Tax Refunds Helping Lift Economy

Bigger tax refunds this year, and more on-time payments by the Internal Revenue Service, are contributing an extra $10 billion to the economy’s rejuvenation this spring.

The IRS sent taxpayers 41.6-million refunds, averaging $1,252 each, through March 29. That’s up from 38.8 million refunds averaging $1,076 a year earlier. The total, $52.1 billion, is up 25%.

“It’s not insignificant,” said economist Mark Zandi of Regional Financial Associates in West Chester, Pa. “Refunds spur all kinds of sales . . . appliances, TV sets. Twelve-hundred bucks goes a long way toward a down payment on a car.”

Last year, IRS computers delayed 7.4 million refunds--an inadvertent fallout from a crackdown on fraud. Angry callers flooded IRS’ toll-free telephone lines, and the agency reported its worst-ever rate of answering calls.

This year, the IRS reports a marked increase in the flow of refunds and a moderate improvement in telephone access, despite budget and staff cuts and the threat of last-minute tax changes from Congress.

“Notwithstanding the budget cuts . . . this year’s filing season seems to be progressing more smoothly than did last year’s in some key respects,” said Lynda D. Willis of Congress’ General Accounting Office.

Still, the IRS has closed some of its offices, reduced walk-in hours and cut back on auditing. A group of commercial tax preparers reported a sharp increase in calls from taxpayers searching for forms. And, it said, morale problems appear to have soured some revenue officers.

“Certain enforcement employees have started to exhibit an attitude of callousness to the plight of taxpayers far in excess of their usual indifference,” said Joseph F. Lane of the National Assn. of Enrolled Agents.

He said a cut in the IRS’ budget, from $7.5 billion last year to $7.3 billion this year, and an increase in anti-IRS rhetoric in political campaigns are taking a toll.

From January through March, the IRS answered 20% of the 91.7 million calls it received. The rest of the callers either heard busy signals or gave up after being put on hold.

That’s an improvement over last year, when only 8% of 236 million calls were answered between Jan. 1 and the April 15 filing deadline.

According to the IRS, this year’s access rate--by caller rather than by call--actually is about 51% because many answered calls represent multiple attempts.

But no matter how it is measured, and despite the improvement, telephone access remains very low, the GAO says. As recently as 1989, 58% of calls went through.

Also, it’s harder to find in-person help from IRS employees. According to the GAO, the IRS closed 93 walk-in assistance offices. Those remaining served 2.1 million taxpayers through March, a 16% drop from last year.

On the plus side, the IRS’ home page on the Internet has been visited more than 41 million times. And through March, 5.2 million taxpayers listened to IRS information tapes over the telephone, up from 4.5 million a year ago.

“The most expensive way to deliver services is face to face,” IRS Commissioner Margaret Milner Richardson said in an interview. “What we’re trying to do is . . . serve more and more taxpayers . . . in a way that makes the most efficient use of our resources.”

In another fallout from the budget crunch, the IRS audit rate for individual returns is projected to drop to 1.4% from 1.7% last year.