Tax Preparation Help – Online, Software, Professional, and Paper

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More Tax Preparation Help

Matt has already looked at TurboTax online this week.  While TurboTax is still my personal favorite tax program and I will be using the PC based TurboTax Deluxe this year, there are many other options for tax preparation.  Let’s review a few of them today.

Computer software and online tax preparation

This is how I like to do my taxes.  There are now more choices than ever, with programs for your computer, and lower cost options available over the Internet.  The most important part of any tax software is making sure it will work for your situation.  The cheaper programs are usually lighter on features.  If you choose a program that only does simple (1040EZ) returns but you need a full 1040, you might end up costing yourself more than the $20 you saved.

Also consider user-friendliness.  Some programs work better for beginners, others are cheaper but are suited for those with a better understanding of their tax situation.

Here are a few options for software and online tax preparation:

  1. TurboTax is the original in this field.  If you can take a bubble quiz, you can do your own taxes.  In fact check out this nifty little quiz tool they made called the TurboTax TaxCaster that helps you estimate your 2009 taxes.
  2. H & R block has joined the party and now offers online tax preparation and computer software.  Both are priced to compete with TurboTax.
  3. Tax Act is very favorably priced although it lacks TurboTaxes’ Q & A format.  I have been told it is better suited for the more experienced, but I have not used it.
  4. IRS FreeFile allows those with incomes under $57,000 to use this list of services free.  Lots of choices, and all the cautions about picking an appropriate one for your situation apply.  I am unable to review any of them, as my income is over $57,000.  IRS FreeFile offers no state option, only federal.

The Professional

Probably the most popular way to handle tax season is to just let someone else do it for you.  Personally, I believe each of us should make every effort to prepare our own taxes before handing off the responsibility to another.  We sign our returns, making us liable for their contents, so it makes sense to educate ourselves to ensure they are prepared correctly.  Additionally, no one cares about your money like you do – so it makes sense to assume that most professionals will be motivated by revenue first and your personal situation second.

H & R block says:

“Tax laws and IRS rules are complicated, and the language of the tax code is difficult to understand.”

I don’t think they give us enough credit… I believe we’re smarter than that!  There are a lot of tools out there to help us.

In most situations you don’t have to be an accountant to understand your tax situation, and it is never a bad idea to learn how to file for yourself rather than automatically assuming it too complicated.  We cannot shift the responsibility if something goes wrong, so we should not be so quick to shift the responsibility to file.  Tax professionals claim to guarantee their work, but will not answer to the IRS if there is a problem.  We will.

If you must use a tax professional, choose carefully.  They are everywhere this time of year, and the whole lot of them are promising to get you more money than anyone else.  As previously mentioned there is nothing arcane about tax preparation.  It is a complex math problem, nothing more.  We just need to work through the problem to find the best solution for our tax situation, and all the rules are public knowledge.  You do not want to be accomplice to a tax professional with questionable practices who bends the rules to get you a little more, and we do not want to hire someone who is incompetent.

With all that said, we will now focus on tools for those who choose to shoulder the responsibility of filing their own taxes on paper.

Paper

Filing on paper is the oldest way to file our taxes – outside of armed men coming straight to our doors and taking their share.

One of the biggest advantages of filing on paper is cost – it is completely free.  All you need is a stack of forms and booklets.  A disadvantage is that the stack can get VERY thick really quick.  Another factor to consider into the equation of filing on paper is the time spent reading all the booklets in order to fully understand what forms you need, and how best to file them.  This will improve with time as your understanding and experience grow.

For the bona fide do-it-yourself-er filing on paper is an excellent option.  People who use paper usually tend to have the best understanding of what exactly is going on with their tax situation.  If you tend to pay in at the end of the year, I would recommend paper.  Why spend $50 to spend more money… right?

The IRS now provides fillable electronic forms to make things easier.  You still have to read the booklets, but these eliminate the need for a #2 pencil, and do basic computations on each form.  Here are a the fillable form FAQs to help you along the way.

Final Thoughts

The most important step to finding the right tax solution is to understand what you need to pay and why.  The more you learn, the better able you will be to find a product that meets your unique needs.  It will also allow for better big picture financial management.

What do you think?

How are you doing your taxes this year?  What positive/negative experiences have you had with various methods in the past?



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1 Ryan

I used TaxAct this year. It’s one of the companies that the IRS suggests for free file. I agree it probably is best for those who have an idea of what they’re doing. For me, it wasn’t a problem because I only had one W2 and one 1099.

I’ll probably transition to TurboTax when my taxes become more complicated with student loans and more income.

2 Matt Jabs

Yeah, my taxes aren’t overly complicated either… but I always plan to do them myself if at all possible – I would not want to have my own tax/financial situation taken out of my hands.

3 FinancialBondage

I’ve used TaxAct the last 3 years. great product good price.

4 Joe

This is what I think.

When you think about getting married, ask yourself, (If I marry her, could she do the taxes?)

I hit the jackpot with my wife even though I didn’t think like this before I got married.

