Another year is past, and once again it’s time for the annual hair-reduction program known as filling out your taxes, forking over too much money to the IRS, etc. But here I sit, armed with a copy of TurboTax Deluxe Federal + E-File (2009), a pile of W-2s and 10-whatevers, spreadhseets deductions, and the bar of soap I'll probably need for washing out my mouth: I'm good go.
With the exception of the year I used H & R Block On-Line to file, I’ve been using TurboTax since the mid-nineties. Sometimes it’s Deluxe, sometimes Basic, sometimes Federal + State, sometimes Federal only. I’ve e-filed for about ten years. Except for the Cdilla licensing fiasco in 2002, I’ve never had a serious problem with the software (though it isn’t idiot-proof). Here’s this year’s story
I installed from CD-ROM, though a download is available (as is an almost identical on-line version). Installation took just a few minutes. I then had to update (the CDs are distributed before the year's tax code is finished). That took a couple of minutes over broadband. Once done, I went straight into filling out the forms. Here’s how that goes…
Entering income and deductions is either through a “Let us Guide You” process (suggested for newbies) or by “exploring” the process (for experienced users). Either way follows the same steps one would take if filling out the forms on paper:
Personal information: TurboTax automatically copies personal information from last year’s return if it’s on the current computer; you can also enter by hand or correct anything that’s changed from last year.
Income: You can hand-enter W-2 information, and (for some employers) you’ve been able to download W-2 information via the web for the past few years. I’ve never downloaded, myself. You can also download (if available) or hand-enter interest and dividend income, investment income, and the like – a total of nine different income sources.
While in this process, you can divert to filling out profit or loss from a business (IRS Schedule C) sheet(s). Note that self-employment taxes are automatically figured in this section. If you don’t take some of the more common business deductions (health insurance, mileage) the program “nudges” you to take a look at the topic -- it’s part of the Maximize Your Deduction process.
Deductions: Step-by-step, progress through common and few uncommon deductions. Where there are subsidiary calculations (e.g., maximum deductions for home equity loans), rules and limits are built into the process. Deductions include the usual biggies – house, medical, charitable – and also everything that’s subject to the two-percent limitation (casualty and loss, business expenses). For charitable deductions, you can download your information directly from Intuit’s free on-line utility ItsDeductible (TurboTax Deluxe and higher only; not available for Basic). For all deductions (for income and expenses as well), you can import directly from Intuit’s Quicken product (assuming you’ve good records for the tax year).
There are a total of ten different deductions/credits sections. Once again, when you’ve completed the section you get a programmatic nudge to look at any common deductions you haven’t claimed, sort of just in case.
When Income and Deductions sections are complete, the program runs a check on the input -- here’s where the “not idiot-proof” part comes in. If you fail to fill in a necessary blank, you’ll be prompted to correct it: so far, so good. The idiot-proofing part? for 2009, there’s a tax credit for housing people displaced by natural disasters. As a test, I input information for a hypothetical person displaced by 2008’s Hurricane Ike from Galveston, TX – including name/SSN, address, and number of days. In the check, I was warned that the displaced person’s home address had to be in part of the country flooded in summer 2009. I plugged in Indiana instead of Texas, and it went through – even though there’s no Galveston, IN, and if there were its zip code would start with 4 instead of 7. I’m betting that a lot of the errors “not caught” by TurboTax are of this sort…
State Tax: According to TurboTax, “Lucky [me] – [my] state does not have a personal income tax…” for those of you who live in states that have personal income taxes, well, let me just say it ain’t all it’s cracked up to be…
Wrap-up: Next is an automatic step in which TurboTax analyzes the return. The program guarantees you’ll pay the minimum tax. The return is also guaranteed 100% accurate or Intuit will pay any penalty and interest – a final check for errors and missing information is run at this time (still not idiot-proof, though). And last, the return is analyzed for “audit risk” based on known IRS flags (home office, schedule C, high charitable deductions, etc.).
Print and File: You can e-file up to five returns for free (a limit set by the IRS, not intuit). You can also print and snail mail. Either way, you can save a pdf copy to your computer as desired. Per the IRS regulations, you need to supply identifying information: the PIN(s) you used for last year’e e-file or the AGI (adjusted gross income) from last year’s return. When that’s over, you’re done.
Filling in this year’s forms took me perhaps three hours, because I wasn’t current with either Quicken or ItsDeductible, which would be a lot quicker (I've already set up my 2010 ItsDeductible file - it's free, why not?). If you can’t finish it all in one sitting, by the way, you can set a flag and return to your stopping point. You can also set flags throughout for information you want to re-visit.
Once you’ve entered your income and withholding information, the program tracks the current status of your tax bill – a green number for a refund and a red number for a tax bill. This lets you do things like test the potential change in your tax bill from funding an IRA (which you can still do up until midnight on April 15th).
An aside: One thing most people don’t know is that if you’re nostalgic for the smeary newsprint versions of forms, you can change the interface to let you fill in facsimiles of those forms. Kind of defeats the purpose, if you ask me.
When it comes to help: TurboTax has taken several approaches over the years. At one time, the Deluxe version had cute videos as part of the help, but they’ve been jettisoned in favor of a “Live Community” that (supposedly) is there to answer your questions. That’s the only free option for help with tax questions. Of course there are many in-context links (“explain this” and “see more information”) to On-Demand Tax Guidance throughout the interface, which includes glossary entries.
For another $30 (for the first 20 minutes) you can get “one-on-one answers”” from a “tax expert.” For a one-time fee of $40, your return will be reviewed by an “pro.” And for another $40, you can buy an AuditDefense insurance policy. As in past years, I remain unimpressed by the quality of the help in the “free” forums. I’ve seeded the forums with questions to which I already know the answer in the past and gotten bogus information. I would not depend on this “help” for complex situations – I’m more inclined to call the IRS to ask whether I can charge off my Netflix fees against the income I make from movie reviews (IRS tells me that if I think I can support the deduction in an audit, it’s my call…) For my money, this “forum” approach is a profoundly negative outgrowth of social networking. I’d hate to need help and depend on those people…
Will I Buy TurboTax Again Next Year? Almost certainly. Using the software makes completing and filing my return almost foolproof, even though I’ve been known to add two and two to get fifty-four. I can also use the software later in the year to get a feeling for how shifting income and deductions will change my tax liability next year, though of course impending tax law changes can make this a guessing game. Now whether you should buy the product is another question. Here are some things to continue (points I make every year):
• Shelling out the MSRP $49.99 is a waste of money if your tax situation is dirt-simple. If you have a few deductions to apply, TurboTax Basic would be better, but if you don't itemize it makes no sense. You can use the free on-line Federal version. Besides, if you can't fill out a 1040A or a 1040EZ without this kind of help, you probably can't install and run the software, either.
• TurboTax Deluxe can be indispensable if you have complex income and deductions, including entries for self-employment or farming/ranching. If you have lots of income from investments or you're a slumlord with a bunch of rental properties, you may want to step up to the Business or Premier edition (n additional $20 or so). Trust me: they’ll nag you to upgrade if they think you need a more powerful version.
• You can easily save the software's cost by finding a single missed deduction - especially with the "Maximize Your Deductions" process.
I've used both Basic and Deluxe, and I’ve found that either one is worth having on my side.
Closing Recommendation: In truth, I don't know what I'd do without Turbo Tax - and it's a good bet that I'll buy it again next year. Highly recommended. Happy Tax Day!
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