Filing online can ease pain of tax season

Getting Started

Your Money

February 01, 2004|By Carolyn Bigda

A paper Form 1040 is like a cassette player or typewriter - it's out of place in the age of electronic tax filing. By going online you may be able to maximize deductions, reduce computation errors and file for free, so why linger in the past?

Most people in their teens and 20s have returns that don't require the expertise of an accountant. The interviews, or series of data-gathering questions, that the tax-preparation Web sites ask you generally will ensure that you've filed the return completely and taken advantage of all your deductions - all things you may overlook doing a paper file on your own.

If you're eligible, the best way to go electronic is the Free File program offered by the Internal Revenue Service.

Here's what to do: Log on to www.irs.gov and scan the list of companies that have partnered with the IRS, as well as the criteria you must meet to qualify. Most sites require that you make no more than $35,000 a year. There are exceptions: FreeTaxUSA.com offers free filing based on state residency, and TaxAct.com limits the pool to those who earn more than $28,000.

While determining your eligibility, also check that the site supports the state tax returns you need. And be sure to link to your selected provider through the IRS: If you go directly to the independent Web sites, you may have to pay traditional fees.

Since Free File does not cover state returns, you may have to pay to do those taxes. However, first go to your own state's Web site to see if your state provides free filing - almost 20 do.

If you don't qualify for free filing, you can view a list of authorized e-file providers on the IRS Web site (Look under e-file for individual taxpayers). Some are pretty good deals. OnlineTaxes. com, for example, keeps filing affordable - $9.95 for federal returns and $5.95 for state - while including some useful features, such as a summary of tax laws.

No-frills filers can check out Average1040.com, which charges a mere $3.99 to do your federal taxes. (It does not handle state returns.)

Programs that cost slightly more but offer more plush services include:

TaxActOnline.com, produced by 2nd Story Software Inc. This site will help you file federal taxes at a cost of $9.95 through its Deluxe version, which provides tax tips and a guarantee on the accuracy of your return, so if the numbers don't add up, you won't be at fault. In addition, each state return (a maximum of 5) will cost you $7.95 each.

TurboTaxOnline.com, a product of Intuit Inc. As long as you file before April 1, you can file a federal return for $19.95 and take advantage of a unique TurboTax feature: It imports data from your W-2 and other forms from participating employers for you - no typing necessary. If you're filing a state tax return, it will cost you an additional $19.95, and you can submit only one.

H&R Block (HRBlock.com). The big tax preparer this year introduced a Young Adult edition for those in their early 20s. For $24.95 (comparable with the company's standard package), you can file your return, plus get the basics on how to itemize deductions or use your refund wisely. A calculator, for instance, reveals how long it would take you to be a millionaire if you kept investing - not spending - those returned tax dollars.

Like TurboTax, the program gets a little more expensive if you have to file a state return, up to three at about $15 each.

Some other sites to consider are TaxEngine.com, which can handle one of the three basic federal returns (1040, 1040A and 1040EZ) and a state return for $19.95 combined, and CompleteTax.com, which will do a federal and resident state return for $29.95 (the system does not handle part-year or nonresident state returns).

No matter what service you select, remember to read everything closely before starting, check to see if your state offers free filing and print out copies of your return for your own files - just in case.

E-mail Carolyn Bigda at yourmoney@tribune.com.

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