This year I settled on TaxACT. The price is right, it’s a quick 10MB download (an easily electronically-archiveable size when compared to a multimedia-laden CD), and the software interface is perfect (for me). There is kind of a text-based interview (no multimedia mini-lectures like with TurboTax), but really, all any tax software can do is ask you to perform basic data entry of various numbers from various forms, and then go figure out how to put those numbers together.
I’m pleased to say that TaxACT saved us some money :). I had changed jobs mid-year, which meant I had two employers withholding social-security taxes. However, since social security tax withholdings are not coordinated between these two employers, one can end up paying too much social security tax. This is known as “excess social security and tier 1 RRTA tax withheld”, in form 1040 line 67, which you get back as a refund. Cha-ching.
My odyssey through tax software:
- In 1996, I filed my taxes for the first time, using TurboTax. I think it came on a single 3.5″ floppy disk. Life was simple back then.
- For 2000, I switched to Kiplinger’s TaxCut (now H&R Block TaxCut), partly for the sake of experimentation, but mostly because it came with a rebate for an effectively free upgrade to the latest version of Microsoft Money, which I had been using using 1993. I remember it working well enough, but not liking it that much compared to TurboTax. It was rather unfriendly going back to parts of the tax return that had already been covered by the initial interview. When I did revisit something to make a correction, I remember feeling rather uncomfortably unsure whether or not the software had re-done all the resulting cascading computations based on my changes. But it would be unfair to give TaxCut today a negative review based on my 6-year old fuzzily-negative impressions.
- For 2001, I switched back to TurboTax. I think this was the year of the big hoo-ha surrounding Intuit, TurboTax, and the introduction of the surreptitiously installed and not-so-surreptitiously un-installed “Cedilla” DRM (anti-piracy) software. TurboTax came on a CD, and a ton of multi-media videos that wouldn’t play on my old slow laptop. Aside from Cedilla, it worked well enough. It also integrated pretty well with Quicken. (In what can be a complete discussion of its own, I had switched away from Microsoft Money to Quicken this same year. But let’s stick to taxes.)
- For 2004, we paid an accountant to do our return. The accountant was selected based on glowing recommendations from my wife’s co-workers. This was a very terrible experience for me. There were numerous errors in the return (which the accountant acknowledged and corrected) ranging from misplaced decimal points and mis-reading various forms (irritating, but honest human mistakes, I suppose), to a final exasperated “well, tell me what you want me to enter for this line of the form and I’ll enter it”. Please, lady, have some professionalism! She should have simply told me she couldn’t do my return and that I should find someone else, rather than hang on to my business (which was rapidly become less and less worth her while, and making me more and more angry). To her credit, when she mailed us our copy of the prepared return, she also included an unsolicited partial refund. She probably does a fine job for my wife’s co-workers; all this means is that everyone’s tax situation is different, which means that everyone will have a different ideal accountant.
Having lost all confidence in the accountant after the first error (discovered by my own paranoid cursory examination of the return), I had done my return myself by hand (which had uncovered the subsequent errors). This was an extremely painful but rewarding exercise. As can be expected, it was extremely painful. However, it was also extremely rewarding because by the time I had finished setting up my tax forms in my spreadsheets, I could see exactly how every number affected the outcome of my taxes, in a manner far more transparent than any tax software I’ve ever used. By plugging in different numbers in different fields, I could play with various “what-if” scenarios to help minimize tax consequences. How much more (or less) could I have donated to charity? Should I have splurged more on the home-office expenses for itemized deductions? How much stock can I sell? And so on. And ultimately, I felt better. It’s my money; why should I completely trust someone else to take care of it?
- For 2005 (this year), I simply copied my spreadsheet work from last year. I also purchased some tax software to double-check my results, and for the e-filing functionality. It’s really stupid. Rather than openly publish the technical interfaces for e-filing, the IRS restricts e-filing to some small list of approved software, which you of course have to pay for. More tax dollars at work: the e-filing taxpayer saves the government money, but often ends up paying more than filing by mail. Aside from the excess social security tax withheld, my spreadsheet agreed with TaxACT, so we’re either both right or both wrong.