do you check your taxes when using tax software?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Topic Author
anoop
Posts: 1761
Joined: Tue Mar 04, 2014 1:33 am

do you check your taxes when using tax software?

Post by anoop »

How do you check if your taxes were done right by tax prep software? Do you actually try and figure out if the software has done the right thing?

I have been using TT since 2005 and my approach is the following:

- Make sure I have entered somewhere, hopefully in the correct place, an entry for every form I received (W-2, 1099-INT, 1099-R, etc.), state and local taxes, property taxes, and charitable contributions, and check the $ amount for each. This means for every form received, I should see an entry somewhere in my return.
- Check that 8606 was correctly populated and entered based on my knowledge of the backdoor Roth.
- Check schedule D.

That's it. I don't verify the math for the AGI, forms 8959 and 8960, or anything on the state tax forms. I just assume TT will have handled everything correctly.

Am I being too trusting?
Last edited by anoop on Sun Feb 16, 2020 11:57 pm, edited 1 time in total.
mega317
Posts: 4582
Joined: Tue Apr 19, 2016 10:55 am

Re: do you check your taxes when using tax software?

Post by mega317 »

I have found it helpful to check the math, since something you think you did right but actually screwed up might look like a math error.

Example: the first year I used a dependent care FSA, my wages, AGI, taxable income all were too high by the contribution. I know I entered all the boxes correctly, but I did something else wrong farther down the line (still don't know exactly what) that was messing it up. If I just confirmed transcription I wouldn't have clicked over and over until it worked.

Another example is backdoor Roth. You can transcribe all the numbers correctly but if you make a mistake on a question you might get taxed on your conversion of your nondeductible tIRA.
https://www.bogleheads.org/forum/viewtopic.php?t=6212
User avatar
whodidntante
Posts: 9121
Joined: Thu Jan 21, 2016 11:11 pm
Location: outside the echo chamber

Re: do you check your taxes when using tax software?

Post by whodidntante »

I print the forms to a PDF and check for reasonableness.
User avatar
cheese_breath
Posts: 9853
Joined: Wed Sep 14, 2011 7:08 pm

Re: do you check your taxes when using tax software?

Post by cheese_breath »

I verify everything has been entered correctly. Then I verify the TT number against the number I've already calculated in Excel. If they're within a couple dollars of each other I attribute it to rounding differences and submit my taxes. If they're different, then I have to discover which one is wrong before I go any further.
The surest way to know the future is when it becomes the past.
mega317
Posts: 4582
Joined: Tue Apr 19, 2016 10:55 am

Re: do you check your taxes when using tax software?

Post by mega317 »

anoop wrote: Sun Feb 16, 2020 9:56 pm Am I being too trusting?
One way to answer this question would be to go back and do the last 14 years by hand and see if your trust was betrayed.
Here are the 2005 instructions for 1040 to get you started https://www.irs.gov/pub/irs-prior/i1040--2005.pdf
LOL
https://www.bogleheads.org/forum/viewtopic.php?t=6212
Normchad
Posts: 1311
Joined: Thu Mar 03, 2011 7:20 am

Re: do you check your taxes when using tax software?

Post by Normchad »

I do check them. I do everything the OP does. Additionally I go to the forms view, or print the pdf, and check/verify everything.

I do this for two reasons. First, there can be bugs in the software. (TurboTax currently has a bug in it for the EV tax credit). But more importantly, I do it to increase my understanding of the tax code, and the ways in which various forms or income and deductions or credits impact each other.
User avatar
grabiner
Advisory Board
Posts: 27953
Joined: Tue Feb 20, 2007 11:58 pm
Location: Columbia, MD

Re: do you check your taxes when using tax software?

Post by grabiner »

mega317 wrote: Sun Feb 16, 2020 10:05 pm I have found it helpful to check the math, since something you think you did right but actually screwed up might look like a math error.
In addition, tax software has bugs, situations it cannot handle properly, and situations it does not ask you about. These are more common on state forms, because there are 44 different forms and thus quality control is harder.

