2005 CCH Whole Ball of Tax
Online or in Person? CCH Outlines Tax Preparation Methods
(RIVERWOODS, ILL., January 2005) – If you’re getting the feeling that the
rest of the world is passing you and your trusted pencil by as people either
head for their computers or turn to their accountants at tax time, you are
probably onto something. With a tax code that is filled with not only rules, but
thousands of exceptions and exclusions to the rules and phase-ins and
phase-outs, the idea of going it alone may soon become extinct, according to CCH
INCORPORATED (CCH), a leading provider of tax and accounting information,
software and services.
"Whether you decide to file your tax return online or use an accountant
– someone is sitting down at a computer and completing the return with
electronic support," said Kevin Robert, president and CEO of CCH Tax and
Accounting, the developer of CompleteTax, (www.completetax.com)
online tax preparation and filing service for consumers and ProSystem fx Tax,
the market-leading software for tax professionals.
"Accountants have been using tax preparation software to support the tax
return side of their business for decades. And even before that – in the era
of mainframe computers – they were using service bureaus that would make the
necessary calculations for the returns. With so many variations and nuances, as
well as the risk of simple oversights, it’s just not practical to manually
prepare most returns," said Robert.
Not only are more taxpayers using online software to prepare their taxes, but
they are also being increasingly encouraged by the Internal Revenue Service
(IRS) to file tax returns online or, in very limited instances, via telephone.
For the 2003 tax filing season, as of the end of August 2004, nearly 48 percent
(more than 61 million) of the nearly 128 million tax returns filed were done so
electronically, an increase of almost 16 percent over the previous year,
according to the IRS. The majority of e-filed tax returns, 42.7 million, are
still filed by tax professionals – presumably the same professionals who
prepared the returns. However, more than 14.5 million individuals e-filed their
own tax returns last year, up almost 22 percent from the previous year.
Deciding whether to use an accountant or tax software generally is a personal
preference – assuming you have a basic knowledge of PCs and the Internet and a
tax situation that is not exceedingly complex. For example, some people believe
they should prepare their own return while other individuals would rather do
just about anything other than sit down in front of a computer and detail the
taxable issues of their lives during the past year.
Below, CCH provides an overview of the general issues that individuals should
consider when evaluating outside tax preparation support.
Evaluating Self-prepared Online Options
Among questions you should ask in evaluating online tax preparation software:
- Is the site created and managed by a trusted name in the tax arena?
As the online tax preparation industry has developed over the past several
years, consumers have become more aware that the ability to put up a site does
not mean that the operators necessarily are experts in accounting or taxes. At
the very least, you should check out the site’s owner, its credentials, how
long it has been providing tax information and if tax information and software
is its primary business.
If you’re still unsure, ask your accountant. In fact, many CPA firms are
now offering private-label versions of online tax preparation software for
clients that fit in the do-it-yourself category.
- How easy and secure is it to use?
A key benefit of preparing your tax returns online is that it requires no
downloading or updating of software. But that doesn’t mean that all programs
are equally easy to use. The program should be easy to navigate and should
help you organize your information in a way that’s orderly and intuitive.
Also, it should offer a glossary and provide clearly written and easily
accessible explanations of how to handle various tax situations you may
encounter.
Security is also essential and you should ensure the online tax service
encrypts your data using recognized Internet security standards.
- Can you work at your own pace and check your work?
Online tax preparation sites allow you to password protect your work,
coming back as often as you need, and some even have visual gauges showing you
how much of the return you’ve completed so you can track your progress. Make
certain the program you use also automatically checks for errors or oversights
and provides links to the pages where the problems occur so you can quickly
spot and correct potentially costly mistakes.
Once you’ve entered your tax information, the program will calculate your
tax obligation and populate your tax return. Check to see that you have the
ability to print and review the final forms one last time before they’re
electronically filed with the IRS or state revenue department. You also should
have the choice to print and mail the forms if you choose rather than
e-filing.
- What becomes of your return after you file?
One benefit of using some online programs is that they will save your prior
year’s return, allowing you to print the return should you need another
copy. Also check to see that it allows you to roll over basic information from
one year to the next, saving you more time when you begin this year’s tax
return.
- What are all of the costs associated with preparing and filing both
federal and state returns?
