In many ways I still feel like a person with a lot to learn, but on the other hand, I feel like I am finally getting a good understanding of some things. One of the most complex and confusing systems is the U.S. tax system. Not only are there a number of different types of taxes (federal, state, property, etc.), but there are also a number of different deductions. While I’m not a tax professional, I’ve learned the best way for me to do my taxes.
What is a deduction? A tax deduction is also known as a tax write-off. It reduces your taxable income. Instead of being taxed on your gross income, you are taxed on your gross income minus any deductions that you may qualify for.
My Huge Mistake When Doing My Taxes for the First Time
My first time of doing taxes, my wife and I were extremely clueless when it came to doing our own taxes. I had no idea what tax brackets meant, let alone how to begin preparing my tax documents in order to file them by the tax deadline. It was around this time that I saw an advertisement for HR Block. They had a special of something like free federal tax return preparation. But, it wasn’t just the price that attracted me to them. My rationale was that these people help hundreds of people file their taxes each and every year. They must know how to help me. Even though there was a little part of me that felt like I should learn how to do it myself, I rationalized it with saying that I could learn from this person and do it myself next year.
Instead of meeting a tax guru like I was expecting, I met this 50-year-old woman who was apparently doing this job because she had nothing else to do. While many people have great experiences at HR Block, I did not. This is what happened. I went in, sat down with all of my tax documents, and after a little small talk, she began looking at my tax documents and inputting them into some software. She did this one-by-one until she was done, rushing through the entire process and providing little room for me to ask any questions. I even provided her with a tax form that in the end made us qualify for an additional $1,000 refund, but she rejected it saying that we weren’t able to claim that deduction (I had to later modify my tax return in order to get the additional refund). I let it go at the moment and later consulted with a CPA, only to find out she didn’t know what she was talking about.
While I was greatly disappointed in the service, some of you are probably thinking, “But it was free, so quit your complaining.” The problem was that it wasn’t free. It cost us nearly $200 when we were all said and done. JUST TO FILE MY TAXES. I didn’t understand what I was paying for and when I asked for clarification, she brushed it off saying that when we added other deductions and other forms (like to file state taxes), it added additional fees. I was expecting to pay to file state taxes, but not $200. The worst part is everything was rushed through. I was in and out in less than 30 minutes. While she may have experience doing this, there is no way that she deserves to make $400 per hour. Being the young and inexperienced person that I was, I reluctantly agreed because I didn’t know what I was doing. We were getting around $2,000 back in our refund, so $200 seemed like nothing. How I regret that decision…
A Better Way to File Your Taxes
Since doing my taxes for the first time, I’ve learned a much better way to file my taxes. While many of my accountant friends tell me that it’s important to consult with a tax professional, I haven’t faced a question about which I need to consult with a tax professional. Instead, I use TurboTax. TurboTax is probably the most popular tax software and for good reason.
I started using TurboTax the year after my bad experience with HR Block, because there was no way I was going back to them. They lost my trust and I didn’t want to pay more than I had to this year. What I received from TurboTax was amazing, and I’ve used this software for the past few years. Here are a few things that I like about TurboTax:
- It’s Simple and Easy to Use – I’m sure many of you are wondering how a software can help you prepare your taxes. How can a machine do what a human is supposed to do? Well, we use computers to replace humans and there is no reason that tax filing is any different. It walks you through all of the important questions in logical order. It even adds up everything that you put in, so you can trust the calculations.
- TurboTax Provides Clarity on Obscure Rules – One of the things that I HATED about my HR Block experience was that the representative did not take the time to fully answer my questions. She would give me short answers and pressure me to stop asking questions so she could keep working. With TurboTax, it provides an explanation of what everything is and even clarifies when something is rare.
- I Can Complete My Filing in an Hour or Two – Never having to leave my home, I can insert all of our taxes in one evening’s time. It’s not hard – it just takes a little bit of time to insert all of your tax information. It even saves your information from last year, so I didn’t have to input personal information this year. How great is that?! In the past, it took me less time to complete, but this year we had to account for my self-employment income and the little income from our investments.
- It Saves Your Progress – One of the best things that I like about TurboTax is the ability to save your progress. A couple weeks ago, I did 95% of the work in filing our taxes. I learned that we are going to owe the Federal government a large sum of money. While I could have completed the filing at that time, I choose to wait a couple months since it isn’t due until April. This is just one of the many benefits. If you only have 30 minutes to input your information, you can work on it without worrying that you will waste your time.
- Cost Effective – While everyone’s price will depend on your situation (marriage status/filing, # of states employed in, etc.), I can say that TurboTax is very reasonable. Last year, it was less than half of what I paid HR Block and I expect it to be even less this year. It also saves me from having to consult with a tax professional.
How to Do Your Taxes with TurboTax
Filing your tax return with TurboTax is really as easy as one, two, three.
- Save all Your Tax Documents
- Sign up for TurboTax
- Fill in all of your information into TurboTax and send it off.