The tax man cometh

Julius Caesar had a pretty tough March 15, but for most people, it’s April 15—tax day—that warrants a “beware.” This year, due to April 15 falling on a Saturday, the deadline has been extended to April 17. But no matter when it falls, it’s a day that haunts haters of math, forms and, well, stuff that’s boring. And the challenge of choosing the right service to prepare your tax return can loom as large as any pile of W-2s.

We’ve taken the guesswork out of the process. Using a test return with a gross income of $23,298 for 2005—a mixture of wages, dividends, interest and self-employment income from multiple states—we’ve researched three tax services to find the best price, the best service and most important, the biggest refund.

FreeTaxUSA, www.freetaxusa.comOnline services are easy to use, guiding taxpayers through a series of simple prompts. The IRS lists numerous sites offering preparation on its website (www.irs.gov), including FreeTaxUSA, which we used.

For people who’ve never prepared their own taxes before, FreeTaxUSA’s user-friendliness and support resources make everything a little clearer. Users enter each type of income (gross dividends, qualified dividends, etc.) into on-screen fields that correspond to the paper tax forms.

Despite its convenience and price, online preparation isn’t perfect. FreeTaxUSA has no defense against mistakes, so an error-riddled return is the taxpayer’s problem. And while taxpayers with simple returns can breeze through the process in a half-hour or so, we weren’t so lucky: We had income from two states, and a pile of 1099-MISC forms for self-employment income—two categories the site couldn’t process. We squeezed the self-employment stuff in under miscellaneous income (usually reserved for awards or lottery winnings), but we had to adjust it ourselves, which made us a little nervous.

Results for test return:
Fee: Federal return is free for earners under $50,000; $9.95 fee if over that. $9.95 fee for state return.
Federal refund: $747
State refund: N/A for test return, as it involves part-time and nonresident.
Total refund: $747
Cash in hand: $747

H&R Block, locations throughout the city (www.hrblock.com) For taxpayers who just aren’t comfortable doing their own returns, there seems to be an H&R Block on every corner. Inside each branch, a “tax professional,” like James Biegler of the company’s office at 29 South LaSalle Avenue, sits with individual clients to review the return before preparing it. Our test return took almost three hours, though Biegler said clients with extensive returns have the option of leaving their return to be completed for pick-up.

Unlike online services, H&R Block agents can not only complete all of the necessary forms, but also pepper the customer with questions to find specific deductions for the return. For self-employment income, Biegler suggested writing off home-office costs, even depreciating office furniture for a tax credit. The company also stands by its work, offering a guarantee to pay any penalties resulting from its mistakes.

But H&R Block’s additional calculations and customer service come at a price, and those costs can add up. While the base price for preparation is $78, each additional form filled out accrues a flat fee. The average return usually costs $150 to $200, but our complicated return came in at a whopping $547.75.

Results for test return:
Fee: $547.75
Federal refund: $558
Nonresident state refund: $194
IL resident state refund: $33 owed
Total refund: $719
Cash in hand: $171.25

Jack Forde, JPF Ltd., 120 W Madison St, suite 1409, between Clark and LaSalle Sts, ( 312-425-0001, jpf208@msn.com)Accountants like Jack Forde, of JPF, Ltd., can cost a little more than other services, but the peace of mind is often worth the price. With 20 years of experience, Forde knows the tax code inside and out. When he started rattling off terms such as about FICA, Keogh and SEP, he was happy to clarify their meanings in layman’s terms.

Forde suggested that self-employed taxpayers and full-time employees using an itemized deduction can deduct travel time between client meetings or satellite offices, and even business lunches. Nonreimbursed supplies and professional dues are fair game, too: Business-related magazines can be written off, as can membership fees for professional organizations.

Forde even offers regular clients advice on strategies to maximize next year’s return, by pointing out credits a taxpayer could exercise by investing in different retirement options, such as Roth IRAs or SEP funds for the self-employed. For someone with a complicated return like ours, it’s nice to know that when a CPA is working on it, you’re getting the most for your money.

Results for test return:
Fee: $500
Federal refund: $1,002
Nonresident state refund: $190
IL resident state refund: $11
Total refund: $1,203
Cash in hand: $703