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A Couple of Tax-Prep Tidbits

Tax Day is now less than 20 days away--have you finished preparing your taxes?

Yeah, me neither. I know I'm going to owe money to the Feds, and I'm also reluctant to dive back into this topic after this month's review.

In the meantime, I am happy to exercise my First Amendment right to gripe about the indignity of the whole procedure. That led me to WAMU's Kojo Nnamdi Show on Tuesday, when--with Internal Revenue Service Electronic Tax Administration and Refundable Credits director David R. Williams in the studio, and USA Today personal-finance columnist Sandra Block on the phone--I talked about electronic tax preparation and filing.

We had a good discussion. But two of the most interesting parts of my time at WAMU didn't make it on the air.

One came right after the show. After hearing so many listeners complain about having to pay for electronic filing when that saves the government money--an objection I entirely agree with--I had to inquire further. So I told Williams about my own positive experience with Virginia's free e-filing and asked him if the IRS was thinking about following this example.

He answered affirmatively, saying that the IRS was considering ways to reduce the cost of e-filing and remove other obstacles to it (he suggested, for instance, that as an interim step the service might require professional tax preparers to file electronically). In a follow-up e-mail, he pointed me to this summary of state e-filing initiatives; I was surprised to see how many states had moved to free, direct online filing.

The other was Williams' reaction when I got into my usual rant about how the complexity of the tax code has turned a fundamental rite of citizenship into some sick little game. I could see him nodding vigorously in agreement, and during the next break in the program, he said as much to me directly. A little later, as we were both heading out of WAMU's offices, he mentioned that before he started at the IRS, he'd spent 14 years working on tax policy in Congress, going back to 1986's tax reform--and even with all that experience, he was never quite sure that he paid the right amount in taxes each year.

By Rob Pegoraro  |  March 28, 2008; 10:23 AM ET
Categories:  Gripes  
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"have you finished preparing your taxes"

Yep. Back in January. As soon as I had all the paperwork in hand. Much less stress that way.

Posted by: wiredog | March 28, 2008 11:31 AM | Report abuse

Note that complexity is a problem for only a relatively few higher-income taxpayers. If you can use the 1040EZ or the 1040A, taxes are much simpler.

Posted by: Tom T. | March 28, 2008 12:16 PM | Report abuse

All my 1099-DIVs, -INTs etc go in a folder, and as I get them I enter them into turbotax online. Then about the middle of march, I file. This isn't really all that complicated unless you want it to be.

Posted by: Aaron | March 28, 2008 12:42 PM | Report abuse

I do my own taxes starting in February and weekly reviews thereafter. Somehow it seems that I am in court without a lawyer. At least you can get the proper forms in PDF and instructions as required. After several iterations, with numbers from one form relating in some Byzantine way to numbers on some other form, one arrives at a preliminary result, which gets printed out and allowed to age for a week. I deeply resent having to take so much of my time to know where I stand, especially since the hours spent cannot be billed. There is an urgent need for a grand simplification of tax code, but our congress does not have that vision or any concept of leadership.

Posted by: Bill | March 28, 2008 12:46 PM | Report abuse

Tom T.,

You are so wrong that I think you must be joking. My taxes are complex and I am hardly earning big bucks. I know there are many more people just like me.

Posted by: A | March 28, 2008 1:00 PM | Report abuse

Part of the complexity is knowing what questions to ask and where to get information. Turbo tax (I only used it one year) asked me so many questions (How much did I spend on a certain type of kerosene this year?), that I threw out that approach and think I have a grasp on the several types of income I need to report and the several types of deductions I can claim.

but i could be wrong... hope not!

I file by paper. Put all the sensitive info online with SSN's and all my personal info? No thanks.

Posted by: josef | March 28, 2008 1:31 PM | Report abuse

TaxACT has a free option for federal and state taxes. I paid, but it was my choice. They save my data for me.

Posted by: Gary E. Masters | March 28, 2008 5:05 PM | Report abuse

TaxACT has a free option for federal and state taxes. I paid, but it was my choice. They save my data for me.

Posted by: Gary E. Masters | March 28, 2008 5:05 PM | Report abuse

I use Turbo Tax, but i have to admit its annoying that these companies make so much $$ on tax time each year!!!