Example of a bug I caught: if you moved to NJ on November 16, how many days in November were you a NJ resident? TaxACT 2010 got the incorrect answer of 14; the correct answer is 15. This matters because part-year NJ residents get 1/12 of the personal exemption for every month that they were a resident at least 15 days.

Example of a situation not properly handled: TaxACT 2010-2013 had no way to report dividends and interest in my HSA on the NJ tax form; it did not support any source of income in NJ which had no federal equivalent. (If I created a fake Form 1099, reporting the dividends as "tax-exempt income" on the federal form, that would not have affected the federal tax directly, but tax-exempt dividends do affect several other provisions of the tax code.) I had to override the entered value, which prevented me from filing electronically. This was fixed in 2014.

Example of situations software does not ask you about: If you file taxes in NJ, your tax software will probably ask you whether there is a difference between your federal and NJ salary, because NJ taxes some things as salary (health insurance paid by payroll deduction, retirement plan contributions other than 401(k) plans, and HSA contributions) that the federal tax does not. But it probably won't ask you if you have any dividends or interest not reported on your federal tax form that are taxable in NJ; you do if you have an HSA invested in anything other than Treasury bonds, even a bank account. If you know about this, you can go to the state tax form and correct the Interest line manually (once the bug above is fixed).
Wiki David Grabiner
User avatar
BroIceCream
Posts: 279
Joined: Tue Oct 30, 2018 11:31 pm
Location: California

Re: do you check your taxes when using tax software?

Post by BroIceCream »

mega317 wrote: Sun Feb 16, 2020 10:05 pm Another example is backdoor Roth. You can transcribe all the numbers correctly but if you make a mistake on a question you might get taxed on your conversion of your nondeductible tIRA.
Ditto. I always double check the backdoor Roth, by looking at the Print Preview of the form. The software will calculate it correctly, but sometimes I slip up and miss one question, making this look like a distribution, instead of a conversion.
gator15
Posts: 458
Joined: Sun Mar 18, 2012 8:33 pm

Re: do you check your taxes when using tax software?

Post by gator15 »

I use TT most years. One year I sold a rental property and decided to use TT as usual. I was so unsure of the amount TT said I owed I gladly paid an accountant to check my math. Turns out I was off by several thousands of dollars. Going to the accountant saved me a ton of money. I’m tempted to go to an accountant once again this year because Im afraid I may make a mistake which could cost me money.
RetiredAL
Posts: 988
Joined: Tue Jun 06, 2017 12:09 am
Location: SF Bay Area

Re: do you check your taxes when using tax software?

Post by RetiredAL »

I use a 'pony sheet' listing all the received documents from last year and this year, which I check off as I enter them. After I believe I have everything entered, I wait a day or 2 to think about it before I finalize everything.

I'm using H&R Block this year, whereas for many years I used TaxAct, so I have had some learning curve as to what goes where. A couple of sections I've have gone back and repeated/changed the entries as I learn how HRB handles the small amount ( < $1000 ) of self-employment income we have. Other than this self-employment income and some IRA to Roth Conversion $, I'm an uncomplicated tax payer without even a 1099B this year. At this point in time, I'm basically complete with the Fed's, but have not yet started the state.

I pretty much do understand what all the finished forms should look like, and I carefully scrutinize them. Taxact online did not let you see the forms until you got to the pay/print step, which is one of the reasons I'm trying out HRB download this year. I dumped TurboTax years ago because I did not like their format along with it's high cost.

Other than just some quick mental math checks, I generally accept that the computer will do the actual math computations correctly.

After I'm done with mine, I'll do the Grand-children's taxes related to their UTMA accounts.
quantAndHold
Posts: 5028
Joined: Thu Sep 17, 2015 10:39 pm

Re: do you check your taxes when using tax software?

Post by quantAndHold »

I bring up the pdf of the forms, go through line by line, and make sure I know where each number came from. I don’t think I’ve ever found a bug in the program, but I find enough problems in my own data entry that it’s worth going to the trouble.
Yes, I’m really that pedantic.
User avatar
HueyLD
Posts: 7738
Joined: Mon Jan 14, 2008 10:30 am

Re: do you check your taxes when using tax software?

