7th Annual Anandtech Tax Time Thread

[JEDI]

i've always done my taxes using Turbo Tax ($35).

THen a co-worker told me about a CPA he used that did some creative accounting and he got back a couple of thousand more. (He lives in a different state.)

Do you usually get back more $ to justify the additional fees by using a CPA?

 

[kranky]

Maybe.

If your entries are all W-2 wages, interest/dividend income, plus fundamental itemized deductions such as mortgage interest, real estate taxes, etc., then there are no gray areas for a CPA to reduce your taxes. They are totally straightforward.

If you have other more complex circumstances, maybe a CPA could help.

 

[bruceb]

It all depends. In my case I need to deal with broker 1099's and they are a nightmare. Last year I ran a trial thru Turbotax 2008 Premier (needed for stocks) and after I entered all the data and it downloaded the 1099, it said I owed a huge amount. I also let my accountant do it and his numbers came in at HALF of what Turbotax thought it should be. I did of course know I would be paying, but my deductions for home mortgage are almost gone and have no dependents.
My accountant is a NYS CPA and also a Professor of Accounting.

 

[DrPizza]

When we had a simple return, there was nothing that a CPA could have known that we didn't know. But now that we have a farm that we run as a business, rental property, etc., our CPA is worth every penny. We did what bruceb did - our taxes ourselves, then had the CPA do them. If the results had been very similar, we wouldn't have bothered with the CPA again. Instead, we ended up with about $3k more on our return after the CPA did our taxes a couple years ago.

 

[ZOOYUKA]

Just like anything, there is a correct way and a wrong way. Having a CPA do you taxes should give you greater assurance that your taxes are done correctly. Your friends creative accoutning probably=fraud. If something should come up down the line he would still be ultimately responsible if it was a bogus return. Also, you cannot compare your refund to someone else. There are too many factors to consider to do this. Some people that get large refunds are withholding too much money from their paychecks. They are so proud of themselves, but all they've really accomplished is giving the government an interest free loan. In the long run breaking as close to even as possible is usually a better outcome.

 

[TuxDave]

It all depends. In my case I need to deal with broker 1099's and they are a nightmare. Last year I ran a trial thru Turbotax 2008 Premier (needed for stocks) and after I entered all the data and it downloaded the 1099, it said I owed a huge amount. I also let my accountant do it and his numbers came in at HALF of what Turbotax thought it should be. I did of course know I would be paying, but my deductions for home mortgage are almost gone and have no dependents.
My accountant is a NYS CPA and also a Professor of Accounting.

FYI, you only need Deluxe for everything including stocks. Did you check the 1040 side by side to see what he changed? It could be that you put in your cost basis for SPP/options incorrectly. Turbotax can only do what it can with what you put in it.

 

[bruceb]

I prefer the Premier as it also gives guidance for your investment return. I did not check it side by side to see what was changed, as I did not print out the Turbotax version when it's numbers came out so bad. As to inputting the Gains & Losses, I had TurboTax import the data directly from the broker account. My accountant, probably entered this data manually and may have been able to move some items from short to long gains. And of course, there was probably some Loss Carryover to use (but it is limited to $3,000 per year)

 

[TuxDave]

I prefer the Premier as it also gives guidance for your investment return. I did not check it side by side to see what was changed, as I did not print out the Turbotax version when it's numbers came out so bad. As to inputting the Gains & Losses, I had TurboTax import the data directly from the broker account. My accountant, probably entered this data manually and may have been able to move some items from short to long gains. And of course, there was probably some Loss Carryover to use (but it is limited to $3,000 per year)

Turbotax can handle loss carryover (assuming you actually had some) I'm not really sure how you can just move stuff from short to long term gains. It's either one or the other. Maybe that is what they mean as creative accounting

 

[BoomerD]

Maybe.

If your entries are all W-2 wages, interest/dividend income, plus fundamental itemized deductions such as mortgage interest, real estate taxes, etc., then there are no gray areas for a CPA to reduce your taxes. They are totally straightforward.

