I have always done my own taxes. Back in the day on paper forms and now with TurboTax. As a former accountant, I suspect that will always be the case (at least as long as I am mentally able to do so). At one point it took several hours but I realized most of that was tracking down info. Now I keep a folder with everything tax related in it. Takes less than an hour. And even without the folder, the process would be faster now as such much info is readily findable online (in terms of tax statements, estimate payments, etc).
I prepared my son’s return last year. Took less than 30 minutes and I expect this year’s will be easier as much of the info will transfer from his return last year. Will prepare my daughter’s this year as well (she has a taxable scholarship in another state so there will be a little more involved with hers). Though generally speaking both of their returns will be easy. Once they get fulltime jobs after graduation, I expect to turn their tax returns over to them.
I know several people who pay to have their tax returns prepared who believe they need to for complexity reasons. Sometimes that is the case but often its not. What I did back in the day when TurboTax come on disk, I would give them the disk after tax season when I was done with it and suggest that they use it to prepare their own tax return and then compare it to the ones their accountant prepared. More often than not, they prepared their own taxes going forward.
And I get that a lot of people do not want to prepare their own taxes. There is a lot of comfort in having someone else prepare them. And some people have complicated returns which require a professional. And for others its more a convenience thing (time saved is worth the cost – and I do that myself for some things just not taxes – actually tax returns are not something I mind doing).
" And for others its more a convenience thing (time saved is worth the cost – and I do that myself for some things just not taxes – actually tax returns are not something I mind doing)."
I used to do our taxes on TT, sometimes with input help from DH (one of us reads the numbers, the other types). Usually the main burden was on me. But then DH got a nice Macbook (while I still have an old, sloooow desktop computer)… so last year I put him charge. I actually think it’s good that we both know how things work.
I used to do my own taxes – first on paper, then on a predecessor to TurboTax (Macintax?) and then on TurboTax. I was a professor with a little bit of consulting income. I really enjoyed doing taxes and read the law then (and still do so). I figured out that if I handled three steps right, all of my rent (for a loft in SoHo), food, dry cleaning, etc. for my two year leave of absence in NY would be tax deductible. So, I did the three things right (getting a letter from the Dean saying I was expected back, visiting periodically and I forget the third). But, over time, my tax life became very complicated. Two companies currently but there was a third. One is a pass-through entity and partnership accounting is really opaque. Sometimes we get stock, options or warrants as part of our compensation. Foreign income, so sometimes we have to file for a Foreign Income Tax Credit (truly opaque). Several real estate properties. AMT. Various investments in partnership entities. Plus a wife who is Canadian and has Canadian assets and is self-employed. Then a beneficiary-defective trust. And .so on.
The accountant helped me figure out original setup that I think saves about $10K a year in taxes does the returns. My Federal return is probably 100 pages long. Then there are the C-Corp, the LLC, the trust. I also have his firm do my mother’s taxes, the taxes for a small trust my father left for my mother (and his kids when she dies), and both of my kids’ taxes (at pretty nominal cost).
My daughter has been working all through college but has just finished her first year of full-time work. Nothing complex as she is an employee, so she could probably do her return with TT. She would get pretty stressed but then would figure it out and be methodical. My son is drawing his first real salary in 2018. But, he has started a venture-backed company and his net worth on paper is pretty impressive for a 27 yo and he hopes to double the enterprise valuation within a year. My advice to him will be to get the same accountant who does his company’s returns to do his. He’s not a detail-oriented guy but with those stakes, you don’t want to screw anything up and his return will probably have complications. They closed their investment just before Christmas so they probably will have to file a return this year.
My D’s started doing their own taxes first year out of college.
I have a question that I know my 24 yo D will figure out through her work but am wondering if there’s a quick easy answer or it’s more complicated…D works for a large engineering firm. She’s based in and rented in DC but lived in Boston on the company’s dime for 8 months of 2017. When moving back to DC December 1, she chose to rent in Northern Virginia. So, with regard to state taxes, she lived in 3 states during 2017. She knows she needs to figure it out but it’s causing her some angst in the meantime. With all the knowledge here, even though I know it’s not my responsibility to figure it out, I’m wondering if there’s a straight forward rule as to how state taxes work when you reside in more than one state during a year.
@collage1 It’s been awhile since I’ve had to do the “multiple states” thing but each state’s policies on taxation can vary. Programs like Turbo Tax are pretty good at walking the filer though the process with a series of questions to determine where to file and who to pay taxes to. Here’s an overview from TT:
Wow. Again, I know it’s not mine to solve but those links show me that D is going to need to work with someone to figure her particular situation out! Thanks for posting them, @doschicos.
Not necessarily, @collage1. I’ve done the multiple state filings in the past, including moving expenses related to relocations, home purchases and sales, etc. and have never used a tax preparer. Barring other tax issues for your D, if her return is otherwise straight forward (W-2 income, no esoteric investments for example), the tax preparation software is designed to easily guide one through the steps and prepares multiple returns. It is pretty easy and straightforward.
When my D changed residency, the states divided up her income for taxes, anything earned while she resided in each state belonged to the state and taxed at the state’s rate. If I remember correctly, if one takes up a temporary residence with the intention to be back “home”, the original state remains to be the state of residency.
I concur. When I did that, I had to keep track of how many days I was in each state during the year and we prorated income. I don’t think this has changed, but it might have. There is a chance that she can deduct all costs of a temporary residence if she lived in one city and she and the company intended for her to come back. She’d need to read the rules.
Thanks. Clearly, she’ll need to figure it out. She really didn’t have any expenses, though, as her food, housing and transportation were all covered. It was a sweet deal in a great city for the 8 months; for the most part, her only expense was her gym membership!
We’ve always been self-employed and always used an accountant, back in the 80s we were involved in more complex businesses and it was smart, we’ve continued on & been happy to have some one point out any audit flags.
However, I have kids who have worked abroad and after paying for the first return to be done professionally, I did the rest. I have done all their returns for as long as FAFSA was in the picture for any of the kids and then any time any one was abroad. Why? Because it was complex and confusing and they were just approaching being independent adults, it did not seem necessary to learn those complexities. They do their own returns now, TT, but are welcome to ask questions and I do remind them about things like tracking expenses for interviews and moving, at least for 2017.
I have no issue with young adults seeking help/advice from their parents or others when tax time comes around. Heck, DH and I have used an accountant for decades, as our various business interests can get complicated, and we want to make sure we do everything by the book and/or avail ourselves of every available tactic to reduce our tax burden legally and ethically.
The only thing that would makes me scratch my head is someone deciding whether or not to “let” another competent adult who wants to do their own taxes, you know…do their own taxes. I think the poster in question just made a poor choice of words, so I don’t want to belabor that point any further.
@SherBear Depends on what options you have and your age. If you have a 401k at work just keep dropping money every paycheck into a broad market index fund. You could do it in an individual account.
@SherBear , if you already maxing out any matching 401k or such account with your employer or don’t have that available, many of us would recommend that you open an account with a very low cost company like Vanguard and find their “Target 20XX” fund for the year you might retire.
Then, if you want to be more actively involved, start reading mainstream investor publications and websites. Stay off fringe websites that promise lots with little risk.
I did the paperwork for two international adoptions.
I did the paperwork for two house purchases.
I did the FAFSA all by myself.
But I refuse to do my own taxes. My relationship with our CPA started when I moved states, got married and bought a house all within a month. It was more than I could handle 25 years ago. Now, he’s almost a family member lol. I once asked him if he would go with us if we were every audited and he said “no, I go instead of you.”
I gladly pay him every year to do our taxes. Peace of mind. But kudos to those who do it themselves.
