An E-Filer's Cautionary Tale

Don't hate me because I'm dutiful. It's not even the last day of January and my 2010 tax returns are filed with refunds on the way straight to my bank account. We have an agreement in our house. The person with the most income pays the CPA takes all the deductions. This leaves me still filing a 1040EZ. I used to be an April  14th filer. I think, one year, long ago in the days of paper forms one had to file out on one's own, I even filed for an extension because I blew the chore off too long. The IRS has made it easier and easier for average Americans with W-2s and 1099s to file our taxes. At first, the forms were simplified. Then you could use your push button telephone to file a return. Now of course, there's e-filing. I like e-filing. I enter my numbers, the software does the work. I get my refund or know how much I have to pay. I can leave it there until April `14th, or file it right away.

The IRS has one official website: http://www.irs.gov/. Do not go there through an internet search. Type the address directly into your browser. Doing this eliminates any possibility that you have been directed to any other site. In the past there have been IRS look alike sites that were phishing for information. They don't seem as prevalent now, but it never hurts to be cautious.

The official IRS site has  pretty much every form the average filer could want. Some of them, like the 1040EZ are 'fillable', meaning you can type your information into them, save your work and print it out when you are ready to file. E-filing is a slightly different process, in that the information you give the software is transmitted directly to the IRS electronically when you decide to file. You print out paper copies only for your own files after the return has been accepted. On the IRS website you will find options to e-file for free, or 'freefile'. If you click the link to free file you will be taken to a portion of the IRS website that tells you how to file your return for free electronically. This is verbage copied directly from  the http://www.irs.gov/ website:

• Free File companies have their own eligibility criteria, but none offer Free File to taxpayers with an adjusted gross income of more than $58,000.
• Other eligibility criteria may include your: age, state, eligibility for the Earned Income Tax Credit, and military status.
• Check the company's website for details because the companies' offers may differ. For example, some companies charge a fee for state tax returns and some may not support a particular form you need to file.
• Remember to begin your Free File return on IRS.gov or you may be charged a fee or asked to buy additional products and services.

There's a nifty little screening tool, if you're still not sure you're eligible to free file, but if you are eligible, as I am,  all you have to do is choose your site from an IRS provided list and you're good to go. But, herein lies my cautionary tale:

Last year I free filed, following a link to a provider's site directly from the IRS website. The software interviewed me and guided me entirely through the process. I still had a question for which I phoned the IRS directly and spoke to a person who answered immediately and was extremely helpful, but for the most part I completed my return without a hitch. I must have hit a wrong button and navigated past the piece of the interview that asked how much I paid in State taxes. I reviewed my work but trusted the software that I owed the State $900.00, even as this little voice inside me was screaming, "You made a mistake!" I submitted my return without listening to it. The software is almost too easy. It can lull you into submission. Literally. It was the stupidest mistake I ever made on my taxes. I had to hand file an amended return with the State. It took six months before I got my money back, and I had a threatening letter before that happened. I filed my State taxes through the same site I filed my free filed Federal return. There was a fee for filing my State taxes. It was nonrefundable. I paid a fee to make my mistake. I vowed be more careful in the future.

I liked the website where I free filed enough that I saved the URL in my favorites for this year. When I got my W-2, I hopped right back there efficiently. They had my information from last year. It was even easier to complete a return, although I was a little gun shy, so I did check it over pretty thoroughly. I noticed that the draft form 1040EZ I was looking at on the provider site did not match the form on the IRS website. The provider's form did not have the important added line for this year, "Making Work Pay". I wrote to customer service about that. They wrote back quickly to tell me where to find the credit on their form--that had been automatically given to me--and to explain that information is electronically submitted to the IRS, not the forms. The way their forms look don't actually matter, as long as all the information's there. It was still confusing, but at least they were prompt with their explanation. The explanation worked for me and I was finally ready to file. I entered all the information to get my return ready to file and hit the button, only to find that they wanted money for both my Federal and State return--to the tune of nearly forty dollars! WHAT?! I went back to the IRS website to double check that this provider was still on their free file list. They were. I wrote to customer service again to ask them why their software was trying to charge me when I clearly qualified for free filing.

The explanation was surprising. The provider site offers free filing as per the IRS, but they also run a commercial site for people who want to file electronically but don't qualify to file for free. If you come to their site somewhere other than through the IRS website--as I did when I saved the URL from the previous year--the software sees you as a commercial customer and there's no way to change it. The customer service rep did apologize for the misunderstanding and gave me an electronic coupon code to file both returns for less that my State return would have cost. They did make good, and I did file my returns, but hey people what about a link to your free site if someone eligible comes to your commercial site? Would that be so hard?

I'm a big proponent of e-filing. I'm sure it's easier on everyone and processing is cheaper, but you do have to be cautious and aware. Any mistakes you make are still ultimately your responsibility.

I know most people cringe at the mere mention of IRS. I once didn't open a letter from the IRS for a month because I was so terrified that I had done something wrong, only to find that someone at the IRS had refigured my taxes for me because I had forgotten to take the Earned Income Credit, and sent me a refund of nearly three hundred dollars. If e-filing is too much for you, you need help filing your taxes or you have issues around taxes from previous years, the IRS does offer help on all fronts. You can find information on the IRS website for anything from taxpayer advocacy services to IRS offices with extended Saturday services to assist you in filing your taxes.

I don't work for the IRS, I just have a die-hard helpful nature and I was thinking that someone might be helped by the story of my mishaps. I'm glad my refund's on the way. We can finally replace the carpeting downstairs. That's a big yay!

Be well. If you can't ignore the inevitability of paying your taxes, at least you can bash about in the world and enjoy yourself with the time you save because paying them is a lot easier these days. That's what I'm off to do.