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CCH Takes a Look at Tax Preparation and E-filing Methods

(RIVERWOODS, ILL., January 26, 2006) – In the last year alone, the tax code has increased from around 60,000 pages to more than 66,000 pages, as measured by the CCH Standard Federal Tax Reporter. In addition, four major tax packages were enacted in 2005 – with some provisions retroactive to the beginning of 2005, others phasing in over the year and in 2006. So, if you’re like millions of other Americans right now, you’re likely trying to determine how to take steps to make preparing and filing your taxes simpler – even if the tax law keeps getting more complicated.

While there is no single best solution for everyone, one thing is for certain – the vast majority of taxpayers need help when it comes to completing and filing their tax returns, according to CCH, a Wolters Kluwer business and a leading provider of tax and accounting law information, software and services (tax.cchgroup.com).

In fact, according to Internal Revenue Service data last year, more than 68 million tax returns were filed electronically through October 21, 2005, with more than 17 million taxpayers filing their own returns online compared to just 5 million in 2000.

“The complexity of your tax return – and your own self confidence – will determine whether you prepare the return yourself with the support of an online tool, or if you hand the matter over to an accountant working with professional tax software,” said Dave Bergstein, CPA, CCH business development manager and developer of both CCH CompleteTax, (www.completetax.com) the online tax preparation and filing service for consumers and ProSystem fx Tax, the market-leading software for tax professionals.

Below, CCH provides an overview of the general issues that individuals should consider when evaluating outside tax preparation support.

Evaluating Do-it-yourself Online Options

Some questions you should seek to answer when evaluating online tax preparation software include:

Is the software easy and secure?

Using online software can save time because you don’t have to download the program onto your computer. But you also want to make sure the program is easy to navigate, helps you organize your information in a way that makes sense to you, and provides the support resources you need to complete your return, for example, a plain-language glossary of terms and an information guide clearly explaining how to handle various tax situations you may encounter. You also want to make sure the online tax service you choose encrypts your data using recognized Internet security standards.

Can you work at your own pace?

Online tax preparation sites allow you to password protect your work, coming back as often as you need. Make certain the program also automatically checks for errors or oversights and provides links to the pages where the problems occur so you can quickly spot and correct potentially costly mistakes. Also, while a growing number of taxpayers are now e-filing, check to see that you have the ability to print and review the final forms before they’re electronically filed with the IRS or state revenue department.

What becomes of your return after you file?

One benefit of using some online programs is that they will save your prior year’s return, allowing you to print the return should you need another copy. Also check to see that it allows you to roll over basic information from one year to the next, saving you more time when you begin this year’s tax return.

Does it clearly show the cost of preparing and filing both federal and state returns?

Navigating the complex pricing structure used by some tax software providers can be frustrating to taxpayers. Some promote a federal price or free federal filing but don’t point out the significant added costs for completing and filing a state tax return. Others have a multi-tiered pricing structure that can quickly add up to equal the fees of some tax preparers. However, most do-it-yourself taxpayers should be able to find a good tax program for under $40, including costs for preparing both a federal and state return, as well as e-filing the returns.

What are the payment and refund options?

Many sites now allow you to deduct the cost of using their program from your expected tax refund. Most also allow direct deposit of your refund into your bank account, allowing you to access your refund even faster. Some sites also have partnerships with firms that provide an advance payment of your refund. If this is a feature you’re interested in, proceed carefully, making certain the associated fees and interest are reasonable.

What are the help and support options?

Ideally the tax prep program you’re using should be straightforward so that you do not need support. However, you will want this safety net, so look to see that the program offers the support features you want, for example, via e-mail or live online chat. Premium support features, such as live phone or online chat may come at a nominal charge.

Evaluating Tax Professionals

If you choose to hire an accountant, some of the questions you will want answered when evaluating professionals are:

What is your experience and do you have a specialty?

Some tax professionals have specialties or gear their practice to particular types of professionals or individual taxpayers. If you have specific concerns or have not been directly referred, ask for references. Also, if you have financial interests in states other than where you live, make sure your tax professional is familiar with those state laws.

How do you bill your clients?

Before you ask your tax professional to do anything, get a good idea of how he or she bills and the level of detail provided. Is the charge an hourly rate or a straight fee? How will you be billed? Will you be billed for research time if needed? To avoid confusion, get the billing and payment terms in writing.

How do you characterize your professional style?

Find out how aggressive an approach the preparer takes to minimize the tax burden. Would you prefer that he or she is aggressive, even if it means incurring questions from the IRS or risking an audit, or would you prefer a practitioner who takes a conservative path, even if it means paying a few extra dollars?

If I am audited, will you represent me?

Ask if he or she would represent you if the IRS questions your filing or decides to audit you. While audits remain rare – with fewer than 44,000 individual or sole proprietor returns examined in 2004 – they’re still unpleasant and time intensive for those individuals that face an IRS examine. So, ask prospective accountants how much experience they have with IRS audits. While some experience is good, too much can be a warning sign.  

What do you need from me?

Before providing information to your tax professional, ask exactly what information is needed and in what form. Many professionals provide print or electronic “organizers” to help you sort your financial records. Some ask that all tax information be saved on a diskette, which can be downloaded into tax return software. The more organized you are before you give your tax preparer your records, the better he or she is able to prepare you.

Before making a final decision, check to make sure your CPA is licensed by your state’s CPA association and whether any complaints have been filed against him or her. Also, even though you’re having a professional prepare your return, take a good look at it before it’s filed as you are still responsible for the accuracy of the information.

About CCH, a Wolters Kluwer business

CCH, a Wolters Kluwer business (tax.cchgroup.com) is a leading provider of tax, audit and accounting information, software and services. It has served tax, accounting and business professionals and their clients since 1913. Among its market-leading products are The ProSystem fx® Office, CCH® Tax Research Network™, Accounting Research Manager™ and the U.S. Master Tax Guide®. CCH is based in Riverwoods, Ill.

Wolters Kluwer is a leading multinational publisher and information services company. Wolters Kluwer has annual revenues (2004) of €3.3 billion, employs approximately 18,400 people worldwide and maintains operations across Europe, North America and Asia Pacific. Wolters Kluwer is headquartered in Amsterdam, the Netherlands (www.wolterskluwer.com). Its depositary receipts of shares are quoted on the Euronext Amsterdam (WKL) and are included in the AEX and Euronext 100 indices.

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