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This is a relatively long review of TurboTax 2012 Online, software for completing tax forms and submitting them to both the federal and state authorities. I’ve updated the review to reflect the changes to the software in 2012 (for filing 2011 tax returns).

Recently, the IRS began accepting federal tax returned filed electronically. Even before the IRS began accepting returns, you could still have completed your tax forms online through software. Programs like TurboTax, H&R Block, and Jackson Hewitt have been accepting customers and holding off on filing until now. This delay affected those who had itemized deductions, claimed the tuition and fees deduction, or claimed the sales tax deduction.

Many taxpayers are just getting started with their 2011 federal returns now. I’ve been using the services of an accountant for the past few years, and he was able to cut through the more confusing tax consequences of owning a business, saving me $15,000. Before my tax situation was complicated, however, I completed my taxes online using various software. Following a series of questions, completing and filing my 1040 form was easy.

Every year, the companies that provide tax e-filing services like TurboTax and H&R Block tweak their products, not only for the latest tax laws, but to improve features, making the process of tax filing easier. I took a look at TurboTax to see what changes the newest edition has to offer.

The first thing I noticed with TurboTax is the wide variety of products they have available. There is an option that is completely free for filing federal returns, but it is limited. This free version is for taxpayers whose returns can be completed using the 1040-EZ form, a simplified version of the 1040 form. If you have deductions, investments, a mortgage, or self-employment income, or if you want a step-by-step hand-holding guide to completing the forms, you will not be able to take advantage of the TurboTax Free Edition.

TurboTax offers several flavors in addition to the Free Edition, including Deluxe, Premier, Home & Business, and Business, each to handling more complicated tax situations above and beyond the lighter editions. The Deluxe Edition focuses on capturing all of your deductions. The Premier Edition does deductions, as well, but also includes the forms you need for investments like stocks, mutual funds, and rental properties. Home & Business covers all of the above as well as self-employment income, and the Business Edition is for anyone who is a partner in or owner of a corporation.

The editions are flexible; start with the Deluxe Edition, and as you come across features you need, TurboTax will ask if you’d like to upgrade — without charging you yet — to the edition that takes all of your needs into account. I started the Deluxe Edition to see how far I could go. I saw that for the most part none of the upgrades are needed if you are confident about your tax accounting abilities and are willing to enter your information directly into forms rather than have the software hold your hand through every decision.

Get your refund in as little as 8 days. E-file with TurboTax today. It’s Easy

Here is an overview of my entire process of completing my federal and state tax returns with TurboTax.

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There’s a chance you could become a multi-millionaire after repeatedly slamming your head into other people and suffering through the resulting mini-concussions and minor brain damage, but not everyone can be a professional football player in the NFL. There’s a safer and less harmful path toward financial independence.

Cognitive ability is an important part of your human capital, and your human capital measures, among other things, how likely you’ll be able to support yourself financially, particularly through difficult economic times. Cognitive ability is important because many jobs requiring intricate skills and the best careers that offer opportunities for advancement require the ability to learn and adapt, and that’s the core of cognition.

The ability for the brain to process information changes throughout one’s lifetime, and without stimulation, cognitive ability can decline. When companies like Google or SAS ask puzzling interview questions, they’re testing, among other things, cognitive ability. To be hired as a software engineer, you would need to show that you have a strong command of whatever primary programming language is popular at the time, but in an industry that changes so quickly, strong cognitive ability will show that you can learn and adapt to the changing environment.

Rubik's CubeThe key is instilling cognitive ability in children at an early enough age. As we get older, we can continue to refine cognitive ability, but only to a small extent. These tactics may no longer work for me; the best adults can generally do to keep cognitive skills sharp is to get enough sleep and exercise, and eat nutritious food.

If you’re interested in helping your child prepare for a life full of challenges, there are some tactics you can employ.

Learning a new language

As a child, I enjoyed learning languages. I never became fluent in anything other than English, but I enjoyed the process of learning the rules. As a kid, I was fascinated by languages, and spent time learning a little bit of as many as possible. Like many kids, I learned a little Spanish from Sesame Street. I learned Hebrew and tried to teach myself Yiddish. I studied Latin in middle school, was taken out of usual classes to study Greek independently, and took five years of German. I learned programming languages like BASIC, Pascal, lisp, and C. And as a younger kid, I dabbled with creating my own languages and codes.

Music and mathematics have features in common with languages, as well. Music, particularly learning to play an instrument instead of just listening to Mozart, has been shown to improve cognitive ability.

As an adult, learning a new language or a musical instrument is a time-consuming task. There are programs that help frequent travelers learn languages quickly, but you could get a bigger cognitive benefit by learning a language through a more academic curriculum or through immersion. Rather than focusing on key phrases that help you get by in a foreign land, incorporating a new language into the way you think can help keep your brain active. On the other hand, young children, even those learning their first language or languages, can often learn multiple languages concurrently without being confused. Language skills not only improve cognitive ability, but they can make someone a more marketable employee around the world or increase the chance of international success in their own businesses.

