The following script is of "The Martinsburg Monster," which aired on March 31, 1970. Harry Reasoner is the correspondent.
All the rest of the year, we praise or curse the kind of government we've got. But this is the time when we just worry about what it costs each other to keep it going, like it or not.
Tonight, 60 Minutes goes into the den of the Martinsburg Monster, the master computer which keeps track of the whole Federal tax system, collecting from each taxpayer his due. We set out to learn how much that computer can do about checking up on each of us, what happens in that transaction between the citizen and his hardworking government computer.
This is where we are at. The end of the line for all of us, lined up together on the shelves of Internal Revenue's National Computer Center in Martinsburg, West Virginia. I share one reel of computer tape with 56,000 of you. About 1,800 reels store everything Internal Revenue knows about each of us. And what Internal Revenue knows is enough to keep most of us honest.
No sign of your tax form, you say? Well, the reams of paper have become reels of tape, and they all get fed into this computer, the Martinsburg Monster. It runs day and night, all year long, keeping tabs on what the government says are the most willing taxpayers in the world. The very idea of computer checking returns conjures up images of frightening efficiency which guarantee either that you can't cheat, or that the other fellow can't cheat, depending on how you look at it.
We'll follow your return all the way through the system. What ends at Martinsburg begins this year when the taxpayer faces the most complicated tax forms in history. This year the new forms are driving taxpayers by the millions, to turn to outsiders for assistance. In this case for free help at Internal Revenue. A lot of people are stumped by Form 1040, which is probably the most disliked number in America, except maybe for 1-A.
One of the troubles is that the simple short form that many of us knew and loved is gone. Now the return looks almost as complicated as the computer.
[Tax preparer giving advice to a taxpayer]
The tax preparer crops up this time of year like the spring crocus. Sometimes he's a specialist in taxes. Sometimes it's a sideline to another business. Most tax preparers give good service at low cost, if you don't need sophisticated help.
Internal Revenue cautions taxpayers to beware of the tax preparer who won't sign the return, taking responsibility for his work, and be sure you know where to find him if you need him later in the year. Almost one out of ten tax returns that will be fed to the Martinsburg Monster this year will be made out by the firm of H & R Block. There are 4,000 Block offices across the country, this one is in Baltimore, all offering help for five dollars and up, depending on the complexity of the return.
Tax Preparer: Well, you're going to get a refund of $408.
Taxpayer: Four hundred and eight.
Tax Preparer: Yes.
Taxpayer: Uncle Sam's treating me good, huh?
Tax Preparer: Sure.
The H of H & R Block is Henry Block, who started the business with his brother, Richard, fifteen years ago.
Harry Reasoner: I had the experience, just a few weeks ago, of trying to fill out one of these new forms for a 19-year-old girl who had earned $700, and thought she had about a $38 refund coming. I couldn't figure out how to do it and I'm reasonably bright. Now is that me, or her, or is there something wrong with the form?
Henry Block: Well, you're like many millions of other people. As you probably know, the 1969 Form was changed more than it ever has been in all the past years. In fact, last year this girl could have filed what we call a 1040-A, that's the little card form. And of course, that was eliminated this year, so that everybody has to file the big 1040. And there were 22 million taxpayers last year that used this little card form that now are faced with the problems of the big tax form and this is causing lots of problems. And I don't know what the answer is. It seems like continually, taxes are becoming more and more involved.
Harry Reasoner: So in a practical way, things look good for you and for the CPAs and the tax lawyers?
Henry Block: They do. But really, in all honesty, the more complicated you make taxes, the more fair they will be and the only way they can make taxes fair for you and fair for me and for each individual is to have different exceptions. In other words, if you're over 65, you need a certain exception. If you're sick and can't work, you need an exception. If you work in a foreign country for a while, you need an exception. So these are very good things. They each improve taxes, but they do make taxes much more complicated. And they keep people, like myself in business.
The newest wrinkle in the tax preparation business is based on the idea that you fight fire with fire. If computers work for the government, why not have one working for you.
Woman: Hello. Excuse me this is a brochure on our new Tax Pac. It's a computerized system to help you out with your income tax preparation. To give you an idea, this is our Tax Pac organizer kit.
Tax Pac is just one of many computer tax firms. This one asks you to put your tax information in a compartmentalized box, and bring it back to the bank. Then it goes to tax experts who fill out the return, call you if they have any questions, and feed the figures into a computer. The customer likes the idea that his return looks neat, and the arithmetic is right, when it goes to Internal Revenue.
If you wondered whether there are people, as well as a computer monster at Internal Revenue, here are six football fields of them under one roof. This is the Regional Service Center in Andover, Massachusetts, and there are six others, almost as big, serving other areas of the country. This center, for the northeast, collects almost one-fourth of all of the Federal Government's tax revenue. It handles more than 17 million returns.