Post by HueyLD »

Trust but verify!
elvisimprsntr
Posts: 133
Joined: Wed Jan 08, 2020 7:24 pm

Re: do you check your taxes when using tax software?

Post by elvisimprsntr »

HueyLD wrote: Mon Feb 17, 2020 6:25 am Trust but verify!
- Ronald Reagan

+1
User avatar
SpringMan
Posts: 5421
Joined: Wed Mar 21, 2007 11:32 am
Location: Michigan

Re: do you check your taxes when using tax software?

Post by SpringMan »

I check imported data to make sure it imports correctly. Vanguard's consolidated 1099 imported as being mine when it was jointed owned with my spouse. This mistake would not change tax obligations and it was easily corrected
Best Wishes, SpringMan
User avatar
mmmodem
Posts: 2270
Joined: Thu May 20, 2010 1:22 pm

Re: do you check your taxes when using tax software?

Post by mmmodem »

I'm not an expert in tax code. I buy TT because I trust TT is doing the right math. I do check for reasonableness in Excel. I also do my taxes twice. Immediately after I get all my tax forms and once more a few weeks later after I "forget" everything. Finally, this year I did my taxes on Credit Karma to compare. Once everything agrees exactly, I file.
Longdog
Posts: 1496
Joined: Sun Feb 09, 2014 6:56 pm
Location: Philadelphia

Re: do you check your taxes when using tax software?

Post by Longdog »

cheese_breath wrote: Sun Feb 16, 2020 10:13 pm I verify everything has been entered correctly. Then I verify the TT number against the number I've already calculated in Excel. If they're within a couple dollars of each other I attribute it to rounding differences and submit my taxes. If they're different, then I have to discover which one is wrong before I go any further.
+1

I have been updating my Excel spreadsheet over the years as my tax situation has evolved (gotten more complex!) It gives me great insight into how decisions I can take impact my current and future tax obligations, and, I believe, has allowed me to “optimize” (or at least improve) my tax situation.
Steve
carolinaman
Posts: 4357
Joined: Wed Dec 28, 2011 9:56 am
Location: North Carolina

Re: do you check your taxes when using tax software?

Post by carolinaman »

I have a tax spreadsheet that I use to estimate taxes. I need this to make sure I withhold the proper amount in my RMDs. I update it with actual data as things occur. I also update it when I get my many 1099s for dividends, interest, pensions, SS and RMDs. I always compare this with my TT return to assure that I have entered everything correctly. It is more a check on me than TT, but it is good to know that both are in sync. It is easy to make mistakes, either by entering something incorrectly or omitting something. I think everyone needs some means of verification, especially when you have a complex return.
muddgirl
Posts: 159
Joined: Wed Aug 17, 2016 1:33 pm

Re: do you check your taxes when using tax software?

Post by muddgirl »

This was the first year I used interview-style software to e-file, so I knew what the forms should look like and furthermore could compare to last year's filing which I did myself using Free Fillable Forms.

After I finished I checked each form to make sure that information was in the correct place and all necessary forms were generated. Then I had my husband review as well and answered any questions had (such as on the notoriously complicated California 540 Schedule CA). He also roughly checked math.

When you (and your spouse if applicable) sign the 1040 it affirms that you have examined all of the returns and schedules and that they are true, correct, and include all amounts and sources of income, to the best of your knowledge and belief.
MikeG62
Posts: 3115
Joined: Tue Nov 15, 2016 3:20 pm
Location: New Jersey

Re: do you check your taxes when using tax software?

Post by MikeG62 »

anoop wrote: Sun Feb 16, 2020 9:56 pm How do you check if your taxes were done right by tax prep software?
I do two checks.

First, I have an excel spreadsheet (created several years ago and updated as necessary) to project my income and resulting tax liability for the year. As things change during the year, I update the spreadsheet. When wrapping up TT, I check the result against my projection. To the extent there is a more than an insignificant variance (tax difference of more than ~$100) I look at the TT output and compare the two calculations to identify the drivers of the variance.

Second, I review the TT output. I scan the forms for reasonableness, which includes comparing the current year (main forms/schedules) to the prior year.
Real Knowledge Comes Only From Experience
User avatar
Watty
Posts: 20701
Joined: Wed Oct 10, 2007 3:55 pm

Re: do you check your taxes when using tax software?

