Turbo Tax Users: You Need to do a Three Year Review

August 14, 2012 by Jan Roberg · Leave a Comment
Filed under: Divorce, Do It Yourself, Refunds, Review 
Money and Magnifying Glass

Photo by Images_of_Money on Flickr.com

I’ve said it before: I think Turbo Tax is a great product. I also like 1040.com, the do it yourself software you can get on my website. Good products, good results. But, they’re not perfect—none of them are. And neither are tax preparers, after all they are human and make mistakes as well.

 

It’s August, generally quiet time in the tax business—but no, not this week. The other day my phone rang nine times—people getting IRS letters. “Hello, I got an IRS letter, what do I do?” I suspect that the IRS must have done a mass mailing the other day for my phone to ring so much. (My phone is usually slow in August.)

 

Some calls are easy and I can guide someone over the phone, “Oh, just send them a copy of XYZ form, that’s all they want.” Usually though, people need to come in and have me take a look. What I’m often finding this summer—is that people are getting IRS letters saying folks owe money, but when I review their returns, they should be getting a refund instead. And while I think that’s great fun (because I’m a tax geek and that’s the kind of stuff I live for) most people don’t like getting IRS letters saying they owe thousands of dollars at all. (Although they’re usually happy when I show they’ve got a refund coming.)

 

But here’s the catch—these people wouldn’t know they had money coming back if the IRS didn’t send them the nasty letter in the first place! What about all the people who left money on the table but won’t get an IRS notice?

 

What I’m finding is that the people with money coming back did their own taxes with Turbo Tax. Not that the Turbo Tax program made a mistake but it is usually just a misunderstanding of what should or should not be listed or possibly a typo. That’s why I’m recommending a three year tax review.

 

Why three years? If you made a mistake on your tax return, you have three years from the date of filing to file an amendment to get your money back. This is achieved by filing a Form 1040X.

 

For example, let’s say back on your 2009 tax return, you typed in that you paid $1,000 in mortgage interest when really you paid $10,000. The two numbers look pretty similar but there’s $9,000 worth of deduction there that you just missed out on. If you’re in the 25% tax bracket, that’s a $2,250 refund that you’d be entitled to. Your 2009 tax return was due on April 15, 2010. So, three years from that date is April 15, 2013. If you wanted to get that money back from the IRS, you’d need to file an amended return by then.

 

You don’t need to do this every year, just bring in three years worth of returns once every three years. Most places charge a fee, but it’s generally much lower than the cost of preparing your returns. (I know one large tax company used to advertise that they’d do it for free.)

 

If your returns are fine—then you’ve got peace of mind. If you’ve been doing something wrong—well then you’ve learned something. If you get money back—well then you know you did the right thing. It’s a winning situation all the way around.

5 Most Common Mistakes on E-filed Tax Returns

February 7, 2012 by Jan Roberg · 4 Comments
Filed under: Do It Yourself 
Work

Photo by Falk Lademann on flickr.com

I’m a big fan of using computer software to file your tax return. By using tax software, you eliminate many of the problems that are associated with paper filing. You can even access an online program right from my website, here’s a link: http://robergtaxsolutions.com/do-your-own-2011-taxes/. Yes, that was a blatant commercial plug, sorry.

But tax software is only as good as the information you put into it. If you know what you’re looking for, you’re less likely to make mistakes. Here’s a list of 5 of the most common problems that I’ve seen:

