Did you find mistakes or problems with Turbotax?
March 19, 2013 7:05 AM Subscribe
Hi AskMefi. Did my taxes as I always do withTurbotax Deluxe. They came out higher than I expected. I'm considering getting a professional to see if I'm making errors but wanted to see if anyone has had a similar experience where they found that turbotax left them with unaccounted or unexpected payments. Any experiences like this?
Thanks.
Have you tried running your information through a different program to see if it gives you the same result? Many offer free downloads/trials and will give you the amount you owe or are due for free; you only have to pay to see the return itself or file.
posted by payoto at 7:33 AM on March 19, 2013
posted by payoto at 7:33 AM on March 19, 2013
When I did my taxes a couple years ago I had a case where TurboTax was projecting a higher owed amount than I was expecting, so I took them to a professional and found that I owed essentially the same amount that TurboTax was saying. It turned out that I hadn't set up my withholdings correctly at work (ugh) and I also had some complications from having to file returns in different states after a job change and move. If you've had any major life changes like those recently, that might be the culprit.
posted by Kosh at 7:33 AM on March 19, 2013
posted by Kosh at 7:33 AM on March 19, 2013
Best answer: I use a different program that compares my current year's to previous year's. If TurboTax doesn't do that (or if it doesn't have access to your past year's return), simply go through the 1040 from last year and this year and see if any of the lines differ significantly.
posted by Mr.Know-it-some at 7:40 AM on March 19, 2013
posted by Mr.Know-it-some at 7:40 AM on March 19, 2013
Are you in Minnesota, by any chance? There have been many problems with TurboTax there -- Google it and you will see. Supposedly Intuit has since addressed the issues.
posted by wisekaren at 7:46 AM on March 19, 2013
posted by wisekaren at 7:46 AM on March 19, 2013
When I lived in the US, TurboTax worked fine. However, I used it last year as an American living abroad, and it had me pay roughly $2,000 more than the IRS later said I actually owed. I have no idea what went wrong but at least I got a fat refund. I no longer trust the program like I used to.
posted by ceiba at 7:46 AM on March 19, 2013
posted by ceiba at 7:46 AM on March 19, 2013
Are you importing any sort of stock transactions from the likes of eTrade? I've had issues in the past with the data coming over, but everything being mis-categorized, which resulted in a gigantic mess. Not sure which end the problem was on, but it screwed us up bad enough that we ended up going to a tax accountant to fix it.
posted by jquinby at 7:46 AM on March 19, 2013
posted by jquinby at 7:46 AM on March 19, 2013
Response by poster: No, OK - I found it. I was commissioned to write some music (a 1-time thing) for around 6,000 and it taxed me at nearly 50% on that (I'm nowhere near that backet, being a teacher & musician). TurboTax suggested that I enter it as business income, but I'm wondering if it would actually something like misc income?
posted by CaptainCaseous at 7:50 AM on March 19, 2013
posted by CaptainCaseous at 7:50 AM on March 19, 2013
Absolutely do a Schedule C and deduct expenses in any year you have freelance income. Think about every expense you incurred because of that commission - score printing/binding, manuscipt paper or other supplies, software, travel, etc.
Are you a member of any professional orgs for musicians/composers? They have staff who can advise.
Also google for help; Here are some good thoughts about deductions for musicians.
posted by kalapierson at 10:10 AM on March 19, 2013
Are you a member of any professional orgs for musicians/composers? They have staff who can advise.
Also google for help; Here are some good thoughts about deductions for musicians.
posted by kalapierson at 10:10 AM on March 19, 2013
All income earned . . . through informal side jobs is self-employment income.
This is not as clear cut as you think. What that sentence is referring to are side jobs that you take that are similar to your normal day job, for example, an employed plumber that does some side plumbing repair jobs on the weekends. That is obviously a business, not a hobby.
If writing music is not your regular day job, you could argue that this one-time commission is a hobby and not a business and just put the income on 1040 line 21 (other income). This would save you a lot in FICA taxes and eliminate the Schedule-C.
This is somewhat a gray area. If this is unrelated to your normal work and it is a one-time thing, then it becomes more ambiguous. It might be worth getting the opinion of a tax professional. Otherwise, it's a question of how much you worry about being audited. Worst case, you might have to pay some back taxes and a small penalty, if audited and the IRS disagrees about the hobby status.
posted by JackFlash at 11:15 AM on March 19, 2013
This is not as clear cut as you think. What that sentence is referring to are side jobs that you take that are similar to your normal day job, for example, an employed plumber that does some side plumbing repair jobs on the weekends. That is obviously a business, not a hobby.