Post by Watty »

I print and read through my forms mainly to understand a learn more about the taxes are calculated and to double check my data entry.

I am a retired computer programmer and I am not worried about the software making math errors.

Way back in the old days when I did my taxes myself on paper forms I made at least one math error. The IRS computers caught that and sent me the correction. Even if there was somehow a math error in the software they would catch it.
WhyNotUs
Posts: 1770
Joined: Sun Apr 14, 2013 11:38 am

Re: do you check your taxes when using tax software?

Post by WhyNotUs »

The Tax history and two year reviews provide enough check for me. I look to see that there are not empty columns or missing forms by looking at last year's info but not much more. I use Quicken to import as much as possible.
I own the next hot stock- VTSAX
Hockey10
Posts: 839
Joined: Wed Aug 24, 2016 12:20 pm
Location: Philadelphia suburbs

Re: do you check your taxes when using tax software?

Post by Hockey10 »

I look at the comparison in TurboTax vs. the prior year, line by line. If there is a significant change from one year to the next in any line, I ask myself if this makes sense.
DetroitRick
Posts: 839
Joined: Wed Mar 23, 2016 9:28 am
Location: SE Michigan

Re: do you check your taxes when using tax software?

Post by DetroitRick »

I don't check every number and calculation. Beyond the software review itself, here's what I do:

Check all my inputs (the most likely cause of errors)
Review the comparison with prior year that the software provides
Do a high-level comparison to the tax estimate I did (outside the software) before starting the process
Review immediately before e-filing to make sure no forms are missing

I trust the program to do the math, but these steps would reveal any big errors. More importantly, for the sake of my tax planning, I always make sure I understand the result so that my future tax planning is complete in future years.
Financologist
Posts: 235
Joined: Wed Jan 01, 2020 11:16 pm

Re: do you check your taxes when using tax software?

Post by Financologist »

If you click "tax tools" then "tools" then "view tax summary" you can preview your 1040 in TT.

This can help you see obvious errors.

The ones that have plagued me over the last few years have been related to the backdoor Roth IRA and to establishing the correct basis for restricted share unit sales.

These can be costly mistakes.

Also, I can never figure out how to report foreign taxes on investments. This seems to be unintuitive in TurboTax. Since it is typically only a few dollars I just take a guess and call it a day.
User avatar
GerryL
Posts: 2870
Joined: Fri Sep 20, 2013 11:40 pm

Re: do you check your taxes when using tax software?

Post by GerryL »

quantAndHold wrote: Mon Feb 17, 2020 2:13 am I bring up the pdf of the forms, go through line by line, and make sure I know where each number came from. I don’t think I’ve ever found a bug in the program, but I find enough problems in my own data entry that it’s worth going to the trouble.
Pretty much my situation. I always "sleep on it." Even after I feel like I am done, I let at least 24 hours pass before carefully reviewing everything again, including the worksheets in some cases, before submitting.
GeoffD
Posts: 182
Joined: Tue Mar 20, 2018 1:31 pm

Re: do you check your taxes when using tax software?

Post by GeoffD »

I already know my tax liability since I have to do quarterly estimated taxes. I just keep everything in a spreadsheet and copy-paste to Free Fillable Forms. There is no way in the world I’m going to ever give money to those Intuit racketeers who bribed Congress so you can’t trivially file a return for free. The Feds already have all my 1099. I should be able to go to IRS.gov, click “calculate my taxes”, and then enter anything that is missing. For me most years, that’s nothing.
tibbitts
Posts: 11930
Joined: Tue Feb 27, 2007 6:50 pm

Re: do you check your taxes when using tax software?

Post by tibbitts »

The only practical way to verify your taxes is to do them on two unrelated software packages. I always get rounding errors, which is annoying - I wish the IRS wouldn't say things like "at least <some number of> decimal places."
jacksonm
Posts: 234
Joined: Tue Oct 16, 2018 11:48 am

Re: do you check your taxes when using tax software?

