Software review: TurboTax

by Philip Brewer on 24 March 2008 9 comments
Photo: TurboTax

I wasn't looking forward to doing my taxes this year.  They were going to be more complicated than in years past, because I left my regular job and started working full-time as a writer.  I also had some other new complications.  TurboTax handled it all without difficulty.

I should mention that I've used TurboTax (and before that, its predecessor MacInTax) since 1995.  This year I got a free review copy.  I wrote a bit about the new features in TurboTax back in January.

Me and tax expertise

Back in 1981 there were some major changes to the tax code.  Since I was just out of college, working at my first job, I paid some attention--this stuff was going to matter to me.  There were lots of parts of the tax code that I didn't understand, but I felt like I had a pretty good handle on the ordinary stuff as it applied to ordinary people earning a salary.

The rules changed a bit every year, which was annoying--I'd put a lot of effort into understanding all this stuff, and here they were still screwing around with it--but I was keeping up okay.  Then, in 1986, there was a big rewrite of the tax laws.  Practically all the stuff I'd learned in 1981, and then kept up on for the next four years, was changed.

There'd been a brief period there when I was, if not a tax expert, at least a resource for my friends and coworkers.  They could ask me stuff about the rules for IRAs or 401(k)s, and I'd often know the answer.

After 1986, though, I gave up.  Not only was it impossible to keep up with the changes, it really wasn't worth arranging your finances to take advantage of special rules, unless you got an advantage in that same tax year:  several special rules that I'd been counting on were eliminated in the 1986 tax reform--before I'd had a chance to take advantage of them.

Since then, I pretty much don't say anything about taxes without prefacing the statement with, "Well, I'm no tax expert, but...."

This year's taxes

Here's how things went.

The old stuff

TurboTax still has the good stuff that it's had for years.  It gets the information from last year's tax files, so you don't have to retype your name, address, social security number, or bank account direct deposit information.  It also remembers things like what 1099 forms you had last year, and tells you if one is missing this year--very handy if you're trying to do your taxes early, unaware that there's a form or two yet to come.

Speaking of 1099s, they've improved the process for entering them.  For a long time, they've been set up to walk you through them in batches--all the 1099-INTs, all the 1099-DIVs, all the 1099-OIDs, etc.  In my case, though, several of my 1099s (the ones from fund families and brokerage accounts) combined two or three or four different kinds of 1099, which meant that I had to go through the same form two or three or four different times.  Much better for me to just put the stack of 1099s next to my keyboard, and go through it one time, entering all the information off each form.  Once I've gone through my stack, I know I've got all the information.  The latest version of TurboTax makes it quite a bit easier to do it that way.

The new stuff

The last time I thought I understood the home-office deduction (which was probably back in the 1980s, although I might have tried to figure it out again during the period when I owned a home in the 1990s), the rules were more strict than they seem to be now.  Back then, I think, you could only deduct whole rooms as a home office.  If any part of the room was used for non-business purposes, no deduction was allowed.

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With that as my recollection, I wasn't too sure if the space I use for my writing qualified for a home office deduction.  Happily, TurboTax is set up to help users figure that sort of thing out, asking questions to make sure you meet the rules.  (As near as I can tell, I do.)  Once it verified that, it gathered the information on deductible expenses and did all the calculations to pro-rate the home expenses by the fraction of the home that my office uses.  (It also has a page to gather home office expenses that shouldn't be pro-rated, but I didn't have any of those.)

The other new (for me) thing was that I had a Health Savings Account.  That was a bit complicated--the rules about how much I could put in had changed last year, after I'd already arranged (back in October of 2006) to fund it via payroll deduction.  Also, while I'd been working, my employer had contributing, but that ended when the site closed.  Those contributions were pre-tax (hence not deductible), but I also contributed a chunk of after-tax money to bring my total contribution up to the IRS maximum.  TurboTax sorted out the pre-tax and post-tax contributions, deducted the deductible parts, and verified that I hadn't gone over the maximum.  All very handy.

Filing

For years, I resisted electronic filing.  (I figured I'd go with electronic filing as soon as they'd do it for the cost of a stamp.)  About three years ago, I finally came around, and I've been pretty happy with the e-file process.  No need to make photocopies of the forms.  No need to sort out what goes in the envelope.  No need to make a trip to the post office.  Get proof that you filed.  Get your refund much earlier.  It seemed like it was worth the $16.

