I’ve been using TurboTax to file both my personal and business taxes for three years now, and for me, it’s a lot like having an accountant right in my computer! My personal knowledge of taxes and finding deductions is extremely limited — but I have found that by using TurboTax to file my dreaded taxes, all I have to do is gather all the information needed to enter into the forms. Basically, the online software asks me questions (in English, not accountant-speak) and I fill in the answers. I guess this is the case with most good tax software packages out there, and it’s no different for this one.
You can either purchase software to install directly on your computer (CD or downloadable), or you can do everything completely via the internet, over secure servers. Turbo Tax’s desktop version and its online version accessed via the web have their separate advantages and are both worth checking out. I’d look into trying the internet version since you pay only after you’ve completed your taxes and are ready to file them. I like the fact that I can take my time to get my financial data organized and entered as TurboTax requires it.
Four Different TurboTax Products
There are five different versions of TurboTax, each designed to meet the needs of different life situations, including:
- Free Edition, for 1040EZ & Simple Return filers (includes free federal tax filing).
- Deluxe, for people who own a home, who make charitable donations and have medical expenses, etc. Available for desktop use or online.
- Premier, designed for people with investments or rental property; Desktop or Online.
- Home & Business, which offers sole proprietors, consultants, and single owner LLC businesses an easy way to file both personal and business taxes; Desktop or Online.
There’s also the Basic version, but it’s like the Free edition with extra help and import features (and is not as promoted as the other products).
With any version, you can either choose to e-file your taxes and submit them electronically once you have finished entering all of your information, or you can print and mail them. Federal e-filing is included in the price of your TurboTax software, but you do pay an additional fee to e-file your state taxes. E-filing typically results in consumers receiving their tax refunds in about eight days.
As you use the software to enter tax information and answer questions, you’re also given the option to submit questions to the TurboTax community and to receive help if something doesn’t make sense to you. I’ve asked three questions this year, and within a few hours received extremely helpful answers from other TurboTax users who pointed me in the right direction.
For online TurboTax, tax returns you’ve entered will remain available for future access and use. As expected, the application also carries over any tax information from previous years that you may need in the current year.
Watch Out For Audits!
Last year, the IRS got stricter and ended up auditing over 1.3 million individual tax returns, a 7% jump from 2006 and the largest number of audits since 1998. To address this trend, TurboTax has come up with a couple of tax audit support tools that are included as features in its Deluxe, Premier and Home & Business versions.
As a TurboTax customer, you can identify and reduce your audit risk with these tools:
- Audit Risk Meter: This new tool helps taxpayers reduce their risk of an audit by identifying potential audit triggers before they file their return.
- Audit Support Center: Helps customers deal with, and prepare for audits, in the unlikely event that they are audited.
Before you file your taxes with TurboTax, the software runs an audit check and points out any information from your tax return that may increase your chances of being audited. In the unlikely event that you are contacted by the IRS after filing your taxes, TurboTax will help you understand why you’ve been contacted, and help you prepare your next steps for dealing with the situation.
In addition, you can also reduce your risk of a tax audit by knowing what common situations and events have a higher chance of being flagged by the IRS. Some possible triggers:
- Child Tax Credit: With more and more children living with separated or divorced parents this is becoming a more common red flag. To receive the child tax credit you must enter the child’s social security number. If another parent has already claimed that social security number, the second return to be filed will trigger an audit.
- Home Office Deductions: The home office deduction is an area the IRS pays close attention to. Taxpayers claiming this deduction should make sure they are disciplined in what they deduct and how they use their home office.
- Rental Property: If a taxpayer owns a rental property, the IRS may be taking a closer look at their return. Owners of rental properties will want to make sure their home can be classified as a rental property and not a vacation home.
TurboTax Observations
Here are some observations I’ve made about the software, most being favorable!
- Convenient way to enter tax details with step-by-step instructions performed in simple to understand language
- Easy way to determine eligibility for tax deductions
- You can e-file and get refunds in about a week’s time
- Audit Support is included with most versions of the software
- You can access previous years’ returns
- The TurboTax community is available to answer your questions
- The TurboTax application is available both for online and desktop use (the latter is installed on your computer)
- Inconsistent use may make things more challenging: switching between software applications (TurboTax vs TaxCut) or between different versions (Premier vs Home & Business, for example) of the application may be troublesome
And Finally…Free Stuff!
Cool Tax Tools
The TurboTax web site also has an area for free tax calculators and tools. A few examples of what you can find in this section:
- Tax Rebate Calculator: Are you one of the 130 million Americans eligible for tax rebates very soon? Basic amounts you can expect: $600 for single folks, $1,200 for married couples, $300 more for each eligible child under 17. Find out what your refund will be by answering a series of questions!
- Average Tax Rate: We pay our taxes in “brackets” because we use a marginal tax system, but how much tax do we really pay on average? Actually, our average tax rate is much lower than the highest marginal rate we pay.
- Tax Estimator: Here’s where you can get some idea of how much you owe the government.
Plus Free Filing!
Is your income $30,000 or lower? Were you (or are you) on active military duty? Do you qualify for the Earned Income Credit? Then check out TaxFreedom.com to enter your information or e-file free of charge. Do your taxes for free, care of the Intuit Tax Freedom Project.
With this tax application, there’s nothing much I can really pick on, except perhaps it may on occasion be the bearer of bad news: but then even the best software can’t help you if you owe taxes!
Guest Post: Thank you to Debbie D. for this great contribution!
Copyright © 2008 The Digerati Life. All Rights Reserved.
{ 9 comments… read them below or add one }
I used to use Turbo Tax and really liked it as well. It was really simple to use.
A great help, especially for internet marketers!
Not sure if this is cleared up yet, but we also used TurboTax Deluxe Online, but couldn’t get all the way through the program.
We have an HSA from my work and it just wouldn’t calculate things properly.
To solve the issue, we ended up calling the help line and they offered us a free version of the Desktop Turbotax Deluxe. However, we have to call in and get a rebate on our filing fee.
Overall, quite annoying but we’ve used TurboTax so much it always seems worth it.
I’ve used TurboTax online for the last few years of filings, and think the interface is excellent.
I’ve used turbo tax probably for about 10 years. I’ve never bothered to try the other similar programs. If you are doing a straight forward return, it works pretty well. However, sometimes I don’t think there is enough explanation of the question they are asking, even when looking at the help. If you start getting more complicated returns with self-employment, options, etc. it can still get tricky. The last two years I had to file amended returns, and it can do it, but it is a little hidden. One very important tip is at the end, make sure you save your return to a pdf file. You cannot open old returns with the current software, so you need to archive in pdf.
* E-filing is essentially another mode of filing your income tax return, in addition to the popular mode of printing and submitting your return at the income tax counters. It is a two step process:
a. Prepare your return using tax preparation software: Enter your income tax data, such as, PAN, income, deductions, and TDS. Review your data for completeness and accuracy; and, generate your electronic return in XML format.
b. Upload your XML format return on income tax department website. Upon successful uploading, it will generate an acknowledgement form called ITR-V. If you do not use digital signatures, then you have to submit the ITR-V at the income tax counter.
* If you do not wish to e-file, then you can print your ITR1 or ITR2 and deposit it at the nearest income tax office or counter.
Intuit has made some very good products. ProFile is awesome. In Canada, we had QuickTax, which is being renamed TurboTax (a name most American tax preparers are familiar with) starting in the 2010 tax season.
What is the best software to get for your taxes, is this the best?
@axact, I believe you can’t go wrong with this software.