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Tax Follow-Up

On this rainy, windy Monday morning, we can all give thanks to the District of Columbia--since today is Emancipation Day, a legal holiday in D.C., we all get one more day to finish our taxes. And once again, I could use that extra time.

As I wrote last month, my taxes are even more of a mess than usual--the two tax-prep programs I used couldn't even come up with the same number, and both of their estimates seemed to be way too high:

H&R Block's TaxCut says my wife and I owe the feds $18,000, but Intuit's TurboTax says our bill comes to $3,000 and change.

(Lest anybody think those numbers mean I'm getting rich off this journalism gig, I've always set my withholding allowances to ensure that I'll owe money at the end of the year: I don't like handing out interest-free loans. The nature of my freelance work only increases the odds of me writing a reasonably large check every April.)

Anyway, after entering some overlooked charitable donations, correcting a few numbers I'd entered twice--sometimes to our benefit, sometimes not--and factoring in the hit we take from the Alternative Minimum Tax, it looks like our bill will be closer to two grand and change. A few other observations as I continue to slave away at this:

* I am continually surprised at how easy it is to make little mistakes--typing a 6 instead of a 9 or putting a deductible expense in the wrong category--that nobody catches. For example, I just realized that I may have been deducting my car taxes under the wrong heading for the last couple of years.

* The interfaces of these programs can conspire to help you miss these mistakes--for instance, the screen in which you enter your charitable donations in TurboTax only displays three entries at a time.

* When your personal-finance program downloads account information from your bank, and your tax-prep application then imports this info into its own files, you can miss a lot of important details. For instance, Quicken only listed some donations we made online by the firm that processed the payment--which could have caused trouble if I'd left those entries as is, since PayPal.com is not a 501(c)3 charity.

* It seems that the odds of these mistakes increase if you don't get the tax ordeal over in one sitting; it's too easy to forget what you typed in a week ago.

Best of luck to all who are still crunching the numbers on their tax bills. When you're done, don't forget to add the time you spent on this--then send your representatives a bill for those hours, since they're the people most responsible for making the tax code the monstrosity that it is.

By Rob Pegoraro  |  April 16, 2007; 12:20 PM ET
Categories:  Gripes  
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Comments

I did my taxes in January, as soon as I could get the paperwork together. Got the refund back in early March.

Don't forget the telephone tax refund.

Posted by: wiredog | April 16, 2007 12:28 PM | Report abuse

Rob, I'm with you on the no refund thing, putting my tax money in the bank (and collecting interest on it) is better than letting Uncle Sam have it interest free. But you do have to be careful to pay 90% of your taxes in withholding or pay a penalty. Tax Cut used to let you ignore that and take your chances with the IRS (pretty good, they've got bigger fish to fry) and then it wouldn't let you ignore it. But I see this year you can ignore it again. I didn't, cost me $22, wiped out any interest gains--but anything I had left in that savings account after paying taxes (actually I scheduled the payment for today) was my 'refund' and it was available right away!

Posted by: Frank S. | April 16, 2007 1:14 PM | Report abuse

I was with you right up until the part about doing it all in one sitting. I tend to find mistakes better when I leave my return alone for a day or week and come back to it.

I just don't see why the IRS hasn't created free online filing for the long form yet. Even if you have to do the worksheets offline, geez, why not just let us fill in the 1040 online??

Oh yeah, the tax prep lobby. Thanks H&R Blockheads, who gave me completely wrong advice the one time I paid for "professional" advice. Good thing I decided it felt wrong and decided to read the whole IRS publication, but I still had to file an amended return by the time I realized they had just completely misrepresented the tax credit rules about which I asked them. That's the first and last time I used them, or paid for any "professional" advice.

Posted by: The Cosmic Avenger | April 16, 2007 1:46 PM | Report abuse

I do it all by hand: slow, laborious, and not very neat looking. After it is done, I let it sit a week or two, then re-check every number, every schedule, and every source document. My constant assumption is that the IRS' hardest-nosed auditor will pick my return for a full-blown analysis. The system I use has performed well now for most of a lifetime. It lets me sleep well at night, and that is worth a lot.

Posted by: Marvin McConoughey | April 16, 2007 4:34 PM | Report abuse

"For example, I just realized that I may have been deducting my car taxes under the wrong heading for the last couple of years." You're a brave man to announce that, Rob.

The Cosmic Avenger, I would never use H&R Block but have used individual CPAs. Don't be afraid of them, they're competent overall.

Rob, I'd be interested in a story if you contacted the tax prep companies with your criticisms.

Posted by: Anonymous | April 16, 2007 6:14 PM | Report abuse

I agree with Marvin. I do it all by hand, let it sit and mellow for a few weeks, review it and then enter the data into a tax program. The program slots everything onto the proper schedules and does the math. I use Tax Act software, electronic filing is free for the federal return. For the last three years, its numbers have agreed with mine (or mine with its.)

The state return is easy enough using the software available from the state.

Posted by: MMRudy | April 16, 2007 7:08 PM | Report abuse

I agree with not giving the government an interest free loan. I usually get a small refund from the federal government, less that $100. I then use that money to pay my state taxes with maybe some pocket change left over, so it all evens out.

Posted by: John | April 16, 2007 7:59 PM | Report abuse

My Federal tax return was onerous to fill out, and I don't have anything fancy in the way of deductions, etc. On the other hand, i did my Virginia State taxes online at the state website for the first time- plug in the numbers and a screen popped up with the amount of the refund. It took maybe 5 minutes. Given that the feds already have all the data (as reported by my employer, bank, and stock brokerage) there really shouldn't be a need for an intermediary or third party involvement. Plug in charitable donations and push the "file" button. Why can't they figure that out? Maybe because a lot of useless people would be out of a job?

Posted by: random | April 17, 2007 5:33 PM | Report abuse

You should not have posted an article (which made the real, hardcopy Post) complaining about the tax software until you were sure that it wasn't you who screwed up.

Posted by: Tod | April 18, 2007 9:05 PM | Report abuse

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