Paperless automatic extensions would benefit both government and taxpayers.

• Author: Josephs, Stuart R.

IR-91-86 essentially states:

The Internal Revenue Service said that it is reconsidering its plans for an automated extension process. As a result, Apex - the Automated Processing of Extensions - will not begin in 1992 as previously announced.

The IRS initially proposed APEX to reduce the burden on taxpayers who file extensions each year. According to IRS estimates, APEX would have saved 7.6 million hours of taxpayers' time and $5.5 million in processing costs for the IRS.

"In recent months, a number of taxpayers and practitioners raised a variety of concerns over the impact and implementation of APEX," IRS Commissioner Fred Goldberg explained....

One concern raised by practitioners dealt with elections taxpayers must make on timely filed returns (those returns filed by the due date with extension). Practitioners felt that APEX did not provide the certainty that the current application process provides. This uncertainty raised questions of whether and how these elections would be made.

"We will not implement APEX next year," said Goldberg. "We believe everyone will be better served if we spend the extra time now identifying and responding to taxpayer and practitioner concerns.

"We're going to continue to look to reducing the burden on taxpayers and we still believe the extension process can be simplified for both taxpayer and the IRS." (Emphasis added.)

However, an appropriate IRS National Office individual recently indicated that there are no current plans to pursue APEX. The major obstacle appears to be practitioners' concerns regarding timely elections.

On the other hand, paperless automatic extensions have been beneficially used since 1991 for California income and franchise tax purposes by corporate and noncorporate taxpayers.

For Federal income tax purposes, beginning with 1996 returns, California's successful approach can be implemented if the Service adopts the following suggested procedures:

* All returns filed within six months of their original due dates are automatically deemed to be timely filed.

* Interest will be imposed on tax paid during the automatic extension period, if such payment does not exceed 10% of the total tax shown on the return. In addition to interest, the late payment penalty will be imposed on tax paid during this period, if such payment exceeds 10% of the total tax shown on the return. (These particular procedures would continue those presently in effect.)

* Eliminate all extension forms, such as Form 4868...