Software review: TurboTax

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I wasn't looking forward to doing my taxes this year.  They were going to be more complicated than in years past, because I left my regular job and started working full-time as a writer.  I also had some other new complications.  TurboTax handled it all without difficulty.

I should mention that I've used TurboTax (and before that, its predecessor MacInTax) since 1995.  This year I got a free review copy.  I wrote a bit about the new features in TurboTax back in January.

Me and tax expertise

Back in 1981 there were some major changes to the tax code.  Since I was just out of college, working at my first job, I paid some attention--this stuff was going to matter to me.  There were lots of parts of the tax code that I didn't understand, but I felt like I had a pretty good handle on the ordinary stuff as it applied to ordinary people earning a salary.

The rules changed a bit every year, which was annoying--I'd put a lot of effort into understanding all this stuff, and here they were still screwing around with it--but I was keeping up okay.  Then, in 1986, there was a big rewrite of the tax laws.  Practically all the stuff I'd learned in 1981, and then kept up on for the next four years, was changed.

There'd been a brief period there when I was, if not a tax expert, at least a resource for my friends and coworkers.  They could ask me stuff about the rules for IRAs or 401(k)s, and I'd often know the answer.

After 1986, though, I gave up.  Not only was it impossible to keep up with the changes, it really wasn't worth arranging your finances to take advantage of special rules, unless you got an advantage in that same tax year:  several special rules that I'd been counting on were eliminated in the 1986 tax reform--before I'd had a chance to take advantage of them.

Since then, I pretty much don't say anything about taxes without prefacing the statement with, "Well, I'm no tax expert, but...."

This year's taxes

Here's how things went.

The old stuff

TurboTax still has the good stuff that it's had for years.  It gets the information from last year's tax files, so you don't have to retype your name, address, social security number, or bank account direct deposit information.  It also remembers things like what 1099 forms you had last year, and tells you if one is missing this year--very handy if you're trying to do your taxes early, unaware that there's a form or two yet to come.

Speaking of 1099s, they've improved the process for entering them.  For a long time, they've been set up to walk you through them in batches--all the 1099-INTs, all the 1099-DIVs, all the 1099-OIDs, etc.  In my case, though, several of my 1099s (the ones from fund families and brokerage accounts) combined two or three or four different kinds of 1099, which meant that I had to go through the same form two or three or four different times.  Much better for me to just put the stack of 1099s next to my keyboard, and go through it one time, entering all the information off each form.  Once I've gone through my stack, I know I've got all the information.  The latest version of TurboTax makes it quite a bit easier to do it that way.

The new stuff

The last time I thought I understood the home-office deduction (which was probably back in the 1980s, although I might have tried to figure it out again during the period when I owned a home in the 1990s), the rules were more strict than they seem to be now.  Back then, I think, you could only deduct whole rooms as a home office.  If any part of the room was used for non-business purposes, no deduction was allowed.

With that as my recollection, I wasn't too sure if the space I use for my writing qualified for a home office deduction.  Happily, TurboTax is set up to help users figure that sort of thing out, asking questions to make sure you meet the rules.  (As near as I can tell, I do.)  Once it verified that, it gathered the information on deductible expenses and did all the calculations to pro-rate the home expenses by the fraction of the home that my office uses.  (It also has a page to gather home office expenses that shouldn't be pro-rated, but I didn't have any of those.)

The other new (for me) thing was that I had a Health Savings Account.  That was a bit complicated--the rules about how much I could put in had changed last year, after I'd already arranged (back in October of 2006) to fund it via payroll deduction.  Also, while I'd been working, my employer had contributing, but that ended when the site closed.  Those contributions were pre-tax (hence not deductible), but I also contributed a chunk of after-tax money to bring my total contribution up to the IRS maximum.  TurboTax sorted out the pre-tax and post-tax contributions, deducted the deductible parts, and verified that I hadn't gone over the maximum.  All very handy.

Filing

For years, I resisted electronic filing.  (I figured I'd go with electronic filing as soon as they'd do it for the cost of a stamp.)  About three years ago, I finally came around, and I've been pretty happy with the e-file process.  No need to make photocopies of the forms.  No need to sort out what goes in the envelope.  No need to make a trip to the post office.  Get proof that you filed.  Get your refund much earlier.  It seemed like it was worth the $16.

This year, though, it was more like $18.

So, I compromised.  I filed the federal return (where I'm getting a refund) electronically.  But I'm sending the state return in via regular mail.

There are a couple of reasons why this makes sense.  First, in Illinois, the state taxes are very simple--just a couple of pages--so there's not so much to send in.  Second, I'm not getting a refund, so it's easy to send in a check with the return.

Bottom line

Basically, I'm entirely pleased with TurboTax.  I got a free copy this year.  (It didn't come with free e-filing, though, so Intuit still made a little money off me.)  Next year, I expect I'll once again buy my own copy.