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Best Reader Comments: Tax-Prep Travails

Nobody likes paying taxes, but people dislike paying money to figure out how much tax they owe even more. I've gotten a lot of great e-mail in response to last Thursday's column (in addition to the comments you all have left here).

This was one of my favorites:

"I can make an E. coli bacterium produce human insulin, but I wouldn't take the time or tear up my brain trying to figure out our tax codes!"

Can trust your state's revenue department more than your tax-prep software? One person said you can:

"Due to a poorly-worded question (TaxCut might say due to a bit of inattention on my part) I overpaid my Maryland taxes by $240. But the state caught it."

How did things get this bad? One reader pointed out that a look in the mirror would be appropriate:

"....we live in a society where tax payers want every tax break they can think of an excuse to get. Lower income folks wouldn't want to lose their earned income credit - middle class wants their share and of course, upper class folks who pay better than 30% of their income into the federal tax system feel entitled to their cuts too."

I really liked this proposal:

"Every elected federal official and all appointed officials have to do their tax returns isolated in a room with nothing but all the tax code volumes, some scratch paper and a few pens. No outside help."

Here's a tip that Virginia readers might want to check out:

"Apparently, Virginia had a mistake in the Itemized Deduction Worksheet on page 11 of the 2006 Virginia 760 Resident Individual Income Tax Booklet. The paper version of the booklet has a 16 line worksheet to use in calculating your itemized deductions. However, the electronic version of this document on the Virginia Department of Taxation website has an 18 line worksheet. Tax preparation software vendors were notified of this change and some have updated their software and others have not."

(This reader ended his e-mail by pleading "PLEASE DO NOT USE MY NAME IN YOUR COLUMN AS I DO NOT WANT TO BE AUDITED.")

By Rob Pegoraro  |  March 19, 2007; 10:22 AM ET
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I don't find doing taxes that difficult, and I have had quite a few of the twists and turns with self-employment, obscure deductions and credits, etc. Most of the strangeness in the instructions are in places where a certain program is phased out as income increases--the IRS tries to explain this by a series of formulas and micro-instructions[take the smaller of this, subtract, divide by itself and multiply by the number of days since you did something else, etc.] rather than simply explaining the logical idea behind a particular deduction, or using more complicated, but nevertheless straightforward math. It's like reading the multipage instructions for assembling a cheap MDF bookshelf--they all boil down to "screw sides to top and bottom, nail on back, add shelves".

Posted by: bkp | March 19, 2007 11:25 AM | Report abuse

I got out of the Air Force and moved from Tx to Va and having spent over half of last year on active duty in Tx, was puzzled by the HUGE proposed return TurboTax said I would get. When filing my Va taxes, it asked if I had spent over half the year on Active Duty. I had. It did not specify whether that was in Va, or my state of previous residence, so I checked yes... and when I made it to the end I did not feel right about the HUGE amount I was projected to get... I knew it would be wrong if I were to be so happy after doing my taxes, so my honest self dug through page after page of codes and after about an hour of truth-seeking I found the exact wording indicated that my time on active duty was to have been as a resident of Va. I had to practically start over! I wrote TurboTax about this problem and heard nothing.

As a former officer, I stand behind my integrity and do not like how easy the software would have made it to lose it all by clicking a box and signing it away. In the end, you are responsible for what you put your name to... It was bad enough wasting hours of my life using supposedly easy software, but having to pay for the use of it when they so quickly cut corners in a manner that would have made me wind up with an inaccurate return was apalling and offensive to me! If I could have gotten a refund for their lousy service, I would have- but they never responded.
To top it off, they would not let me e-file because some idiot at the Social Security administration had changed my birthday by making a typo in the computer system! I actually wrote a letter throwing myself on the mercy of the IRS and included a copy of my birth certificate to show I was who I said I was. The whole situation was so absurd I have to laugh now. Especially since IRS responded in the affirmative by sending me my refund, and TurboTax left me hanging AND had the nerve to charge me for it! The whole system is a mess in need of an overhaul.

Posted by: Chris | March 19, 2007 1:33 PM | Report abuse

For most people it's really not that hard to just do it by hand. I itemize but I don't have lots of dividend income and such. the 1040 form is fairly straightforward if you follow the instructions in the book. I bought Turbo tax once to compare against my calculator and paper and the Turbo Tax was much harder to follow and ambiguous and ended up way off.

If you use Quicken to keep track of all your accounts it is easy to print out a year end report with everything categorized which makes tracking down the numbers easier.

Give it a try. Just say no to Big Software!

Posted by: Glenn | March 19, 2007 4:26 PM | Report abuse

Overall, I have found tax preparation software to be a labor/frustration saver compared to doing my taxes with pencil and paper forms and instructions. I share bkp's frustration with the IRS' maddening "fold flap A into slot B" approach to certain items, as noted, is common with deductions that are phased out at higher incomes.

Ultimately, however, I wholeheartedly agree with Rob's point that our complicated tax code is a moral outrage, a disgrace.

I am reminded of the time I spent a session in a law school seminar that was led by a well-known tax scholar--the topic of the day was the deductibility of intangible assets, specifically goodwill, in corporate transactions. Yuck! After the session, I commented to the professor that I found it appalling that the federal income tax code was so complicated that a majority of US citizens have to pay others just to calculate how much income tax to pay in order to avoid criminal penalties. The professor's only comment was that it was a good idea for every taxpayer to hire someone to compute his taxes for him.

I could have throttled the professor. But, to expand on one of Rob's comments from his column, the special interest lobbyists who are successful in getting their special tax treatments added to the tax code also hire tax law scholars to help them do their dirty work.

Posted by: Russ | March 20, 2007 9:52 PM | Report abuse

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