Looking for a way to make tax season less taxing this year?
If you're not among the 14.5 million people who prepare their returns on their home computers, this may be the time to retire your pencil and calculator.
Recent changes to federal and Maryland tax laws are finally hitting the dining room table. The upshot: You may get more money back, but you'll have to work harder for it. There are more than 150 new or revamped federal income tax forms this year. Maryland taxpayers, meanwhile, face longer short forms and extended long forms this season.
There's high-tech help for this old headache -- starting with tax preparation software such as Block Financial's Kiplinger TaxCut and Intuit Turbo Tax.
Sam Biller has used one program or the other for nearly a decade. The reasons are simple.
"To reduce the possibility of me generating an error in the math, to save time, and to reduce the probability of me overlooking something that I need to file," says the 33-year-old electrical engineer from Tampa, Fl.
For many years,the slick Intuit Turbo Tax ($49.95, Mac or Win 95/98) easily trounced its less refined upstart competitor, Kiplinger Tax Cut ($39.95, Mac or Win95/98).
But this year the annual bout looks to be a draw. In their deluxe versions, both products contain video clips of wooden accountants explaining the arcana of tax changes and forms. Both lead you through a comprehensive, step-by-step interview about your finances, and both record your answers on the appropriate tax form. Both will comb your return for errors, then advise you of audit-provoking "hot spots" and money-saving shortcuts. In short, both will get the onerous job done.
The choice comes down to price, and here Tax Cut may have an edge, especially if you plan to use the program for state returns, too. TaxCut not only costs 10 bucks less than Turbo Tax up front, but also throws in every state version for free, a boon if you have to file returns in more than one jurisdiction, such as Maryland and the District of Columbia. Turbo Tax users pay $27.95 for one state tax program and $19.95 for each additional state.
Professional tax preparers caution that home PC tax programs aren't for everyone. "If you can't do them by hand, you're not going to be able to do them by computer," advises Dick Adams, who teaches accounting at the University of Baltimore and oversees the online newsgroup misc.taxes.moderated.
What's more, even die-hard do-it-yourselfers may want to cart their receipt-stuffed shoe boxes to a certified tax preparer, especially if they own rental property, are entangled in partnerships or dabble in other Donald Trump-like investments.
"We cater to the people who sit around the kitchen table with a bottle of Wite-Out and a bottle of white wine," says Block Financial vice president Gene Goldenberg "If you're going to a professional tax preparer now for whatever reason, stay with them. But if you're struggling with your own tax return or wasting a lot of time on it, buy tax software."
Once your federal and state forms are complete, don't switch off your computer just yet. You may want to consider sending them to Uncle Sam over the Internet.
Launched by the IRS more than a decade ago, electronic filing is slowly catching on. Last year, one in five taxpayers filed electronically, either through home computers or certified tax preparers. The IRS is pushing hard to loosen taxpayers' grip on their paper returns even more.
By 2007, the agency wants 80 percent of taxpayers to file electronically. "We're trying to encourage people to take that next step," says IRS spokesman Domenic J. LaPonzina. To that end, the normally buttoned-down agency has has devised a hip, cybersavvy slogan for its e-file service: "It's click, zip, fast round trip!"
Maryland tax collectors aren't far behind, and wish they were further ahead.
"We're drowning in paper," complains Marvin A. Bond, spokesman for the Maryland comptroller's office in Annapolis. This year Maryland taxpayers can file state returns electronically using their home computers and check on the status of their refunds on the state's Web site by punching in their Social Security numbers.
Why e-file at all?
First, it slashes the time it takes Uncle Sam to deliver your refund. Last year 75 percent of Maryland taxpayers were due refunds that averaged $1,300, according to the IRS. Those who filed on paper typically waited five weeks for their checks. E-filers got their money in half that time. By authorizing the IRS to deposit your refund check directly to your bank account, you can shave a few more days from the wait.
Second, e-filing cuts down on careless mistakes -- both yours and the IRS'. When you send a paper return, an overworked IRS clerk has to decipher your hieroglyphic handwriting and feed each line into a computer. When you e-file, the IRs computer gives the return a once-over for errors before it accepts it. The result: Last year, nearly 8 percent of paper returns contained mistakes, compared to less than 1 percent of electronic returns.
Finally, electronic filing offers peace of mind. When the IRS accepts your electronic return, the agency dispatches a confirmation receipt within 48 hours, a perk not afforded to paper filers, who often send their returns by certified mail just to get proof that they arrived.
In the past, some certified tax preparers charged $50 or more to file your return electronically. Now you can do it for much less. Both the basic and deluxe versions of Kiplinger TaxCut offer free electronic filing for one return (after you mail in the included rebate coupon). Turbo Tax users pay $9.95.
If you earn $20,000 or less, you may be able to do your taxes for free. For the first time, Intuit is offering lower-income taxpayers the chance to use its online preparation service, Web Turbo Tax, at no costs. The site prompts users for the information it needs and then files their tax returns via the Internet. Visit www.quicken.com/freedom for more information.
Despite its paperless billing, electronic filing is not completely paper free. When you send your return electronically, you still have to sign Form 8453-OL and attach to it supporting documents, such as W-2 or 1099R slips.
If you owe money, the IRS allows you to file electronically at any time and pay your balance as late as April 15, the standard deadline. This year, you can send a check or credit card number, or have the IRS debit the money from your checking account.
But the last vestiges of paper may soon disappear. In a pilot program, the IRS this year is assigning personal identification numbers to 12 million taxpayers who have used PCs to prepare returns or file electronically in the past. The number can be used in lieu of Form 8453-OL. Lucky recipients don't even have to mail their W-2 forms.
But not everything has changed. Just because the IRS has embraced the Internet to make taxpayers' lives easier, "it doesn't mean the [electronic] return is going to get subjected to less scrutiny than any other return," says LaPonzina.
Pub Date: 01/18/99