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Does TurboTax, TaxCut And Other DIY Tax Software Really Save You Money?

by The Happy Rock on January 13, 2008

turbotax-taxes-software.jpgThe obvious answer is…….Yes! The not so obvious answer is that it might cost me well over $300 dollars this year.

First, the software can usually be purchased for next to nothing after rebates or through other programs. SlickDeals is a great way to scour the net for a deal on the software you want.

The other factor to take into account is your time and stress in having to deal with taxes yourself. The time and stress will be extremely personal decisions that we each must measure for ourselves. The only thing I will say is that the software tends to be fairly straightforward and not as scary of some people might think.

Finally, the last thing to take into account is the risk and cost of mistakes. I can tell you from first hand experience that making one honest mistake can quickly destroy years of frugality. I am currently fighting to lessen the fines from not realizing that I had to pay state taxes by April 15th, even when you file for extension.

We were waiting on the social security number for our son after his adoption was finalized, so I filed extensions for both sets of taxes. Everything was fine until a few months ago the NJ Division of Taxation sends me a bill for over $300 dollars in interest and late penalties. This is over 30% penalty considering that the bill was about $900 dollars. Silly honest mistake that I really should have known better, but hopefully NJ will remove the late penalties and the bill will be under $100 dollars. A severe mistake could increase your risk of getting audited which would most likely cost you much more in stress and fees for representation.

I am not here to get everyone to their local CPA, but I want everyone to consider all the sides when deciding between tax software and using a professional. I may still do my own taxes again this year, but I will make sure I am a bit more careful if I don’t use a professional. More and more I am learning the effeciencies that come from focusing on your own area of expertise and letting other focus on theirs. That is great in theory until you have to shell out $200 to get your taxes done. I will follow up our decision as it gets closer to tax time.

{ 8 comments… read them below or add one }

Shela January 13, 2008 at 1:31 pm

Ah, the simple life!

I file form 1040EZ, and so I can honestly say that I do not need TurboTax at this point in time.

I timed myself last year, it took exactly 17 minutes total to complete my federal, state, and local tax returns.

Granted, I may own property and have a small business in the future, and tax preparation software or professional help might be necessary. But for now, I am enjoying the lack of complications in my life.

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Will January 15, 2008 at 3:15 am

I’ll have to agree with you on this one Rock. The piece of mind involved with having a professional do your taxes is worth every penny!

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Paula January 17, 2008 at 10:22 pm

Hmm… Maybe you can look at it this way: the money you save with a frugal or money-saving step elsewhere in your budget could pay for the difference in cost for this expense!

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The Happy Rock January 19, 2008 at 2:43 am

17 minutes that sounds like a record! Simply is good I agree!

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The Happy Rock January 19, 2008 at 2:51 am

@Will – The trick is finding a CPA you trust, because HR Block or similar service doesn’t give me a piece of mind.

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Jolie December 19, 2008 at 6:16 am

Well I’ve found that the effectiveness of TurboTax and the like is proportional to the nature of the finance situation a person is in. For most people, think TT and TaxCut is great, but for those in a complicated or unusual tax situation, its effectiveness is greatly reduced. TT and TaxCut can adapt to these situations, but they cannot optimize like a certified tax preparer can. We recently had a discussion on this at my site taxadvisr.com ( TaxAdvisr! forums ) All in all I think this software is good, but cannot replace a real tax professional especially in more complicated situations.

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Gee Tee March 30, 2009 at 6:19 pm

I have been doing my taxes with Turbo Tax for about ten years. Its quick easy and I feel very through since I always go step by step. I live in New Jersey as well,and anything from taxation unless its a rebate would shake me up. So far no mistakes have been made.

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Skip February 2, 2014 at 1:17 pm

I’m a homeowner with a few CDs and such. I used to do the long forms by hand and would get Soooooo frustrated just trying to interpret the various tax laws to be sure I was entering the correct data….along with doing a zillion work sheets to determine if I get to take various deductions. Then I tried TurboTax Deluxe. My oh my, what a pleasant difference; just enter the figures step by step and presto – done! One year it even determined I was better off taking the standard deduction. I also pay the few bucks extra for state efile….saves having to print out and mail the forms. TurboTax is not perfect, but, gee wiz, for fifty bucks or so, it sure beats doing taxes by hand.

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