As featured in The Wall Street Journal, Money Magazine, and more!
     

How Will You File Your Taxes?

This article was written by in Taxes. 13 comments.


I’ve started receiving W2s, 1099s, and a variety of other tax-related documentation in the mail and online, which means one thing: It is time to get serious about determining my final tax liability. If I planned right, I will have paid just enough between estimated taxes and withholding to avoid an underpayment penalty, but it’s likely I’ll end up with a hefty tax bill.

I’m leisurely seeking a recommended tax accountant in my area, someone specializing in sole proprietors, to help me out with my filing this year. Theoretically, a professional who understands more of the nuances of the tax code than I understand will help me manage my tax liability. I could do an adequate job with TaxACT, as I have been for the past several years, but I don’t want to part with any more money than I would need to. If I find a good tax accountant, his or her fee would pay for itself through suggestions for deductions or other tips. Also, a professional will allow me to save time for other activities and reduce my stress.

TurboTax is Easy, Free Edition, Fast Refund

For typical taxpayers, hiring an accountant may be overkill. Before my situation increased in complexity, I was a happy user of TaxACT, as I mentioned above. I switched to TaxACT from TurboTax Online thanks to a lower introductory price. Both of these services allow you to store your past years’ returns in an online repository, but if you want to access older filings, you may need to pay an additional fee. I keep copies of all my tax documentation on paper in a folder, on my personal computer hard drive, and on an external back-up drive, so I can avoid paying fees from TaxACT or TurboTax just to look at my old 1040 forms.

TurboTax and its parent company, Intuit, has been in the news recently thanks to the revelation that Timothy Geithner, the incoming Secretary of the Treasury, used this software to file his taxes and somehow missed paying $34,000 in Social Security and Medicare taxes in 2001 and 2002. He was careful to accept blame rather than fault the software, but TurboTax was quickly linked to the “scandal” after Geithner was pressed to name the method he used for filing. The company quickly responded noting that any software calculation relies on the validity of the data entered by the user. Somewhere, between Geithner and the software, this should have been caught.

In 2001 and 2002 I filed my taxes by hand, so I’m not sure how advanced the error-checking features of TurboTax were at that point. With current incarnations of tax filing software, self-employment taxes would be taken into account and calculated properly if all income were entered accurately, at least among well-known and long-running software like TaxACT, TurboTax, and TaxCut.

H&R Block’s At Home is another popular option for self filing, also for a price. But not everyone is required to pay to file taxes. If you qualify, there are ways you can file your taxes for free. Qualifications vary per the method you choose, but you may need to live in a certain state or have an income below a certain maximum.

How do you plan to file your taxes this year? And can you recommend a good tax accountant in central New Jersey?

Updated April 13, 2011 and originally published January 26, 2009. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

Email Email Print Print
avatar
Points: ♦127,386
Rank: Platinum
About the author

Luke Landes, also known as Flexo, is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about him and follow Luke Landes on Twitter. View all articles by .

{ 13 comments… read them below or add one }

avatar Wayne

I have and will continue to use TurboTax. Been using them for years along with Quicken which lead me to use them. Easy to move data from one to the other. I just picked up my copy at Costco, they have a $10 off coupon for all versions. I use the Premier version.

WW

Reply to this comment

avatar kai

Using a local guy in Jersey City. My wife and I used Liberty Tax in Manalapan(?) a few years ago and liked ‘em. We got a refund.

Reply to this comment

avatar Bill

I’ve been using TurboTax for quite a few years now. Being a little an*l, I always double-check the calculations and have never found a problem.

I did switch to TaxAct one year but I found the TurboTax interface a little easier to use. Other than that they are pretty close in features.

Bill

Reply to this comment

avatar Madison

I went back to TaxCut this year after trying out TaxAct last year. I file multiple returns for family members and needed the state software, so TaxCut was actually cheaper with the 5 returns included.