Post by jacksonm »

I've always figured if you are going to go to all the trouble of double checking everything and take the time to understand the rules you might as well just go ahead and do it yourself.

Having said that, Turbo Tax has twice made mistakes that got the attention of the IRS. Didn't amount to more than a few dollars however, once in my favor and once in theirs.

I did mine yesterday and in the final review I was asked to double check that the imported figures from Fidelity were correct. I did as they asked and they were. Beyond that, the whole damn thing has gotten too complicated so I just go with whatever Turbo Tax says. As I said above, the IRS will let me know if they made a mistake.
jebmke
Posts: 11428
Joined: Thu Apr 05, 2007 2:44 pm
Location: Delmarva Peninsula

Re: do you check your taxes when using tax software?

Post by jebmke »

tibbitts wrote: Mon Feb 17, 2020 10:51 am The only practical way to verify your taxes is to do them on two unrelated software packages. I always get rounding errors, which is annoying - I wish the IRS wouldn't say things like "at least <some number of> decimal places."
I don't check my taxes this way but I do check the tax software this way - sort of. I use a different software for volunteer work. We have training exercises with known answers which I work in both packages. Of course, they could both be wrong but I always check the output of my own return when I finish mine in HRBlock before I efile. It is all arithmetic so not that tricky.
When you discover that you are riding a dead horse, the best strategy is to dismount.
User avatar
mmmodem
Posts: 2270
Joined: Thu May 20, 2010 1:22 pm

Re: do you check your taxes when using tax software?

Post by mmmodem »

jacksonm wrote: Mon Feb 17, 2020 11:11 am I've always figured if you are going to go to all the trouble of double checking everything and take the time to understand the rules you might as well just go ahead and do it yourself.

Having said that, Turbo Tax has twice made mistakes that got the attention of the IRS. Didn't amount to more than a few dollars however, once in my favor and once in theirs.

I did mine yesterday and in the final review I was asked to double check that the imported figures from Fidelity were correct. I did as they asked and they were. Beyond that, the whole damn thing has gotten too complicated so I just go with whatever Turbo Tax says. As I said above, the IRS will let me know if they made a mistake.
The check is not for mistakes in the IRS's favor. The check is for when the mistake is in my favor.
muddgirl
Posts: 159
Joined: Wed Aug 17, 2016 1:33 pm

Re: do you check your taxes when using tax software?

Post by muddgirl »

jacksonm wrote: Mon Feb 17, 2020 11:11 am I've always figured if you are going to go to all the trouble of double checking everything and take the time to understand the rules you might as well just go ahead and do it yourself.
I usually do it myself, but unless I am missing something, it was nearly impossible to e-file in California without using third party software. The CalFile system only appears to work for the simplest of tax situations. And no software allowed me to e-file just the state and use Free Fillable Forms for federal e-filing. Also IIRC by the time I filed FFF was still missing the form needed for HSA contributions and distributions.
JBTX
Posts: 6983
Joined: Wed Jul 26, 2017 12:46 pm

Re: do you check your taxes when using tax software?

Post by JBTX »

whodidntante wrote: Sun Feb 16, 2020 10:06 pm I print the forms to a PDF and check for reasonableness.
+1
User avatar
ClevrChico
Posts: 1767
Joined: Tue Apr 03, 2012 8:24 pm

Re: do you check your taxes when using tax software?

Post by ClevrChico »

I triple check my data entry and run the numbers through Excel 1040.

I also review the returns a few times throughout the year. I have caught problems with the software this way. Amending returns is straightforward with software if required.
Nowizard
Posts: 3020
Joined: Tue Oct 23, 2007 5:33 pm

Re: do you check your taxes when using tax software?

Post by Nowizard »

We enter what we have in our informal documents regarding income from interest, dividends, income, etc., make a list of places where we have received income and then enter data, making additions and corrections, when the appropriate forms arrive. That's it other than checking the audit risk, comparing prior year's income and taxes before submitting. By the way, we submitted our forms last Tuesday and the refund hit our account on Friday for a reasonably complex return.

Tim
Topic Author
anoop
Posts: 1761
Joined: Tue Mar 04, 2014 1:33 am

Re: do you check your taxes when using tax software?