If you have other more complex circumstances, maybe a CPA could help.

Agreed. MOST of the tax software does a good job for relatively simple tax returns, but if you have rental property, a small business, or any thing other than simple W-2 income, some interest/dividends, and mortgage deductions, then using a CPA can usually pay for itself.

I'm a bookkeeper in a small CPA firm, and their prices, while more than the software, really aren't that high for the average taxpayer. In addition to the knowledgeable tax preparation, you also get document storage, (copies of your tax documents, your returns, etc.) and you also get someone who can go to bat for you with the IRS to explain deductions and write-offs.

 

[TraumaRN]

I did the math etc and did my taxes on my own, figured out that I'd get about $6300 back, then took it to my CPA apparently I missed a tax credit. Along with a few other things that I forgot(I have to pay to park, my nursing union dues etc) and we ended up getting $8950 back from just the Fed alone, so yea I kinda like my CPA. And hey despite it being $200, thats a tax deduction for next year

 

[bruceb]

Yes, I am sure a loss carry over can be inserted. As to wether or not the cpa moved any gains or losses from one category to another, I can't say. I know the rule is 1 year or less is a Short Term Gain / Loss ... anything over 1 year is Long Term Gain / Loss .. But a lot of stocks I have get dividend reinvestment and the cost basis may not always be what the tax software thinks it should be. I am wary of TurboTax results in complex returns since it took my 1099 electronically from the broker directly into the program. And everything else I entered by following the program step by step, box by box.

 

[Ns1]

If you have businesses/investment/complicated issues then a CPA can do wonders

If you have W2 and take the standard deduction, stick with ttax.

 

[JS80]

For 99.999999% of filers, there is only one right way to do a tax return. If a CPA got you more money, then it means you were doing it wrong before or the CPA is cheating.

 

[MikeyIs4Dcats]

I have a company truck used for business purposes only that I drive home each day. The company has begun to report the fringe benefit of the mileage for the daily commute on my W2. I have always used Turbotax, but this year I also did my return in TaxAct to compare and TaxAct is asking me to determine if the benefit reported in Box 14 needs to be reported elsewhere in my return. I'm guessing not since TT doesn't ask, but wanted to be sure.

it is also flagging my wife's state employee retirement contribution in the same box.

Advice?

 

[madmanbeck]

My SO was a graduate student all of last year and made no income. However, she did rollover ~20K from an old work 401k to a Traditional IRA. We both live together (both listed on mortgage) and I supported her financially. My two questions:

1) Can I still claim her as a dependent? I am confused by the gross income test. I claimed her last year as the situation was the same except without the rollover event.

2) Even if I claim her as a dependent, would she still need to file her own return? Does that make sense?

Thanks to everyone helping in this thread! I've tried researching my answer but have only become more confused!

 

[MikeyIs4Dcats]

My SO was a graduate student all of last year and made no income. However, she did rollover ~20K from an old work 401k to a Traditional IRA. We both live together (both listed on mortgage) and I supported her financially. My two questions:

1) Can I still claim her as a dependent? I am confused by the gross income test. I claimed her last year as the situation was the same except without the rollover event.

2) Even if I claim her as a dependent, would she still need to file her own return? Does that make sense?

Thanks to everyone helping in this thread! I've tried researching my answer but have only become more confused!

I think so, but I'm not a CPA

 

[alkemyst]

If you aren't married, you can't claim an SO AFAIK...

http://www.irs.gov/publications/p501/ar02.html#en_US_publink1000220868

dependents still have to file if they made over a certain amount, the link above explains it also.

 

[madmanbeck]

I think so, but I'm not a CPA

Thanks, I think so too..

If you aren't married, you can't claim an SO AFAIK...

http://www.irs.gov/publications/p501/ar02.html#en_US_publink1000220868

dependents still have to file if they made over a certain amount, the link above explains it also.