This year, though, it was more like $18.

So, I compromised.  I filed the federal return (where I'm getting a refund) electronically.  But I'm sending the state return in via regular mail.

There are a couple of reasons why this makes sense.  First, in Illinois, the state taxes are very simple--just a couple of pages--so there's not so much to send in.  Second, I'm not getting a refund, so it's easy to send in a check with the return.

Bottom line

Basically, I'm entirely pleased with TurboTax.  I got a free copy this year.  (It didn't come with free e-filing, though, so Intuit still made a little money off me.)  Next year, I expect I'll once again buy my own copy.

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Guest's picture
Scott

..consider doing it on Turbo Tax and just having the preparer check it(they will do this for a bit less than the full fee). The education you get investing a few hours a year into your biggest expense is worth it.

Linsey Knerl's picture

I too used TurboTax this year.  I did the online edition for those of us who qualify for the FreeFile.  Totally pleased!

Guest's picture
Hannah

Personally, I actually prefer to do my taxes by hand, filling out the forms and adding manually. I've used tax software before (Turbo Tax and a Quick Tax) but I just like the simplicity of filling out a bundle of papers.

Guest's picture

Just be warned that *if* you run into a problem with their software, their support is next to non-existant. I'd used Turbo Tax for the last five years or so with great luck, but this year it miscalculated my tax and it was incredibly difficult to resolve the situation. My husband has a Health Savings Account through his employer, so we are required to submit a form 8889. That form became corrupted somehow ~ it calculated excess contributions (and figured tax on the excess) even though our contributions were $2K below the limit. All the figures I had entered were correct, and no amount of deleting and reentering them would fix it. To make my aggravation level worse, the problem didn't emerge till after I paid. I searched the help files, FAQS, and support forums extensively and tried every suggestion I could find, but nothing worked. My posts on their "support forums" were answered only by others having the same problem, not Turbo Tax staff, and my emails were essentially blown off with "well, form 8889 seems to work for us". The only phone number I could find on the site came with a $30 price tag, which I hated to pay since I'd already given them over a $100. Finally, in response to my fourth contact attempt, they emailed a phone number for free support. The tech on the phone was able to quickly fix my problem by directing me to a part of the site I hadn't found on my own and having me delete the form 8889 altogether. When I started the interview questions over it worked like a breeze. If I had been able to talk to this tech when the problem first popped up, it would have been solved immediately. But instead I got no response from Turbo Tax for three weeks, and spent more hours trying to resolve the situation than I had with all the rest of the return combined.

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jvthomp

I will not use TurboTax again. Last year I completed the return successfully online but was unable to print it, and their help desk could not help me or print it for me. This year I was all done, checked and double checked the numbers, and just as I pushed the button to send my return to the IRS, it doubled my income! There was no way to retrieve it so I had to file an amended return - which, of course, I couldn't do on the site. I had to find the paper forms at my PO and go to the trouble of re-filing, which I could have done in the first place and which will delay my refund for some weeks. What a waste of time and money.

Guest's picture
Guest

THE SAME THING HAPPENED TO ME LAST NIGHT!!!
It doubled my income right after I e-filed!!!
What happened to you after it got filed? Did the IRS reject it? According to TurboTax I have to pay an outrageous 24,000 in tax and I don't have that in my bank account, this will mess up my account if it goes through.

Guest's picture
Mary

We've used TurboTax for years. Never any problems with it. Very easy to use.

Guest's picture
Ben Lin

Your software on this is terribly flawed for people who pay quarterly estimated taxes, federal and state. You assume everyone makes the same income every quarter and penalize those who seemingly underpay. In my case 1) I am an actor. My income various from month to month., sometimes with no income for weeks or even months 2) Most of my income comes in December. Typically, I make my required minimum distribution from my retirement fund (IRA or Keogh) in this month. Futhermore, even more of my annual income comes from distributions from my various mutual funds and they occur usually in mid-December or towards the end of the year. However, your erroneous assumption forces interest payment on me every quarter, especially with the federal return which I cannot file without inclusion of your assessesed interest. This is wrong, unjust and inequitable.

Philip Brewer's picture

I actually have another article specifically on doing estimated taxes for people with irregular income:

http://www.wisebread.com/taxes-on-irregular-income