Last year I used H&R Block to do my taxes…face to face at their office. I got banged $240.00 for the pleasure. This year I have received numerous E mails from them to do my taxes on line for $19.99.
I know…no brainer.
So, why the huge difference?
And, is it as easy as they say it is?
Anyone had the experience of on line filing?
With online taxes, you are the preparer. When you go there in person, H&R Block is the preparer. And when you hire a professional tax preparer, you’re paying for their operational costs–they have to keep the lights on during the day and heat on in the winter. You’re also paying for their time, to error-check your return. You’re also paying an invisible insurance premium because, when they sign your form, they’re personally guaranteeing its correctness to the IRS. If they make a mistake and you end up underpaying, they are financially responsible for the error . You can Google “directors and omissions liability” for more information on how this kind of insurance works.
I always do my own taxes online (Turbotax). Of course, my taxes are easy. I have one job and no investments. The only fancy thing I deducted this year was student loan interest payments. If you have multiple jobs, are a contractor, or collect investment income, it becomes a lot harder to do your own taxes correctly, and your chances of being audited increase. In those cases, a professional tax preparer is a good idea.
But don’t go thinking that using their software buys you the same things that going there in person buys you. It doesn’t, not at all. The online forms have software that error checks for you, but it’s not as sophisticated as the human brain. And the online preparation doesn’t indemnify you against paying back taxes in the future, if a mistake is made.
Online taxes are really easy for the normal schmoe with a job and some investments and maybe a house and a kid or whatever. If you do anything weird, like trade futures or own your own business or exercise stock options, you may need a human to help.
How weird? I, for example, do a lot of work as a self-employed contractor with many short-term outside contracts with a couple of companies. Does this mean I need to shell out for the Home and Business edition like the website implies?
I also use the free version of Turbo Tax and find it pretty robust. I’m not sure a professional preparer is all that necessary even if you had multiple jobs or are a contractor. If I were in that situation, I’d pay closer attention to make sure I’m doing it right but I don’t see how paying $240 just because you have to enter an extra W2 makes any sense.
I did mine with H&R Block online and it didn’t cost me anything and I have two jobs, mortgage interest and PMI deductions and charitable contributions. I think you can do it free for most simple tax situations. When you start going through the form it has places it tells you if the situation requires an upgrade to a paid version.
To clarify: they are financially responsible for penalties and interest resulting from the error - YOU are responsible for the tax itself.
We have: 2 jobs (one apiece), a fair amount of dividend income, some interest income, regular itemized deductions (the simple stuff: mortgage interest, state income tax) and I do our taxes using TurboTax. Much more complex than ours, and without my background (mom was a tax accountant so I literally grew up with it, and even did clerical work at H&R Block in high school), and it might get iffy.
For example when we had multiple states (moved from NC to VA), I had my mother prepare our return. Later on, when I had nonresident NY State taxes, I did them myself… and screwed it up. This was before TurboTax etc. so it might have been easier with such a tool.
We used to have a household employee and that was a pain in the neck - I think most people would have trouble with those forms (which were submitted as part of our 1040 process).
Self-employed: Yes, you could do it yourself and you’d probably be fine, but a professional might be able to give you guidance on the kinds of records you need to keep, what can be counted a business expense, etc.
Personally I just download the Fill in PDF’s of the forms and do it that way, took me like 45 min for Federal and state even doing all the math by hand.