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Another Year's Tax-Prep Torture Nears An End

Be honest: How many of you are a little bleary-eyed this morning because you stayed up late to finish doing your taxes?

Yeah, me too. Even though I already did my taxes not just once but twice, as part of last month's review of tax-prep software from H&R Block and Intuit, I didn't actually file my taxes at that time. My wife and I owe the Feds a little money, and I didn't feel like handing that over sooner than required. I also wanted to take a little time, outside of deadline pressure, to go over my returns.

(Some readers have asked if I ever learned why these two tax-prep apps couldn't yield the same total after processing just our W-2s. But after repeating the exercise from scratch, I still don't know. Since TaxCut doesn't show its work until you're finished with the whole return, at which point nobody can untangle the math, I can only guess that it factors in some allowances or exemptions later in the game than TurboTax. I hope that -- contrary to the suggestion of one Intuit publicist -- there isn't leeway for interpretation on such basic math.)

Anyway, you can guess what happened after my review ran: I didn't even look at the forms again until last week. So that means I'll be among the hordes jamming the e-file servers today. Will you? Tell me how things go in the comments -- especially if you're using the Internal Revenue Service's new "Free File Fillable Forms" option.

When you're done, you might also want to set aside a few minutes to read a short report (PDF) about tax-prep software from the Government Accountability Office. The GAO's research, as my colleague Cecilia Kang reported on Saturday, reveals some interesting details about the state of electronic tax preparation and filing. To wit:

* The IRS's figures show that "processing an electronically filed return costs the agency $0.35 per return while processing a paper return costs $2.87 per return."

* The service "does not have plans to review tax software to see if the guidance it provides to taxpayers is sufficient in helping them prepare accurate returns, in part because IRS relies on the extensive scenario and other testing done by the industry."

* Remember when Intuit's servers got swamped by all the returns filed electronically in 2007? The IRS found that "about 171,000 tax returns were affected" by the outage.

* The IRS has some fairly detailed guidance about security for tax-prep providers but did not plan to verify that e-file providers adhered to its "advisory security and privacy standards for the 2009 filing season."

As Kang reported, the IRS plans to address some of these items, starting with the security issues noted by the GAO. That's a good idea, but not nearly as good as simplifying this abomination of a tax code. Mr. President, you say you want to do that -- let's get on with the job.

By Rob Pegoraro  |  April 15, 2009; 12:14 PM ET
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Comments

Free e-file and fillable forms rock....zip-zap, bada-bing...filed and refund (direct deposit) in record time.
BTW: I was the one everyone hated in high school...my term paper was always done before the third week of class. Go ahead, snark me if ya want...I can take it :)

Posted by: tbva | April 15, 2009 1:14 PM | Report abuse

Rob: re the difference between tax calcs from tax programs, I did my taxes both manually and with TurboTax. Looking at the resulting 1040 forms and comparing line-by-line, I was able to determine that I had picked an erroneous option for a 401(k) rollover to a traditional IRA. After correcting that, both agreed. You should be able to compare the 1040 printouts from your test programs to zero in on the different results for further analysis.

BTW, TurboTax showed me a couple things that I would have overlooked, including a HUGE income exclusion on the state form.

I enjoy your columns in the Washington Post.

Posted by: rrgeek | April 15, 2009 1:23 PM | Report abuse

I used Turbo Tax and e-filed about 4 pm today. There was no delay.

I could not be in more violent agreement with you about the need to simplify the tax code. I'm almost certain that I overpaid because of the inability to correctly comprehend the combination of Turbo Tax, the IRS instructions for one form, and the tax information that I received about one investment.

Also, it is both incredible and unforgiveable that Turbo Tax found a statement that I needed to add just before it was about to transmit my return even though it was long after I had successfully sent the return through Turbo Tax's error checking routine multiple times. By then, I no longer had the context of what the entry was all about and had to back up and try to figure out what I was supposed to comment about. Turbo tax offered NO HELP. I've used the program from the beginning of time and am becoming less pleased with it.

Posted by: Arlington4 | April 15, 2009 5:58 PM | Report abuse

The web version of turbotax, which I have used for many years now, is particularly frustrating when it comes to AMT calculations. It essentially forces you to re-calculate your prior year's taxes by hand. This is an extremely tedious process involving multiple forms, finding old instructions, etc., more or less eliminating the convenience of using tax software.

Posted by: binxboll | April 15, 2009 11:27 PM | Report abuse

I did my taxes online back in January. Took an hour, and the refunds were direct deposited in my account within two weeks.

The IRS sent me a nice letter informing me that I had miscalculated, and they owed me $500 more than I thought they did, which they also direct-deposited.

Posted by: wiredog | April 16, 2009 7:50 AM | Report abuse

In case anybody's wondering about my own results: I e-filed via TurboTax Online at around 4 yesterday afternoon and got the "your return was accepted" e-mail at 1:25 this a.m.

- RP

Posted by: robpegoraro | April 16, 2009 10:12 AM | Report abuse

I did my taxes in February with the CD version of TaxCut. A bit more costly, but there are multiple filers who use the computer. Besides, you can check the forms as you go along, if you need to. Efiled with no problem. I never have really understood the compulsion to hang onto money a few extra months, then go crazy April 14. Maybe I just don't make enough money that the difference matters.

Posted by: seller11 | April 16, 2009 11:32 AM | Report abuse

MY letter to the IRS regarding Tax Programs and Filing:

17 April 2009
Taxpayer Advocate Office
Internal Revenue Service
55 Market St., Stop 0004,
San Jose, CA 95113


For the Commissioner of the IRS: Dougles Shulman
In recent years, I have received a letter from the IRS urging me to e-file.
However, I have continued to ignore this, since it requires me to have my taxes done or buy a commercial program.

I would urge the IRS to implement some minimal programs to perform the addition and calculations required on the following forms:
- 1040,
- Schedules A, B, D, and especially the
- work sheets for calculation of the Social Security that is taxable,
- the tax calculation for Capital Gains and for Qualifying Dividends.

The minuscule programs should be part of the downloadable forms which can be filled in on a computer. It is on these that most errors seem to take place, especially the mind boggling work sheets. It would seem that the IRS must already have such programs to recalculate pages, since that would save an enormous amount of time.

Such minor programs will not compete with the commercial programs that many people buy, but which I find totally unnecessary, because 90% of the work of tax form preparation is in assembling the data which you have to provide to a tax preparer, or enter into a program.

My experience over many years has been that "professionals" make many errors in execution or judgment, either by employing low level people, or carelessness. In the several years I employed a number of CPAs, including one ex-IRS agent, I had to send my returns back every time because I found errors in their work.

I have my own system, set up on a spread sheet which takes care of form 1040, though the constant changes require almost yearly adjustments. If the IRS does not have this available in Jan 2010, I will probably start making out my form on my PC and then copy it by hand to another form 1040 and attachments. Cooperation is a two way street.


Posted by: beagun27 | April 17, 2009 6:04 PM | Report abuse

Rob,this was my first year filing electronically using "Free File Fillable Forms" and I will never go back to filing forms again. Easy to use, and got my return within two weeks of filing. Sure beats the 6 weeks I was used to. If you can do your own return on paper you can use this format, because all you are doing is transcribing your paper return and W-2 to on-line forms. And the best part, it did not cost me anything. Can't beat that. I highly recommend this method.

Posted by: alsnow1 | April 20, 2009 11:45 AM | Report abuse

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