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Notice

Proposed Collection; Comment Request for Form 1040 and Schedules A, B, C, C-EZ, D, D-1, E, EIC, F, H, J, R, and SE, Form 1040A and Schedules 1, 2, and 3, and Form 1040EZ, and All Attachments to These Forms

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AGENCY:

Internal Revenue Service (IRS), Treasury.

ACTION:

Notice and request for comments.

SUMMARY:

The Internal Revenue Service, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to take this opportunity to comment on proposed and continuing information collections, as required by the Paperwork Reduction Act of 1995 (PRA), Public Law 104-13 (44 U.S.C. 3506(c)(2)(A)). This notice requests comments on all forms used by individual taxpayers: Form 1040, U.S. Individual Income Tax Return, and Schedules A, B, C, C-EZ, D, D-1, E, EIC, F, H, J, R, and SE; Form 1040A and Schedules 1, 2, and 3; Form 1040EZ; Start Printed Page 39551and all attachments to these forms (see the Appendix to this notice). With this notice, the IRS is also announcing significant changes to (1) the manner in which tax forms used by individual taxpayers will be approved under the PRA and (2) its method of estimating the paperwork burden imposed on all individual taxpayers.

DATES:

Written comments should be received on or before September 6, 2005 to be assured of consideration.

ADDRESSES:

Direct all written comments to The OMB Unit, SE:W:CAR:MP:T:T:SP, Internal Revenue Service, Room 6406, 1111 Constitution Avenue, NW., Washington, DC 20224.

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FOR FURTHER INFORMATION CONTACT:

Requests for additional information or copies of the form and instructions should be directed to Chief, RAS:R:TSBR, NCA 7th Floor, Internal Revenue Service, 1111 Constitution Avenue, NW., Washington, DC 20224, or through the internet at ChiefTSBR@irs.gov.

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SUPPLEMENTARY INFORMATION:

Change in PRA Approval of Forms Used by Individual Taxpayers

Under the PRA, OMB assigns a control number to each “collection of information” that it reviews and approves for use by an agency. A single information collection may consist of one or more forms, recordkeeping requirements, and/or third-party disclosure requirements. Under the PRA and OMB regulations, agencies have the discretion to seek separate OMB approvals for individual forms, recordkeeping requirements, and third-party reporting requirements or to combine any number of forms, recordkeeping requirements, and/or third-party disclosure requirements (usually related in subject matter) under one OMB Control Number. Agency decisions on whether to group individual requirements under a single OMB Control Number or to disaggregate them and request separate OMB Control Numbers are based largely on considerations of administrative practicality.

The PRA also requires agencies to estimate the burden for each collection of information. Accordingly, each OMB Control Number has an associated burden estimate. The burden estimates for each control number are displayed in (1) the PRA notices that accompany collections of information, (2) Federal Register notices such as this one, and (3) in OMB's database of approved information collections. If more than one form, recordkeeping requirement, and/or third-party disclosure requirement is approved under a single control number, then the burden estimate for that control number reflects the burden associated with all of the approved forms, recordkeeping requirements, and/or third-party disclosure requirements.

As described below under the heading “New Burden Model,” the IRS” new Individual Taxpayer Burden Model (ITBM) estimates of taxpayer burden are based on taxpayer characteristics and activities, taking into account, among other things, the forms and schedules generally used by those groups of individual taxpayers and the recordkeeping and other activities needed to complete those forms. The ITBM represents the first phase of a long-term effort to improve the ability of IRS to measure the burden imposed on various groups of taxpayers by the Federal tax system. While the new methodology provides a more accurate and comprehensive description of individual taxpayer burden, it does not estimate burden on a form-by-form basis, as has been done under the previous methodology. When the prior model was developed in the mid-1980s, almost all tax returns were prepared manually, either by the taxpayer or a paid provider. In this context, it was determined that estimating burden on a form-by-form basis was an appropriate methodology. Today, about 85 percent of all individual tax returns are prepared utilizing computer software (either by the taxpayer or a paid provider), and about 15 percent are prepared manually. In this environment, in which many taxpayers' activities are no longer as directly associated with particular forms, estimating burden on a form-by-form basis is not an appropriate measurement of taxpayer burden. The new model, which takes into account broader and more comprehensive taxpayer characteristics and activities, provides a much more accurate and useful estimate of taxpayer burden.

