Try before you fileMar 24 '03 (Updated Apr 16 '03) Write an essay on this topic.
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The Bottom Line You have to know what you're doing in order to determine whether the software knows what it's doing.
This is difficult for me to write -- I hope it's helpful to you. The features that Epinions allows you to rate in reviews of online tax preparation products are: Helpfulness of Preparer: Note 2 Amount Paid: Note 1,3 Time to Complete: Note 1 Confidence: Note 2 Customer Service: Note 1 Web Site Experience: Note 1 Web Site Load Time: Note 1 and, I would add: E-filing available? Note 3 State tax returns available? Note 3 Refund Anticipation Loans available? Note 3,5 Rounding to full dollar amounts? Note 4 What If capability? Note 3,6 Import (well, upload for web-based tax preparation) capability? Note 7 (and probably 3) Carry forward (the ability to carry forward numbers and calculations from preceding years you've used the same service)? Note 3 You'll have to decide for yourself how to weight the various factors. I, personally, don't consider E-file capability to be important, and consider RALs completely unnecessary, but you have to decide that based on your own needs. See the notes below for how to interpret what you read in the various factors. Note 1. Can pretty much be analyzed by reading the reviews of the specific product, such as here on Epinions. You can decide for yourself after trying it, as well, as you usually don't need to pay in order to fill out the worksheets. Note 2. Here's the tough one: Helpfulness of the preparer (by which Epinions means asking questions which lead to tax reductions which you might be unaware of) and Confidence are difficult to determine unless you are a professional tax preparer. If you aren't a professional and cannot find a review of the product written by a professional, you only have a few real choices. 1. Have your taxes done professionally this year, and also try out the various software options you're considering. If any produce lower taxes than your professional, ask your professional why? If any produce the same result, you should certainly consider those for future years until your tax situation changes. 2. Try a lot of different software packages this year. When you find differences in the results, ask questions on semi-professional boards. The only ones I can recommend at this time are Fairmark at http://www.fairmark.com/messages.htm , and the Usenet newsgroup misc.taxes.moderated , either through a conventional Usenet connection, or through http://groups.google.com . (Note: Do not believe answers in the similar newsgroup misc.taxes . There are a lot of crazies there, but most of them are filtered out in the two boards I've mentioned.) Bryan_Carey may have other recommendations in his reviews of online financial service web sites. 3. Become a professional. Although I cannot recommend H&R Block as a tax preparer, I can recommend their tax course. At last report, it costs around $400, has 60 contact hours (at least in California), and provides a good introduction to tax preparation. 4. Have a friend in a similar financial situation to you try step 1 or step 2. (He has to be a good friend, as, for the information to be useful to you, he has to show you some of the tax returns.) Note 3. You'll find that information on the web site in question. If you can't, and it's at all important to you, don't use that product. Note 4. I'll need to explain this one. As you may very well be aware, the IRS and most state taxing agencies allow, but do not require, you to round all amounts on the tax form to the nearest whole dollar amount. (Actually, Arizona does require it. California and Indiana do not. I'm not that familiar with other states.) What you may not know is that you are not allowed to round amounts entered on separate worksheets. For example, if for some reason, you had two (taxable) state tax refunds of $23.60 and $21.60, and you choose to round, you would calculate the total of $45.40 and (if you choose to round) enter $45, rather than rounding to $24 and $22 and entering $46. I don't know of any tax preparer or tax preparation program or web site who/which does this correctly. Note 5. I may have to explain this one, also. A Refund Anticipation Loan "gives" you your tax refund immediately, as opposed to waiting for the IRS to process it. What they usually don't explain fully, is that it's a loan, and that there is a processing fee (usually $29) -- and, even if you don't E-file, refunds are usually sent within a month. If, for example, you're paying credit card rates of 24%, you'd need to have a refund of $29/(24%/12), or $1450, for this to pay off financially. If your interest rate is lower, you'd need even a higher refund. Yet another stupid tax. Note 6. Explanations one -- more -- time. I mean the ability to try and compare different options on your return, such as married filing joint vs. Married filing separate, whether to elect "bonus" depreciation, whether or not to itemize deductions (believe it or not, sometimes you don't want to itemize, even if your itemized deductions exceed your standard deduction), etc. Note 7. This applies primarily to capital gains to be filed on 1040 Schedule D, but there may be other cases in which you already have an Excel® spreadsheet or Quicken® or Microsoft® Money® with the information to be filed on the tax forms, and you really don't feel like typing all of it into the web form. Summary: I don't want to dissuade you from using online tax preparation software, but you have to know what you're doing in order to determine whether the software knows what it's doing.  |
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