The old-fashioned way to file your taxes. As April 15 approaches, California taxpayers have more technologically advanced — and free — options.
The deadline for filing state and federal tax returns for 2012 is midnight Monday, April 15. If like many taxpayers in California you've been procrastinating, no need to panic. The federal government supports a free online system called Free File. And California also provides free options.
Q: I've waited until the last minute to file. What do I do?
A: First, you need to complete the federal return. You'll use the federal form to complete the California return. You can always pick up the paper forms, fill them out, sign them and either pay what you owe or start anticipating a refund. It will cost you the price of a couple of stamps.
Tax preparation companies such as H&R Block offer free online filing options, and there's always TurboTax and other popular software/online options. But in California, you can use the state's free online system, called CalFile, as long as you qualify.
"It's a direct and simple option for California residents," said John Roper, spokesman for California State Controller John Chiang, who chairs the Franchise Tax Board, California's tax-collecting arm. "CalFile has been around since 2004-'05, and it takes less than 30 minutes. The controller believes it's a great option. Filing taxes is a burden and any way you lessen that burden can help taxpayers."
Roper adds that CalFile lowers the cost to the state of dealing with taxes by $2 per return — and those savings translate into more money to spend on other services.
Q: It still sounds complicated. What else can I do?
A: California also has a system called ReadyReturn. This system takes information about your taxes that the state already has and uses it to "pre-populate" your return. Not everyone who is eligible to use CalFile — about 6.4 million California residents — can use ReadyReturn. But if you start using CalFile, the system will let you know if you qualify. And 2.2 million people in California could, according to Dennis Ventry, a law professor at the University of California, Davis, who has studied free tax filing in California since it was introduced.
ReadyReturn generates your return and your either agree or disagree with it, making changes as needed.
"There have been restrictions on how well advertised the program can be," said Roper of the Controller's office. But he notes that just through general media outreach, there are more than 50,000 taxpayers a year who make use of ReadyReturn.
Q: Is there anyone who doesn't like these options?
A: CalFile isn't very controversial. But ReadyReturn is. Dennis Ventry points out that only a few states can effectively use ReadyReturn; California is one of them because there isn't much lag in how it processes tax data, which gives taxpayers a generous window to file from the beginning of the year.
Pete Sepp is the Executive Vice President of the National Taxpayers Union, a tax-reform organization that's been around since the late-1960s. Sepp asks if the taxpayer has to review and possibly change information on ReadyReturn, then what was the point of letting the state pre-populate the data in the first place?
"It's important to remember that this system is sold as a way of relieving filing burden on taxpayers," Sepp said.
He also doesn't like the disengagement from the taxpaying process that ReadyReturn introduces.
"Having visibility in tax system is an important concept," Sepp said. "There's something to be said for a tax system that keeps involving the citizen, and that allows the citizen to make improvements."
Q: Does that mean that ReadyReturn is going to go away?
A: Actually, the opposite, according to UC Davis' Ventry. He thinks that ReadyReturn will eventually be absorbed into CalFile.
"It makes tax filing less anxiety-ridden," Ventry said. "If we have the information, it's just dumb that we don't help taxpayers with the process. If you make people pay taxes, then shouldn't you make it easier?"
Bottom line: If you haven't filed your California taxes yet, you still have time — and you can still file for free. And if you qualify, the state can do much of the work for you.