I don't think its complicated, but I do finance for a living, so maybe that is why.

Posted by: Ho Co Terp 01 | March 28, 2008 5:13 PM | Report abuse

I completely agree that it's ridiculous that we have to pay to file taxes electronically. How can the IRS possibly justify forcing people to pay to use a government service? To make it worse, Turbo Tax this year eliminated the option of filling in your info and printing the form for free -- but they didn't bother to tell me that until after I went through the entire process of entering my tax info. I couldn't even view my return until I agreed to pay them $9.95 at least. Why can't I just send my return directly to the IRS the way I did to VA?

By the way, Mr. Pegoraro, if you have contact information for someone at the IRS that we can address these complaints to, please pass it along -- I couldn't find any suitable contacts on the IRS web site.

Posted by: Arlingtonian | March 28, 2008 5:22 PM | Report abuse

I live in Virginia and paper file. What I don't get is folks that use the E-File don't have to follow up with sending all the Fed return copies. I file on paper and have to copy all the Fed forms and send with my Va tax form. Why can't I use the honor system too?

Posted by: Tina | March 28, 2008 7:52 PM | Report abuse

I will continue to file by paper until it is free. Wake up IRS. There are millions like me. If you want to streamline your business and save everyone a bunch of money, MAKE E-FILING FREE!!!!!!!!!!!!!!!!!!!!

Posted by: Nelms | March 28, 2008 8:36 PM | Report abuse

Way back in the early days of the Apple ][ computer one of the user group made a template for working the tax forms in an early spread sheet program. Now it takes a Gigabyte of memory, Turbotax (TM) program and a huge number of pages of printout to do the same task. And on top one has to pay a fee to file!

It must be admitted that we own a lot more stocks and bonds, 2 cars, and a paid for house. We have zero debt, so no interest deductions. It should be much easier to do this task than at present.

On top of that the Federal Debt increases each year by an obscene amount. We have no need for an economic incentive that increases it even more!!!

Further proof that common sense is an oxymoron.


Posted by: duke | March 28, 2008 9:43 PM | Report abuse

For web-based filing, I recommend ; there is a fee. As to why tax laws are so complex today, blame the personal computer, tax software, and the desktop laser printer. without these items, there is no way that we would even have the complexities of the tax reform act of 1986, much less today's tax code.

Posted by: Duane Eckelberg, CPA | March 28, 2008 10:44 PM | Report abuse

The State of Maryland's site has had free filing for many years. That has worked quite well for me and is quite straightforward. For most people, you could probably figure everything out in excel first and then put your numbers in the form. Or you could use state form from a tax program and then enter the information.

Posted by: Neil | March 30, 2008 11:55 AM | Report abuse

Isn't David Williams a political appointee from a conservative administration? Of course he's going to agree that taxes are bad/too complicated. He'd probably say that if it only took 5 minutes to do the taxes.

I didn't see it mentioned, but if you go to the IRS's website, there's a tool that will check to see if you meet the requirements for free e-filing from various tax companies. I think the income cut-off is around 60k (after taxes taken out), there's also free military and a few other things.

Posted by: ugh | March 30, 2008 2:09 PM | Report abuse

I'm hardly Donald Trump, but if you own stock and then sell it....the taxes ARE complicated.
I do my own. Always have, always I just use the time up until the end to make sure everything appears to be in order. Whats so wrong about that? At least I'm not so stupid as to be letting the govt use my money for a whole year interest free just to get an overpayment back.

Posted by: Suzanne | March 31, 2008 9:20 AM | Report abuse

"He answered affirmatively, saying that the IRS was considering ways to reduce the cost of e-filing ..."

The problem, of course, is political. Politicians wouldn't dare cross their big business contributors by allowing the IRS to provide free-n-easy tax filings.

Posted by: Northern Virginia | March 31, 2008 9:23 AM | Report abuse

Send my return early? No way. The IRS has done nothing to make my life easier, I will send my return with the big wave. And a nicely handwritten return, too. Copied from the printout from my tax software. Swamp them.

Posted by: 20850 | March 31, 2008 9:48 AM | Report abuse

My recollection of charging people for e-filing is it started in the Ronald Reagan years. Companies said the government should not do anything that people could make money on by selling ... and the Reagan administration agreed. So not only do you have to pay, you have to turn over your sensitive financial data to a stranger.

