Your Take 

Your Take: How Do You Prepare Your Taxes?

Busboys & PoetsLast night I had to pleasure to finally meet some of the DC personal finance bloggers and some PR folks at a happy hour (or three) hosted by TurboTax at Busboys and Poets at 5th and K Street. It was a fun event that was really casual and it was nice to meet people I’d only been emailing, instant messaging, or twittering with these last few months and years. Many thanks to the most awesome Chelsea (@TTaxChels) for inviting me!

In talking with both Scott Gulbransen (@prgully) and Dave Donohue (@davedonohue), I was surprised to learn that most people prepare their taxes the same way their parents did. If your parents did their taxes online with a service like TurboTax, you were more likely to use TurboTax. If they always went to a tax prep place like H&R Block, then you would be more likely to go to H&R Block over trying to do them yourself.

At first I was a little surprised to learn our tax preferences are influenced by our parents, but then I realized I was influenced by my parents. When I first decided to use TurboTax, I didn’t compare it to TaxCut or TaxAct or going to a tax preparer. I chose it because that’s how my dad did our taxes when I was younger. So I shouldn’t have been that surprised because I did the same thing!

So the Your Take for today is a two parter – How do you prepare your taxes and how much do you think your choice is influenced by your parents?

(Photo: daquellamanera)


File Your Taxes Now or Pay More Later

1040 Tax FormsI’ve been blogging about personal finance for four years now and I have a little tip for anyone out there who hasn’t filed their taxes yet (which may not be that many, because I went through half a dozen “winners” for the TurboTax Deluxe free filing card before I found someone who hadn’t filed their taxes yet, go pro-active Bargaineering readers!). At the end of March, most of the tax preparation companies will increase their prices.

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Free Tax Filing Resources

1040 Tax FormsWe’re deep in the throes of tax season and with the economy in the sorry shape that it’s in, I’m sure many taxpayers are looking to gain an edge. I mean we’re already paying taxes, surely it makes less sense that we have to pay to figure out how much we’re going to pay in taxes right? Fortunately, there are a lot of different ways you can get tax filing software or assistance absolutely free.

In addition to the nationally available programs I’m about the list, there are also a lot of local programs. Each state’s tax website will usually list the free tax filing resources or services available in the state. many of these are simply listings of data made available through the IRS Free File system but you might be able to find some gems in there as well.

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2009 Tax Software Shootout: TurboTax vs. TaxCut

In the world of tax preparation software, the big players are Intuit’s TurboTax and H&R Block’s TaxCut. You have smaller players like TaxACT, but the two biggest in terms of branding and market share have to be TurboTax and TaxCut. They battle each other each year but when you really get down to the basics, both products offer the same thing – tax preparation that won’t cost you hundreds of dollars.

Don’t buy the commercials that say you have to go to a tax preparer because you can’t ask the box. A friend of mine once walked into a branch of H&R Block and had her fairly straightforward taxes prepared for $350. She didn’t have any special circumstances whatsoever! Her problem was that she didn’t know how owning a home would affect her taxes. She heard needed to itemize, had no idea what it meant, and that cost her $350. Fortunately for everyone else, you don’t have to know much to prepare your taxes with software because the software will do it for you. I don’t fault H&R Block, they’re a business and they need to keep the lights on, but she could’ve gone with software and saved herself some serious coin.

So, which company should you go with? Intuit’s TurboTax or H&R Block’s TaxCut?

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Complete 99% of Your Tax Return Now

Income Tax OfficeDid you know that 30% of taxpayers file by the first week of February? I found it difficult to believe but apparently it’s true, according to an email I received from the folks at TaxCut. 30% of people file between January 1st and February 7th. Of course, the other 70% file on April 15th!

Why File So Early?

People file early because they want their tax refund as quickly as possible. Why wait until April 15th to file when the government owes you money? If your only income is from your job (and maybe some bank interest), chances are you the government owes you a tax refund unless you adjusted your tax withholding. If you didn’t adjust your withholdings on your W-4, I’m fairly confident the government will owe you money and by not filing ASAP you are extending the interest free loan.

The reason why people even have to wait in until the first week of February is because employers and banks have until January 31st to mail out W-2s and 1099-INTs. However, that doesn’t mean you have to wait until the first week to begin the filing process. If you have your December pay stub, you will have pretty accurate numbers to use as placeholders. You can look up all your bank interest by calling or logging in to your bank account and looking for a tax form. While I would wait until the official W-2 form arrives before e-filing (especially since they will ask for information not typically printed on your stub), nothing stops you from filling out the form now and updating the numbers when your W-2 arrives.

What You Can Do Now

So, want to get a jump? First, check to see if you qualify for free tax preparation. There’s no sense paying for software if you can get it for free. If you earn under $52,000 a year, you can access the IRS Free File Program (details to come Jan 16th) as well.

