IRS Supports a Deadline Extension for E-Filers

The Treasury Department and the Internal Revenue Service said Wednesday that they would support legislation to extend tax deadlines for consumers who agree to file their returns electronically.

President Bush intends to include this proposal, as well as one to make electronic tax filing free to everyone, as part of his upcoming budget, Treasury officials said.

The new electronic-filing initiatives would give participating taxpayers 10 extra days to file and pay their federal income tax bills, which are usually due April 15.

However, the changes won’t come in time for this year’s tax season, Treasury spokeswoman Tara Bradshaw said.

That’s mainly because the proposals require congressional approval and no supporting legislation has been proposed.

The proposals are part of an effort to meet the goal set by Congress in 1998 that 80% of all taxpayers--corporate and individual--file and pay their taxes electronically by 2007.

That goal was set partly because it’s cheaper and less time-consuming for the government to process electronically filed returns, which are less prone to error.

However, an IRS task force on electronic initiatives told Congress last year that it isn’t offering sufficient incentives for taxpayers and tax practitioners to flock to electronic filing.

The IRS projects that 34% of individual taxpayers will file electronically this year--up from 30.7% in 2001--and 43% will e-file by 2003. That’s well short of what is needed to meet Congress’ goal.

Treasury officials said there are several reasons taxpayers are sometimes reluctant to e-file. Paper returns can be filed for the cost of postage. But taxpayers usually must go through a third party to file electronically, which can add a $10 to $12 fee for routing the e-filing to the IRS. And some taxpayers are hesitant to send tax information through a third party.

The IRS believes allowing taxpayers to file late and for free when they file electronically might be just the inducement many need.

House and Senate staffers said it’s too early to say whether lawmakers would sponsor an e-filing bill.

Sen. Charles E. Grassley (R-Iowa), ranking minority member on the Senate Finance Committee, supports e-filing, a committee spokeswoman said. However, he needs to know what the Treasury’s proposal might cost and how it would work before he could support or oppose it, she said.

The Treasury Department didn’t provide cost estimates or a proposal for setting up the program. It probably would involve working with the private sector, officials said.