Monday, January 18, 2016

TurboTax Admits That Easy Is Better Than Accurate

Okay, so before TurboTax sues me, they haven't actually SAID that, but that's the impression I get from their latest commercials.  While we're on the subject of getting sued, let me be clear that this post represents my OPINION, which I BELIEVE to be true based on what I've seen, read and experienced as a Tax Professional and by using their software and watching their commercials.  Also, this applies to pretty much all tax software, but TurboTax is the one embarrassing themselves on TV right now.

That said, how else can you interpret what the commercials are saying?  Any idiot can use our software.  Got it.  It actually makes sense, as I've been arguing for a while.  Tax preparation software has competing interests: ease of use, cost, and accuracy.  It doesn't take a rocket scientist to figure out that nobody's going to buy tax software unless it's easy to use, and price matters for everyone.  So obviously the software developers are going to make SURE that it's easy to use, and not too expensive.  Problem is, those two criteria are in direct conflict with Accuracy. 

Taxes are COMPLEX!  4 million words in the Tax Code alone.  Then there are revenue rulings, publications, tax court results and tons more.  Even the simplest of topics: owning a home, having kids, going to college are not as cut and dried as TurboTax would like you to think.  I believe it is literally impossible to write a software program that both asks enough questions to be accurate, and still is easy to use.  Not possible - and my experience fixing TurboTax returns bears this out.

Sure, if you work hard, answer every question, read every pop-up, and refer to the instructions, you might do okay, but you also might not.  I know some really smart people (REALLY SMART) who have gotten their taxes wrong with TurboTax.  In addition, as far as TurboTax is concerned, this is YOUR fault, not theirs.  Their software did the math right - you just put the wrong stuff in.  Don't believe me?  Here's their words: "100% Accurate Calculations Guarantee
If you pay an IRS or state penalty or interest because of a TurboTax calculation error, we'll pay you the penalty and interest."

So what do you do?  Do you have to use a professional?  Not exactly.  But if you do, make sure they know what they're doing.  Use an Enrolled Agent or a CPA experienced with YOUR tax situation. 

If you still want to do it your self, here's what you need to do:

1.  Download the Publication 17 and the 1040 instructions from the IRS and browse through them.  The 1040 line by line instructions can help you think of things to look for in the software.
2.  Buy my book: Everyday Taxes 2015.1 and read the sections that apply to your life.  Yes, this entire post was a thinly veiled advertisement for my book.  Not really.  Yeah kinda, but it is a good book.  The sections are based on life events and it's written in ENGLISH.
3.  Click on the more information buttons and carefully read everything.  If you have questions, refer to the Pub 17 or download the specific publication for the topic.
4.  Don't use their values for Goodwill type donations.  These are a perfect example of the "ease of use" vs. "accuracy" issue.  They have to use low, average values for this, to make sure they don't over-estimate your values.  that means the $400 designer shoes you donated will be GROSSLY undervalued.  Spend a little time on ebay, amazon, bookfinder, and in second hand stores (for profit - not Goodwill) to get an idea of the value.
5.  When done, pay for your return and don't file it until you've printed it out and reviewed it, line by line, using the 1040 instructions.  You can also have it checked by a professional.  Many will do it for free (I know I will) hoping to find a big error, and then convince you that you should be paying them to do your taxes.
6.  E-file your tax return.  Print a copy and keep it with the documents you used to file it.  Save for at least 4 years (I have a file box that holds about 7 years worth - when I can't stuff a new year in it, I shred the oldest)

If you don't want to have a professional review before you file, at least have them reviewed every 4 years.  Bring the whole package for the current year and the previous 3 years to a professional and drop them off for review.  This way, if you left any money on the table, you can still get it back.  After 4 years - it's gone forever.


  1. My widowed mother (86) received a 1099-C dated Dec. 31, 2016, for credit card debt for my deceased father (2015). Her lawyer established with the credit card company (we have documentation) that the debt is only in my father's name and not my mother's. This debt is not on her credit history. The 1099-C has my father's Social Security number. No estate account was established in his name, and we did go through probate which is the Identifiable Event code used (#6/E). My mother filed my father's final tax return in 2015. For 2016 she is filing as a single person. My question: How do you file this 1099-C? Can I amend the 2015 return since it has his social security number attached to it? Do I start a new return this year in the name of his estate even though there are no estate accounts? Thanks,Suzanne

    1. I think you can safely ignore it (just add to the estate paperwork file). If the irs sends a letter, send a death certificate back.


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