Wednesday, February 19, 2014

Acts of Tax

As long as Brian and I have been a Married Couple Filing Jointly, doing our taxes has always been my job. The very first year we were married, which was also the first year I started working as a freelancer, we hired an accountant to help us over the complications of our new tax situation—but when we saw the $300 bill, we realized doing that every year wasn't going to be an option for us. So for the past eight years, I've done our taxes the cheap way: at home, on paper. I'd manually transfer all the numbers from all the forms we received to the 1040 and add everything up on my little pocket calculator, and then Brian would double-check my math before I popped the returns into their envelopes and took them down to the post office to send by Certified Mail to make sure they arrived safely. It was a bit of a hassle, sure, but it only took me a few hours to get everything done, so I figured I wouldn't have much to gain by shelling out $50 for a copy of TurboTax.

The process became a bit easier in 2010 when the IRS introduced its Free File Fillable Forms, which let me input everything directly on the screen and did the math for me—in some cases even picking up the total from one form, such as our Schedule A, and automatically inserting it in the appropriate place on the 1040. Using the Fillable Forms also allowed us to e-file our federal return, which saved us the cost of a certified letter and let us get our refund a bit faster (without actually forcing us to pay up any sooner if it turned out that we were the ones who owed money). Unfortunately, we couldn't do the same with our New Jersey tax return, as the free NJ Webfile service isn't available to folks who have business income (such as my freelance earnings) to report. So from 2010 through 2013, we continued to go old-school with our state taxes, filling out the forms by hand and sending them by certified snail-mail.

From time to time, I'd get offers from MyPoints for online tax filing services, some of which even offered to let me file my federal return for free (and tack on a state one for a modest fee). However, every time I gave one a try, I ran into a snag: it couldn't understand Brian's W-2. Apparently Rutgers fills out its W-2 forms in a way that's nonstandard (otherwise known as "wrong"), and when I attempted to copy the information from the form Rutgers gave us to the one on the screen, it didn't work. So I just assumed that these services weren't an option for us and consoled myself with the thought that sooner or later New Jersey would have to get with the program and introduce an e-filing option that worked for everyone. (Why continue paying people to process all those paper forms if they didn't have to?)

This year, however, when a MyPoints offer for the free edition of TaxAct popped up in my in-box again, I thought I'd give it just one more try. As usual, I ran into the snag with the W-2, but by examining TaxAct's instructions carefully, I was able to figure out where on the form the misplaced numbers actually were supposed to go and insert them there. After that, everything was pretty straightforward. The software walked me through the return with a series of questions about my tax situation, and its calculators automatically took care of all the time-consuming parts, like figuring out whether or not we needed to pay the much-loathed Alternative Minimum Tax. Whenever I got stuck (for example, because I needed a form that I hadn't received yet), I could just log out and come back in a few days, picking up right where I left off. The only annoying part was the repeated messages that kept popping up throughout the process promising me all kinds of benefits if I'd just pay an extra $13 to upgrade to the Deluxe Edition. But I just kept clicking "No thanks," and I got to the end of the federal return in much less time than I'd expected.

My original plan at this point was to just e-file the federal return, print out a copy for myself, and then fill out my New Jersey return in the usual way. However, TaxAct wouldn't let me file the federal tax return without first going through the questions for the state return. "Aha," I thought, "this must be how they make money offering their federal edition for free—they force people to complete the state return as well, so that most of them will just go ahead and file it." But I figured there was no point letting the time I'd already put in on the federal return go to waste, so I went ahead and answered the questions for the state return and was surprised to find that it took only a few minutes to get through them. The prospect of just paying the $15 to have the whole process done with began to look tempting. After all, I reasoned, when you factor in the $4 or so I normally spend on certified mail, plus the time required to fill out the return, review it, print it, seal it up, and take it to the post office, my hourly pay for redoing the whole return myself would probably be less than minimum wage. So after consulting with Brian, I concluded that maybe shelling out the $15 was a reasonable idea after all.

It turned out, however, that TaxAct had one more trick up its sleeve. We instructed the program to have our refunds directly deposited into our bank account, which is what we usually do if we happen to be getting any. In order to do this, we had to provide some information and then electronically sign a whole bunch of different forms agreeing to let TaxAct have access to our account—and way down at the bottom of the last form, where it would be easy to overlook if you had stopped paying attention at that point and just wanted to get it done already, was a note to the effect that there would be a $19 "handling fee" for TaxAct to process the deposit. And since we had two refunds coming to us (federal and state), naturally there would be two $19 handling fees. Ah, so that's how they're making money on this "free" service—by charging you to give you your money!

Fortunately, we spotted this little hidden charge before paying it, so we simply walked the program back several steps and told it to send us a check instead. We still had to pay the $15 for the state return, but given the amount of time the software saved us (or rather me) on filling out forms, we figured that was a reasonable amount to pay.

So my final verdict on TaxAct is that it actually is, on the whole, a better way to do taxes than filling everything out by hand. Yes, it costs $15 to do both returns, but $15 to have both returns done and out of the way in a couple of hours is pretty reasonable. I suspect, unless something better pops up, that this is going to become my new standard method of filling out my tax return each year, because it really was easier and quicker (at least once I got past the initial snag with the W-2 form). But I'll definitely make sure to read through every word of everything TaxAct asks me to sign to make sure they haven't slipped any new hidden fees into the agreement—and if they add one that I can't get around, it's back to the old paper forms for me.
Post a Comment