Tooling with Tax Returns—Depending upon your circumstances, expert advice may be in order

February 2012 View more

“It’s income tax time again, Americans: Time to gather up those receipts, get out those tax forms, sharpen up that pencil, and stab yourself in the aorta.” This great observation by American humorist Dave Berry rings true to many Americans as April 15 rolls around. It often takes more brainpower to figure out the income tax forms than it does to earn the income.


But there are ways around the annual bloodletting associated with tax season, and your tool of choice should depend on the complexity of your financial situation. A college student selling Christmas trees over the holidays can file a W-2 using the standard deduction. But taxpayers dealing with investment income issues, a recently sold home, a divorce, a business venture, or any combination thereof, are in a decidedly different category.

Though many people with accounting degrees have a decent grasp of how taxes work, more complex tax situations might require the help of a tax expert.

Tax Manager Cammy Corso (CPA, CFP®, CDFA) of Naperville’s DiGiovine Hnilo Jordan + Johnson Ltd. says that while simple tax returns don’t require the services of a certified public accountant (CPA), taxpayers with complex investment structures that generate K-1s—with multiple reporting and disclosure requirements—might consider using a CPA to guide them through the murky tax process to assure returns are done properly.

Another time to consider using a CPA to do some planning is when your tax situation is set to change, such as in the case of a new job, retirement, marriage, or divorce. Should you be shifting deductions into the higher tax years and postponing gains into lower tax years? “This is where you can really gain value from a multiyear tax projection because the answer isn’t always as straightforward as you may think,” says Corso.

And then there are those of us who fall into what Corso calls “the grey area.” While taxpayers can use take-home software for at-home preparation and feel confident that they are preparing returns correctly, what she sees most often are easily missed opportunities in the tax game. “Whether it’s taking advantage of deductions that would otherwise be lost (by generating income at a zero-percent tax rate) or utilizing credits that are about to expire, there are value-added scenarios that we can help our clients take advantage of.”

If you’re in this grey area Corso describes and want to forego services of a CTA or an accountant, your local office supply centers—Office Max, Staples, Office Depot, and even Costco—as well as once-only bricks-and-mortar H&R Block, offer software alternatives at very reasonable prices. Turbo Tax is carried by most of them, and friends tell me it’s very easy to maneuver. Depending on the version you require, cost ranges from $30 to $130.

H&R Block At Home™ tax software—at $20 to $90—looks interesting if you’re a do-it-yourselfer. In addition, H&R Block Best of BothSM is a hybrid: It’s where the convenience of filing at home meets the confidence of filing with a tax professional, and—if you have all of your ducks in a row—it could take as little as 48 hours to complete your return.

TaxACT offers a free federal edition (no state return help included) for basic returns, up to an inexpensive $17.95 “Ultimate Bundle.”

Finally, if you like to compare tax program features—and you should—do a web search for the “Top 7 Tax Software” reviews by William Perez. As a tax professional for a number of years, he’s put various programs through three tax scenario stress tests, including verification that the software is up to date on the latest changes in the alternative minimum tax.