Electronic filing of tax returns has become the norm. And that means more demand for online tax-preparation programs. If you are in the market for a provider this year, here’s a look the latest the industry has to offer.
Prices vary widely for these paid programs, as do the services they provide. With some sties raising their fees a few dollars and some dropping them a few, the price spread has increased.
For instance, CCH’s CompleteTax federal tax return prices increased from $25.95 to $29.95. State prices rose from $12.95 to $14.95. That’s not a lot when you consider what you get for the price. A complete tax return—no additional charges for additional forms. See the CompleteTax site.
CompleteTax.com product manager Debra Gray says the firm’s information database has increased this year. Enhanced email, paid chat support and a helpful resource center are also 2008 highlights.
Since CCH is a major publisher of tax information for tax professionals, it draws upon those publications to keep the resource center, news links and calculators up-to-date. One big benefit goes to investors using Gainskeeper: They can import their data directly into CompleteTax.
What do they not do? Phone support. This is the only major service with no phone support and no published phone number.
At TurboTax, Scott Gulbransen, senior manager of corporate communications, is excited about the company’s new question-and-answer interface. It starts with what changed in your life and uses that information to move you through a more tailored path. There’s an Audit Risk Meter that combines proprietary historical expertise with IRS information to highlight areas you might want to address. It alerts you to places where it’s important for you to save the source documentation with this year’s tax file. Visit TurboTax.
TurboTax’s paid users will get a unique downloadable audit support tool to use in the event of an IRS notice. It helps you interpret what the IRS letter means, since not all letters are about audits. For letters requiring a written response, the tool provides letter templates for you to fill in to produce an immediate reply.
Don’t you just love it? Use your form letter to reply to IRS’s form letter. This is sheer poetry.
TaxCut offers audit and IRS letter support too. You just have to call them when you get a notice. With their Tango product you can get unlimited 24/7 chat, phone or email support and tax advice from real tax professionals for a flat fee of $70.00 for federal and state returns. A great option for someone with lots of questions. Check out TaxCut.
Watch for warranties
With any online tax site, read the warranty information carefully before you accept the terms of your user contract. Then, you won’t assume you’re covered just because they claim to pay your interest and penalties if a program error results in IRS action.
For instance, CompleteTax will only pay penalties and interest up to the amount of the fee you paid while TaxSlayer will pay all the penalties and interest if their program caused the error. Visit TaxSlayer.
(Shh…don’t tell anyone. IRS rarely charges penalties when there are system errors.)
Incidentally, TaxSlayer is a member of IRS’s FreeFile program. In addition to all the usual folks they serve for free, TaxSlayer invites all members of any branch of the military to use their services for free.
Refund-anticipation loans
Trafficking in Refund Anticipation Loans (RALs) has been nearly wiped out. And FreeFile Alliance members are not permitted to offer them to their free customers. Read more on FreeFile eligibility.
The only major company still pushing RALs in their ads on their site, is TaxBrain. You can see why, when you look at the revenue RALs generate. To pay your tax-prep fee from your refund, TaxBrain will charge you $30 for the standard service (compared with prices under $15 at TaxCut and TurboTax, and $19.95 at CompleteTax). Paying TaxBrain’s fee from your Instant Refund (two-day service) will cost you $100, in addition to the fees for the refund anticipation loan, according to a customer service rep on their phone lines.
CompleteTax includes a link to their RAL rates starting at $34 for $500 or less, compared with $75 at TaxBrain. The TaxCut, TurboTax and TaxSlayer sites don’t even mention RALs.
Gap in coverage
What’s overlooked by all the services? Registered domestic partners. RDP’s have special needs when it comes to tax returns. States may require a joint return, while IRS treats them as single. Not one of the services even asks that question on the choice of filing statuses in the federal questionnaire. But in TurboTax, when you select California or Massachusetts, then the RDP or same-sex marriage questions come up.
So, if you are an RDP or same-sex couple, either work with a tax professional or be prepared to create test versions of several tax returns. Depending on how you hold title to homes, cars and other deductible assets, who paid the bills, and who is the legal guardian of your children, you’ll need to test out the best legal way to split income, expenses and children on the IRS return.
You should be able to get away with just one state form. An interesting option is offered to you in TurboTax, which suggests you download the software and prepare multiple returns for the one price instead of doing your return online.
Choices, choices, choices
You’ll find many other Web sites offering online processing. Some of them are really portals or associates of these major providers, with their tax processing running on the systems of these companies. You have to dig deeply into the site to learn that sometimes. See more tips on identifying reliable providers.
Two quick ways to select a company, if you’re not using the FreeFile Alliance is to use the IRS Web site.
Select the paid service of one of the FreeFile Alliance members. There are very high standards to belong to that elite group.
IRS spokesman John Lipold points to an IRS Web site with a list of affordable e-file options. Those companies can’t get on the list without IRS knowing who they are, and something about their tax preparation history. Visit the site.
Eva Rosenberg is the founder of TaxMama.com and an enrolled agent licensed to represent taxpayers before the IRS. She is the author of the new book, 100% Home-Based Business Tax Solution. Reach her at taxquips@gmail.com.
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Fi-Life :: Free File: Winnowing Out the Best Free Sites for Filing Your Tax Returns
