IRS Improves Staff, Computers to Speed Tax Return Processing

The processing of federal income tax returns this year will not be hampered by the delays and computer failures that plagued the system last year, a top Internal Revenue Service official predicted Monday as Americans continued to receive their 1985 tax forms.

“I’m very hopeful that this will be a substantially different year, that it will be much improved--more like a normal processing year,” Fred Perdue, director of returns processing, said at a news conference aimed at encouraging taxpayers to file early.

More Workers Hired

Largely because Congress gave the IRS $31 million more to spend this year than President Reagan had requested, the agency was able to hire more workers, improve training and write better computer programs to handle the flood of tax returns, Perdue said.

IRS officials have acknowledged that delays last year in receiving new computers, as well as computer breakdowns and human errors, kept many taxpayers from receiving refunds for up to 16 weeks--the longest lag time in years.

Now, efforts have been made not only to speed up processing but to improve assistance given to taxpayers over the telephone, officials said Monday. The IRS has installed more phone lines, hired more helpers and expanded training so that answers given to taxpayers will be accurate and more courteous, Phil Russo, head of the Taxpayer Service Center, said.

Meanwhile, officials noted that several changes in the tax forms--all aimed at curbing cheating--may complicate things for many taxpayers when they fill out their returns.

One change that will have wide effect requires a payer of alimony, in claiming the sum as a deduction, to list the last name and Social Security number of the recipient. Thus, the IRS will be able to ensure that the recipient is reporting the payments as taxable income, Art Altman, assistant director of tax forms, said.

In addition, he said, new rules apply to divorce or separation agreements made last year, to determine whether payments to former spouses qualify as alimony or child support, which are treated differently for tax purposes.

Change on Exemptions

A related change that affects separated parents is designed to prevent both parties from claiming their dependent children as exemptions. Currently, either may claim a child as an exemption. The new rule will bar the parent without custody from claiming the exemption unless there is a formal agreement with the estranged spouse.

In another change, Social Security recipients must list tax-exempt interest payments separately when they report whether large amounts of outside income require them to pay taxes on their Social Security benefits. It is hoped that the new step will help cut down on computation errors, Altman said.

For the first time, taxpayers who receive capital gains must report on Schedule D “total sales of stocks, bonds, etc., reported for 1985 by your broker to you on Form(s) 1099-B or an equivalent substitute statement(s), such as a broker’s confirmation statement.”

Few Simplifications

The only simplifying changes this year are a scaled-down Schedule F for listing farm income and a depreciation work sheet on Schedule E that property owners no longer will be required to fill out--but may do so if they wish.

But Altman said that the major tax law changes made in 1981 and 1982 had produced many more “disruptive” alterations in tax forms than congressionally enacted changes last year.

The massive tax revision bill passed last month by the House but not yet acted on by the Senate would lower income tax rates for most Americans but would do little to change the current process of filling out tax returns, congressional aides said.