Tax Information With A Mother's Touch
Published by Eva Rosenberg, MBA, EA
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Tax Information With A Mother's Touch Published by Eva Rosenberg, MBA, EA |
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I Can Do It Myself, Thank You! Everyone Should Do it! Note: Prices and dates listed in this article have not been updated yet - we'll do that soon. In the mid 1980s, I wrote the book, Tax Anxiety Xperience, as a handbook for people who wanted to prepare their own tax returns. A little earlier, the CPA firm I was working for was charging their clients about $250.00 to prepare very simple tax returns. (That was one month's rent at the time. Today that same apartment would be renting for over $900.00.) It's precisely because I thought that was outrageous that I wrote the book and used it as a textbook in my live TV course at USC. But it was 1984 when I wrote that book. A couple of years later, in 1986, Congress completely re-vamped (spelled 'simplified') the tax code. It bore little resemblance to the naively confusing tax code of 1954. Back before 1986, I firmly believed that most people should be preparing their own tax returns - and even depreciation could be learned. But now, with passive losses, complex alternative minimum taxes (AMT), credits that are available but often overlooked, phase-outs of tax attributes and lots of other little traps, you pretty much need a professional to work through the maze of new laws. Sure You Can! Oh sure, you can do your own return. And you may even end up doing it correctly. But there are so many things you overlook, or don't take advantage of. Either you don't know about those opportunities, or you are afraid to use them in case of audit. That's one of the reasons companies like H&R Block can offer to review your last three years' tax returns and be almost certain to find improvements. OK, So, Who Should Do Their Own Tax Returns?
The minute you have a mortgage, you can use itemized deductions. Once they come into the picture, there are many more variables. Add a child or two ... and the tax picture blurs even more. With being able to itemize, you can add things like charitable contributions, employee business expenses, investment expenses, dependent care costs (and is your parent your dependent?) , gambling losses, medical expenses .... And you need to know when you start losing deductions due to income level phase-outs and AMT. Sure, the program you use may calculate some of those things for you. After all, it's supposed to. But do you know what to enter to take advantage of the things that are to your benefit? Or how to re-define expenses so they become deductible? Or how enter things in your life that might reduce your taxes? Or even how to enter the information about last year's rebate that you did - or did NOT get? Do you know to test to see if an IRA would reduce your taxes? Or do you understand that you might qualify for a KEOGH, SEP, SIMPLE, Education IRA or 529 plan? But, if you own a home and have a child or two, you're in that gray area where, it might be OK for you to prepare your own return. You could get away with it if there really aren't any more things you'd be entitled to use. Who Should Never Be Doing Their Own Returns?
At TaxMama.com, we try to provide enough information to help you walk through the questions you have on your tax return. We do try to point to the forms, their instructions, and IRS booklets with more explanations. I try to give you explanations that you can understand about the different issues you bring up. But, let's face it, my friends, tax laws are arcane. They are designed to be confusing, contradictory and insane. The instructions for some of the forms are so confusing even IRS agents can't do the calculations without a computer. You're Going to Do it Anyway Online vs. On Disk OK, you're going to be brave and bold and prepare your own tax return. In the past, you've managed to do it by buying a software package at your local computer or office supply store. So, you think you're ready for the big time - doing it online! Just some overall pros and cons of your two choices:
Who Are The Top Packaged Software Providers? TurboTax by Intuit, the Quicken and QuickBooks folks TaxCut by H&R Block Tax Act by 2nd Story Software TurboTax and TaxCut for Macs Just in case you need some books to help you, here is a link to some selected Tax Books. Is it Safe? So, let's say you're going to do your own tax return. You've been seeing ads everywhere you go to do your tax return online. And you're ready to go! Whoa there. Are you sure you want to prepare your return online? Think about it. You're still afraid to put your credit card into some site's shopping cart. But, you're ready to commit your Social Security number, your job data, all your income and sources of investments, dividends, interests .... all the information about your spouse and your children --- ONLINE!!!???? What are you? Nuts? Do you know how many hackers are out there, just for kicks, hacking into secure files? And do you remember last year when IRS announced that they had lost 40,000 tax returns at a Pittsburgh processing facility? Even IRS isn't all that secure .... and you think these companies are? Sure, it's probably safe, or they wouldn't be doing it. Right? Of course! Yeah, and have I got a some swampland for you. Remember, many of the sites that are offering tax preparation services are companies you've never heard of. This is NOT