Currently, there are 121 forms used by individual taxpayers. These include Forms 1040, 1040A, 1040 EZ, and their schedules and all the forms individual taxpayers attach to their tax returns (see the Appendix to this notice). For most of these forms, IRS has in the past obtained separate OMB approvals under unique OMB Control Numbers and separate burden estimates.

Since the ITBM does not estimate burden on a form-by-form basis, IRS is no longer able to provide burden estimates for each tax form used by individuals. The ITBM estimates the aggregate burden imposed on individual taxpayers, based upon their tax-related characteristics and activities. IRS therefore will seek OMB approval of all 121 individual tax forms as a single “collection of information.” The aggregate burden of these tax forms will be accounted for under OMB Control Number 1545-0074, which is currently assigned to Form 1040 and its schedules. OMB Control Number 1545-0074 will be displayed on all individual tax forms and other information collections. As a result of this change, burden estimates for individual taxpayers will now be displayed differently in PRA Notices on tax forms and other information collections, and in Federal Register notices. This new way of displaying burden is presented below under the heading “Proposed PRA Submission to OMB.” Since 74 of the 121 forms used by individual taxpayers are also used by corporations, partnerships, and other kinds of taxpayers, there will be a transition period during which IRS will report different burden estimates for individual taxpayers and for other taxpayers using the same forms. For those forms used by both individual and other taxpayers, IRS will display two OMB Control Numbers (1545-0074 and the OMB Control Numbers currently assigned to these forms) and provide two burden estimates. The burden estimates for individual taxpayers will be reported and accounted for as described in this notice. The burden estimates for other users of these forms will be determined under existing methodology based on form length and complexity.

New Burden Model

Data from the new ITBM revises the estimates of the levels of burden experienced by individual taxpayers when complying with the Federal tax laws. It replaces the earlier burden measurement developed in the mid-1980s. Since that time, improved technology and modeling sophistication have enabled the IRS to improve the burden estimates. The new model provides taxpayers and the IRS with a more comprehensive understanding of the current levels of taxpayer burden. It reflects major changes over the past two decades in the way taxpayers prepare and file their returns. The new ITBM also represents a substantial step forward in the IRS' ability to assess likely impacts of administrative and legislative changes on individual taxpayers.

The ITBM's approach to measuring burden focuses on the characteristics and activities of individual taxpayers Start Printed Page 39552rather than the forms they use.[1] Key determinants of taxpayer burden in the model are the way the taxpayer prepares the return (e.g., with software or paid preparer) and the taxpayer's activities, such as recordkeeping and tax planning. In contrast, the previous estimates primarily focused on the length and complexity of each tax form. The changes between the old and new burden estimates are due to the improved ability of the new methodology to measure burden and the expanded scope of what is measured. These changes create a one-time shift in the estimate of burden levels that reflects the better measurement of the new model. The differences in estimates between the models do not reflect any change in the actual burden experienced by taxpayers. Comparisons should not be made between these and the earlier published estimates, because the models measure burden in different ways.

Methodology

Burden is defined as the time and out-of-pocket costs incurred by taxpayers to comply with the Federal tax system. For the first time, the time expended and the out-of-pocket costs are estimated separately. The new methodology distinguishes among preparation methods, taxpayer activities, types of individual taxpayer, filing methods, and income levels. Indicators of complexity in tax laws as reflected in tax forms and instructions are incorporated in the model.

The new model follows IRS' classification of taxpayer types: individual taxpayers are taxpayers who file any type of Form 1040. “Self-Employed” taxpayers are individual taxpayers who file a Form 1040 and a Schedule C, C-EZ, E, or F, or Form 2106. All other individual taxpayers using a Form 1040 are “Wage and Investment” taxpayers. The taxpayer's choice of preparation method is identified as a major factor influencing burden levels. The preparation methods are:

  • Self-prepared without software
  • Self-prepared with software
  • Used a paid tax preparer

The separate types of taxpayer activities measured in the model are:

  • Recordkeeping
  • Form completion
  • Form submission (electronic and paper)
  • Tax planning
  • Use of services (IRS and paid professional)
  • Gathering tax materials

Taxpayer Burden Estimates

Tables 1, 2, and 3 show the burden model estimates. In tax year 2003 the burden of all individual taxpayers filing Forms 1040, 1040A or 1040EZ averaged about 23 hours per return filed, or a total of more than 3 billion hours. Similarly, the average out-of-pocket taxpayer costs were estimated to be $179 per return filed or a total of $23.4 billion. Including associated forms and schedules, taxpayers filing Form 1040 had an average burden of about 30 hours, taxpayers filing Form 1040A averaged about 9 hours, and those filing 1040 EZ averaged about 7 hours.

