Passbook savings at even .01% is still better than the 0% you get by loaning your money to Uncle Sam for a year, and I’m seeing quite a few institutions offering as much as 1.6%
Getting a $1000 tax refund is an awful way to save.
For me, even $200 is too much. I would be looking very closely at next year’s taxes.
Why let Uncle Sam use your money for free? That’s silly.
100% totally incorrect? Nope. Sorry.
Another vote for Turbo Tax. It’s easy.
You’re certainly free to pull up any of the numerous tax filing websites and run the numbers on your own. It’s free to do, no one will know you’re doing it and you can check his math. The other nice thing about that is it lets you play with the numbers to see what changes what.
Just make sure you don’t enter your credit card, as long as you don’t do that, you can’t accidentally file them. I only mention this because if you want to see the actual forms, you have to get almost to the point of filing.
My refund is about $1500 a year. If I got my withholding numbers exactly right, it would only be another $30 per paycheck. I know that’s a lot for some people, but I’d rather not cut it any closer and owe money. Especially since a lot of it depends on other things. Maybe a stock pick goes way up or down and you sell it, for example.
Anyway, yes, technically the closer to zero it is, the better. But most people would rather get a nice refund. When I hear people say their refund is too small, I usually say what you said, but [if applicable], tell them I can adjust their W-4 and it would be bigger. If they don’t catch on right away, I’ll explain that I can take more out each week and they’ll get it back at the end of the year. I wouldn’t recommend it, I just try to get them to understand that the refund is just extra money they paid in.
Regarding the OP. I do my own. I’ve used TurboTax, but switched to TaxAct a few years ago. This year I’m giving Credit Karma (totally free) a shot. I’ve thought about having an actual CPA look over them, but I’d have to really mess up to make that worth it.
I have done my own with TurboTax since it was TurboTax for DOS. I usually spend 2-4 hours. The reason I do not use a paid preparer is that most of the time is collecting and organizing the paperwork, which I would have to do anyway. Entering it into TurboTax doesn’t take long except for my securities transactions for capital gains/losses. We are married, file jointly, two incomes, investment account, two kids in college. I used to have rental property, which is a little tedious to deal with but straightforward. We itemize (not sure what we’ll do for 2018).
USA - TurboTax
I have income in multiple states, so that is a wrinkle that I find daunting. In the past I used an accountant, but he charged too much, and handed my taxes off to one of his juniors who didn’t seem to have mastery of the multi-state scenario anyway. So, back to me doing them and worrying I’m off somewhere!
Strictly from an economic standpoint you should strive to owe the most possible without paying a penalty. However, many or most people can’t come up with enough cash for that.
I used to, until very recently. In fact, one of the advantages of being self-employed in Navarre is that our forms tend to be a lot simpler than those for the general government (1) and, until very recently, our webpages were quite well-behaved. The current government though… they have complicated the web-based process to where doing the two quarterly taxes requires three (yes, 3) different browsers due to different forms being compatible with only one browser, and the payments page plumb doesn’t work; if the payment doesn’t get processed, then you get hit with a fine and interest. Note that in my case, the payment which had not gone through showed in the list of transactions as “performed correctly”. It doesn’t matter: they’re the government and you’re not, so bring the lube.
So I’ve hired someone to present them in person for me. I gave him a notary power to be able to present the paperwork and do payments to the Treasury in my name (he has to go to my bank and cannot pay anything else), gave him my scanned sig so he’d be able to print it on the forms, and give him the data every quarter. He scans the presented, stamped forms so I have them for reference. I still do some other stuff myself, but it’s things which have to be via internet and which don’t involve payments (anti-fraud reports).
1: in Spain you pay your taxes to different governments depending on what location are you a tax resident of. You only pay to one government, but which one will vary by location.
I’m in Canada. Mrs Piper and I have simple employment income but some complicated investments, so we use TurboTax; have done so for over a decade. Gives us the comfort that all the calculations are done correctly.
It’s pretty simple. We can usually do it in an evening or a weekend afternoon.
