Average Tax Refund Is 20% Higher, IRS Reports

Fewer Americans are rushing to file their federal tax returns this year, but those who do are finding the average refund up by almost 20% from 1987, the Internal Revenue Service said Thursday.

During the first five weeks of the year, the IRS received 9.14 million returns, down 17.5% from the 11.08 million for the same period a year ago. The average refund was $656, compared to $548 at the same time last year.

These returns, due by April 15, are the first since most of the big new tax law enacted in 1986 took effect. And although some errors are turning up, the IRS said, there have been no big surprises.

“Early indications are that the filing season is going pretty much as expected,” Robert LeBaube, director of the IRS taxpayer-service division, told reporters. The drop in the number filing early returns is not significant, he said.

Education Efforts

In fact, the number of couples and individuals who delay filing has been growing each year. The figure for the first five weeks in 1987, for example, was down almost 8% from the previous year.

This year, LeBaube said, some of the procrastination can be traced to taxpayers’ efforts to educate themselves about the new law. He noted that the agency has received 30% more requests for forms and explanatory publications than in any previous year.

The 1986 law was a thorough rewrite of the federal tax code--cutting rates, raising personal exemptions and eliminating or reducing several deductions.

The increase in the size of the average refund this year is almost nine times as large as the 2.2% tax cut that the average person received in 1987 from the new tax law.

As in years past, about 80% of taxpayers can expect refunds. Through the first five weeks of 1988, refunds were certified for 528,000 couples and individuals whose returns had been processed, up 3% from last year.

Last week’s average refund was $711--up $100 from the same time in 1987.

One IRS goal this year is to improve the accuracy of answers to taxpayers’ telephoned questions. Past surveys by Congress’ General Accounting Office found accurate replies less than 80% of the time.

Now, the IRS is testing the system on its own. Agency officials pose as taxpayers and call in typical questions to see how IRS “assisters” respond. It is too early to point to any major findings, LeBaube said, “but we already have found some problems.”

A spot check of early returns has turned up four areas in which many taxpayers are making mistakes, LeBaube said. They were:

- On forms 1040A or 1040EZ, where many people, especially students with part-time jobs, are failing to check a box indicating whether they can be claimed as a dependent by another, usually by a parent.

- On Schedule A, where some who itemize deductions are concluding--erroneously--that they are no longer allowed to deduct state and local income taxes and property taxes. The new law eliminated the deduction for sales taxes--not income and property taxes.

- Those over 65 or blind, were unaware that they still get a special tax break if they do not itemize, even though they no longer get an extra exemption.

- Schedule D, on which capital gains are reported, is causing special problems because the law was changed so significantly in this area.