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 at http://www.irs.gov/elec_svs/partners.html.

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 to CCH.

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 calculators.

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 for calculation.

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 any money.

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.


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.

-- ### --