Tax preparation time calls up ugly images for a lot of people: a feeling of being trapped indoors, wading through a morass of paperwork and forms, hour after hour, no end in sight. Sometimes there's a reward: a refund. Often, though, the final step is signing a sometimes hefty check.
But people who think it's too early to start preparing their tax returns — including those who don't like to start the process until April 10 or so — should pay attention. Quicken TurboTax for the Web announced that it had filed its millionth federal tax return electronically Feb. 22, weeks ahead of the pace set last year.
Folks are getting the task done earlier this year. And by the millions they're doing it with electronic tax preparation help, either purchased and loaded on their computers or actually prepared at certain Web sites.
Forget the piles of papers and shuffling through forms to find the right one, the late-night runs to the post office or the local library to find that obscure tax form. This year, it's available online. And if you're using a tax program, it's built into the software.
Don't worry, either, about setting aside a couple of weeks to organize forms and calculate your return. Where the average taxpayer spends 11 hours filling out his or her tax forms manually — most of it spent shuffling paperwork, seeking that elusive 1099-INT — the average for people who use computer or online tax programs is about three hours. Even with complicated returns.
The fact that the tax return can be filed electronically with programs like TurboTax, H&R Block's TaxCut and 2nd Story's TaxACT— or prepared and filed directly over the Web — is catching on. Nationally, the Internal Revenue Service predicts as many as 35 million federal returns will be electronically filed, including those filed by paid tax professionals.
It's not just something that's happening in other regions, either, according to Janice Perry Gully, spokeswoman for the Utah Tax Commission. While the number of paper returns filed last year increased .07 percent from the previous year, telefiles (using the telephone for simple returns) increased 27 percent and professional tax preparer-filed returns were up 14 percent. Internet e-filing was up a whopping 229 percent in Utah.
Utahns already are filing their returns at a record pace, she said. So far this year, the state Tax Commission has received 77,030 prepared by professional tax practitioners, 27,083 over the Internet and 24,763 by touchtone telefile. State officials are pleased with the early pace — but especially the electronic returns.
"We love it when people e-file," Gully said. "It bypasses manual handling. People can have refunds electronically deposited whether they file paper or electronically, but the latter is more accurate. There are fewer chances of human error — both theirs and at the Tax Commission. The software eliminates a lot of error, including math."
In the 1980s, the consumer simply took advantage of having all possible forms available when he or she used tax-prep software but still had to fill out the forms himself on the computer. Tax preparation programs really took off in the last few years, since the introduction of the "interview" format, which lets the consumer answer a few simple questions and the program figures out where things go. In Gully's words, "It walks you through the process as though you were sitting across from a tax preparer and answering the same questions."
And, like that professional tax consultant, the programs sometimes pick up things that the taxpayer wouldn't think of in the way of deductions and credits.
Tax programs also reduce major errors, like failure to sign the return, Gully said.
There are lots of tax programs out there. When choosing one, it's important to determine whether it will be possible to file the state tax return at the same time, since it can't be filed independently if you're using e-file.
Information available online from both the Internal Revenue Service and the Utah Tax Commission shouldn't be overlooked, either, Gully said. The state tax site www.utahtax.com has all the schedules and the instructions needed to fill them out. It also offers links to other states' tax forms if needed, and a link to the IRS Web site www.irs.gov, as well. There's updated information on tax changes and a plethora of tips, too.
While there are lots of online and computer tax preparation programs out there, the Deseret News looked at three of the most popular. They vary in price, and the programs have some basic differences. For instance, while all of them have interviews that walk the consumer through the program, the information available in the help sections varies in simplicity and thoroughness.
Each has a tax adviser available, as well, and all three programs let you import information from financial programs like Money or Quicken.
But the important thing is, when the reviewer prepared the same complicated tax return — complete with small business income, three W-2 forms and jam-packed Schedule A and C forms — the bottom line was the same with all three programs. Not a penny's difference. There was also no significant difference in the amount of time needed to complete the return.
Here are some quick facts about the programs:
Quicken TurboTax www.turbotax.com: This one goes an extra step and lets the consumer import W-2 and 1099 tax information electronically into the correct tax forms, as long as the company issuing the forms offers that capability.
The standard edition is $19.95, including a $5 mail-in rebate. It includes a free federal e-filing, after a mail-in rebate. The deluxe package ($29.95 after mail-in rebate) offers video clips, a free state product and free electronic filing (both require mail-in rebate). The home and business program ($49.95 after rebate) includes free state product, federal e-file (both after rebate) and a tax guide for mall business.
Larger businesses will want the $69.95 program (also after rebate) for partnerships, corporations, S-corporations, fiduciary and limited-liability companies.
As for the online offering, it's $14.95 for federal returns printed or e-filed before April 1, and $5 more after that date. State returns are $9.95, while the 1040EZ forms are $6.95 before April 1 and $9.95 after. Both include the state return.
2nd Story TaxACT www.taxact.com: The latest edition is available online and combines the power of the deluxe version without the need to put the program on your computer. The Ultimate Bundle combines federal and state tax returns and is guaranteed 100 percent accurate, for $19.95. Deluxe ($9.95 when downloaded online) includes a free electronic filing of the federal return and an unlimited number of paper returns.
E-file of the state return is only $4.95. The state program, available for 23 states, costs $12.95.
Online version is free for preparation but $7.95 to electronically file the return.
The program also is available in a standard form for free download, and that's a big selling point to a lot of consumers.
H&R Block's TaxCut: Available from www.taxcut.com, taxes can be done on the Internet or from a CD-ROM. Online, the federal return can be prepared and filed for $19.95. For $29.95, it can be reviewed by an H&R Block tax professional before it's filed. For $99.95, you can wash your hands of most of the preparation and fill out an online tax organizer, then let a professional do the return, regardless of how complicated it is. You can also, through the online site, consult a tax professional for $19.95 per solution.
It comes in federal, state and business editions, starting at $9.95 for the former, then $19.95 for state programs and $49.95 for home and business editions, including payroll returns.