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No Comments [ Add Comment ]Doing your taxes is as easy as 1-2-3
By STEPHANIE CHAMBERSAnd here are three viable options for getting them done
The United States tax code is longer than a night in jail. According to the Government Printing Office, for the fabulous price of $89.50 each, you too can be the proud owner of two volumes, or 3,387 pages, of Title 26, a.k.a. the U.S. tax code.
It's no wonder taxpayers, myself included, have nightmares in which towering numbers squash us and we are subsequently ripped from our families and thrown in jail, screaming, "I forgot the decimal! I forgot the decimal!"
I do my own taxes and have for 12 years. Every year after I gather the W-2s, find my bank statements and crunch the numbers, I am haunted by the idea that the IRS will be calling. Or I am equally haunted by the idea that the IRS somehow stole my money -- if only I were smarter, I would owe less tax.
This year, I decided to test my "owe less money" theory by trying three different methods of preparing my married-filing-jointly taxes. Our tax situation is simple. We don't have any off-shore bank accounts, we haven't inherited any money, nor do we have investments beyond our house, bank accounts and two small children. I do operate a home business (as a correspondent for the Standard-Examiner, I am considered an independent contractor), which throws some complications into our taxes.
Without completely revealing my family's income, let's just say that we qualify for the IRS free file, my first tax-filing method. The other two filing methods I chose to examine were the popular TurboTax software, and having a real person (as opposed to a fake one) from a private CPA firm prepare my taxes.
I rated the methods in five areas: ease of use, time spent, amount of refund, confidence and cost.
Here's how it worked out for us:
H&R Block TaxCut(through IRS free e-file)
Taxpayers who have an adjusted gross income of $54,000 or less can file their taxes electronically online (e-file) for free if they use www.irs.gov. This Web site gives taxpayers access to 19 business Web sites that have differing conditions, but are free if accessed through the IRS Web site.
I chose H&R Block because I have heard of it before. The software is easy to use and takes users step-by-step through the 1040 tax form. In each section, the program tells you what documents to gather and then asks you to check specific topics. It took me two hours to complete.
Within TaxCut, there are often "learn more" links, or the actual fill-in-the-blank is a link that will explain (in mostly simple terms) exactly what you are supposed to put in the blank box. There are also FAQs listed with most questions. I found this helpful when I didn't understand what an EIN was, or didn't grasp the accounting methods.
Sometimes, however, TaxCut asked me questions I was uncomfortable answering; such as whether I wanted to enter the state sales tax rate. How should I know, especially when all the helpful links disappeared right at that moment? Another complaint was that TaxCut added my mortgage interest and real estate taxes twice -- once as a deduction and once for my home office, and it didn't catch the error.
TurboTax
The $29.95 Deluxe TurboTax includes e-file in its price. The deluxe version allowed me to take my home office deductions and enter my small business income, so I wasn't sure what the $74.95 business version would add except cost.
If I used Quicken to track my financial data, I would have loved TurboTax. It allows you to import data from Quicken, and it even can import some W-2s, as well as some 1099s.
TurboTax also walked me through some business things that I wasn't aware of in using TaxCut. It also had "on demand tax assistance" links to explain things, and on the side it had "Live Community," which allows you to ask a question that other users answer.
TurboTax had a sense of humor and a good, clear interface. The thoroughness of the topics made me feel that I was getting the most money back that I could. In fact, TurboTax gave me the best tax rate out of the three that I tested -- by $40 for federal -- but it did take the longest, coming in at 2.5 hours.
Bouwhuis Morrill & Company LLC
Finally, I went to an accounting firm.
Chris Futral, a tax preparer for the firm, determined that my return was easy enough to not need a CPA. The cost of having a firm prepare your taxes depends on the complexity of the return and the firm's rates. My return would cost $145 with a discount for first-time customers bringing it down to $125.
The firm used QuickBooks to prepare my return. Futral advised me against taking a home-office deduction based on his knowledge of the tax code, and was also able to offer advice and explain the why's and how's of the form.
Futral said most clients drop off their documents and come back when the return is finished. The time we spent on taxes during the interview amounted to about one hour.
Where the two software programs stepped me through deductions, with Futral, the impetus was more my own to let him know what I wanted deducted, such as my car expenses for business, and my charitable contributions (which we forgot). With the decision to not take a home office deduction and the absence of my charitable contributions, this method gave me $1,000 more in taxable income and resulted in a higher tax, but it took the least amount of time. And having an experienced person prepare my taxes and give me personal advice gave me peace of mind. It was also reassuring to know that if the IRS did call, Futral would be my advocate.
Although each method had its strong points, the biggest plus for me proved to be the free aspect. Someday, when we have off-shore bank accounts I will use an accountant. For now, I'm all about more money in my accounts.
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