Other than my first year of freelancing, when the thought of a Schedule C put me in a panic, I’ve used TurboTax since I’ve been in business for myself. And I’ve never had a problem.
So let’s look at TurboTax’s 2014 version of its software, as I used it to prepare my taxes for the year:
Table of Contents:
Doing the math
I’m an English major. And as an English major, I hate doing math.
Seriously, when my husband and I play strategy games, I make him add up my points because I suck at doing math in my head.
TurboTax is kind enough to do the math for me, too. And I’ve never had a problem with the software’s calculations – at least not one that threw up a red flag with the IRS.
Also, TurboTax does the math as you go, which is kind of fun. (Or, if you’re going to owe money like me, depressing.) The top left hand of the screen keeps a running total of how much you’ll owe or get back from both your federal and state taxes.
(You can see this on the first screenshot below, though I’ve blurred out the figures since this is my actual tax return!)
Step by step
Another excellent thing about TurboTax is that it takes you through every possible piece of income and deduction step by step, like this:
This is just a random screenshot of one of the many questions about obscure tax-related issues that TurboTax asks. It’ll also have you fill in the blanks on more basic questions, like this:
This series of images shows how TurboTax takes you through the process of putting in a new W-2. It seems like a ton of unnecessary questions, but TurboTax actually uses your answers to fill in the blanks. For instance, when I choose my husband’s name for a W-2, TurboTax automatically puts his Social Security number and other information where it needs to go in our tax forms – so I don’t have to type it over and over again.
TurboTax apparently has this new feature where they can import your W-2 information automatically. It didn’t work for me, as apparently none of Ben’s employers participated in the program. (Not surprising, as two are quite small and all three are non-profits!)
But this could be an excellent time-saving device if it does work for you. (Though you should certainly double check that the imported numbers match those on your copy of your W-2!)
This step by step setup is just as thorough for the business portion of TurboTax. It takes you through all of the most common business income sources, including 1099-MISC forms and miscellaneous business income. It also walks you through the most common business deductions, as well as some more obscure write-offs.
(Since I only take basic business deductions, I’m not sure if TurboTax covers more obscure options. If you may qualify for particularly obscure business deductions – or if you have lots of capitalized deductions, etc. – you probably want to consult with a professional.)
While you can have TurboTax walk you through step by step, you can also choose to fill out portions of your return on your own. This is great for me, personally, because I rarely do our taxes all in one sitting.
Because I’m exclusively self-employed, I can put in my own information as early as the 1st of the year. And I usually do start filling out my Schedule C pretty early – well before we get Ben’s W-2s and our other information that we need to wait on.
So I can go through and get started on our taxes, but then go back as I get new forms in to include them. So instead of spending one chunk of a few hours working on our taxes, I do them in spurts between January and April. This works really nicely for me.
Here’s what it looks like when you choose this option:
TurboTax will ask you every time you go back to work on a section whether you want to be guided through or explore the options on your own. If you choose “explore on my own,” the screen will look something like this:
This is the personal income section. As you can see, you can add different types of income individually.
This is the business deductions screen. Again, you can easily choose which deductions to add at any point.
I’m sure not everyone actually utilizes this flexibility. But it works well for me!
I trust TurboTax partially because it’s an Intuit product, and they’re masters at this sort of thing. But also, I know that TurboTax updates its software to match new tax laws every year. So you don’t have to worry about claiming a deduction that’s no longer available, or missing one that’s just be instituted.
Like I said, I’ve been using TurboTax for years. So I don’t have a whole lot of bad things to say about it. But here are a couple potential issues:
No actual advice
I’m glad I hired a tax pro that first year I was freelancing. He was able to point out different deductions I might have otherwise missed, and he could give me solid advice. And sometimes I still worry that I might be missing deductions because I’m not hiring a professional.
But I think the costs of hiring said professional would outweigh anything I might get in return, simply because TurboTax is very thorough.
However, if I had questions about qualifying for certain deductions – especially ones like the home office deduction or taking a loss that are IRS red flags – I’d definitely want to hire someone. It’s better to pay for tax help up front than to hassle with an audit later on!
Missing a state deduction
Until this year, I’ve never knowingly missed out on a deduction by using TurboTax. But, like I said, our deductions are usually pretty basic.
This year, though, I’m having problems with the state tax portion (which, by the way, costs extra). TurboTax does go through many state-specific tax deductions. For instance, in Indiana, we get deductions for paying rent and contributing to our daughter’s 529 college savings account. Not all states have these deductions, so I know the system is specific for Indiana.
However, this year, we do have an unusual deduction on our list – NAP credits.
NAP – Neighborhood Assistance Program – credits are available for donations to certain charitable organizations that do specific types of work within a local community. When you donate to a NAP organization in Indiana, you get the regular federal deduction for a charitable donation (if, of course, you itemize your taxes).
But you also get a dollar-for-dollar reduction on your state taxes equal to 50% of your donation. So if you donate $500, you should get a $250 dollar-for-dollar reduction on your Indiana taxes.
The problem? I can’t find anywhere in TurboTax to claim this deduction! So I may have to file my state taxes separately or something, which is annoying. I’m sure I’ll get it figured out, but this is a frustration, for sure.
The Bottom Line
The bottom line here is that TurboTax is an excellent program to help you quickly and easily do your taxes – even if you file a Schedule C as a small business owner. I haven’t tried any other tax preparation software, nor are my taxes particularly complicated.
If your taxes are similarly uncomplicated, I would definitely give TurboTax a try this year!
(PS. You can actually fill in your information and check out how big your refund will be before you even pay for the Home and Business edition. You just can’t file your taxes until you pay!)