  1. Using decimal points. The IRS doesn’t want you to include the pennies when you do your tax return, they just want round numbers. Some software programs let you use pennies anyway, but most don’t. If you’re an anal retentive bean counter like me, you just can’t help yourself and you automatically type in the pennies anyway. So instead of rounding $99.78 to 100 like you should, you type in 99.78. Some software programs convert that to $9,978 and that messes up your tax return.
  2. Not proofreading before you hit send. Problems like the decimal point issue can be easily fixed if you proofread your return before you hit “Send.” One time I helped a woman who had gotten an IRS letter about her tax return – they wanted her to document the million dollars of mortgage interest she had claimed on her Schedule A. Well, of course she didn’t pay a million dollars; it was a case of the decimal point not working. She never bothered to look at the return before she sent it. She saw that she was getting a huge refund (million dollar deductions can do that for you) and was happy so she sent her return in. Here’s a good tax tip: if you’re getting an unusually large refund, or owe a whole lot more than you’ve ever paid before, there’s a good possibility that there’s a mistake that needs fixing.
  3. Missing a Schedule D – the form for sale of stock. “But I didn’t sell any stock,” you say. Think again. If you work for a company that issues stock options, and you benefited from those stock options, you need to do a Schedule D. Yes, the tax was paid through your withholding, but you’ve got to do the paperwork on your tax return to go with it. One local company here in St. Louis, famous for hiring smart people, issued stock options to almost all of their employees one year. I spent a good part of a summer amending returns for people who didn’t file their Schedule D. (They really were smart people, so they won’t make that same mistake again.)
  4. Missing a Schedule D – same form. This category is made up of senior citizens who take money out of their mutual funds as part of their retirement income. When you take money out of your mutual fund, you have to sell the shares to take the cash. It’s not like a regular savings account, it’s a stock investment and those sales must go on a schedule D.
  5. Leaving out required information about taxable income. I can’t stress this enough, if you get something in the mail that says, “Important Tax Information Enclosed”, then there’s probably a number in that envelope that needs to go on your tax return. Here’s some common misconceptions:
    • Just because you paid tax when you took money out of your 401(k) account, doesn’t mean you don’t have to report it on your tax return. It must be reported.
    • Most retirement income is taxable on your federal return. Even if your retirement money isn’t taxable, it still gets reported on your tax return.
    • The same holds true for tax exempt interest: you report it even if you don’t pay tax on it. And, a lot of federally tax exempt interest is taxable to your state. Don’t just leave that stuff off.
    • Social security: for many people, social security isn’t taxable so a lot of folks just leave their social security off of their returns altogether. But for many folks, part of their social security is taxable. If you don’t include it in the calculations, you won’t know you missed it. Trust me, the IRS won’t miss the calculation if you owe tax on your Social Security.
    • Along with reporting your social security, don’t forget to fill out all the boxes. In my state of Missouri, your medicare part B payment can actually reduce your taxes or qualify you for a larger property tax credit. Software programs are pretty good about making those things flow through to the pages they belong to. The key is that you have to input everything they ask you to.

Despite this list of common mistakes, you’re still much better off e-filing your return than preparing your taxes by hand. I did a separate post on common mistakes on paper filed tax returns: http://robergtaxsolutions.com/2012/02/four-most-common-mistakes-in-a-paper-tax-return/ – those mistakes are impossible to make when e-filing so you’re already ahead of the game. Besides, you now know what these common mistakes are so you’re not going to make them.

Four Most Common Mistakes in a Paper Tax Return

February 3, 2012 by Jan Roberg · Leave a Comment
Filed under: Do It Yourself 
F***in' taxes

Photo by Beatrice Murch on flickr.com

First, let me mention that you’re reading this on the internet. That means that you have access to a computer and can probably navigate your way around some computer software. Because you can, I highly recommend preparing your taxes on the computer and e-filing the return. But if you really want to do it “by hand”, be aware of these mistakes.

  1. Not putting your name on the return. This sounds totally idiotic but it actually happens quite a lot. Back in the stone age when I was learning how to prepare returns professionally, the instructor made a big stink about putting the name, address, and social security number on every practice return we ever did. If you missed those items, you got a zero on the test. How can anyone miss that? It’s easy. You worry about doing your numbers right, you do a draft copy first and then write it neatly on a new form later. Nobody puts their name on the draft copy, but then they forget to put the name on the clean one too. This can’t happen with a computerized return because you can’t e-file without a name. I usually handle about one call a year because someone didn’t put his name on the tax return.
  2. Not sending all the pages that need to be attached. In my experience, the most common missing form seems to be the Schedule EIC. That’s the page that says your child’s name, birth date, social security number and relationship to you. It doesn’t really look like a real tax form so I think it’s easy to miss. http://www.irs.gov/pub/irs-pdf/f1040sei.pdf Once again, if you e-file a return with EIC on it, the Schedule EIC is automatically submitted for you.
  3. Math errors. Ever have one of those days when you add 2 plus 2 and then you write down 5 even though you know its 4? The IRS will just correct those for you and they do understand that it’s just an adding mistake, not tax fraud – you’re not going to jail for that. It’s really just an embarrassment factor and that official looking letter on the IRS letterhead can give you the willies. Once again, computer software will take care of the math for you.
  4. Getting the income tax or EIC figure out of the wrong column or row. Lots of numbers and small print – it’s easy to make a mistake. Once again, if you make a mistake here, the IRS will correct it for you. And also, a computer tax program won’t have that problem.