As I read the Qualifying Relative test, my SO does qualify. Here is something from Turbotax answering that question: http://blog.turbotax.intuit.com/deductions-and-credits/can-i-claim-my-girlfriend-as-a-dependent

However, I just don't know what the IRS means by gross income. She earned $0 last year and only moved some money from one Traditional 401k account to a Traditional IRA account. Her 1099-R shows $0 for taxable amount. Does this count as gross income? If so, she would fail the dependency test, which doesn't seem like it would make sense since she never saw a penny of it and had no other income to speak of..

The more I think about it the more I'm guessing that she will need to submit a return and (hopefully) note on there that she was claimed as a dependent.

From the Tests To Be a Qualifying Relative (my responses in bold):

1. The person cannot be your qualifying child or the qualifying child of any other taxpayer.
   Pass.
2. The person either (a) must be related to you in one of the ways listed under Relatives who do not have to live with you, or (b) must live with you all year as a member of your household2 (and your relationship must not violate local law).
   Satisfies (b)
3. The person's gross income for the year must be less than $3,650.3
   Yes, unless the rollover counts.. ??
4. You must provide more than half of the person's total support for the year.4
   Pass.

 

[alkemyst]

Interesting on that (b) part. AFAIK, SO's used to be off-limits...maybe with non-traditional relationships this was opened up.

 

[EagleKeeper]

Interesting on that (b) part. AFAIK, SO's used to be off-limits...maybe with non-traditional relationships this was opened up.

IRS opened up a SO to be declared as an dependant last year.

 

[EagleKeeper]

I have a company truck used for business purposes only that I drive home each day. The company has begun to report the fringe benefit of the mileage for the daily commute on my W2. I have always used Turbotax, but this year I also did my return in TaxAct to compare and TaxAct is asking me to determine if the benefit reported in Box 14 needs to be reported elsewhere in my return. I'm guessing not since TT doesn't ask, but wanted to be sure.

it is also flagging my wife's state employee retirement contribution in the same box.

Advice?

TaxAct will flag things that it wants you to be sure of. Those items may not be incorrect; but the S/W wants to make sure you have entered the information properly.

 

[PCMarine]

Alright, so I've got a tax question for the accountants:

I graduated in May of 09 and was a full-time student up until then. Because of this, my dad is going to claim me as a dependent on his return. He also, thankfully, paid for my tuition.

The American Opportunity Credit provides up to $2500 per student per year for pursuing higher education. My dad doesn't qualify for the credit since he makes more than $80k a year (or whatever the cutoff is). TaxAct says that if the person claiming me as a dependent isn't eligible for the exemption, then I can claim it.

So my question: Can I claim the $2500 tax credit even though I didn't pay for tuition, since my dad isn't eligible?

Thanks for the help!

 

[onza]

Alright, so I've got a tax question for the accountants:

I graduated in May of 09 and was a full-time student up until then. Because of this, my dad is going to claim me as a dependent on his return. He also, thankfully, paid for my tuition.

The American Opportunity Credit provides up to $2500 per student per year for pursuing higher education. My dad doesn't qualify for the credit since he makes more than $80k a year (or whatever the cutoff is). TaxAct says that if the person claiming me as a dependent isn't eligible for the exemption, then I can claim it.

So my question: Can I claim the $2500 tax credit even though I didn't pay for tuition, since my dad isn't eligible?

Thanks for the help!

It follows the dependent.

Basically if you claim yourself as single and not on your dads return then you can claim the Am Opp credit even if you didn't pay for your tuition. Who's name is on the form? Yep yours!

 

[shortylickens]

Well, once again, I used Turbo Tax. Did alright I suppose. Only got a thousand bucks back, and thats only cuz I was full time college.
For state I owe 40 bucks. I declared all my online purchases. Figured that would be better than letting them find it on their own (which is unlikely, but still).

Turbo Tax cost me 20 bucks more than last year, but I got free E-file this time. Do they still make a cheap version with no free e-file?

 

[alkemyst]

On income taxes, sales taxes are a deduction....did you file with the dept of revenue as well?