Post by anoop »

JBTX wrote: Mon Feb 17, 2020 12:03 pm
whodidntante wrote: Sun Feb 16, 2020 10:06 pm I print the forms to a PDF and check for reasonableness.
+1
Just the return or all the worksheets?
Target2019
Posts: 471
Joined: Sat Mar 03, 2007 5:30 pm

Re: do you check your taxes when using tax software?

Post by Target2019 »

We go over each W-2, 1099, etc. I make a small pencil mark in the corner of the W-2, etc.

I carefully look at the Two-year Comparison, and determine if I can answer why things may be different vs. previous year.

I run Final Review, and fix whatever it flags.

I print a PDF and look that over, page by page. I usually wait until April, in case another something comes in email or snail mail.

:sharebeer :sharebeer
:moneybag
JBTX
Posts: 6983
Joined: Wed Jul 26, 2017 12:46 pm

Re: do you check your taxes when using tax software?

Post by JBTX »

anoop wrote: Mon Feb 17, 2020 12:38 pm
JBTX wrote: Mon Feb 17, 2020 12:03 pm
whodidntante wrote: Sun Feb 16, 2020 10:06 pm I print the forms to a PDF and check for reasonableness.
+1
Just the return or all the worksheets?
I look at all the applicable worksheets.
Billionaire
Posts: 339
Joined: Sat Jan 04, 2014 3:05 pm

Re: do you check your taxes when using tax software?

Post by Billionaire »

whodidntante wrote: Sun Feb 16, 2020 10:06 pm I print the forms to a PDF and check for reasonableness.
That's what I do. I also double check my entries after the initial input. I gotta believe if there is a math problem, it's discovered somewhat early in the filing season and corrected on the current version of the software. The worksheets are more painful than the Form 1040 itself, so I don't check the worksheets too closely.
Lexi
Posts: 130
Joined: Sat Jan 30, 2016 10:28 am

Re: do you check your taxes when using tax software?

Post by Lexi »

I have found software frequently bad on state taxes and stopped even using it for those. There were so many mistakes that it is easier and more reliable to set up my own forms for those returns. This may depend on what state you are in, how complicated their taxes are, and how much they differ from the way the federal taxes work.

I particularly look at recent changes in the law because the software companies have very little time to program those changes and they are most likely to be wrong. I focus on recent changes and unusual situations but not so much the math. Any software company should be able to handle that.
Topic Author
anoop
Posts: 1761
Joined: Tue Mar 04, 2014 1:33 am

Re: do you check your taxes when using tax software?

Post by anoop »

Lexi wrote: Mon Feb 17, 2020 4:37 pm I have found software frequently bad on state taxes and stopped even using it for those.
Which product(s)?
MathWizard
Posts: 4339
Joined: Tue Jul 26, 2011 1:35 pm

Re: do you check your taxes when using tax software?

Post by MathWizard »

I print the return and any tables and go through it by hand, so that I know that everything has been entered correctly and went into the
right place. I'll read the appropriate instructions if I don't understand why TT did what it did.

My wife then goes through and makes sure she is comfortable with the return.

Then we sign it.

Call it due diligence.

I did taxes with paper and pencil for many years. The software is just to make it easier, not to replace my best judgement.
User avatar
GerryL
Posts: 2870
Joined: Fri Sep 20, 2013 11:40 pm

Re: do you check your taxes when using tax software?

Post by GerryL »

anoop wrote: Mon Feb 17, 2020 4:50 pm
Lexi wrote: Mon Feb 17, 2020 4:37 pm I have found software frequently bad on state taxes and stopped even using it for those.
Which product(s)?
Over the years I have used TT, HRB and OLT and found that they are little more than online forms as far as state taxes go. Little to no guidance on what qualifies for a credit or deduction. I now download a copy of my state's tax publication and review possible additions to income and, especially, reductions to taxes, to locate any that apply to me. In the future I may just use the state's online forms to save the cost of e-filing charged by the commercial products.
SlowMovingInvestor
Posts: 1824
Joined: Sun Sep 11, 2016 11:27 am

Re: do you check your taxes when using tax software?

