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Number of Itemizers Dropped 15 Percent, IRS Says

May 4, 1988

WASHINGTON (AP) _ The scaling back of some favorite deductions under the new tax law reduced the number of itemizing taxpayers by 15 percent this year, the Internal Revenue Service said Wednesday.

And despite the major changes and a confusing W-4 withholding form, the number of taxpayers receiving refunds this year is up slightly over 1987, the tax agency reported.

About 31 million - 51 percent - of the 60.9 million long tax forms received through April 22 itemized deductions, said IRS spokeswoman Johnell Hunter. At the same time last year, 36.4 million - 60 percent - of 60.3 million long forms included itemized deductions.

The drop comes as no surprise. Reducing the number of itemizers was a major goal of the 1986 tax overhaul; in fact, the reduction was the largest element of simplification in the big package.

In addition to cutting tax rates and boosting the personal exemption, the new law - which was reflected for the first time on returns filed this year - eliminated the deduction for state and local sales taxes and limited writeoffs for consumer interest, medical expenses and such miscellaneous expenses as union dues.

The combination of a higher standard deduction and a smaller total of itemized deductions made it beneficial for those 5.4 million taxpayers to stop itemizing. By the time the IRS counts all the returns filed this year, the number switching to the standard deduction will be even higher.

The number of taxpayers receiving refunds is up 0.3 percent, to 55.5 million. That means about 79.5 percent of filers are getting refunds.

″Apparently withholding was more in line with tax liability than we had been expecting,″ Mrs. Hunter said.

Other statistics released by the IRS on Wednesday also indicate that taxpayers may not have had as much trouble understanding the new law and revised tax forms as some experts had predicted.

For example:

-Fewer taxpayers asked the IRS to fill out their returns, about 625,000 this year compared with 770,000 last year.

-Although the number who hired professionals to prepare their returns rose to 44.5 million (47 percent) from 42.7 million (45 percent), the increase was less than forecast.

-Through April 29, the IRS had received 4.76 million requests for four- month extensions of the April 15 filing deadline. Although this was more than the 4.37 million at the same time last year, again the growth was less than anticipated.

For reasons that the IRS cannot explain, changes in the number of taxpayers seeking extensions varied sharply from region to region.

For example, the Philadelphia service center, which processes returns from Pennsylvania, Maryland, Delaware and the District of Columbia, reported requests for extensions were almost 29 percent below last year. Cincinnati, which serves Kentucky, Michigan, West Virginia and Ohio, showed a 47 percent drop in extensions.

Through Friday, the IRS had received 98.6 million returns, a 2 percent increase over the 96.7 million filed in the same period in 1987. Before the year is out, the agency anticipates 107.6 million total filings, compared with 104 million last year.

Some other statistics from this year’s filing season:

-The number of taxpayers claiming deductions for Individual Retirement Accounts dropped dramatically. Last year, when all wage earners were eligible to make deductible contributions to an IRA, 14.6 million did so. This year, with deductible IRAs denied middle-and upper-income workers covered by company pensions, 5.7 million deducted their full contribution and 1 million claimed a partial deduction.

-The average refund this year is $850, up less than $2 from last year.

-Through April 29, the IRS had processed 69.9 million returns, down 0.2 percent from 70 million in 1987.

-11.8 million returns were prepared on home computers before being mailed. Some 600,000 others were prepared by professionals and filed via computer.

-Despite a lingering rumor that doing so makes it easier to be fingered for an audit, the number of taxpayers who used the official peel-off, stick-on label rose this year. About 52.6 million peeled off and stuck on, compared with 52.2 million last year.

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