To generate fee income and attract more customers into branches, a number of banks have begun offering a tax return review and electronic filing service.

The banks, which range in size from multibillion-dollar institutions to community banks, will use the Annual Tax Checkup service developed by Tax Shop, an Orlando-based provider of electronic tax services and income tax software.

Through the service, bank customers can have their tax returns checked by tax professionals and electronically filed for a charge of $39. This fee also covers tax advice.

With an estimated 55 million taxpayers preparing their own returns each year, many institutions believe tax services are an easy route to increased fee revenue.

"This is a valuable service to offer our customers that's not labor intensive for the bank," said Mr. Skarohlid, executive vice president of the $112 million-asset Princeton Bank, Princeton, Minn.

The other banks offering the service include Citizens First National bank, Princeton, Ill.; First Commercial Bank, Asheville, N.C.; Irwin Bank & Trust, Irwin, Pa.; Peoples Bank of Unity, Pittsburgh; Bank of Montgomery, Montgomery, Ill.; Bank of Newport, Newport, R.I.; and Roosevelt Bank FSB, Chesterfield, Mo.

Participating banks serve essentially as mailboxes where customers drop off their returns for certified public accountants or tax preparers to collect.

After reviewing the documents for errors and additional allowable credits or deductions, the tax professionals forward the return information electronically to the Internal Revenue Service.

Over 5,000 tax partners located throughout the country participate in the program.

After a return is filed, a customer receives an acknowledgement verifying that the Internal Revenue Service received it. Any refund may be deposited directly into a customer's account or mailed.

Customers of the service also receive a tax summary report, a quarterly newsletter with tax-related articles written by bankers and tax professionals, and a Capitol Hill report that informs them of new tax legislation.

Research indicates that there is room for growth in the electronic filing area. In 1993, 12 million returns were filed electronically, representing only 11% of the total number of taxpayers in the United States, according to the Research Institute of America, publishers of analytical tax services for accountants, lawyers, and financial executives.

The potential for new fee income was the primary reason officials at Roosevelt Bank in Missouri, decided to sign up for the program.

David L. Dilthey, director of marketing at the $8.5 billion-asset institution, said the service requires "very little operational involvement on our part."

Financial institutions may Sign up for the service at no charge. Tax Shop provides all marketing materials, such as statement stuffers and lobby brochures.

Roosevelt Bank will market the service to a group of about 175,000 checking and money market customers via monthly statements, said Gerald Fister, vice president and manager of retail marketing.

Roosevelt also plans to market the service to noncustomers as part of an effort to woo new business.

Several years ago, the bank considered running its own electronic tax filing service, but the project proved to be too expensive.

One of the appeals of Annual Tax Checkup is that "Tax Shop does the administrative and operation work and we share in the benefits," Mr. Dilthey said.

The low cost of the service is especially important to smaller institutions.

"We can't afford to take one of our employees and have them dedicate even half their time to handling a product or service as important as this," said Mr. Skarohlid.

"Tax Shop provides all the labor and marketing. We simply invite our customers to take advantage of a service that will get their return back to them in a matter of days as opposed to weeks."

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