Canadian system sounds a bit simpler than the US. The Feds and the provinces both charge income tax, but in all provinces except Quebec, the provinces charge tax on the income calculated federally, and the Canada Revenue Agency collects for both the Feds and the provinces, so it’s just one set of returns. The provincial return is just one additional form to attach to the federal return. Also, your provincial tax depends where you lived in December 31. That’s the province that taxes you, even if you just moved to that province a week before.
However, we have to itemise everything for deductions. From previous threads here, it sounds like you have the option in the US of taking a general deduction, or itemising? Is that right?
Also, no joint filings for spouses. We each file our own returns, on our own income, although there are some provisions for income splitting (e.g. Pensioners where only one is drawing a pension).
Once it’s done, we e-file.
From Perú.
Since I work for a school as a full time teacher, I don’t have to do taxes. All taxes are taken before my paycheck. Even if the school didn’t pay, I wouldn’t be liable.
For my self-employed wife it is different. She has to pay taxes, but the ammount is calculated by the SUNAT (Peru’s IRS) because all her bill have to be filed electronically, so, at the end of the year she get’s an e-mail saying “pay this”.
I do my own taxes and always have. I remember my father doing his own return and also for my two grandfathers, so it is a family tradition.
Living in Canada, I fill out federal and provincial returns for me and my wife plus a US tax return. For five or six years I have been using free software (Studiotax) for the Canadian returns but the US I do by hand. That last is especially painful, not because the forms are complicated, but because of special level of hell they have created called FATCA. Bastards. Of course, I owe no US tax because US taxes are considerably less than Canadian and I get a tax credit from the latter.
My husband owns a business in full and another in part and we both work full time. We farm our taxes out to the CPA who manages the corporate taxes. At one point I owned my own business and did my own taxes and promised myself that when I could afford to farm them out, I would, and I did. The woman who completes our returns and who we reach out to for advice on a regular basis is absolutely phenomenal. And, thanks to the fact that she’s one of my husband’s partner’s cousins, she does our taxes at a steep discount.
Now that’s an interesting idea!
Gotta think about that one.
Everyone’s priorities are different, but a $200 refund at today’s interest rates is ~$2/year. I am fortunate enough to be at a point where that $2 is not critical enough for me to spend the time carefully calculating next year’s withholding. (Actually, arguably, anyone spending more than 10 minutes to make the correction (which it would) is losing money as they could have earned at least that much at minimum wage.)
If you count tax software as doing my own, I do my own. In the past, I worked a couple of years at H&R Block, so I’ve done lots of people’s, too. Mine are comparatively fairly straightforward, though.
I’ve always done my own. Nothing terribly complicated - between the two of us, we have 2 jobs, 2 W-2 forms, one house, one mortgage, and a bit in the way of charitable donations. (Thankfully I paid off the student loans a few years ago at long last, so no more student loan interest deduction.)
It’s not my favorite thing in the world to do, but I figure it would take me at least as much time to deal with having someone else do them as just to do them myself.
What I will never understand is why anyone literate and English-speaking would pay a tax preparer to do a 1040EZ.
I kind of doubt that there is anyone working minimum wage who is taking time off of work or declining jobs/clients in order to calculate their taxes. Most likely, they are using 10 minutes for which they would otherwise not have been paid in order to earn a couple of bucks.
I think anyone can underpay by $1000 per year (even up to 10% of tax due) without penalty. Maybe not much difference if it sits a savings account all year, but could be significant for somebody paying a high rate on credit card debt or if put into one of the more successful stocks or mutual funds.
I do my taxes by hand, mail in the stack of handwritten forms, and pay the tax due online.
I’m in the US and still do them using the fillable PDF forms for both state and federal. I mail them the old fashioned way. I refuse to pay someone and I have no interest in using 3rd party filing software as I don’t trust their security. I make too much to get free filing.
I don’t understand why the IRS and my state can’t let me file directly to their site. It’s ludicrous that I have to pay. So until that option exists I will continue to mail it in.