We followed the whole process, and we confess we came away impressed. The returns are first checked to be sure all papers are in order, that the forms are filled out properly, and signed. If not, you'll hear about it right away, with a request for more information. The forms are sorted and grouped: individual returns, joint returns, business returns, and so on. Every return gets a number for permanent filing.
If you send a check, it gets into the Federal bank account right away, partly because the Government can use the money, partly because housewives and corporate treasurers don't like outstanding checks. The law requires Internal Revenue to clear the check within six days. And just in case there's a loose check in an envelope, all the envelopes are rechecked by machine on the way to the waste bin, to be sure they're empty.
The information on the returns is being transferred to punch cards, so it can be fed into the computer. At this point, the Revenue people still take what you say at face value. Your own information is simply punched into the system, right or wrong. If your arithmetic isn't up to snuff, this is where it shows, when the information from your return gets fed from the punch cards onto the computer tape. If you made a mistake in math last year, there were more than five million taxpayers who did the same.
One of the happier moments in the life of the computer is when it can send out a notice like this one, telling a taxpayer he has made a mistake against himself, and that before long, he will get a check for $262.04. Unfortunately, however, most of the mathematical errors cause the computer to ask the taxpayer for more money. If there are other kinds of errors, the machine, in effect, goes "tilt," and the number of the return and the taxpayer's name prints out here so that agents can go back into the file and check the original papers. Sometimes it requires a letter to the taxpayer asking for more information. This is still not an audit, just getting the information in order. Once all the errors have been corrected, the return is ready for the master file.
There are those at Internal Revenue who say that if this building in Martinsburg, West Virginia, were filled with hay instead of computers, it still would put the fear of God in us all, so long as it said 'National Computer Center' on the outside. The truth is, it ain't hay. Inside are all the records of all the individuals and all the businesses that file a tax return. Sent here on tape from the regional centers. Security is tight. And in case you wondered, there's a copy of everything somewhere else for safekeeping.
We wondered how much space each of us takes up at Martinsburg, so we asked for the records of our Producer, sort of to keep him honest. This is what a typical taxpayer boils down to. Our Producer, Paul Loewenwarter, takes up about half-an-inch of space, lined up according to his Social Security number. On paper, this is what the half-inch looks like. Three years of his tax returns in what seems to be gibberish. Not every line item from each return, but the summary highlights, plus figures on his net balance with the Government and a lot of other numbers to guide the computer. We didn't learn much about our Producer from all this, which is probably why IRS lifted security a little to let us film his file.
Normally, there are no paper print-outs at all here at Martinsburg, just tapes talking to tapes. And what are they saying about you? How do they decide whether to call you in for a chat? Well, the computers know what a typical taxpayer, with your total income, would have in the way of deductions and exemptions and how many different sources of income he would have. If you vary much from normal, overall, the computer marks your return for a second look. What the machine really does is line up all the returns in the country, in order, starting with the ones which are most worth examining by an agent. High income or low, it's all the same to the computer. It's the chance to turn up another dollar that counts. But if the computer trips you up, it will almost always be because of what you have told it. Contrary to what you may have thought, other information about you is rarely, if ever, fed into the computer.
What about Form W-2 from your boss stating your annual income? What about Form 1099, reporting interest and dividends? As of now, what your employer, your bank, or your stockbroker tells IRS, rarely is matched against your file in the computer. It will be found only if there's an audit and investigation of your affairs. If that looks like a possible loophole, remember that the Government picked up three billion dollars through audits last year.
In addition, the computers that cannot do some kinds of cross-checking this year may do it next year or the year after. Plans are on the drawing boards. If honesty is not its own reward, remember that the statute of limitations on fraud never runs out. What doesn't hurt you today could hurt you very badly sometime in the future. But honesty is at the root of the whole tax collection system in this country. We talked about that with the Commissioner of Internal Revenue, Randolph W. Thrower.
Randolph Thrower: Well, it is a remarkable phenomenon. Here during this filing season in the neighborhood of a hundred million people are participating cooperatively, without the coercive presence of the tax collector in providing the revenue for Government. It's unmatched anywhere in the world.
Harry Reasoner:Sometimes people think of it as sort of a game where you will list deductions that you know are not legitimate, figuring you might get away with them, and even if you don't you will only have to pay what you would have paid in the first place if you'd been honest. Is there that aspect to it?
Randolph Thrower: Well, we are seeking all of the time, to take the sporting aspect out of this. So far as we're concerned, it's not a game.
Finally, if you like happy endings, this is what happens to most of the nation's taxpayers. These are refund checks going out to almost 50 million people who overpaid their taxes. Last year, the total of refunds ran to $12 billion. It's money the Government had been using all year, interest free. The Government is embarrassed by it, but not much, and says the trouble is it can't figure out a better way to withhold taxes, so that the amount would be right for all of us at the end of every year.
If you get a refund, it's because you asked for it, and the computer said OK. On these tapes, that information is stored away as part of the half-inch of electronic balance sheet on each of us who files an income tax return, stored away with the Martinsburg Monster.