IRS steers more people into the electronic lane

Picking the right tax software package can be, well, taxing. One has many programs to choose from, some equipped with bells and whistles ranging from video tutorials to free tech support. And now, the IRS is offering a whopping 20 software programs at no cost to some lower- and middle-income taxpayers.

There's some good news for the easily overwhelmed. While some tax software isn't simple to use, the programs tend to be reliable. And there's no need to spend a lot of money if you have a simple return, says Elsa Wenzel, an editor who reviews tax software at the online site CNET.

Take time to check out any software before you buy.

"Make sure that the software will provide a thorough set of tools, that it will be simple enough that you won't feel so dependent on an accountant, and that the support is adequate in case you have questions," Ms. Wenzel says. "And if you're switching from another program, check that the new tax software will import files from the old one."

William Perez, an enrolled agent (a step below CPA) and former IRS employee in San Francisco, prefers the two major players in tax software - the H&R Block TaxCut and Intuit TurboTax programs. "The big companies have invested in software that's easy to use and gets the job done pretty quickly," Mr. Perez says.

CNET also likes both products, although it says the TaxCut Standard edition is a "tad harder to use." Depending on their complexity and whether state return software is included, various editions of the two products can cost as little as $9.99 or more than $70.

CNET's Wenzel says the programs are doing a better job of handling itemized deductions and have made it easier for taxpayers to figure out if they have to pay the Alternative Minimum Tax, which is catching some people by surprise.

But be aware that the cheap basic editions of the programs might not work for you, she says. "Things get complicated if you're self-employed, work more than one job, have moved in the past year, or earn money from multiple investments. In such cases, you'd be wise to pay for a deluxe version that will help you to itemize complex deductions and file in multiple states."

If your adjusted gross income is less than $50,000, you might be able to take advantage of the IRS's new "Free File" program.

Taxpayers can go online (www.irs. gov/efile/article/0,,id=118986,00.html) to choose from among various tax-software programs offered by 20 participating companies. Those eligible to use Free File - and the IRS estimates that 93 million taxpayers are - can then calculate and file their tax returns electronically at no cost.

No matter which software program you choose, complications exist. Some of the no-cost programs range "from mediocre to downright horrible," Perez warns, with some raising security concerns in addition to being difficult to use.

Eligibility requirements for these programs also vary widely. TurboTax, for example, only offers its free software to people with an adjusted gross income of $28,500 or less, with exceptions for the military and those eligible for earned income tax credits. TaxCut limits its eligibility to those age 50 or under with adjusted gross incomes of $50,000 or less.

Once taxpayers calculate their tax bill or refund, the next step the IRS wants them to take is to file electronically. More than 68 million Americans did so last year, the first time that more taxpayers filed electronically than by mail.

While many Americans still prefer to do their taxes themselves with pen on paper, going the electronic route has its advantages. It can reduce the possibility of error because "someone's not sitting in the IRS tax warehouse retyping your paper forms," Perez says.

And, of course, filing online will save you the cost of at least one stamp.

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