Which tax software for our particular situation?

February 11, 2013 5:56 AM

I'm looking at tax softwares and not finding one that suits our particular need, which is, specificially: run all these scenarios and figure out what's best.

So our situation is a little peculiar. We're not married, we do own a house and car together and we do have a child, for whom only I take payroll exemptions (I make more $) and for whom we both otherwise evenly pay. I work from home 20% of the time. I also have a small business which is currently not being claimed because it is so small.

I completed my taxes in TurboTax 2012 this year, and my return was way less than I suspected. So, I started playing around with what I was claiming, and it turns out that even though I was claiming $4,141 in childcare credit, my return didn't increase above $1900, so I should really put the difference on HER return instead of mine. Same with my small office deduction---it didn't change much, so I figure why claim it all? Housing interest didn't do a lot either---or at least not all of it, and same with our significant healthcare bills this year, student loan interest, etc.

Anyway, now I'm tasked with finding the balance of who claims what so that we can maximize our return, which we DESPERATELY need---finances are rough right now.

So I'm thinking, there HAS to be tax software that takes all the info and then runs all the scenarios and spits out the best combination of claims, right?

Or...am I relegated to something like H&R Block? To give you an idea, our combined gross is right around $50k annually, so hiring a personal accountant person to squeeze the last bloody drops from the turnip hasn't seemed to make much sense.

posted by TomMelee to work & money (7 answers total)

Are you comfortable with Excel, or another spreadsheet program? The calculations behind the tax return are very basic, and if you've run the numbers once through TurboTax, you can see more or less how it holds together. Then, once you've set it all up, you can just run different columns where you make different assumptions, and see them all at the same time.

Also, it sounds like you may be seeing the standard deduction at work; do you understand how it applies? Anecdotally, I've heard a lot of people buy a property thinking that they'll get a big deduction on their taxes for mortgage interest, not realizing that if they claim the standard deduction, it won't move the numbers--it's essentially already baked into the standard deduction.

This is not legal or tax advice, and I am not your legal or tax advisor. Consult a tax/legal professional regarding your specific situation.

Good luck!
posted by Admiral Haddock at 6:20 AM on February 11

So I'm thinking, there HAS to be tax software that takes all the info and then runs all the scenarios and spits out the best combination of claims, right?

There may be, but probably not one of the big ones. Generally speaking, the IRS doesn't really let you pick and choose who gets credits and deductions - the person who actually pays expenses is supposed to be the one to claim the deduction/credit. That's not to say you can't move stuff around, but you aren't supposed to, and I doubt any of the big names have software set up to let you do that as it'd give them a bad name, not to mention be a huge liability if people got audited and got caught.

So, I started playing around with what I was claiming, and it turns out that even though I was claiming $4,141 in childcare credit, my return didn't increase above $1900, so I should really put the difference on HER return instead of mine.

This doesn't necessarily follow. It depends on what you would get from/owe to the IRS if you didn't factor in the credit. If you would have owed $2241 but for the credit, then a refund of only $1900 is correct. Try doing the software both with and without the credit to see what the difference is.
posted by payoto at 6:36 AM on February 11

2nding Admiral H.

I asked a similar question last year. I ended up making my own spreadsheets. Its actually pretty simple and kind of surprising that more people - especially geeky, data-driven, numbers-savvy people - don't do it this way. And it made me feel much more in control of my finances. I ended up buying an hour or two of a tax accountant's time to confirm that what I did was right and he pointed out some things that I missed.

(Political rant sidebar: of course the federal government could easily send about 90% of the population 90% of the information they need to do their taxes on one sheet of paper, as they do in most countries around the world, but that would make paying taxes too easy and remove an easy way for conservatives to gin up anti-government anger.)
posted by RandlePatrickMcMurphy at 6:39 AM on February 11 [1 favorite]

I use the H&R software and if I was in your situation I would enter in a lot of the base information (name, income forms) then save at that point and branch in different directions from there using "Save As..." to make different versions of my return. I imagine you could do the same using Turbo Tax.
posted by mikepop at 6:45 AM on February 11

mikepop--Yeah, I've been doing the "Save As" with Turbotax. Just time consuming.

Admiral Haddock / RandlePatrickMcMurphy--I like. I'm buried in financial data every day at work, but I know little to nothing about these tax calculations. Do you happen to have a jumping off point? I am also NOT taking the standard deduction, I am WAY itemized.

payoto-- Yes, I understand. The trick is that we each pretty much pay for everything. I don't think I was clear with my statement. We paid a total of $4,141 in childcare, which I just stuck on myself for the first run. Then, as I was chipping away at individual deductions to find the tipping point, I had to take it all the way back to only $1900 claimed, as beyond that the deduction no longer changed. I think people decide who claims what all the time? I claim the property tax, you claim the mortgage interest, etc., because at some point you stop getting more back. I think this year my gross is something like $28k and I'm rocking something like $17k in deductions, changing it to $21k doesn't affect my return 1 single penny, which I'm assuming is just the allowed percentages of each deduction/credit as a percentage of the whole.

Thanks so far. Yes, I realize a significant portion of our challenge is that we're not married. Working on that.
posted by TomMelee at 6:57 AM on February 11

The childcare thing may just be the way the credit is calculated (which is one of the problems with using software--you just plug in numbers and unless you read the fine print you don't know what's going on behind the scenes). The maximum credit for one child is $1050 for families with an AGI below $15,000, $600 for families with an AGI above $43,000, and somewhere in between for families with incomes in between that. (you get to claim up to $3000 in childcare expenses, but then the credit is calculated as 20-35% of what you claim).
posted by drlith at 8:31 AM on February 11

Can someone expand on the spreadsheet method? If I'm solid with numbers, can I work out my taxes w/out Turbo Tax?
posted by amandabee at 3:18 PM on February 11