Massachusetts is strongly promoting their e-file income tax system. I should love it, right? I spend much of my time in front of a computer. I keep much of my tax information on my computer. What isn't there to love?
Let's start with a bug. It's trying to tax me on a qualifying indirect IRA-to-IRA rollover. The Form 1 instructions and this letter clearly state that the distribution is not taxable for Massachusetts income purposes if it is not taxable for Federal income purposes. In order for the rollover be Federally nontaxable, the money has to be deposited in a qualifying IRA within 60 days of receiving the distribution. We did this. Yet, there's nowhere in the WebFile for Income system to indicate so or to override the WebFile determination.
Is that the only complaint? No. Instead of helping me to make this determination, the WebFile for Income documentation only hindered my search. The "Help Library" included useless (to me) entries on rollovers and didn't even provide the relevant text from the Form 1 Instructions (!)
The only plus of the WebFile for Income system is that they caught a mistake I made in filling-out the dependent care expense worksheet. In incorrectly interpreted "qualifying expenses" as being the total paid for dependent care whereas part of the instructions clarify that line 1 of the worksheet should be line 31 of a pro-forma Federal 2441 with the Massachusetts limit entered into line 27.
In principle, I like the idea of electronic filing. It has the potential to be much simpler, easily eliminating 80%+ of the fields I have to fill-in with a traditional form. However, people always underestimate how difficult it is to get software right, especially for something as complex as taxes. I hope that the Massachusetts DOR keeps trying as the current version is a valiant effort.
Update (2/28/11): The Mass. DOR provided me with a speedy clarification: non-taxable rollovers should not be entered into WebFile for Income. I hope they improve their wording in future years as the system indicated that any 1099-R showing income should be entered into the system.