I’m Not a Do-It-Yourself’er
I started doing my own taxes after graduating medical school. Prior to that my income was low enough and my return easy enough that my parents did my taxes along with theirs and I never paid a whit of attention to the process.
However suddenly I was a grown-up – within a few weeks of graduating I was married and living with my new wife in our first apartment while doing q4 call in a strange state over a thousand miles away from where we started.
Along with these new found responsibilities came another one – taxes. While I had the option of working on my own with my parent’s accountant, I decided early on it was something to do myself. With both of us salaried employees and no deductions to speak of, TurboTax was the perfect option. Cheap and relatively straightforward a decade ago, I’ve used TurboTax every year of our marriage until this one.
TurboTax is no longer as cheap or easy to use as it once was, and our returns have become more complicated, though still relatively simple. A little bit of investment income, Backdoor Roth IRAs, and itemized deductions should all be easy-to-do. While TurboTax fills in the forms for me, I’ve made it a point to understand the “why” behind everything as I went along to ensure the return was created properly. As I’ve learned more about the tax code it seems that TurboTax made the process more painful. Returns that were only marginally more complex than prior years were much more expensive and navigating how to enter things became more painful. Over the past few years I’ve had to spend hours trying to resolve errors in the return or learning the new way to enter a Backdoor Roth IRA, which TurboTax to ensure I the software doesn’t charge me thousands in taxes that I do not owe.
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I Quit
This year, after entering in only our W2 forms, I kicked TurboTax to the curb. It immediately told me we owed several thousand in taxes based on the W2s, which I knew to be erroneous based on my own rough calculations (not accounting for other deductions). After 30 minutes of trying to find the problem, I quit.
I have a good friend who is a CPA (employed doing other work), and occasionally prepares taxes as a side job. He’s been my tax law resource for years (same way I am his random pediatric healthcare resource). He agreed to do my taxes, I handed over my meticulous documentation and log of possible deductions, and let him do his thing. He entered it into his own software and had a draft return that almost complete in a fraction of the time it would have taken me. However, we did have to clarify a couple deductions that I thought were allowable where he disagreed.
Anyone with just W2 income and using the standard deduction should be doing their own taxes. It’s easy, can be done online cheap (or free), and helps you understand the basics of how your tax bill is generated. Once you’re comfortable with the basics, it’s easy to start doing more complicated ones on your own.
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When Do You Need Help?
However eventually you may reach a point of complicated returns where it makes sense to use an accountant (or like me where you are so aggravated by the software you just can’t take it anymore). While I have never worked with the guys on the street in the Statue of Liberty costumes twirling arrows, there are plenty of qualified accountants able to do returns for a fee that is only marginally higher than what TurboTax now charges for complicated returns.
Having someone else do my taxes did not mean I stopped learning about the tax code and what was impacting my final totals. Now that I have this blog I need to better understand deductions available to me via self-employment that I currently cannot use as W2 employee (note that at the time of publishing this blog has generated zero dollars in revenue).
While the cost of hot water on the days I write blog posts may or may not be a deductible expense, it’s still worth asking. If you don’t like the answer, just beat him up.
Apr 2018 update — someone sent me this link of reviews of popular online tax software. I read through it and thought it was decent so decided to share it here.
Have you been doing your own taxes? What interesting or uncommon deductions have you used?
