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Free online filing can speed refunds

By HELEN HUNTLEY, Times Staff Writer

© St. Petersburg Times
published February 16, 2003


It took Bryan Marks all of an hour-and-a-half to do his tax return on the Internet this year. He could have finished more quickly but says, "I always read everything twice and back up a few times to doublecheck answers as I go along."

Martha Barry calculates she finished in 70 minutes flat. She liked the "easy directions, leading you through the process, with help if you did get caught up with questions."

The best part? They didn't have to spend a dime. Marks, 29, and Barry, 58, took advantage of free online filing services that the IRS is promoting this year to try to nudge more taxpayers into the electronic era.

Electronic filing has grown dramatically since its modest beginnings in 1986, when 25,000 returns were filed in a test run. This year the IRS hopes the number will be at least 54-million returns, or about 40 percent of the total.

Electronic filing saves the IRS money and reduces errors. For taxpayers, the primary reward is a faster refund.

This year free filing opportunities are available through a consortium of 17 private tax software companies. Each company sets its own eligibility requirements, but they cover about 60 percent of all filers.

Barry, a teacher's assistant in Largo, went with TurboTax for the Web, while Marks, who works on marketing projects with a Tampa company, picked TaxACT.com. They both proclaimed the experience uniformly positive, although it may have been a bit easier for them than the average person in that they are experienced electronic filers.

"I've been filing online now since 1999 and don't plan on changing that," Marks said. "I use the direct deposit option (for refunds), and I have always received my money in the 10-day window that the IRS states."

Not everyone who has tried online filing has been as happy about the experience.

Carla Kennedy of St. Petersburg said it took her four to five hours when she did her return online two years ago.

"It did work, and it proved errorless, but to tell you the truth, it's still easier to file the old way," she said.

This year some taxpayers filing online have complained about software glitches or about being charged for services they thought would be free. A few companies have changed eligibility requirements for free filing in the month since they were first announced. Most expanded eligibility, but a couple became more restrictive.

It is important to link to the companies through the IRS Web site (www.irs.gov) to be certain you'll get the free filing offer.

Some of the companies offer extra services for a fee, such as state tax returns and return analysis. Marks said he paid $9.95 for return analysis, including calculations showing what he and his wife would pay if they filed separately rather than jointly. He said he thought he got his money's worth.

Some of the companies also sell refund anticipation loans, but IRS officials say those are mainly marketed to a different type of customer, one more likely to rely on a professional preparer.

"This service (free online filing) is really targeted to people who do their tax returns themselves," said Terry Lutes, who directs the IRS' electronic filing program. "The IRS already offered free filing opportunities for taxpayers in a paper environment, and we felt we had an obligation to provide equivalent service in an electronic environment."

He said the IRS chose the partnership with private industry partly because it would have been expensive for the government to build and support its own system.

"There are almost 180 different schedules and statements that might be required, and that's not a low-cost application to build," Lutes said. "We already get tens of millions of phone calls more than we can answer."

Lutes said tax preparers, including the online filing companies, are bound by a federal law that forbids their use of a taxpayer's tax return data without explicit consent. However, he notes that information a taxpayer gives to register with a site is classified differently and governed by each company's own privacy policy.

Still, some people remain nervous about putting private information on the Internet.

Scott Lewis of Lutz said he did his return online last year but decided to go back to tax software he installed on his computer.

"I wondered all year what happened to all my financial data that was left on their server," he said.

Lewis said he is sold on the value of computer-generated returns. One reason is that he can download data from his brokerage firm, saving time.

While tax software in both online and desktop versions offers lots of helpful tips, some taxpayers still prefer the comfort of a face-to-face encounter with a professional.

"The CPA's expertise in filing and completing the tax schedules correctly gives me peace of mind," said Ronald Piccinini of Palm Harbor. "The software is only as reliable as the information entered, and there may be several deductions or entries we would miss."

Electronic filing

Last year 35.6 percent of all returns were filed electronically. Do-it-yourselfers were the fastest-growing category, while telephone filing is on the decline.

Total electronic filing 46.9-million

Professionally prepared 33.3-million

Self-prepared 9.4-million

Telephone filing 4.2-million

Total paper filing 84.8-million

Source: IRS

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