Finance and Economic

These days most Americans have abandoned pencils and forms. Most individual tax returns now arrive at the IRS electronically. In Missouri, at least 41 percent of taxpayers last year simply dumped their shoeboxes full of records on a professional tax preparer, who filed the returns electronically.

Others turned to their home computers. About 17 percent of taxpayers filed electronically from home using tax software, while other software users printed out their returns and mailed them in.

Both options can be pricey. But 70 percent of taxpayers this year can get their federal taxes done online for free, or almost free. If you make $56,000 a year or less, and your return is fairly simple, the IRS offers "Free File" through it’s website, www.irs.gov. The program connects you to dozens of private companies offering free online preparation and free electronic filing of your federal return.

The companies are approved by the IRS, and the website includes a program to help you select one. Three companies offer help in Spanish.
What’s the catch? Expect pitches for the company’s paid products, and some charge a fee to file your state return.

The Missouri Department of Revenue lists websites that will let taxpayers prepare and file electronically their federal and Missouri state income taxes for free. However, all have income or age restrictions that rule out many taxpayers. You can connect through the state’s website at www.dor.mo.gov/tax. Click "electronic filing," then "free online filing."

Most Illinois residents can file state returns through the state website: www.tax.illinois.gov. You’ll need an Illinois PIN number. If you didn’t get one in the mail, the website has instructions for obtaining a number.

A war is raging between tax preparation software companies. One of the benefits is that people with higher incomes, but fairly simple returns, can get their federal taxes prepared for free online, or through free software downloads.

TurboTax, the king of the tax software business, offers a free version online. But you can’t use it if you owned a business or rental property or had capital gains. Lesser-known rivals, such as TaxAct, also have free versions.

If you don’t have a simple return, you have three choices. Pull your hair out over the paper forms, hire a tax preparer or buy software.

If you go to a commercial tax preparer, you may hear a pitch for a refund anticipation loan, sometimes called "rapid refunds," or "fast cash refunds" or "express money." Consumer groups generally call these a bad deal payday loan lender. You may pay $30 to $100 in fees for immediate access to money that the IRS would send in about 10 days anyway.

"A refund anticipation loan is a wolf in sheep’s clothing," says Jim Campen, director of Americans for Fairness in Lending, a group that crusades against predatory lending.

All is not lost for those without computers or money. If you make less than $42,000 per year, the Gateway EITC Coalition will help you prepare your taxes for free and in person. EITC stands for the Earned Income Tax Credit, a tax refund available to low-income people with jobs. You can dial 211 for the United Way’s help line for more information.

The coalition is offering help on Feb. 21 and Feb. 28 from 9 a.m. to 1 p.m. at MET Center, 6347 Plymouth Avenue in Wellston, and at the Five Star Senior Center, 2832 Arsenal Street in St. Louis. Other locations are available by appointment. Bring a photo ID and your tax information.

Information on other tax preparation events for qualified taxpayers can be found online. In Missouri, you can find these events at www.extension.missouri.edu/hes/taxed/vitasites.htm. In Illinois, visit www.revenue.state.il.us/app/freetaxpreparer.

On the software front, the news is mixed. The biggest player in the business, TurboTax, raised its price this year, but TurboTax and rival TaxCut now offer electronic filing for free. TurboTax was going for $49.99 and TaxCut for $39.99 at Office Depot this week. Both include a state version.

The big boys of the tax business have cheaper rivals. TaxAct charges $16.95 for federal and state versions.

The IRS is beating the drums for e-filing these days, promising refunds in eight to 10 days for electronic returns. Paper filers can expect to wait four to six weeks. The IRS says 80 percent of taxpayers get refunds.

Software programs, like those above, use a simple interview process. The program asks you questions and prepares your return based on your answers. Some never show the actual IRS forms.

But, for the tax-savvy, the IRS website also offers a fillable-forms option. The program will do the arithmetic and let you file electronically for free. But you won’t get the hand-holding that comes with private tax software.

The IRS’s telephone help line is 1-800-829-1040.

jgallagher@post-dispatch.com | 314-340-8390

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