Yes! That’s a ton of money and what annoyed me the most was, my accountant decided to increase his rates- after completion of the filing. That was it – going forward this CPA would have no more of my dollars and better still no CPA would get any of my money again. Self filing of taxes was an unchartered territory, but I was determined to file my fears to rest. My tax returns include overseas income and hence not the simple W-2 based. Hence I had sought out a professional in order to have a error free reporting. But over a certain price point, the value of any service become questionable.
What is so different in my returns?
My tax returns has to account for the following income heads.
- 2 W-2’s for Mrs and self
- Home mortgage and taxes in the US
- Dividend income
- Rental income – US
- Rental income – Overseas
- Dividend income – overseas
- Interest income – Overseas
- Long term bonds – Overseas
Moreover, based on a threshold value of foreign assets I have to also file the following reports as part of my annual tax obligations.
FATCA – Foreign Account Tax Compliance Act ( has to be filed on Form 8938 and attached to the annual tax return.
FBAR – Foreign Bank Account reporting ( Has to be filed in FinCEN Form 114) separate from the tax filing by April 15, 2018. Last few years the deadline was June 30.
Yes that’s a handful, but does it take 7 hours of work at over $100 per hour. Not really – I was to discover this later. Does it require any intricate knowledge of tax laws and complex interpretations of taxation provisions ? Not really.
My CPA gets me refunds every year is the usual comment I have heard from friends and colleagues. This is not the right reason to use a CPA. In fact if any tax preparer promises larger refund than competition, be wary of such dubious entities. The objective should always be to pay just the right amount of taxes, taking home a larger paycheck every month and getting the least amount of refund at the end. Your refund is free money sitting with the IRS for the year.
Self Filing – What tax software should I use?
The first steps towards self filing was to find out the right tax software to use. If you have got a W-2 form from your employer, and your tax situation is simple and you are not into day trading of stocks- then you are probably fine with a free version of any of the leading tax software. Based on your income level, you may also quality to file for free.
Add homes, rental properties, business income , children , gain from Bitcoin– now you will need to use the appropriate paid version which caters to your filing needs.
What happens if IRS decides to pick on me?
The IRS audits less than 1% of the tax returns it receives, so your chances to get audited is very slim. However if you feel that you could be the lucky one and want to cover yourself , then most of the leading software comes with free audit support and for an extra free they will take care of audit preparation and represent you in person.
What Tax software did I choose?
I did a basic study on the top four tax software providers – Turbo Tax, H&R Block, Tax Act and Tax Slayer. You can’t go wrong with either of them but Turbo Tax had a better support for filing of FATCA ( Form 8938) and together with its highly rated ease of use, I decided on Turbo Tax. I chose the Deluxe version which included filing of Form 8938 and I also upgraded to the Audit representation support. So in total this cost me $120.
Initially I was skeptical of using an online tax software, but from the minute I started using it, I can safely say that all my preconceived notions of having to navigate through pages and pages of clunky dropdown menus and long forms were quickly put to rest.
The user experience Turbo Tax has built into its software is so well done, it takes the drudgery out of filing taxes and make the whole process fun. Throughout its software, it uses a comment that says “ We know taxes are a pain, but we are here to help”. As you walk through the filing process, you feel as if you are just having a normal conversation with an accountant who is sitting right next to you, rather than doing it alone.
As I had collated all the data in advance, the process took me less than an hour. Turbo tax has made me a convert and I am thankful to my overpriced CPA for initiating a life long saving on CPA filing fees.
The IRS reports that millions of the returns filed have errors every year. Errors in the filings can delay the refunds and necessitate amendment of returns. Most of the errors are simple such a mismatch in the name, social security numbers, bank account details, claiming wrong filing status etc. You know your details better than the CPA, so recheck your returns before signing off. Filing your own taxes forces you to understand the tax laws and exemptions and will minimize chances of erroneous filing.
So for all of you sitting on the fence, I will encourage you to take the plunge and in the process become more financially aware and maybe save some money as well. Well by the way this year I am getting a larger refund than what I was getting with my CPA. Not that it is the deciding factor – but just saying. Happy filing. For more stories on taxes head on to Decoding the tax code. Will you pay less taxes in 2018?
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