individual income tax returns processed to date is comparable to last year, and the number filed electronically is almost 6 percent greater, it says.

"Taxpayers’ ability to reach an IRS telephone assistor was somewhat less than last year, but the accuracy of answers to taxpayers’ questions was about the same," the report says. "Use of IRS’s Web site increased, important because it is available 24 hours a day and is less costly than some other types of assistance," GAO says.

Other areas still require IRS improvement, the investigators find.

"Taxpayers’ use of the Free File program, which provides free tax preparation and electronic filing through IRS’s Web site—is 5.2 percent below last year at this time. Also, the Customer Account Data Engine (CADE), a modern tax return processing system, became operational 2 months behind schedule. IRS still expects to post 17 -19 million taxpayer accounts to CADE, which is about two and a half times more than last year," GAO says.

Tax systems changes have not had a significant effect on filing season performance. For example, IRS has received a fraction of the TETR-related telephone calls it expected to date, the report says.

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Association Offers Last-Minute Tax Tips for Self-Employed

It's April, and U.S. tax day is right around the corner but small-business owners submitting their 2006 tax returns are in luck -- everyone gets two extra days to submit their forms because April 15 falls on a weekend and April 16, Emancipation Day, is a holiday in Washington, D.C.

Those two extra days provide valuabletime for entrepreneurs rushing to file. "Don't be tempted to take shortcuts or make up numbers that you thinkyou won't have time to calculate correctly because that will increase yourchances of making a math mistake," says Keith Hall, national tax adviser for the National Association for the Self-Employed (NASE). "It's important to remember that you're not alone since there are a number of resources out there to help micro-business owners, even for those last minute filers."

For those micro-business owners who find themselves running out oftime, the NASE offers these tips to help filers waiting until the April17 deadline:

• Check for hidden deductions: There are a number of deductions that small business owners and the self-employed forget when filing taxes. If you work out of your home, your office may qualify for a deduction. Do you drive to the post office or a client site? Those miles may add up to a sizable deduction too.


• Retirement Savings: Retirement savings are deductible for last year's tax return up until April 17 of this year. That means you can count money deposited into retirement savings in 2007, up until the day you file, on your 2006 tax return.


• Filing Date: If, despite all your rushing around, you still can't make the April deadline, relax. All tax filers can get an automatic 6-month extension by filing Form 4868 by April 17, which you can download from the IRS Web site. However, an extension of time to file is not an extension to pay. If you do not send the IRS what you think you owe in taxes by April 17, you'll be subject to late fees and interest.


• Check your math: Most of the mistakes on tax returns are simple addition and subtraction errors. Check your math. Then, check your math again.


• Start thinking about next year: While small business owners may be tempted to finish their return and not think about taxes again until next year, now is a great time to reflect on how to reduce your 2007 tax liability. Consider deductions for a home office or employing your children; create a medical reimbursement plan, which would enable the business to reimburse the employee for all out of pocket medical expenses; reconsider the tax implications of incorporating your business; and research retirement plans designed specifically for the self-employed, including an IRA, SIMPLE, SEP, Single 401(k), and Keogh plan.


• Look for help: Sole proprietors doing their own taxes can find help from a number of sources, including Schedule C from A to Z, a line-by-line guide for completing the tax form Schedule C, available online.

Additionally the IRS offers a toll- free help line, 1-800-829-1040, which offers assistance to small businesses.


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