If you don’t qualify, you have the option of going online or buying the software in a box. In the past, I used TurboTax Online a few times. I don’t think there’s much difference between TurboTax and TaxCut, outside of pricing. I personally like the online version because I’m comfortable entering all that sensitive information online but if you aren’t, the software from a box is just as good.

With the exception of your income, you already have every other piece of information. You already know all of your tax deductions, all the tax credits you should be eligible for (if not, the tax preparation software will ask you), and everything else the form or software will require. You’re just missing the official income numbers, which will arrive by early February. Fill out everything else and wait for your official tax forms. With your placeholder numbers, you have a good idea of the refund (or tax due). If you end up owing tax, just wait until April! 🙂

I always e-file and I always opt for direct deposit. By e-filing, you don’t have to worry about the post office losing it or having your sensitive information floating around. By direct depositing, you get your money much faster. If you e-file your taxes on February 6th and requested direct deposit, you can get your rebate within two weeks. Last year, if you filed within the first week of February, you received the direct deposit by February 13th! (2008 schedule)

(Photo: thetruthabout)


PC Magazine’s 2009 Editor’s Choice: TurboTax

TurboTaxPC Magazine named its 2009 Editor’s Choice for personal tax preparation software and the winner was Intuit’s TurboTax, beating out H&R Block’s TaxCut and TaxACT. Before you run out and just buy a copy of TurboTax, read the review itself. The advantage TurboTax has over the competition is in their breakdown of difficult and complicated topics. TaxCut won more points because of pricing and matches up in terms of functionality, it was TurboTax’s goes the extra mile in explanations. TaxAct is billed as the product if you’re “more budget-conscious and knowledgeable.”

PC Magazine’s Editor’s Choice

In PC Magazine’s review of TurboTax Premier 2008, a product that retails around $90, they compare the three products on a variety of levels. The real distinction is in what PC Magazine calls “guidance systems:”

There’s a much clearer distinction between the competitors when it comes to their guidance systems. TurboTax makes help more obvious in many places, and gives more—and more useful—explanations more often. Take home-office expenses, for example. After you’ve told TurboTax the dimensions of your home office, it asks for a list of expenses for your entire home, like insurance, mortgage interest, and real estate taxes. It tells you up front that it will prorate those expenses for you, and warns you not to duplicate some amounts you’ve already entered.

TurboTax also offers direct importing of W-2 data from ADP, Paychex, and ProBusiness; TaxCut doesn’t. TurboTax’s FAQs are more context sensitive, TaxCut are less so. It sounds like TurboTax has a lot of nice features that can make your life a little easier, if you’re the type who transposes numbers incorrectly often enough.


However, when it comes to pricing, H&R Block’s TaxCut wins out. Their TaxCut Premium Federal + State + E-File 2008 only runs you $45 compared to the TurboTax Premium, which goes for $90. Twice the price for a few bells and whistles? I’m not sure if it’s worth it.

All that goes out the window if you qualify for free tax filing. If you qualify for free tax filing, just go with the one you’ve always used and the one you feel most comfortable with. I have always used TurboTax because I could file for free and it didn’t matter which I used. When you’re filling out a 1040EZ and you aren’t paying a cent (except the e-filing fee), it doesn’t really matter which one you use!


If I had to choose which one to use, I’d go with the cheaper one. I have a pretty simple tax situation without any crazy investments or schedules I need to account for. If you have a more complicated tax situation, but not so complicated you need a living breathing accountant, maybe it would serve you better to use TurboTax and it’s superior interface and greater degree of handholding. Either way, using one of these packages beats walking into a tax accountant’s office!

Which do you prefer? Do you agree with PC Magazine that TurboTax is better? Or are you a TaxCut fan?


Win A USB Key With TaxCut Software

The contest has ended and the winners have been notified.

One of the PR firms representing H&R Block sent me three USB keys loaded with their TaxCut software and I’m going to give you all a chance to win them. I know April 15th is coming upon us soon, less than a month away, so this contest will only be running until this Friday. Some quick requirements if you want one:

  • Please don’t enter if you already did your taxes or you can do them for free.
  • Please live in the US (I know it’s obvious but sometimes people don’t realize it, this is for tax prep in the US!)
  • Then, please leave a comment with your favorite Laffy Taffy joke ever, and/or,
  • Sign up to receive these posts via email from Feedburner.

To sign up to receive the posts on Blueprint for Financial Prosperity via email, enter your email address below. All you will get are emails from Feedburner (and then one from me when I select a winner for this contest and potentially future contests), otherwise you will receive no other emails.

On Friday I will select the funniest joke, one email subscriber, and then one at random from both lists; email them, and hopefully mail out the keys on Saturday.

Good luck!

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