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Of the 110 million tax returns filed electronically with IRS in
2011, 40 million were prepared and e-filed by taxpayers
using computers without the help of a paid preparer.
This was also the sixth tax season in a row that more
"do-it-yourselfers" chose to use web-based (online)
programs instead of packaged desktop software to prepare
and file their returns.
Why is web-based filing proving to be more popular than desktop software?
Here are a few reasons:
1) Desktop software must be purchased in advance, and once opened, cannot be returned.
Web-based programs can be tried for free (and in
many cases, such as basic returns, can be printed and
e-filed for free). For more complex returns or State
returns, the online user does not have to purchase it
until he or she prints or e-files the return.
2) Desktop software is licensed to be installed and used on one computer, forcing
taxpayers to use the same computer to update their tax return information. Web-based
tax returns can be updated from any computer at any location.
3) Desktop software requires the user to download/install the latest updates, patches,
and fixes, exposing them to potential errors if they fail to do so. Web-based programs
are automatically updated.
On the negative side, the chances of having your electronic tax return rejected
by IRS is greater if you file it yourself (compared to having a tax professional
file it). In 2011 about 20% of all online returns filed by individual taxpayers
were rejected by IRS, while less than 10% of electronic returns filed by professionals
were rejected.
Also, thanks to the rapid growth of self-prepared online filing, the number of unreported
income notices IRS mails to taxpayers has more than tripled in the last five years!
Is Online Filing Right For You?
Before deciding to do your own taxes online, first consider some advice from 800-TAX
REFUND, the founders of ProTaxNet. Since 1990 we've e-filed tens of thousands of
self-prepared tax returns, many of them computer-generated, and have a good idea
where taxpayers are most likely to make mistakes when preparing their own returns.
It is important that you review any recent changes in the tax laws (go to our own
Tax Central) to see if any of the changes apply to your tax situation.
Here's a few other trends we've seen over the years:
1) Online filing appears to be best suited for young, low income, single wage earners
who are least likely to qualify for Earned Income Credit or Retirement Savings Contribution
Credits. If wages are over $9,500 and these filers could have Student Loan Interest
Deductions and/or Education or Tuition Deductions or Credits, then it may be more
beneficial to use our professional tax services.
2) Online filing may also be better suited for taxpayers whose tax situation has
not changed since last year's return was filed. If you have a good grasp of your
own tax situation and have last year's return handy to compare this year's results
to, and if you're sure that nothing more can be gained by hiring a tax professional,
then you're a good candidate for online filing.
3) If your tax situation is complex, or if your tax situation calls for review or
preparation of a new or unfamiliar form or worksheet (college tuition, home sale/purchase
or re-finance, sale of stock or mutual fund, etc.) then we do not recommend online
filing, as it would be more beneficial to use the services of a tax professional.
Finally, and perhaps most importantly, should you decide to do your taxes online,
make sure you feel comfortable with the online filing program you choose. Not only must it meet your specific tax preparation needs, but it should also be "user friendly",
something that we believe our ProTaxNet online filing program achieves. It also helps to know
as much as you can about the company that's handling your tax information: back
in 2003 IRS promoted as many as 103 companies on its e-file Partners Page, and eventually
whittled that down to 20 or so companies that IRS felt served the taxpayer community
the best. 800-TAX REFUND is one of just two companies to be promoted by IRS for
every year that IRS recognized such distinction.
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© 2012 800-TAX REFUND, Inc. |
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