Review: Tax-Prep Software
Quicken 2000 Tips
The final countdown has begun. You haven't filed your federal and state income taxes yet, and you've got just a matter of days left. Lucky for you, April 15th falls on a Saturday this year, so you've actually got a couple of extra days -- until midnight April 17th -- to either file a return or request an extension.
Naturally, we hope you're expecting to get a little money back rather than write a big fat check, but either way there's a good chance you can save significantly on tax-preparation fees by doing your taxes on the Web. Thanks to a good-old fashioned battle for market share, you can get state-of-the-art software assistance and electronic filing of both your federal and state return this year for less than $10 -- possibly even for free.
One important warning needs to be stated up front: DO NOT WAIT until the last minute to attempt to calculate and file your taxes on the Web! Frankly, you've already waited longer than you should. Did you ever try to send an electronic greeting card on Valentine's Day? Or download the trailer for "Star Wars: Episode One" on the first day it was available? The crowds on the tax Web sites next weekend will make the most mobbed post office look like Siberian tundra. Sites were already showing signs of the strain on the penultimate tax-preparing weekend -- so try to pick a time mid-week when most people will be watching The Sopranos or sleeping.
This year, only about one percent of taxpayers will file their taxes using a Web-based program, but that's still about 1.25 million people, and it's significantly more than did it last year. The vast majority of these online Web filers will be using either Intuit's TurboTax for the Web or H&R Block. You may recall H&R Block from the days when tax preparers actually had offices where you schlepped a carton full of personal records and handed them over to some guy in a white, short-sleeved shirt.
Both TurboTax for the Web and H&R Block offer Java-based applications that can step you through a questionnaire and fill out all of the standard forms (plus a few you've probably never heard of). Both will print copies of your return for your records or for you to mail to the IRS. Both also let you electronically file your return, which can dramatically speed up refunds. What's more, both programs will also do your state taxes for no extra charge, assuming your state is supported. H&R Block can handle 26 different states, while TurboTax boasts 45.
TurboTax is basically Intuit's popular standalone tax-preparation software (MacInTax on the Mac, TurboTax on PCs) ported to the Web as a Java-based app. Using it on the Web is very similar to running the CD-ROM version. You just don't get the fancy multimedia features (most of which feel like they were included just to fill up the disc, anyway). TurboTax runs on Netscape (version 4.06 and higher [except 4.6]). However, Intuit does not support it for Internet Explorer on the Mac, despite the fact that Windows users have a choice of Netscape or Explorer.
You can use TurboTax to calculate your taxes for free. But if you want to print out the completed forms or file them electronically, the charge is $9.95. Form 1040EZ, however, which is generally only applicable if you earned less than about $50,000, is free to print or file. If you earned less than $20,000, Intuit will even let you file a regular 1040 for fee, which it advertises as its way of "giving back to the community." Of course, you could probably fit the nation's under-$20,000-earning, itemized-deduction-claiming, Web-enabled tax filers in a school bus, but it's a nice sentiment. No wonder Microsoft wanted to buy these guys.
We prepared a return using both the CD-ROM and Web versions of TurboTax and got the same results. We were pleased to see that TurboTax on the Web actually caught an error caused by a data-entry typo -- there are some real smarts to the program. Form 1040 users should allow plenty of time, though, to plow their way through TurboTax's lengthy "interview" process, especially if Intuit's servers are overloaded by fellow procrastinators.
As you file out your return, your tax data is saved on Intuit's servers. This is a good thing because, if you're like us, you can expect the Java app to crash at least once or twice during the course of the interview. No problem -- we were able to resume right where we'd left off. Although you can print a copy of your forms for your records, Intuit keeps the actual data files on its servers for only six months after the filing deadline. So after October 16th, they're gone for good. However, you can save your tax data to your hard drive and later import it into the CD-ROM version of MacInTax.
This is the first year that H&R Block has offered a Web-based tax program, and there were a few rocky moments early on. The site had to be shut down, in fact, during February for a few days.
Like TurboTax, the application is Java-based, although it works with recent versions of both Netscape and Explorer. Some other significant differences: Perhaps because there is no CD-ROM version of its software, H&R Block will save your data for three years rather than delete it after 6 months as Intuit does. H&R Block also guarantees that it will pay interest and penalties for any errors that are caused by its software.
We wish we could tell you more about how the H&R Block program actually works, but we couldn't get it to load at all nine days before tax deadline -- possibly as a result of heavy weekend traffic. When we did get it to work (with Internet Explorer 5.0), the program's windows were unusable. Buttons required for navigation were barely visible at the bottom of the page.
Last-minute filers might want to start with Intuit's site, since pricing is the same and Intuit has a better established track record for tax software both online and offline.Getting an Extension
Feeling like you just don't have time to deal with this right now? One option is to file a request for an exemption. The advantage for procrastinating online filers is that you can then come back sometime before August 16th to finish your taxes long after the last-minute assault on Intuit and H&R Block's servers has subsided.
Requesting an extension isn't terribly complicated. In fact, the TurboTax site offers step-by-step instructions. The main catch is that you still have to send in any money that you expect to owe.
You should be aware of a couple of potential problems with electronic filing. First of all, be sure to double check that the Social Security number and name on your return match up with what the government thinks they are. In other words, if you've changed your name (maybe you got married or became DotComGuy ), you need to make sure that the Fed's records reflect that fact. Believe it or not, incorrect Social Security numbers are the top reason for rejected returns.
Second, be sure to get the correct routing number from your bank so that the Internal Revenue Service can deposit your refund directly in your account. The routing number is not necessarily the one that you see printed on your checks. Check with your bank if you're not sure. If you do opt for direct deposit, refunds can arrive with breathtaking speed -- I got mine within a couple of weeks of filing. Of course, you might not be so lucky. Probably one in twenty electronically filed returns gets held up by what the IRS refers to as "random validity" check. That can cost an extra week.JAMES BRADBURY is a former editor of MacUser and Macworld Online. He wrote " Easy Money ", a guide to using Quicken more effectively, in the March 2000 issue of Macworld.