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Online tax preparation is easy, but is it secure?

Millions of taxpayers head to their computers each tax-filing season to prepare and send their returns. These filers, however, don't buy tax software. They just point their mouses to an online tax preparation site and a few clicks later, their returns are done.

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Why are people flocking to the Web to do their taxes? It is fast, easy and convenient, particularly compared to the old do-it-yourself, paper-and-pencil method. It's even quicker than using software since there's nothing to purchase or download and install on a PC.

"It takes about 10 to 12 hours to prepare a return manually using pen and paper," says Aaron Horvath, a spokesman for H&R Block in Kansas City, Mo. "The same return prepared on our site only takes one to two hours."

Is it secure?
Sure, it's fast, but is it safe?

What happens if you start your return, realize you're missing some filing information and leave a half-prepared form floating out there in cyberspace? When you relinquish control of your taxes to an online site, where does your data go and who has access it?

Basically, you are entering all your personal finance data for the year, as well as your Social Security number and other identifiers, onto somebody else's computer and using the Internet to do it. Hacking is a real, if relatively remote, possibility.

"Think about it sweetheart," says Eva Rosenberg, an Enrolled Agent and the Web's Tax Mama. "You're nervous about charging something online and here you are putting all your tax information online on somebody else's Web site."

Advocates of online tax return preparation, however, say the process if safe -- as long as the filer chooses a reputable site that utilizes accepted Web-security features. And, proponents of the process argue, online preparation actually safeguards taxpayer information by keeping a back-up copy of returns stored off-site.

"We retain the data for customers for a long time so if their computer crashes they don't lose their tax return information," says Atilla Taluy, president of FileYourTaxes.com of Oxnard, Calif.

Ease is appealing
While security concerns do scare off some potential users, millions of filers obviously have no qualms. For them, online ease outweighs the worries.

Like their software-using brethren, Web preparation taxpayers note that the system means not having to wade through and translate tax jargon. The computer tax programs, whether on a Web site or installed on your computer, interview you as much as a CPA. And online upgrades are automatic, whereas the PC software user must reload the new tax rules on his or her computer each filing season.

Online taxpayers also get to try a site before they plunk down money for the service. Unlike buying a software program sight unseen, most of the online tax preparation sites don't charge you until you hit the "send to the IRS" button. That lets you play around with the site all you want.

Next: Considering online tax preparation?
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Picking the filing method that suits you
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Find the tax professional who's right for you
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