Ax at IRS means business for private tax services

The Internal Revunue Service (IRS) used to do more than offer advice to befuddled taxpayers. It would actually fill out their tax forms.

But this year, the tax preparation service has fallen victim to the budget cutter's ax. So the 275,000 individuals whose tax returns were prepared by the IRS last year are now potential customers for private tax companies.

For tax preparers, the IRS move is as welcome as an unexpected refund check. Traffic at tax preparers' offices often falls off in recessions when consumers are looking for ways to trim costs.

''Recessions hurt us,'' says Thomas Bloch, president of tax operations at H & R Block Inc. ''It is an area where people believe they can cut back.''

Cutting back on tax help in 1982, however, is going to be harder, since the IRS is trimming the kind of advice it will provide. Last year, IRS employees were allowed to give advice on filling out a host of IRS forms. This year, advice will be limited to forms 1040A and 1040, the basic forms.

The IRS decision to stop filling in forms and cut back on advice will partly offset the recession's effect on tax preparers. And confusion about the effects of tax law changes passed in 1981 will be another traffic builder.

Still, Mr. Bloch predicts that as a result of the recession, business at the firm's 9,500 offices ''will be flat or up 5 percent'' in the 1982 tax season.

Forecasts for growth are only slightly greater at services that cater to more affluent customers than Block, where the median client income is $20,000.

For example, Tax Man Inc., of Cambridge, Mass., aims at customers with incomes of $40,000 and down. President Robert Murray says he ''would be delighted to see a 10 percent'' increase in volume at the firm's 24 offices this tax season.

Major public accounting firms expect little effect from changes in IRS tax assistance policies. ''People using that kind of assistance (from the IRS) are not inclined to go to an accounting firm'' because of the costs involved, says Herbert Paul, associate national tax director at Touche Ross & Co.

Reagan administration critics are troubled by the decision to trim tax advice and preparation services for people who often cannot afford more expensive aid.

''As I understand it, they will give (preparation) aid to the blind and to congressmen,'' snaps Jay Angoff, a lawyer with the Washington-based Tax Reform Research Group. ''That is consistent with Reagan tax policy.''

''People should be outraged about the administration's overall tax (policies).'' Reducing tax preparation services ''adds insult to injury,'' Mr. Angoff says.

The IRS contends that service cuts were necessary to help the agency meet budgetary targets. ''With every federal agency absorbing its share of cuts, we have to maintain a proper mix of assistance and enforcement,'' IRS Commissioner Roscoe Egger said in a prepared statement.

According to an IRS spokesman, the changes in assistance policies will let the agency field an assistance staff of 7,000, down from 7,300 last year.

The slightly smaller staff will run classroom sessions where IRS employees will talk citizens through the basic tax forms rather than fill them out for the taxpayer. ''The idea is that next year they will realize they can do it themselves. This is a more cost efficient'' way to handle assistance, an IRS spoeksman says.

Of course, there are some exceptions to the IRS policy of not filling out forms for taxpayers. The agency will still fill out forms for handicapped or illiterate individuals.

And the IRS has backed away from plans to close two offices on Capitol Hill. The agency's congressional outposts provide legislators with special forms to make tax preparation easier and also make available IRS staffers to review congressional tax returns.

Taxpayers do not have to be members of Congress to get advice from IRS experts during a television advice program the agency will hold Sunday, Feb. 7, at 2 p.m. EST. Broadcast time may vary in some parts of the country, so local schedules should be consulted. The three-hour tax clinic, to be broadcast on public television stations, will accept telephoned questions from viewers.