Ack! How could I owe so much? Get me a CPA!
Sunday, March 14, 2010
They say it is better to give than to receive, but paying taxes has got to be the one exception to this golden rule. At least I know that I felt far from virtuous as my tax bill kept climbing during a recent five-hour tussle with TurboTax.
$2,312 owed to the federal government. $3,592 owed to the District. The red numbers glared at me from the top corner of my computer screen, frozen in place no matter where else I clicked.
Personal finance experts with a stronger moral fiber than mine might spin this as a good thing, that I've been making Uncle Sam's money work for me throughout the year and now he just wants it back. The only problem is that Uncle Sam's money was exceptionally lazy last year, garnering a measly 1.2 percent interest in my money market account. And I had already planned to take my refund check on a fun trip to Next Day Blinds or the appliance store.
I ran the error check on TurboTax to confirm the results so far; they came back squeaky-clean. My kitchen table was littered with W2s, old receipts, property tax bills and my cat, who had decided my files could double as a scratching post. I was ready to shred something myself. Five painstaking hours with TurboTax had left my brain addled and my eyes strained.
But I refused to believe the numbers.
One of my New Year's resolutions had been to do my taxes on my own. I got burned last year when I worked with an accountant, who found that I owed about $2,500 in taxes. I wasn't happy but sucked it up, wrote a check and didn't question him -- until I realized that he didn't complete our tax returns until well after the extended deadline. As I rushed to mail my forms in the last days of 2009, I swore that this year I would take matters into my own hands.
How hard could it be? I was on the math team in high school, after all. Several friends and colleagues swore by the latest tax preparation software. And my life isn't that complicated: I'm married, own a home, refinanced last year, claim two rental properties, receive income from three jurisdictions plus some freelance wages and closed out a stagnant Roth IRA.
Okay, maybe it's a little complicated. But TurboTax promised that I wouldn't have to pay until I was satisfied with my return. Based on the program's recommendation, I signed up for the online "premier" version, tailored for folks with investments and rental properties. Federal filing cost $49.95; state filings were $36.95 each.
At first I was impressed. The program asked lots of questions: Did I have interest or dividend income? Did I receive money from a foreign trust? Was my home foreclosed? Did I buy an energy-efficient car? But it didn't always ask the right questions. None of the stock responses seemed to account for my home refinance. I got confused when entering information for the Roth IRA and did not check a crucial box. My document organization system quickly disintegrated; hunting down the right paperwork for each screen became a job in itself.
And still my tax bill refused to drop.
The last straw came as I finished my federal return. Even though my husband and I were filing jointly, TurboTax said we might save money by filing our state taxes separately -- and that would require re-entering the same information I had just spent five hours perfecting. Plus, because my husband and I live in the District but receive income in the District, Maryland and Virginia, the program found we had to file three state returns.
I was done. With three state returns, our TurboTax bill was $160.80 -- more than half of what our tax preparer cost. And the computer was still telling me I owed more than $5,000. If that were really true, I decided, I wanted to hear it from a live person and not a heartless machine.