Wednesday, March 10, 2010

Tax Deadline Madness Looms Ahead

Yahoo! I just completed my taxes and business deductions for 2009 and am relieved I had enough deductions to reduce my taxes significantly. I also had capital losses I could use when I sold my gold coins for a loss the same year. The deduction is $3,000!

Yesterday I was about to drop the returns in the mail without the capital loss deduction when it suddenly dawned on me as I headed out the door I could include capital losses on Schedule D! It was very simple to do and saved me $800 in taxes. I proceeded to rewrite a check to the IRS for $800 less than I had only 30 minutes prior. Had I later learned to have missed such a significant deduction, I would have been very upset to say the least. I could have amended the return of course, but doing so is always a red flag for the IRS for possible audits.

I had started out doing my taxes with the free e-filing forms the IRS offers on its site only to learn the calculating math sections are buggy. I then turned to Turbo Tax, something I used last year for a more simpler return, but decided to file the old fashioned way.
Here's the reason why; I believe Turbo Tax is dangerous to use for more complex tax filings.

Turbo Tax software isn't as complex as one might expect. Turbo leads you to believe taxes done its way will be fast and simple with its internal guidance feature, but I believe it poses a danger to tax payers to depend far too much on the software itself. They also lie claiming filing with Turbo is "free". Not so! You'll not only pay to use the software, but pay a $50 fee to file electronically.

I used to have an accountant do my taxes but decided I could do them myself to save a few hundred dollars. My accountant was great to call up with tax questions he'd answer at no charge. However today's Internet, along with various self-help tax books, allows answers in a matter of minutes. My former accountant's one of those ole fashioned professionals who has no email address or website. I'd have to mail my returns and wait 4 weeks, then be charged at least $300.

Thanks to PDFs and the Internet providing all the information at one's fingertips, doing one's own taxes and deductions is doable. The only question that remains is, does the IRS tend to trust accountant's work over the tax payer doing their own returns much like judges give more credence to attorneys then pro pers (self represented) people? Is there a special protection that comes with using an accountant who signs the return? Only time will tell.