Hunting down online tax options

A growing number of Americans will file via the Web. At least 15 sites now offer help.

For the first time, US taxpayers can file returns this year to the Internal Revenue Service without ever putting pen to paper.

While more than 35 million people sent their returns electronically last year (via telephone or the Internet), they also had to mail in a copy of their signature.

Now, new personal identification numbers, which serve as a sort of virtual signature, have enabled an entirely digital process. And the IRS predicts a boom in interest. It expects nearly one-third of the estimated 130 million returns filed this year to arrive electronically. And about 8 million taxpayers will file solely through the Internet without the help of an accountant.

Filing online has clear benefits. The most compelling: Refunds can be deposited directly into a checking account in two weeks, rather than the customary 10. And the rate of errors committed by the IRS in processing the returns is much lower - less than 1 percent.

The IRS website, www.irs.gov, lists 15 different companies that offer online preparation and filing. Five of them do not process state returns, and five are still not up and running yet. Many only serve customers in a limited number of states. Most charge about $20 to prepare and file state and federal returns.

The site offered by financial-services giant H&R Block (www.hrblock.com) is among the easiest to use. The forms are clear and mistakes are easy to correct. The site, however, does have a few problems. The description of the company's security policy, for example, runs off the screen. And the Terms of Agreement page is practically unreadable. And, like most other sites, H&R Block asks you to agree to let them send you a bunch of promotional material through the mail.

The site's filing service should be available in most states later this month at a cost of $19.95 for federal and state filing. And if you feel unsure about your work, you can have an H&R Block accountant check your return and sign it for an additional $29.95.

Another popular site for online filers is Intuit.com. Its TurboTax software is also easy to use and less expensive if you file before April. Plus, it offers to pay any penalties and interest for errors made in processing the return.

One significant obstacle to filing online is the vulnerability of computers to crashing and freezing. (A problem that will multiply as traffic increases on these sites during April.) That was the primary problem with www.hdvest.com. My computer (outfitted with a fast T1 Internet connection) froze twice while attempting to input information on the site. The reason: It's likely the site isn't formatted well to accommodate Macintosh computers.

Also, H.D. Vest places distracting promotions - like ads for online banks - on the right side of the screen as you work.

For basic information, look at freetaxprep.com. While I wasn't able to access any tax forms, and the company doesn't respond to phone calls, the site contains plenty of useful, well-organized, easily-digested information. Some features include a "Tax Guide" with helpful nuggets of information - including a tip suggesting the filer deduct for a computer they use to track investments. The "Filing Basics" section is a thorough primer for for first-time filers, and the glossary clears up foggy terms like "amortization."

Of course, sometimes it's best to just go straight to Uncle Sam. The IRS website contains basic rules and frequently asked questions, as well as a report on tax-exempt groups. Also the Treasury Department's site, www. treas.gov, contains the latest from the office of tax policy.

A final warning, though. Despite strong encryption software, the data you enter is not 100 percent secure. Case in point: Last week, the Social Security numbers and passwords belonging to users of www.e1040.com, a tax-preparation site, were left exposed most of the day due to an employee's mistake.

(c) Copyright 2001. The Christian Science Publishing Society

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