If you’re paper filing your tax return, here’s a really important piece of information you need to know: The number of e-filed returns that get audited is ½ of 1%. The number of paper returns that get audited is 25%. Which category do you want to be in? If you want to try out some tax software, you can go to my site and do it online. You don’t pay unless you actually file and it’s pretty inexpensive. Here’s a link: http://robergtaxsolutions.com/do-your-own-2011-taxes/

Three Problems With Turbo Tax and How to Fix Them

January 20, 2012 by Jan Roberg · 96 Comments
Filed under: Do It Yourself 
Day 30 - Working late makes me..

Photo by Phil and Pam Gradwell on flickr.com

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.

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Note:  We try to answer all the questions that come to us but please be patient.  It’s our busy season right now.  We may not get to your post until the weekend.  When you make a post and use the capcha code, it won’t immediately show up.  You see, for every normal person like you that posts, there’s about three advertisements for things your mother wouldn’t approve of.  (We try to keep this a G rated website.)   We have to edit those out.  If you need an answer right away, here are some links that might help:

EIC questions of any kind:  http://www.irs.gov/Individuals/Earned-Income-Tax-Credit-(EITC)-%E2%80%93–Use-the-EITC-Assistant-to-Find-Out-if-You-Should-Claim-it.

How to find free tax preparers:  http://www.irs.gov/Individuals/Free-Tax-Return-Preparation-for-You-by-Volunteers

How to find your local IRS office:  http://www.irs.gov/uac/Contact-Your-Local-IRS-Office-1

If you want to hire us, please call (314) 275-9160 or email us.  We do prepare returns for people all over the country (and a few foreign countries as well.)  We are sorry but we cannot prepare an EIC return for someone outside of the St. Louis area because of the due diligence requirements.

Tax Organizer

January 13, 2012 by Jan Roberg · 2 Comments
Filed under: Do It Yourself, Tax Preparation 

I’m not a big fan of tax organizers. I got started in this business many years ago because of a bad CPA (if he was even a real CPA). He had me fill out a 20 page long ‘organizer,’ which quite frankly, I figured that after doing all that work I could have just done my taxes myself pretty easily. But the worst part was that after I did all that work, the guy still did my taxes wrong!

Being a bit of a tax geek already, I caught the mistake before I mailed in my return. (Yes, back in the stone age when we used the US Postal service to mail our tax returns.) So when I confronted him about it he blamed his secretary for inputting my numbers incorrectly.

But here’s the thing. I didn’t hire a secretary to do my taxes. I hired a CPA. I sort of made the assumption that the guy signing the tax return would actually look at it somewhere along the line.

Anyway, I was so mad I wound up going to tax school etc., etc. Here I am with my own tax company. (Maybe I should thank the guy but I don’t even remember his name.)

Anyway, I don’t like organizers because I like to talk to people and get to understand their situation. I like to look at a person’s actual W2 or 1099 and not what the person wrote down on a piece of paper – it makes for fewer mistakes. I also think that if a person is paying me to do their taxes for them, my job is to make it easy. I had spent hours working on that 20 page organizer for that dude. That’s not easy!

But some people really like to use organizers. I always have some clients that ask for one. I like this one because it’s only 8 pages and it doesn’t ask you to copy your W2 information, just to list them and bring the documents to your appointment. Some pages you might not need – for example, page 7 is for rental income. Well, if you don’t have rentals, then you don’t need to fill out the page. I like that.

So while a tax organizer is no substitute for meeting with your tax preparer in person, if you like to get organized and make sure that you have all your ducks in a row before going to your appointment this is the one I recommend. It’s also helpful if you’re preparing your own tax return as well.

Here’s the link so you can download a copy of the organizer for yourself: http://robergtaxsolutions.com/wp-content/uploads/2012/01/2011-RTS-Organizer.pdf or check our downloads tab at the top of the page.

And here’s a request. Would you please do me a favor and let me know what you think? Do you like organizers, don’t like them? Do you like this one, or don’t like it? What’s your opinion? I’m afraid that my bad experience years ago gives me a jaded view. But if I get a lot of positive feedback about it, I’ll start printing them out and using them with all my clients. (I’m not so stodgy that I can’t learn to change. I learn new tax laws every year, right?) Thanks for your help.

