Death and taxes are a certainty. So are higher tax-preparation costs for many electronic filers this year.
John Kowalski, a computer engineer from Mead, has already filed his taxes, using TurboTax software, the country’s leading package. Although Kowalski said he likes the software’s convenience, he was dinked with a $14.95 electronic-filing fee. Last year, the same service was free after rebates.
“Transaction fees are a joke,” he said. “It is a way for them to make money. Everybody wants their hand in the pot.”
If a free option comparable to what TurboTax offers were available, Kowalski said, he would take it.
Such options were available last year online at no cost through an Internal Revenue Service program called Free File.
“Microsoft’s Bill Gates could have filed for free,” said Denise Sposato, spokeswoman with H&R Block, maker of a tax-preparation software package called TaxCut.
But last summer, tax-software companies struck a new four-year agreement with the IRS. The agreement returned the free-filing program to its roots of helping lower- income taxpayers.
“We have consistently voiced our concern that over the past several years, the Free File Alliance had drifted from its original philanthropic and public-service intent,” said Julie Miller, a spokeswoman with Intuit, the maker of TurboTax.
To qualify for Free File this year, taxpayers must report an adjusted gross income of $50,000 or less. The 20-plus providers in the program, however, differ widely in whom they will accept.
Still, a lot of people – about 70 percent of tax filers – can prepare and file their taxes online for free at www.irs.gov.
Others who want to file electronically can expect to shell out more this year if they aren’t careful.
TurboTax charges $39.95 for its deluxe package with state forms. The package costs the same as last year, but TurboTax eliminated rebates for e-filers, adding $14.95 each for federal and state returns.
TaxCut, the second-most popular package, still offers a federal e-filing rebate.
Several trapdoors can boost costs for users of tax-software packages. Paying filing fees and other fees out of a refund is an added expense. If you don’t pay those by credit card, it can add $14.95 to $29.95 more per return.
But whipping out a credit card when it comes time to pay taxes owed also can take a bite – 2.49 percent of the amount due the government. You’re better off sending a check. Add up all those costs, and in some cases doing it yourself can approach what it costs to get live help. Preparing and filing a basic 1040A with a state return costs $69 at Jackson Hewitt, said Larry Cox, a local franchisee of the tax-preparation chain.
The average return done at H&R Block costs about $151. TurboTax and TaxCut also offer online filing by going to their websites and paying $19.95.
A cheaper option is TaxAct, which offers online filers and software users a free package, including free federal electronic filing.
“We were the first to offer free electronic filing for everyone,” said Lance Dunn, president of 2nd Story Software in Cedar Rapids, Iowa. “We are making people an offer they can’t refuse.”
The free TaxAct package lacks the bells and whistles of advanced calculators and in-depth help features offered in pricier versions.
Users also get pitched to upgrade and must pay for state tax forms. But the young company has managed to grab about 10 percent of the market with the strategy. Combining TaxAct with Colorado’s no-cost NetFile program, available at www.netfile.state.co.us, offers a free option.
The IRS has a goal of seeing eight of every 10 returns filed electronically, a method that costs less to process. Last year, more than half of returns were filed that way.
Staff writer Aldo Svaldi can be reached at 303-820-1410 or asvaldi@denverpost.com.
