updated 3/23/2007 9:11:52 AM ET 2007-03-23T13:11:52

With nearly half this year's tax returns filed, the average refund is up more than $100 from last year at $2,548, Internal Revenue Service Commissioner Mark Everson said Tuesday.

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Everson, in remarks prepared for a House hearing, said the tax agency had issued 50.5 million refunds out of the 60.9 million returns received as of March 10, for a total of $128.7 billion. He said the average refund was up about $125 from last year.

The IRS expects to process about 136 million individual tax returns in 2007. Everson said that about three-fourths of those already filed were done electronically, an increase of about 5 percent over the same period last year. More than 13.3 million e-filed from their personal computers.

Everson noted that those who file electronically can usually have their refund deposited directly into their bank accounts in two weeks or less, about half the time it takes to process a paper return.

So far, the IRS has directly deposited more than 39 million returns, up 73 percent from the same period in 2006.

The IRS has also recorded 83.4 million visits to its Web site, a 9 percent increase, to get information on such issues as the Free File program for lower income taxpayers, the Earned Income Tax Credit and the Alternative Minimum Tax.

At the hearing, Everson said the agency doesn't want to put new burdens on honest taxpayers in explaining to impatient lawmakers why it will take time to reduce a tax gap estimated at near $300 billion annually.

"The problem is the more you do the more you get into incremental burdens and the more controversy you get," he said.

The IRS, in a report last year, estimated that in 2001 the gap between what individuals and companies owed and what they paid was $290 billion even after enforcement efforts and collection of late taxes.

Lawmakers have seized on this shortfall as a way of funding legislative priorities while keeping the budget deficit in check, but the Bush administration budget proposal for next year offers proposals that would cut the gap by only $29 billion over 10 years.

"I thought and I hoped that we would have had more energy from the administration in efforts to close that tax gap," said Rep. Richard Neal, D-Mass.

Lawmakers questioned whether the proposed IRS budget of $11 billion for fiscal 2008 was enough to increase the effectiveness of an agency that collected $2.4 trillion in 2006.

Everson said one of the most important steps the administration is promoting is more third-party reporting such as expanded broker information reporting and reporting on merchant payment card reimbursements.

Only 1.2 percent of wages reported by employers on W-2 forms is underreported, but there is a 53.9 percent underreporting rate for income subject to little or no third-party reporting, he said.

He also cited figures showing a rise in IRS audits, particularly of larger corporations and wealthy individuals. "Going after the corporations and the high income folks was job one for me in the last four years."

Several lawmakers asked about a program begun last September under which private collection agencies that contract with the IRS can keep up to 25 percent of the money they receive from delinquent taxpayers. As of a month ago, these agencies collected $14.47 million in gross revenue, Everson said.

"The IRS could do this work cheaper," Everson acknowledged. But he said that with current personnel levels it would "take a number of years of hiring and training before we would get to the work you are talking about."

Copyright 2007 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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