E-Filing: Where Should You Go?
Nothing is as simple as it should be when it comes to the Internal Revenue Service. To encourage taxpayers to submit their 2002 returns electronically, the IRS has certified about 60 firms that can help you with e-filing--if you don't choose to use your local accountant. Links to the certified preparers appear at www.irs.gov.
The problem is the list isn't organized in any way, and your only clue to the service being offered is a promotional statement that accompanies the link. For example, Homeowners Tax Return Sale $7.95 (homeowners.efile-tax-returns.org) connects to a site where you can prepare and transmit a basic return but no schedule C for a business, or schedule E for rental and royalty income. It's not clear why homeowners should use this service rather than another. Jackson-Hewitt, another certified firm, simply wants you to visit its offices for face-to-face help.
All the IRS certification means is that a vendor has proven it can transmit tax returns electronically, and that no red flags have popped up in FBI files or credit and tax records. The IRS cannot guarantee that the provider will help users produce accurate returns.
When searching for a preparer, look for a site that will guide you through the process with plain-English "interview" questions, error-checking systems, and access to nontechnical explanations. Beyond that, here are a few questions that will help you make a choice:
-- Do you want to prepare your return online as well as file electronically?
Online preparation means all your financial data are on the tax preparer's server. If that makes you uneasy, it's better to use software that goes on your hard drive--and then transmit the finished return through the preparer's site.
-- Can these services prepare and file state returns?
Many don't at all, or offer the service only for a limited number of states. Some don't prepare returns for partial-year residence in particular states.
-- Which forms do you need to file?
If you have complicated tax issues, such as big capital gains or losses, the adoption of a child, or rental income, make sure the system you choose supports all the forms.
-- Do you want tax tips and advice as you prepare the return?
For example, some systems might suggest that you contribute to an IRA if the information you submit shows that you're eligible to do so.
-- How easy is it to navigate the site and understand instructions?
Sites surveyed range from the annoying--Taxactonline interrupts you with pop-ups to sell you a more expensive program--to the helpful Turbo Tax and TaxCut, with their user-friendly functions.
-- How much will this cost?
Unless your income is low and you qualify for the "Free File" options, you may be able to do a return for as little as $19.95. For a system that is easy to navigate and offers most forms you would ever need, expect to pay $39.95. TaxProfilers.com charges $50 to $60 for the 1040 form alone, but if you have interest income, itemized deductions, and capital gains, the price can total $90 to $100. State returns are usually extra, from about $9.95 to $19.95.
By Ellen Hoffman