The data shown are the best estimates from tax returns filed for 2003 currently available as of June 27, 2005. The estimates are subject to change as new forms and data become available. Estimates for combinations of major forms and schedules commonly used will be available and the most up-to-date estimates and supplementary information can be found on the IRS Web site: http://www.irs.gov.

Proposed PRA Submission to OMB

Title: U.S. Individual Income Tax Return.

OMB Number: 1545-0074.

Form Numbers: Form 1040 and Schedules A, B, C, C-EZ, D, D-1, E, EIC, F, H, J, R, and SE; Form 1040A and Schedules 1, 2 and 3; Form 1040EZ; and all attachments to these forms (see the Appendix to this notice).

Abstract: These forms are used by individuals to report their income tax liability. The data is used to verify that the items reported on the forms are correct, and also for general statistics use.

Current Actions: Changes are being made to the forms and the method of burden computation.

Type of Review: Extension of currently approved collections.

Affected Public: Individuals or households.

Estimated Number of Respondents: 130,200,000.

Total Estimated Time: 3.0 billion hours.

Estimated Time Per Respondent: 23.3 hours.

Total Estimated Out-of-Pocket Costs: $23.4 billion.

Estimated Out-of-Pocket Cost Per Respondent: $179.

Table 1.—Taxpayer Burden for Individual Taxpayers Who Filed Form 1040, by Preparation Method

Major form filed or type of taxpayerNumber of returns (millions)Average burden
Average for all preparation methodsSelf-prepared without tax softwareSelf-prepared with tax softwarePrepared by paid professional
HoursCosts (dollars)HoursCosts (dollars)HoursCosts (dollars)HoursCosts (dollars)
All Taxpayers Filing Form 1040, 1040A and 1040EZ130.223.3$17916.4$1727.9$4422.9$268
Major Form Filed:
Taxpayers Filing Form 1040 (and associated forms)88.230.524226.9$2136.65228.7338
Taxpayers Filing Form 1040A (and associated forms)23.39.16210.82911.5447.482
Taxpayers Filing Form 1040EZ18.77.2297.0110.195.560
Type of Taxpayer *:
Wage and Investment94.611.89311.51417.8359.0142
Self-Employed35.653.941048.53168.48153.9522
Note: Detail may not add to total due to rounding.
* You are a “Wage and Investment” taxpayer (as defined by IRS) if you did not file a Schedule C, Schedule C-EZ, Schedule E, Schedule F, or Form 2106. If you filed a Schedule C, Schedule C-EZ, E, or F, or Form 2106, you are a “Self-Employed” taxpayer.
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Table 2.—Taxpayer Burden for Taxpayers Who Filed Form 1040, by Preparation Method

Type of taxpayer * and common combinations of forms filedAverage burden
Average for all preparation methodsSelf-prepared without tax softwareSelf-prepared with tax softwarePrepared by paid professional
HoursCosts (dollars)HoursCosts (dollars)HoursCosts (dollars)HoursCosts (dollars)
Common Filing Combinations of Wage & Investment Taxpayers
Wage and Investment Taxpayers11.8$9311.5$1417.8$359.0$142
Form 1040 and other forms and schedules, but not Schedules A and D9.28812.21715.8346.6118
Form 1040 and Schedule A and other forms and schedules, but not Schedule D16.312619.21722.64111.9198
Form 1040 and Schedule D and other forms and schedules, but not Schedule A17.615922.51427.34812.9223
Form 1040 and Schedules A and D and other forms and schedules24.623932.81335.44418.1365
Common Filing Combinations of Self-Employed Taxpayers
Self-Employed Taxpayers53.9$41048.5$3168.4$8153.9$522
Form 1040 and Schedule C and other forms and schedules, but not Schedules E or F or Form 210659.424551.42474.66356.1323
Form 1040 and Schedule E and other forms and schedules, but not Schedules C or F or Form 210644.759137.54357.710042.8717
Form 1040 and Schedule F and other forms and schedules, but not Schedules C or E or Form 210634.823838.13749.78134.8238
Form 1040 and Form 2106 and other forms and schedules but not Schedules C, E, or F55.424242.03262.58055.8283
Form 1040 and forms and schedules including more than one of the SE forms (Schedules C, E, or F or Form 2106)69.461872.04088.39965.7746
* You are a “Wage and Investment” taxpayer (as defined by IRS) if you did not file a Schedule C, Schedule C-EZ, Schedule E, Schedule F, or Form 2106. If you filed a Schedule C, Schedule C-EZ, E, or F, or Form 2106, you are a “Self-Employed” taxpayer.