If writing music is not your regular day job, you could argue that this one-time commission is a hobby and not a business and just put the income on 1040 line 21 (other income). This would save you a lot in FICA taxes and eliminate the Schedule-C.
This is somewhat a gray area. If this is unrelated to your normal work and it is a one-time thing, then it becomes more ambiguous. It might be worth getting the opinion of a tax professional. Otherwise, it's a question of how much you worry about being audited. Worst case, you might have to pay some back taxes and a small penalty, if audited and the IRS disagrees about the hobby status.
posted by JackFlash at 11:15 AM on March 19, 2013
The IRS provides some guidance for deciding if it is a business or hobby. Note that these are non-inclusive so ambiguity remains:
"The following factors, although not all inclusive, may help you to determine whether your activity is an activity engaged in for profit or a hobby:
Does the time and effort put into the activity indicate an intention to make a profit?
Do you depend on income from the activity?
If there are losses, are they due to circumstances beyond your control or did they occur in the start-up phase of the business?
Have you changed methods of operation to improve profitability?
Do you have the knowledge needed to carry on the activity as a successful business?
Have you made a profit in similar activities in the past?
Does the activity make a profit in some years?
Do you expect to make a profit in the future from the appreciation of assets used in the activity?
An activity is presumed for profit if it makes a profit in at least three of the last five tax years, including the current year (or at least two of the last seven years for activities that consist primarily of breeding, showing, training or racing horses)."
posted by JackFlash at 11:31 AM on March 19, 2013 [1 favorite]
"The following factors, although not all inclusive, may help you to determine whether your activity is an activity engaged in for profit or a hobby:
Does the time and effort put into the activity indicate an intention to make a profit?
Do you depend on income from the activity?
If there are losses, are they due to circumstances beyond your control or did they occur in the start-up phase of the business?
Have you changed methods of operation to improve profitability?
Do you have the knowledge needed to carry on the activity as a successful business?
Have you made a profit in similar activities in the past?
Does the activity make a profit in some years?
Do you expect to make a profit in the future from the appreciation of assets used in the activity?
An activity is presumed for profit if it makes a profit in at least three of the last five tax years, including the current year (or at least two of the last seven years for activities that consist primarily of breeding, showing, training or racing horses)."
posted by JackFlash at 11:31 AM on March 19, 2013 [1 favorite]
Nearly 50% is probably about right. That kind of income is taxed at your highest marginal bracket, which is probably 25 or 28%. Then there is both halves of FICA, which amounts to something like 15%. Then any state and local tax.
posted by gjc at 4:00 PM on March 19, 2013
posted by gjc at 4:00 PM on March 19, 2013
Yeah, the issue with income like that is that you need to also pay FICA, which of course is something that is deducted from your paycheck automatically (in most cases) so you never see it. You have this chunk of income, and you need to pay income tax on it, but you also need to pay into Social Security and Medicare.
Schedule C is not always the ideal choice, but you can certainly use it to deduct any appropriate business expenses which come before the income is realized and taxed. I assume you have for whatever reason thus far been treating your musician income some other way (e.g. you're a salaried member of an orchestra?), in which case any related expenses would fall on Schedule A, but that does not give you a dollar-for-dollar deduction. Given that you're talking about a few thou here one way or the other it may be worth consulting with a CPA about how to structure this. Even if it's a one-time thing it's worth looking at the outcomes of different approaches.
posted by dhartung at 2:48 AM on March 20, 2013
Schedule C is not always the ideal choice, but you can certainly use it to deduct any appropriate business expenses which come before the income is realized and taxed. I assume you have for whatever reason thus far been treating your musician income some other way (e.g. you're a salaried member of an orchestra?), in which case any related expenses would fall on Schedule A, but that does not give you a dollar-for-dollar deduction. Given that you're talking about a few thou here one way or the other it may be worth consulting with a CPA about how to structure this. Even if it's a one-time thing it's worth looking at the outcomes of different approaches.
posted by dhartung at 2:48 AM on March 20, 2013
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In looking at the forms and information, is there a certain portion of your return that seems out of whack?
posted by NotMyselfRightNow at 7:24 AM on March 19, 2013