What USA Says About Turbo Tax
Essex & Associates::www.essexinc.biz April 4, 2011
Greetings!
Just like Watson, the IBM computer that stumped the champions on Jeopardy, tax-preparation software uses sophisticated technology to perform a task previously done by a human – in this case, your neighborhood tax preparer.
For taxpayers with straightforward returns, tax software gets the job done, at a fraction of the cost of a tax preparer.
If you file a 1040-EZ, there's simply no reason to pay someone to do your taxes for you when you can do it online for less than $20 (or free if you qualify for the IRS Free File).
But this year's tax software review by USA Today Newspaper also revealed the limitations of these programs.
They reported taxes have grown so complex that even those of us who don't invest in individual stocks, own rental property or run a small business could find ourselves in need of advice from a flesh-and-blood tax preparer. Here's where the paper ran into trouble in their annual test drive of off the shelf tax preparation software (turbo tax, tax act, tax cut):
Retirement savings
Most taxpayers with lengthy investment portfolios hire a professional to prepare their returns, with good reason. Even Watson would have a hard time figuring out the cost basis for a stock you bought in the 1980s and sold last year.
But these days, something as common as saving for retirement can create tax headaches.
Miscellaneous income
If you're self-employed or starting a business, you're probably better off paying a tax preparer to do your return. Otherwise, you risk overlooking valuable deductions, or making errors that could attract scrutiny from the IRS.
But many people who work for an employer also earn a little extra income through consulting, freelancing or tutoring kids at the local elementary school. This income typically appears on Form 1099-MISC.
The bottom line: USA Today said it may be worthwhile to consult with an experienced tax preparer.
Wishing you many happy returns,
Wayne
Wayne T. Essex Ph.D.
Essex & Associates
Tax, Accounting, HR, Payroll
7501 Paragon Road
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