Post by SlowMovingInvestor »

I do some spot checks, and check some complicated things like FTC. I also spot check some larger 1099 item downloads. No math checks.
02nz
Posts: 5565
Joined: Wed Feb 21, 2018 3:17 pm

Re: do you check your taxes when using tax software?

Post by 02nz »

I don't check the math per se, but I do look at the forms to make sure that the numbers make sense based on my inputs. While TurboTax is generally good, there have been times when I realized that I misunderstood a question and therefore entered information incorrectly. Having at least some understanding of how the inputs from the Q&A get translated into the forms will help you catch those errors (and better plan your taxes in the future).
User avatar
dratkinson
Posts: 5038
Joined: Thu Jul 26, 2007 6:23 pm
Location: Centennial CO

Re: do you check your taxes when using tax software?

Post by dratkinson »

My method of double-checking tax return software.
--Do (fed+state) draft tax returns. Get a printed copy. Wait a few days to clear mind.
--Review printed draft tax returns against paper instructions* and verify data entries. Wait a few days.
--Enter any corrections. Print my record copy of tax returns and double-check corrections. Then efile.


* I expect the math** to be correct, but have found some things in the instructions not implemented in the s/w. (** Morbid curiosity. I have sometimes worked my way through the math in the capital gains and SS taxation worksheets just to see how they work with my numbers.)

+1 GerryL: Example. In my 3rd years as a Colorado senior, I noticed that the s/w (TaxCut?) did not include a $20K senior tax deduction ($1K overpayment = $20K x 5% tax rate). Called them and had to argue with them that their s/w was wrong, and had been wrong for several years. (Earned a free tax return for the next year as a "thank you". Had to argue with them again the next year to get the free return.)

For that year, I entered an override amount to correct s/w. Then filed 2yrs of amended returns to get back prior year overpayments. So saved myself $3K.

I did not always check tax s/w against the instructions. But I do now.


Last year I noticed that the s/w Sch D processing omitted the Form 8949s on my ST/LT TLHing of covered shared (allowed omissions). But I wanted the forms for completeness so I could more clearly see where the Sch D numbers came from. So completed/printed fillable forms to add to my records... just because.


So we should check:
--data entry, definitely.
--math, maybe.
--instructions, definitely.
--omitted forms, maybe.
d.r.a., not dr.a. | I'm a novice investor, you are forewarned.
JediMisty
Posts: 607
Joined: Tue Aug 07, 2018 7:06 am
Location: Central NJ

Re: do you check your taxes when using tax software?

Post by JediMisty »

grabiner wrote: Sun Feb 16, 2020 11:10 pm
mega317 wrote: Sun Feb 16, 2020 10:05 pm I have found it helpful to check the math, since something you think you did right but actually screwed up might look like a math error.
In addition, tax software has bugs, situations it cannot handle properly, and situations it does not ask you about. These are more common on state forms, because there are 44 different forms and thus quality control is harder.

Example of a bug I caught: if you moved to NJ on November 16, how many days in November were you a NJ resident? TaxACT 2010 got the incorrect answer of 14; the correct answer is 15. This matters because part-year NJ residents get 1/12 of the personal exemption for every month that they were a resident at least 15 days.

Example of a situation not properly handled: TaxACT 2010-2013 had no way to report dividends and interest in my HSA on the NJ tax form; it did not support any source of income in NJ which had no federal equivalent. (If I created a fake Form 1099, reporting the dividends as "tax-exempt income" on the federal form, that would not have affected the federal tax directly, but tax-exempt dividends do affect several other provisions of the tax code.) I had to override the entered value, which prevented me from filing electronically. This was fixed in 2014.

