Tax software choice

Finance Tax
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I have found it is worthwhile to do some calculations of taxes before the end of the year to identify profitable last minute adjustments

This can be done with the previous years software by copying a return and then modifying key entries to see what differences they make.
If the laws have not changed much, this should work.

However, a new copy may have any changes (of course, if the Trump changes go through there will be major changes). Also some things can be entered once, especially if they are not likely to change, saving you time when you finally do your taxes.

The issue then becomes what to buy, and when.

In last two years I went with Taxcut (H R Block) because of their Amazon offers, but this year it is only 5%. Since I can get that with my Amazon store card, and several credit cards, this feature is no longer important to me. .

Historically, there have been offers from financial firms for discounted versions, or even free versions, if you were customers or had certain amounts with them. Are any of these announced now?

It may be false economy to wait for one to save a few dollars on the software, and lose thousands on taxes, or hours of extra work.

In the now expired offer on Amazon discussion, it was pointed out that by getting the downloaded version of Amazon you could use credits you had from accepting delayed delivery of Amazon prime items.

It seems that on Amazon now, the HR Block is significantly cheaper for comparable products. For instance the Federal only download is $17.20 ($39.99 with state)
Turbotax Deluex Fed seems to be $39.86 for disc and more if downloaded.

I suspect if the Tax laws get rewritten, no early version will be accurate, although you may be able to make them work with overrides, etc.

Having used both, I recall Turbo as a little easier partially because I have not figured out how to keep two forms open with Taxcut.

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Fidelity - Free TurboTax Premier - Qualifying accounts only (credit to @3c3)
Per Fidelity chat rep the requirements change every year and are based on number of trades and retail holdings (excluding “accounts such as” 401k). He said you should see the link in the “summary” tab.

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I use a spreadsheet with formulas to mirror as closely as possible the federal and state tax returns, with sections for any schedules/forms as needed. I update the entries each pay period and with each month’s statements. This gives me an up-to-date picture so withholding adjustments can be made if needed.

For filing, I use Free File Fillable Forms.

https://www.irs.gov/filing/free-file-do-your-federal-taxes-for-free

I did taxes manually most of my life. Free File Fillable Forms is closest to that experience. It does the math for you and it’s easy to add the schedules/forms as needed. Then you file electronically. My state also has free electronic filing on it’s website.

I tried TurboTax several years ago, for 2 tax years. Both times, the software made errors regarding my husband’s company contributions for HSAs. I later learned that this was a programming issue as others were reporting the same problem. There was only one way to answer the question. If you have a number in this box, enter it here. No workaround. That was the last time I used a question and answer software program.

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Looks like H&R Block mailed out their CDs around mid-December last year. Since they mail different offers to different people, it takes a bit to determine what is the best offer and sharing the .iso with everyone else. I usually wait until late January/early February to purchase. The tax forms aren’t usually finalized until then anyway, and I am lucky if I received all my W-2’s and 1099’s.

For my 2016 taxes, I did my taxes online using Credit Karma. Totally free to use and e-file both federal and state, and it handled everything just as well as H&R Block I thought.

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I also do my taxes in a spreadsheet with updates each pay period, so if there’s a bug in the tax software, I can usually find it and fix it – TaxCut / H&R Block allows overriding any entries and recalculates the rest automatically. It requires me to do some research to figure out if the bug is in my spreadsheet or in the software.

If your tax situation doesn’t change year to year, a spreadsheet is the way to go – you only need to update the numbers that change annually (like these). My tax situation changed this year with things that aren’t in my spreadsheet, so I’m hoping that the early release of taxcut will help me with that.

I’m also 99% certain that the major tax changes (like standard deduction, exemption, or brackets) being rammed through congress won’t be retroactive to 2017.

I’m pretty sure you can’t. You could save/print them to PDFs as a workaround.

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I have used TurboTax since the DOS days. I have always used the “form” method, not the interview method.

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I also do the spreadsheet method to estimate my tax burden throughout the year.

Any tax changes will affect 2018 and onward, so I’ll have to recreate my spreadsheet for next year. I also included some of the nuances for the Pease reductions (when applicable), reduction of child tax credits, deductions, etc.

The interesting thing to me as a father of a large family is how quiet large families have been about this reform. Since they tilted Trump, I don’t think they’re aware of just how much of a tax increase they’re going to see. I’ve already run some preliminary numbers and it’s going to be huge - as in thousands of dollars of additional federal tax as the most likely outcome.

So if you have 4 or more kids, and make a decent living (75th percentile or higher)… you may want to start adjusting your spreadsheets now.

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Interesting. This could save some people some money.

How complex are your affairs? Do you itemize?
Do they handle stock investments with dividends, capital gains etc. ?

I presume they do not have provision for downloading automatically data from brokerage houses. This is very important if you have numerous transactions, or even a Betterment account which optimally harvests tax losses and rebalances (which also means several transactions).

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As I mentioned, if you have financial flexibility (such as owning a business), doing a first cut early can be very useful in deciding which income and expenses should be in this years return.

If there are major changes in the tax laws that affect 2018, but not 2017, it may make a big difference which year you take certain deductions or receive certain expenses.

Hopefully, if there are major changes someone will make a spreadsheet available to calculate taxes under the new rules, and tell you your new marginal rate.

