Online Tax Prep: Is It Cheap and Safe?

iStockphoto/Thinkstock(NEW YORK) — Online tax tools — many offering free advice — can make filing your return this year a breeze.  But beware: People who file online should heed two cautions.

First, the price you’ll pay to file for online tax prep programs may be higher than the one that’s advertised.

Second, after you have filed, be sure to take precautions to protect yourself against identity theft.

All the major online tax-help providers, including household names such as TurboTax and H&R Block, offer comparable services at comparable advertised prices.  Each website gives you the option of buying tax software and then downloading it (so you can file a printed return); or of using the website to do your return entirely online.

For example TurboTax, for a basic federal return, quotes a price of $29.95 to download and $19.95 to file online.  If you choose the latter option, most sites don’t bill you until the very end of the filing process, after you’ve entered your data and completed your return.

But between start and finish, added fees can accrue.  Some sites, for example, try to up-sell you additional services and features — like audit or fraud protection — without always making clear that you’ll be charged extra for them at checkout.

Filing state taxes also costs you more — sometimes much more — a fact that’s easy to overlook on some sites.  And more complicated returns — ones involving, say, itemized deductions or personal businesses — may incur higher fees.

Sneaky?  Not at all.  Anybody who reads the websites carefully at the outset understands that he or she can wind up paying more than the promoted price.  Still, if you file online, you aren’t told the total cost until you’ve done all the work and entered all your data, which makes you something of a hostage to the process.

Enter new, flat-fee providers such as TaxSlayer and OnePriceTaxes.

OnePriceTaxes, as its name implies, charges a single flat fee, regardless of whether the filer’s return is simple or complex.  Total cost is disclosed up-front, and there are no hidden fees.  There’s also no extra charges for the efiling of state taxes.

On OnePrice, a federal or state return costs $9.95.  A federal and state return, combined, cost $14.95.

If you do opt to efile, take a few precautions to make sure you don’t leave your data vulnerable to identity thieves.

If you file the old fashioned way — on paper — then you’d want to shred tax documents you no longer need. Also do the same with your electronic documents.

For Apple users, says security consultant Securosis, that’s easy: Macs come with what amounts to a built-in shredder, “Secure Empty Trash,” listed in the Finder menu.  By selecting it, you overwrite your data, making recovery of it by thieves all but impossible.

PC users can delete a document and then empty their recycle bin.  For greater security, they can buy document-shredding software, such as Erasure or File Shredder, that overwrite their data.

Any tax documents you want to retain should be stored, says the Identity Theft Resource Center, on a password-protected USB thumb drive or external hard drive.  Drop these in a safe deposit box or put them in your home safe.

Copyright 2012 ABC News Radio