Example of situations software does not ask you about: If you file taxes in NJ, your tax software will probably ask you whether there is a difference between your federal and NJ salary, because NJ taxes some things as salary (health insurance paid by payroll deduction, retirement plan contributions other than 401(k) plans, and HSA contributions) that the federal tax does not. But it probably won't ask you if you have any dividends or interest not reported on your federal tax form that are taxable in NJ; you do if you have an HSA invested in anything other than Treasury bonds, even a bank account. If you know about this, you can go to the state tax form and correct the Interest line manually (once the bug above is fixed).
Yes, the NJ tax on HSA earnings is vexing. To avoid this issues, I only invest in a treasury fund in my Fidelity H.S.A. Also, while the screen shot after you enter or download your 1099-DIV does ask you about "uncommon" situations including adjustments to government obligations, you must know in advance that NJ doesn't tax certain bonds funds, or portions of certain bond funds and manually enter the correction. Certainly not a perfect support by TT for NJ rerurns.
You Know What I Mean
Posts: 92
Joined: Tue Mar 06, 2018 9:27 am

Re: do you check your taxes when using tax software?

Post by You Know What I Mean »

Longdog wrote: Mon Feb 17, 2020 6:50 am
cheese_breath wrote: Sun Feb 16, 2020 10:13 pm I verify everything has been entered correctly. Then I verify the TT number against the number I've already calculated in Excel. If they're within a couple dollars of each other I attribute it to rounding differences and submit my taxes. If they're different, then I have to discover which one is wrong before I go any further.
+1

I have been updating my Excel spreadsheet over the years as my tax situation has evolved (gotten more complex!) It gives me great insight into how decisions I can take impact my current and future tax obligations, and, I believe, has allowed me to “optimize” (or at least improve) my tax situation.
Yes, to both. I use an Excel spreadsheet both for tax planning throughout the year and to double check my TurboTax results.
DoubleClick
Posts: 517
Joined: Mon Oct 18, 2010 1:12 am

Re: do you check your taxes when using tax software?

Post by DoubleClick »

Verification of correct filing has been one of the biggest challenges for me. For many years, I used H&R software (unwillingly, but that's another topic), and also filled out everything by hand to cross check the software. However, I got lazy with the hand filling, and eventually noticed I had let some errors slip by.

In recent years, I've replaced hand filling with https://sites.google.com/site/excel1040/ (thanks to the kind gentleman who provides it; I donate too). This works better, but it's been hard to keep up with every tax change and every form. AMT carryover when you have both exclusion and deferral items, capital gains carryover when federal and state differ, ESPP complexities are some examples that come to mind.

In addition, systemic errors are harder to catch. I found out that I completely forgot to input a 1099 with short term losses a few years ago, both with software and the excel sheets.

So even more recently, I've added a third method: I use personal finance software (gnucash and a bunch of scripts) to cross check my tax return. This has exposed several hundred dollars worth of errors I've made in the last couple years (I'll be amending). This approach is unfortunately impractical for a vast majority of the folks. But there may be some lessons to learn: using a checklist of forms (1099s, etc.), a spreadsheet to track year-to-year carrover amounts, and notes to figure out common traps (eg: ensuring non-taxable interest is marked as such) might get you most of the way there.

The ultimate of course, would be a tax code so simple that everyone benefits from tens or hundreds of hours of burden. Short of that, the above hopefully help.
manatee2005
Posts: 938
Joined: Wed Dec 18, 2019 9:17 pm

Re: do you check your taxes when using tax software?

Post by manatee2005 »

Hockey10 wrote: Mon Feb 17, 2020 9:23 am I look at the comparison in TurboTax vs. the prior year, line by line. If there is a significant change from one year to the next in any line, I ask myself if this makes sense.
This is all I do as well.
User avatar
teen persuasion
Posts: 1271
Joined: Sun Oct 25, 2015 1:43 pm

Re: do you check your taxes when using tax software?

Post by teen persuasion »

I run thru my taxes with paper and pencil first. I use TurboTax just so I can e-file.

After going thru the rage inducing interview format, I compare the output forms with my paper forms. When TT agrees with me, I can efile. If TT has some difference, I track down and debug the mismatch between what numbers should be on the forms and what the fuzzy questioning appeared to be asking that I misinterpreted. I'd prefer to simply directly enter my data onto the forms, but that's not an option with free file SW.

I've deliberately kept our financial situation quite simple, to make filing as straightforward and unambiguous as possible. But I still take advantage of all possible credits we are eligible for, so we have lots of forms for AOTC, EITC, CTC, HSA, Retirement Saver's credit, state versions of most of these...
Post Reply