It’s becoming increasingly frustrating for taxpayers to navigate the
complex pricing structures used by many of the tax software providers. Some
promote a federal price with free e-filing but don’t point out the significant
added costs for completing and filing a state tax return. Others have a
multi-tiered pricing structure that can quickly add up to equal the fees of some
tax preparers. However, most do-it-yourself taxpayers should be able to find a
good tax program for under $40, including costs for preparing both a federal and
state return, as well as e-filing.
- What are the payment and refund options?
Over the past few years, several new payment and refund options have been
introduced. For example, some sites now allow you to deduct the cost of using
their program from your expected tax refund. Some sites also have partnerships
with firms that provide an advance payment of your refund. If this is a feature
you’re interested in, make certain the associated fees and interest are
reasonable. Most sites also allow direct deposit of your refund into your bank
account, allowing you to access your refund faster.
- What are the help and support options?
Ideally the tax prep program you’re using should be straightforward so that
you do not need support. However, you will want this safety net, so look to see
that the program offers the support features you want, for example, via e-mail
or live online. Premium support features, such as live phone or online chat may
come at a nominal charge. Make sure you’re aware of these costs.
Hiring an Accountant
While the Internet offers a tremendous resource to help many individuals with
their taxes, it may not be a substitute for professional help. Therefore, if
your tax situation is complicated, you should seek the guidance of a CPA or tax
attorney.
Among the questions to ask accountants you’re evaluating are:
- What is your experience and specialty?
Some tax professionals have specialties in areas such as estate planning or
gearing their practice to particular types of professionals, such as
physicians or small business owners. If you have specific concerns, make sure
your tax professional is qualified to provide the special assistance you
require by asking for references. Also, if you have financial interests in
states other than where you live, make sure your tax professional is familiar
with those state laws.
- How do you keep current with the tax law?
Does the preparer use current-year computer software to prepare your
returns? Also, ask if he or she has access to tax research services, such as
CCH, should the need for research arise.
- How do you bill your clients?
Before you ask your tax professional to do anything, get a good idea of how
he or she bills and the level of detail provided. Is the charge an hourly rate
or a straight fee? How and when will you be billed? Will you be billed for
research time if needed? To avoid confusion, get the billing and payment terms
in writing.
- How do you characterize your professional style?
Find out how aggressive an approach the preparer takes to minimize the tax
burden. Would you prefer that he or she is aggressive, even if it means
incurring questions from the IRS or risking an audit, or would you prefer a
practitioner who takes a conservative path, even if it means paying a few
extra dollars?
- If I am audited, will you represent me?
Ask if he or she would represent you if the IRS questions your filing or
decides to audit you. If so, ask if he or she has much experience with IRS
audits. While some experience is good, too much can be a warning sign.
- What do you need from me?
Before providing information to your tax professional, ask exactly what
information is needed and in what form. Many professionals provide print or
electronic "organizers" to help you sort your financial records.
Some ask that all tax information be saved on a diskette, which can be
downloaded into tax return software. The more organized you are before you
give your tax preparer your records, the better he or she is able to prepare
you.
Before making a final decision, check to make sure your CPA is licensed by
your state’s CPA association and whether any complaints have been filed
against him or her. Also, even though you’re having a professional prepare
your return, take a good look at it before it’s filed as you are still
responsible for the accuracy of the information.
About CCH INCORPORATED
CCH INCORPORATED (tax.cchgroup.com),
based in Riverwoods, Ill., is a leading provider of tax and accounting
information, software and services. CCH has served tax, accounting and business
professionals and their clients since 1913, providing them with the most
authoritative, timely and comprehensive tax resources. CCH is a Wolters Kluwer
company (www.wolterskluwer.com).
Wolters Kluwer is a leading multinational publisher and information services
company. The company’s core markets are spread across the health, tax,
accounting, corporate, financial services, legal and regulatory, and education
sectors. Wolters Kluwer has annual revenues (2003) of €3.4 billion, employs
approximately 18,750 people worldwide and maintains operations across Europe,
North America and Asia Pacific. Wolters Kluwer is headquartered in Amsterdam,
the Netherlands. Its depositary receipts of shares are quoted on the Euronext
Amsterdam (WKL) and are included in the AEX and Euronext 100 indices.
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