Checklist of Tax Filing Documents

January 4, 2012 by Jan Roberg · Leave a Comment
Filed under: Do It Yourself 
Paperwork

Photo by kozumel on flickr.com

It’s that time of the year again when we get to file our tax returns. If you’re expecting a refund, you’re probably anxious to get all your paperwork together so that you can file. For those of you who expect to pay, you’re probably not too thrilled about it. Whether you’re hiring a professional or preparing your own return, make sure you have all of your paperwork together before you start.

Here’s a list of some of the more common documents associated with filing. Not every person will have every form, but this list should just help jog your memory so that you don’t forget something you need. The list:

  • W-2 wage and income statement – that’s your statement of wages, you’ll need a W-2 for each job you held. For lots of people, this is the only thing you need for filing your return. Make sure you have all of your W2s though; the most common problem is that Christmas season job part-time you had last year where you got paid in January of this year. Make sure you get all of your W2s before filing to avoid an IRS letter.
  • W-2G is for gambling income. The W2G is the second most frequently lost tax form (only the Social Security SSA-1099 beats it.) If you’ve received one of these statements, you need to include it on your tax return. If you don’t, you will get a letter from the IRS. Gambling losses, up to the amount of winnings, can be deducted on your Schedule A. The catch is, you have to report it. You can’t just leave it off if it’s deductible.
  • You need all of your 1099 forms – there are several types:
    • 1099-INT for interest – you get this from your bank. If you earned less than $10 in interest, you probably will not get one
    • 1099-DIV for dividends – you’ll get this from stocks you own. Sometimes they’ll come from a broker (like Edward Jones) and sometimes they’ll come straight from the stock issuing company (like Ameren).
    • 1099-B for sale of securities – and this is going to be different this year. The laws about reporting stock sales have changed so don’t be surprised if your report is looking a little different. Some companies (like Edward Jones) send out a combined form that has your 1099-INT, 1099-DIV and 1099-B all in one statement and it can be 12 or 20 pages long, or longer. Be sure to give all of the pages to your tax preparer – if you don’t, you’re cheating yourself out of your own money.
    • 1099-R for annuities, pensions and other retirement plan withdrawals—once again, even if your pension isn’t taxable, you need to report it on your tax return.
    • 1099-G is for government payments like a state tax refund or unemployment benefits. If you live in Missouri, the state doesn’t send you a 1099G for your refund anymore; you have to go online to get it. Here’s the website: https://sa.dor.mo.gov/tax/1099g/
    • 1099 MISC is for miscellaneous income, like commissions or non-employee compensation. If you have income shown in box 7, you’ll be required to file a Schedule C for self employment income.
    • SSA-1099 is for Social Security income – a note about the SSA 1099 form: it has to be the most frequently lost form on the planet. It’s usually the first one mailed out and I think it kind of gets lost in the shuffle. If you receive Social Security benefits, or are assisting someone who does, please make sure that this form is included with the other tax documents. For some people, it’s not taxable – but you need to include the figures from this form when preparing your taxes to determine if it is taxable or not. You get the 1099SSA form at about the same time that you get the information about what your benefits will be for the next year. You need the 1099SSA to do your taxes, not the future benefits statement.
  • 1098 tells how much interest you paid on your mortgage—important for itemizing deductions
  • 1098-E shows interest paid on a student loan—so you can claim a student loan interest deduction
  • 1098-T shows the amount of tuition paid at an educational institution–you need this to claim those college tax credits
  • If you purchased a new home this year, you’ll want to have a copy of your settlement statement—there are little things that might help with your deductions
  • K-1 forms – if you are a member of a partnership, joint venture, S corporation, estate or trust. Those forms aren’t required to be completed until March 15th (partnerships not until April 15th) so you may not be able to file your personal return before then. It’s a good idea to make your tax appointment once you have all of your other forms together. The K-1 information can be added at a later date.

And of course, you’ll want to have all the documents to support your deductions like real estate taxes, charitable contributions or deductible business expenses.

It’s a good idea to have a copy of last year’s return with you also.

Don’t forget to bring the social security cards for you and your children to your tax appointment.

One last thing—have a blank check so that you can use the routing and account numbers for direct depositing your refund.

Once you have everything together, you’re ready to go!

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