Table 3.—Taxpayer Burden for Taxpayers Who Filed Form 1040, by Activity

Form or schedulePercent of returns filed (percent)Average time burden of taxpayer activities (hours per return)Average costs per return (dollars)
Total timeRecordkeepingTax planningForm completionAll other activities
All Taxpayers100%23.314.13.23.22.8$179
Form 10406830.519.14.23.83.5242
Form 1040A189.14.31.11.91.863
Form 1040EZ147.22.51.52.11.229
Type of Taxpayer *100
Wage and Investment7311.85.02.32.71.893
Self-Employed2753.938.15.84.41.2410
Note: Detail may not add to total due to rounding.
* You are a “Wage and Investment” taxpayer (as defined by IRS) if you did not file a Schedule C, Schedule C-EZ, Schedule E, Schedule F, or Form 2106. If you filed a Schedule C, Schedule C-EZ, E, or F, or Form 2106, you are a “Self-Employed taxpayer.”

An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB Control Number.

Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103.

Request for Comments

Comments submitted in response to this notice will be summarized and/or included in the request for OMB approval. All comments will become a matter of public record. Comments are invited on: (a) Whether the collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; (b) the accuracy of the agency's estimate of the burden of the collection of information; (c) ways to enhance the quality, utility, and clarity of the information to be collected; (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology; and (e) estimates of capital Start Printed Page 39554or start-up costs and costs of operation, maintenance, and purchase of services to provide information.

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Approved: July 6, 2005.

R. Joseph Durbala,

Acting IRS Reports Clearance Officer.