Reply to this comment

avatar Susan

We have used an accountant for years, but we are thinking of using software this year to save $. I see they seem to advertise “free federal” returns, what is the usual cost to do a federal return (with itemized deductions), and a state return?

If it’s about the same cost as using an acct – we’ll just go back to our “guy”.

Thanks.

Reply to this comment

avatar Luke Landes ♦127,386 (Platinum)

Susan: You can expect to pay at least $20 to $30 for a federal return with itemized deductions and another $10 to $20 for a state return. The more complicated your situation (investments, for example), the more the company will charge to file. If you want live web-based assistance, that usually costs extra. You might be able to save some money — but not in all cases — by using the software and then printing and mailing the forms yourself rather than e-filing.

Reply to this comment

avatar velvet jones

I filed my taxes on Friday using TurboTax. I used TaxACT last year, however they wanted to charge me extra to access the info from my 2007 return. I didn’t like that, so I just went with TurboTax, as I’d used them before and never was charged to access previous return info.

Reply to this comment

avatar PT Money

Flexo,

I’ve used TaxAct and TurboTax in the past, but this year I have serious blog income. I need to call in a CPA. My Dad is a CPA and will be doing my taxes this year. I’d recommend him to you, but you’d only get to speak with him by phone (his practice is in MO.). His contact info is at https://my.hdvest.com/larrytaylorcpa/default.aspx

Reply to this comment

avatar Grant Baldwin

I have used Turbo Tax since I was a teenager and love it. Not only is it simple to use, but I’ve learned a lot about the tax process in general. While I don’t think every citizen needs to be a tax guru, you should at least know what’s going on instead of handing your papers over to your “tax guy” and sit and wait for the bill.

While it sounds strange, by using TurboTax, I’ve actually come to enjoy doing my taxes (as much as you can enjoy that task!).

Reply to this comment

avatar Brian

I always file online, its free, quick return of owed money, and hassle free. Once I make enough that i can not do this, i will do it myself. I really do not trust others to put me first besides their tax prep business

Reply to this comment

avatar TaxMan

I think for the vast majority of Americans (even some with relatively complicated financial situations like sole proprietors) there is absolutely no reason to hire a CPA to prepare and file your tax returns. I second (or is it third or fourth by now!) the other comments that using TurboTax (my preferred software) or TaxCut is the way to go. Much less expensive and frankly probably more accurate and dependable than hiring an CPA. Unfortunately the tax industry as a whole is predicated on the fear most Americans have over preparing their tax returns. For most Americans, preparing and filing tax returns is really a simple process. I can understand how that may not have been the case prior to the advent of the very good software systems that are now available.

Reply to this comment

avatar Writer's Coin

I will file as I did last year: Federal for free online with any of the ones the IRS recommends on their site. And then State directly via the state.

Total cost: $0

Reply to this comment

avatar Jeff

If you haven’t already found a CPA for this tax season, you’re risking hiring one that is already swamped with customers, and who is going to be prone to errors due to stress, overwork, lack of sleep, etc… CPA’s are human, too.

Let me recommend another alternative: File for an online tax extension changing your filing deadline until October 15, giving you 6 more months to finish your taxes. The extra time can be used to find the right CPA, search for extra deductions (we all need them in this economy), or to ensure accuracy of your return.

about 15M extensions are filed every year, and what many people don’t realize is that the IRS doesn’t ask for an excuse of why you need more time… it’s automatic as long as you extend on time, with the right information. Using an e-file tax extension solution like FileLater.com will also give you en email notice when your tax extension is approved (something you won’t get if you mail in the extension form).

Hope this helps!

Reply to this comment

Leave a Comment

Connect with Facebook

Note: Use your name or a unique handle, not the name of a website or business. No deep links or business URLs are allowed. Spam, including promotional linking to a company website, will be deleted. By submitting your comment you are agreeing to these terms and conditions.

Notify me of followup comments via e-mail. You can also subscribe without commenting.

Previous post:

Next post: