3:22am

Mon March 4, 2013
All Tech Considered

'Consumer Reports' Offers Tips For Doing Taxes Online

Originally published on Mon March 4, 2013 1:02 pm

Tax day is looming and taxpayers are scrambling to gather receipts, W-2 forms and other documents. For many, gone are the days of paper ledger books and calculators, now that there's software to figure out how much they owe.

Tobie Stanger, a senior editor at Consumer Reports, tells NPR's Renee Montagne that when — sometimes free — online programs and smartphone apps are available, they're worth a try. "People should take advantage of it and not be afraid to try doing it yourself because you could save yourself $200 [to] $600," she says.

Stanger says Consumer Reports hasn't tested every software program and app out there, but many of them make tax preparation easier and more efficient.

Consumer Reports lists these few things to look for when preparing taxes online:

  • Investigate what documents the website supports.
  • Make sure the site can handle your state taxes.
  • Check out the complaints the site may have.
  • Don't get sucked in to floating pop-ups.
  • Think about the cost.

Here are edited highlights of the interview with Stanger:

On available digital tools

If you expect to have an adjusted gross income of $57,000 or less, the easiest thing to do is use the IRS website — it has a section called Free File. You can prepare and file your federal income taxes for free with one of 15 companies that have signed up with Free File. If you think you're going to have an adjusted gross income that's greater than that, you can use the search engine, type in "tax preparation," and a number of names should come up. One that everybody might know is TurboTax. H&R Block has its own online version, and TaxAct is a good one because everybody can file their federal return for free.

On the best and most helpful software

There are charitable deduction trackers like ItsDeductible. It works with TurboTax, but you can also use it online even if you don't use TurboTax. If you have receipts throughout the year there's something called Shoeboxed. You actually send the company your receipts, and they scan the documents for you and upload it. Then, you can then download it to your tax software or use it however you want.

On online identity theft

[Tax software developers] say they use bank-level security encryption. If you're comfortable with online banking, you can be comfortable filing your taxes online. If you find that you have trouble getting your refund because the IRS tells you somebody else took it, you should definitely contact the IRS right away.

On smartphone apps

There are apps to file 1040EZ — which is a very simple form — through TurboTax or H&R Block at Home. You photograph your W-2 form with your smartphone, and it will import your information directly into your 1040EZ; it goes into your return, and then you're able to file it directly from your smartphone or you can go online and do it.

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Transcript

RENEE MONTAGNE, HOST:

Tax day is looming - April 15. And Steve, I don't know about you, but I am among those scrambling to gather receipts, W-2s and other documents.

STEVE INSKEEP, HOST:

Oh, no, no, no, you can wait another, you know, weeks and weeks, more than a month before you get started with that.

MONTAGNE: Weeks and weeks before I have to start thinking about my tax extension. But whenever you do get around to it, there's plenty of software out there to help figure out how much you owe to Uncle Sam or how much Uncle Sam owes you. For more about helpful tax technologies, we reached Tobie Stanger. She's a senior editor for personal finance for Consumer Reports. Welcome to the program.

TOBIE STANGER: Thanks for having me.

MONTAGNE: With many people preparing taxes on their own now because, of course, they have all these tools, where does one go, though, to start? Where do you go to even find out what's out there?

STANGER: Well, if you expect to have adjusted gross income of 57,000 or less, the easiest thing to do is to go to the IRS website, and they have a free section called FreeFile, and you can prepare and file your federal income taxes for free with one of 15 companies that has signed up with FreeFile. So you go to IRS, you click on FreeFile. If you think you're going to be, have an adjusted gross income that's greater than that, you can use a search engine and just type in tax preparation and a number of names should come up. One that everybody might know is TurboTax. H&R Block has its own online version. And TaxAct is a good one because everybody can file their federal return for free.

MONTAGNE: Give us some examples of the best and most helpful online tools.

STANGER: Some of the tools that are quite interesting are charitable deduction trackers. There's something called ItsDeductible. It's with TurboTax, but you can also use it online even if you don't use TurboTax. If you have receipts throughout the year there's something called Shoebox. You actually send them your receipts, and they scan the documents for you and upload it so that you then download it into your tax software or use it however you want.

MONTAGNE: In the last couple of years we've been hearing a rise in identity theft related to online filing - such as using someone's name and Social Security to steal their refund check. What about these tax prep sites? Do they make one more vulnerable to identity theft?

STANGER: Well, they say they use bank-level security encryption. If you're comfortable with online banking, you can be comfortable filing your taxes online. If you find that you have trouble getting your refund because the IRS tells you that somebody else took it, you should definitely contact the IRS right away.

If it were earlier in the season, I would say that filing early can help, because what identity thieves are doing is they're taking advantage of people who haven't yet filed. So for next year, file early, so that you wouldn't be vulnerable in that way.

MONTAGNE: So what do you use?

STANGER: I use TurboTax and I do itemize my deductions. I use Mint, which is an online product that is free and I can sort out my charitable deductions that way. There are other online products that do the same thing.

MONTAGNE: What other tips do you have for those who are willing to do it themselves and go online that'll make it easier for them to file?

STANGER: Well, if you have mobile phone technology, there are apps to file a 1040EZ, which is the simple - very simple form - through TurboTax or H&R Block at Home. You can photograph your W-2 from your smartphone, and it will import your information directly into your 1040EZ. And it goes right up into your return, and you can file it directly from your smartphone or you can go online and do it.

MONTAGNE: In the end, how would you judge these new online technologies? Are they in fact, making it easier for individuals to prepare and file their tax returns?

STANGER: Well, Consumer Reports hasn't tested all of these. But just from my looking at them in general, there's a lot that's out there to make tax preparation easier, more efficient, less scary, and people should take advantage of it and not be afraid to try doing it yourself because you could save yourself $200, $600. It's worth trying. And it's, you can try it for free so, what the heck.

MONTAGNE: Thank you so much for joining us.

STANGER: Thank you. Take care.

MONTAGNE: Tobie Stanger is a personal finance editor for Consumer Reports.

For more tools and tips on filing your taxes, you can go to npr.org. Transcript provided by NPR, Copyright NPR.