5 Matt Jabs

Ha ha, maybe I could have you write a guest post on financial filters for choosing a spouse. 🙂

6 Robert Espe

Mine could. But when I asked if she would mind (to save money) she said she would be getting Turbo Tax unless I wanted to spend my time reading the tax publications. Yes Dear.

7 Jamel Finsurance

I used TaxAct this year. I think it is a good move if you plan for what you’re doing.

8 Andrew @ Earn Give Save

We’ve used TurboTax desktop software each year since we got married. It’s simple, easy-to-use, and we’re able to keep a running history from past years. We recently won a copy of TurboTax Online Premier from Money Crashers, so I expect we’ll use that this year. It does appear that we’ll be able to import last year’s information as well.

9 Matt Jabs

Yeah, the import feature saves a lot of time.

10 Flexo

I’ve used TurboTax in the past and switched to TaxAct when it was less expensive for me, but now I plan on sending all my info to an accountant and letting him handle the whole thing. It’s gotten a lot more complicated, and I could probably do it myself, but it would take too much time that could be better spent doing other things.

11 BG

One of the best resources is simply the IRS itself. You can browse their website, or call and speak with a live person if you have tax questions:

http://www.irs.gov/help/article/0,,id=96730,00.html

I plan on calling them a few times to finish my taxes this year (using TaxAct).

12 Robert Espe

Very true BG.

I always tell people that if they are afraid to call the IRS to ask if they can do something with their taxes, they already know they can’t.

13 BG

Hi Robert! You are anonymous when calling the IRS, they don’t ask for your name, SS number, or anything personally identifying. As for asking the IRS for something you might not think is allowed, there is nothing wrong with asking!

For me, I’m doing some tricky stuff (in my opinion), and the IRS agent said it is completely legit and people do it all the time, I just needed the phase-out numbers and a better description of the law. One thing to take note of when calling the IRS is that the representative will give you their name and their IRS ID number (which you should keep) if you really think you are doing something questionable, and the IRS representative says it was OK. It’s always good to have records in case of an audit!

Anyhow, I’ve always found that the IRS is very courteous and welcoming when I call to ask questions. Now, if you are on the audit side, that is a different matter altogether 🙂 You don’t want to find out you did something wrong 3 years later…

14 Allison

Hi, Matt.
I am a tax professional, and I use Turbo Tax every year for my return. I work in corporate tax currently, so I don’t complete client tax returns, although I used to several years ago. It has always surprised me how many people with simple returns (even the 1040EZ) want a tax pro to complete their returns for them. I always try to encourage friends and family without complicated returns to try Turbo Tax first. They are usually surprised how straight forward it is.

15 Matt Jabs

Yeah, I’m glad my dad helped me through my first tax return… I’ve been doing my own ever since and love it. 🙂

16 Jonathan

Good Article! I’m almost convinced… But I’m so lazy. Maybe next year. 😉

17 Carrie

What are your thoughts on using TurboTax if you live in one state and work in another? That’s my situation, and my husband works in BOTH states. And we bought our first house last year too. People I’ve talked to recommend that we use a professional but I would like to use TurboTax to save money (I have used it for two years and it worked fine, but now our situation is much different). Do you have any thoughts on this? Thanks!

18 Robert Espe

Glad you asked Carrie. I say go ahead, especially since you have a couple years experience. I actually had a similar situation this year.

I moved from MN to TX, only to immediately begin work in NM for 6 months (while my wife stayed in MN and worked there). I still used Turbo Tax (and believe me when I say I am NOT a tax professional). It will not complicate the Federal side at all, and the states (if applicable) will be separate.

Two things you should plan for:

one, if you receive W-2’s, check them. They will show which states withheld income tax from your checks. Those are the states you need to file in. The other is that Turbo Tax Deluxe comes with only one free state. You can add as many as you need, but there is a nominal charge ($20?) for each addition.

19 Carrie

Thanks for your help! I looked at my W-2’s and yep, I had one for each state (MN and WI). Now my problem is that my husband only had W-2’s for one state (MN, where we used to live), not two like me. When we moved, he had a job in MN, so I’m not sure if they just never knew that he had moved or if he ever told them. Also, he started working in WI but this particular job (a local YMCA) probably assumed he still lived in MN since he used to work at a MN YMCA. Ok, so my question is, do we need to worry about the fact that my husband’s two W-2’s only show MN income tax withheld? Is there any way to remedy this or is it two late? Would we get in trouble for the fact that his only show MN income tax withheld? I’m confused by it all. We entered it all into turbotax delux and we are set up to get about $2K total in federal/state tax refund, but I’m not sure if we’re okay to file right now since it seems like this issue needs resolving. Any advice? Thanks!

20 Robert Espe

Carrie,
Short answer, you shouldn’t get in trouble as long as you follow what is on your W-2’s, although if you are really concerned you could always consult a professional, but their time can be expensive. As long as the company he works for has your husband’s correct address, I wouldn’t worry about it.

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