Preparing And Filing Your Taxes On The Web - online tax filing services

Nation's Business, Feb, 1999 by Tim McCollum

Taxpayers whose returns aren't too complex now have an option other than desktop software to deal with the IRS electronically.

You can say goodbye to the paper 1040 forms the Internal Revenue Service sends you each year--and maybe even to desktop income-tax software--if figuring out your taxes isn't too complicated.

Now you can prepare your personal tax returns and, if necessary, make payments electronically using any of several Internet-based services that have come online in the past year.

Preparing and paying taxes via the World Wide Web is an extension of desktop income-tax software such as Kiplinger Tax Cut Deluxe from Block Financial Corp. and TurboTax from Intuit Inc. For several years, these programs have allowed users to prepare and file their taxes and have provided links to Web-based tax information.

The IRS says that last year, 1.2 million returns were filed electronically using tax-preparation software. This year that number seems certain to grow, partly because the IRS for the first time will allow people to make payments by credit card directly over the Internet.

Unlike desktop tax software--which costs $30 to $50, including electronic filing, and which must be upgraded each year--the online tax services enable people to fill out their returns using free Web-browsing software such as Microsoft Corp.'s Internet Explorer and Netscape Communications Corp.'s Netscape Navigator.

Whereas tax-software products are laden with multimedia tax help and financial-planning capabilities, the online services are more streamlined--in recognition of the speed limitations of accessing Web-based data by modem.

Online services, most of which charge $10 to $20 per return, are an economical alternative for households that don't need all the help and planning assistance offered by the tax-software products and that file only one or two returns a year.

Each of the online tax services uses a technology called Secure Socket Layer, which is supported by Internet Explorer and Netscape Navigator, to ensure the privacy of data transmitted over the Web. Also, tax forms submitted to each service are stored in encrypted form that can be accessed only by the transmitting party.

Tax software still is a good deal for people who need extra help or who want to incorporate into their returns financial data they already have entered into personal-finance programs such as Intuit Quicken or Microsoft Money. It's also useful for households that file several returns each year. But, as the services described below attest, the tax-software products aren't the only electronic-filing game in town anymore.

Kiplinger TaxCut 1O4OEZ Online (Block Financial Corp., www.taxcut.com). Block Financial is offering taxpayers a chance to prepare and file their taxes for free. But there's a catch. Kiplinger TaxCut 1040EZ Online is limited to helping people prepare relatively simple 1040EZ forms.

To do this, the creators of Block Financial's site have stripped away many of the graphics and multimedia capabilities of the software version of TaxCut to provide a spartan yet useful way for individuals to complete their returns. When users log in to the TaxCut 1040EZ site, they choose a password that enables them to fill out their form, store it, and retrieve it later. Once online, users respond to a series of questions about their income. Along the way, Web links explain tax concepts and answer questions.

Once users have completed their forms, TaxCut 1O4OEZ calculates their refund or payment and allows them to either print their return on an IRS standard form or file it electronically.

TaxCut 1040EZ Online can complete the federal 1O4OEZ form as well as all of its state equivalents. Those who need to complete standard 1040 forms can download via the Internet the software version, TaxCut Deluxe, for $30. TaxCut Deluxe allows users to complete federal returns and download state forms at no additional charge.

OneTax.com (Thomson Investors Network, www.onetax.com). The newest Web tax site, OneTax.com, leverages the tax-preparation technology used by leading accounting firms and major corporations. And, at $9.95 per return, it's a bargain for individuals.

As with the competing online services, taxpayers fill in financial information by answering a series of questions. Then OneTax.com calculates their federal and state refund or payment.

Moreover, OneTax.com helps taxpayers reduce current taxes and plan ways to minimize taxes in the future.

OneTax.com offers online storage of tax-return data, which can be used to revise a tax return filed this year for 1998 or to put together a return for 1999.

Users do this by going through "what-if" scenarios that explore how their taxes would be affected if they were to itemize business expenses, for example, or contribute to a Roth IRA.

Taxpayers can prepare their returns and explore the "what-if" scenarios at no charge. They pay only to electronically file their returns or print paper forms.

SecureTax.com (Universal Tax Systems Inc., www.securetax.com). Unlike some of its competitors, SecureTax.com makes no corresponding tax-software product. But like the other online services, its streamlined interview process helps people file their returns quickly.