The Grassroots Corner April 18, 2022

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  • Source: FAIRtax
  • 04/18/2022

Tax Software


If you do your taxes using tax preparation software, this Grassroots Corner is for you. The IRS has an online product that lets you do your taxes for free. Florida FAIRtax State Director Paul Livingston used it, except for the online filing feature when he filed his taxes. The product is available at olt.com (as in OnLine Taxes). A state return costs $9.95.

I have been using TurboTax from Intuit for years. There is a free version for simple returns, but I usually pay for the Home and Business edition because I have some residuals from my time practicing law. I generally like TurboTax, but a few changes this year gave me the shakes:
 
1. The software now waits until just before it’s time to “pull the trigger” to file a return before allowing a printout of the return and key calculation sheets. Previously the printout step came much earlier. Having this step come earlier allowed for a more timely review of the return and a chance to go back if something seems amiss.
2. In my case, there was much amiss. When I reviewed the return before filing:
 
  • Dividends and interest were wildly understated.
  • No IRA distributions from the financial institution appeared. There were only the distributions that I had entered manually.
  • A self-employment tax mysteriously appeared.
  • The balance due was sometimes exorbitant and sometimes too good to be true.
  • The problem likely was how I imported data from my financial software. The user can choose between filling in forms directly or using a "step-by-step" feature to respond to questions. I decided to use the step-by-step feature so as not to leave anything out.
3. But there is no automatic prompt in the step-by-step sequence to import either the financial institution data or data from my accounting software (Quicken, which I have been using since the ‘90s). I need the capability to import data from my financial institution and Quicken. Without that capability, the calculations would be overwhelming and tie me down for weeks. 
4. Before clicking “file,” I went over my tax return and saw that there was no dividend income, interest income, or security sales from my investment software. 
5. Then came my Maalox moment. If I go back and re-import data from my financial institution, will the step double-enter the data I have already imported? Or will it overwrite the data? I had no choice. I had to re-import, checking all accounts, including IRAs and inactive accounts. Luckily, the new data did not duplicate the previously imported data. I was safe! Whew! And the final result made sense.
6. How did the self-employment tax get in there?! I had taken a commission from administering an estate, but the administration was a one-shot deal. I was hardly “employed.” I went back and unchecked a box in the worksheet that said I intended to make money, and voila! The self-employment tax disappeared.
7. TurboTax features an error check to ensure the figures line up and make sense to the IRS. For me, a figure on a worksheet was causing a problem. When I changed it to a negative figure, I successfully faked out the software to permit an "error-free" return with no substantive mistakes caused by the change.
8. After several days of horsing around with iterations of the financial software import, I finally had a return that passed the “straight face” test. I filed it electronically. 
 
I will stay with TurboTax next year. But there will always be steps that cause the jitters.

TurboTax is not the only commercially available tax preparation software. Others are Tax Cut, TaxAct, H&R Block, Keeper Tax (focusing on freelancers and self-employed individuals), Tax Slayer, Jackson Hewitt, Credit Karma, TaxChat, E-File, and E-Smart. I am not familiar with the others and cannot give a recommendation either way. There are certainly more.

Tax season is over, but now is the time to gather and arrange your financial records to simplify tax filing in 2023. I have been using Quicken. A more business-oriented version from the same company, Intuit, is QuickBooks. Other personal financial software packages are Microsoft Money, Kiplinger’s Personal Finance, FreshBooks, Oracle, Zoho Books, 1-800Accountant, Patriot Software, ZarMoney, and Sage. As with the tax prep software, I am not familiar with the other programs and cannot give a recommendation either way. For sure there are more.

But we FAIRtax-ers know the answer. PASS THE FAIRTAX! And never file an income tax return again. Of course, personal finance (non-tax) software will continue to make our lives easier.

Please let us know what your experience was using tax software.


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Jim Bennett
AFFT Grassroots Coordinator & Secretary

 

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