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Helpware: Want to save money on your taxes? Hire an accountant


TurboTax is the most expensive $100 software Iíve ever used.

Last year, I prepared my straightforward personal and business taxes with TurboTax, and then I gave the same income and expense data to an accountant. He discovered that I made multiple errors when I input data into TurboTax; he also discovered that I paid more than $1,600 to the IRS than I should have. True, it cost me $500 to find out about the overpayment, but Iím still up more than $1,000.

Park of the reason I like to do my own taxes is my fascination with numbers. In high school I took a test that was supposed to ascertain the professions suited my talents and personality. I fit the profile of an accountant by a wide margin. Way down the list of professions I would succeed in was journalism. So naturally I became one. I had seen "The Front Page" one too many times.

My last years, after the paper I worked for was sold, were miserable. I worked for several newspapers for nearly five decades because I liked my colleagues in the newsroom. I retired because I had reached the limit in my misery index. It didnít help on black Mondays, when our paltry wages were cut again and again. In 2013, I was making less money than I made in 1990. Things were so bad, advertising so sparse, that the half-life of a publisher was between four and six months. At one time the paper I worked for had more than 700 full- and part-time employees. When I left, the number was barely in the double digits. The ship was sinking, and it was either grab a life jacket or go under.

But enough about my wasted youth. Back to TurboTax.

I gathered all my income and expense data and spent the better part of a Sunday inputting it all into TurboTax. When Iím finished, Iíll give my TurboTax return to my accountant and see what he comes up with. Itís worth noting that my accountant is conservative. While he looks for legal deductions, he spots instances where TurboTax didnít request essential information, or other instances where I entered the wrong answers. He will file an honest, scrupulous return and charge me $500 for his time. In a future column Iíll write about how much he saved me ó or, perish the thought, how much extra I owe the taxman.

Meanwhile, back at the ranch, Iím putting the 2017 version of TurboTax Home and Business through its paces. Installation did not go well. Despite an on-screen disclaimer that it wasnít TurboTaxí fault that the installation couldnít proceed, it went into damage control, automatically spending an hour making things right. As I watched, TurboTax probed the depths of the Windows operating system to fix what it said it didnít break. It was somehow all my fault.

On to entering personal information. Since I had used the program for my 2016 return, the 2017 version automatically filled in the blanks for the 2017 version, including information about previous employers, some of which I had to delete, since I didnít work for them anymore.

TurboTax acts much like a tax preparer ó it asks questions, and instead of jotting down the answers, I type in the answers as best can. Oddly, the program wanted to deal with my writing and editing business first. I figured that the first questions should have been whether I have a home office. Thatís important because there are deductions associated with home offices. When I searched for "home office" in the help feature, it didnít come up. I flailed about, bamboozled by such terms as "net operating loss." But how could I have a net operating loss if I couldnít figure out whether I have such things as a "domestic production activity deduction"? This would take some time to sort out, so I decided to handle the personal section first.

To aid in this effort I had printed reports from Quicken, the financial program that I used obsessively during the year. It not only categorizes tax-related expenses, it told me I spent $49.46 at Gelsonís, an upscale grocery, in February 2017. The Quicken reports and graphs are like artwork for the accountant in me. I would hang the color graphs in a museum if I could. I really do recommend Quicken as a way to find out whether expenses are galloping past income in real time. Quicken data can be downloaded into TurboTax, but I download bank and credit card transactions daily so that I can discern whether I can afford that vacation in Turks and Caicos. In my dreams.

Since I had categorized medical expenses, I faithfully entered them all, only to learn that I didnít have enough to claim a deduction. Thatís the price I pay for staying healthy and having great insurance if I need it.

Still, I couldnít figure out why the Personal section asked for so many business deductions, and then did nothing with the information.

Just as the moon went dark, so did my desk light. I had a sore neck from spending so much time on my computer, and a headache to match.

TurboTax does its best to take the mystery out of filing tax returns, but itís only as good as the information you feed it. That depends on the questions it asks before data is fed to it. To be charitable (a personal deduction), it shines when a tax return is fairly straightforward. I would not recommend it for General Electric or folks with complicated returns.

My advice is to hire a professional tax preparer. You may have to spend $500 or more for his competence, but Iím willing to bet that he wonít find that Iím in the 45 percent tax bracket, or anywhere near it. Thatís the figure TurboTax came up with. Come to think of it, that $1,000 net savings my accountant found in my 2016 return might pay for airfare to Turks and Caicos after all.

More information: www.turbotax.com. For folks with simple returns, TurboTax has a free feature.

 

 


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