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Put Pencil, Paper Aside: Preparing Taxes Online And
E-filing Can Ease Tax Tension
(RIVERWOODS, ILL., February 21, 2002) – If the agony of manually
completing last year’s tax returns didn’t convince millions of
taxpayers to abandon the pencil-and-paper method, the approximately
450 changes to the tax code this year may very well do so, according
to CCH INCORPORATED (CCH), a leading provider of professional tax law
information and provider of CompleteTax (www.completetax.com)
online tax preparation software. Luckily, with a little caution and
some planning, preparing and submitting your tax returns online is an
easy and convenient process, even for newcomers to the online world.
Based on government statistics, the number of returns filed by
individuals online has grown from just 157,000 in 1996, the first year
the IRS began accepting returns online, to more than five million
returns in fiscal year 2000. While that represents just four percent
of all individual income tax returns filed, it’s a method that’s
gaining more and more interest, according to CCH.
But for the many more who would like to join the online crowd,
there may be a significant stumbling block: they have no idea how to
file their taxes online.
"A lot of people think you have to be computer-savvy to file
taxes online, but you don’t," said Kevin Robert, president, CCH
Tax Compliance, developer of CompleteTax. "All you really
need to know is how to log on to the Internet. Because the software is
usually hosted by the provider, there are no programs to download or
backups to worry about."
Another stumbling block is the fear of entering personal
information into the ether.
"A certain amount of skepticism is healthy," said Robert.
"Make sure the site clearly addresses any concerns you have. And
despite the fact that you should be able to find a good online tax
service for under $20, make sure the site allows you to try before you
buy – that way, you don’t stand to lose anything if you decide you
want to use a different solution."
You also want to check the fine print, as some of the online tax
sites are offering one price for returns completed prior to April 1,
but significantly raise their prices for those last-minute filers who
use the service the two weeks prior to taxes being due.
A good place to start your hunt for a reputable provider is on the
IRS web site. As part of the IRS’ effort to foster electronic
filing, it has entered into partnerships with some online tax filing
and preparation companies. The firms it is partnering with are listed
The IRS also is working to make e-filing even easier for the
typical taxpayer. For example, taxpayers can now use a self-selected,
five-digit PIN as their electronic signature, rather than being
required to contact the IRS for a PIN or pre-register their PIN. This
program is eligible to any individual who filed Form 1040, 1040A,
1040EZ or used TeleFile for their 2000 return. The online tax filing
service you select should support this PIN option and guide you
through the process.
Making the Leap Online
Once you’ve decided this is the year to go online and you’ve
made a choice of which online option you want to use, the five steps
from start to finish are really quite straightforward and should shave
hours off what you spent with the pencil-and-paper method, according
1. Open an Account
When you go to open an account, the software will ask you to
create a user identification and password. You then will be asked
a few general questions, such as your contact information, filing
status and a short series of basic tax questions.
2. Answer Questions Customized for Your Tax Situation
Based on your responses to the initial series of basic tax
questions, the software should create a customized series of
questions designed to gather the information needed to complete
your tax returns. For example, if you indicated that you have
investment income, then you will be asked what type of investment
income (e.g. dividends, interest, capital transactions, etc). If
you have a relatively simple return, you should be able to
complete the questionnaire quickly. If your situation is more
complex, you may want to take a break and return to the
questionnaire at a later point. The tool you select should allow
you to save your data and return to it at a later date to
complete. Helpful software also guides you in finding the
information needed to complete the forms. For example, offering an
online library of tax information or access to useful tools and
3. Review Your Returns
Once you’ve completed the questionnaire and the software has
calculated your return, you should automatically receive the
following items for review:
Return information issues – this should include any errors or
omissions the software identified in the information you provided.
Return summary – an at-a-glance overview of your gross
income, deductions, exemptions, taxable income, tax obligations or
refund for federal and state taxes.
If you find you entered something incorrectly or need to change
it, simply return to that portion of the questionnaire and enter
the correct information. You can then resubmit the questionnaire
4. File Your Returns and Payments
Once you are satisfied with the information, select whether you
want to print and mail your returns or have them filed
electronically. The federal returns can be submitted
electronically, as can most states. Check on the software to see
if your state allows electronic returns and if the software
provides the necessary state support. Submitting the forms
electronically generally means that you’ll receive your money
faster if the government owes you.
It is only at this point – once you decide you want to
electronically file or print the actual return – that the online
site should request payment for use of its service. Simply enter
this information and proceed with your filing choice.
Once you’ve made your selection, you will be able to view
your actual complete return online, allowing you to do a final
check. The software should also provide you with filing
instructions. For example, if you’re sending by mail, where to
send the returns and who to make the checks payable to if you owe
If you choose to file electronically, again, the filing
instructions will provide the necessary information. If you owe
money to the government, the software should also allow you to pay
electronically as well – either by entering your credit card
information or by providing the government with permission to make
an automatic withdrawal for the amount owed from your bank
account. Conversely, if the government owes you money, with the
electronic filing method, you can request the IRS make a direct
deposit of the refund into your bank account.
If you file electronically, the software also will provide
confirmation that your returns were submitted and notify you once
your returns have been accepted by the IRS or appropriate state
treasury department. Typically, the government agencies accept the
forms within two days.
5. Retain Copies for Your Records
If you sent your returns electronically, or forgot to make
copies of the printed forms you mailed, the final step is making
sure to print out the forms as soon as possible and retain them
for your records. While online services will generally hold your
information for a period of time, the sooner you make sure you
have the paper copies in your file the sooner you’re officially
done with tax time.
About CCH INCORPORATED
CCH INCORPORATED, headquartered in Riverwoods, Ill., was
founded in 1913 and has served four generations of business
professionals and their clients. The company produces more than 700
electronic and print products for the tax, legal, securities,
insurance, human resources, health care and small business markets.
CCH is a wholly owned subsidiary of Wolters Kluwer North America. The
CCH web site can be accessed at cch.com.
The CCH tax and accounting destination site can be accessed at tax.cchgroup.com.
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