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http://wire.ap.org/?PACKAGEID=taxes By CURT ANDERSON AP Tax Writer

WASHINGTON (AP)  To entice more Americans to abandon postage stamps for computers, President Clinton is proposing a tax credit up to $10 for people who file their income tax returns electronically.

``It's good for them. It's good for the IRS. It's good for the system,'' Treasury Secretary Lawrence Summers said Thursday in announcing the proposed credit at a conference on modernizing the nation's tax collector.

The president will ask Congress in his fiscal 2001 budget to approve a $10 credit for people who file returns electronically, either on their home computers or through a tax professional. For people who use the IRS telephone filing system called Telefile, the credit would be $5.

If the credit had been in place in 1999, it would have cost the government about $264.5 million, according to congressional estimates.

IRS Commissioner Charles Rossotti AP/ [18K]

Using money as an incentive marks a departure from the Internal Revenue Service campaign that is selling e-filing as more accurate, as a quicker route to a refund  an average of 20 days instead of 40  and as the only way to get a specific confirmation that the return was received by the government.

``With anything that involves changing people's habits, you need a little push,'' said IRS Commissioner Charles Rossotti. ``It's really designed to accelerate what was happening anyway.''

Indeed, electronic tax filing has grown dramatically over the past few years, including a 19 percent increase last year. About 34 million returns  a little over one in four  will be filed by computer or telephone this year, up from 29.3 million in 1999.

But the pace is not swift enough to meet a goal set by Congress in the 1998 IRS reform law for 80 percent e-filing by 2007. Indeed, the most recent IRS projection is for about half of all returns to be e-filed by that date.

AP Correspondent Mark Smith: E-filing is on the increase -------------------------------------------------------------------------------- ``There is, to be sure, more that needs to be done,'' Summers said.

Some people remain reluctant to put their sensitive tax data on line, while others fear they could be more easily targeted for an audit if they file electronically  a fear the IRS says is unfounded. Many people, however, won't file electronically because the fees are usually many times the cost of a 33-cent postage stamp.

The proposed tax credit would eliminate the cost factor, said Bob Weinberger, government relations vice president at H&R Block Inc., the nation's largest tax preparer.

``People are comfortable doing it a certain way,'' he said. ``This is likely to push a lot of people across the line who might have been saying, 'What's in it for me?'''

But Rep. Bill Archer, chairman of the tax-writing House Ways and Means Committee, poked fun at the proposal and added that it leaves out millions of people who still file paper returns.

``What's next  a tax credit for good penmanship?'' said the Texas Republican.

Rossotti also told the conference Thursday that improved technology  including more electronic filing  is critical to improving the IRS's ability to respond to taxpayer problems and questions.

``Our purpose is not to move some imaginary pendulum back or forth a few degrees,'' Rossotti said. ``Our purpose is to improve the entire way the IRS works.''

As part of its modernization effort, the IRS is remaking its structure into four operating divisions: one each for individual taxpayers, large businesses, small businesses and tax-exempt organizations. The new structure is expected to be in place by October.

John Dalrymple, who will head the new Wage and Investment Division that includes the vast majority of taxpayers, said the IRS hopes within five years to be able to communicate directly with taxpayers via secure e-mail. That would allow completely paperless filing with PIN numbers in place of physical signatures and provide tax refunds within two days, he said.

``We're going to position ourselves to make full use of the Internet,'' Dalrymple said.

Summers said the president would ask Congress for a substantial increase in the IRS budget for fiscal 2001 to continue an ongoing replacement of the agency's antiquated, tape-driven taxpayer computer records and to prevent any further reduction in employees. The job cutbacks are frequently cited as one reason  along with fallout from the IRS reform law  that the agency is doing fewer audits and enforcement actions.

-- Dee (T1Colt556@aol.com), January 14, 2000

Answers

$10 electronic

$5 credit if phoned in

--CNN

-- Hokie (Hokie_@hotmail.com), January 14, 2000.