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Thursday, February 22, 2007

Taxes can be quite taxing...

Last year was the first year I had my taxes done by a CPA. He charged $850, and came highly recommended. But he didn't know about self-employed 401Ks, so I had to teach him about how to do ours, and he was rather impatient with my wife when she asked questions. So, we decided to give tax software another try.

We went with Turbotax Home & Business, which we downloaded and used. It was far cheaper than the CPA and did all the same stuff; the general numbers are the same as last year, and it didn't give my wife an attitude. I was careful to use the same structure as he did regarding things like depreciation so we have proper continuity, so I did "leverage" his work a bit...

The software was straightforward, if you were patient with it and followed its steps in order. I got everything inputted and it happily calculated my taxes and set up the forms, and things went reasonably, although I was worried for awhile that I wouldn't find where it handled SE401Ks. It does, and even has a "401K maximizer" feature, but you have to wait until the right part of the "interview".

My only complaint about "interview-style" tax software is there's no way to get help on "if I have Situation X, where and when do I deal with it?" You have to wait until the part of the interview which covers that step, and infer that Situation X applies in that case. In this case, the software handled self-employed 401Ks perfectly, but I didn't see that part until after I completed inputting my wife's business tax numbers for her Schedule C. (This makes tax sense since you don't know how much to use for the "employer's share" of the SE401K until you know your profit after expenses and depreciation.)

The help available in the software directs you to IRS info, which is helpful if it's a tax question, but not so helpful if your question is related to the structure of the software itself.

But in general, it was a good experience. I'm not sure I'll still be able to use tax software next year as we'll probably have some income property by then, but I like knowing what's going on with my taxes, so I'll keep doing them if I can.

Comments:
The online tax solutions are getting better each year. And like you said the savings is pretty big. Your cpa charged $850! wow.
I've been doing my own taxes for about 5 years now. The newcomer this year is Tax Brain. It must be the easiest all online tax software out there right now. I used there operators on chat to answer some form questions. The competitors will have to struggle to keep up with this one.
 
Hi Carrie:

Thanks for your visit and your comment.

In some ways, I'm a "bad example user" since my taxes are rather complicated, and I tend to be an early adapter of new retirement savings vehicles (self-employed Roth 401Ks, anyone?). And I'm enough of a software weenie that I do a lot of second-guessing of program structure and such that many users don't bother with.

I used to use web-based software to do my taxes, but went to the CPA because the web software didn't appear to know how to handle a lot of tricky situations that I had gotten myself into. But I'm glad that Turbotax can handle these, and hopefully I can use it next year.
 
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