Meeting the Tax-Prep Challenge
Overcoming taxophobia: A convert's account of e-prep and e-filing.Rex Farrance, PCWorld.com
At tax season, I always seem to reap a sizeable payoff in needless anxiety. After procrastinating, I typically pack up my paperwork and head to a local tax-prep mill. The institutional handholding costs a healthy chunk of change, and I file by snail mail. Sometimes I'm pleasantly surprised by the size of the refund, and other times I'm dismayed by the size of the check I had to write. And refunds always take too many weeks to arrive.
After enduring the gibes of coworkers about "a Senior Technical Editor who's afraid to use software to do his own taxes," I decided things will be different this year. My colleagues have a point: The major tax chain I patronize uses software, too, to prepare my return. I particularly liked the idea of doing the job in my own home at my own pace. If I forgot to gather some receipts, I'd have the time to find them, instead of passing on a deduction because of limited appointment time.
TurboTax: Tool of Choice
I chose the market-leading TurboTax from Quicken as a solid choice for a first-timer. I chose the Deluxe version of the desktop software, priced at $39.95. That cost about one-fifth what I paid a preparer last year, and includes some extra tax advice not available with the $29.95 standard edition, along with a free state download, a rebate for one e-filing, extra advice, and easy access to IRS publications. (These prices are from Quicken's Web site; some retail outlets price them lower.) You can also download a limited-use version of TurboTax 2000, and pay a fee to file electronically.
Getting started was easy. I gathered my family's four W-2s, assembled the requisite documents for our mortgages, investments, and so forth, and headed into the family room. As a 14-year veteran with PC World, I've installed a ton of software, and TurboTax provided a typical install--except for one timely facet. The program not only encouraged me to update it over the Web after installation, but also to check for updates at some key points in the preparation process to make sure I had the very latest stuff. I downloaded my state module and got busy.
Getting Down to Business
From the get-go, I was pleasantly surprised. I hadn't done my 1999 return with TurboTax and am not a Quicken user, so I had to enter all the information manually. (I also couldn't use the automated W-2 and 1099 features because my family's financial institutions aren't on the supported list.) That wasn't much bother, and I kept reminding myself about those two crisp C-notes it cost for a professional to do the entry last year.
Throughout, the software prompted me--and at crucial junctures, such as determining our filing status, it stepped me through a decision process and made a recommendation to fit my needs. In the really rough spots--such as determining the dependent status of an older child--TurboTax offered a helpful video featuring a well-known tax expert. For other questions, I got information directly from context-sensitive IRS regulations on the installation CD-ROM. This help is good enough that I didn't need the optional live support available on the TurboTax Web site.
Most of the process is step-by-step data entry and answering questions. Part way through the process, I realized the program asks all the questions--and more--that my professional preparer asks. That's about the time it occurred to me that I was actually having fun. I never thought I'd say that about anything to do with taxes. But something about controlling the process--rather than being a passive victim--filled me with a sense of purpose.
Deductions: Just Data Entry
Entering deductions is as easy as putting in my income information. After all those years going to the pros, I am pretty familiar with what I can deduct, but the software prompts me to consider every legitimate deduction--for example, the sizable check I sent to my state last year is a significant deduction this year. The video on charitable contributions is helpful, and actually aided me to find a more strategic way to support my favorite charities this year.
The roughest spot was figuring out how to deal with some of my wife's business expenses, but the software and reference materials finally got me through. I also followed the step-by-step analysis to determine that we weren't subject to the Alternative Minimum Tax. When I finished the Federal return, TurboTax did a review for errors--and even checked to see if anything on my return was likely to flag an audit.
Completing the state return was a piece of cake, as the software automatically moved all the relevant information I had already entered in my Federal form.
Faster Than a Speeding Refund
Once I completed both returns and double-checked all my entries, I decided to e-file, figuring it would save some time. It was relatively inexpensive, costing $11.95 for the Federal return (covered by the rebate) and $4.95 for the state.
Still a little nervous, I knew I wouldn't feel totally comfortable until I got a confirmation that the return was accepted. At work the next day, I got an e-file reminder by e-mail to check the status of both returns. The state form was accepted--but the Federal return was not!
Sweating bullets, I sought the reason. It turns out I had entered my wife's name like our tax preparer did last year--without hyphenating her surname. That worked for a snail-mailed return, but for e-filing, the IRS requires that names match Social Security Administration records. I made a quick correction, filed again (at no additional charge), and got a confirmation of acceptance the next day.
For some reason, no additional e-mail reminders came. But when I checked the next day, the return had been accepted, and the IRS estimated my refund would be automatically deposited in my checking account in ten days. In my case, the Feds beat their prediction by three days--and the state refund arrived later the same afternoon.
People with really complex financial situations and lots of investments may still need professional help. And some people will never feel comfortable dealing with the IRS on their own. But if my experience is any indication, I'll bet a ton of folks out there (like me) would feel a genuine sense of empowerment from using a good tax-prep package to do their own taxes. And this year, I can use good tax planning to make sure I know where I stand--even before I start preparing my returns.