Completing puzzles

Elementary school is a great time to focus on solving puzzles whose solutions require thinking “outside the box.” I seem to remember this being called “lateral thinking” when I was younger, but I don’t know if that term is widely used today. These are the types of puzzles that stymie job applicants at companies like Google. But puzzle solving as an adult won’t have the same impact as puzzle solving when the brain is at its most impressionable.

  • Logic puzzles are kind of like the game Clue. You often have two or more dimensions to work with, and the goal is to pair each of the dimensions together based on a limited number of clues. A grid helps eliminate incorrect pairings to discover what’s correct. The more dimensions included in the puzzle, the more brain power necessary to solve the puzzle.
  • For a child, a Rubik’s Cube can be an engaging puzzle. While the answer now comes packaged with the toy, and there are numerous Youtube videos describing how to solve the puzzle in about twenty moves, the cognitive challenge is in working to find patterns of movement that move closer to the result.
  • Text adventure games open up a child’s mind to being able to control their environment. Video games have changed since I was a kid, but I enjoyed the early text adventure computer games like Scott Adams’ Adventureland. (Classic game lovers can play Adventureland here.)

Reading and writing

Reading and writing help develop important cognitive skills focused on processing information the same way they’ll need to make sense of problems as adults. Writing, particularly creative writing, improves the command of language and can help children find clarity when expressing their ideas. Writing is a skill that will easily set someone apart from the competition, as might be necessary in tough job markets. I’ve personally seen atrocious written communication among co-workers throughout the many jobs I’ve had. I will never say I’m a great writer, but these skills are lacking in my former non-profit and corporate environments.

When I compose a well-worded communication, the supervisors shouldn’t be surprised. Every employee with a college education should be able to express himself or herself somewhat eloquently.

These cognitive skills nurtured at an early age can help prepare children for financial success in life. The best careers need smart and flexible employees to take on unforeseen challenges. People often predict what the hottest careers may be one generation from now, but the specific opportunities are irrelevant if children are prepared today to handle any problem that presents itself.

What did you do as a child to improve your cognitive ability? If you have children, how are you helping them prepare for the future?

Photo: Don Wright

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Opinions are generally clear about why such a large percentage of the American population winds up in financial jeopardy. There’s no formalized way to learn how to use money properly and with the best results; most people learn by experience. It would save a lot of headaches if we could somehow warn people in advance that they’ll need to consider finances in their choices in their life in order to build wealth over time, and that lesson would have more meaning if we could somehow extol the virtues of financial independence.

Financial literacy advocacy programs try to address this problem. Encouraging good behavior with money at an early age could help increase the probability of achieving financial success in the future. With efforts conforming to this principle, some high schools offer money management classes while some companies like ING Direct offer tools to help younger students learn about money management. Neither of these approaches have been proven to have any long-term positive effect.

Kid with moneyI’ve previously discussed the limitations with money management classes in high schools. First of all, if a child doesn’t receive the first lesson with money until he or she is a teenager, the student has already formed an attitude about money that will define the relationship during the important formative years when he or she later begins earning money for living for the first time. At the age when children are forming their money personalities, they are most influenced by parents. If the parents aren’t making an effort to set a good environment and example for handling money, it will negate any effect by a money management class as a teenager.

Most teachers are not trained in personal finance, so they cannot provide the best instruction. And without mandatory money management classes, only a small percentage of students will choose this class as an elective. Those who choose this class make this choice at the expense of other possible electives, many of which enrich the mind rather than purport to enrich the wallet.

At the same time, society can’t rely solely on parents to transmit good financial habits to their children, even if the right tools are provided by outside sources to help those parents.

The problem of poor money management skills manifests itself in lower-income communities more than middle-class areas. Change, in the form of professing the opportunities that one can enjoy through financial independence, must come from within the community. It’s important for successful individuals to be involved with the community, serving as a role model, particularly when parents don’t have the skills or resources to serve in that role. Poor financial management and a lack of economic mobility can become a cycle. As a child grows up without a great financial role model, he or she will continue to be poor role models to his or her children.

The only way out is to break the cycle, and the only way to break the cycle is for successful individuals to assume the job of parents as financial role models.

Photo: Pink Sherbet Photography

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Good Debt and Bad Debt

This article was written by in Debt Reduction. 16 comments.

Misuse of credit can destroy a family’s financial life. A household can crumble under the weight of debt, whether it has increased from a poor house-purchasing decision, a drastic change in the real estate market, a shopping addiction, an unexpected medical bill, or the lack of preparedness for an emergency. It’s no surprise people consider debt to be “bad.”

Is there any situation where debt can be “good?”

I have a problem with the good debt vs. bad debt argument. Good and bad are polar opposites, and most issues tend to sit somewhere on a spectrum between two extremes. In fact, issues don’t often sit; they can shift position. The requirement to declare anything, particularly “debt” as a concept, as either good or bad is oversimplification. There’s a tendency to want to make issues simple. Catchy soundbites reducing issues to the most basic terms attract people, and no one ever won a Presidential election while talking about nuances.

See-sawPeople who are looking to sell you something, like car salesmen, college recruiters, investment professionals, and real estate brokers, are more likely to be willing to point out how debt can be used effectively.

