Here in the tax business, there's no shortage of similar tools you can use to help satisfy your obligations with your friends at the IRS. TurboTax, TaxCut, and similar programs give you much the same power as professional tax-prep systems. If your circumstances are simple enough, and you're familiar with the process, you might be able to do a perfectly serviceable job of preparing your own return. You might not want to write off an entire weekend wrestling with the various questions, forms, and procedures — but the tool is there if you want to.
But sometimes, doing it yourself really isn't the best idea. We just learned that the hard way, to the tune of a trip to Tax Court (where he represented himself, of course). Carry used to use accountants to prepare her taxes. But two years ago she wanted to try it herself and see the value in hiring a professional to prepare a pretty complicated return. Here's how his DIY tax prep worked out:
- He deducted $79,000 in mortgage interest in 2011 and 2012, for a loan that was due to be paid off in 2008. The court could see that Bulatikes had paid something, but he couldn't cough up the paperwork to show the amount of interest or even why he was obligated to pay. The court disallowed it all.
- He deducted $100,000 in alimony he paid over the same period. His separation agreement specified $2,000 per month, but he and his ex- orally agreed to bump it to $5,000. Unfortunately, the law specifies oral agreements aren't enough to qualify, so the court disallowed the excess.
- He deducted $185,673 for "other expenses" in 2011, which he claimed was a net operating loss carryforward from a previous year that he put on the wrong line of his return. Too bad he failed to file the required "concise statement setting forth the amount of the net operating loss deduction claimed and all material and pertinent facts relative thereto, including a detailed schedule showing the computation of the net operating loss deduction." The court allowed just $142.
Here's the real irony, at least as far as we're concerned. Preparing your taxes, on your own or with a professional, is important. But all that really does is record history. The real value comes from planning your taxes to pay less in the first place. So call us when you're ready for planning, and don't let cheap office-supply store software bully you into paying more than you have to! We have helped 6 individuals just this summer that have been audited by the I.R.S. after using Turbo Tax for their 2015 returns. It appears that more audits from the I.R.S are being conducted by people using Turbo Tax.
For a true Professional Tax Accountant that keeps up with all the latest I.R.S laws and regulations, call Mike McVay at 850-725-5696. Mike@MikeMcVay.com - Free review and 30% off your tax return for 2016.