Wednesday, April 13, 2011

Turbo Tax may save your time but won't save your money

Each year, lots of people use TurboTax to file their Tax returns. We did the same thing. We would say it was working OK. However, after this year’s tax return, we decide to say Good-by to Turbo Tax.
This year, we sold some of our ESPP stocks and I took two-month family leave. With these two items, our Tax return becomes very complicated by using Turbo Tax.
1. When we import stock transactions into Turbo Tax, it assumes all the transactions have 0-cost. Thus, all the transactions amounts are counted as my earnings. To correct this, I must manually enter each transaction. Fortunately, I don’t have many. Imagine, if a short-term stock investor uses Turbo Tax, how much time he needs to put all the records in?
2. When we add my family leave W-2 in the system, it’s added as my normal wage income. Thus, both Federal tax and State tax are deducted from this part of income. However, in California, family leave is supposed exempt from State Tax deduction. We tried to manually fix this on Turbo Tax. No way! unless we have a PDF writer and manually change and re-compute everything. ---(Update, ironically, after we finished this year’s tax return, we close the Turbo Tax and re-open it, it automatically downloads many patches. After that, we saw an option to specify whether a W-2 is from Family Leave or not. Thank God, we haven’t sent out the tax return forms! ) Should I wait till all the patches are released out before I send out the tax return forms?
3. We also realized that Turbo Tax deducts the withheld State Tax from Federal Tax. For example, if I withhold $8000 for State tax this year but my real State Tax is $9000, we are supposed to deduct $9000 from our Federal Tax as our Local Tax. But, Turbo Tax only deducts $8000. Thus, you have $1000 being double taxed. There is no way to fix it, unless you manually file Federal Tax. Then, why should I buy Turbo Tax?
I will say Good-bye to Turbo Tax. It does not save my time or money. Next year, I probably go with a CPA. Although I may spend a little more, but I won’t have so many headaches.

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