This is the same reasoning Verizon used when Verizon lawyers sued the City of Philadelphia to prevent the City from providing WiFi to its citizens.

Posted by: Chris Viking | March 31, 2008 11:54 AM | Report abuse

I just completed my return, well I think I did anyway. This year my wife started doing some telephone calling for a charity which brought in a whopping $600 for the year. I began tutoring online which brought in only a little more. But those jobs are considered freelance (1099-MISC), so that makes us both selfemployed, so for that little bit of income we had to file two schedule C's, another form to take off $23 I needed to upgrade my computer's memory for the tutoring, another form for the second phone and phone line we needed for the charity job. What used to be a few pages to send the IRS is now about 15.

If it were not for TaxCut I'm certain I could not have filled out the forms without help. I agree the IRS should provide free efiling, but I'm wondering why the IRS does not provide a free tax program like Taxcut or TurboTax. We are trying to pay our taxes and the IRS provides a volume of help online and via the phone. Good help too as I experienced in the past when I ran into problems. So why can't the IRS provide tax software we can all use for free? I mean, I just drove interstate 95 without paying a toll to some private company, why does software to comply with IRS law need to be made only in the private sector? I think the IRS should provide software to complete it's complicated filing requirement. THAT would be something I'd like to see my tax money used to develop.

Posted by: Sully | March 31, 2008 12:04 PM | Report abuse

I too use Excel... each year I update my spreadsheet by reading and updating/ copying from the actual paper forms I receive. I add a sheet for any new form (including state taxes)and, yes, I type it in line for line. (After the first one, though, it's not a really big project.) I update my formulas as I go, and take the time to make sure they relate correctly. My first page of the spreadsheet I devote to basic information from W2's, 1099's, bank statements, etc. Formulas built along the way put that information each place it has to go... but I only put it in once.

It does take work and time, but what I gain is immeasurable...
--First... PRIVACY!
--Then, of course, there's the awareness of changes that have been made to the tax code... which percolates the whole next year into my financial decisions... I have a better knowledge of what to do to reduce my taxes
--My arithmetic is done by the machine, so I only have to copy the info accurately
--I get a review of my excel skills each year, no training fees for me
--I have learned to keep track of things like car mileage throughout the year, and don't get caught short... which for me is a good thing.
--I have learned how to do formulas that take my sums/results from my travel log, stock trades, etc. and plug them into the proper form. (travel log and stock trades each have their own sheets)
--but most of all and once again, I have not given away any private information to any company that charges me for taking it, then turns around and sells it out to advertisers or market researchers, and my files are not in some database that will be hacked.
It does take at least a weekend each year... but at least for me it saves several hundred dollars in accountant fees, and also what I would have spent at the mall that weekend.

Posted by: Marina | March 31, 2008 2:03 PM | Report abuse

"Then, of course, there's the awareness of changes that have been made to the tax code... which percolates the whole next year into my financial decisions... I have a better knowledge of what to do to reduce my taxes"

Marina's comments remind me of something I periodically think about: Since I started using tax preparation software, I no longer pay attention to what the tax rules are - I just assume the software will guide me. That guidance is not always sufficient for me to understand exactly what the various options mean - so I just guess. I'll admit I'm not a accountant, but I figure if it's somewhat confusing to a guy who did his taxes by hand, for many years, it's got to be even more confusing for people who've never actually had to figure out what went where, on a 1040.

Posted by: Northern Virginia | March 31, 2008 10:57 PM | Report abuse

* Form 16 is a certificate issued by the employer at the end of the year and provided to the employee. This certificate provides details of the salary income of the employee and the TDS deducted from the employee's income.
* Form 16 is all you need to file ITR if you have reported all your income to your employer.
* It is your right to obtain F16 from the employer within 15 days time after the end of the financial year.
* Obtain your Form 16 early, so that you can file your return early. The earlier you file, the faster you will get refund.
* Your chance of scrutiny reduces by filing early.
* Ensure that you have F16s from all the employers that you have worked for during the year.

Posted by: Tax Spanner | April 21, 2008 6:28 AM | Report abuse

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