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Should
you use TurboTax?
Nowadays,
most tax returns are prepared using computer
software. Software calculates
automatically and helps preparers avoid making silly
mistakes.
In fact, the IRS requires paid tax preparers
to use professional grade tax software and file returns electronically.
As for the consumer products, The
New York Times has reviewed TurboTax
and other brands and you
can read their reviews here
and here. Like
the Times
said, TurboTax is a fairly good product and does a good job with straightforward tax returns.
Two big drawbacks:
Too expensive, and not a good
value
In just the first
quarter of 2011, TurboTax spent $23
million at NBC alone for advertising!
You’re
paying for that. And
still the program’s
owner makes a pretty healthy profit.
TurboTax’s list
price is $79.99. And
the program has a lot of extra charges
embedded in the software. By
the time
you’re finished with those extra charges, you’re approaching
professional rates. Except
you’re doing the work yourself and don’t
have the expertise of a good tax guy or gal to help you.
Looking at other
comparable programs out there, tax software
is very overpriced. I
think it should be
priced under $20, not around $80.
What if you goof?
Tax software can be convenient, but not
always
accurate. Remember,
you’re still held responsible
for what’s on your return.
If you use tax software, your return is
considered
self-prepared. In
short, as far as the
IRS is concerned, you get the blame, not TurboTax.
You won’t go to jail for accidently
transposing a number, but you may have to pay penalties and interest.
- Penalties
are often waived if you relied in good faith on a CPA or lawyer, BUT
the courts have upheld IRS penalties if the taxpayer relied on TurboTax
or another brand of tax software!
- If you miss
claiming a $500 tax credit, the IRS won’t tell you that.
You just paid an extra 500
bucks in taxes. (The New York
Times found several
deductions and credits that TurboTax missed!)
My
Recommendations:
- If your
income is under $57,000, you can use the tax software and efile at the
IRS website for free. Why
pay $80 (or more) for something that’s free?
- If you made
over $57,000, is your return really that straightforward?
Could a professional
identify opportunities to reduce your tax bill?
(If you made under $57,000, a professional may
still help you get a bigger refund.)
- If your
return really is straightforward, save money and file a paper return
for free! (You’re
only doing 1 or 2 returns, not dozens or hundreds.)
- The IRS
has all the paper forms and instructions available at their website. You can call
their 800 number for free advice.
- For more
tax tips, buy J.K. Lasser’s Your Income Tax,
written by my friend Barbara Weltman.
It’s updated every year and only $15 at Amazon!
- Calculators
are available at the dollar store.
And it will cost you less than a dollar to
mail your return at the post office!
The Bottom Line
Save your
money. Do it yourself on paper or
call a
professional.
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