Free online tax prep — benefits and risks

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	BEST PRACTICES[/size][/font] Free online tax prep — benefits and risks[/size]
	By Michael Lasky In this time of tight budgets, paying to pay seems especially galling. The good news is that many of us can use a free IRS service to calculate our contribution to the Feds — but you still have to do some homework. [/size]

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The full text of this column is posted at WindowsSecrets.com/2011/02/10/06 (paid content, opens in a new window/tab).

Columnists typically cannot reply to comments here, but do incorporate the best tips into future columns.[/td]

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Would have been nice if you had included TaxACT in your “test” of paid tax programs, to see how its results differed from Intuit and H&R Block, as well as ease of use. If the only reason you declared TurboTax the “winner” is that it “saved” $221, how do you know for sure that calculation is actually correct? Until at least Feb 15th, you don’t.

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I’m guessing this article didn’t rate highly as Windows Secrets must have a sizable non-US population. It’s pretty hard to cover this subject in any way that is going to make the rest of the world happy though (I’m Canadian myself).

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I’ve used TaxAct for several years now for myself and my family. They DO allow you to save your tax files to your computer in the form of a PDF. When its time to print the finished tax forms I just use the PDF printer instead of my ink jet printer and save them that way so I have hard and soft copies of the taxes.

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TurboTax does warn you now about filing before February 14, when you update it beyond the January 27 update. You can efile the Federal and they will submit it after February 14.

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IMHO, it’s crucial that you figure out how the two came up with different results. Short of a data entry fumble, the most likely cause is that one of them let you to enter something in the wrong place. Whichever did that should be the “looser”.

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Good article, but…

Be warned – TT does not calculate MA state tax correctly for federal employees under the old Civil Service Retirement System (CSRS), or presumably for workers who make contributions to anything but Social Security. It did until the 2008 tax year, then stopped.

MA allows all retirement contributions – Social Security, CSRS, railroad retirement systems, etc – as a state income tax deduction. Although TT accepts the correct CSRS amount and W2 code when entering W2 information, it does not add it to Social Security (& Medicare) contributions when calculating MA deductions.

For 2008 I overrode the automatic calculations and TT still allowed me to e-file, which the state accepted. Last year TT wouldn’t allow me to override and still e-file with MA, insisting I had to do it on paper or accept its (faulty) numbers.

Both years I tried to get Intuit to correct this in several forums, including registering as a user in Intuit’s users circle (or some such), which it claims to monitor. Intuit never responded (no surprise there) and rather than correct the problem last year, made it worse.

This year I’m not using TT for anything, and never will again, and am trying MA’s own state tax on-line system.

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I enjoy reading Windows Secrets especially when it covers general products, security or hardware. Even if the products are not currently available outside the USA, because they may well come. However products that are very specific to the USA I would feel much happier if they were restricted to web links only not taking up valuable newsletter space.
I don’t know what percentage of your readers are in the USA but as a paid content reader I would rather the content be restricted to that which could apply to any country not specific to USA.

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Columnist writes: “ TurboTax was a slam dunk. Inputting the same set of data into both programs, TurboTax said I owe $1669; H&R Block At Home figured $1890. That’s $221 TurboTax left in my pocket.” WRONG! All you know is that you got different answers. You do NOT know which one is correct. You need to dig through the data, find the discrepancy, and figure out why the taxes differ.

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I’m sure I would be considered anachronistic by most, but the fact is that by using the online tax prep packages, you (the taxpayer) don’t “own” the data. You are trusting that it will be secure in the “cloud” (another marketing moron term). You are trusting that the entity holding the data is trustworthy and knowledgeable enough about security that they can keep the most talented hackers away, and that everyone they trust to have access to your data is trustworthy also. You are hoping that the entity holding your data will be around next year, five years from now, however long the IRS requires you to keep your records (including your tax returns), which, for all intents and purposes, is forever. (Yes, the IRS suggests something less than 10 years I think, but they also can audit you at any time, without any time limitation if they suspect fraud.) Needless to say, I use the “software on my PC, not in the cloud” packages. I’ve used TurboTax almost exclusively, with the exception during the period Intuit foisted their anti-piracy debacle on their honest customers.

BTW, I have every tax return I’ve ever filed, on paper and, when I started using software that would allow me to, to PDF. I have every CD-ROM and diskette for the installation. (I know that some lawyers recommend against keeping such a long history, but I have absolutely nothing to hide.)

And, yes, I do e-file, albeit grudgingly and with reservations. Does this leave me as vulnerable as if I just use the software in the cloud, where my data is stored online? I don’t think so, but I don’t know. I am of the impression that the return is transferred to Intuit, and Intuit then transmits to the IRS. I would have to believe that the IRS regulates just how long the middlemen can store the return, but I honestly don’t know. I have to say that with the increasing reports of Chinese hackers penetrating what should be extremely secure networks, I am re-evaluating my use of e-file.

But I do know that when the data is on my PC, I own it, not some other entity. That is why I will never use tax-software-in-the-cloud.

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BTW, Michael, I am in complete agreement with Millwood and Handy-Harry. Unless you determine why TT handed you $221 more than H&R Block, you are putting yourself at risk if the IRS ever calls you for an audit.

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