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Off-the-Shelf Programs Preserve Tax Data Security

By Alan S. Kay
Special to The Washington Post
Sunday, March 6, 2005; Page F04

If you work for the Internal Revenue Service, pass along our congratulations, and our thanks -- for finally embracing free online tax preparation and filing. Anyone who goes to www.irs.gov and chooses Free File will find links to 20 companies, nine available to all.

It's hard to argue with free, but when it comes to your income tax filing, we do just that. We'd rather prepare our return on our own home computer than on the Web, even though we will still transmit a return online.

For the security-conscious, Intuit's TurboTax may still have important tax-computing advantages. (Susan Goldman -- Bloomberg News)

_____Tax Time 2005_____
Numbers Crunch
Singletary: Fix Your Withholding
Find the Best Deductions
Tax Ambushes For the Unwary
Steps Toward A Happier Return
Ways to Reduce A Big Fat Tax
Off-the-Shelf Programs Secure Data
Complete Coverage/Resources

Why? For the same reason we advise that whenever possible you not store personal financial data with a company other than the one you bank or trade securities at. The data you enter when preparing your tax return is immensely detailed, and its circulation could cause immense harm. You can tell if your return is being sent online with proper encryption, but you can't make the same judgment about the computers your tax data will reside at if you prepare the whole thing online.

It's common sense, reinforced by reports of escapades such as the recent ChoicePoint Inc. admission that con artists accessed the personal data of up to 110,000 people: Don't let important data out of your control unless and until you're forced to.

All of which means when tax time rolls around, we turn to off-the-shelf tax preparation software.

For simple returns, we've consistently recommended Second Story Software's TaxAct, available as a stripped-down free download, with more forms and handholding and free e-filing for $12.95, and combined with a state or District form for $19.95 (all three Win 95 or newer, www.taxact.com).

For more complex returns, the same two competitors are duking it out again: Intuit Inc.'s TurboTax and H&R Block's TaxCut.

TaxCut is the perennial underdog here, and we'd love to see it unseat TurboTax. But this year's edition can't. TaxCut will certainly do the job, and it, along with its competitors, has advanced light-years from the early days of computerized tax preparation. Nonetheless, judged purely as software, it's still the clunkier, more difficult of the two market leaders.

Installation is clean and neat, but brings with it first the need to accept the inevitable license agreement and privacy policy. Unpleasant fine-print alert: You can't sue Block in court if you're unhappy but must instead accept binding arbitration, and unless you go through a separate Web-based opt-out process, the company can disclose personal information to companies it has relationships with so they can try to sell you things.

Block's pushy salesmanship doesn't stop there: TaxCut's installer leads you seamlessly into a half-price offer for EarthLink's Internet service, with the default choice being to open an account.

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