Tighter credit raises a tax-return question

What do you do if your bank overdraft credit line is suddenly taken away from you -- and you were going to use the credit to pay your income taxes? For thousands of US taxpayers now slamming together final details on their 1979 income-tax returns, that question, say Internal Revenue Service officials, is hardly hypothetical. Thanks to the recent Carter administration anti-inflation policies, bank credit lines are now being slashed or reduced for millions of Americans.

But according to the IRS, all is not lost for the taxpayer. Rather, say IRS officials, the taxpayer should go ahead and mail in the tax return by the April 15 deadline. At the same time, they say, mail along the largest amount of money possible on the tax due.

The taxpayer will later receive a bill from the IRS for the tax amount remaining. Although the taxpayer will have to pay interest charges on the late payment, there will be no penalty for late filing, although there will be a slight charge for late payment.

That helpful advice comes as millions of Americans are wrapping up their 1979 tax forms. Though 55 million returns already have been filed, an estimated 36 million forms are yet to be mailed.In part, these include many of the more complicated and extensive returns.

For its part, the 85,000-employee IRS is working harder than ever in these "wrap-up days" of the current tax season to aid taxpayers:

* Under terms of the Revenue Act of 1978, the agency has been training volunteers to help elderly taxpayers put together their forms. The program, called Tax Counseling for the Elderly, is in part coordinated by the American Association of Retired Persons.

* The agency is stepping up its Problem resolution program, which is designed to clarify the most perplexing tax problems that occur for many individuals.

The service now has a national "ombudsman" to coordinate the Problem Resolution program.Also, the tax agency is reviewing overall IRS procedures, as well as the tax form itself, to see where simplification is possible. Undescoring the new helpful mood of the IRS, agency officials have been instructed to apologize to taxpayers when the agency is at fault regarding some tax matter. In fact, the requirement for apology has actually been written into the instruction booklet for IRS employees.

Although the average refund this year is 20 percent higheer than last year ($ 591.20, compared with $490.53), IRS officials are noting that the haste to file and collect that higher refund may be prompting unnecessary filing mistakes.

In fact, says IRS official Ellen Murphy, there is a pattern to the most frequent mistakes, which include:

* The earned income tax credit is often miscalculated.

* Even more mistakes are made in reckoning the medical deduction on the long form. This particular deduction, says Miss Murphy, requires perhaps "the most math computation" of all deductions.

* Taking the wrong tax due from the wrong line in the tax schedule.

* And, one of the most frequent mistakes of all, forgetting to sign the return, or enclosing all necessary tax forms, including withholding statements.

Still, says Miss Murphy, taxpayers are "probably making fewer mistakes overall" than last year, in part reflecting increasing familiarity with the current forms.

The form has remained basically the same for the past three years. That means that taxpayers have been able to simplify preparation of returns by using the 1978 return as a guide to putting together 1979 taxes.

Has the IRS begun actual auditing of current returns to look for "false" or erroneous filings?

According to one IRS official, perhaps 90 to 99 percent of current auditing involves 1978 or 1977 forms. The statute of limitations on 1976 returns expires in mid-April. Most 1980 returns will not really be subject to formal auditing until the end of summer or early fall of this year.

Private tax consultants suggest that since the IRS is now looking more closely than ever at tax shelters -- reflecting the administration policy of cracking down on "Tax chiselers," -- it would be well to engage an outside tax attorney or accountant for professional assistance if called in by auditing agents. Further, if a "special agent" is present, that could mean that the agency is mulling possible fraud -- which would increase the need for special counsel.