where I would be starting to build my trust. Do you really believe that all these companies with the nice flashy sites are really going to keep your data secure AND not sell it to anyone AND not use it to target you, themselves? All online tax preparation services have low prices for basic online preparation, but watch out. The prices start rising higher and higher as you add complexity to your return. They should give you a price quote BEFORE they process your return. If you feel the final price is too high, back out BEFORE you transmit the return and subject yourself to the charges. Frankly, once their prices get up to $150, you're better off meeting with your preparer, face-to-face. QUICK TIP: If you do input all your data, I'd suggest that, initially, you don't use your own SS number or real address. Wait until you're satisfied with the computations, the price and the process. Then, and only then, put in your real data. That way, you're protected until the very last minute. So, Who Do I Use? If you must file online, here are some companies offering online filing that are large, established corporations, with the resources to develop secure sites. Or the deep pockets to sue, if their security is breached and someone steals your credit identity, assets or otherwise messes up your life for years, while you fix the problem. First, the free sites. IRS has made arrangements with the major online processors offer free services to certain taxpayers needing help. They have split up the 'free' workload among them. Free filing for those over the age of 50, taxpayer OR spouse, OR those with an AGI under $12,000 is at: TaxBrain.com For the rest? IRS has a list of all the Free File Alliance Members. [Please note: Some of these sites will pay TaxMama.com a commission if you use the link below. We won't tell you which ones so as not to prejudice your choice.] Incidentally, prices listed are for Federal and State for a standard tax return. These folks are among the oldest original tax information resources used by tax professionals. While I haven't seen their software product, they do have a high reputation for good data as a publisher of tax books. CCH Computax was the finest tax processing company before we got in-house software. They were used by all the large CPA firms. (I spent a couple of tax season working for them, waay back, testing their programs to make sure they worked. They were quite impressive.)TaxBrain - $49.95 The price above includes SmartCoverage Audit Defense for your 2002 Returns, and One Year of Unlimited Fax-A-Return Service, among other things.TurboTax Online - $32.90 You're already quite familiar with these folks. You see their boxes in all the computer and office warehouse stores. TaxMama uses the professional version of this software. So while you pay a mere pittance, I pay more than the price of my first new car - each year! Incidentally, if your income is under $25,000, you may qualify to get free tax preparation from Intuit at their Tax Freedom site.H&R Block.- $19.95 ($29.95 after 3/1/02) You'll be seeing them everywhere you look. They have a contract with AOL to be the exclusive tax information provider on AOL's sites and search engines (spelled Netscape, Compuserve, etc.). Some Tips How to identify an online preparation site to avoid:
You May Be Filing Online Without Even Knowing It How can that be? After all, you aren't preparing your return. You're taking your business to a real tax pro. So, huh???? Just a word of caution. And this may not be anything to worry about. But for those folks who wouldn't even use a credit card online, this may bother you. Some preparers with smaller practices can't afford the thousands of dollars for the full-blown tax software. But, caring about you, they want to give you the best service. So they use a Pay-Per-Return (PPR) feature. That part's fine. Not an issue. However, some of these same preparers have figured out the cost of their own commercial grade copy machines and high-speed laser printers and printed supplies and they've opted to use a PPR service that let's them transmit your tax return to their processor. The processor proofs and prints your return and ships it out to the preparer the next day. We used to send in these returns by courier or mail in the dark ages BI ( before Internet). Now, they are transmitted ONLINE! Also, for some of the very large tax practices those companies have Intranets. That's like their own, private Internet, where all their offices are connected. Again, all that data, your data, is being transmitted ONLINE between offices and is potentially hackable. Also, any tax office that gives you a password to be able to access your files on their system is connected to the Internet or by phone. Caution. Naturally, it is in the best interests of all concerned to maintain very high security. But ... just thought you'd want to know. Go Forth and File! All right, you're all set. You've got your books, your disks or your online site chosen. While you're working, please feel free to use the articles, FAQs and search engine on TaxMama.com to help you. The resources here are up 24/7 365 days a year. And when you are finally done ... or going cross-eyed from stress, take a Break with TaxMama's Money Funnies. © Copyright Eva Rosenberg, 01/27/03 All rights Reserved |
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| Library of Congress - ISSN 1532-0790 Copyright © 2000-2006 - Eva Rosenberg |
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