Right now the IRS has no money to even answer the phones. Congress is punishing them for trying to prevent Tea Party affiliated groups from registering as charities. There’s no way they could undertake such a project.
But in the past, the IRS was actually eager to improve its electronic services, including free, direct filing. But each time they tried, Big Tax reminded Congress who was financing their campaigns and Congress sent hints to the IRS that such activity was not approved of. Take for example, "Free File Act of 2016," a bill introduced by Rep. Peter J Roskam, [R-IL-6] with 172 co-sponsors from both parties. If you read the text of the bill, it seems innocuous enough, except it requires the IRS to provide any free filing programs through the Free File Alliance, a tax-industry group. The purpose of the FFA is to provide Congress with a cover by making available some minimal free filing programs for low and middle income taxpayers with simple returns.
The IRS got the message, so Congress did not have to pass the bill.
A few states have their own online tax filing systems. But Big Tax has been at work in state legislatures, too. In fact, Big Tax has convinced several states to discontinue their online filing systems and use services provided by the FFA as their excuse.
By the way, some people may have heard of the Free Fillable Forms web site (there is a link to it in the IRS web site) and think it is a service provided by the IRS. It is not. It, too, is an FFA controlled site.
Lots of people get really intimidated by even basic bureaucratic formalities, but some of them also want to get an “instant” refund, i.e. a cash advance with usurious interest.
I’m all for using professionals when it is needed. For example, I am the first person to tell people to talk to an attorney for legal matters. For complex accounting matters, I pay to have an accountant consultant on how to do something when it is needed.
We used to use a CPA all the time, because we were both busy working and didn’t care to be bothered with the whole thing to be honest. But after the accountant charged us $2K to do a return and answer some questions over the phone, we decided it was time to look into things more closely to explore options if we should continue doing this ourselves or have a professional do this.
We tried another accountant, and he got us to visit him in his office and he spent half the time telling us war stories to impress us of former clients he had. But we got a huge bill for this session for the hour when only 5 minutes of it was useful to us and we could have done that over the phone.
Once we spent some time reviewing our old tax returns that were professionally prepared we decided to give Turbotax a try. We were surprised at how easy it was. When you have an accountant, you still have to keep records and summarize things to hand over to the accountant to do the tax return. The only real work was doing the tax return itself and Turbotax was very helpful in that regard.
We usually spend a weekend taking our time doing the tax return with Turbotax so we can carefully review everything. We keep a word processing file we keep updated on what needs to be done for the next return or answers to questions we had during the year.
Turbotax does a good job of prompting you for things that apply to you, or has good logic. But it isn’t perfect. If it doesn’t know about something for your specific state, it won’t prompt you to ask “How much was your XYZ Nice Guy Rebate from the state?”. You need to know about that, and have to know how to enter it in Turbotax so it is correct.
In retrospect, I think accountants charge way too much money for what they do, especially when the bulk of it is passed on to a low-cost employee to do. If your return is complex or you have events you don’t know how to handle use an accountant, but if it is a static return that is basically the same thing each year you can handle it fine with Turbotax.
As for accounting questions from real CPAs, we have used some online services to spend like $25.00 asking an important question. We have asked the same question to two consultants independently and if we got the same answer, then we consider it to be the correct thing to do.
Another thing about working with an accountant, after we reviewed the old returns just to figure out what needs to be done in the future, we found out the accountant was doing things without asking us. For example, if we are to get a refund, I want it paid immediately deposited into our bank account. This accountant was arbitrarily having it applied to pay taxes for the next tax year so we didn’t get the refund sometimes. I think he was doing this to be lazy by checking the box, because otherwise he would have needed our bank account and routing number to do the direct deposit. After all, it isn’t his money so he doesn’t care. Again, if he would have asked us that would be a different story but he would just check that box and we didn’t get the refund deposited.
Have we made mistakes? Yes, early on, we messed up some things and have to amend a return. Once we missed out on a tax deduction, but when you consider the cost savings from not using an accountant we were still way ahead.