How can online banking help you manage your taxes?

It's important to hang onto some financial paperwork, but online banking can serve as a perfect life preserver if you're drowning in a sea of documents.
It's important to hang onto some financial paperwork, but online banking can serve as a perfect life preserver if you're drowning in a sea of documents.

Although some people experience anxiety when it comes to dealing with financial matters over the Internet, the practice is fairly secure as long as the Web site has a valid security certificate and your password is strong. It's no surprise then that online banking has become a growing trend. A 2009 survey conducted on behalf of the American Bankers Association found that for the first time, more than a quarter of U.S. bank customers preferred online banking to other methods such as visiting their local branches, using ATMs or banking over the phone [source: ABA].

While online banking offers enormous day-to-day convenience by allowing customers to bank from the comfort of their homes (and without the annoyance of a phone tree), it can also be of great service on special occasions. Namely, that delightful day each year when a person decides to sit down and deal with his or her taxes.

The IRS has jumped on the Internet bandwagon in a big way, and in 2008, about 90 million people filed their taxes online [source: IRS]. Those who also engaged in online banking throughout the year probably recognized how the two activities synergize to make the entire process a lot less painful and problematic.

Gone are the days of collecting and saving formidable stacks of receipts and records. With online banking, that information is all available at the click of a button. Some banks also offer features like a service that allows you to tag any tax-deductible expenses you accrue throughout the year and another that generates a report to summarize your annual spending habits.

On the next page, we'll look at a few more ways your computer can endear itself to you during tax season.

 

Taxing Times

The IRS has leveraged the Internet to help make tax time less of a chore -- if you choose to take advantage of it.
The IRS has leveraged the Internet to help make tax time less of a chore -- if you choose to take advantage of it.

Aside from straight online banking, there are other ways the Internet can make taxes much less of a headache. As previously mentioned, you can file your tax returns electronically, which not only helps assure they get where they need to go, but also means you'll receive your refund (if you're lucky enough to get one) that much faster, too. Just so that you'll have everything you need, you might want to check with your bank to find out how long your records are available online.

The IRS allows you to pay any owed taxes and receive any incoming refunds electronically, so there's no hassle with making a trip to your actual bank. If you're impatient for your tax refund to arrive, you can track its progress online.

Another way to simplify the tax season is to purchase software like TurboTax. Instead of having to wade through difficult-to-decipher jargon, the software walks you through the process with a series of straightforward questions. Tax law changes from year to year, and TurboTax helps ensure you aren't messing things up or missing out on potential deductions and credits.

There's also the ease of importing data. Whether you keep your information stored in financial planning software or leave all your recordkeeping in the digital hands of online banking, you can just import it into TurboTax and get going. If you use TurboTax every year, you can even import your personal data from previous years into the current forms. There's also the obvious benefit for the mathematically challenged among us -- using TurboTax guarantees you won't mess up the math.

Factors like these mean tax time doesn't have to be the hassle it was back in the day. But even helpful services can still be bittersweet. After all, you're just parting with hard-earned money that much faster -- but at least you're saving time doing it. That's something, right?

On the next page are links to lots more information that can answer any questions you're having about the upcoming April 15.

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Sources

  • "Get Organized: Prepare for tax season with Online Banking." Bank of America. (1/15/2010) http://www.bankofamerica.com/promos/jump/prepare_tax_season/
  • The Internal Revenue Service Web site. (1/15/2010) http://www.irs.gov/index.html
  • Kaplan, Carol. "ABA Survey: Consumers Prefer Online Banking." American Bankers Association. Sept. 21, 2009. (1/15/2010) http://www.aba.com/Press+Room/092109ConsumerSurveyPBM.htm
  • "The State of the Online Banking Industry." FinWeb.com. (1/15/2010) http://www.finweb.com/banking-credit/state-of-online-banking-industry.html
  • The TurboTax Web site. (1/15/2010) http://turbotax.intuit.com/