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Appendix

OMB No.FormTitle
0028926Return by a U.S. Transferor of Property to a Foreign Corporation.
0043970Application To Use LIFO Inventory Method.
0047982Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment.
00741040 (SCH A)Itemized Deductions.
00741040 (SCH B)Interest and Ordinary Dividends.
00741040 (SCH C)Profit or Loss From Business.
00741040 (SCH D)Capital Gains and Losses.
00741040 (SCH E)Supplemental Income and Loss.
00741040 (SCH F)Profit or Loss From Farming.
00741040 (SCH R)Credit for the Elderly or the Disabled.
00741040 (SCH SE)Self-Employment Tax.
00741040 (SCH J)Income Averaging for Farmers and Fishermen.
00741040 (SCH EIC)Earned Income Credit.
00741040 (SCH H)Household Employment Taxes.
00741040 (SCH D-1)Continuation Sheet for Schedule D.
00741040 (SCH C-EZ)Net Profit From Business.
01211116Foreign Tax Credit.
01341128Application To Adopt, Change, or Retain a Tax Year.
00731310Statement of Person Claiming Refund Due a Deceased Taxpayer.
01392106Employee Business Expenses.
14412106 EZUnreimbursed Employee Business Expenses.
00712120Multiple Support Declaration.
01402210Underpayment of Estimated Tax by Individuals, Estates, and Trusts.
01402210 FUnderpayment of Estimated Tax by Farmers and Fishermen.
00702350Application for Extension of Time To File U.S. Income Tax Return.
01452439Notice to Shareholder of Undistributed Long-Term Capital Gains.
00682441Child and Dependent Care Expenses.
00672555Foreign Earned Income.
13262555 EZForeign Earned Income Exclusion.
01523115Application for Change in Accounting Method.
01553468Investment Credit.
01593520Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts.
08953800General Business Credit.
00623903Moving Expenses.
01624136Credit for Federal Tax Paid on Fuels.
00594137Social Security and Medicare Tax on Unreported Tip Income.
01664255Recapture of Investment Credit.
01724562Depreciation and Amortization.
01734563Exclusion of Income for Bona Fide Residents of American Samoa.
01774684Casualties and Thefts.
01844797Sales of Business Property.
01874835Farm Rental Income and Expenses.
01914952Investment Interest Expense Deduction.
01924970Tax on Accumulation Distribution of Trusts.
01934972Tax on Lump-Sum Distributions.
08035074Allocation of Individual Income Tax to Guam or the Commonwealth of the Northern Mariana Islands (CNMI).
02035329Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts.
07045471Information Return of U.S. Persons With Respect to Certain Foreign Corporations.
02165713International Boycott Report.
02195884Work Opportunity Credit.
07126198At-Risk Limitations.
02276251Alternative Minimum Tax—Individuals.
02286252Installment Sale Income.
02316478Credit for Alcohol Used as Fuel.
06196765Credit for Increasing Research Activities.
06446781Gains and Losses From Section 1256 Contracts and Straddles.
07908082Notice of Inconsistent Treatment or Administrative Adjustment Request (AAR).
08818271Investor Reporting of Tax Shelter Registration Number.
08898275Disclosure Statement.
08898275 RRegulation Disclosure Statement.
09088283Noncash Charitable Contributions.
09158332Release of Claim to Exemption for Child of Divorced or Separated Parents.
12108379Injured Spouse Claim and Allocation.
09308396Mortgage Interest Credit.
10088582Passive Activity Loss Limitations.
10348582 CRPassive Activity Credit Limitations.
09848586Low-Income Housing Credit.
10218594Asset Acquisition Statement.
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10078606Nondeductible IRAs.
09888609 (SCH A)Annual Statement.
10358611Recapture of Low-Income Housing Credit.
09988615Tax for Children Under Age 14 With Investment Income of More Than $1,600.
10028621Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund.
10328689Allocation of Individual Income Tax to the Virgin Islands.
10318697Interest Computation Under the Look-Back Method for Completed Long-Term Contracts.
10738801Credit for Prior Year Minimum Tax—Individuals, Estates, and Trusts.
16208812Additional Child Tax Credit.
11288814Parents' Election to Report Child's Interest and Dividends.
11738815Exclusion of Interest From Series EE and I U.S. Savings Bonds Issued After 1989.
15058820Orphan Drug Credit.
11908824Like-Kind Exchanges.
12058826Disabled Access Credit.
12888828Recapture of Federal Mortgage Subsidy.
12668829Expenses for Business Use of Your Home.
12828830Enhanced Oil Recovery Credit.
13748834Qualified Electric Vehicle Credit.
13628835Renewable Electricity and Refined Coal Production Credit.
18298836Qualifying Children Residency Statement.
15528839Qualified Adoption Expenses.
14108840Closer Connection Exception Statement for Aliens.
14118843Statement for Exempt Individuals and Individuals With a Medical Condition.
14448844Empowerment Zone and Renewal Community Employment Credit.
14178845Indian Employment Credit.
14148846Credit for Employer Social Security and Medicare Taxes Paid on Certain Employee Tips.
14168847Credit for Contributions to Selected Community Development Corporations.
15618853Archer MSAs and Long-Term Care Insurance Contracts.
15678854Initial and Annual Expatriation Information Statement.
19108858Information Return of U.S. Persons With Respect to Foreign Disregarded Entities.
15848859District of Columbia First-Time Homebuyer Credit.
16068860Qualified Zone Academy Bond Credit.
15698861Welfare-to-Work Credit.
16198862Information To Claim Earned Income Credit After Disallowance.
16188863Education Credits.
19248864Biodiesel Fuels Credit.
16688865Return of U.S. Persons With Respect to Certain Foreign Partnerships.
16228866Interest Computation Under the Look-Back Method for Property Depreciated Under the Income Forecast Method.
17228873Extraterritorial Income Exclusion.
18048874New Markets Credit.
18058880Credit for Qualified Retirement Savings Contributions.
18108881Credit for Small Employer Pension Plan Startup Costs.
18098882Credit for Employer-Provided Childcare Facilities and Services.
18078885Health Coverage Tax Credit.
18008886Reportable Transaction Disclosure Statement.
19118889Health Savings Accounts (HSAs).
19288891U.S. Information Return for Beneficiaries of Certain Canadian Registered Retirement Plans.
19148896Low Sulfur Diesel Fuel Production Credit.
NEW8898Statement for Individuals Who Begin or End Bona Fide Residence in a U.S. Possesion.
NEW8900Qualified Railroad Track Maintenance Credit.
NEW8903Domestic Production Activities Deduction.
NEW8904Marginal Wells Oil and Gas Production Credit.
0007T (Timber)Forest Activities Schedules.
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Footnotes

1.  As IRS continues to develop the new burden model, the new method of estimating burden will be expanded to cover other groups of taxpayers (corporations, partnerships, tax-exempt entities, etc.).

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[FR Doc. 05-13593 Filed 7-7-05; 8:45 am]

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