Bush to propose giving electronic tax filers an extra 10 days, free Web filing

Thursday, January 31st 2002, 12:00 am

By: News On 6

WASHINGTON (AP) _ President Bush wants to encourage more people to file tax returns electronically by giving taxpayers an extra 10 days to e-file and allowing many of the simpler returns to be zapped to the IRS free of charge.

The proposal raised concern among tax preparation industry groups and members of Congress that the Internal Revenue Service's Internet site might compete with private businesses _ becoming both the tax collector and return preparer. Treasury Secretary Paul O'Neill said Wednesday that was not the project's goal.

``I don't intend for the IRS to get into the software business, but rather to open a constructive dialogue with those who already have established expertise in this field,'' O'Neill said in a written statement.

Officials at the White House Office of Management and Budget said the proposals, to be included in the president's budget submission due next week, are part of a broader effort to improve government services via the Internet. The IRS concept, they said, is to allow more people who file the simple 1040EZ returns to do so online for free.

O'Neill said the 10-day deadline extension _ which would not take effect until the 2003 tax filing season if approved by Congress _ is intended as extra encouragement for people to try electronic filing.

About 45 million taxpayers are expected to file electronically this year. But that means close to 90 million will not, even though e-filing promises faster refunds, fewer errors, lower cost to the government and acknowledgment that the return made it to the IRS.

One barrier is cost: Private companies can charge $12 to transmit a return, compared with 34 cents for a postage stamp, although many do provide free filing. Also, some taxpayers are concerned about protecting the personal financial information they give to these companies.

The proposal for free Internet tax filing is potentially more far-reaching and could stir up some controversy. O'Neill said the IRS will ``reach out and work in a new partnership'' with private companies, an attempt to head off resistance from businesses concerned about competition from the government in the tax preparation industry.

Ed Black, president of the Computer and Communications Industry Association, said the administration concepts announced Wednesday ``do not correspond'' with what the group had understood to be a plan to allow for government preparation of tax returns.

``The idea of IRS-prepared tax returns has properly met with widespread criticism,'' Black said.

Some of that has come from Capitol Hill, where Rep. Randy ``Duke'' Cunningham, R-Calif., and seven other House members recently wrote White House budget chief Mitch Daniels warning against government competition with private business.

``We see no compelling reason for the federal government to compete in this field, where the private sector has succeeded'' in making online tax preparation work, their letter said. Cunningham represents the San Diego area, home to Intuit Inc., maker of the top-selling TurboTax software.

Robert Weinberger, H&R Block's vice president for governmental affairs, said the nation's largest tax preparer supports increased online filing and is willing to discuss the administration's concept. But he said the idea is fraught with difficulties.

Among them, he said, is ``the question of whether the government ought to do both tax collection and tax preparation. ... The government is not going to go out of its way to maximize tax savings.''

The first meeting between administration officials and industry leaders was scheduled for Thursday, an IRS spokesman said.