Looks like I made some mistakes on my tax return

by Joseph · 5 comments

in Personal Finance

White piggy bank and coins

It’s the week of the Financial Blogger Conference and I’m very excited to meet all my fellow personal finance bloggers. I should have some great content to share with all of you in the weeks following the conference. In the mean time I wanted to talk a little bit about a situation I found myself in recently that may require me to break into my piggy bank.

I received a letter from the IRS about 3 weeks back. The moment I saw a letter from the IRS I wasn’t feeling too good. Receiving a letter from them this far away from tax season can’t be a good sign right? Sure enough it wasn’t. They claimed I had made some mistakes on my tax return and owed about $1,200 dollars in taxes.

Ouch.

Not exactly having $1,200 set aside for tax payments, I figured I’d better figure things out before ponying up the money. Luckily I paid for audit defense when I filed that year (this is for the 2009 tax year — they’re a bit behind I guess), so I called up the audit defense company and sent them the documents they requested (W2′s, the letter from the IRS, etc.).

With any luck we’ll get that $1,200 down to a more reasonable amount, but just in case I’m writing off the money now. Plan for the worst and hope for the best. I try my best to live by that saying. Nevertheless the audit defense company should have everything filed with the IRS before the end of the week, so hopefully I’ll find out soon what the damage will really be (the IRS is trying to charge me taxes on a private scholarship I received).

I’ve been using Turbo Tax Online to file my taxes for the past several years, but after this event I’m considering hiring an accountant to do it for me. If I’d have filed correctly in the first place I wouldn’t have to deal with this (and possibly have to pay interest on the unpaid tax amount). So my question to all of you is this, do you do your own taxes or do you pay an accountant to do them for you (and why)?

{ 4 comments… read them below or add one }

Andrea @MoneyMastered September 27, 2011 at 6:57 pm

I’ve done my taxes myself for the past few years, but I’ll probably pay someone this year to make sure I report my freelance/blog income correctly. Stories like this make me think I’ll just pay someone from now on!

I hope you’re able to get that knocked down to a more reasonable amount. I would absolutely die if I got a bill for $1200 right now.

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Eric J. Nisall September 28, 2011 at 8:12 am

Being that I am an accountant, I do my own every year. I really despise the “do it yourself” utilities, because they assume that the person inputting the figures knows what is and isn’t supposed to be used. One example, if you have health insurance deducted pre-tax on your payroll, but put the figure on Schedule A of the 1040, the program won’t know it’s wrong, even though it is. These things just aren’t intuitive enough to guide anyone who has more than a W-2 and some interest or dividends properly. Trust me, I’ve seen plenty of mistakes made using Turbo Tax that an experienced preparer would never let go (not that we don’t make mistakes, but their not on some basic things like my example)

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Joseph September 28, 2011 at 8:24 pm

@Andrea — Yeah, I’m pretty sure with how complicated taxes are getting (investments, retirement accounts, school, work, side income) that I’m going to go with an accountant. I’m still waiting to hear back from my tax advocate on this with how much I’m actually going to owe… fingers crossed.

@Eric — thanks for the comment! Yeah, I’m realizing that with my taxes getting a bit more complex nowadays a “do it yourself” utility (as you called it) probably isn’t going to be the best option anymore. Lesson learned the hard way I guess.

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Kellen October 20, 2011 at 9:29 am

I do my own taxes with a different free tax software – TurboTax stops being free once you have a 1099 I think.

However, my boyfriend gets some tuition reimbursement as part of his compensation as a graduate assistant, and when we entered his stuff into the free tax software I like to use, it definitely did not treat it correctly.

So I’m worried, because I’d like to use my free tax software, but I think I have to also do a little estimated tax calculation by hand to make sure it’s popping out a reasonable amount.

It’s a bit silly, since I’ve done 1040′s much more complex than mine at work, but those were with the help of seniors and partners reviewing it. Until I buy a house or have anything really weird to account for, I will probably keep filing my own.

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