For instance, if they raise the standard deduction, some people who itemize in 2017 will not in 2018. This means many deductions will be valuable for them only this year. They may want to push up mortgage payments, charitable donations, medical expenses, etc.

Many may find that their tax rates are much higher or lower in 2018, and they may wish to shift income and expenses between the years. Possibly 2018 will be at 0% (large child tax credits for instance), or 2017 is now zero (due to personal exemptions) but the rate will be positive in 2018.

For instance, IRA withdrawals become income when withdrawn.My spread sheet shows that I could take perhaps $15,000 in withdrawals beyond the required minimum, and not change my Federal taxes (due to child credits and other elements). I probably will not since this leaves the money in the accounts to grow for another year, but it could be useful to know. If I was planning to spend a lot more next year, it might be worth doing, but with the market up, my required distributions will probably be substantially larger next year, so money taken out would be invested.

In Maryland there is a tax break for putting money into a Maryland 529 plan (including bringing it in from an out of state plan), but it appears that if this goes beyond reducing your taxes to zero, you do not benefit. I was trying to figure out how much I might wish to bring in this year.

I decide a while ago to make large charitable contributions each year to exhaust the limits. Estimating income can tell how much I may want to donate this year.

One can push a mortgage payment up to increase this year’s deductions, but the above suggests it will gain me nothing.

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My post above points out how this could affect what you do for the remainder of 2017.
You may wish to calculate your marginal rate under the new rules, and compare it with your marginal rate under the current rules.

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I had a few capital gains transactions. Last year was Credit Karma’s first time to offer free tax filing. I don’t think it was possible to download or import data from brokerage houses, but who knows if Credit Karma will add something like that this year. I figured both itemized and standard deductions. My state makes me add itemized deductions back to my AGI, so it was advantageous to just take the standard deduction.

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I have been using the downloaded TaxAct for years to pre-calculate my taxes, I just finished my calculations for 2017 and made the necessary adjustments with 2016 TaxAct. This year the price for TaxAct has increased dramatically and it looks like H&R Block may be the best price for a downloadable tax software. Since taxes will probably have major changes next year I think I will not purchase any tax software this year. I may do my taxes with one of the free online federal tax vendors available. I just hesitate posting all my financial information to one of these vendors since I suspect they then use the financial information to develop mailing lists that they sell. Thus far I have avoided posting my financial info online even though the state and possibly federal governments also sell mailing lists. I guess having my finances analyzed and commercialized ts unavoidable.

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That makes no sense at all – they’ll all release downloadable updates for the software regardless of how complex the changes may be.

I’m all about personal privacy, and I would be extremely surprised if they were allowed to sell your financial information. In the very worst case it may just be your name and mailing address, but I doubt they sell anything. Read their privacy policies before forming an opinion.

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Them selling my name and address on mailing lists is exactly what I’m trying to avoid.

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With that logic, why buy tax software at all? Just make a spreadsheet and re-use it every year!

Again, nobody said they are allowed to sell any of your information. Read the privacy policy.

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The .iso method worked very well for me the last 5 years or so. Every year now, we receive CDs in the mail with offers for either TurboTax or H&R. After going back and forth between them, they are identical products functionally, they import from each other flawlessly, so best product is more or less the cheaper of the two.

I tried Credit Karma free filling thing last year too but inability to import anything and how clunky the interview was (it was missing one deduction because of it IIRC) made me stick with H&R.

My costs have been $0-10 for the Deluxe + State + efile over the years. If I find a deal for that price, I usually go for it.

The only issue is making sure nothing nefarious comes along the .iso so it may not be perfect for paranoid people. You wouldn’t want your SSN and other sensitive financial info to end up with ID thieves. Fortunately, Equifax solved that concern for a lot of folks this year. lol

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Great points @Shandril.

Something important to say is you can use your own CD and you only need one small file for a different/better deal. That’s not to say paranoid people won’t find fault in downloading a 16Kb text file, but it is dramatically less than a full 510mb download.

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To everyone here wondering how their tax software purchase will be affected by the current tax law debate going on… don’t worry about that. It won’t.

Whatever you are considering purchasing right now is for filing your 2017 taxes. As far as I have seen, nothing being discussed in congress right now applies to tax year 2017. The tax laws for 2017 are pretty much set and considering how much discussion is going on for 2018 and beyond in congress, I don’t see them making any changes to 2017. The laws for filing your 2017 taxes are about as locked down as they possibly could be right now.

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However, as pointed out earlier, major changes in tax law could affect what you do for the rest of 2017, such as taking advantage of deductions that may disappear.

This may suggest buying something now, filling in what you know now, and experimenting with shifting expenses and income for the rest of the year.

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I agree with that method as being safer. Still that small file itself is an encrypted .xml file. So you still won’t be able to look at it and make sure it’s safe. After that, it depends on what software (and its potential vulnerabilities) opens the xml. If it’s TurboTax or H&R proprietary software which change annually, if the .xml is published very quickly after the CDs are mailed, I don’t think the risk is too high. Especially if multiple people can vouch for the checksum of the xml file.

So it’s definitely a lot safer than using executables from the iso directly but you always want to warn people no matter how small the risk. Especially at the cost savings - maybe $10-15 less than a good deal -, for many people, it may not be worth the hassle or simply worrying about potential vulnerability.

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