Saturday, February 12, 2011

How I Saved $1200 On My Taxes

In the mad rush to get everything done during the week of our move, I also wanted to get our taxes completed so I wasn’t carrying our tax paperwork all over the country and could leave the papers in our storage shed. I first did our taxes manually which meant downloading the forms, breaking out my calculator, and using a pencil with a good eraser plus taking a couple hours out of my busy schedule. In the past I have usually had my taxes professionally done, especially during complicated years (buying or selling property, cashing out investments, complicated business years, etc). However that costs around $300 and I really didn’t want to spend my travel money on an accountant (not that accountants aren’t great but this past year wasn’t very complicated tax-wise).
In other past years when the tax year was pretty uneventful, I would use prior year tax returns as a template and then enter my current info on a new tax form and do the calculations with a calculator. Needless to say, doing the math took quite a while because it seems like every calculation was made as convoluted as possible!
So last week, I did our taxes using a previous year’s return as a template and was shocked to see that I would owe about $9,500. Ouch! Turns out I wasn’t following my income during the year very well and made much more than I thought and therefore owed much more in taxes than I thought, as well as other small things (like paying less in mortgage interest because we were getting down to about ten years owed on the house and that means more of our money at this point went to principal than interest. Property tax was also lower, and sometime around the beginning of the year, I found a much cheaper house insurance policy so all of these things meant I had less deductions than usual.
While I was still reeling from the huge payment I would get to send to the IRS, I saw a post on a forum about people doing their taxes online. I did a bit of research, found this highly rated site, and learned that you can do your tax return online through a simple process of answering questions. At the end, you know how much you owe/will be receiving back, then you pay a small fee ($24.95 in my case), and you can either e-file or print and mail your return. I figured there was nothing to lose because at the end, if it showed that I owed as much as I had calculated, I would figure I was on the right track and not pay for or use the tax return I had just completed online.
When I got finished, however, there were a few new deductions and credits that I was unaware of which meant that, according to this tax return, I would only owe $8,300! Still a lot, but less than my calculations had shown. So I happily paid for the return to be completed, downloaded the 1040 as well as the other attachments (schedule A, Schedule Cs, etc) and not only finished my taxes in record time (the whole process online took less than an hour and was super easy to complete), but was able to pack up all of my tax records for the year before we left the state.
The bottom line is that if you usually do your own taxes and you aren’t super keen on every single new tax rule change, doing your taxes online can be a cost-effective, and in my case cost-enhancing was to take the drudgery out of tax filing!

1 comment:

  1. You really saved a lot by doing your taxes online!
    I do mine online too and find it to be a lot faster and easier.