I use the canned software more to avoid computational errors on my part and produce a legible, typed return than for any other reason -- My returns are simple, using the most common forms, so I trust the software to handle that without major errors.

I once used a version of Turbo Tax to prepare my own return and my newly ex-wife's return -- It was a year they were playing around with formats, so the return produced did not resemble the standard forms -- Rather, the form number and line numbers appeared along with the amount entered by the user, and ONLY those numbers appeared, the theory being that the program and the IRS computers would only trade the user-entered fields and would do their own computations from that -- A few calculated fields were printed as markers and to ensure that each form was a match to the rest of the return -- Looked like gibberish to the untrained eye unless one had a copy of the program to run it through.

I did the taxes because in our divorce we split all our stuf, including investments, down the middle -- She had then, with our financial advisor, sold most of the growth stocks and mutual funds and replaced them with income-producing investments, creating a lot of capital gains tax accounting entries and calculations. I already had the copies of statements with the original costs, so I figured it would be easiest for me to do her return and save her the money.

I made the 'mistake' of providing her with only a copy of what was to be sent to the IRS to be scanned and processed, the original so to speak -- I didn't bother to produce or store a paper copy of what the forms would have looked like -- All I retained in my records was the file saved to my computer of the program's results.

Mistake number two was that I sent them to her with a hand-written note to the effect that if she had any earned income in that year, she was going to either have me re-do her return or have a tax preparer re-do it and not to submit the original non-standard form. I didn't make or keep a copy of the note.

Final mistake was that I didn't make a copy of the Turbo Tax program itself, to go with the stored file version of the return.

She had apparently taken a job and received one paycheck in late December of the tax year but lost, discarded or ignored my handwritten note and just mailed the strange return in. Of course, the unreported income eventually popped out at the IRS and they sent something to her about it all -- I was full-timing in my RV and off somewhere with voice mail service just piling up for a few days, so she panicked and went to see a full-bore CPA.

He/she was thoroughly perplexed at first by the printout send to the IRS for scanning and processing, finally recognizing it and reconstructing the entire return for examination and input to the practice's software, along with her previously reported earned income, which took a few billable hours, for which she was subsequently charged. I don't know the details, but from the way she was acting, it's likely that the CPA's one-time learning curve cost more than the original paycheck, much less the tax that was unreported (and probably paid by withholding anyway).

I learned a few things from that incident, for sure!

Pay me now or pay me much more later. lol

David,

What is the advantage of using a CPA vs Turbo Tax? I have a very good reliable CPA that I'm happy with, but, I'm just wondering if Turbo Tax is worth it. I was audited in the late 90's and that kind of spooked me and I've been seeing a professional since. Every one around me is switching to Turbo! I know this year I will do my taxes through Turbo; however, it will not be sent because I want to see the difference between Turbo and my CPA's work. I'm curious.

And last year I was on short term disability through work and eventually knocked down to half pay, is there any tax benefits there? What about mileage to txs?

Thank you!

Ray,

The same advantage going to see your RO versus using Wikipedia to diagnose you. If you have a common cold comparing that to a very simple return with only W-2 income and not itemizing your deductions then a visit to Walgreens or in the tax world Turbo Tax (or even the IRS' own tax software)would be OK but if you have more complications in your health or tax world then a licensed physician or licensed CPA is the logical choice.

Re half pay....only advantage is you will incur less income tax.

Re medical mileage....definitely deductible as an itemized deduction. For 2008 miles driven between Jan 1 and Jun 30, 19 cents per mile and from July 1 thru Dec 31, 2008, 27 cents per mile. Remember your chances of being audited are very slim so if you didn't keep a mileage log book that few seldom do, just write down how you arrived at your estimate and keep it with your tax records.

Also deductible are lodging for you and even for someone with you to help. Meals are not deductible though on the theory that you would have to eat regardless of where you were.

When dealing with unusual medical expenses it's always a good idea to get your doctor to write a letter saying it's medically necessary and recommended. That's not a 100% guaranteed deduction but as close as you can get.

The main problem with medical deductions is that first you have to be able to itemize your deductions, i.e. expenses that exceed the "standard deduction" for your filing status plus you only get to deduct those that exceed a whopping 7.5% of your adjusted gross income which is usually limited to only those with very high unreimbursed medical expenses. Congress has enacted many Code sections that allow employers, including yourself if you are self employed, to provide medical reimbursement plans that permit you to make contributions to them with pre tax dollars and then pay medical expenses thereby avoiding the 7.5% threshold. Plan requirements do vary from simple to complex so read up on them or consult with a professional before you make a choice.

[quote=davidcpa]Ray,
Re half pay....only advantage is you will incur less income tax. [/quote]

In Canada, if we collect long term disability insurance payments and have paid the premiums ourselves (rather than the employer paying the premium) the benefits are not considered taxable income. Is this the case in the U.S.?

Mike T,

To answer your question, in the U.S. payments from an accident and health plan are excludable from an employee's income to the extend that the plan providing the benefits is funded by the employee.

Ok, thanks David. Same rules as Canada by the sounds of it. Hopefully everyone who's affected is aware of this.

The difference between using tax software (free to pay) and a tax preparer (HRBlock-style to CPA/Tax Attorney) is going to rely on how well you know the ins and outs of YOUR tax situation -- Consumer tax software (not the pro stuf David uses) is designed to basically fit the needs of the average tax-payer, not someone all wrapped up in odd situations -- The human knows what questions to ask and the software, although it may ask a LOT of questions, may not even be in the right ballpark.

Also, the human pretty much knows what will fly, what will not, and what *might* fly.

I just happened to look at free Turbo Tax, because it was in an HP ad I got, and it won't even do a 1040 with Schedule A, just a 1040EZ.

The one I just got through using, free Tax Act, had a glitch in it that somehow had me making a vehicle donation of $81 -- I just couldn't get the software to shake loose of it! Since my standard deductions happened to exceed my income this year, I decided to just go that route and let the flawed program just print out my return nice and neatly.

Had I not been paying so much attention to my cancers this year, I would have brought some of my tax-deferred IRA investments out and let my itemized deductions "shelter" that income, but I didn't. I won't let that happen this year, because I expect the deductions will be about the same.

Just a note to those in the throes of treatment and incurring lots of miles to and from the doctors/hospitals/labs/treatment facilities.

For the year 2007 (the year of cancer for us) I googled a calendar that had a large format and printed it. Then, by looking at EOB's, receipts, check registers, and credit card statements (also you can have your RO/MO print out a list of treatment days)...I filled the calendar in with visits on each day...sometimes it was multiple appointments. For each provider, I figured mileage from the house and back. I wrote that in each day block and figured the week total and then the monthly total. You would be amazed at how many miles you rack up when faced with the medical issues we here have faced.

Most of our doctors live within 7 miles of our house (14 roundtrip) with the exception of the CCC in Tampa. Bill's biopsy, PEG and Port placement, rads and chemo all were done locally and we still racked up almost 1600 miles. So with all your copays and deductibles, prescripton and premiums...you would be surprised at what that totals to. It might be worth the trouble to document...it was for us in a year of lower income.

Hope this helps, Deb

I am in the habit of keeping a small weekly calendar book every year with all my appointments in it -- At the end of the year, it's easy to go through the book and mark down how many visits and to where -- I print out the routes from Google Maps and keep them with my tax papers, plus a worksheet of miles x trips, plus ferry and parking if involved. The appointment books are easy to store (I have 11 years worth right now) and have other info, like where I camped each night when I was living in my RV.