  • In real estate transactions, debt allows more families to afford a house, and in some cases, that could mean a healthier environment for raising children. Leverage also helps you reflect a higher rate of return if your home value increases and you decide to sell.
  • If you can borrow money at a low interest rate and use that cash to invest at a higher rate of return, you are using someone else’s money to benefit yourself financially. You can pocket the difference in interest rates or rates of return.
  • Getting a college education increases your lifetime earning potential, and going into debt for a bachelor’s degree could pay off.
  • If you work in a career where image is important, a higher-priced and otherwise-unaffordable car could help you succeed in your business.

Risk makes debt dangerous. There’s a risk that house prices go down. Since the housing bubble burst, that risk should be more apparent. Leverage may amplify your return, but it also makes losses more severe. You could lose your house. If your hot investment doesn’t pan out, you might not be able to pay back your borrowed money. If you find yourself in a career not earning much money, you could struggle to pay off your student loan debt. Using debt to focus your image doesn’t always pay off.

You can only determine whether a risk, like borrowing, is worthwhile after the fact. Hindsight provides perspective. If borrowing allowed you to triumph financially, it was “good” debt. If the debt was unmanageable or caused financial ruin, it was “bad” debt. Taking on debt to purchase an asset that increases in value would always be “good,” while using debt to finance an asset that decreases in value would always be “bad.” The problem is being able to accurately predict the future. The assets we hope will increase would be a house, an investment portfolio, lifetime earning potential, and career opportunities.

The determination of whether debt is “good” or “bad” also depends on the individual or household involved. What could be a good use of debt for one family might not be a good use for another.

There are often other options rather than increasing debt. While it may be expensive to attend an out-of-state private college, you could save money by enrolling in an in-state public college or by taking advantage of grants and scholarships. The Consumerism Commentary Podcast interview with Zac Bissonnette, author of Debt-Free U: How I Paid for an Outstanding College Education Without Loans, Scholarships, or Mooching off My Parents, can offer more insights on how to obtain a valuable college degree without going into debt.

If you are able to postpone desires until you’ve diligently saved for a purchase, you can avoid debt and its possible pitfalls. Not everyone has the opportunity to save, though. A college graduate without any money might need to buy work-appropriate clothing in order to get a job. The credit card comes out, and she buys a week’s worth of outfits to get her to the first paycheck. This may not be “good” debt, but if she didn’t earn and save enough money while achieving her degree, it could be a short-term necessity.

Then again, another way to look at this need for credit to prepare for the first week in a professional environment is an excuse for not following a solid financial plan over the course of her higher education and the start of her life as an adult.

In another example, a savvy investor could use borrowed money to invest in a business that succeeds. Financial analysts can often determine whether a risk is acceptable, and individual investors can use the same approach. For example, if you could borrow a sum of money at an introductory rate of 0% APR on a credit card for 12 months with no fee, as new customers of this Discover More Card offer can do right now, deposit that in a savings account with 1% interest, you can keep the proceeds as long as you pay the credit card bill on time each month and in full by the end of the introductory period. Back when interest rates were higher, this “credit card balance arbitrage” was a more worthwhile endeavor.

Today, however, most investments that would make borrowing money from a 0% APR credit card worthwhile are riskier than a savings account. Even when the safe interest you could earn was more favorable, there was always a risk of missing a credit card payment and owing penalties and interest to the issuer. If you completed the arbitrage scheme and succeeded in increasing your bank account balance, you’d consider that debt to be good. If not, the debt would be bad.

Do you believe that all debt is bad debt, or are there some situations where it’s worthwhile to pay interest and accept the risk of defaulting?

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Choosing a Career Path By Chasing Hot Jobs

by Flexo
Oil field pipes

A recent article in Fortune Magazine predicts that one of the hottest jobs ten years from now will be data scientist. If this prediction is true, parents of teenagers in their first year of high school and their parents might consider encouraging their kids to develop the skills necessary to be in high demand by ... Continue reading this article…

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Money Planners Can Help You Take Control of Your Finances

by Flexo
Kimberly Palmer's Money Planner

Having ready many books about personal finance and money management over the last decade, I recognize most new books as offering nothing particularly new to readers. Some of the world’s favorite money gurus rehash the same ideas repeatedly, some on a predictable yearly release schedule, and these books become best-sellers due to the names attached. ... Continue reading this article…

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Reflecting on My 2011 Goals

by Flexo

A little less than a year ago, I mentioned that 2011 would be the year that everything changes. It’s a phrasing that I borrowed from Torchwood, but it was relevant for me as well as to the television program’s concept. I’ll have more to say about this year’s changes later. At the time I created ... Continue reading this article…

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Podcast 140: Kidworth

by Flexo

Today on the Consumerism Commentary Podcast, Tom Dziubek talks to Rudy DeFelice, founder of the financial management tool for children and parents, Kidworth. Rudy discusses several topics about Kidworth including what it does, what inspired him to found it, as well as how Kidworth can help children save towards different financial goals. Consumerism Commentary Podcast ... Continue reading this article…

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