Friday, March 28, 2014

Writer Friday: TurboTax vs Tax-Act

Tax time. April 15th is, in America, the deadline for taxes. So if you haven't already done them, you're about to do them. Here's my experience with taxes and which program I'd recommend. (Note: I am in no way a tax or legal professional.)

Hint: if you're writing your taxes sideways or
upside down, you're probably doing them wrong.
(Image by Dave Dugdale from Superior, USA )
Historically I've used TurboTax to do my taxes. It's a good program; easy to use and free for federal 1040 EZs. But if you need to file additional forms, it ceases to be free. Last year I payed $20 for the federal form and figured it was worth it, because I had a few, er, "complicated" additions in the name things I was writing off due to starting a career as an author. Not terrible. On the whole the site is fairly easy to use, and it's well-designed. Questions and answers are usually easy to find, and explanations are easy enough to understand.

As a writer, I needed to file a Schedule C (basically the "self-employed income" form) this year, plus I had an IRA rollover into a new IRA account. When I started, TurboTax automatically recommended I choose the $75 option due to my Schedule C, but I decided to start with the free edition and find out if I really needed the upgrade.

I got to the IRA rollover form and found I'd need to pay $50 to do that. It's required, stuff I have to report, unlike the deductions for investing in writing as a business (last year I was pre-published and had no income, but several expenditures as I was getting the novel ready for publication).

I decided to try another piece of software and see if I couldn't find anything cheaper. A quick look at some commonly used programs revealed TaxAct, which seemed to include all the federal forms for free. I switched over.

Compared to TurboTax, the platform wasn't quite as intuitive, and the explanations were less clear. There was more financial-ese, and I had to look up about 3 or 4 terms (for example, cash vs accrual methods of accounting*). However, all the forms I needed were included for free, and filling them out wasn't much harder than through TurboTax. Free vs $50 or $75; for me that's an easy choice. I finished up with TaxAct.

(*Note: Cash means you note expenses/sales when they're paid. Accrual accounting means you note them when the sale/order occurs, not when payment is made. For most authors, cash is the method you'll probably use. [As explained by this Inc. post])

After entering all the data it let me through, there were a couple of miscellaneous expenses I hadn't entered. So I did have to use the review feature to go back through and enter the extra data. Plus, there were a couple of boxes I had to take my best guess on, because not all the paperwork I'd received had every box filled as the tax software seemed to want them to be.

Technically my refund through TaxAct was a bit larger this year than in the past through TurboTax, but that would have happened anyway because of the expenses I paid for putting together my book, plus the professional development and career-building expenses I occurred (such as website and taking online courses with the RWA to learn about various aspects of publishing, including cover design and a self-publishing course). Without a control I can't actually compare which program gives me a better refund. It's entirely possible I would have gotten the same from either, or more from TurboTax.

It took me a little longer to file using TaxAct, but with all the federal forms included it was worth it. If you're not a tax expert expect to Google a couple of terms when filling out your taxes. However, it's not so much more hassle than TurboTax as to not be worth the savings. Both sites charge for state returns (at least for NC), but the price for that is comparable. 

For pre-published authors who want to file a Schedule C, or any other miscellaneous forms needed, I'd personally suggest TaxAct. Everything you need without the extra fees, at the cost of only a little extra time and head-scratching. 

If you're only filling out a 1040EZ, I'd go with TurboTax, which offers that form free, with its streamlined and just slightly easier-to-use platform. 

As far as which published authors should use, I'll have to get back to you on that one next year. 

How do you do your taxes, online or in person? What or who do you use, and would you recommend them for others?

2 comments:

  1. I use TurboTax. The free federal version is plenty good enough for someone like me (low-income household, all our income comes with pre-filled forms, we don't accrue enough deductions to get more than the standard deduction), and I'd have to pay for state no matter who I do it through.

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    1. I do wish state returns were free on some platform, but I know they have to make their money somehow. Yeah, if you can do free federal on Turbo, I think that's the way to go.

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