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.
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.