First, full disclosure: I love Turbo Tax. I used to tell people that I’d do TV commercials for it. I even seriously considered going to work for the company. I have worked for one of their competitors – and I still like Turbo Tax better. So when I title this blog post as “Problems With Turbo Tax”, you’re not going to find an exposé of all things bad with the company. This is just a heads up for people using the number one tax software in America.
Problem number 1: “The program won’t let me…” This is the one I hear most often, “The program won’t let me change the number, it won’t let me delete my neighbor’s child.” Turbo Tax is great when you’re in the act of preparing your taxes, but it’s not as easy to go back in and make a change if you’ve done something wrong and need to correct it. For example: one of the things I do is review tax returns that people have prepared for themselves before they send them to the IRS. (I charge a fee for that but it’s much cheaper than paying me to do your taxes for you.) One year, I reviewed a woman’s return and she had put a $4,000 tax credit on her return. That was wrong; the $4,000 belonged someplace else. I explained the problem and where the $4,000 needed to go. Granted, she wasn’t going to get that big refund she was expecting, but her return would have been right. Anyway, a few months later she was in my office again. She had received a notice from the IRS stating that she wasn’t allowed to claim that $4,000 tax credit I had warned her about. I asked her, “Why didn’t you change it like I told you to?” “Because Turbo Tax wouldn’t let me,” she said.
Dealing with that problem: First, you need to know that “Turbo Tax wouldn’t let me,” is not an acceptable excuse in Tax Court. Second, one thing that Turbo Tax does well is that they have real people who can answer your questions. You call the phone number and you get to talk to an Enrolled Agent who understands tax issues and the Turbo Tax software. You can tell her you’ve got a number on line 53 but it really belongs on line 29 but you can’t figure out how to make it work and she’ll guide you through it. You might pay a little more for Turbo Tax to get that service, but it’s there when you need it so don’t be afraid to use it.
Problem 2: Choosing the right product. Turbo Tax has 5 versions of its product, plus its online applications. In the store you can buy:
- Basic – for simple tax returns with no itemized deductions
- Deluxe – for regular 1040 returns with home mortgage interest and charitable deductions
- Premier – which includes everything in Deluxe but also handles investment income and rental property
- Home & Business – which is for sole proprietors
- Business – for persons filing corporations, partnerships and LLCs
I cannot stress this enough, if you need the more expensive package, don’t be cheap – buy it. I’m always amazed when people call me for help because they want to depreciate their income property by hand because Turbo Tax won’t do it for them. Yes it does, if you buy the Premier edition. Of course I will gladly prepare a depreciation schedule for your property (for a fee), but if you don’t use the correct software when preparing your tax return, there could be other problems that you won’t realize like passive income limitations (sounds like I’m speaking Geek doesn’t it? I am.) The right software will keep you out of trouble. And there’s no excuse for buying the wrong one: go to their web site and do their quiz to determine which package is right for you.
Problem 3: Not updating the program before you e-file. This isn’t a Turbo Tax problem so much as it is a user error. You have to install the updates before you file your tax return or it could easily be wrong. Let’s be realistic about this. Turbo Tax tries to get its product to the shelves by December for customers to buy it. This is a pretty good business plan. The problem is; there’s always some last minute change to the tax code. Last year, Congress changed the tax rules on December 17th. They messed things up so badly that the IRS computers weren’t able to accept certain returns on the normal date. Intuit (the Turbo Tax Company) has to get its product out to the stores in time. The only way for them to get the product to the store shelves and have it work correctly is to have people install the updates to the software before they file their returns. If you didn’t install the update, your return could easily have been wrong. Installing updates is a normal part of doing taxes – I update my professional software almost every day. If you don’t have internet access and cannot install the updates, the box might not be your best option.
Now I wrote about these Turbo Tax issues because these are all problems that I have helped people with because they had filed taxes and there was a problem. If you file a bad return and the IRS sends you a letter, I charge a lot to fix it. All of these problems I mention are preventable. You will save yourself lots of money by buying the right program, updating before you file, and making use of the Turbo Tax 1-800 number provided in your box.
Final disclaimer—if you haven’t already purchased your tax software, let me recommend clicking on the “Do Your Own Taxes” page at the top and take a walk through my 1040.com program. It doesn’t have the famous name recognition, but it is a good, solid program. If it wasn’t, it wouldn’t be on my website.