Thursday, January 10, 2008


The tax season ads have started to appear – mostly for software.

I am pleased that I did not see one ad for a “pay stub loan” this year – telling you that one of the “fast food” chains can prepare your tax return based solely on your last pay stub for the year and give you an immediate check (i.e. a Refund Anticipation Loan).

And the ads that stress RALs over competence have been few – but it is still early and I expect the tube to be flooded with them eventually. Remember – RALs bad!

The ads for one software company continue to lie and tell you that using their software is easy. I suppose it could be easy, but that does not mean that it will necessarily be accurate, and prepare a correct return with the least possible tax, if you don’t know the tax law. Garbage In – Garbage Out.

One ad mentions an “audit meter” that will let you know your return’s chances of an audit. What I think is that this compares the deductions on your return to IRS published averages for past years and interprets that the greater your deduction exceeds the average for your level of income, the more likely the audit.

For one, this is not necessarily true. And, more important, the “advice” of an “audit meter” should not deter you from claiming an excessive, yet totally legitimate, deduction! If you spent the money for a legitimate deductible item and you can prove it you should definitely claim it. Even if you spent the money for a legitimate deductible item and your proof is shaky you should still claim it – you should not audit your own return.

Henry and Richard advertise that their software product comes with “people” – i.e. access to H+R Block “experts” if you have a problem. A recent post by Kay Bell at DON’T MESS WITH TAXES reports that several other tax software products also offer access to “people”, with varying availability and charges.

The tax software package will cost at least $40.00 plus tax. If you need to talk to “people” that will no doubt cost you more. Then, based on IRS averages, you will have to spend 10 to 20 hours more of your time actually preparing the return than if you paid someone. Why not just forget the software and go to a competent tax professional (and I don’t mean an H+R or Jackson Hewitt office) in the first place?

You will be able to ask a real professional questions face-to-face and, more important, have him/her ask you questions, you will certainly save time and aggravation, and you will be a lot more sure that the finished returns are done correctly and accurately, and that you are paying the least amount of federal and state tax possible under the law, than if you did them yourself.

If you need to find a tax professional in your area you can go to Don’t come to me – I do not need any more 1040 clients.

Be on the look-out for next Wednesday’s ASK THE TAX PRO posting when I deal with a question concerning tax software.


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