Tax credit for online filing proposed

Secretary of the Treasury Lawrence Summers unveils a proposed $10 credit as incentive for taxpayers to submit their returns online.

Taxpayers could soon have an incentive to file their returns online: a $10 credit from the federal government.

At a Washington conference on modernizing the Internal Revenue Service, Secretary of the Treasury Lawrence Summers today unveiled a proposal that also includes a $5 rebate to taxpayers who file their returns over the phone. The suggested tax credits will be part of President Clinton's forthcoming budget proposal, and must be enacted by Congress to take effect.

The IRS is pushing electronic filing because it considers it to be a much more efficient process than traditional paper returns. "Electronic filing will produce faster refunds, a reduction in errors, quicker identification of compliance problems and reduced costs, all at the same time," Summers said.

Growing numbers of consumers are already jumping at the chance to file their returns electronically. Some 2.5 million taxpayers filed tax returns using their home computers last year, up 161 percent from 1998, Summers said. Overall, taxpayers filed some 29 million returns electronically last year, either over the phone or through one of several online means.

The proposal comes one day after tax preparation firm H&R Block announced that it would allow its customers to file online through its Web site this year. As the April 15 deadline for filing deadlines approached last year, two of the more popular tax return Web sites were hit with sporadic outages.