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Online, phone tax filings satisfy the need for speed

By DAVE GUSSOW
© St. Petersburg Times
published March 9, 2003

Uncle Sam wants you -- to file your tax returns electronically.

And the Internal Revenue Service is offering a pretty good incentive to skip the paper, pen and postage: You get your refund a lot faster. Unlike many promises the government makes, this one it kept.

I filed returns for my daughter (by phone), my son (free online) and my wife and I (through tax preparation software). All three refunds were direct deposited to checking accounts in less than two weeks. That included my son's, even though he had to send a signature form the old-fashioned way.

By contrast, one of my co-workers mailed his return three days after I clicked the mouse on my return. He's still checking his mailbox for his refund..

There's also good news for those procrastinating about their return. E-filers still can expect to get their refunds in the promised 10 to 14 days, even if they send in their return around April 15, according to IRS spokesman Mike Dobzinski.

That's an even bigger contrast with those who mail in a return as the tax deadline draws close. The wait for a refund could be as long as six weeks for those who send it in around April 15.

Novelty aside, doing taxes electronically is no more fun than using paper, pen and calculator. If you file with the help of tax preparation software, it also involves what some might consider a little tax penalty: The software will set you back $20 to $50, depending on rebates.

The software services also can charge $15 or so to file the return. TurboTax and TaxCut, the programs we tested, each has a rebate to cover the cost of the filing. It's cheaper than a CPA, but more expensive than doing paper forms yourself.

Don't expect that system to change. The IRS doesn't want to get into the software business.

"We felt that the private sector had more experience in the actual e-filing and preparation of tax returns," Dobzinski said.

I already pay most of my bills, keep tabs on investments and shop online. Filing my tax return electronically seemed to be the next logical step. So, in the line of duty (not to mention to bolster my case for business expense deductions), I took the plunge.

Electronic filers seem to be the early birds. As of the end of February, almost two out of three returns were filed electronically. The IRS' goal is to have 54-million returns filed electronically this year, or 40 percent of all returns, compared with last year's 47-million. By 2007, the IRS wants 80 percent of all returns to be filed electronically.

Beyond speed, the IRS is touting the convenience of e-filing, the prompt notification of acceptance or rejection, the ability to fix errors more easily and the safety of direct deposit over mailed checks.

Here's a rundown of how each of our returns went:

TeleFile: You don't need a computer to use TeleFile, only a touch-tone phone. For this program, though, you can't choose it; the IRS chooses you. It's limited to people who receive a TeleFile booklet from the IRS in the mail, indicating they're eligible to use the service, and who have less than $50,000 in taxable income.

It's perfect for my daughter, a college student, who worked several part-time jobs last year (and certainly is in no danger of bumping up against the $50,0000 limit).

I punched in her data, the IRS computer did the calculations, and I filled in the appropriate boxes on the forms for her records. The whole thing was finished in 10 minutes, including a verification number.

Free e-filing: My son, a high school student, did not receive a TeleFile booklet. Because his adjusted gross income from his part-time jobs easily met the criteria set by the various companies offering this service, he could file his return online for free. It's estimated that about 60 percent of all filers can participate in the program.

To start, I went to the IRS Web site (www.irs.gov/app/freeFile/welcome.jsp). There, I could choose from 17 companies (including TurboTax and TaxCut) to use. I selected TaxCut, went through the process to show that he qualified and punched in the numbers.

It took 20 to 25 minutes to complete. The screen said we would be notified within 48 hours if the IRS had accepted the filing. Like clockwork, we got an e-mail within two days that the filing met the IRS' needs -- except for one little detail.

The electronic verification required is the previous year's adjusted gross income, and the 2001 return was nowhere to be found. (My son correctly pointed the finger at me for misplacing it.)

We had to print out a signature verification form, he signed it, and we had to send it by Express Mail ($4.30), per the online instructions.

Still, that did not delay his return, and the free filing system clearly is a great option for people who qualify.

Tax preparation software: There's really little difference between Intuit's TurboTax and H&R Block's TaxCut, at least as far as preparing your return.

The process for each was similar, each took about an hour to complete, and each came out with the same results in my case. Some functions, such as attempting to download W2 information directly from employers or brokerages, are so limited as to be a waste of time to even try.

While I had no technical problems with either, a friend trying TaxCut ran into glitches when it wouldn't accept his noncash deductions. He had no problems with TurboTax.

I gave TurboTax a slight edge in explaining the Hope Credit for college expenses, and my friend thought it handled some elements of his return better, too.

But Intuit has been criticized for an activation process that forces people to register TurboTax to use it fully. For example, you can use TurboTax on more than one computer, but you can print and file only from the original PC.

Both programs also promote and sell additional services as you go through the process of filling out the forms. Have a question? For $19.95, you can talk to a TurboTax help line for 10 minutes, paying $1.99 for each additional minute. TaxCut's $19.95 covers phone or e-mail support on one topic. If you have another question, it's another $19.95.

But TurboTax is more heavyhanded than TaxCut on sales pitches. It placed four extra icons on my computer desktop, including those for an online bank and Quicken's brokerage service.

Because I had used TaxCut for my son's return, I used TurboTax to file with the IRS.

I paid the $14.95 by credit card. If I wanted the fee deducted from my return, that would cost another $10. No thanks.

Again, an onscreen message said I would be notified within 48 hours. It took less than 24 hours, and it gave me a target date for the return to be deposited.

And it was right on the money.

-- Dave Gussow can be reached at gussow@sptimes.com or (727) 445-4228.

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